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pdfDEPARTMENT OF HEALTH AND HUMAN SERVICES
Food and Drug Administration
Tobacco Product Standard for Nicotine Yield of
Cigarettes and Certain Other Combusted Tobacco
Products
Docket No. FDA-2024-N-5471
Preliminary Regulatory Impact Analysis
Initial Regulatory Flexibility Analysis
Unfunded Mandates Reform Act Analysis
Economics Staff
Office of Economics and Analysis
Office of Policy, Legislation, and International Affairs
Office of the Commissioner
0
Table of Contents
I. Introduction and Summary ..................................................................................................... 5
A. Introduction ......................................................................................................................... 5
II.
B.
Overview of Benefits, Costs, and Transfers ....................................................................... 5
C.
Terminology ...................................................................................................................... 10
A.
Preliminary Economic Analysis of Impacts ......................................................................... 14
Background ....................................................................................................................... 14
B.
Need for Federal Regulatory Action ................................................................................. 16
1.
Discussion of Tobacco Market Failure ......................................................................... 16
2.
How This Proposed Rule Addresses the Market Failure .............................................. 18
C.
Purpose of the Proposed Rule ........................................................................................... 18
D.
Nicotine Population Health Model Discussion ................................................................. 19
E.
Baseline Conditions .......................................................................................................... 24
1.
Prevalence Trends ......................................................................................................... 24
2.
Premature Deaths Attributable to Various Types of Tobacco Products ....................... 28
3.
Sales Revenue and Market Trends ................................................................................ 32
4.
Number of Affected Entities and Products ................................................................... 38
5.
a.
b.
c.
6.
F.
Current Manufacturers .............................................................................................. 38
Other Affected Entities ............................................................................................. 39
Number of Affected Products ................................................................................... 41
Federal and State Excise Taxes..................................................................................... 42
User Fees ....................................................................................................................... 47
Estimated Impacts of the Nicotine Product Standard on Tobacco Use ............................ 50
1.
Prevalence of Tobacco Product Use ............................................................................. 51
2.
Changes in Quantity Sold of Affected Tobacco Products ............................................ 52
3.
Premature Deaths Avoided ........................................................................................... 56
4.
Quality-Adjusted Life Years Gained ............................................................................ 61
5.
Limitations and Assumptions of this Modeling Approach ........................................... 62
G.
Benefits of the Proposed Rule........................................................................................... 65
1.
Monetized Avoided Tobacco Attributable Premature Deaths ...................................... 65
a.
Benefits from Avoided Tobacco-Attributable Premature Deaths ............................. 66
1
b. Benefits from Avoided Premature Deaths due to Reductions in Secondhand Smoke
Exposure ........................................................................................................................... 67
c. Benefits from Avoided Smoking-Related SIDS Deaths ........................................... 69
d. Benefits from Avoided Smoking-Related Fires ........................................................ 70
e. Benefits from Avoided Cigar Attributable Premature Deaths .................................. 72
f. Benefits from Avoided Pipe Tobacco Attributable Premature Deaths ..................... 73
2. Monetized Morbidity Benefits ...................................................................................... 75
3.
Summary of Monetized Benefits .................................................................................. 76
4.
Additional Discussion of Benefits ................................................................................ 77
a. Medical Cost Savings ............................................................................................... 78
b. Reduced Exposure to Thirdhand Smoke................................................................... 80
c. Environmental Benefits – Changes in Tobacco Litter .............................................. 80
d. Improvements in Health-Related Quality of Life ..................................................... 81
Costs of the Proposed Rule ............................................................................................... 81
H.
1.
Cost to Industry ............................................................................................................. 82
a.
b.
Economic Transition Cost......................................................................................... 82
Producer Surplus Loss .............................................................................................. 86
1.
Producer Surplus Assuming a Hypothetical Competitive Market and a Constant
Price 87
2.
Producer Surplus Assuming a High Degree of Market Concentration and
Constant Price ............................................................................................................... 92
c. Reading and Understanding the Rule ....................................................................... 93
d. Manufacturers: Reformulation Costs ........................................................................ 95
e. Labeling Cost .......................................................................................................... 102
f. Cost to Submit Premarket Applications .................................................................. 103
g. Testing costs............................................................................................................ 104
2. Costs to Consumers..................................................................................................... 106
a.
Withdrawal Cost ..................................................................................................... 106
1.
Withdrawal Symptoms and Cravings ................................................................ 106
2.
People Who Quit All Tobacco Use ................................................................... 107
3.
People Who Switch to VLNC Exclusively ....................................................... 110
4.
People Who Switch Between NNC Products .................................................... 111
5.
Summary ........................................................................................................... 111
b. One-Time Search Costs .......................................................................................... 112
c. Utility Change for Consumers ................................................................................ 113
1.
Addictive Nature of Tobacco Products ............................................................. 114
2.
Cigarette Smoking Initiation During Adolescence When the Brain Is Not Yet
Fully Developed and How Most Addiction Begins in Adolescents ........................... 115
3.
Developing Nature of Information About the Health Harms of Smoking ........ 116
2
4.
Tobacco Product Demand Based on Demand for Other Perceived Benefits of
Smoking (Derived Demand) ....................................................................................... 117
5.
Regret Expressed by People Who Currently Smoke Cigarettes, Desire to Quit,
and Cognitive Bias ...................................................................................................... 118
6.
What Role Does Nicotine Play in Discussions of Consumer Surplus for
Combusted Tobacco Products? ................................................................................... 118
7.
Summary ........................................................................................................... 120
Government Enforcement Costs ................................................................................. 121
3.
4.
I.
a.
b.
c.
Federal Enforcement Costs ..................................................................................... 121
State and Local Enforcement .................................................................................. 122
Costs for Premarket Review of New Tobacco Products ......................................... 123
Summary of Costs ....................................................................................................... 123
Transfers Caused by the Proposed Rule ......................................................................... 124
1.
Estimation of Federal and State Excise Tax Revenue Transfers ................................ 125
2.
Transfer of Revenue from Tobacco Products Market to Consumers ......................... 131
3.
Tobacco Manufacturers, Distributors, Retailers, and Growers................................... 136
4.
Impact on Tobacco User Fees ..................................................................................... 139
J.
Analysis of Regulatory Alternatives to the Proposed Rule ............................................ 149
1.
2.
Gradual Reduction in Nicotine ................................................................................... 149
a.
b.
Literature on Gradual versus Immediate Nicotine Reduction ................................ 149
Gradual Reduction Alternative Estimation ............................................................. 149
Change the Effective Date .......................................................................................... 153
3.
Include Waterpipe Tobacco ........................................................................................ 154
4.
Allow for Acceptance Testing of the Nicotine Level ................................................. 155
K.
Distributional Effects ...................................................................................................... 157
1.
2.
3.
L.
Specific Populations.................................................................................................... 157
a.
b.
c.
d.
e.
Children and Adolescents ....................................................................................... 157
Race and Ethnicity .................................................................................................. 158
Socioeconomic Status, Household Income, and Educational Attainment .............. 162
Mental Illness and Substance Use........................................................................... 162
LGBTQI+ Individuals ............................................................................................. 163
Impact on Tribal Governments ................................................................................... 163
Regional Effects .......................................................................................................... 164
International Effects ........................................................................................................ 166
M. Uncertainty, Sensitivity, and Extended Analyses ........................................................... 168
1.
Estimates of this Proposed Standard without Adjusted Baseline ............................... 168
3
2.
Sensitivity Analysis of PHM Modeling Assumptions ................................................ 170
3.
Illicit Trade and Adverse events ................................................................................. 171
4.
Effect of the Policy with Other Tobacco Control Policies ......................................... 173
5.
Estimating Monetized Benefits with VSL Range ....................................................... 174
6.
Sensitivity Analysis on the Value per Statistical Life ................................................ 175
7.
Estimated Monetized Benefits from 2065 to 2100 ..................................................... 177
8.
9.
a.
b.
Estimated Avoided Premature Mortality from 2065 to 2100 ................................. 177
Extended Analysis of Monetized Benefits .............................................................. 179
Accounting for Effects on Capital .............................................................................. 180
Declines in Baseline Cigarette Product Dollar Sales and Unit Sales.......................... 181
III. Initial Small Entity Analysis ............................................................................................... 182
A. Description and Number of Affected Small Entities ...................................................... 183
1.
Tobacco Product Manufacturers ................................................................................. 183
2.
Retailers and Wholesalers ........................................................................................... 184
3.
Small Governmental Jurisdictions .............................................................................. 186
B.
Description of the Potential Impacts of the Rule on Small Entities ............................... 186
1.
Combusted Tobacco Product Manufacturers .............................................................. 187
2.
Noncombusted Tobacco Product Manufacturers ........................................................ 194
3.
Combusted and Noncombusted Tobacco Product Dual Operation Manufacturers .... 197
4.
Retailers and Wholesalers ........................................................................................... 200
5.
Small Governmental Jurisdictions .............................................................................. 200
C.
Alternatives to Minimize the Burden on Small Entities ................................................. 201
IV. References ........................................................................................................................... 204
V. Appendix ............................................................................................................................. 222
A. Main Analysis and Section II.M.1 Analysis under 3 and 7 Percent Discount Rates ...... 223
B.
Literature Review on Economic Transition Costs .......................................................... 225
C.
Consumer Surplus ........................................................................................................... 226
D.
1.
Summary Literature Review: Consumer Surplus in Tobacco Product Use ................ 227
2.
Approaches to Modeling Demand for Tobacco Products ........................................... 228
3.
Challenges with Estimating Consumer Surplus for Tobacco Products ...................... 232
4.
Conclusions ................................................................................................................. 232
Undiscounted Streams of Estimates and Estimates by Product Category ...................... 233
4
I.
Introduction and Summary
A. Introduction
We have examined the impacts of the proposed rule under Executive Order 12866,
Executive Order 13563, Executive Order 14094, the Regulatory Flexibility Act (5 U.S.C. 601612), and the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4).
Executive Orders 12866, 13563, and 14094 direct us to assess all benefits, costs, and
transfers of available regulatory alternatives and, when regulation is necessary, to select
regulatory approaches that maximize net benefits (including potential economic, environmental,
public health and safety, and other advantages; distributive impacts; and equity). Rules are
“significant” under Executive Order 12866 Section 3(f)(1) (as amended by Executive Order
14094) if they “have an annual effect on the economy of $200 million or more (adjusted every 3
years by the Administrator of [the Office of Information and Regulatory Affairs (OIRA)] for
changes in gross domestic product); or adversely affect in a material way the economy, a sector
of the economy, productivity, competition, jobs, the environment, public health or safety, or
State, local, territorial, or tribal governments or communities.” OIRA has determined that this
proposed rule is a significant regulatory action under Executive Order 12866 Section 3(f)(1).
The Regulatory Flexibility Act requires us to analyze regulatory options that would
minimize any significant impact of a rule on small entities. Because businesses, including small
businesses, would incur costs to comply with the proposed product standard, we find that the
proposed rule will have a significant economic impact on a substantial number of small entities.
The Unfunded Mandates Reform Act of 1995 (section 202(a)) requires us to prepare a
written statement, which includes an assessment of anticipated costs and benefits, before
proposing “any rule that includes any Federal mandate that may result in the expenditure by
State, local, and tribal governments, in the aggregate, or by the private sector, of $100,000,000 or
more (adjusted annually for inflation) in any one year.” The 2023 threshold after adjustment for
inflation is $183 million, using the 2023 Implicit Price Deflator for the Gross Domestic Product.
This proposed rule would result in an expenditure in at least one year that meets or exceeds this
amount.
B. Overview of Benefits, Costs, and Transfers
The summary of costs, benefits, and transfers is presented in Table 1. Benefits occur
because the proposed rule would discourage people who do not use tobacco products from
initiating combusted tobacco products and progressing to regular use and increase cessation or
switching to potentially lower risk tobacco products among people who currently use covered
combusted tobacco products and wish to quit. Lower prevalence of combusted tobacco product
use would lead to reduced health consequences for people who formerly used combusted tobacco
5
products and those who were previously exposed to secondhand smoke. The main quantified
benefits come from averted mortality and morbidity as a result of reduced prevalence for people
who currently use combusted tobacco products, and reduced mortality from reduced exposure to
secondhand smoke among people. 1, 2 We use the PHM output to estimate averted mortality and
apply the value of a statistical life according to HHS guidance, while also requesting comment
about our estimates (1). The morbidity estimates come from PHM output that evaluates the
health difference for being in the state of smoking verse not smoking. Unquantified benefits
include medical cost savings, productivity loss savings, reduced exposure to thirdhand smoke,
and environmental impacts. We estimate that the present value of the quantified benefits over a
40-year time horizon ranges between $7.6 trillion and $33.2 trillion with a primary estimate of
$30.6 trillion at a 2 percent discount rate. The primary annualized quantifiable benefits equal
$1.1 trillion at a 2 percent discount rate.
As most of the benefits from avoided initiation among youth and young adults due to this
proposed product standard are expected to fall outside of the 40-year time horizon of the main
analysis, we present an extended analysis over a period beyond the 40-year time horizon to
capture the impact on youth and young adults. The present value of quantified benefits, mostly
attributable to youth and young adults, over this extended period range between $8.4 trillion and
$19.7 trillion with a primary estimate of $19.1 trillion at a 2 percent discount rate. Additionally,
we present the incidence of benefits for specific populations in the Distributional Effects section.
We expect this proposed rule, if finalized, to impose costs on industry to follow the
product standard, on the broader economy to repurpose land, labor, and capital, on consumers
impacted by the product standard, and on FDA to enforce this product standard. The tobacco
market faces a one-time primary cost with a present value of $374 million at a 2 percent discount
rate (low impact scenario estimate of $112 million to a high impact scenario estimate of $700
million) to read and understand the rule. 3 We use the PHM output on prevalence to estimate the
baseline and policy market size. These estimates feed into cost estimates, such as lost producer
surplus. Producers of combusted tobacco products incur a primary annualized producer surplus
loss of $1.7 billion (low impact scenario of $0.2 billion and a high impact scenario of $2 billion)
at a 2 percent discount rate. We expect that some manufacturers would reformulate their
products to comply with this standard. We estimate a one-time reformulation cost with a present
value of $0.6 billion (low impact scenario estimate of $8.8 billion to a high impact scenario
Please see our sensitivity analyses in Section II.M.5 and Section II.M.6 for a discussion of several additional
sources of uncertainty that could result in the VSL approach underestimating or overestimating the benefits of the
proposed rule.
3
For the purposes of this PRIA, we use the population health model (PHM) to estimate impacts for a range of
averted mortality and tobacco prevalence. The “high impact scenario”, generally referred to as the upper bound,
corresponds to the scenario where the policy has 95th percentile averted mortality projected by the PHM, which also
corresponds with the lowest (5th percentile) post-policy combusted tobacco prevalence. For some costs (product
reformulation, premarket submission, and review, and testing costs), the “upper bound” corresponds to the scenario
with the fewest products and, thus, would reflect the lowest estimate of costs.
2
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estimate of $0.04 billion). Manufacturers that reformulate would collectively incur a one-time
cost to submit their new tobacco product for FDA review, estimated at a present value of $1
million at a 2 percent discount rate (low impact scenario estimate of $15 million to a high impact
scenario estimate of $0.1 million). In addition, these manufacturers would also incur recurring
costs to test the nicotine level of their products with a primary annualized estimate of $0.3
million (low impact scenario estimate of $1.9 million to a high impact scenario estimate of $0.1
million) at a 2 percent discount rate. We estimate a one-time cost for FDA to review submissions
for new tobacco products at a present value of $1.0 million at a 2 percent discount rate (low
impact scenario estimate of $15.3 million to a high impact scenario estimate of $0.1 million).
The economy faces a one-time economic transition cost with a present value of $7.2 billion at a 2
percent discount rate (low impact scenario estimate of $4.3 billion to a high impact scenario
estimate of $9.1 billion) to reallocate productive resources (such as labor and capital) currently
devoted to the manufacture of normal nicotine content (NNC) covered combusted tobacco
products to other tobacco products or to non-tobacco products. We estimate transition cost based
on average industry capital expenditures and literature on the cost of labor transition. Consumers
of NNC covered combusted tobacco products would face a one-time search cost with a present
value of $1.4 billion at a 2 percent discount rate (low impact scenario estimate of $0.46 billion to
a high impact scenario estimate of $2.8 billion) to find other tobacco products or nicotine
replacement therapy as a replacement for the prohibited NNC products. We estimate one-time
withdrawal costs for consumers who quit tobacco products, with a primary estimate present
value of $1.4 billion at a 2 percent discount rate (low impact scenario estimate of $0.02 billion to
a high impact scenario estimate of $8.9 billion). We estimate additional costs associated with
FDA enforcement of the product standard to range from an annualized value of $3.3 million to
$7 million at a 2 percent discount rate. Unquantified costs may include changes in consumer
surplus for some people who smoke NNC products, including potential utility changes for
consumers who switch from NNC to very low nicotine content (VLNC) combusted tobacco
products. The present value of the costs over a 40-year time horizon has a primary estimate of
$58 billion (low impact scenario estimate of $19.3 billion to a high impact scenario of $76.2
billion) at a 2 percent discount rate. The primary estimates for the annualized costs are $2.1
billion at a 2 percent discount rate.
In addition to benefits and costs, this rule would cause transfers from the Federal
Government, state governments, and from firms to consumers, who in turn would spend this
money in other sectors of the economy (including savings), in the form of reduced revenue and
tax revenue. We also estimate transfers between or within firms to cover shifts in user fee
obligation. The primary estimate for the annualized transfers from the Federal Government to
consumers, in the form of reduced excise tax, ranges from $1.4 billion to $4.3 billion, with a
primary estimate of $4.1 billion at a 2 percent discount rate. The primary estimate for the
annualized transfers from state governments to consumers, in the form of reduced excise tax,
ranges from $2.8 billion to $8.9 billion, with a primary estimate of $8.4 billion at a 2 percent
discount rate. The primary estimate for the annualized transfers from the firms to consumers, in
7
the form of reduced revenue, is $20.0 billion at a 2 percent discount rate (low impact scenario of
$6.2 billion; high impact scenario of $17.6 billion). The primary estimate for the annualized user
fee obligation shifted from combusted tobacco products to noncombusted tobacco products has a
range from $26.3 million to $461.1 million with a primary estimate of $332.6 million at a 2
percent discount rate. Transfers are summarized in Table 1.
Table 1. Summary of Benefits, Costs, and Distributional Effects of the Proposed Rule (Millions
of 2023 Dollars over a 40-Year Time Horizon)
Category
Primary
Estimate
Low
Estimate
High
Estimate
Dollar
Year
Discount
Rate
Time
Horizon
Notes
2025 –
2064 (40
years)
See
footnot
e4
BENEFITS
Annualized
monetized
benefits
Unquantified
benefits
$1,097,053
$273,521
$1,190,582
2023
2%
Medical cost savings, productivity loss savings, reductions in smoking-related fires
(excluding mortality), reduced litter, and other associated harms to the environment
COSTS
Annualized
monetized costs
Unquantified
costs
$2,077
$690
$2,729
2023
2%
2025 –
2064 (40
years)
Changes in consumer surplus for some people who smoke normal nicotine content
combusted tobacco products, including potential utility changes for consumers who
switch from NNC to VLNC combusted tobacco products.
TRANSFERS
Annualized
monetized
Federal
$4,092
$1,386
$4,313
2023
2%
2025 –
2064 (40
years)
FDA notes that these results hinge on an expert elicitation in which the experts were provided peer reviewed
literature on VLNC and NNC cigarette use in experiments. The literature and the expert elicitation specifically
referenced the nicotine level of 0.4mg/g. However, due to the nature of variation in agricultural products, in 22nd
Century Group, Inc.’s modified risk tobacco product applications, the company reported that after 9 years of
sampling by the company, the average nicotine content of its genetically engineered VLNC tobacco is 0.6 mg
nicotine per gram of total tobacco, with a range of 0.4 to 0.7 mg nicotine per gram of total tobacco. It is likely that
the Quest and SPECTRUM Nicotine Research Cigarettes, used throughout the scientific literature that referred to
the 0.4 mg nicotine per gram, also contained between 0.4 to 0.7 mg nicotine per gram of total tobacco (262). This
suggests the literature the experts reviewed studied cigarettes in the range of 0.4-0.7mg/g as opposed to only
0.4mg/g. Therefore, the results of the expert elicitation are still applicable to a nicotine level of 0.7mg/g. Given our
undated understanding of the true nicotine level in the available VLNC cigarettes, the forthcoming updated expert
elicitation will ask about 0.7 mg/g. For reference, Nicotine content in the top 100 cigarette brands (2017) is 17.2
mg/g (261).
4
8
budgetary
transfers
Bearers of
transfer gain
and loss?
Annualized
monetized State
budgetary
transfers
Bearers of
transfer gain
and loss?
Other
annualized
monetized
transfers
Bearers of
transfer gain
and loss?
Other
annualized
monetized
transfers
Bearers of
transfer gain
and loss?
Transfers of Excise Tax Revenues from Federal Governments to Consumers
$8,414
$2,848
$8,877
2023
2%
2025 –
2064 (40
years)
Transfers of Excise Tax Revenues from State Governments to Consumers
$19,964
$6,235
$17,603
2023
2%
2025 –
2064 (40
years)
2%
2025 –
2064 (40
years)
Transfers of Revenues from Tobacco Firms to Consumers
$333
$26
$461
2023
Transfers from User Fees Owed by Combusted Tobacco Firms to User Fees Owed by
Noncombusted Tobacco Firms
NET BENEFITS
Annualized
monetized net
benefits
$1,094,976
$272,831
Category
$1,187,853
2023
2%
2025 –
2064
(40
years)
Effects
Effects on State,
local, or Tribal
governments
Significant transfer of tax revenues for state governments. Potential
transfer of tax revenue for local and tribal governments.
Effects on small
businesses
Significant revenue reductions and compliance costs for small, combusted
tobacco product manufacturers. We expect most small, combusted
manufactures would shut down or switch industries.
Effects on wages
No significant wage impacts.
9
Notes
Effects on growth
Anticipated growth in the noncombusted tobacco sector.
We request comment on our estimates of benefits, costs, and transfers of this proposed rule.
C. Terminology
In Table 2, we discuss several terms used in this preliminary regulatory impact analysis
and in Table 3 we define abbreviations used through this document.
