Tuesday, June 16, 2009

The FDA and Tobacco.

The FDA is now responsible for tobacco control. This raises some interesting questions:

1. Philip Morris is on board:

“Philip Morris USA, the nation's largest tobacco company, came out in support of the bill, saying it was behind tough but fair regulation. Its chief rivals were opposed, saying that FDA restrictions on new products would lock in Philip Morris' share of the market.

Costs of the new program will be paid for by a new user fee imposed on the industry. The Congressional Budget Office estimated that assessments could rise from $235 million in 2010 to $712 million in 2019.”

This is because, as the largest producer, Philip Morris will benefit from having additional fixed costs imposed on the entire industry. These additional regulatory costs and fees will fall much harder on the smaller companies than on Philip Morris, so this is essentially a means to protect their market share from competition.

Straight out of the crony capitalism playbook. Large corporations hate capitalism, because capitalism means competitors. It’s easier to get Congress to keep out your rivals than have to meet them in the marketplace. Congress also likes this, because it means a) they get to be perceived as doing something, which means positive media coverage, b) they improve their political contributions, and c) they can land lucrative jobs for their cronies, as well as personal sinecures after leaving office.

2. Given what we know about cigarettes and tobacco use, the mildest of which is that it isn’t good for you, and the consensus opinion that large percentages of regular smokers will contract lung cancer, emphysema, heart problems, or some other life threatening condition, the FDA is logically forced into considering banning the substance entirely.

After all, this stuff kills people, right?

However, the national socialist angle now comes into play. Both the Federal Government and the States are significant partners in the tobacco business, either through litigation or outright taxation. A ban on domestic tobacco sales would negatively impact government revenues at almost all levels.

Regardless of what the FDA believes to be the public health consequences of tobacco use, they are extremely unlikely to do anything that will negatively impact the government’s revenue stream.