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FDA starts collecting fees from tobacco companies

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FDA starts collecting fees from tobacco companies

The Food and Drug Administration on Thursday began collecting millions in fees from the nation’s tobacco companies to help fund the agency’s newly granted authority to regulate the industry.

The user fees, which will be collected quarterly, are based on each company’s share of the U.S. tobacco market. The FDA will collect about $23 million for fiscal 2009. That will rise to $235 million in 2010 and grow to $712 million by 2019.

The FDA would not disclose the assessments for specific companies.

Stifel, Nicolaus & Co. analyst Christopher Growe said in a note to investors that Richmond, Va.-based Altria Group Inc., owner of market-leading Philip Morris USA, would be responsible for about 50 percent of the fees.

FDA spokeswoman Kathleen Quinn said the fees will be used to fund the Center for Tobacco Products, the agency’s group tasked with regulating tobacco. The fees will pay for staffing, offices, systems that will be used to register products and outside contractors.

In June, President Barack Obama signed the law that allows the FDA regulate the industry. Its authority includes the ability to ban certain products, reduce nicotine in tobacco products and block labels such “low tar” and “light.” Tobacco companies also will be required to cover their cartons with large, graphic warnings.

The law doesn’t let the FDA ban nicotine or tobacco outright.

The Congressional Budget Office estimated in June that the law would reduce the number of underage tobacco users by 11 percent by 2019 and lead to a 2 percent decline in smoking among adults.

Altria supported the legislation, while its chief rivals — No. 2 Reynolds American Inc. and No. 3 Lorillard Inc., both based in North Carolina — opposed it. The latter two have joined in a lawsuit with other smaller tobacco companies challenging specific marketing regulations of the law.

The nation’s tobacco companies already pay $1.01 per pack that it sells for federal excise taxes, and the top cigarette makers also make yearly payments as part of the landmark 1998 tobacco settlement to reimburse states for smoking-related health care costs.

In that settlement, tobacco companies agreed to make about $206 billion in annual payments over more than two decades. Companies also make payments as part of legislation that ended the federal tobacco program, a quota program that limited and stabilized the amount of tobacco produced by farmers.

© 2009 Associated Press. Displayed by permission. All rights reserved.

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