Tobacco

1/ Includes Salaries & Expenses, Rent, and PDUFA, where applicable.

EXPLANATION OF PROGRAM

The Tobacco Program seeks to promote and protect the health of our nation's youth by reducing the number of young people who begin to use and become addicted to tobacco products each year. The Agency's approach to the tobacco initiative combines a focus on supply and demand so that the problem is addressed comprehensively and reduces the number of illegal purchases.

FDA's long-term goal is a 50 percent decline in young peoples' use of tobacco within seven years of full program implementation, using a threefold strategy of enforcement and evaluation, compliance outreach, and product regulation. This is accomplished through reducing the access and appeal of tobacco products to young people, enlisting retailers' and other stakeholders' assistance in these efforts, and developing regulatory procedures for cigarettes and smokeless tobacco products.

On August 23, 1996, FDA issued its final regulation restricting the sale and marketing of nicotine-containing cigarettes and smokeless tobacco products. The rule contained a comprehensive set of provisions that limit young people's access to tobacco products, as well as restrictions on the marketing of these products to minors. The rule was the culmination of an intense multi-year investigation that sought to determine if FDA has jurisdiction over these products, and if so, what form the regulation should take.

The cigarette, smokeless tobacco, advertising and retail industries, and others brought suit in the United States District Court for the Middle District of North Carolina (Greensboro Division) to invalidate FDA's assertion of jurisdiction and enjoin its regulations. Argument was heard on February 10, 1997, and the Court issued its decision on April 25, 1997, upholding FDA's jurisdiction and its access and labeling regulations. The Court held that the statutory provision relied on by FDA does not provide FDA with authority to regulate advertising and promotion of tobacco products. Furthermore, the court delayed implementation of all remaining provisions, pending appeal, except those for age and photo identification that had gone into effect on February 28, 1997.

Both the government and plaintiffs appealed to the United States Court of Appeals for the Fourth Circuit. On August 13, 1998, the Fourth Circuit issued its decision finding the FDA's assertion of jurisdiction and issuance of regulations invalid. On April 26, 1999, the US Supreme Court granted the Petition for a Writ of Certiorari filed by the Solicitor General. The Supreme Court heard oral arguments on December 1, 1999, and a decision is expected by summer 2000. The granting of the petition continues a stay of the issuance of the Fourth Circuit's mandate while the Supreme Court considers the case. The age and identification provisions of FDA's tobacco rule have been in effect since February 1997, therefore remain in effect pending the Supreme Court's final decision.

FY 2001 BUDGET REQUEST

SPECIAL PROGRAM INITIATIVES

Enforcement and Evaluation + $3.0 million

• The Agency will expand its enforcement program by conducting 225,000 compliance checks, a 12½ percent increase over the number scheduled to be conducted in FY 2000. This will allow FDA to inspect 28 percent * of identified retail outlets at least once, and re-inspect 100 percent of retailers found in violation within three months of providing notice of the violation or of adjudication of a civil monetary penalty. (Tobacco Performance Goal # 1)

• FDA will create targeted demonstration-enforcement areas, where random inspections will be conducted, while being subject to intense outreach and enforcement efforts. This will allow FDA to measure the effectiveness of different mixes of interventions on illegal sales of tobacco products to minors. (Tobacco Performance Goal # 1)

• Assuming other parts of the tobacco regulation are in effect, the Agency will increase investigators' responsibilities during each visit to include checking on the removal of vending machines and self-service displays and illegal advertising.

Increase by 14 percent the number of compliance checks conducted in FY 2001 to 228,000 and conduct follow-up compliance checks of 100 percent of retailers found to be in violation of the rule.¹

¹ We have attempted to align the budget request and performance plan goals. All italicized items represent performance goals in the Agency's performance plan, with the specific reference following. More information on these goals and past performance can be found in the performance plan. * This number assumes 800,000 tobacco retailers; estimates range from 500,000 to 1.5 million retailers.

