TOP Tobacco Republic Tobacco. FDA Regulation 35 Month Review May 21, 2012

Transcription

1 FDA Regulation 35 Month Review May 21, 2012

2 Company Background Republic Tobacco Established 1972 TOP Tobacco 1987 (Purchased from RJ Reynolds) Industry Leading RYO/MYO Brands - TOP Established JOB Established Gambler Established DRUM 1999 (US Rights) RYO/MYO <1.5% of Tobacco Industry 1

3 RYO/MYO Uniqueness RYO/MYO Cigarettes Different and Unique From Any Other Tobacco Product - Tobaccos Blends/Types/Amounts Used - Tubes Sizes/Packings (Density)/Filter/Components - Papers Sizes/Packings (Density)/Porosities/Components/Filter (Unfiltered) Range of Cigarettes MADE BY CONSUMERS = COMPLEX and DIFFICULT to DEFINE Making Your Own Cigarette = Making Your Own Cup of Coffee (Everyone has THEIR OWN WAY of MAKING THEIR OWN Resulting in NO TWO RYO CIGARETTES EVER BEING THE SAME) Development of Regulatory Standards for Consumer Made RYO/MYO Cigarettes Requires Significant Consideration 2

4 Compliance A History of Federal, State and Local Compliance - USDA Mid 1980 s to Present - OSHA Late 1970 s to Present - Insurance Late 1970 s to Present - State EPA - Late 1970 s to Present - Federal Trade Commission - Late 1970 s to Present - State Consumer Agencies - Late 1970 s to Present - ATF/TTB - Late 1970 s to Present - MSA/NAAG 1999 to Present SPM - FDA 2009 to Present - PACT ACT 2010 to Present 3

5 Experiences FDA / FSPTCA / CTP Communication - Accessible - Approachable - Generally Timely Start-up Logjam - Generally Understandable Top Down Pronouncements Unwieldy ISSUE: DURING CTP START-UP, UNREGULATED NON- COMPLIANT UNDERGROUND has ESTABLISHED with NO MEANS for INDUSTRY to ASSIST CTP ENFORCEMENT 4

6 Experiences FDA / FSPTCA / CTP - Continued Reporting Compliance - Software Cumbersome - IT Group Outstanding Operating Compliance - Length of Communication Process Potentially Business Prohibitive (e.g. State Requirements Which May Conflict with FDA Requirements Paper vs. Acetate Filters) - GMP Compliance as Small Company Regulation to Take Account of Industry Don t Close Off Market to Small Businesses - Vital to Industry, Economy 5

7 Costs of Compliance - $$ MILLIONS $$ - Legal - Personnel - Manufacturing - Import - Training - Technology - Packaging - Laboratory - Infrastructure - User Fees The Real Financial Burden of the Millions Invested in Compliance by Small Companies is Disproportionate. We have Less Financial and Human Capital to Employ than Large Companies. If Regulation is Not Logical and Purposeful the Laws Become Crippling to Industry and Government PACT ACT Experience 6

8 Costs of Compliance Opportunity Costs of Compliance - Product Development Delays Substantial Equivalence - Product Innovation Delays Substantial Equivalence - Factory Investments Equipment On Hold - Factory Investments Personnel On Hold - Factory Investments Technology On Hold - Product Import Delays Inspections Demurrage ADVANTAGE: NON-COMPLIANT (UNREGULATED) COMPANIES THAT REPLACE LEGITIMATE COMPANIES ON PRICE (Lower Cost Base) AND SPEED TO MARKET (Regulatory Approval Delays) 7

9 Costs of Compliance Costs of Unintended d Consequences of Regulation -Flavored Cigarette Papers / Flavored Tobacco Wraps/Flavored Herbal Wraps Some Companies Recalled by 9/22/09 Costs in Millions OTHERS REFORMATTED PACKAGING AND CONTINUED MARKETING TOBACCO WRAP RYO CIGAR (No Such Thing) - Some Importers of Cigarette Papers and Cigarette Tube Products Have Either Not Reported or Have Relocated Operations Into the US and Not Registered - Legitimate, Compliant Companies Suffer Significant Increased Costs and Significant Lost Business 8

10 REGULATED FLAVORED PRODUCT Before Flavor Ban: After Flavor Ban: RECALLED 9

11 UNREGULATED FLAVORED PRODUCT Before Flavor Ban: After Flavor Ban: WHAT CHANGED??? 10

12 Compliance Recommendations - Level the Playing Field - Regulate All Tobacco Products Correct Unfair Effects of Unintended Consequences on Compliant Companies - Publicly Identify Registered Companies and Registered Products - Engage Industry in Regulatory Process 11

13 FDA Regulation 35 Month Review May 21, 2012