Congress mulls FDA regulation of tobacco

Congress mulls FDA regulation of tobacco

	Published : Wed, 18 Jul 2007 14:57 By : Agencies Print this Story

WASHINGTON (AP) - A bill moving through Congress designed to make cigarettes and other tobacco products safer could inadvertently cement Philip Morris' position as the dominant tobacco company in the U.S., according to industry analysts.

The Senate committee that oversees public health is expected to approve a proposal Wednesday that would give the government authority over tobacco products for the first time. If the bill becomes law, the Food and Drug Administration would receive new power to crack down on advertising aimed at children, add stronger warning labels to tobacco products and reduce dangerous ingredients used in cigarettes. Although similar proposals failed to pass as recently as 2005, analysts say the bill's chances have dramatically improved now that Democrats control both the House and Senate.

Although FDA regulation would likely hurt the tobacco business overall, the bill has the support of the nation's biggest cigarette maker by sales, Philip Morris, a unit of Altria Group Inc. In February, the company's chief executive testified before Congress in favor of more regulation, saying it would focus companies on reducing the harm of their products.

But analysts say Philip Morris' support for the bill likely stems from the fact that it is better positioned than its rivals to operate in a more-regulated environment. Philip Morris 'has deep pockets to continue lobbying its interests at the FDA and to lead in terms of product development,' writes Deutsche Bank's Marc Greenburg, in a recent note.

The advantages Philip Morris would enjoy under FDA regulation have not been lost on competitors like the Vector Group Ltd. and Reynolds American Inc., which have begun referring to the proposal in Congress as the 'Marlboro monopoly act.' Marlboro is Philip Morris' top-selling cigarette brand.

'Under this proposal they can basically lock in their market share and make it much more difficult for their competitors to promote their products to adults,' said Steve Kottak, a spokesman for Reynolds American, which makes Camel brand cigarettes. The Winston-Salem, N.C.-based company is the second largest tobacco company in the U.S.

Under the Senate bill, FDA could curtail cigarette discounts and giveaways that tobacco critics say are designed to encourage young people to smoke. Kottak and other industry representatives say these are legitimate marketing practices that help cigarette companies compete in a shrinking market.

Second-tier tobacco companies like Reynolds American and Lorillard Tobacco, a unit of the Carolina Group which makes the Newport brand, could also fall behind Philip Morris in developing reduced-risk products. If FDA gains oversight of tobacco, companies would have to submit any new products that claim to have safety benefits to the government for scientific evaluation. After investing more than $300 million in a new research facility to develop safer tobacco products, analysts say Philip Morris is more prepared than competitors to conduct large-scale studies that would be needed to gain FDA approval of such products.

According to its Web site, Philip Morris is experimenting with ways of heating and filtering tobacco that could reduce smokers' exposure to dangerous carcinogens. The company plans to recruit more than 500 scientists to work on these and other projects at its Richmond research center when it opens later this year.