Table 2. Terms Used in the Preliminary Regulatory Impact Analysis
Term
Description
We, our, us
We use these terms to refer to the United States Food and Drug
Administration.
ENDS
Electronic Nicotine Delivery Systems (ENDS) that deliver aerosolized eliquid when inhaled. Generally, ENDS include e-cigarettes and vape pens.
Cigarette
As defined in Section 900(3) of the Federal Food, Drug, & Cosmetic Act
(FD&C Act) (21 U.S.C. 387(3)) and in this rule, the term “cigarette” (1)
Means a product that: (i) is a tobacco product and (ii) meets the definition
of the term “cigarette” in Section 3(1) of the Federal Cigarette Labeling
and Advertising Act (15 U.S.C. 1332(1)); and (2) Includes tobacco, in any
form, that is functional in the product, which, because of its appearance,
the type of tobacco used in the filler, or its packaging and labeling, is
likely to be offered to, or purchased by, consumers as a cigarette or as
roll-your-own tobacco.
However, for purposes of this document, FDA uses the term “cigarettes”
when referring to combusted cigarettes, unless specifically stated
otherwise. In general, the term is not meant to include any noncombusted
tobacco products that meet the definition of cigarette in Section 900(3).
Cigarette
Tobacco
As defined in Section 900(4) of the FD&C Act (21 U.S.C. 387(4)) and in
this rule, the term “cigarette tobacco” means any product that consists of
loose tobacco that is intended for use by consumers in a cigarette. Unless
otherwise stated, the requirements applicable to cigarettes under chapter
IX of the FD&C Act also apply to cigarette tobacco.
Component or
Part
FDA defined “component or part” in the Final Deeming Rule, which
amended 21 CFR 1140.3. We have reiterated that definition in this rule as
it applies to tobacco products within the scope of the proposed rule.
10
“Component or part” in the context of part 1160 means any software or
assembly of materials intended or reasonably expected: (1) To alter or
affect the tobacco product’s performance, composition, constituents, or
characteristics; or (2) to be used with or for the human consumption of a
tobacco product. The term excludes anything that is an accessory of a
tobacco product.
Roll-Your-Own
(RYO) Tobacco
As defined in Section 900(15) of the FD&C Act (21 U.S.C. 387(15)) and
in this rule, the term “roll-your-own tobacco” means any tobacco product
which, because of its appearance, type, packaging, or labeling, is suitable
for use and likely to be offered to, or purchased by, consumers as tobacco
for making cigarettes.
Tobacco Product
FDA generally defines tobacco products as defined in Section 201(rr) of
the FD&C Act, and in this rule, the term “tobacco product” means any
product that is made or derived from tobacco, or containing nicotine from
any source, that is intended for human consumption, including any
component, part, or accessory of a tobacco product (except for raw
materials other than tobacco used in manufacturing a component, part, or
accessory of a tobacco product). The term “tobacco product” does not
mean an article that is: a drug under Section 201(g)(1) of the FD&C Act;
a device under Section 201(h) of the FD&C Act; a combination product
described in Section 503(g) of the FD&C Act (21 U.S.C. 353(g)); or a
food under Section 201(f) of the FD&C Act if such article contains no
nicotine, or no more than trace amounts of naturally occurring nicotine.
Modeled Tobacco The two types of tobacco products simulated directly by the Population
Products
Health Model (PHM) – (1) Cigarettes (including cigarette and RYO
tobacco), and (2) noncombusted tobacco products (i.e., smokeless
tobacco, ENDS, and HTPs).
Heated Tobacco
Heated tobacco products that meet the definition of a cigarette in the
Products that are
FD&C Act.
Cigarettes
Covered tobacco
product
The tobacco product categories covered by this proposed rule are
cigarettes (other than HTPs and other noncombusted tobacco products
that meet the definition of a cigarette), cigarette tobacco, roll-your-own
(RYO) tobacco, cigars (including little cigars, cigarillos, and large cigars,
but excluding premium cigars), and pipe tobacco (other than waterpipe
tobacco).
Impacted tobacco
products
Covered tobacco products and products that are expected to have
increased consumption post policy (smokeless and ENDS).
11
Cigars
Within this document, “cigar” means covered or non-premium cigars.
Combusted
tobacco products
Within this document, the term “combusted tobacco products” includes
cigarettes (other than HTPs that meet the definition of a cigarette),
cigarette tobacco, roll-your-own (RYO) tobacco, cigars (including little
cigars, cigarillos, and large cigars, but excluding premium cigars), and
pipe tobacco (other than waterpipe tobacco).
Combusted
tobacco market
Within this document, the combusted tobacco market is the total market
for all combusted tobacco products as defined above (e.g., excluding
premium cigars).
Total tobacco
market
The total tobacco market is defined as the market for all tobacco products
excluding premium cigars.
Noncombusted
tobacco products
Tobacco products that are not combusted tobacco products, such as
smokeless tobacco (snus, snuff, and chewing tobacco), ENDS, and HTPs.
Premium cigars
A type of cigar that:
• is wrapped in whole tobacco leaf;
• contains a 100 percent leaf tobacco binder;
• contains at least 50 percent (of the filler by weight) long filler
tobacco (i.e., whole tobacco leaves that run the length of the
cigar);
• is handmade or hand rolled (i.e., no machinery was used apart
from simple tools, such as scissors to cut the tobacco prior to
rolling);
• has no filter, nontobacco tip, or nontobacco mouthpiece;
• does not have a characterizing flavor other than tobacco;
• contains only tobacco, water and vegetable gum with no other
ingredients or additives; and weighs more than 6 pounds per 1,000
units.
Population Health FDA has developed a population health model that projects the impact of
Model
changes in tobacco product initiation, cessation, switching, and dual use
on tobacco use prevalence, morbidity, and mortality in the United States,
considering two types of tobacco products. See Center for Tobacco
Products (2) for additional information.
Table 3. Abbreviations and Acronyms Used in the Preliminary Regulatory Impact Analysis
Abbreviation/Acronym What It Means
AI/AN
American Indian/Alaska Native
ACES
U.S. Census Bureau, Annual Capital Expenditure Survey
BLS
Bureau of Labor Statistics
12
Abbreviation/Acronym
CBO
CDC
CFR
CPSC
CTP
EMI
ENDS
E.O.
E.U.
FD&C Act
FDA
FR
FTE
GAO
HHS
HTP
IRS
LGBTQI+
NAICS
NCHS
NHANES
NHIS
NIDA
NIH
NNC
NPRM
NRT
NSDUH
NYTS
PATH
PHM
PRAMS
PRIA
RYO
QALYs
QALDs
SBA
What It Means
Congressional Budget Office
U.S. Centers for Disease Control and Prevention
Code of Federal Regulations
U.S. Consumer Product Safety Commission
U.S. FDA, Center for Tobacco Products
Euromonitor International
Electronic Nicotine Delivery Systems
Executive Order
European Union
Federal Food, Drug, and Cosmetic Act
Food and Drug Administration
The U.S. Federal Register
Full-time Equivalent (Employee)
U.S. Government Accountability Office
U.S. Department of Health and Human Services
Heated Tobacco Product
Internal Revenue Service
Lesbian, Gay, Bisexual, Transgender, Queer, Intersex, and Other
Sexual and Gender Minority Populations 5
North American Industry Classification System
U.S. CDC, National Center for Health Statistics
U.S. CDC, National Health and Nutrition Examination Survey
U.S. CDC, National Health Interview Survey
U.S. NIH, National Institute on Drug Abuse
National Institutes of Health
Normal Nicotine Content
Notice of Proposed Rulemaking also referred to as ‘the preamble’
Nicotine Replacement Therapy
U.S. Substance Abuse and Mental Health Services
U.S. National Youth Tobacco Survey
U.S. Population Assessment of Tobacco and Health
Population Health Model
U.S. CDC, Pregnancy Risk Assessment Monitoring System
Preliminary Regulatory Impact Analysis (This document)
Roll-Your-Own Tobacco
Quality-Adjusted Life Years
Quality-Adjusted Life Days
U.S. Small Business Administration
Throughout this document, FDA uses the term “LGBTQI+” broadly when referring to lesbian, gay, bisexual,
transgender, and queer (and other) communities. When we describe findings from the published literature, we refer
specifically to the groups that are studied. For example, some authors examine tobacco-related outcomes for
members who identify as lesbian, gay, bisexual, or transgender (LGBT) only; as such, the data are limited to those
who identify as LGBT, and authors interpret the findings for those specific groups.
5
13
Abbreviation/Acronym
SE
SGR
SIDS
SLT
TCA
TPMP
TRLM NG
TTB
TUS-CPS
UPC
U.S.
VLNC
VSL
II.
What It Means
Substantial Equivalence
Surgeon General’s Report
Sudden Infant Death Syndrome
Smokeless Tobacco Product
The Family Smoking Prevention and Tobacco Control Act. (Pub.
Tobacco Product Manufacturing Practice
The Tobacco Registration and Listings Module Next Generation
Alcohol and Tobacco Tax and Trade Bureau
Tobacco Use Supplement to the Current Population Survey
Universal Product Code
United States
Very Low Nicotine Content
Value of a Statistical Life
Preliminary Economic Analysis of Impacts
A. Background
Cigarettes are responsible for the greatest amount of tobacco-related death and disease in
the United States. Each year, 480,000 people die prematurely from a smoking-attributable
disease (3). Cigarette smoking is causally linked with increased risk of at least 12 cancers (e.g.,
oral, esophageal, lung), heart disease, and many other negative health outcomes (3). The
mortality rate among people who currently smoke cigarettes is 2 to 3 times as high as that among
individuals who never smoked (4). It is estimated that individuals are living with a combined 14
million major smoking-related conditions in the United States (5), and the U.S. Surgeon General
has reported that about 30 individuals will suffer from at least one smoking-related disease for
every person that dies from smoking each year (6). Nicotine is the primary addictive constituent
in tobacco products and can be delivered through a variety of products along a continuum of risk,
with combusted cigarettes at the most harmful end of this continuum.
Nicotine is the primary addictive chemical in tobacco (3), and numerous Surgeon
General’s Reports (SGRs) from 1988 through 2020 have documented the many ways in which
nicotine affects the brain and nicotine addiction drives smoking behavior. The 1988 SGR
established: “1) Cigarettes and other forms of tobacco are addicting; 2) Nicotine is the drug in
tobacco that causes addiction; and 3) The pharmacologic and behavioral processes that determine
tobacco addiction are similar to those that determine addiction to drugs such as heroin and
cocaine” (7). More recently, the 2020 SGR reported that “[n]icotine addiction is now
increasingly emphasized as a main driver of both the initiation and continuation of smoking” (6).
The role of nicotine addiction in driving cigarette use and cigarette sales is unambiguous.
14
Cigarette companies have engaged in extensive research to understand how nicotine
operates within the human body and then designed their cigarettes to precisely control nicotine
delivery and provide nicotine doses to create and sustain addiction. 6 These companies sought to
identify the “optimum” dose needed to “satisfy” people who smoke cigarettes and, thereby,
assure their continued smoking. 7 This proposed product standard would seek to set a maximum
nicotine level requirement such that tobacco products covered by the proposed rule—cigarettes
(other than heated tobacco products (HTPs) and other noncombusted tobacco products that meet
the definition of a cigarette), cigarette tobacco, roll-your-own (RYO) tobacco, cigars (other than
premium cigars), and pipe tobacco (other than waterpipe tobacco)—would no longer be able to
create and sustain this addiction among people who smoke cigarettes and use certain other
combusted tobacco products.
The proposed product standard would limit the addictiveness of the most toxic and
widely used tobacco products, which would have significant public health benefits for all age
groups. Researchers estimate that each year, only between 5.4 and 5.6 percent of people who
smoked cigarettes successfully quit for good (8). Lowering nicotine of cigarettes and certain
other combusted tobacco products to minimally addictive or nonaddictive levels would improve
the ability of people who use combusted products to successfully quit using these products. It
also would prevent experimenters (mainly youth) from moving beyond experimentation and
progressing to regular use. Furthermore, it is well-established that secondhand tobacco smoke
causes premature death and disease in children and in adults who do not smoke (9). Rendering
cigarettes and certain other combusted tobacco products minimally addictive or nonaddictive
would address the principal reason that people who smoke cigarettes have difficulty quitting
smoking. If this proposed product standard is finalized, people who use cigarettes and certain
other combusted tobacco products covered by this rule would be unable to obtain enough
nicotine from those tobacco products to sustain addiction no matter how they smoked the
products (10; 11; 12), making it easier for people who currently smoke cigarettes to make more
successful quit attempts.
As stated throughout the notice of proposed rulemaking (NPRM), in the event that a
nicotine product standard includes solely cigarettes within its scope, FDA expects that, to
maintain their nicotine dependence, some number of people who are addicted to cigarettes would
likely migrate to other similar combusted tobacco products (or engage in dual use with such
products) after the product standard goes into effect, reducing the benefits of the standard.
Therefore, to maximize the public health benefits, we are proposing to cover the following
products under this proposed product standard: Cigarettes (other than HTPs that meet the
definition of a cigarette and other noncombusted tobacco products that meet the definition of a
cigarette), cigarette tobacco, RYO tobacco, cigars (including little cigars, cigarillos, and large
6
7
United States v. Philip Morris USA, Inc. et al., 449 F.2d 1, 307-309 (D.D.C. 2006).
449 F.Supp.2d at 309-11
15
cigars, but excluding premium cigars), and pipe tobacco (other than waterpipe tobacco). FDA
requests comments, data, and research regarding this proposed scope.
B. Need for Federal Regulatory Action
1. Discussion of Tobacco Market Failure
This proposed rule addresses an inefficiency in the market caused by information
asymmetry, by externalities, and by a behavioral bias, specifically an internality decision-making
bias. An internality is defined as a “within-person externality…which occurs when a person
underweighs or ignores a consequence of [their] own behavior for [themselves]” (13). This
internality occurs insofar as the market price does not reflect the full health cost of using tobacco
products because the addictiveness of tobacco products and the fact that most people who use
tobacco products become addicted as youth or young adults causes consumers to underestimate
the cost of negative health effects that may be known in an abstract sense but lack the immediate
salience of the money and time associated with current consumption. Additionally, one of the
major conclusions of the 2014 SGR was that the tobacco epidemic “was initiated and has been
sustained by the aggressive strategies of the tobacco industry, which has deliberately misled the
public on the risks of smoking cigarettes” (3 p. 7). The true or full price of smoking would
include the value a fully informed and nonaddicted rational consumer would place on the
negative health effects of consumption. However, consumers make purchasing decisions based
on market prices for tobacco products that do not fully reflect the full social costs of
consumption, including impacts to people who do not use tobacco products. This results in
consumer choices that produce market failures and social welfare losses. Therefore, policy
interventions, such as this proposed rule, reduce the gap between the market cost and the full
social cost and enhance social welfare.
The psychology and economics literatures suggest several sources of internality-related
market failures. As discussed in Gruber’s 2002 paper on smoking internalities, internalities refer
to a cost that consumers impose on themselves by taking actions that are not in their own best
interest and can lead to feelings of regret (14). Many people who smoke cigarettes have varying
preferences, either over time or at the same time, making it difficult to determine the true
preferences underlying their consumption choices. For example, Schelling (15) notes that one
“self” wants to stop smoking for health reasons, while the other “self” wants to continue smoking
to avoid withdrawal symptoms, thus leading to inconsistent preferences at the same time.
Nicotine dependence and initiation in adolescence complicates the notion of consumer
preference in this context. Myopia and time inconsistency may be sources of internalities.
Myopia, or a strong present bias, can explain the use of a product that yields utility in the present
but whose continued use leads to health problems later. For instance, decisions made by people
who smoke cigarettes at early stages of use may impose significant costs on their future selves.
Time inconsistency exists when consumers use lower rates of discounting for consequences far
16
in the future than for consequences close to the present. Time-inconsistent consumers make
current decisions that they would not make from the perspective of their future selves. Time
inconsistency is particularly relevant in the case of tobacco products, for which the
overwhelming majority of people who initiate tobacco product use in adolescence, when their
still-developing brains tend to assess risks and rewards differently. Additional literature further
explores internalities and other sources of market failure associated with consumption of
addictive products (16; 17; 18).
Nicotine is the primary addictive chemical in tobacco (3), and numerous SGRs since
1988 have documented the many ways in which nicotine affects the brain and nicotine addiction
drives smoking behavior. The 1988 SGR established: “1) Cigarettes and other forms of tobacco
are addicting; 2) Nicotine is the drug in tobacco that causes addiction; and 3) The pharmacologic
and behavioral processes that determine tobacco addiction are similar to those that determine
addiction to drugs such as heroin and cocaine” (7). The 2020 SGR explains that “[n]icotine
addiction is now increasingly emphasized as a main driver of both the initiation and continuation
of smoking” (6). A Federal court ruled that the major U.S. cigarette companies “have designed
their cigarettes to precisely control nicotine delivery levels and provide doses of nicotine
sufficient to create and sustain addiction” (Tobacco Control Act 2009, §2(49) (reciting findings
of fact in U.S. v. Philip Morris USA, 449 F. Supp. 2d 1 (D.D.C. 2006), aff’d in relevant part, 566
F.3d 1095 (D.C. Cir. 2009)). Addiction increases the difficulty of incorporating the full costs of
future negative health effects into the present decision to initiate or continue smoking and makes
it more difficult to quit tobacco use. Therefore, this proposed product standard, which would
reduce nicotine to minimally addictive or nonaddictive levels in cigarettes and certain other
combusted tobacco products, would remove one of the key causes of the internality problem
allowing consumers to make consumption choices that narrow the gap between current market
consumption and the consumption expected when accounting for the full social cost of
combusted tobacco.
Almost all people who use tobacco products started in adolescence when the brain’s
critical areas for decision-making are not fully developed, creating an environment for impulsive
behavior and time inconsistency. Based on over 50 years of published and peer-reviewed
scientific evidence and data, the 2014 SGR concluded that 87 percent of adults who currently
smoke cigarettes, initiated use of tobacco products before the age of 18 (3). The 1994 and 2012
SGRs on smoking and health note that almost 90 percent of current adults who regularly smoke
cigarettes initiated smoking before age 18, and 99 percent initiated smoking by age 26, which is
notable given that 25 is the approximate age at which the brain has completed development (19;
20). Given that the brain continues development into an individual’s mid-twenties, people who
use tobacco products at these ages are more vulnerable to nicotine addiction (21). Exposure to
nicotine during adolescence can have long-term consequences for executive cognitive function
and for the risk of developing substance use disorders and various mental health problems as an
adult (22; 23). Adolescent tobacco users who initiated tobacco use at earlier ages were more
likely than those initiating at older ages to report symptoms of tobacco dependence, putting them
17
at greater risk for maintaining tobacco product use into adulthood (24). Youth may have
problems with accurately processing and acting on information about risky activities by
overestimating short-run benefits of engaging in the activity while underestimating potential
adverse effects of the activity on health, safety, or well-being. For addictive goods such as NNC
tobacco products, this misprocessing of information puts youth who experiment with them at risk
of becoming dependent before they fully understand the consequences of their actions (25; 26;
20).
Combusted tobacco use is also associated with negative externalities that are typically not
paid by the consumer. Between 2017 and 2018, approximately 25 percent of non-smokers were
exposed to secondhand smoke, including 38 percent of 3- to 11-year-olds and 33 percent of 12to 19-year-olds (27). Even though all states have instituted laws requiring fire-safety-compliant
paper (beginning in 2003 with all states adopting these laws by 2012), between 2012 and 2016
there were an average of 18,100 home structure fires per year started by smoking materials,
accounting for 1 in 20 of all home fires (28). The fatality rate for smoking-related residential
building fires is seven times greater than for nonsmoking-related fires (29). Finally, litter is an
additional externality of combusted tobacco products.
2. How This Proposed Rule Addresses the Market Failure
This proposed product standard would address the market failure discussed above by
setting a maximum level of nicotine in finished cigarettes and certain other combusted tobacco
products to minimally addictive or nonaddictive levels, allowing consumers to align their
smoking behavior more closely with an understanding of the full cost of tobacco consumption.
This proposal would help prevent experimenters (mainly youth) from initiating use and
progressing to regular use of combusted tobacco products. Further, it would also have benefits
for adults who currently use combusted tobacco products, most of whom want to quit but few
who are successful because of the highly addictive nature of these products. This would lead to a
significant reduction in combusted tobacco use, thereby reducing negative internalities and
externalities associated with smoking as discussed in the previous section. This proposed product
standard would narrow the gap between the market cost and the full social cost, causing
significant gains in social welfare, including reductions in mortality and morbidity (illness)
associated with combusted tobacco use. Additionally, reductions in combusted tobacco use
would lessen the extent of the tobacco-related externalities discussed above.
C. Purpose of the Proposed Rule
This proposed product standard would limit nicotine yield by setting a maximum nicotine
content level in covered products of 0.7 milligrams (mg) of nicotine per gram of total tobacco.
As discussed in the Preamble of this Proposed Rule, we categorize current NNC cigarettes as
18
those with greater than or equal to 11.4 mg of nicotine per gram of total tobacco. Therefore, for
cigarettes, the maximum nicotine level set by this standard is at least a 94 percent reduction in
nicotine. However, FDA is not seeking to require the reduction of nicotine yields in any tobacco
product to zero, which would violate section 907(d)(3) of the FD&C Act. The proposed nicotine
product standard would apply to all manufacturers of covered tobacco products—cigarettes
(other than HTPs and other noncombusted tobacco products that meet the definition of a
cigarette), cigarette tobacco, RYO tobacco, cigars (including little cigars, cigarillos, and large
cigars, but excluding premium cigars 8), and pipe tobacco (other than waterpipe tobacco).
The proposed product standard would limit the addictiveness of the most toxic and
widely used tobacco products, which would have significant public health benefits for all age
groups. The proposed rule would have benefits for adults who use tobacco products, most of
whom want to quit but are unsuccessful because of the highly addictive nature of these products.
It also would help prevent experimenters (mainly youth) from moving beyond experimentation,
developing an addiction to nicotine, and progressing to regular use of combusted tobacco
products as a result of that addiction. Reducing the number of experimenters who become
regular users of combusted tobacco products would help prevent the severe adverse health
consequences of long-term smoking at the individual level and result in public health benefits at
the population level.
