E-Cigarette CEOs Visit Capitol Hill
On February 5, the CEOs of five e-cigarette vendors (JUUL Labs, Inc., Fontem Ventures, NJOY, Logic Vapes, and Reynolds American) testified in Congress before the Oversight and Investigation Subcommittee of the House Committee on Energy and Commerce. As lawsuits and public backlash continue to barrage the American e-cigarette industry, the Committee members questioned the five executives about whether the companies they lead marketed their nicotine-based products to children and teenagers.
A JAMA study published last November estimated that 27.5% of high student students and 10.5% of middle school students in America smoke e-cigarettes, even though the FDA and many doctors warn that vaping might cause nicotine addiction and damage adolescents’ lungs. The majority of underage smokers vape with JUUL devices, according to the research. At the hearing, JUUL CEO K.C. Crosthwaite expressed concern about the problem. “I fully recognize that the opportunity for the millions of adult smokers who still use combustible cigarettes to have an alternative is at risk if we don’t address this issue,” Crosthwaite told the Subcommittee as he vowed to keep his company “focused on combating underage access.”
Crosthwaite and the other CEOs all denied allegations that the e-cigarette industry targets children and adolescents. As evidence, several of the CEOs informed the Subcommittee that their companies had voluntarily stopped selling sweet-flavored and mint-flavored vaping products even before the FDA banned them last year. The FDA asserts that young people are most likely to use such products.
Most of the CEOs also touted their policy of suspending social media marketing campaigns which appeal to underage viewers. One Subcommittee member, Rep. Kathy Castor (D-FL), condemned Foment CEO Antoine Blonde as the “odd man out” because his company still pays online “influencers” to promote BLU e-cigarettes.
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Disposable Vapes And FDA Oversight
The proliferation of open-system and disposable vaping devices was a major topic at the hearing. The FDA policy against flavored vaping products went into effect on February 6, but the policy only affects devices with closed-system cartridges, such as JUUL e-cigarettes. Closed-system devices have cartridges (or “pods”) pre-filled with e-juice. While these products still dominate the e-cigarette market, vape pens with refillable, open-system cartridges and single-use, disposable “puff bars” are becoming more popular. These products also contain nicotine and offer a variety of flavors.
Meredith Berkman, the co-founder of Parents Against Vaping E-cigarettes (PAVE), told the Subcommittee that the FDA should extend its flavored-devices ban to all vaping devices. Meanwhile, Gregory Conley of the American Vaping Association criticized the Subcommittee for only questioning “one side of the industry,” that is, closed-system e-cigarette manufacturers. Conley also accused Congress of attempting to usurp the FDA as America’s tobacco regulator.
Throughout the hearing, the five executives appeared to agree with Conley’s position by frequently deferring to FDA oversight. In response to questions about disposable devices, NJOY CEO Ryan Nivakoff cited “the fact that the FDA excluded the disposables from the guidance completely” to absolve his company from any obligation to withdraw them from the market.
On other issues, such as whether nicotine is harmful and whether regulations on cigarettes should apply to e-cigarettes, the CEOs stated that the FDA should decide. When Rep. Diana DeGette (D-CO) asked if JUUL would initiate a sales freeze, Crosthwaite replied that the review of his company’s application for FDA approval is “the process we think is best to make that determination.”
Despite the executives’ statements about combatting underage vaping, Committee Chairman Rep. Frank Pallone (D-NJ) ended the hearing on a note of skepticism. “I heard all of you over and over say you are responsible men, men of integrity. That is not true,” he declared. “If you want to be men of integrity, responsible men, you would not be selling this product.”
JUUL Restructuring Continues
Under the suspicious gaze of lawmakers and regulators, America’s largest e-cigarette company is working to adapt to new rules and a tougher playing field. After Crosthwaite became JUUL CEO last year, he cut the company’s expenditures by $1 billion and dismissed over 650 employees. He also suspended advertising and political lobbying to signal cooperation with the government after a surge of vaping-related respiratory illnesses shocked the country, although there is no evidence JUUL products caused the crisis.
In the past year, over 300 parties have filed lawsuits against JUUL for allegedly marketing e-cigarettes to adolescents. After the hearing, Pennsylvania joined New York, Massachusetts, Illinois, and California in a bloc of states suing JUUL. The legal pressure has impacted the company’s profits. Last October, JUUL’s market valuation fell to $24 billion from its $38 billion valuation in 2018, the year the tobacco giant Altria Group, Inc. bought a 35% share of the company. Altria has since reported about $8 billion in impairment fees for its JUUL investment. Even still, JUUL has raised over $700 million in convertible debt from investors, a sign of the company’s intent to persevere.
Nathan Yerby is a writer and researcher. He is a graduate of the University of Central Florida.
- More from Nathan Yerby
- Cullen, K.A. (2020). e-Cigarette Use Among Youth in the United States, 2019. JAMA, 322(21): 2095–2103. Retrieved on February 7, 2020, from https://jamanetwork.com/journals/jama/article-abstract/2755265?guestAccessKey=54b2dc7d-3855-4728-a522-573083a5d2cd&utm_source=For_The_Media&utm_medium=referral&utm_campaign=ftm_links&utm_content=tfl&utm_term=110519
- Ebbs, S. (2020). Tobacco company CEOs face lawmakers' questions on their role in youth vaping epidemic. ABC News. Retrieved on February 7, 2020, from https://abcnews.go.com/Politics/tobacco-company-ceos-face-questions-role-youth-vaping/story?id=68753963
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- Nadeem, D. (2020). Juul raises $700 million in debt from investors: source. Reuters. Retrieved on February 7, 2020, from https://www.reuters.com/article/us-juul-financing/juul-raises-700-million-in-debt-from-investors-source-idUSKBN2002TE
- Sapra, B. (2020). Embattled e-cigarette company Juul raises $700 million in debt, amid financial strain and regulatory pressure. Business Insider. Retrieved on February 7, 2020, from https://www.businessinsider.com/juul-raises-700-million-in-debt-financial-strain-2020-2
- Snouwaert, J. (2020). Altria bet almost $13 billion on Juul, now it's paying the price with $4.1 billion in impairment charges. Business Insider. Retrieved on February 7, 2020, from https://www.businessinsider.com/altria-takes-impairment-charge-on-juul-investment-2020-1
- TruthInitiative. (2020). What are Puff Bars? Retrieved on February 7, 2020, from https://truthinitiative.org/research-resources/emerging-tobacco-products/what-are-puff-bars