The U.S. Food and Drug Administration announced a plan on Friday to reduce tobacco-related disease and death by increasing regulations on tobacco and nicotine products. The FDA is seeking to lower nicotine levels in cigarettes to non-addictive levels.
In reaction to this news, Tobacco stocks plunged in morning trading. Shares of Altria Group (MO - Free Report) , which makes Marlboro and Parliament brand cigarettes, fell 11% after the announcement. Shares of Gillia tumbled 7% while British American Tobacco (BTI - Free Report) stock plunged 9%. Meanwhile, Vector Group (VGR - Free Report) shares fell 5% and Philip Morris (PM - Free Report) stock was down 1% in the same time frame.
The FDA’s regulation targets the addictive nature of cigarettes, which could hurt the profitability of tobacco companies. However, the FDA views these regulations as a way to encourage development of innovative tobacco products that may be less dangerous than cigarettes.
“The overwhelming amount of death and disease attributable to tobacco is caused by addiction to cigarettes—the only legal consumer product that, when used as intended, will kill half of all long-term users,” FDA Commissioner Scott Gottlieb said in a statement.
“Envisioning a world where cigarettes would no longer create or sustain addiction, and where adults who still need or want nicotine could get it from alternative and less harmful sources, needs to be the cornerstone of our efforts—and we believe it’s vital that we pursue this common ground.”
The agency also announced plans to delay a policy that requires makers of e-cigarettes, or electronic nicotine delivery systems (ENDS), to get agency approval for their products. To help spur industry innovation, products that were on the market as of August 8th, 2016, do not need to submit applications until 2022.
The agency said it will issue guidance to describe a new enforcement policy “shortly” as it begins a public discussion around lowering nicotine levels. The FDA has not said what level of nicotine it is aiming for.
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