D. Nicotine Population Health Model Discussion
To assess the potential public health impacts of a nicotine product standard, FDA
developed a peer-reviewed population health projection model (hereafter referred to as “the
population health model” or “PHM”) using inputs derived from available empirical evidence and
expert opinion to estimate the impact of changes in tobacco product initiation, cessation,
switching, and dual use on tobacco use prevalence, morbidity, and mortality in the United States.
8
On August 9, 2023, the U.S. District Court for the District of Columbia issued an order vacating FDA’s rule
deeming tobacco products to be subject to FDA’s tobacco product authorities “insofar as it applies to premium
cigars.” Cigar Ass’n of Am. v. FDA, No. 16-cv-01460, 2023 WL 5094869 (D.D.C. Aug. 9, 2023) appeal docketed,
No. 23-5220 (D.C. Cir. argued Sept. 13, 2024). For purposes of its ruling, the district court specified that a premium
cigar is a cigar that: (1) Is wrapped in whole tobacco leaf; (2) Contains a 100 percent leaf tobacco binder; (3)
Contains at least 50 percent (of the filler by weight) long filler tobacco (i.e., whole tobacco leaves that run the length
of the cigar); (4) Is handmade or hand rolled (i.e., no machinery was used apart from simple tools, such as scissors to
cut the tobacco prior to rolling); (5) Has no filter, nontobacco tip, or nontobacco mouthpiece; (6) Does not have a
characterizing flavor other than tobacco; (7) Contains only tobacco, water, and vegetable gum with no other
ingredients or additives; and (8) Weighs more than 6 pounds per 1,000 units. The government has appealed the
District Court’s decision. When the deemed status of premium cigars is resolved, FDA will consider any impacts
with respect to the proposed rule and take additional steps as warranted, including for example, by reopening the
comment period and/or issuing a supplemental notice of proposed rulemaking. References to premium cigars in the
preamble serve merely to clarify the current proposed scope of products covered, evaluate the scientific evidence
related to non-premium cigars, and describe FDA’s approach to modeling the projected public health impacts of this
proposed standard.
19
Model code and inputs/outputs are available in the rulemaking docket [Docket No. FDA-2024N-5471]. Specifically, the PHM projects use and harm from the following two types of tobacco
products: (1) cigarettes and (2) noncombusted tobacco products (i.e., smokeless tobacco,
electronic nicotine delivery systems (ENDS), and HTPs). Details of this peer-reviewed modeling
approach have also been previously published in two peer-reviewed publications and are being
concurrently posted to the docket for this proposed rule in FDA’s scientific modeling document
(30; 31; 2). These papers provide detail on the overall model in terms of the inputs, transition
behaviors, and outputs, along with results from a simulation involving use of cigarettes, very low
nicotine content (VLNC) cigarettes, and noncombusted products in the U.S. population over
time. For a more detailed discussion of the PHM, please see the Preamble Section VIII.A or
FDA’s scientific modeling document (2). We request comment on the methodology and analysis
(including the overall model in terms of the inputs, transition behaviors, and outputs as noted
above) presented in the PHM report (2).
The PHM derives the input values and ranges for the potential impact of a nicotine
product standard on changes in use of cigarettes and noncombusted tobacco products based on
results from a formal expert elicitation conducted in 2018 through a contract with the FDA. The
estimates from the 2018 expert elicitation supersede those collected in an initial expert elicitation
conducted in 2015 (30) . The 2018 elicitation generally reconvened the same expert panel as
2015 and allowed them to update their estimates considering several studies that were not
available at the time of the 2015 elicitation (e.g., Donny et al. 2015 (32); Hatsukami et al. 2017
(33)) on the effects of VLNC cigarettes, as well as changes in use of the two tobacco products
including Electronic Nicotine Delivery Systems (ENDS) (e.g., Jamal et al. 2017 (34)).
Specifically, the 2018 elicitation expert panelists were instructed to assume that the potential
standard would limit the nicotine content of certain combusted tobacco products to no more than
0.4 milligrams of nicotine per gram of tobacco, based on available literature, and that once the
standard was in effect 9, non-compliant cigarettes would be entirely unavailable, including from
illegal or illicit sources. The 2015 elicitation methodology used to identify experts, develop the
protocols, conduct the elicitations, and summarize the findings has been described in Apelberg et
al. (2018). Additional details regarding the 2018 elicitation are provided in FDA’s scientific
modeling document (2). FDA is conducting another expert elicitation process and intends to
publish the results of this update for public review and additional comment on this proposed
standard in light of that update. In this new elicitation, experts have been instructed to consider a
Due to the nature of variation in agricultural products, in 22nd Century Group, Inc.’s modified risk tobacco product
applications, the company reported that after 9 years of sampling by the company, the average nicotine content of its
genetically engineered VLNC tobacco is 0.6 mg nicotine per gram of total tobacco, with a range of 0.4 to 0.7 mg
nicotine per gram of total tobacco. It is likely that the Quest and SPECTRUM Nicotine Research Cigarettes, used
throughout the scientific literature that referred to the 0.4 mg nicotine per gram, also contained between 0.4 to 0.7
mg nicotine per gram of total tobacco (262). This suggests the literature the experts reviewed studied cigarettes in
the range of 0.4-0.7mg/g as opposed to only 0.4mg/g. Therefore, the results of the expert elicitation are still
applicable to a nicotine level of 0.7mg/g. As a reference point, normal nicotine content in the top 100 cigarette
brands (2017) is 17.2 mg/g (261).
9
20
product standard that would limit the content of certain finished combusted tobacco products
manufactured, distributed, or sold in the US to no more than 0.7 milligrams of nicotine per gram
of tobacco in alignment with what is being proposed to ensure feasibility given the natural
variation of an agricultural product.
The PHM incorporates the following tobacco-use transitions from the expert elicitation to
estimate the impact of the policy relative to baseline: (1) cigarette smoking cessation; (2) people
who smoke cigarettes switching to noncombusted tobacco products (e.g., smokeless tobacco
and/or ENDS) rather than quitting tobacco use entirely; (3) people who continue to smoke
cigarettes beginning dual use of cigarettes and noncombusted tobacco products; (4) people who
do not smoke cigarettes initiating regular cigarette smoking; and (5) people who do not smoke
who have been dissuaded from smoking cigarettes and certain other combusted tobacco
products, who may instead initiate use of a noncombusted tobacco product. The model, based on
input parameters derived from empirical evidence and expert estimates, projects the population
size for nine tobacco product use states by age and sex in each time step (tobacco product use
states are combinations of current, former, and never use for cigarettes and noncombusted
tobacco products). 10
Projected mortality probabilities for each of the nine tobacco use states (by age and sex)
are then multiplied by the population size in each tobacco use state to project the numbers of
individuals surviving and dying during the time step. Using these calculations, the model
projects the impact of a potential nicotine product standard in terms of four main outcomes: (1)
prevalence of cigarette smoking and noncombusted tobacco use; (2) mortality attributable to the
two types of tobacco products (i.e., cigarettes and noncombusted tobacco products) the PHM
considers; (3) life years lost due to tobacco use from the two types of tobacco product the PHM
considers; and (4) quality-adjusted life years (QALYs) lost due to cigarette smoking-attributable
morbidity in the U.S. population over time. Additional averted premature mortality from
reductions in secondhand smoke, sudden infant death syndrome (SIDS) related to perinatal
smoking, and smoking-related fires due to reductions in cigarette smoking, along with averted
premature mortality from reductions in cigar and pipe tobacco use are calculated in a postprocessing procedure based on the PHM output. We note that, based on the structure of the
PHM, there is an implicit assumption that the average intensity of consumption (e.g., cigarettes
per day) does not change as a result of this policy. 11 Therefore, it is assumed there would be no
The nine tobacco product use states projected by the model include populations that: (1) have never used
cigarettes or noncombusted tobacco products; (2) have never used cigarettes and currently use noncombusted
tobacco products; (3) currently use cigarettes and have never used noncombusted tobacco products; (4) currently use
cigarettes and formerly used noncombusted tobacco products; (5) have never used cigarettes and formerly used
noncombusted tobacco products; (6) formerly used cigarettes and have never used noncombusted tobacco products;
(7) formerly used cigarettes and currently use noncombusted tobacco products; (8) currently use cigarettes and
noncombusted tobacco products; and (9) formerly used cigarettes and formerly used noncombusted tobacco
products.
11
Studies of VLNC cigarettes in smokers have shown that their use results in reductions in cigarettes smoked per
day and exposure to toxic constituents among individuals who continue to smoke, which may reduce smoking10
21
compensatory smoking as the nicotine levels are reduced under the proposed approach
(immediate nicotine reduction). For consistency, this assumption is maintained throughout the
economic analysis.
Use of cigarettes made from RYO tobacco and subsequent health effects are included as
part of the PHM estimates for cigarettes generally. The PHM inputs do not distinguish between
manufactured and RYO cigarettes. Some data sources such as the National Youth Tobacco
Survey (NYTS) and the Population Assessment of Tobacco and Health (PATH) Study ask
specific questions about RYO cigarette smoking, whereas others such as the National Health
Interview Survey (NHIS) do not. The PHM inputs (such as cigarette smoking initiation and
prevalence) are for cigarette smoking overall. An analysis of International Tobacco Control Four
Country Survey data collected in 2008 found that 10.9 percent of U.S. adults who smoke
cigarettes reported smoking RYO cigarettes as at least part of their cigarette consumption and 5.7
percent reported smoking mainly or only RYO cigarettes as opposed to manufactured or factorymade cigarettes (35).
For the purposes of this analysis, the PHM is adjusted under the baseline and policy
scenarios to model a scenario incorporating the proposed product standards to prohibit menthol
as a characterizing flavor in cigarettes (87 FR 26454, May 4, 2022) (Menthol Product Standard)
and to prohibit all characterizing flavors (other than tobacco) in cigars (87 FR 26396, May 4,
2022) (Cigar Flavors Product Standard). We assess an alternative baseline without these product
standards in Section II.M.0. If finalized, these rules are anticipated to reduce overall youth
initiation and increase cessation among individuals who smoke cigarettes and cigars. To
incorporate the potential impacts of these proposed product standards, if finalized, the PHM
estimates a scenario in which these product standards would become effective in 2025. In this
scenario, the PHM utilizes estimates of the likely population health impact of those rules,
quantified in peer-reviewed publications and discussed in the proposed rules (87 FR 26454, May
4, 2022; 87 FR 26396, May 4, 2022), to adjust the baseline inputs for initiation of cigarettes and
noncombusted products as well as cessation of cigarettes and likelihood of switching to
noncombusted products to incorporate the impact of those rules.
The PHM quantified the potential impact of a menthol cigarette product standard on the
U.S. population for a scenario in which the implementation of a rule prohibiting menthol affects
baseline model input parameters associated with cigarette smoking initiation, cigarette smoking
cessation, noncombusted initiation, and switching from cigarettes to noncombusted products.
Changes in use behaviors for users of the two tobacco product types that the PHM considers due
to the implementation of a menthol cigarette product standard (primarily for people who wouldinitiate future menthol cigarette use and people who currently smoke menthol cigarettes) were
derived from an expert elicitation by Levy et al. (36) that was developed to assess the impact on
cigarette smoking initiation and cessation and noncombusted tobacco product use of a
related disease risks. Consequently, additional public health benefits may be observed among those who continue to
smoke cigarettes (but smoke fewer cigarettes per day) after a nicotine product standard is in place. Please refer
section VII.F.6 of the NPRM for additional discussion.
22
hypothetical ban on menthol in cigarettes in the United States. The PHM used the results of the
Levy et al., (36) expert elicitation to compute factors that can be used to scale cigarette smoking
initiation and cessation rates, as well as switching and noncombusted product initiation,
accounting for a potential reduction/increase in rates. As the authors of Levy et al. (2023) did in
modeling the impacts of a hypothetical U.S. ban on menthol in cigarettes, the PHM assumes that
people who currently smoke non-menthol cigarettes are unaffected by a menthol cigarette
product standard and uses the average impact scenario from Levy et al. 2023. The PHM makes
an additional adjustment to the cigar post-processing procedure to incorporate the impacts of a
cigar flavor product standard, adjusting the nicotine standard policy impact to account for a
reduction in baseline cigar use. 12 Please see Center for Tobacco Products (2) for a full
description of how these adjustments were made.
We acknowledge that these adjustments incorporate the effects of published regulatory
proposals that have not yet become effective. We consider the potential impacts of this proposed
product standard without these adjustments in Section II.M.1.
The PHM also incorporates sensitivity analyses of various scenarios of illicit trade. See
Section 2.4.2 of FDA’s scientific modeling document for a complete discussion (2). There are
three scenarios of illicit trade that are analyzed by the model categorized by the percent of
smokers that may divert to use of NNC cigarettes under a proposed nicotine product standard: a
low estimate of 3.8 percent, a primary estimate of 5.9 percent, and a high estimate of 21 percent
of people who smoke cigarettes who may divert to use of NNC cigarettes under a proposed
nicotine product standard. 13 The PHM also incorporates changes in smoking initiation assuming
The proposed Tobacco Product Standard for Characterizing Flavors in Cigars (87 FR 26396, May 4, 2022) would,
if finalized, prohibit characterizing flavors (other than tobacco) in cigars and their components or parts. On August
9, 2023, the court in Cigar Association of America v. Food and Drug Administration set aside FDA’s deeming rule
as it applied to premium cigars, making products that meet the definition of “premium cigar” in the court’s order not
subject to FDA’s regulatory authority. However, the court’s definition of “premium cigars” applies to certain cigars
that do not have a characterizing flavor other than tobacco and contain only tobacco, water, and vegetable gum with
no other ingredients or additives. Under the proposed Tobacco Product Standard for Characterizing Flavors in
Cigars, cigar products that have a characterizing flavor other than tobacco will be prohibited. Thus, the proposed
Tobacco Product Standard for Characterizing Flavors in Cigars, if finalized, would not affect products that meet the
definition of “premium cigar” in the court’s order. The district court’s order is on appeal (see footnote 7, supra).
13
We use 3.8 percent as a low-end estimate based on 2017 estimates of illicit trade volume in cigarettes from
Euromonitor International (44). This estimate excludes interstate smuggling for purposes of tax avoidance. Using
findings from the International Tobacco Control United States Survey (226), we estimate that 5.9 percent of U.S.
smokers last purchased cigarettes from low-tax locations. We use these figures as proxies for the proportions of
cigarette smokers who may actively seek out illicit NNC cigarettes under a nicotine product standard, although we
note that the product standard would be implemented nationwide, avoiding disparate pricing/availability between
states. We use 21 percent as a high-end estimate based on the difference in non-compliance rates between reduced
nicotine intervention groups (78 percent) and control groups assigned to NNC cigarettes (57 percent) in clinical trial
data from Donny et al. (32) and Nardone et al. (236). This estimate of 21 percent also represents the high-end of the
range estimated in National Research Council (237), which reflected the methodology of the pack return survey by
Fix et al. (258). This estimate of 21 percent also represents the high-end of the range estimated in National Research
Council (237), which reflected the methodology of the pack return survey by Fix et al. (258).
12
23
that youth and young adults who would have initiated NNC cigarettes (in the absence of a rule)
would seek to smoke NNC cigarettes via illicit trade. The model uses findings from an expert
elicitation developed to gauge the impact of a menthol cigarette product standard in the United
States (37), which indicate that among people ages 12-24 who would have otherwise initiated
menthol cigarette use, 2.6 percent would initiate illicit menthol cigarette use (primary estimate).
Experts’ estimates ranged from 0 percent (low estimate) to 10 percent (high estimate). For our
main analysis, we calculate the expected benefits of the product standard using PHM outputs that
incorporate the primary illicit trade estimates (assuming 5.9 percent of people who smoke divert
to use of NNC cigarettes and 2.6 percent of youth and young adults may newly seek to smoke
NNC cigarettes via illicit trade under a proposed nicotine product standard). In Section II.M.2,
we present sensitivity analyses calculating expected benefits under the other two illicit trade
scenarios.
E. Baseline Conditions
As our primary baseline, we consider a state of the world in the absence of the proposed
rule, but with FDA’s proposed product standards to prohibit menthol as a characterizing flavor in
cigarettes (87 FR 26454, May 4, 2022) and to prohibit all characterizing flavors (other than
tobacco) in cigars (87 FR 26396, May 4, 2022). We consider a baseline absent these rules in
Section II.M.1. For this analysis we use a 40-year time horizon from 2025-2064. We request
comment on this time horizon. 14
1. Prevalence Trends
The PHM estimates the prevalence of cigarette and noncombusted tobacco product use,
in the first year of the time horizon, using prevalence estimates for the general population from
2020 NHIS data (38) and 2020 NYTS data (39), and population estimates from the 2020 U.S.
Census data (40) 15. For cigarettes and noncombusted tobacco products, the PHM begins with an
initial population, divided into subgroups defined by age, sex, and tobacco product use status,
accounting for all combinations of current, former, and never use for cigarettes and
noncombusted tobacco products, that is representative of the U.S. population in a particular year.
Then, using methodologies described in the modeling report (2), the PHM projects the
14
We note that in a shorter time horizon of 20 years, annualized costs would be approximately $2 billion and
annualized benefits would be approximately $805 billion using a 2% discount rate. This corresponds with an
approximate 25% reduction in costs and benefits compared to the main analysis with a time horizon of 40 years.
Annualized and net present value of benefits and costs for various time horizons can be constructed using the
undiscounted results presented in Appendix D.
15
In the PHM, the simulation model period starts at year 2021. To populate data on tobacco use prevalence, data from 2020
NYTS and NHIS were used instead of the 2021 data surveys due to challenges with data collection during the pandemic.
24
population changes for subsequent years in one-year time increments according to product use
states and transitions (e.g., cessation, initiation, switching), while accounting for births, net
migration, and deaths. Once the PHM has estimated the number of people using either cigarettes
(which include RYO) and/or noncombusted products for each year over the time horizon in the
absence of the rule, it then estimates the prevalence of use by dividing the population estimated
to use these products by the projected U.S. population for each respective year.
In the absence of the proposed rule, the PHM estimates that the adult prevalence of
cigarette smoking declines over the time horizon. The model assumes that pipe tobacco and
RYO follow the same declining prevalence trend as cigarettes. The PHM estimates that in the
absence of the proposed nicotine product standard, cigarette smoking prevalence in the U.S.
adult population would be approximately 10 percent in 2025 and would fall to approximately 3
percent by the end of the time horizon (2064). See Figure 1.
Figure 1. Baseline Prevalence of Cigarette Use, Incorporating the Impacts of the Menthol
Product Standard
The PHM estimates that adult noncombusted tobacco use would increase over time. The
PHM estimates that in the absence of the proposed nicotine product standard, adult
noncombusted tobacco use prevalence in the U.S. adult population would be approximately 7
percent in 2025 and increase to approximately 10 percent by the end of the time horizon. See
Figure 2.
25
Figure 2. Baseline Prevalence of Noncombusted Tobacco Product Use, Incorporating the
Impacts of the Menthol Product Standard
Taken together, however, the model projects overall use of tobacco products (cigarettes
or noncombusted tobacco products) to decrease over time, largely driven by the trends in
cigarette prevalence combined with the overall size of the cigarette smoking population. The
PHM estimates overall use of tobacco products would decrease from approximately 17 percent
in 2025 to less than 13 percent by the end of the time horizon. See Figure 3.
Figure 3. Baseline Prevalence of Both Modeled Tobacco Product Use, Incorporating the Impacts
of the Menthol Product Standard
26
We estimate cigar smoking prevalence in the U.S. adult population by using a different
methodology. Specifically, we assume a baseline prevalence of approximately 5.9 percent for
2025 using historical data from the PATH Study. 16 We note that adult cigar prevalence has been
relatively stable over time, but we have seen reductions in youth and young adult cigar
prevalence that would begin to impact overall adult cigar prevalence over the time horizon of
this analysis. We estimate an average reduction in cigar prevalence of 37.5 percent based on two
estimates of reduced young adult use: 29.9 percent 17 and 45 percent. 18 Therefore, we assume
prevalence would decrease linearly throughout the time horizon, resulting in a 37.5 percent
reduction from 2025 to 2064 in the absence of the proposed cigar flavors product standard. To
incorporate the potential impacts of a cigar flavors standard at baseline, we assume a scenario in
which a cigar flavors product standard were to become effective in 2025 and results in an
additional 15 percent reduction in prevalence from cessation of exclusive cigar smokers (41).
Accounting for the proposed cigar flavor standard, we estimate that cigar prevalence, in the
absence of this proposed nicotine product standard, would be approximately 5.0 percent in 2025
and would decrease to approximately 3.1 percent by the end of the time horizon. Our estimates
of cigar prevalence encompass both premium and non-premium cigars. We use our estimate for
overall cigar prevalence, as discussed above, as a proxy for non-premium cigar prevalence. See
Figure 4. We expect youth use of premium cigars to be relatively infrequent, given that analysis
of NSDUH data from 2010 to 2019 found that the prevalence of past 30-day use of premium
cigars among youth aged 12 to 17 years was 0.1 percent (42).
PATH Study data from Wave 5: https://www.icpsr.umich.edu/files/NAHDAP/pathstudy/OlderAdult-30DayAnyCigar.pdf
17
29.9 percent is the reduction in cigar use among young adults (ages 18-24) between PATH Study Waves 1 and 5
(1 – (11/15.7)) https://www.icpsr.umich.edu/files/NAHDAP/pathstudy/YoungAdult-30Day-AnyCigar.pdf
16
Rostron et al. (256) reported that in 2015-2016 approximately 302,000 18-year-olds were people who smoke
cigars on some or every day. Based on 2019 Census data and the PATH Study Wave 5 (2018-2019) data, the
population of 18-year-old people who smoke cigars on some or everyday decreased to approximately 166,000 18year-olds by 2019. This amounts to a 45 percent decrease in cigar smoking ((302,000 – 166,000)/302,000) over 3
years.
