FDA Loses Appeal, Can't Regulate Electronic Cigarettes as Drug, Court Says

The U.S. Food and Drug Administration lacks the authority to regulate electronic cigarettes as drugs or devices, an appeals court ruled, upholding a lower-court decision.

The U.S. Court of Appeals in Washington said today the FDA can only regulate e-cigarettes as a tobacco product. The ruling means the government can oversee the marketing of the products, not restrict their sale.

E-cigarette maker Sottera Inc., which does business as Njoy, argued in the case that its products -- battery-powered devices that generate a nicotine vapor instead of smoke -- are tobacco products and not drugs. E-cigarettes are marketed as a tobacco alternative for “smoking pleasure,” rather than for therapeutic uses, the company said.

“We’re thrilled,” Craig Weiss, the president of Scottsdale, Arizona-based Njoy, said in a telephone interview. “Now we can continue to sell e-cigarettes under the regulations of the Tobacco Act.”

The FDA is “studying the opinion and considering next steps,” Jeffrey Ventura, a spokesman for the agency, said in an e-mailed statement. Campaign for Tobacco-Free Kids, a Washington-based group, criticized the decision.

“This ruling invites the creation of a wild west of products containing highly addictive nicotine, an alarming prospect for public health,” the group said in an e-mailed statement. “We urge the government to appeal this ruling to the U.S. Supreme Court.”

FDA Injunction

An Njoy competitor, Smoking Everywhere Inc., filed the original lawsuits in 2009. A district court granted a preliminary injunction barring the FDA from alerting U.S. customs officials to prevent the importation of e-cigarettes manufactured outside the country.

In 2000, the Supreme Court ruled that Congress didn’t grant the FDA jurisdiction to regulate tobacco products as drug- delivery devices under the Food, Drug and Cosmetic Act.

The e-cigarette consists of a battery, a heating element and a cartridge that contains a liquid suspension with nicotine. When a user inhales from the cartridge, the liquid is heated and a vapor is emitted. The nicotine is obtained from tobacco plants.

Njoy sells a “starter kit” for $79.99 that includes two batteries, a charger and five cartridges, Weiss said. Users can buy a bottle of five replacement cartridges for $19.99, with each cartridge roughly equal to 1 1/2 to two packs of cigarettes. A pack of cigarettes in New York costs about $10.

“Great Victory”

Njoy sells products online and at retailers such as 7- Eleven Inc., Weiss said. The closely held company, which doesn’t disclose sales, is profitable, he said.

“This is a great victory for the American people, especially for long-term committed smokers,” Matt Salmon, chief executive officer of Njoy, said in a separate telephone interview.

Salmon, who served three terms as a Republican U.S. congressman from Arizona, became CEO last month after spending more than a year as president of the Electronic Cigarette Association trade group. He described himself as an “anti- smoking crusader” and said that his father died from a smoking- related illness.

The case is Sottera Inc. v. Food & Drug Administration, 10- 5032, U.S. Court of Appeals, District of Columbia Circuit (Washington). The lower-court case was Smoking Everywhere Inc. v. U.S. Food and Drug Administration, 09-cv-00771, U.S. District Court, District of Columbia (Washington).

To contact the reporter on this story: Don Jeffrey in New York at djeffrey1@bloomberg.net.

To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net

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