Compliance Outreach +$2.0 million, 0 FTE

• Enhance outreach activities by: Advertise via TV, radio, newspapers and billboards reminding retailers of their responsibility; Increase to 50 the number of major markets where intensive advertising campaigns are conducted to evaluate the effectiveness of the ongoing campaign in reducing illegal sales; Create new retailer materials specifically designed for different types of retail outlets such as grocery stores, pharmacies and gas stations; and distribute new retailer kits to 200,000 retailers, which include explanations of the requirements, and posters and materials that help explain the rules to customers to defuse customer anger or anxiety. (Tobacco Performance Goal # 2)
• Increase the retailer recognition program to 10,000 retailers by: Distributing direct mail pieces and provide kits to retailers who request them. (Tobacco Performance Goal # 2)

Maintain the percentage of known retailers of cigarettes and smokeless tobacco products who are aware of the FDA tobacco rule at no less than 90 percent and double the percentage of retailers who understand the age and ID provisions and the consequences of not complying with the rule in all markets subject to the intensified media campaign.

JUSTIFICATION OF BASE

The FY 2000 budget included $34,000,000 for implementation of the age and photo identification requirements of this regulation, as well as the implementation of other provisions of the rule as they become effective. During FY 2000, FDA will primarily engage in three activities: enforcement, compliance-based outreach, and product regulation.

The FY 2000 goals for the tobacco program build on the progress made toward enforcing the tobacco rule. Implementation and enforcement of FDA's tobacco regulation is a central component of the President's Initiative on tobacco. FDA plans to ensure fundamental progress in all States - in partnerships with State and local authorities - to reduce young people's use of tobacco products.

Enforcement and Evaluation

A key influence on a retailer's decision to comply with a new legal requirement is the extent to which the individual perceives he or she is likely to be found in violation. The Agency has developed a general enforcement strategy aimed at conducting compliance checks in each retail outlet that sell tobacco products. Under the current enforcement plan, those retailers who do not make a sale receive a letter informing them that they are in compliance with the rule. To enforce the rule:

• FDA inspects retail facilities and takes enforcement actions against those establishments found to have violated the age and identification restrictions. (Tobacco Performance Goal # 1)
• FDA contracts with and commissions State and local officials to conduct inspections. The FDA regional staff train the designated officials as each new State contract is signed, with subsequent training to be conducted by the State and local officials, as the need arises. Under contracts signed in FY 1999, FDA inspections will be conducted in all 50 States, Washington, DC, American Samoa, and the Virgin Islands in FY 2000. (Tobacco Performance Goal # 1)

Increase by 14 percent the number of compliance checks conducted in FY 01 to 228,000 and conduct follow-up compliance checks of 100 percent of retailers found to be in violation of the rule.

Compliance Outreach

A strong outreach program is one of the most effective ways to increase compliance with this rule. FDA is conducting a national advertising campaign aimed at raising retailers' awareness of the new regulations and motivating them to comply. The campaign's primary target audience is managers and clerks in stores that sell tobacco. In FY 1999, the Agency received the marketing industry's highest honor for effective advertising, the EFFIE Award, for its 1998 compliance-based advertising and education campaign. The FY 2000 compliance outreach efforts build on the success of the earlier campaign to ensure that those directly affected by this rule understand what their responsibilities are, why such measures are needed, and the consequences associated with noncompliance. Under the current outreach plan:

• FDA is creating, producing and distributing a multimedia advertising campaign in up to 40 top media markets for a four-week flight. The campaign includes 2 radio, 1 TV, 3 billboard, and 3 print advertisements. (Tobacco Performance Goal # 2)
• FDA is distributing to retailers 150,000 free retailer kits and 400,000 direct mail pieces that inform retailers about the program and encourage them to use the in-store materials. (Tobacco Performance Goal # 2)
• FDA is pilot testing a program that will publicly recognize 3,000 retailers across the country who refuse to sell cigarettes or smokeless tobacco to youth. (Tobacco Performance Goal # 2)
• FDA plans to participate in 30 retailer or other trade shows and hold up to 60 one-on-one meetings with retailers to educate them about the program and respond to their questions or concerns. (Tobacco Performance Goal # 2)

Maintain the percentage of known retailers of cigarettes and smokeless tobacco products who are aware of the FDA tobacco rule at no less than 90 percent and double the percentage of retailers who understand the age and ID provisions and the consequences of not complying with the rule in all markets subject to the intensified media campaign.