18
27
Figure 4. Baseline Prevalence of Cigar Use, Incorporating the Impacts of the Cigar Flavors
Product Standard
2. Premature Deaths Attributable to Various Types of Tobacco Products
After estimating the prevalence of tobacco products in the general population, the PHM
estimates the number of deaths attributable to tobacco products in the absence of the rule using
the 2019 NHIS-Linked Mortality Files (NHIS-LMF) data (43). As described in FDA’s scientific
modeling document (2), the number of tobacco attributable deaths during each time step is
determined by multiplying the probability of dying under each tobacco use state (based on
relative mortality risk) by the estimated population in each tobacco use state. The PHM adjusts
the baseline estimates for the Proposed Menthol Product Standard and the Proposed Cigar
Flavors Product Standard.
At baseline, annual deaths attributable to exclusive cigarette use are estimated to decrease
from approximately 280,000 at the beginning of the time horizon to approximately 60,000 by the
end of the time horizon. That decrease represents an average reduction in annual deaths of
approximately 4 percent each year. See Table 4. Annual deaths attributable to exclusive use of
noncombusted products are estimated to increase from approximately 2,000 at the beginning of
the time horizon to approximately 3,000 at the end of the time horizon, which represents an
average increase in annual deaths of approximately 1 percent each year. Annual deaths
attributable to the dual use of cigarettes and noncombusted tobacco products are estimated to
decrease from approximately 130,000 at the beginning of the time horizon to approximately
65,000 at the end of the time horizon, an average of 2 percent each year. Taken together, the
model predicts that overall annual tobacco attributable deaths for cigarettes and noncombusted
tobacco products are estimated to decrease from approximately 410,000 at the beginning of the
28
time horizon to approximately 126,000 at the end of the time horizon, which is an average of 3
percent reduction each year at baseline.
FDA also estimates the number of attributable deaths from use of other combusted
tobacco products (i.e., cigars and pipe tobacco), exposure to secondhand smoke, SIDS, and
smoking-related fires at baseline. Analyses of these additional tobacco-attributable deaths use
model projections and scales the estimate of deaths annually attributable to direct cigarette
smoking from 2005 to 2009 (3), according to the number of premature deaths attributed to each
of these causes. Specifically, there were 437,400 premature deaths annually attributable to
cigarettes from 2005 to 2009, and an additional 41,280 deaths annually attributable to
secondhand smoke exposure from all combusted products, primarily from cigarettes. Thus, after
using the PHM to estimate the baseline number of deaths attributable to cigarettes, we multiply
those baseline deaths by 0.094 (= 41,280/437,400) to arrive at the estimated number of
secondhand smoke attributable deaths. This approach assumes that mortality from secondhand
smoke from all combusted products follow the trend of cigarettes. We request comment on this
assumption. Similarly, SIDS (0.001 = 400/437,400), fire-related (0.001 = 590/437,400), and pipe
tobacco (0.003 = 1,095/437,400) attributable deaths are estimated using the same scalar
approach. See Figure 5. 19 Cigarette, dual-use, and noncombusted attributable deaths are
estimated using the PHM. Since secondhand smoke, fire, SIDS, and pipe tobacco attributable
deaths are calculated using a scalar adjustment, the trends for these mortality sources are
identical to the trend for cigarette deaths.
We estimate cigar-attributable deaths in two steps: 1) assuming a constant number of
deaths (7,397) 20 for the entire time horizon, then 2) phasing in the estimated number of avoided
deaths from the Cigar Flavors Product Standard as estimated in the PRIA for that rule (41)). As
discussed in section VIII.D of the Preamble, by considering a relatively stable trend in adult
cigar use 21 and assuming that adult cigar use is the main driver of cigar-attributable deaths in the
close future, we assumed that non-premium cigar-attributable mortality would remain constant at
7,397 cigar-attributable deaths through 2064 (or roughly the time at which people aged 26 and
older in 2021 who use cigars would all have reached age 70 and older).
For the purposes of this analysis, estimates are then adjusted for the mortality effects of a
product standard prohibiting characterizing flavors other than tobacco in cigars. Specifically, we
Note that the Figure is split into three panels based on the scale of anticipated deaths at baseline.
7,397 is the estimate of the number of annual cigar-attributable deaths due to non-premium cigars. We estimate
that premature deaths from all cigar types is 9,246 annually (255). We estimate that among current (every day or
some day) established (having ever used fairly regularly) people who smoke cigars, 80 percent reported smoking
non-premium cigars and 20 percent reported smoking premium cigars using a classification methodology described
previously in Corey et al., 2014 (214) and subsequently updated in National Academies of Science, Engineering,
and Medicine, 2022 (42). On that basis, 7,397 deaths annually (= 0.8 x 9,246) are attributed to using non-premium
cigars.
21
Adult cigar smoking has historically remained stable. Data from the NHIS over 2000-2015 has shown that
prevalence of current cigar smoking has remained generally stable at around 2.3 percent among U.S. adults aged
18 years and older (256). Adult (aged 26 years or older) cigar use also remained relatively stable in NSDUH data for
2011 and 2019 and did not significantly change (4.2 percent in 2011 to 4.0 percent in 2019 for cigars) (133).
19
20
29
use a scenario where the avoided cigar-attributable deaths from the flavored cigar rule begin to
occur 2 years after the rule’s potential effective date (2027) and would increase in a phased-in
manner over a 30-year period. We then estimate a full annual mortality benefit of 780 avoided
deaths would continue after 30 years (from 2026 to 2055), with a constant benefit of 780 deaths
avoided until year 2064. Details regarding the calculation of avoided cigar-attributable deaths
due to the flavored cigar proposed rule can be found in Appendix L of FDA’s modeling
document (2). The estimated deaths averted by a flavored cigar product standard were subtracted
from baseline non-premium cigar-attributable deaths in the U.S. each year to produce yearly
estimates for non-premium cigar deaths with a flavored cigar standard. This results in nonpremium cigar-attributable deaths declining to approximately 6,600 per year by 2055 when
adjusting for a flavored cigar standard. Thus, while cigar-attributable deaths appear to decrease
with the phase-in of the Cigar Flavors Product Standard, the trend in cigar-attributable premature
deaths flattens by the end of the period because of the underlying assumption of a constant
number of annual cigar-attributable premature deaths. We note that this assumption reflects
historical trends in cigar use rather than allowing cigar-attributable premature deaths to
monotonically decrease at the same rate as cigarette-attributable premature deaths.
See Table 4 for a summary of the average baseline trends in deaths in the absence of the
proposed nicotine product standard from the PHM output. Overall, tobacco-attributable
premature deaths (which include premature deaths attributable to cigarettes, noncombusted
products, and the dual use of both product types) are estimated to decrease approximately 3
percent each year. Cigarette-attributable deaths are estimated to decrease approximately 4
percent each year, while noncombusted-attributable deaths are estimated to increase by 1 percent
per year, on average. Premature deaths attributable to smoking-related fires, SIDS, pipe tobacco
use, and secondhand smoke exposure, are estimated to decrease approximately 3 percent each
year. The number of cigar-attributable deaths in the absence of the rule is estimated to be
relatively flat over the 40-year time horizon. Given the magnitude of the estimates of tobaccoattributable deaths from each source, we sort these estimates by their relative size: Impacts
greater than approximately 10,000 annual tobacco attributable premature deaths, impacts
between approximately 1,000 and 10,000 annual tobacco attributable premature deaths, and
fewer than approximately 1,000 annual tobacco attributable premature deaths.
30
Figure 5. Baseline Smoking-Attributable Deaths from Various Sources in Absence of the Rule
31
Table 4. Average Annual Trends for Deaths Attributable to Various Tobacco Products
Source of Estimate
Mortality Cause
Average Annual Change in
Baseline Deaths1
FDA Population Health
Model
Additional Analyses
Overall Modeled Tobacco
Product Use
-3.2%
Cigarette2 Use
-4.2%
Tobacco Product
Dual-Use2
-1.9%
Noncombusted2
Tobacco Product Use
1.4%
Cigar3 Use
-0.2%
Smoking-Related Fire4
-3.2%
SIDS4 Resulting from
Exposure to Tobacco
Products
-3.2%
Pipe Tobacco4 Use
-3.2%
Exposure to Secondhand
Smoke4
-3.2%
Notes:
1
Average annual change is the average (across the time horizon) percentage change from year to year in baseline
deaths.
2
Directly estimated from the population health model.
3
Adjusted from population health model, accounting for the Cigar Flavors Product Standard
4
Scalar adjustment to population health model
3. Sales Revenue and Market Trends
We use 2021 Euromonitor International (EMI) Passport data pulled in 2024 to benchmark
revenue and quantity for the combusted and noncombusted tobacco product markets in the U.S.,
excluding cigars (44). We estimate revenue and quantity for cigar products using a dataset
prepared by EMI in 2021 that categorizes the cigar market by premium, non-premium, and
flavored subcategories in 2020 (45) (44). We report 2020 revenues and units for non-premium,
tobacco flavored cigar products, adjusting revenue into 2023 dollars using the GDP deflator. 22
2020 Prices are adjusted using the GDP Price Deflator with base year 2017, accessed at
https://apps.bea.gov/iTable/?reqid=19&step=3&isuri=1&1921=survey&1903=13. The calculation is as follows:
‘2020 revenue in 2023 dollars’ = ‘2020 revenue’ x (122.27 / 105.38), where 122.27 and 105.38 are the GDP price
deflators in 2023 and 2020, respectively.
22
32
These are the most recent data for which we have separate data for premium and non-premium
cigars. Table 5 shows the data from these Euromonitor reports.
Table 5. Unadjusted Euromonitor Revenue and Quantity Data for 2021 ($ Millions, 2023)
Combusted Tobacco Products
Category
Cigarettes
Non-premium cigars (total)
Flavored non-premium cigars
Premium cigars
Pipe Tobacco
RYO Tobacco
Revenue Quantity
$110,836 213,751
$9,125
13,274
$3,702
5,868
$10,213 714
$1,560
11,837
$359
1,726
Noncombusted Tobacco Products
Quantity Units
million sticks
million units
million units
million units
metric tons (2205 lbs.)
million stick equivalent
Category
Revenue
Quantity
Quantity Units
ENDS
Smokeless tobacco
$7,679
$11,095
N/A
58,107
N/A
metric tons (2205 lbs.)
Notes: 1.) All products above, besides cigars, are 2021 revenue and quantity values from the 2024 Euromonitor
Passport data release. Cigar products are 2020 revenue and quantity values from a 2021 special report prepared by
EMI. As FDA’s product standards for menthol in cigarettes and flavors (other than tobacco) in cigars were not
proposed until after 2021, these estimates do not include adjustments for these rules. Adjustments are reflected in
Table 6. 2.) ENDS product units are the sum of 1) 'Closed Vaping Systems', 2) 'Open Vaping Systems Charging and
Vaporizing Devices' and 3) 'E-liquids'. We omit the unit measure because we may not be able to make a meaningful
comparison between units of the different categories.
We then make several adjustments to the data in Table 5 to serve as the basis of our
baseline projections. The PHM estimate of cigarette prevalence accounts for the Menthol
Product Standard in 2025 and therefore we do not make any further adjustments to the cigarette
market. However, the post-processing procedure for cigars differs from the way the PHM treats
cigarettes. As noted in section II.E.1, baseline cigar smoking prevalence in the U.S. adult
population is projected using historical data from the PATH Study and a prevalence reduction is
applied to account for the impacts of the Cigar Flavors Product Standard proposed rule, if the
rule is implemented in 2025 (41). We similarly adjust the Euromonitor report data for nonpremium cigar products to reflect reductions in the market revenue and quantity resulting from
the Cigar Flavors Product Standard. 23 First, we sum the total units across all cigar categories
(13,987 million) and reduce this by 30 percent to estimate 9,791 million sticks purchased
following the Cigar Flavors Product Standard (CF) Proposed Rule. To adjust this estimate for the
scope of this proposed standard which excludes premium cigars, we take the total quantity of
Please see the Cigar Flavors PRIA for a detailed explanation on the scientific foundation and the methods that go
into this adjustment (41), and section VIII.E of the Nicotine NPRM for additional discussion of how a cigar baseline
was created in post-processing.
23
33
cigars estimated following the CF proposed rule and subtract the estimated quantity of premium
cigars (714 million) to estimate 9,078 million units of tobacco flavored non-premium cigars. The
reduction of non-premium cigars is smaller than the pre-policy quantity of non-premium flavored
cigars because we assume some people who use flavored cigars switch to tobacco-flavored nonpremium cigars after implementation of the policy. We calculate revenue by assuming people
who smoke flavored cigars switch, on average, to similarly priced tobacco flavored non-premium
cigars after the policy and therefore multiply post-policy quantity by pre-policy price (pre-CF
policy revenue of $9,125 million divided by pre-CF policy quantity 13,274 million units, or an
average unit price of $0.687) for an estimated revenue of $6,240 million ($0.687 per tobacco
flavored non-premium cigar x 9,078 million units of tobacco flavored non-premium cigars). We
recognize that the CF Rule, if finalized, may not be effective until 2025. The application of this
adjustment is only for the purpose of constructing the baseline for cigars for the 2025 to 2064
time horizon. For all other non-cigar product categories, the revenue and quantity used in our
analysis to construct the baseline and policy scenario revenue and quantity is identical to what is
displayed in Table 5. Table 6 displays adjusted and final revenue and quantity used in this
economic analysis.
Table 6 shows adjusted Euromonitor revenue and quantity of each tobacco product, by
category. In 2021, cigarettes held the largest market share of revenues in both the combusted
tobacco market and the total market for tobacco products, accounting for about 80 percent of the
total tobacco market. The second largest combusted product category by market share is nonpremium cigar products, which accounts for 4.5 percent of the total tobacco market revenue,
followed by pipe tobacco and RYO, accounting for 1.1 and 0.3 percent of the total tobacco
market revenue. In the noncombusted tobacco market, smokeless tobacco products (SLT) and
ENDS products accounted for about 8.1 percent and 5.6 percent of the total tobacco market
revenue as estimated by Euromonitor. 24, 25,26 In 2021, combusted tobacco products accounted for
about 86 percent of the total market revenue and noncombusted products accounted for the
remaining 14 percent.
Table 6. Adjusted Euromonitor Revenue and Quantity Data for 2021 ($ Millions, 2023)
Combusted Tobacco Products
Category
Cigarettes
Revenue
$110,836
Percent of Total
Revenue1
80.4%
Quantity
213,751
Quantity Units
million sticks
The smokeless tobacco product category consists of snuff, snus, and chewing tobacco.
Euromonitor data also includes ‘Tobacco Free Oral Nicotine’ in the form of ‘Nicotine Pouches’ as a
noncombusted product, which we do not include in this analysis.
26
Euromonitor estimates sales through retail and online sales channels and does not separately estimate the size of
the illicit market for ENDS products. However, we note that some unauthorized product sales may be included
within estimates provided by Euromonitor.
24
25
34
Non-premium
cigars
Pipe Tobacco
Roll Your Own
Tobacco
Category
ENDS
Smokeless
$6,240
$1,560
$359
Revenue
$7,679
$11,095
4.5%
1.1%
9,078
11,837
0.3%
1,726
Non-Combusted Tobacco Products
Percent of Total
Revenue
5.6%
8.1%
Quantity
N/A
58,107
million units
metric tons (2205 lbs.)
million stick
equivalent
Quantity Units
N/A
metric tons (2205 lbs.)
Note: 1.) Pipe tobacco from Euromonitor Passport includes waterpipe tobacco. Therefore, these estimates
represent an overestimate of revenues and quantity affected by the rule. 2). ENDS product units are the sum of 1)
'Closed Vaping Systems', 2) 'Open Vaping Systems Charging and Vaporizing Devices' and 3) 'E-liquids'. We omit
the unit measure because we may not be able to make a meaningful comparison between units of the different
categories (for example, mL per unit or tank volume).
1
Not including premium cigars.
We calculate the quantity of the respective product category by starting with the initial
value from the Euromonitor 2021 data, adjusted for the CF Proposed Rule and excluding
premium cigars, as shown in Table 6. Assuming consumption and prevalence decrease at equal
rates, we then adjust that quantity by the annual percentage change in prevalence using data from
the PHM in each subsequent year, excluding cigars. 27 For example, Euromonitor reports that
213.75 billion cigarette sticks were sold in 2021. The PHM estimates that baseline adult cigarette
smoking prevalence fell 5.35 percent between 2021 and 2022. Therefore, we estimate that
202.31 billion cigarette sticks were sold in 2022 (213.75 billion x (100-5.35 percent) = 202.31
billion). For cigar products, we use the annual percentage change in prevalence from the cigar
specific trend, as previously discussed. We estimate the baseline price in each product category
by dividing the Euromonitor revenues for that product category by its corresponding
Euromonitor quantity, as shown in Table 6. We assume that baseline prices are held constant for
each subsequent year, as presented in the CF and Menthol PRIAs (46; 41). 28
We estimate the expected revenue from 2025 to 2064 by multiplying the constant 2021
price, in 2023 dollars, by the estimated quantity sold in each year, for each product category. For
ENDS products, we assume the ratio of ENDS to SLT revenues remain constant and use this
ratio as a scalar to estimate expected ENDS revenues from 2025 to 2064. For example, the ratio
As mentioned earlier in the text, the PHM assesses prevalence, but not intensity, of tobacco product consumption.
To derive the market impacts from the PHM, we assume that, on average, individuals continue to consume at the
average pre-policy rate. If the proposed nicotine product standard policy causes reductions in intensity, then our
estimates may overstate the market size since there would be both lower prevalence of combusted tobacco product
users and lower consumption of combusted tobacco products for those who remain smokers.
28
Historical Euromonitor Passport data on cigarette sales and revenue between 2010 to 2021 suggest that revenues
and units change at differing rates (44). As a sensitivity analysis, we estimate producer surplus loss in the cigarette
market under the assumption of an increasing baseline price. See Section II.M.8.
27
35
in 2021 is about 0.69. Thus, we estimate expected revenue for SLT in 2022 and multiply by 0.69
to estimate expected ENDS revenue in 2022. We request comments on this assumption.
The baseline estimated market revenues for combusted tobacco products in the 40-year
period from 2025 to 2064 are shown below. Figure 6 displays baseline expected revenues for
cigarettes and Figure 7 displays baseline expected revenue for cigars, pipe tobacco, and RYO
Tobacco. While RYO and pipe tobacco share many similarities, there are a few critical
regulatory differences. RYO tobacco is subject to Special Rule for Cigarettes (Section
907(a)(1)(A) of the FD&C Act), which prohibited cigarettes with flavors other than tobacco and
menthol, and would be subject to the Menthol Proposed Rule, if finalized. Pipe tobacco that is
not labeled or offered for sale as cigarette tobacco is not subject to either of these federal flavor
restrictions. Given that pipe tobacco represents such a small part of the overall tobacco market,
we make a simplifying assumption to analyze pipe tobacco trends as mirroring the trends for
RYO tobacco and cigarettes. We estimate that in the absence of the proposed nicotine product
standard, expected revenue for cigarettes is about $89 billion in 2025, $54.2 billion in 2034,
$31.3 billion in 2044, $18.1 billion in 2054, and $10.4 billion in 2064. Expected revenue for nonpremium cigars are about $5.3 billion in 2025, $5 billion in 2034, $4.4 billion in 2044, $3.9
billion in 2054, and $3.4 billion in 2064. Collectively, pipe and RYO tobacco accounts for 1.6
percent of the combusted tobacco product market revenue and 1.4 percent of the total tobacco
product market revenue. Expected joint revenue for pipe and RYO is about $1.5 billion in 2025,
$0.9 billion in 2034, $0.54 billion in 2044, $0.3 billion in 2054, and $0.18 billion in 2064.
Figure 6. Baseline Estimated Revenues of Cigarettes, Adjusted for Menthol Proposed Rule:
2025-2064 ($ Millions, 2023)
36
Figure 7. Baseline Estimated Revenues of Non-Premium Tobacco-Flavored Cigars, Pipe
Tobacco, and RYO Tobacco, Adjusted for Menthol and Cigar Flavors Proposed Rules: 20252064 ($ Millions, 2023)
The baseline estimated market revenues for noncombusted tobacco products in the 40year period from 2025 to 2064 are shown below in Figure 8. We estimate that in the absence of
the proposed nicotine product standard, expected revenue for SLT is about $12.6 billion in 2025,
$16.2 billion in 2034, $17.7 billion in 2044, $18.5 billion in 2054, and $18.9 billion in 2064.
Expected revenue for ENDS is about $8.7 billion in 2025, $11.2 billion in 2034, $12.2 billion in
2044, $12.8 billion in 2054, and $13.1 billion in 2064.
Figure 8. Baseline Estimated Revenues of Noncombusted Products in Millions of 2023 Dollars:
2025-2064
37
4. Number of Affected Entities and Products
a. Current Manufacturers
FDA’s internal database Tobacco Registration and Listing Module Next Generation
(TRLM NG) captures and maintains self-reported establishment registration information and
associated product listings, including labels, advertising, and consumer information. Using
TRLM NG data as of September 2023, FDA has identified 1,585 domestic addresses for
manufacturers and importers of impacted tobacco products, including 133 manufacturers and
importers of cigarettes, cigars, pipe tobacco, and RYO tobacco, 1,427 manufacturers and
importers of only ENDS products, 15 manufacturers or importers of only smokeless tobacco, and
10 dual operation facilities that manufacture both combusted and noncombusted products. 29 Of
the 10 dual operation facilities, 7 manufacture SLT and combusted products, and 3 manufacture
ENDS and combusted products. 30 TRLM NG registration by product type is shown below in
Table 7.
Table 7. TRLM NG Data on Facility Registration by Product Type
Count
Percent
Combusted
Only
133
8.4%
ENDS Only
Smokeless
Tobacco Only
Dual
Operation
Total
1,427
90.0%
15
0.9%
10
0.6%
1,585
100.0%
Note: Percents do not sum to 100 due to rounding.
As this product standard applies to all combusted tobacco products available for sale in
the United States besides premium cigars and waterpipe tobacco, 31 foreign manufacturers of
these products intended for distribution in the U.S. market would also be affected. Currently,
29
We note that there are several limitations with the TRLM NG data. These data are self-reported biannually by
manufacturers to FDA. First, manufacturers that discontinue production of a product are expected to delist the
product with FDA; however, this does not always happen. Second, there have also been cases where manufacturers
were likely miscategorized by the type of product they produce. Third, the same product may also be listed multiple
times due to slight misspellings or other factors, or the same product may be sold under multiple labels and therefore
have multiple product listings. Additionally, the same product may be sold in multiple packaging configurations
leading to multiple listings. Fourth, the currently available product listing data may also undercount the number of
products manufactured by foreign firms because they are not yet required to list products. Fifth, technical difficulties
and capacity restrictions with the TRLM NG system at the time of the initial registration compliance date for
deemed products may also result in duplicative listings in the data. Some of the limitations of the current TRLM NG
data may be resolved as companies provide updated product listing information on a biannual basis.
