Incentives to reduce youth tobacco use will be most powerful if penalties for failure to achieve goals fall hardest on those firms making brands attractive to underage users. If youth tobacco initiation goals are not met, financial penalties should be targeted to manufacturers, based on brands used disproportionately by youths.21 The board recommends that payments triggered by failure to reach public health goals should be structured into any federal legislation. A flat excise tax, based on the weight of the tobacco content, does not provide this incentive because each firm retains the incentive to lure young smokers, thus building a future market, yet penalties are distributed evenly across all tobacco products.

Even states with active tobacco control campaigns have seen increases in tobacco use among young people in recent years, although at rates lower than the national average.22 These states, however, have not seen tax increases of the magnitude now contemplated. Effects of Alaska's tax increase to $1 per pack that went into effect in October, Hawaii's two-step increase scheduled to reach $1 per pack in June, and New Jersey's recently doubled tobacco tax (to $0.80 per pack) should generate data soon, but those increases are still only half the increment recommended by the board. If an initial tax increase (or settlement payment) of $2 per pack (and the equivalent for other tobacco products) fails to reduce use among youths to target levels, payments from firms making brands popular among should be increased to induce further price increases.

STRENGTHEN FEDERAL REGULATION

FDA must continue to regulate tobacco products, and the U.S. Congress must strengthen and clarify FDA's role.

In 1994, IOM recommended that the U.S. Congress enact a comprehensive regulatory statute delegating to an appropriate agency "the necessary authority to regulate tobacco products, for the dual purpose of discouraging consumption and reducing the morbidity and mortality associated with use of tobacco products." The report recommended that the agency be authorized to regulate the design and constituents of tobacco products, and specifically discussed the possibility of setting and gradually reducing ceilings on the nicotine content of tobacco products. FDA was noted as one agency that could exercise the recommended authority. The board believes subsequent events have demonstrated that FDA is the logical lead for tobacco regulation.

A year after the release of the IOM report, FDA formally proposed to regulate tobacco products using its existing authority under the Food, Drug, and Cosmetics Act. The agency enacted final regulations in 1996. FDA's Tobacco Rule regulates the advertising and marketing of tobacco products and the distribution of these products to minors, but it does not address the design and constituents of tobacco products. If the courts uphold FDA's assertion of jurisdiction over tobacco products, the agency will have broad authority to move beyond the current rule to regulate the design and content of tobacco products as well.



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Incentives to reduce youth tobacco use will be most powerful if penalties for failure to achieve goals fall hardest on those firms making brands attractive to underage users. If youth tobacco initiation goals are not met, financial penalties should be targeted to manufacturers, based on brands used disproportionately by youths.21 The board recommends that payments triggered by failure to reach public health goals should be structured into any federal legislation. A flat excise tax, based on the weight of the tobacco content, does not provide this incentive because each firm retains the incentive to lure young smokers, thus building a future market, yet penalties are distributed evenly across all tobacco products. Even states with active tobacco control campaigns have seen increases in tobacco use among young people in recent years, although at rates lower than the national average.22 These states, however, have not seen tax increases of the magnitude now contemplated. Effects of Alaska's tax increase to $1 per pack that went into effect in October, Hawaii's two-step increase scheduled to reach $1 per pack in June, and New Jersey's recently doubled tobacco tax (to $0.80 per pack) should generate data soon, but those increases are still only half the increment recommended by the board. If an initial tax increase (or settlement payment) of $2 per pack (and the equivalent for other tobacco products) fails to reduce use among youths to target levels, payments from firms making brands popular among should be increased to induce further price increases. STRENGTHEN FEDERAL REGULATION FDA must continue to regulate tobacco products, and the U.S. Congress must strengthen and clarify FDA's role. In 1994, IOM recommended that the U.S. Congress enact a comprehensive regulatory statute delegating to an appropriate agency "the necessary authority to regulate tobacco products, for the dual purpose of discouraging consumption and reducing the morbidity and mortality associated with use of tobacco products." The report recommended that the agency be authorized to regulate the design and constituents of tobacco products, and specifically discussed the possibility of setting and gradually reducing ceilings on the nicotine content of tobacco products. FDA was noted as one agency that could exercise the recommended authority. The board believes subsequent events have demonstrated that FDA is the logical lead for tobacco regulation. A year after the release of the IOM report, FDA formally proposed to regulate tobacco products using its existing authority under the Food, Drug, and Cosmetics Act. The agency enacted final regulations in 1996. FDA's Tobacco Rule regulates the advertising and marketing of tobacco products and the distribution of these products to minors, but it does not address the design and constituents of tobacco products. If the courts uphold FDA's assertion of jurisdiction over tobacco products, the agency will have broad authority to move beyond the current rule to regulate the design and content of tobacco products as well.

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The courts may or may not ratify FDA's jurisdiction over tobacco products. On April 25, 1997, Federal District Court Judge William Osteen upheld FDA's assertion of jurisdiction, but he struck down certain provisions. That ruling is now on appeal to the Fourth U.S. Circuit Court of Appeals. The case is likely to be reviewed by the U.S. Supreme Court. This process might take several years, and the outcome cannot be predicted with confidence. Moreover, even if FDA's jurisdiction over tobacco products is upheld, its scope of authority under existing law is likely to remain uncertain. Although the district court upheld the agency's regulation of distribution to minors, for example, it held that the act did not empower the agency to regulate the advertising and marketing of tobacco products. In light of the indeterminacy of FDA's existing legal authority—and the imperfect fit between the unique challenges of tobacco control and the regulatory regime set up under the Food, Drug, and Cosmetics Act—national policy would be clearer if Congress were to enact a specific regulatory statute for tobacco products, as recommended in the 1994 IOM report. Congressional action would avoid wasteful and unnecessary litigation and would establish a strong political and legal foundation for future regulatory initiatives. Congress must also appropriate funding to FDA commensurate with its authority. The settlement proposes that FDA regulatory authority expand beyond the terms of the settlement only if FDA can establish that such measures will not create a black market. Proving that something that already exists in many countries will not occur here is an unreasonable burden and would hamstring FDA before it is clear whether the current regulations and new measures proposed in the settlement will achieve their goals. Moreover, it is also premature to foreclose any regulatory authority until there has been full public disclosure of information about the health risks and addictive potential of tobacco products. Congress, FDA, and the public need time to review information currently held by private firms and their attorneys before making irrevocable choices about regulatory strategy and regulatory authority. The need for congressional action regarding FDA's efforts to restrict tobacco advertising, promotion, and marketing is particularly urgent. Most FDA provisions restricting advertising and promotion are in abeyance pending the federal appeals court decision, and there will be further delay if the case goes to the U.S. Supreme Court. Advertising and promotion constraints may not have dramatic short-term effects, but they are integral parts of all successful tobacco control efforts in states and foreign countries and must be part of any long-term U.S. national tobacco control program. The 1994 IOM report recommended comprehensive regulation of advertising and promotion that tends to encourage young people to use tobacco products. Recommendations included restricting advertisements to text-only format and bans on promotional campaigns attractive to youths. Although the FDA regulation implements many of these ideas, the federal district court ruled that the agency does not have the statutory authority to regulate tobacco advertising and marketing, without even reaching the industry's argument that these regulations violate the First Amendment to the Constitution. Even if the agency's jurisdiction to regulate youth access to tobacco products is upheld, FDA's scope of authority over advertising and marketing will be in litigation for many years. Congressional action to implement IOM's 1994 recommendations would expedite the nation's tobacco control agenda by many years.