Product Regulation

The Agency is exploring questions associated with product regulation, including classification and quality system regulations, to ensure that the health consequences of tobacco products or their ingredients, additives or constituents are made less harmful in order to reduce the death and disease caused by tobacco use.

Tobacco

Selected FY 1999 Accomplishments

Enforcement

• Solicited bids from 57 States and territories to contract with FDA to conduct compliance checks. FDA exceeded its contracting goals by signing contracts that will result in compliance checks being conducted in all 50 States and 3 Territories. Many States increased the number of checks and the area in which they would be conducted.
• Achieved a 166 percent increase in the number of compliance checks. This increase is attributed to the increase in the number of States under contract, the level of efficiency in conducting compliance checks gained through experience, and the use of automation. Existing contracts resulted in a total of 107,200 compliance checks completed, five percent of which were re-inspections of retailers found to have violated the rule. 
• Increased the number of civil monetary penalty cases filed by almost 1,000 percent. FDA began seeking civil monetary penalties from retailers who were found to have violated the age and identification restrictions for a third time. 
• Provided retailers with a mediation procedure to resolve civil monetary penalty complaints and avoid litigation. Many retailers found to have violated the rule more than once have been small businesses, such as individual proprietorships, small convenience stores, or gasoline stations. During a mediation conference call, the mediator offers the retailer suggestions for preventing future violations, and has resulted with almost all cases settling to the satisfaction of the retailer and has been favorably viewed by retailers. 
• FDA designed and installed a computer system equipped to print compliance check forms for each State with the names of the retailers to be inspected; receive and track results of the investigations; print compliance letters and Notices of Violations; and establish and maintain the legal record for later civil monetary penalty proceedings. It is estimated that between 500,000 and 1.5 million retailers may sell tobacco. Although several States have license records for retailers, many States have either inadequate or nonexistent lists. Designed a computer system to automate the program's processes and to develop and maintain a list of retailers selling tobacco in each State.

Outreach

Received the marketing industry's highest honor for effective advertising, the EFFIE Award for its compliance-based advertising and education campaign designed to ensure retailer compliance, and to boost retailer awareness of the regulation. This multi-faceted program consists of free retailer materials, radio, print, and billboard ads, direct mail, exhibits and speeches, and a toll-free hotline. FDA also developed a TV ad for the campaign.

• Increased the scope and reach of the advertising campaign. Retailers and sales clerks are the primary target audience for this campaign. In addition to reminding retailers and sales clerks not to sell to minors and to check young peoples' photo identification, the campaign also urges customers to cooperate with retailers attempting to meet their responsibilities to help keep young people tobacco-free. 
• Participated in national meetings held by the retail industry and health professionals to explain retailers' responsibilities under the regulation and respond to their questions and concerns. Displayed exhibits at four major retailer conferences and provided free in-store materials to help their clerks comply with the age and identification requirements. Continued to participate in conferences held by health professionals and delivered speeches at events and conferences across the country.

Product Regulation

• Commissioned the Institute of Medicine (IOM), a member of the National Academy of Sciences, to convene a national panel of experts to study tobacco issues, and their impact on public health. The IOM will assemble a panel of senior experts in fields such as chronic disease epidemiology, cardiac and pulmonary physiology, device and regulatory law, nicotine addiction, clinical medicine, pharmacology and toxicology, and health risk perception, and will produce a report to better evaluate the scientific and regulatory issues raised by drug and tobacco products.

Edited 3/1/2000