30
Of the 158 firms that manufacture combusted and/or SLT products only 143 firms were available in the D&B
data, Thus some of our analysis is limited to 143 firms.
31
We note that in our data sources waterpipe and pipe tobacco are not separable, therefore our measures of pipe
producers and market revenue include waterpipe tobacco. Waterpipe is a small segment of the pipe tobacco market,
but this could create overestimates in our pipe tobacco assessment.
38
FDA does not require foreign manufacturers of tobacco products or domestic importers that do
not manufacture, prepare, compound, or process tobacco products intended for distribution in the
U.S. market to register and list. As a result, we use the number of domestic importers of
cigarettes, cigars, pipe tobacco, and RYO tobacco from the Alcohol and Tobacco Tax and Trade
Bureau (TTB) to estimate the number of establishments whose business of bringing combusted
tobacco products into the U.S. market would be affected. 32 We estimate there to be no more than
150 importers of combusted tobacco products potentially affected by this rule. We note that we
are unable to differentiate between manufacturers or importers of premium and non-premium
cigar or pipe and waterpipe tobacco products, in our data source, so the number of affected
entities in this section may be an overestimate. We request comment on additional data sources
to identify the number of manufacturers and importers of affected products.
b. Other Affected Entities
In addition to manufacturers, entities that sell affected products, either as wholesalers or
as retailers would also be impacted by this rule, if finalized. To estimate the number of these
affected entities, we use the Statistics of U.S. Business (SUSB) data from 2021 (47). Although
data for wholesalers of tobacco products are identified in a specific 2017 NAICS industry code 33
in the 2021 SUSB data (424940, Tobacco and Tobacco Product Merchant Wholesalers), data for
retailers of tobacco products are not identified in a specific NAICS industry code in the SUSB
data (i.e., SUSB groups all retailers, including those that sell tobacco products and those that do
not sell tobacco products, together).
We incorporate product by industry data from the 2017 Economic Census to estimate the
percent of establishments in each retail category that reported non-negligible retail sales of
tobacco products (North American Product Classification System (NAPCS) code 5000325000,
Retail sales of tobacco products and smoking accessories) (48). Multiplying these percentages
by the count of establishments from the 2021 SUSB data, we estimate the number of tobaccoselling retail establishments in 2021. Assuming the distribution of tobacco-selling establishments
approximates the distribution of tobacco-selling firms, we also multiply these percentages by the
number of firms to estimate the number of tobacco-selling firms in 2021. If firms that have
multiple establishments are more or less likely to sell tobacco products than firms with only one
establishment this could introduce some uncertainty to our estimates.
The TTB, a bureau under the U.S. Department of the Treasury, is responsible for collecting federal excise taxes on
tobacco products and ensuring compliance with federal tobacco permitting requirements derived from Chapter 52 of
the Internal Revenue Code. Entities that manufacture and/or import tobacco products—defined as “[c]igars,
cigarettes, smokeless tobacco, pipe tobacco, and roll your own tobacco” —must apply for a TTB permit, and
manufacturers/importers generally pay federal excise taxes after they remove tobacco products from their premises
or withdraw products from customs custody for domestic consumption.
33
The latest data available uses 2017 NAICS industry codes. Some of these classifications are different in the 2022
NAICS.
32
39
Table 8 presents the NAICS codes and descriptions for wholesalers and retailers
potentially affected by the proposed product standard; estimates of firms and establishments
from the 2021 SUSB data; data from the 2017 Economic Census on establishments that sell
tobacco products within each retail category; and our estimates of 2021 firms and establishments
that sell tobacco products.
Table 8. Affected Entities Other than Tobacco Manufacturers
Total
Estab. 2021
2017
NAICS
2017 NAICS
Description
42494 a
Tobacco and
Tobacco
Product
Merchant
Wholesalers
1,343
1,546
Supermarkets
and Other
Grocery
(except
Convenience)
Stores
38,170
62,329
30,814
65,141
44512
Convenience
Stores
32,008
34,170
25,264
44530
Beer, Wine,
and Liquor
Stores
31,497
35,533
44611
Pharmacies
and Drug
Stores
19,261
44711
Gasoline
Stations with
Convenience
Stores
44511
44719
Other
Gasoline
Stations
Firms –
2021
2017 Economic Census Data
– Retail Sales of Tobacco
Products
% of
Estab.
Estab.
Total
Sell
With
Tobacc Estab tobacco
2017*
o–
sales 2017
2017
Applying the 2017% to:
2021
Firms
Data
2021
Establishment
Data
1,343
1,546
47.30%
18,054
29,482
28,460
88.77%
28,414
30,333
18,700
34,440
54.30%
17,103
19,294
43,879
19,247
45,358
42.43%
8,172
18,618
55,291
98,056
91,667
98,788
92.79%
51,305
90,986
9,062
12,869
3,725
16,581
22.47%
2,036
2,892
40
452311
Warehouse
Clubs and
Supercenters
37
8,070
6,735
8,202
82.11%
30
6,626
452319
All Other
General
Merchandise
Stores
8,057
44,989
31,194
41,241
75.64%
6,094
34,030
12,492
14,512
10,415
10,415
100.00%
12,492
14,512
207,218
355,953
237,761
348,626
145,044
248,318
453991
Tobacco
Stores
Total
a
By definition, all firms in NAICS 42494 sell tobacco products.
Given the complexities of growth and contraction in various industries, as well as the
regularly changing landscape of state and local tobacco policies that may impact the types of
establishments that sell tobacco products, we do not predict a trend in the number of tobaccoselling establishments beyond 2021. Furthermore, given that 2017 is the most recent year
providing disaggregated data on retailers that sell tobacco, we assume the distribution of
tobacco-selling retailers using 2017 tobacco establishment data approximates the distribution of
tobacco-selling retailers in 2021. We request comment on these assumptions and more recent
data to estimate the number of wholesalers and retailers that sell tobacco products by NAICS
code.
c. Number of Affected Products
To understand the baseline state of the tobacco market, we first searched the active
product listing information in TRLM NG as of February 2023 for all products under the category
of “cigarettes,” removing any products containing the words “vape” or “vapor” in their name,
which netted a total of 1,712 unique cigarette products. Filtering these yielded 613 unique
cigarette products with an identified flavor of “menthol” or with a product name that contained
the word “menthol” if no flavor was listed. Following the same steps in TRLM NG for the
category of RYO Tobacco, we found a total of 234 RYO tobacco products, 58 of which are
menthol flavored. For this analysis, we consider a scenario in which a menthol product standard
were to finalize before a nicotine standard, if finalized, would become effective, and therefore
omit all menthol-flavored cigarette products. Thus, we estimate that in baseline, there are 1,099
affected cigarette products (1,099 = 1,712 – 613) and 176 RYO tobacco products (176 = 234 –
58). We also identify 8,961 pipe tobacco products and 515 smokeless tobacco products in the
TRLM NG data that would be affected by the proposed rule.
We identify 31,737 tobacco-flavored cigars in the data. However, we are unable to
differentiate premium from non-premium cigars in the TRLM NG data. Therefore, we make a
simplifying assumption that the number of premium cigar products is proportional to the
41
percentage of premium cigar units sold relative to total cigar units sold, which is about 8 percent
of total cigar units (8 percent = [714 million premium cigar units / 9,078 million total cigar units]
x 100 percent). We request comment on this assumption. We estimate there to be 29,515 unique
tobacco-flavored non-premium cigar products on the market affected by the rule (31,737
tobacco-flavored cigars x [100 percent – 8 percent]). We request comment on this estimation
approach. Counts by product type are displayed below in Table 9.
Table 9. TRLM NG Data on Number of Affected Products by Tobacco Category
Count
Percent
Cigarettes
Cigar
RYO
Tobacco
1,099
2.7%
29,515
73.3%
176
0.4%
Pipe
Smokeless
Tobacco
Total
8,961
22.3%
515
1.3%
40,266
100.0%
We note that the count for pipe tobacco includes waterpipe tobacco. This may result in an overestimate. See
discussion above.
1
5. Federal and State Excise Taxes
To understand the potential effects of the proposed rule on excise taxes, we estimate
baseline excise tax revenues for the baseline volume sales of affected tobacco products in four
categories: (1) cigarettes; (2) cigars; (3) smokeless tobacco products; and (4) pipe/RYO tobacco
products. ENDS products are not taxed by the Federal Government. Since the state tax structure
varies across the country and state-level ENDS tax revenues appear negligible relative to tax
revenues from other tobacco products, we do not assess them in this analysis. We draw on data
from several sources to estimate Federal and State excise tax rates and revenues, and we request
comment on these data sources and estimates.
To estimate baseline excise tax revenues for affected cigarettes, we draw on data from the
PHM and Euromonitor data (44) to estimate a 40-year stream of the number of people who
smoke cigarettes and the number of sticks smoked. We convert the number of sticks to pack
equivalents assuming that there are 20 cigarettes per pack, and we divide the estimated
expenditures on cigarettes by the number of people who smoke cigarettes to yield a per person
expenditure. We multiply the projected number of people who smoke cigarettes in each year of
the 40-year horizon by the estimated expenditure per person to yield total consumer expenditures
for tobacco products. We then assume that tax rates remain constant with respect to nominal
prices over our 40-year time horizon. We multiply the 2021 estimated annual pack equivalents
by the Federal ($1.01) and the 2021 adjusted average State per pack excise tax rate ($2.12 =
$1.91 x 2023 GDP deflator) (49) to yield baseline Federal and State revenues. We acknowledge
that there is variability in State cigarette tax rates but use the average in this analysis as an
approximation of the total change in excise tax collections by States. We use the PHM to project
the 40-year stream of people who smoke cigarettes that would continue to smoke under the
baseline scenario.
We estimate that baseline excise tax revenues for cigarettes are approximately $526.8
billion (= $170.1 billion Federal revenues + $356.8 billion State revenues) over a 40-year time
42
horizon. Estimates of baseline sales volume, excise tax rates, and excise tax revenues for
cigarettes are summarized in Table 10. We request comment on these data sources and our
estimates.
Table 10. Estimated Baseline Sales Volume, Excise Tax Rates, and Revenues for Affected
Cigarettes
Year
Cou
nt
Year
Baseline Volume Sales
for Cigarette Products
People
Sticks
who smoke
(Millions)
cigarettes
Pack
Equival
ent
(Million
s)
0
2025 27,735,454
176,358
8,818
1
2026 26,161,940
164,714
8,236
2
2027 24,859,991
155,114
7,756
3
2028 23,638,003
146,258
7,313
4
2029 22,490,632
138,083
6,904
5
2030 21,423,065
130,565
6,528
…
…
…
…
…
39
2064 9,793,879
51,430
2,572
40
2065 9,759,731
51,063
2,553
Total
3,367,342
168,367
One pack of cigarettes contains 20 cigarettes (sticks).
Excise Tax Rates
(Per Pack)
Feder
State
al
Average
Federal
(Millions)
State
(Millions)
Total
(Millions)
$1.01
$1.01
$1.01
$1.01
$1.01
$1.01
…
$1.01
$1.01
-
$8,906
$8,318
$7,833
$7,386
$6,973
$6,243
…
$2,597
$2,579
$170,051
$18,685
$17,451
$16,434
$15,496
$14,630
$13,833
…
$5,449
$5,410
$356,770
$27,591
$25,769
$24,268
$22,882
$21,603
$20,427
…
$8,046
$7,989
$526,821
$2.12
$2.12
$2.12
$2.12
$2.12
$2.12
…
$2.12
$2.12
-
Baseline Excise Tax Revenues
To estimate baseline excise tax revenue for affected cigars, we draw on data from the
PHM as well as Euromonitor data to estimate a 40-year stream of people who smoke cigars and
the number of cigars sold. To estimate an excise tax rate per cigar, we draw on IRS federal
excise tax data (50), Census Bureau Annual Survey of State Government Tax Collections (STC)
data (51), and TTB National Tobacco Statistics data (52). We total domestic and imported
Federal excise tax revenues in 2022 from the IRS excise tax data, adjust these revenues to 2023
levels with the GDP deflator, and divide this total by the taxable quantity of cigars in 2022
reported in the TTB data to yield Federal excise tax revenue per cigar. To exclude premium
cigars from this calculation, we draw on Euromonitor data to multiply the per cigar rate by the
ratio of the percentage of dollars sales to percentage of units of cigars that are classified as nonpremium. This yields an estimated Federal excise tax rate of $0.0996 per covered cigar. 34 To
estimate average State excise tax rates for cigars, we draw on Census data and estimate the
midpoint between low and high total State cigar taxes. We divide this estimate by the taxable
quantity of cigars reported in TTB data to yield State excise tax revenue per cigar. To exclude
premium cigars, we multiply this rate by the ratio of percentage dollar sales to percentage units
TTB tax rates are $0.0505 per small cigar ($1.01 per pack of 20) and a maximum rate of $0.4026 per large cigar.
In section II.E.3, we estimate an average per unit price of tobacco flavored pre-CF policy nonpremium cigars of
approximately $0.663. Our estimated Federal excise tax rate is approximately 15 percent of the estimated price (=
$0.663 / $0.0997).
34
43
of non-premium cigars. This yields an estimated average State excise tax rate for cigars of
approximately $0.1863 per affected cigar.
We multiply the estimated number of cigars consumed in each year of the 40-year time
horizon by the estimated per cigar Federal and average State excise tax rates to yield baseline
excise tax revenues on affected cigars in each year of the 40-year horizon. We estimate that
baseline excise tax revenues for cigars are approximately $73.3 billion (= $25.6 billion Federal
revenues + $47.8 billion State revenues) over a 40-year time horizon. Estimates of baseline sales
volume, excise tax rates, and excise tax revenues for cigars are summarized in Table 11. We
request comment on these data sources and our estimates.
Table 11. Estimated Baseline Sales Volume, Excise Tax Rates, and Revenues for Affected
Cigars
Year
Count
Year
Baseline
Volume
Sales for
Cigar
Products
(Millions of
Units)
Excise Tax Rates (Per
Unit)
Federal
0
2025
1
2026
2
2027
3
2028
4
2029
5
2030
…
…
39
2064
40
2065
Total
7,716
7,716
7,716
7,642
7,568
7,493
5,045
4,971
256,484
$0.10
$0.10
$0.10
$0.10
$0.10
$0.10
…
$0.10
$0.10
-
State
Average
$0.11
$0.11
$0.11
$0.11
$0.11
$0.11
…
$0.11
$0.11
-
Baseline Excise Tax Revenues
Federal
(Millions)
$769
$769
$769
$761
$754
$747
State
(Millions)
$1,437
$1,437
$1,437
$1,423
$1,410
$1,396
Total
(Millions)
$2,206
$2,206
$2,206
$2,185
$2,164
$2,142
$503
$495
$25,556
$940
$926
$47.772
$1,442
$1,421
$73.328
To estimate baseline excise tax revenue for smokeless tobacco products, we draw on data
from the PHM as well as Euromonitor data to estimate a 40-year stream of people who use
smokeless tobacco products and the number of smokeless tobacco products sold. Euromonitor
data reports the annual quantity of smokeless tobacco products by metric tonnes, which we
convert to 1-ounce smokeless unit equivalents to estimate a per unit excise tax rate.
To estimate an excise tax rate per smokeless tobacco product, we draw on IRS federal
excise tax data, Census STC data, and TTB data. We total domestic and imported Federal excise
tax revenues in 2022 from IRS data and divide this total by the taxable quantity of smokeless
tobacco products in 2022 (reported in metric tonnes and converted to 1-ounce unit equivalents)
reported in TTB data, adjust these revenues to 2023 levels with the GDP deflator, to yield
44
Federal excise tax revenue per smokeless tobacco unit equivalent. This yields an estimated per
smokeless unit equivalent Federal excise tax rate of approximately $0.0818 per unit. 35 To
estimate average State excise tax rates for cigars, we draw on Census data and estimate the
midpoint between low and high total State smokeless product taxes. We divide this estimate by
the taxable quantity of smokeless products reported in TTB data to yield State excise tax revenue
per smokeless unit equivalent. This yields an estimated average State excise tax rate for
smokeless tobacco of approximately $0.1517 per product.
We multiply the estimated number of smokeless tobacco unit equivalents consumed in
each year of the 40-year time horizon by the estimated per smokeless unit Federal and average
State excise tax rates to yield baseline excise tax revenues on smokeless tobacco products in each
year of the 40-year horizon. We estimate that baseline excise tax revenues for smokeless tobacco
products are approximately $34.7 billion (= $12.2 billion Federal revenues + $22.6 billion State
revenues) over a 40-year time horizon. Estimates of baseline sales volume, excise tax rates, and
excise tax revenues for smokeless tobacco products are summarized in Table 12. We request
comment on these data sources and our estimates.
Table 12. Estimated Baseline Sales Volume, Excise Tax Rates, and Revenues for Smokeless
Tobacco Products
Yea
r
Cou
nt
0
1
2
3
4
5
…
39
40
Year
2025
2026
2027
2028
2029
2030
…
2064
2065
Total
Baseline Volume Sales for
Smokeless Tobacco
Products
Number of
Units
People Who
(Millions)
Use
Smokeless
Products
18,016,415
2,421
19,166,657
2,576
20,064,364
2,696
20,918,703
2,811
21,712,824
2,918
22,450,411
3,017
…
…
32,710,114
4,396
32,874,670
4,418
148,848
Excise Tax Rates
(Per Unit)
Baseline Excise Tax Revenues
Federa
l
State
Average
Federal
(Millions)
State
(Millions
)
Total
(Millions)
$0.08
$0.08
$0.08
$0.08
$0.08
$0.08
…
$0.08
$0.08
-
$0.15
$0.15
$0.15
$0.15
$0.15
$0.15
…
$0.15
$0.15
-
$198
$211
$220
$230
$239
$247
…
$359
$361
$12,171
$367
$391
$409
$426
$443
$458
…
$667
$670
$22,575
$565
$601
$629
$656
$681
$704
…
$1,026
$1,031
$34,747
In our analysis, the smokeless product category includes chewing tobacco and snuff. The TTB tax rate for a 1ounce tin of snuff is $0.0944; the TTB tax rate for 1-ounce units of chewing tobacco is $0.0315. This smokeless
product tax rate estimate combines both categories and yields a rate between the individual rates.
35
45
To estimate baseline excise tax revenue for affected pipe/RYO tobacco products, we
draw on data from the PHM as well as Euromonitor data to estimate a 40-year stream of people
who use pipe/RYO tobacco products and the number of pipe/RYO tobacco products sold.
Euromonitor data reports the annual quantity of pipe/RYO tobacco products by metric tonnes,
which we convert to 16-ounce smokeless unit equivalents to estimate a per unit excise tax rate.
We multiply the estimated number of people who smoke cigarettes from the PHM by the ratio of
pipe/RYO tobacco unit equivalents to cigarette pack equivalents to estimate the number of
people who consume pipe/RYO over the 40-year time horizon.
To estimate an excise tax rate per pipe/RYO tobacco product, we draw on IRS federal
excise tax data, Census STC data, and TTB. We total domestic and imported Federal excise tax
revenues in 2022 from IRS data, adjust these revenues to 2023 levels with the GDP deflator, and
divide this total by the taxable quantity of pipe/RYO tobacco products in 2022 (in pounds)
reported in the TTB data to yield Federal excise tax revenue per pipe/RYO tobacco unit
equivalent. This yields an estimated per unit equivalent Federal excise tax rate of approximately
$5.3813 per affected unit. To estimate average State excise tax rates for pipe/RYO tobacco
products, we draw on IRS federal excise tax data (50) and estimate the midpoint between low
and high total State pipe/RYO product taxes. We divide this estimate by the taxable quantity of
pipe/RYO products reported in TTB data to yield State excise tax revenue per unit equivalent.
This yields an estimated average State excise tax rate for pipe/RYO tobacco of approximately
$8.72 per affected product.
We multiply the estimated number of pipe/RYO unit equivalents consumed in each year
of the 40-year time horizon by the estimated per unit Federal and average State excise tax rates
to yield baseline excise tax revenues on affected pipe/RYO tobacco products in each year of the
40-year horizon. We estimate that baseline excise tax revenues for pipe/RYO tobacco products
are approximately $16.5 billion (= $6.3 billion Federal revenues + $10.2 billion State revenues)
over a 40-year time horizon. Estimates of baseline sales volume, excise tax rates, and excise tax
revenues for pipe/RYO tobacco products are summarized in Table 13. We request comment on
these data sources and our estimates.
Table 13. Estimated Baseline Sales Volume, Excise Tax Rates, and Revenues for Affected
Pipe/RYO Tobacco Products
Year
Cou
nt
Year
Number of
People
Who Use
Baseline
Volume
Sales for
Pipe/RY
O
Tobacco
Products
Units
(Million
s)
Excise Tax Rates
(Per Unit)
Feder
al
State
Average
46
Baseline Excise Tax Revenues
Federal
(Millions
)
State
(Millions)
Total
(Millions)
0
1
2
3
4
5
…
39
40
2025
2026
2027
2028
2029
2030
…
2064
2065
Total
Pipe/RYO
Products
173,896
164,031
155,868
148,206
141,012
134,319
…
61,406
61,192
-
56
53
50
48
45
43
…
20
20
1,168
$5.38
$5.38
$5.38
$5.38
$5.38
$5.38
…
$5.38
$5.38
-
$8.72
$8.72
$8.72
$8.72
$8.72
$8.72
…
$8.72
$8.72
-
$300
$283
$269
$256
$243
$232
…
$106
$106
$6,286
$486
$459
$436
$415
$394
$376
…
$172
$171
$10,190
$786
$742
$705
$670
$638
$607
…
$278
$277
$16,476
We total the estimated excise tax revenues for cigarettes (Table 10), cigars (Table 11),
smokeless tobacco products (Table 12), and pipe/RYO (Table 13). We estimate that baseline
excise tax revenues for tobacco products are approximately $651.4 billion (= $214.1 billion
Federal revenues + $437.3 billion State revenues) over a 40-year time horizon. These estimates
are summarized in Table 14.
Table 14. Total Estimated Excise Tax Revenues for Affected Tobacco Products
Total Baseline Excise Tax Revenues
Year Count
Year
Federal (Millions)
State (Millions)
Total (Millions)
0
2025
$10,173
$29,976
$31,149
1
2026
$9,580
$19,738
$29,318
2
2027
$9,091
$18,716
$27,808
3
2028
$8,633
$17,760
$26,393
4
2029
$8,209
$16,876
$25,085
5
2030
$7,819
$16,062
$23,881
…
…
…
…
…
39
2064
$3,565
$7,227
$10,792
40
2065
$3,541
$7,177
$10,718
Total
$214,063
$437,308
$651,371
6. User Fees
FDA collects user fees every quarter from each domestic manufacturer and importer of
six classes of tobacco products: cigarettes, cigars, 36 snuff, chewing tobacco, pipe tobacco, and
RYO tobacco. While the statute sets snuff and chewing tobacco as separate tobacco product
On August 9, 2023, the U.S. District Court for the District of Columbia issued an order in the case of Cigar
Association of America, et al. v. United States Food and Drug Administration et al., No. 16-cv-01460, 2023 WL
5094869 (D.D.C. Aug. 9, 2023), vacating “the FDA’s decision to deem premium cigars”. That decision is on appeal.
Cigar Ass’n of America v. U.S. Food & Drug Administration, No. 23-5220 (D.C. Cir. argued Sept 13, 2024).
36
47
classes, both classes are within the larger smokeless category of tobacco products as defined in
this document. The total amount of user fees is set by statute, and neither the amount of user fees
collected, nor overall FDA accounting costs, would change because of this rule. The total
amount of user fees collected in fiscal year 2019 and each fiscal year that has followed remains
constant under the statute at $712 million. The amount of user fees paid by each tobacco product
class is determined by the federal excise taxes associated with the class of tobacco product in
domestic commerce, with the amount of user fees paid by each firm allocated according to the
firm’s market share within the tobacco product class. While ENDS products are subject to FDA
authority and are indirectly impacted by the proposed product standard, FDA does not currently
have the authority to assess user fees on manufacturers of ENDS products. For fiscal year 2023,
approximately 83.6 percent ($595.5 million annually) of the tobacco user fees were allocated to
the cigarette product class, 0.04 percent ($250,000 annually) to the RYO product class, 1.31
percent ($9.3 million) to the snuff category, 0.06 percent ($0.5 million) to the chewing tobacco
category, 14.4 percent ($102.5 million annually) to the cigar product class (including premium
and non-premium cigars), and 0.57 percent ($4 million annually) to the pipe tobacco product
class (53).
While Congress set user fees at a constant $712 million per year this analysis is in
constant 2023 dollars. We use the Federal Reserve Bank of Philadelphia’s Survey of Professional
Forecasters’ 10-year-ahead inflation forecast as the average inflation over the time horizon to
convert the nominal user fees into real 2023 dollars (54). Over the last 16 quarters the estimated
10-year-ahead inflation forecast averages 2.4%.
For our user fee analysis, we evaluate the tobacco market by product category. We follow
the method as laid out in 21 C.F.R. § 1150.3. User fee obligations by class are determined based
on the previous calendar year’s federal tax revenue. To construct the baseline, we use the
quantity estimates discussed in Section II.E.3 as our quantity times the federal maximum tax rate
from TTB as discussed in 26 USC § 5701. See Figure 9 for a breakdown of the percent of user
fees owed by tobacco product class and Table 15 presents the projected baseline dollar values
owed by each product category.
Table 15. Total Projected Baseline User Fee Allocation by Product Category (2023, $)
Total Allocation for
Year
Cigarettes
RYO
Cigars
Pipe
Smokeless
2025 605,563,358
3,703,374
62,842,681
4,143,691
12,447,642
2030 581,219,683
3,554,498
67,036,058
3,977,115
19,639,266
2035 554,825,813
3,393,084
79,261,980
3,796,509
27,024,860
2040 532,414,904
3,256,029
90,219,428
3,643,158
33,888,539
2045 514,118,347
3,144,134
98,245,798
3,517,960
40,686,580
2050 500,988,341
3,063,837
102,766,241
3,428,115
46,476,792
48
2055 492,590,726
3,012,480
104,144,005
3,370,653
51,103,165
2060 488,133,102
2,985,219
102,930,656
3,340,151
54,681,206
In the existing federal tax structure, combusted tobacco products, especially cigarettes
and cigars, are taxed at a relatively higher rate than noncombusted products. This means that as
consumption shifts towards noncombusted products at baseline the ratio between user fee
allocations and projected revenue for the combusted product categories will increase. We take
the ratio of the projected user fee allocations by class to the projected post-tax revenues by class
to assess the potential burden of user fees on tobacco product manufacturers. See Figure 10.
Figure 9. Percent of Total User fees by Category at Baseline Without the Proposed Rule
49
Figure 10. Baseline User Fee Obligation by Product Category as a Percent of Post-Tax Revenue
Because, at baseline, net tobacco unit sales are declining over time while the total user
fee obligation is only declining at the rate of projected inflation for constant 2023 dollars and the
revenues estimated above in Section II.E.3 assume that firms hold future prices constant at
current rates (in 2023 dollars), user fees represent a continually increasing share of tobacco
manufacturers’ post-tax revenue for each respective tobacco product class. Our analysis
estimates that in 2025 all manufacturers in a given category would collectively owe between 0.1
percent and 1.6 percent of the category’s projected post-tax revenue from sales of that tobacco
category. By 2064, they would collectively owe between 0.3 percent to 4.5 percent of the
category’s projected post-tax revenue in user fees at baseline. These assessments of revenue are
specific to the revenue of each product category and do not consider firms’ overall revenue or
other lines of business. We note that a single manufacturer may produce tobacco products across
a range of tobacco product classes that are subject to user fees, resulting in net transfers of user
fees within firms. We request comment on these data sources, assumptions, and our estimates.
F. Estimated Impacts of the Nicotine Product Standard on Tobacco Use
In Section II.D, we describe the PHM used to estimate the changes in tobacco product
initiation, cessation, switching, and dual use on tobacco use prevalence, morbidity, and mortality
in the United States, for the modeled tobacco product types. This section describes the magnitude
of estimated impacts under the proposed product standard.
For the purposes of this PRIA, we use the PHM to estimate impacts for a range of averted
mortality and tobacco prevalence. The “high impact scenario,” referred to as the upper bound in
this analysis, corresponds to the scenario where the policy has the highest estimated averted
50
mortality (95th percentile results projected by the PHM) and the lowest (5th percentile) postpolicy combusted tobacco prevalence. Conversely, the “low impact scenario,” referred to as the
lower bound in this analysis, is the scenario corresponding to the PHM results with the lowest
averted mortality (5th percentile) and the highest (95th percentile) post-policy combusted tobacco
prevalence from the PHM. The “primary impact scenario,” referred to as the primary estimate in
this analysis, corresponds to the PHM’s averted mortality results at the 50th percentile and the
50th percentile post-policy combusted tobacco prevalence.
1. Prevalence of Tobacco Product Use
The PHM described above and in greater detail in Center for Tobacco Products (2), uses
empirical data and an expert elicitation to construct a dynamic model that projects, among other
things, the prevalence of two types of tobacco products: cigarettes and noncombusted products.
In Figure 11, we present the projected effects of the proposed nicotine product standard
on the prevalence of cigarette, noncombusted tobacco, dual use, and overall tobacco product use.
In this figure, baseline levels of prevalence are presented by a dashed line, the median policy
effects are presented by at solid black line, and the 90 percent prediction range (5th to 95th
percentile) is shaded in gray. As discussed in section II.D, the PHM model has been adjusted to
account for the potential impacts of the Menthol and Cigar Flavors proposed product standards.
With this proposed product standard, if finalized, we expect the prevalence of cigarette use to
decrease from approximately 10 percent to less than 1 percent over the 40-year time horizon of
the analysis. On the other hand, we expect the prevalence of noncombusted tobacco product use
to increase from approximately 7 percent to approximately 11 percent over the time horizon of
the analysis. More detailed information regarding these prevalence projections can be found in
FDA’s modeling document (2). We expect the prevalence of dual-use of both tobacco product
types to initially increase as a result of the rule—driven primarily by the increase in the
prevalence of noncombusted tobacco product use—before decreasing to nearly 0 percent over
the time horizon of the analysis. Overall, the prevalence of use of either tobacco product type is
expected to decrease from approximately 16 percent to approximately 12 percent over the time
horizon.
51
Figure 11. Projected Prevalence of Tobacco Products Under the Policy Scenario, Adjusting for
the Menthol and Cigar Flavors Proposed Rules
2.
Changes in Quantity Sold of Affected Tobacco Products
We estimate changes to quantity sold for tobacco products impacted by the policy under
the low, primary, and high impact policy scenarios. The policy’s reduction in smoking
prevalence is expected to lead to an associated reduction in quantity sold for covered tobacco
products. However, the policy is also expected to lead to an increase in noncombusted tobacco
52
use prevalence, which is associated with an increase in quantity sold for noncombusted tobacco
products.
To calculate the quantity sold of tobacco products impacted by the policy, we assume
consumption and prevalence change at equal rates, and then adjust the quantity of the product by
the annual percentage change in prevalence using data from the PHM under the respective policy
impact scenario. For example, the first year the policy is expected to impact prevalence and
quantity is in 2028. In 2027, we estimate there to be 155.1 billion cigarettes sold in the US
market. The PHM estimates that adult cigarette smoking prevalence fell 62.5 percent between
2027 and 2028 in the primary impact policy scenario. Therefore, we estimate that 58.2 billion
cigarette sticks were sold in 2028 in the primary policy impact scenario (155.1 billion x (100 62.5 percent) = 58.2 billion).
Figure 12 through Figure 15 below depict the expected units sold from 2025 to 2064 for
cigarettes, RYO tobacco, pipe tobacco, and cigars, respectively. In 2028, the first year the policy
impacts quantity, we estimate a reduction in quantity sold for affected combusted tobacco
products of 4%, 60%, and 99% relative to baseline for the low, primary, and high impact policy
scenarios. By 2064, we estimate a reduction of 55%, 96%, and 98% in quantity sold relative to
baseline in the low, primary, and high impact scenarios.
Figure 12. Estimated Millions of Cigarette Sticks Sold at Baseline and Under the Low, Primary,
and High Policy Impact Scenarios: 2025-2064
53
Figure 13. Estimated Millions of RYO Sticks Equivalents Sold at Baseline and Under the Low,
Primary, and High Policy Impact Scenarios: 2025-2064
Figure 14. Estimated Metric Tonnes of Pipe Tobacco Sold at Baseline and Under the Low,
Primary, and High Policy Impact Scenarios: 2025-2064
54
Figure 15. Estimated Millions of Non-Premium Tobacco-Flavored Cigars Sold at Baseline and
Under the Low, Primary, and High Policy Impact Scenarios: 2025-2064
Figure 16 below shows expected units sold from 2025 to 2064 for SLT. Due to variation
in how units are measured between product categories in the ENDS market, we assume the
ENDS market remains proportional to SLT throughout the time horizon. In 2028, the first year
the policy impacts quantity, we estimate an increase in quantity sold for noncombusted tobacco
products of 27%, 64%, and 90% relative to baseline for the low, primary, and high impact policy
scenarios. By 2064, we estimate an increase of 6%, 13%, and 19% in quantity sold relative to
baseline in the low, primary, and high impact scenarios.
Figure 16. Estimated Metric Tons of Smokeless Tobacco Sold at Baseline and Under the Low,
Primary, and High Policy Impact Scenarios: 2025-2064
55
3. Premature Deaths Avoided
The PHM described in Section II.D and in greater detail in Center for Tobacco Products
(2) also predicts the number of avoided deaths as a result of the proposed rule, if finalized.
Specifically, for each time-step and iteration of the model, the PHM multiplies the projected
prevalence of current tobacco use for the modeled tobacco product types, former tobacco product
use, and never use by the number of people in the population to arrive at the number of people
who currently use the modeled tobacco product types, who formerly used the modeled tobacco
product types, or who never used the modeled tobacco product types. Each of these population
groups in the PHM—defined by a unique combination of sex, age, and tobacco product use—
have a specified probability of dying and set of probabilities for transitioning from one tobacco
use state to another. In each year of the simulation, the model updates the number of members of
each population group by calculating the number of individuals that transition into the population
group and remain alive during the year. The sizes of the population groups are also updated by
births and net international migration. The PHM then calculates the probability of dying for
people who currently use and formerly used tobacco (based on relative risk of death) relative to
each tobacco product type and multiplies the probability of dying under each tobacco use state
by the corresponding populations to arrive at an estimated number of tobacco attributable deaths
for each year in the analysis. In each year, the PHM finally compares the estimated number of
tobacco-attributable deaths under the policy to the baseline estimated number of tobacco
attributable deaths in the absence of the rule. The resulting estimates are the number of
premature deaths we expect to avoid as a result of the proposed rule.
See Figure 17. Following the approach established in Apelberg et al. (2018), the PHM
excludes any morbidity and mortality benefits accrued during the first three years after
implementation of the product standard (30). Then, the PHM estimates the annual number of
avoided premature deaths to increase from zero to approximately 14,000 in the fourth year
(2030) and reaching approximately 60,000 in the 25th year (2052) after the implementation of the
product standard before declining to approximately 54,000 by the end of the time horizon (2064).
Over the 40-year time horizon, the PHM predicts a cumulative total of approximately 1.8 million
averted premature deaths attributable to cigarettes and noncombusted tobacco use. We note that
the predicted median (50th percentile) annual number of premature deaths avoided is closer to the
upper bound of the prediction range (shaded in gray) than the lower bound. This is a direct result
of the distribution of responses from the expert elicitation predicting the probability of changing
smoking behavior as a result of the policy. Experts were asked to individually provide
probability distributions of their responses, and when sampling across these various distributions,
the PHM similarly reflects the same distributional shape present in the experts’ responses.
56
Figure 17. Averted Annual Premature Mortality from Cigarettes and Noncombusted Tobacco
Products, Adjusting for the Menthol and Cigar Flavors Proposed Rules
Using the PHM results, we also separately estimate the number of tobacco-attributable
premature deaths avoided from various other sources including reduced exposure to secondhand
smoke, reduced SIDS deaths, reduced smoking-related fires, reduced premature deaths from
reduced pipe tobacco use, and reduced premature deaths from reduced cigar use (see Section
II.D). Similar to the approach in estimating the baseline in Section II.E, the post-processing
procedure scales the estimate of deaths annually attributable to direct cigarette smoking from
2005 to 2009 (3), according to the number of deaths attributed to use of other combusted tobacco
products (e.g., cigars, pipe tobacco), exposure to secondhand smoke, SIDS, and smoking-related
fires. 37 The mortality estimates attributable to the use of other combusted tobacco products (e.g.,
cigars, pipe tobacco), exposure to secondhand smoke, perinatal effects of smoking (e.g., SIDS),
and smoking-related fires are explained in greater detail in Center for Tobacco Products (2).
Specifically, from 2005 to 2009, there were 437,400 deaths annually attributable to cigarettes and 41,280 deaths
annually attributable to secondhand smoke. Thus, after using the PHM to estimate the number of deaths attributable
to cigarettes, we multiply those baseline deaths by 0.094 (= 41,280/437,400) to arrive at the estimated number of
secondhand smoke-attributable deaths. Similarly, SIDS (0.001 = 400/437,400), fire-related (0.001 = 590/437,400),
and pipe tobacco (0.003 = 1,095/437,400) -attributable deaths are estimated using the same ratio approach. Cigar
deaths are estimated in two steps: 1) assuming a constant number of deaths (7,397) for the entire time horizon, then
2) phasing in the estimated number of avoided deaths from the product standard to prohibit all characterizing flavors
(other than tobacco) in cigars (87 FR 26396, May 4, 2022).
37
57
See Figure 18. The PHM estimates annual premature deaths avoided from cigars to
increase to approximately 3,000 each year by the end of the time horizon of the rule. The PHM
predicts annual avoided deaths from secondhand smoke to increase to approximately 5,500 in the
20th year of the rule’s implementation and remain relatively stable for the remainder of the time
horizon. Using the PHM results, we also estimate that the proposed product standard would
result in additional premature deaths avoided from reduced smoking-related fires, reduced SIDS
deaths, and reduced pipe tobacco use.
Across the full 40-year time horizon, the PHM predicts a total of approximately 170,000
averted deaths attributable to secondhand smoke as a result of the rule. The same cumulative
measure is approximately 1,600 for SIDS averted mortality, 2,400 for fire related averted
mortality, 56,500 for cigar related averted mortality, and 4,500 for pipe tobacco related averted
mortality.
Combined with the cumulative number of averted premature deaths attributable to
cigarettes and noncombusted tobacco products, the PHM predicts a cumulative total of
approximately 2 million averted premature deaths across all sources.
The PHM and underlying data support a year-by-year distribution of premature deaths
avoided over time, including in the early years after the modeled policy takes effect. Studies of
all cause smoking-attributable mortality risk, including cardiovascular disease risk, indicate that
premature deaths are avoided early in the time horizon.
This mortality benefit is consistent data from the 2014 SGR on annual smoking-related
mortality for adults aged 35 years and older, which shows that cancer accounts for 37.4% of
smoking-attributable annual mortality (3). Cardiovascular (e.g., coronary heart disease,
atherosclerosis, aortic aneurysm), metabolic (e.g., diabetes mellitus), and pulmonary (e.g.,
pneumonia, influenza, emphysema, bronchitis, chronic airways obstruction) diseases account for
nearly two-thirds (62.6%) of annual smoking-related mortality (3). Cardiovascular diseases
account for 34.7% of total annual smoking-related mortality, alone (3). Updated estimates of
smoking-attributable mortality were published in the 2024 SGR “Eliminating Tobacco-Related
Disease and Death: Addressing Disparities.” Overall estimates of direct smoking-attributable
mortality for U.S. adults aged 35 years and older were comparable in the 2014 and 2024 SGRs,
with 437,400 deaths in the 2014 and 473,300 deaths in the 2024 reports (3 p. 660; 55 p. 495). We
plan to incorporate these estimates into our analysis at the final rule stage.
Results from several studies support estimates of early reductions in mortality risk from
cardiovascular disease including the 2010 SGR that states that “most risk reduction for mortality
occurred in the first one to three years after smoking cessation…[i]t takes about three to five
years of abstinence from smoking for most of the excess CVD [cardiovascular disease] risk to be
gone” (24). More broadly, the 2020 SGR summarizes conclusions from previous Surgeon
General’s Reports on smoking cessation and cardiovascular disease, stating that “[t]he evidence
is sufficient to infer that the relative risk of coronary heart disease among former smokers
compared with never smokers falls rapidly after cessation and then declines more slowly” (6).
58
Specifically, “The excess risk of CHD [coronary heart disease] caused by smoking is reduced by
about half after 1 year of smoking abstinence and then declines gradually” (6).
Overall, the 2020 SGR states that “the decline in risk of death compared with continuing
smokers begins shortly after quitting,” indicating that some premature deaths are avoided early in
the time horizon of analysis for this proposed product standard (6).
59
Figure 18. Averted Annual Premature Mortality from Additional Tobacco- Attributable Sources, Adjusting for the Menthol and Cigar
Flavors Proposed Rules
60
4. Quality-Adjusted Life Years Gained
The PHM described in Section II.D and in greater detail in Center for Tobacco Products
(2) also predicts the number of QALYs gained from reduced smoking morbidity as a result of the
proposed rule, if finalized. Specifically, to estimate the number of QALYs under the baseline and
policy, the PHM first multiplies the difference in previously reported quality of life scores
derived for people who smoke cigarettes and people who do not smoke cigarettes (56) by the
number of people who currently smoke cigarettes according to age, sex, and model year. The
difference between the number of QALYs under the baseline and each policy scenario during
each year represents the number of QALYs expected to be gained in each year under the
proposed rule. Jia and Lubetkin (2010) estimate mean EQ-5D 38 scores by age and smoking status
from the Behavioral Risk Factor Surveillance System (BRFSS) (56). For people who smoke
cigarettes, they find a mean EQ-5D score of 0.893 for ages 18-24, 0.864 for ages 25-44, 0.809
for ages 45-64, 0.799 for ages 65-74, and 0.753 for ages 75 and over. The mean EQ-5D scores
for people who do not smoke cigarettes are 0.935 for ages 18-24, 0.913 for ages 25-44, 0.860 for
ages 45-64, 0.831 for ages 65-74, and 0.773 for ages 75 and over. Using these scores, the PHM
calculates the difference between the mean EQ-5D scores of people who smoke cigarettes and
those who do not at each age. For example, the difference in mean EQ-5D score between a 55year-old person who smokes cigarettes and a 55-year-old person who does not smoke cigarettes
is 0.051 (= 0.860 – 0.809). The PHM incorporates these differences in EQ-5D scores, a QALY
compatible instrument, to estimate QALYs gained for the adult population.
See Figure 19. Following the approach for mortality impacts established in Apelberg et
al. (2018), the PHM excludes the number of QALYs gained during the first three years after the
implementation of the product standard (30). Then, the PHM estimates the annual number of
QALYs gained to increase from zero to approximately 850,000 in the fourth year (2030) after the
implementation of the product standard. Annual QALYs gained are then projected to decrease to
about 450,000 per year by the end of the time horizon (2064). We note that the predicted median
annual number of QALYs gained is closer to the upper bound of the prediction range than the
lower bound. This is a direct result of the distribution of responses from the PHM expert
elicitation predicting the probability of changing smoking behavior as a result of the policy.
Experts were asked to individually provide probability distributions of their responses, and when
sampling across these various distributions, the PHM similarly reflects the same distributional
shape present in the experts’ responses.
EQ-5D refers to the widely used measurement of quality of life, developed by the EuroQol Group
(https://euroqol.org/euroqol/)
38
61
Figure 19. Projected Annual Quality-Adjusted Life Years Gained as a Result of the Policy
5. Limitations and Assumptions of this Modeling Approach
We note several limitations and assumptions in our approach to benefit, cost, and transfer
estimates. First, because the PHM only considers two product types, we make assumptions about
the relative rate of growth of the noncombusted tobacco product categories. This assumption has
no impact on the estimated benefits because data limitations prevent us from distinguishing
between the health consequences of various noncombusted products, however, these assumptions
impact estimated costs and transfers. We assume that an increase in noncombusted prevalence
scales to both the smokeless and ENDS categories. So, for example, a one percent increase in
noncombusted prevalence would lead to a one percent increase in SLTs and a one percent
increase in ENDS. The smokeless tobacco category is subject to Federal taxes and user fees,
while the ENDs category is not. 39
Second, we assume that this product standard does not impact the prevalence rates for
waterpipe tobacco or premium cigars. As discussed in the NPRM, the Agency has determined
that waterpipe tobacco involves profoundly different use behaviors than combusted cigarettes,
which makes it an unlikely substitute for cigarettes. We therefore do not propose including
ENDS products do not have quantity measures provided in the Euromonitor 2021 data. Therefore, we assume the
ratio of ENDS to SLT revenue remains constant and use this ratio as a scalar to estimate expected ENDS unit sales
between 2024 to 2063. The ratio of ENDS to SLT revenue in 2021 was about 0.69.
39
62
waterpipe tobacco products within the scope of this proposed rule. Further, and as also discussed
in the NPRM and footnote 7 of this document, the U.S. District Court for the District of
Columbia issued an order vacating FDA’s rule deeming tobacco products to be subject to FDA’s
tobacco product authorities “insofar as it applies to premium cigars.” Cigar Ass’n of Am. v. FDA,
No. 16-cv-01460, 2023 WL 5094869 (D.D.C. Aug. 9, 2023), appeal docketed, No. 23-5220
(D.C. Cir. argued Sept. 13, 2024). FDA recognizes that, absent further relief, it is bound by the
District Court’s order. As such, cigar products that meet the above definition are excluded from
the proposed rule. References to premium cigars in this document are included for explanatory
purposes to clarify the proposed scope of products covered. Should FDA’s regulatory authority
over premium cigars change in the future, the Agency will address those changes at that time.
Third, the PHM relies on a complete list of transition probabilities, which refer to the
probability that an individual would continue to use the two tobacco product types, switch
products, quit, or not initiate at a given time. Most notably, cessation rates used by the PHM
reflect successful smoking cessation for at least two years given that most relapse occurs during
this period (57). However, the model does not allow for the possibility of relapse beyond 2 years.
As Krall, Garvey, & Garcia (57) demonstrates, relapse rates fall over time, with most relapse
occurring in the first two years following cessation. Beyond two years, they found smoking
relapse rates of between 2-4 percent in between the 2nd – 6th years of cessation and relapse rates
of less than one percent after 10 years of cessation. Given this behavior, the PHM sets the
probability for relapse to zero and likely underestimate annual cessation rates within any twoyear period.
Fourth, the transition probabilities used in the PHM are sourced from an expert elicitation
rather than empirical studies and this introduces the opportunity for statistical bias. Because a
nicotine product standard has not been implemented anywhere in the world, there are no
empirical studies for measuring the transition probabilities for individuals under such a policy.
Therefore, our results are based on the best available evidence.
Fifth, the expert elicitation used for the PHM did not include questions for understanding
how transition probabilities may differ across additional demographics, such as race or ethnicity.
Although the PHM does not directly estimate benefits to consumers of different demographic
groups, we analyze and discuss distributional impacts of this rule for specific populations in
Section II.K.
Sixth, the PHM assesses prevalence, but not intensity, of tobacco product consumption.
To derive the market impacts from the model, we assume that, on average, individuals continue
to consume at the average pre-policy rate. If the policy causes reductions in intensity, then our
estimates may overstate the market size and could understate the morbidity and mortality
benefits. We anticipate that any compensatory smoking caused by this rule will be transient and
rapidly diminish to zero because the nicotine level is low enough in VLNCs that cravings cannot
be satiated through continued consumption. Subsequently we do not anticipate an increase in
smoking intensity.
63
Seventh, in an attempt to account for the uncertainty associated with the model-based
estimates during the first years after the implementation of the nicotine standard, we exclude any
morbidity and mortality benefits accrued during the first three years after the implementation of
the product standard from our cumulative estimates of tobacco-attributable mortality, life years
gained, and morbidity outcomes (30). This may reduce the estimated impact of the proposed
standard.
Additionally, for several reasons, the estimates of the QALYs gained as a result of the
policy are only an approximate measure of morbidity. First, there are limitations associated with
the EQ-5D scores estimated by Jia and Lubetkin (2010) (56). The EQ-5D scores are not based on
smoking-attributable illness or disease, but are instead estimated from a model using the Healthy
Days measure (such as number of overall unhealthy days and self-rated health status) and age
category from the Behavioral Risk Factor Surveillance System (BRFSS). The modeled EQ-5D
scores are then compared by self-reported smoking status, and age category. Using self-reported
smoking status could affect estimates of smoking prevalence.
Second, the Jia and Lubetkin (2010) paper estimates the difference in modeled EQ-5D
scores between people who smoke cigarettes and people who do not smoke cigarettes (never and
former smokers) (56). This comparison allows the PHM to separate morbidity estimates from
mortality estimates. However, it also tends to over-estimate morbidity for younger age categories
and under-estimate morbidity for older age categories (as discussed more below for former
smokers).
Third, residual confounding due to underlying characteristics could lead to bias in the
estimates; however, this bias is expected to be minimal relative to the magnitude of the impact of
smoking on mortality and morbidity (58; 59; 60; 61; 62).
Fourth, the PHM does not differentiate between quitting tobacco use entirely and
switching from cigarettes to noncombusted use, giving the same morbidity impact to both
populations. While evidence to date suggests that e-cigarettes are generally less harmful than
combusted products (21), only complete cessation of all tobacco products fully eliminates all
tobacco-related health risks (6).
Fifth, the effect of the product standard on morbidity may be underestimated because
former smokers would be assigned the same EQ-5D scores regardless of time since cessation,
even for people who would quit absent the product standard (e.g. at baseline). See Figure 20.
Individuals may experience health improvements during the time between when they would have
quit under the baseline scenario and their life expectancy under the baseline scenario. We request
comment on the methods used, alternative studies, and data that may further inform and refine
our estimates of overall population morbidity benefits.
64
Figure 20. Potential Sources of Over- and Under-Estimation of Morbidity
We request comment on the methods and assumptions used, including alternative studies and
data, that may further inform and refine our estimates.
G. Benefits of the Proposed Rule
The proposed product standard, if finalized, would limit the addictiveness of cigarettes
and certain other combusted tobacco products by limiting the level of nicotine in such products.
As a result of the proposed product standard, we expect people who smoke cigarettes or use the
other covered combusted tobacco products to reduce their use of combusted tobacco products,
generating substantial health and other benefits. We quantify the benefits associated with the
expected behavioral changes as a result of the rule. We request comment on all estimates in this
section.
1.
Monetized Avoided Tobacco Attributable Premature Deaths
In this section, we present the monetary value of avoided premature deaths from the
proposed rule, if finalized. We use the PHM described in Section II.D to estimate the number of
avoided premature deaths from the rule (see Section II.F for further description).
We estimate the monetary value of avoided tobacco-attributable premature deaths by
multiplying the number of avoided premature deaths by the value of a statistical life (VSL),
which is standard practice for monetizing changes in mortality risk. VSL estimates do not
represent the dollar value of a person’s life but instead represent the amount individuals are
willing to pay for small reductions in mortality risk. We use VSL estimates recommended by the
U.S. Department of Health and Human Services (HHS), which are based on a review of
published studies. Please see our sensitivity analyses in Section II.M.5 and Section II.M.6 for a
discussion of several sources of uncertainty that could result in the VSL approach
65
underestimating or overestimating the benefits of the proposed rule. The primary estimate of
VSL following the rule’s effective date (2027) is expected to be $13.5 million in 2023 U.S.
dollars. The VSL in the first year of the time horizon and all subsequent years is adjusted for
projected real income growth and income elasticity (1). 40 The Congressional Budget Office
(CBO) currently projects real income growth at one percent per year through 2052 (63). 41 Since
the time horizon for this rule extends to 2064, we assume a real income growth of one percent
per year through 2064. HHS sets income elasticity to be equal to one (64).
a. Benefits from Avoided Tobacco-Attributable Premature Deaths
The primary benefit of the rule is the reduction in tobacco-attributable deaths. As
mentioned previously, by “tobacco attributable,” we mean attributable to the modeled tobacco
product classes: cigarettes and noncombusted tobacco products. The proposed rule, if finalized,
would reduce the addictiveness of cigarettes and other covered tobacco products, which we
predict in the PHM would result in a reduction in the use of combusted tobacco products, which
then results in fewer deaths associated with smoking. We monetize the avoided premature deaths
by multiplying the predicted averted premature mortality from the PHM by the central VSL
provided by HHS Guidelines, discounted for future years. 42 The results are then summarized by
taking the 5th (low), 50th (primary), and 95th (high) percentiles of the resulting distribution of
the value of averted premature mortality for each year in the time horizon. See Table 16. We
present the present value, annualized value, and a figure showing the flow of the value of
avoided premature mortality attributable to tobacco products over the time horizon of the rule.
Using a discount rate of 2 percent, we estimate that the present value of avoided tobaccoattributable premature deaths ranges from $3.7 trillion to $20.8 trillion, with a primary estimate
of $18.7 trillion.
Using a discount rate of 2 percent, we estimate that the annualized value of avoided
tobacco-attributable premature deaths ranges from $133 billion to $747 billion, with a primary
estimate of $672 billion.
The Department of Health and Human Services provides VSL values in 2023 dollars for changes in mortality risk
occurring in 2023 through 2143: https://aspe.hhs.gov/reports/standard-ria-values.
41
Congressional Budget Office. “The 2022 Long-Term Budget Outlook”. Table B-1. Average Annual Growth Rates
for Economic Variables That Underlie CBO’s Extended Baseline Projections, by Calendar Year: Real Earnings per
Worker, Overall, 2022-2052. https://www.cbo.gov/publication/58340. Accessed May 1, 2023.
42
Discounting is used to account for time preferences for individuals so that the values in the future are discounted
to current year dollars for consistent comparison. (124)
40
66
Table 16. Present and Annualized Value of Avoided Tobacco-Attributable Premature Deaths
Using Central VSL Value (2023 USD Billions)
Primary
Low
High
Present Value 2%
Annualized Value 2%
$18,743.08
$3,716.36
$20,846.32
$672
$133
$747
b. Benefits from Avoided Premature Deaths due to Reductions in
Secondhand Smoke Exposure
The proposed rule, if finalized, would reduce the addictiveness of cigarettes and other
covered combusted tobacco products, which we predict would result in a reduction in the
smoking of combusted products which then results in fewer deaths associated with exposure to
secondhand smoke. Cessation or averted use among people who currently use or would use
combusted tobacco products in the future would lead to improved health outcomes among people
who do not use tobacco products but who regularly spend time in proximity to people who use
combusted tobacco products at baseline. The Preamble provides detailed discussion on the health
risks of exposure to secondhand smoke, such as premature death and disease in non-smoking
youth and adults (see Preamble Section IV.D). We quantify these benefits for non-smokers,
although we note that benefits from reductions in secondhand smoke exposure can accrue to both
smokers and non-smokers. As with tobacco-attributed deaths, we monetize the avoided
67
premature deaths by multiplying the number of averted premature deaths by the primary
discounted VSL provided by HHS Guidelines. The results are then summarized by taking the 5th
(low), 50th (primary), and 95th (high) percentiles of the resulting distribution of the value of
averted premature mortality for each year in the time horizon. See Table 17. We show the
present value, annualized value, and a figure showing the flow of the value of avoided premature
mortality attributable to reductions in secondhand smoke exposure over the time horizon of the
rule. We request comment on our assumptions regarding avoided premature mortality
attributable to reductions in secondhand smoke exposure, including the timing of avoided
premature mortality.
Using a discount rate of 2 percent, we estimate that the present value of avoided
premature deaths due to reductions in secondhand smoke exposure ranges from $355 billion to
$2.0 trillion, with a primary estimate of $1.8 trillion.
Using a discount rate of 2 percent, we estimate that the annualized value of avoided
premature deaths due to reductions in secondhand smoke exposure ranges from $13 billion to
$71 billion, with a primary estimate of $64 billion.
Table 17: Present and Annualized Value of Avoided Premature Deaths due to Reductions in
Secondhand Smoke Exposure Using Central VSL Value (2023 USD Billions)
Primary
Low
High
Present Value 2%
$1,775
$355
$1,973
Annualized Value 2%
$64
$13
$71
68
c. Benefits from Avoided Smoking-Related SIDS Deaths
The proposed rule, if finalized, would reduce the addictiveness of cigarettes and other
covered combusted tobacco products, which we predict would result in a reduction in smoking
cigarettes, which then results in fewer deaths associated with smoking-related SIDS. Prenatal
tobacco exposure and postnatal secondhand smoke exposure increase the risks of fetal deaths,
fetal growth restriction/low birth weight, respiratory conditions, and SIDS (9; 3). We monetize
the averted SIDS mortality discussed in Section II.F.0 by multiplying the averted mortality by
the primary discounted VSL provided by HHS Guidelines. The results are then summarized by
taking the 5th (low), 50th (primary), and 95th (high) percentiles of the resulting distribution of the
value of averted mortality for each year in the time horizon. See Table 18. We show the present
value, annualized value, and a figure showing the flow of the value of avoided mortality
attributable to smoking-related SIDS deaths over the time horizon of the rule. As discussed in
Section II.F.3, we calculate smoking-related SIDS deaths avoided in a post-processing procedure
based on the PHM mortality outputs and, thus, adopt similar timing assumptions. Estimated
benefits from avoided smoking-related SIDS deaths may represent an underestimate of impacts
as reductions in deaths will likely occur immediately following the rule. We request comment on
our assumptions regarding the avoided smoking-attributable SIDS impacts, the relationship
between reductions in smoking-attributable mortality and SIDS impacts, and the timing of
reductions in SIDS deaths.
Using a discount rate of 2 percent, we estimate that the present value of avoided
smoking-attributable SIDS deaths ranges from $3 billion to $19 billion, with a primary estimate
of $17 billion.
Using a discount rate of 2 percent, we estimate that the annualized value of avoided
smoking-attributable SIDS deaths ranges from $0.1 billion to $0.7 billion, with a primary
estimate of $0.6 billion.
Table 18. Present and Annualized Value of Avoided Smoking-Attributable SIDS Deaths (2023
USD Billions)
Primary
Low
High
Present Value 2%
$17
$3
$19
Annualized Value 2%
$0.6
$0.1
$0.7
69
d. Benefits from Avoided Smoking-Related Fires
The proposed rule, if finalized, would reduce the addictiveness of cigarettes and other
affected combusted tobacco products, which we predict would result in a reduction in smoking
cigarettes, which then results in fewer smoking related fires. Benefits of reduced smoking related
fires include reduced property damage, injury, and death. During 2012-2016, an estimated annual
average of 18,100 reported home structure fires in the United States were caused by smoking
materials, which killed an average of 590 people annually (28). Moreover, smoking materials
remain a leading cause of fatal home fires in the United States, and people who smoke are not
the only victims (65). The U.S Fire Administration estimates more than $361.5 million dollars in
property damage from smoking-related fires in 2021. We are unable to quantify the averted
property damage benefit that would result from this proposed rule, but we are able to monetize
the averted mortality benefit.
We monetize the avoided premature deaths by multiplying the averted premature
mortality estimated in Section II.F.0 by the primary discounted VSL provided by HHS
Guidelines. The results are then summarized by taking the 5th (low), 50th (primary), and 95th
(high) percentiles of the resulting distribution of the value of averted premature mortality for
each year in the time horizon. See Table 19. We show the present value, annualized value, and a
figure showing the flow of the value of avoided premature mortality attributable to reductions in
smoking-related fires over the time horizon of the rule. As discussed in Section II.F.3, firerelated premature deaths avoided are calculated in a post-processing procedure based on the
PHM mortality outputs and, thus, adopt similar timing assumptions. Estimated benefits from
70
avoided smoking-related fires may represent an underestimate of impacts as reductions in
smoking-related fires will likely occur immediately following the rule. We are unable to
distinguish between avoided premature mortality attributable to reductions in smoking-related
fires that are experienced by people who smoke from those experienced by people who do not
smoke. This could lead to an overestimate of impacts, as this proposed product standard is
estimated to reduce the population of people who smoke over time, thus reducing the causes of
smoking-related fires and smoking-related deaths to those other than people who smoke. We
request comment on our assumptions regarding averted smoking-related fire mortality, the
relationship between reductions in smoking-attributable mortality and smoking-related fire
mortality, the distribution of smoking-related fire damage experienced by people who smoke and
people who do not smoke, and the timing of reductions in smoking-related fire mortality.
Using a discount rate of 2 percent, we estimate that the present value of avoided
premature deaths due to reductions in smoking-related fires ranges from $5 billion to $28 billion,
with a primary estimate of $25 billion.
Using a discount rate of 2 percent, we estimate that the annualized value of avoided
premature deaths due to reductions in smoking-related fires ranges from $0.2 billion to $1
billion, with a primary estimate of $0.9 billion.
Table 19. Present and Annualized Value of Avoided Premature Deaths due to Reductions in
Smoking-Related Fires (2023 USD Billions)
Primary
Low
High
Present Value 2%
$25
$5
$28
Annualized Value 2%
$0.9
$0.2
$1.0
71
e. Benefits from Avoided Cigar Attributable Premature Deaths
People who smoke cigars are at increased risk for many of the same diseases as people
who smoke cigarettes, including oral, esophageal, laryngeal, and lung cancer; cardiovascular
diseases; and chronic obstructive pulmonary disease (COPD) (66). The proposed rule, if
finalized, would reduce the addictiveness of non-premium cigars and other affected combusted
tobacco products, which we predict would result in a reduction in cigar smoking, which then
results in fewer deaths associated with cigars. We monetize avoided premature deaths by
multiplying the averted premature mortality discussed above in Section II.F.3 by the primary
discounted VSL provided by HHS Guidelines. The results are then summarized by taking the 5th
(low), 50th (primary), and 95th (high) percentiles of the resulting distribution of the value of
averted mortality for each year in the time horizon. See Table 20. We show the present value,
annualized value, and a figure showing the flow of the value of avoided premature mortality
attributable to reduction in the use of cigars over the time horizon of the rule. We request
comment on our assumptions regarding avoided premature mortality attributable to reductions in
the use of cigars, including the timing of avoided premature mortality.
Using a discount rate of 2 percent, we estimate that the present value of avoided cigarattributable premature deaths ranges from $127 billion to $631 billion, with a primary estimate
of $576 billion.
72
Using a discount rate of 2 percent, we estimate that the annualized value of avoided
cigar-attributable premature deaths ranges from $5 billion to $23 billion, with a primary estimate
of $21 billion.
Table 20. Present and Annualized Value of Avoided Cigar-Attributable Premature Deaths (2023
USD Billions)
Primary
Low
High
Present Value 2%
Annualized Value 2%
$576
$21
$127
$5
$631
$23
f. Benefits from Avoided Pipe Tobacco Attributable Premature
Deaths
Pipe smoking cause cancers of the lung and upper aerodigestive tract, including the oral
cavity, oropharynx, hypopharynx, larynx, and esophagus (67). Additional evidence suggests that
cigar and/or pipe smoking is causally associated with cancers of the pancreas, stomach, and
bladder (68). The proposed rule, if finalized, would reduce the addictiveness of pipe tobacco and
other affected combusted tobacco products, which we predict would result in a reduction in
smoking pipe tobacco, which then results in fewer deaths associated with pipe tobacco. We
monetize the avoided premature deaths by multiplying the number of averted premature deaths
73
discussed in Section II.F.0 by the primary discounted VSL provided by HHS Guidelines. The
results are then summarized by taking the 5th (low), 50th (primary), and 95th (high) percentiles
of the resulting distribution of the value of averted premature mortality for each year in the time
horizon. See Table 21. We show the present value, annualized value, and a figure showing the
flow of the value of avoided premature mortality attributable to pipe tobacco overtime horizon of
the rule.
Using a discount rate of 2 percent, we estimate that the present value of avoided pipe
tobacco-attributable deaths ranges from $9 billion to $52 billion, with a primary estimate of $47
billion.
Using a discount rate of 2 percent, we estimate that the annualized value of avoided pipe
tobacco-attributable deaths ranges from $0.3 billion to $1.9 billion, with a primary estimate of
$1.7 billion.
Table 21. Present and Annualized Value of Avoided Pipe Tobacco-Attributable Deaths (2023
USD Billions)
Primary
Low
High
Present Value 2%
$47
$9
$52
Annualized Value 2%
$1.7
$0.3
$1.9
74
2. Monetized Morbidity Benefits
As discussed in the Preamble, quitting cigarette smoking substantially reduces the
likelihood of tobacco-related death and disease. The 2020 SGR concludes, “[s]moking cessation
is beneficial at any age. Smoking cessation improves health status and enhances quality of life.”
(6) According to the 2014 SGR, “The Health Consequences of Smoking: 50 Years of Progress,”
which summarizes thousands of peer-reviewed scientific studies and is itself peer-reviewed,
smoking remains the leading preventable cause of death in the United States, and cigarettes have
been shown to cause an ever-expanding number of diseases and health conditions (3). As stated
in the report, “cigarette smoking has been causally linked to disease of nearly all organs of the
body, to diminished health status, and to harm to the fetus” and “[t]he the burden of death and
disease from tobacco use in the United States is overwhelmingly caused by cigarettes and other
combusted tobacco products” (3). Please see the NPRM Section VIII.D for a complete
discussion of averted tobacco-attributable morbidity. We request comment on our assumptions
regarding averted tobacco-attributable morbidity attributable to reductions in the use of
combusted tobacco products.
As discussed above in Section II.F, the PHM estimates the morbidity benefit of this
proposed product standard as the difference in QALYs under in the baseline and policy for any
given year. While this captures a significant morbidity impact of the policy, it likely does not
capture some of the morbidity effects that are associated with many long-term illnesses, such as
lung cancer and heart disease. The PHM also does not capture morbidity effects associated with
improvements in mental health from smoking cessation. For additional discussion of benefits,
see Section II.G.4.
To estimate the potential impact of the proposed standard on QALYs gained, we used
QALY estimates from FDA’s PHM, as discussed in Section II.F. To monetize the benefits of
QALYs gained, we multiply the QALY estimates by the standard dollar value estimates for
QALYs recommended by HHS (64). The primary estimate of the value of a QALY in the year
following the rule’s effective date (2027) using a discount rate of 2 percent is $608,512 in 2023
U.S. Dollars.
The results are then summarized by taking the 5th (low), 50th (primary), and 95th (high)
percentiles of the resulting distribution of the value of QALYs gained for each year in the time
horizon as our low impact, primary, and high impact scenarios. See Table 22. We show the
present value, annualized value, and a figure showing the flow of the value of QALYs gained
attributable to increased cessation of combusted tobacco products over the time horizon of the
rule. We request comment on the estimates of QALYs gained and the monetized values.
Using a discount rate of 2 percent, we estimate that the present value of QALYs gained
ranges from $3.4 trillion to $9.7 trillion, with a primary estimate of $9.4 trillion.
Using a discount rate of 2 percent, we estimate that the annualized value of QALYs
gained ranges from $122 billion to $347 billion, with a primary estimate of $338 billion.
75
Table 22. Present and Annualized Value of Quality-Adjusted Life Years Gained (2023 USD
Billions)
Present Value 2%
Annualized Value 2%
Primary
$9,427
$338
Low
$3,415
$122
High
$9,670
$347
3. Summary of Monetized Benefits
We summarize the total estimated benefits of the rule by adding up the monetary value of
averted mortality from all sources: tobacco products, secondhand smoke, SIDS, fire, cigar, and
pipe tobacco, as well as the QALYs gained from reduced cigarette smoking. See Table 23 for the
total present and annualized values and Table 24 for present value and annualized value from
each source.
Using a discount rate of 2 percent, we estimate that the present value of benefits ranges
from $7.6 trillion to $33.2 trillion, with a primary estimate of $30.6 trillion.
Using a discount rate of 2 percent, we estimate that the annualized value of benefits
ranges from $0.27 trillion to $1.2 trillion, with a primary estimate of $1.1 trillion.
76
Table 23. Present and Annualized Value of Mortality and Morbidity Using Central VSL Value
(2023 USD Billions)
Primary
Low
High
Present Value 2%
$30,611
$7,632
$33,220
Annualized Value 2%
$1,097
$274
$1,191
Table 24. Present and Annualized Value of Mortality and Morbidity by Source Using Central
VSL Value (2023 USD Billions)
Avoided Morbidity
Avoided Mortality
Discounted Present Value (2%)
Primary
Low
High
Modeled
Tobacco
Products
Secondhand
Smoke
Annualized Benefits (2%)
Primary
Low
High
$18,743
$3,716
$20,846
$672
$133
$747
$1,775
$355
$1,973
$64
$13
$71
SIDS
$17
$3
$19
$0.6
$0.1
$0.7
Fire
$25
$5
$28
$0.9
$0.2
$1.0
Cigar
Pipe
Tobacco
$576
$127
$631
$21
$5
$23
$47
$9
$52
$1.7
$0.3
$1.9
$9,427
$3,415
$9,670
$338
$122
$347
Modeled
Tobacco
Products
4. Additional Discussion of Benefits
We provide additional discussion of potential benefits of this proposed rule, if finalized.
Unless otherwise noted, all dollar values presented in this section are adjusted for inflation to
reflect 2023 U.S. dollars. 43
Inflation adjustment done using the most recent medical care Consumer Price Index data from the Bureau of
Labor Statistics (https://www.bls.gov, Data Series ID: CUUR0000SAM, CUUS0000SAM).
43
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a. Medical Cost Savings
People who smoke cigarettes use more medical services during their lifetimes than people
who do not smoke cigarettes; a 2012 CBO report uses regression analysis on two large national
surveys to estimate the impact of smoking on annual health care spending (69). The CBO
estimates that people who currently and formerly smoked cigarettes have higher annual health
care spending per capita than similar people who have never smoked: about $1,507 for 45- to 64year-olds; about $1,660 for 65–to 74-year-olds; and about $1,961 for ages 75 and older. The
difference in annual spending is around $300 for 18- to 24-year-olds, and around $600 for 25- to
44-year-olds. The CBO finds that people who formerly smoked cigarettes have higher medical
costs immediately after quitting than people who currently smoke cigarettes, which is likely due
to poor health leading people who smoke cigarettes to quit, rather than a health disadvantage
from quitting smoking. Like the CBO, we would expect that former smokers’ annual health care
spending converges toward health care spending by similar non-smokers as the number of years
since cessation continue to increase.
The Surgeon General has estimated that smoking-attributable costs include nearly $164
billion annually for direct medical care for adults (3). Smoking-attributable costs included nearly
$193 billion in lost productivity due to premature death and exposure to secondhand smoke.
More specifically, productivity losses due to secondhand smoke-attributable deaths are estimated
to cost the U.S. $7 billion each year. 44 The Surgeon General noted that, because these estimates
do not include lost productivity due to illness, these costs significantly underestimate the full
value of lost productivity costs due to smoking.
Xu et al. used data from the 2010-2014 Medical Expenditure Panel Survey and 20082013 NHIS to estimate the portion of annual healthcare spending potentially attributable to
cigarette smoking (70). Their results suggested that, during 2010-2014, 11.7 percent of U.S.
healthcare spending each year was attributable to adult cigarette smoking, with health care
spending by people who currently smoke cigarettes accounting for 6.0 percent and health care
spending by people who formerly smoked cigarettes accounting for 5.7 percent (1.3 percent quit
in the last five years + 4.4 percent quit more than 5 years = 5.7 percent). Translating this
smoking-attributable fraction into dollars, the authors estimated that smoking may have
accounted for more than $283 billion (2023 USD) of total healthcare spending in 2014. Private
insurance and out-of-pocket costs accounted for only $80.5 billion (2023 USD, 28 percent) of
these costs during 2010 to 2014.
Bolnick et al. (71) used data from the 2017 Global Burden of Diseases, Injuries, and Risk
Factors Study and the Disease Expenditure Project from the Institute for Health Metrics and
Evaluation to estimate that healthcare spending attributable to tobacco smoking accounted for
$154 billion dollars (2023 USD) in 2016 in the United States. Tobacco smoke ranked fifth
highest in terms of all U.S. healthcare spending that could be attributed to modifiable risk
Adjusted for inflation Consumer Price Index (CPI-U), all urban consumers data from the Bureau of Labor
Statistics (https://www.bls.gov, Data Series ID: CUUR0000SA0).
44
78
factors, i.e., risk factors that may be mitigated through behavior. Cardiovascular disease (32.6
percent) and musculoskeletal disorders (21.4 percent) accounted for the largest portions of
healthcare costs attributable to tobacco smoke.
Shrestha et al. (72) used a “human capital approach” to estimate the cost of productivity
losses in the United States in 2018 from cigarette smoking-attributable morbidity among adults
aged 18 and older. Their estimates of productivity losses include losses from absenteeism,
presenteeism, household productivity changes, and inability to work. The authors find that the
cost of these productivity losses totaled nearly $223 billion (2023 USD), with state-level total
costs of morbidity-related productivity loss ranging from $351 million to $20.4 billion with a
median cost of $3.3 billion (2023 USD). 45
Using data from the 2008-2019 Medical Expenditure Panel Survey linked to the National
Health Interview Survey, Valdez and Encinosa (73) provide an updated estimate of the national
medical costs of smoking, including estimated racial and ethnic disparities in the excess
healthcare costs and outcomes associated with smoking. In their study, the authors find that
approximately 7.2 percent of national healthcare spending was associated with smoking, 42.0
percent of which was paid for by federal public programs (e.g., Medicaid, Medicare, the VA,
etc.). With respect to per capita healthcare spending between adult current or former smokers
(ever smokers) and never smokers, the average adult who ever smoked spent an additional
$1,163 on annual medical care than adults who never smoked. The PHM predicts that the
proposed rule may result in a primary estimate of approximately 6.9 million cumulative avoided
initiates by year 40 (2065). 46 If we apply the Valdez and Encinosa estimates of medical cost
savings, this would correspond to approximately $388.7 billion of undiscounted cumulative
medical cost savings by 2065. Furthermore, the study estimates that medical cost-savings would
be $151 million per year if a regulation averted 100,000 Hispanic, Black, Asian, and other nonWhites, and multi-race individuals from initiation into smoking, and $64 million per year if a
regulation averted 100,000 non-Hispanic White individuals from initiation into smoking. The
paper estimates that averting 100,000 adults from smoking would save federal healthcare
programs $93 million per year. Dollar estimates have been inflation adjusted from 2019 to 2023
dollars.
Our main benefits estimates value mortality risk reductions using the VSL, and morbidity
reductions using monetized QALYs. As discussed in the HHS Guidelines for RIAs, the VSL
may include costs borne by affected individuals, including the allocation of work and non-work
time (and associated productivity), and mortality-proximate out-of-pocket costs (see also (74).
Therefore, to avoid double-counting, we do not include medical cost-savings as part of monetary
Adjusted for inflation Consumer Price Index (CPI-U), all urban consumers data from the Bureau of Labor
Statistics (https://www.bls.gov, Data Series ID: CUUR0000SA0).
46
Valdez and Encinosa (73) estimate excess annual medical spending attributable to smoking for those aged 18 and
older. However, the PHM estimates initiation and avoided initiation for the population aged 9-30 years old. The
Valdez and Encinosa (73) paper notes that “…adults who started smoking regularly underage are almost twice as
costly annually as those who started as adults ($1409 vs $718 per year in medical costs).”
45
79
benefits estimates. Cost-savings where third parties bear these costs in the absence of this
proposed rule are discussed in Section II.I.1, below. We request comment on what portion of
these medical cost-savings would be borne by third parties, and more generally, we request
comment, including data and research, that would assist in refining quantification of benefits and
transfers.
b. Reduced Exposure to Thirdhand Smoke
Thirdhand smoke—the chemical residue of combusted tobacco smoke that can become
imbedded in the environment (e.g., carpet, dust) and may remain present for six months after
someone has smoked in the home—also results in exposure to harmful tobacco smoke
constituents such as tobacco-specific nitrosamines (75; 76; 77; 78; 79). In addition, research
suggests that large quantities of thirdhand smoke (equivalent to 1 to 10 cigarettes of secondhand
smoke) can also be introduced into indoor, nonsmoking environments by traveling on the
clothing, belongings, or on the body of the person who smokes cigarettes (80). Exposure to
thirdhand smoke is of particular concern to young children because of both their size and their
behaviors, such as frequently putting their hands in their mouths (81). For example, nicotine
exposure from thirdhand smoke residue can be 6.8 times higher in toddlers than what would be
inhaled by passive (i.e., secondhand) smoke inhalation (82).
Thirdhand smoke can also harm overall health of pets through the presence of smoke
residue. In the case of cats and dogs, they may ingest smoke particles which land on their fur
through grooming themselves; by licking their owner’s skin, hair, and clothes; or through
inhalation of house dust (83; 84; 85). However, these effects are difficult to differentiate from
secondhand smoke-related death and disease in humans and difficult to estimate for pets, and
thus we qualitatively discuss the reduction in thirdhand smoke exposure.
c. Environmental Benefits – Changes in Tobacco Litter
Tobacco products, specifically cigarette butts, are one of the most frequently littered
items (86; 87). For example, in 2023 the Ocean Conservancy found that cigarette butts were the
most collected piece of coastal and waterway litter throughout North America, reaching over
780,000 items collected and double the amount of the next most littered item (bottle caps) (86).
The cost of cleaning up the billions of cigarette butts improperly discarded every year usually
falls on local communities. Cigarette butt abatement is estimated to cost the top 30 U.S. cities on
average $306.7 million annually and an estimated annual mean of $7.49 per capita (88). 47 In
addition, cigarette filters, which are made of plastic, may remain in the environment for many
years, emitting and leaching toxic chemicals into the air and surrounding area, potentially
Adjusted for inflation Consumer Price Index (CPI-U), all urban consumers data from the Bureau of Labor
Statistics (https://www.bls.gov, Data Series ID: CUUR0000SA0).
47
80
threatening human health and the environment, especially marine ecosystems (89; 90; 91; 92; 93;
94).
We discuss qualitatively the impact of reduced tobacco product litter due to reductions in
tobacco product use but note that this product standard could reduce litter. The net effect of the
potential environmental benefits would depend on the behavioral response of baseline consumers
of affected tobacco products, including those who switch to very low nicotine combusted
products or other tobacco products. The environmental benefits would stem from those that stop
or reduce tobacco use as estimated in the benefits section (see Section II.G), as well as from
those who do not initiate tobacco use.
d. Improvements in Health-Related Quality of Life
We recognize that by 6 months of abstinence, most people who smoked cigarettes report
less psychological distress than they experienced while they were still smoking (95 pp. 517-578)
and showed improvements in measures of mental health compared with those who continued to
smoke, including psychological well-being, anxiety, positive affect, cognitive functioning,
energy, sleep adequacy, self-esteem, and sense of mastery (96). A 2014 meta-analysis of
cessation literature concluded that smoking cessation is associated with reduced depression,
anxiety, and stress and improved positive mood and quality of life compared with continuing to
smoke (97). In studies of quality-of-life impacts after quitting, people who formerly smoked
cigarettes reported no deterioration in quality of life and were more likely to see improvements
and many people who no longer smoke cigarettes also reported that they were “happier” after
quitting than they were before (98; 99). Finally, the PHM also does not capture some of the more
immediate morbidity effects associated with improvements in quality-of-life, such as a decrease
in coughing and shortness of breath that may first occur within 1 to 12 months of quitting (6), or
general satisfaction smokers experience after quitting.
H. Costs of the Proposed Rule
This product standard would set a maximum nicotine level for cigarettes and certain other
combusted tobacco products. We expect this proposed rule, if finalized, to impose costs on
industry to follow the product standard, on the broader economy to repurpose land, labor, and
capital, on consumers impacted by the product standard, and on FDA to enforce this product
standard. To accurately quantify the costs of the rule we need to make sure that we do not
inadvertently attribute any sales of illicit products to the formal marketplace. Doing so would
inaccurately attribute the producer surplus value of illicit sales to the formal market which would
give the impression that this rule is less costly than it is to the legal tobacco industry. Therefore,
we use the “no illicit trade” scenario PHM output to restrict transitions to the legal market and
81
quantify the impact that this product standard would have on the legal marketplace. We request
comment on all estimates in this section.
1. Cost to Industry
For all consumers who reduce or quit use of tobacco products as a result of this proposed
product standard, if finalized, spending would shift from the tobacco sector to other sectors of
the economy (including the banking sector in the form of savings or other financial services).
This spending shift would result in land, labor, and capital inputs moving out of the tobacco
sector of the economy and into other sectors. Additionally, this transition also includes firms
transitioning resources within the tobacco industry to shift production to VLNC products or
noncombusted tobacco products. The proposed rule results in three types of industry costs: 1)
transition costs, which account for the cost to repurpose productive equipment and labor to new
sectors, 2) producer surplus loss that results from the new equilibrium as combusted markets
contract and noncombusted markets expand, and 3) compliance costs such as reading and
understanding the rule, reformulating and labeling products to meet the standard, preparing and
submitting premarket applications for new products, and testing costs to ensure combusted
products meet the new standard.
a. Economic Transition Cost
Industry transitions resulting from this rule may take the form of firm closures, individual
facility closure, and employment impacts across the tobacco supply chain including tobacco
farming, tobacco product manufacturing, tobacco wholesalers, and tobacco retailers. We note
that, rather than closing, some firms may shift their productive equipment and labor to the
production and sale of compliant VLNC combusted products, noncombusted tobacco products,
or nontobacco products. Firms that do not continue to operate in the market for combusted
tobacco products would not be expected to face compliance costs, beyond reading and
understanding the rule, as typically measured in Regulatory Impact Analyses. However, there
would be costs related to the reallocation of productive resources to other sectors of the tobacco
market or economy where consumers choose to spend the money that they previously spent on
combusted tobacco products. The firms that transition their productive resources from the
production of combusted tobacco products to noncombusted tobacco products also face
transition costs as noncombusted tobacco products may require different equipment and labor
than combusted tobacco products.
While we estimate significant costs to repurpose productive resources, such as capital,
away from the combusted tobacco product industry, the literature on such significant shifts in the
economy as a result of a regulation is relatively sparse. To develop the economic transition cost,
we first completed a literature review, which is summarized in Appendix B. Given the limited
82
literature on the topic and the limited data that would allow us to estimate for firm/facility exit
from the combusted tobacco market or other measures of the scale of the economic transition
that may occur under this product standard, if finalized, we take a broad approach to the
economy-wide transition of productive resources. 48
We use data from the U.S. Census Bureau’s 2022 Annual Capital Expenditures Survey
(ACES) to estimate the annual amount that firms invest domestically in equipment and structures
for all tobacco manufacturing under North American Industry Classification System (NAICS)
code 3122 (100), inflation-adjusted to 2023 dollars. ACES reports that capital expenditures
during 2013-2022 in the overall tobacco manufacturing industry ranged from $396 million to
$647 million, with a 10-year average of $490 million, as seen in Table 25 below. We assume that
one-time transition costs for capital would be equal to ten times the range stated above from
$3,957 million to $6,467 million, with a primary estimate of $4,902 million. As we are unable to
estimate what portion of the capital expenditures reported by ACES are solely related to
manufacturing combusted products affected by this rule, we assume that annual capital
expenditures by manufacturers of affected products are similar to those of the overall tobacco
market.
Table 25. Capital Expenditures in the Tobacco Manufacturing Industry (NAICS 3122, Millions
of 2023 Dollars)
Year
2013
2014 (max)
2015
2016
2017
2018 (min)
2019
2020
2021
2022
10-Year Average
1
Structures
Equipment
Total1
$80
$82
$221
$107
$128
$121
$91
$115
$108
$85
$114
$423
$564
$357
$299
$336
$275
$457
$294
$359
$400
$376
$503
$647
$578
$406
$465
$396
$548
$408
$467
$485
$490
Totals may not add due to rounding.
We note that that while the main analysis of the RIA is a Benefit-Cost Analysis that measures economic impacts
from the standpoint of U.S. society as a whole, the Small Entities Analysis in Section III looks at the impacts from
the standpoint of individual small entities. In this analysis we go into a more detailed discussion of impacts to firms.
We also discuss reductions in tobacco firms’ revenue in Section H.
48
83
We compute transition costs associated with labor in the following way. We estimate that
the total number of employees working on affected products is 9,003 by multiplying the total
tobacco manufacturing employment in the May 2023 National Industry-Specific Occupational
Employment and Wage Estimates (101) of 11,280 by 79.8 percent, which is the share of revenue
of affected products relative to total tobacco revenue. For the low, primary, and high scenarios,
we use the estimated reduction in cigarette quantity, as discussed in section II.F.2, 5 years after
the nicotine product standard effective date relative to baseline quantity and assume that firms
scale down production proportional to this reduction. The low, primary, and high estimated
reductions in quantity are 17 percent, 96 percent, and 99 percent, respectively. We estimate total
employees facing transition for each scenario by multiplying the reduction in quantity by the
total number of employees working on affected products.
We estimate the social cost of employee transition using estimates from the literature
associated with mass layoffs (102; 103; 104). Walker (2013) estimates the present discounted
cost of an employee separating from their job as a result of an environmental regulation to be
about 120% of their pre-regulatory annual earnings at a 4% discount rate (104). Using the
reported coefficients in Walker’s Column 2 of Table III, we estimate the annualized cost to be
15.7% at a 2% discount rate. Davis & Von Wachter (2011) estimate the cost of an employee
losing their job in a layoff to be about 11.9% of the present discounted value of counterfactual
earnings over a 20-year period at a 5% discount rate or 171% of their predisplacement annual
earnings (103). Bartik (2015) estimates the annualized cost to be 12.8% at a 3% discount rate for
an area with average initial unemployment. For our analysis, we use the range of 11.9% to 15.7%
as the low and high impact scenarios and take the midpoint of 13.8% as the primary impact
scenario (102). We assume employees who lose their job as a result of the policy will face an
annualized loss in wages of 11.9, 13.8, and 15.7 percent of their 2023 earnings over a 40 year
time horizon, in the low, primary, and high impact scenarios, respectively. We estimate the
potential multiple year impact on wages for transitioning employees as a one-time employment
shock using the method explained below.
The 2023 annual mean wage for the Tobacco Manufacturing sector (NAICS 312200) is
$67,570 (101). We calculate the annual lost wages due to an employee’s transition by
multiplying the annual wage by the annualized loss in wages, then discounting at a 2 percent rate
over the 40 year time horizon. This yields a present discounted value per employee that ranges
from $224,360 to $296,004, with a primary value of $260,182. We multiply the per employee
cost by the number of affected employees in each policy impact scenario to compute the total
transition cost of labor. The low, primary, and high estimates are $0.35 billion, $2.24 billion, and
$2.64 billion, respectively. Refer to Table 26 below. We note that this approach may
overestimate labor transition costs if firms that reallocate capital into the production of
noncombusted tobacco products also retrain employees to manufacture them. We request
comment on our approach, and for any additional literature on the topic.
84
Table 26. Transition Costs of Labor Under the Low, Primary, and High Policy Impact Scenarios
(2023 Dollars)
Primary
Employees Working on Affected Products
Low
9,003
Reduction in Smoking Prevalence 5 years Post-Policy
96%
Transitioning Employees
High
9,003
17%
8,620
9,003
99%
1,561
8,926
Social Cost Per Employee
$260,182
$224,360
$296,004
Total Cost
$2,242,782,659
$350,299,554
$2,642,118,350
We estimate the total one-time economic transition costs by summing costs associated
with capital and costs associated with labor, as individually discussed above. We use a
compliance period of 12 months (one year before the effective date), to allow firms time to
reformulate and then submit a premarket application for their new tobacco product. Thus, we
assume that costs occur one year following the publication date of the rule. Table 27 displays the
estimates for the total economic transition costs. We estimate total economic transition costs to
range from $4,307 million to $9,110 million, with a primary estimate of $7,145 million. We note
that firms may be able to repurpose or reallocate capital to manufacture other noncombusted
tobacco products or continue to domestically manufacture NNC combusted tobacco products for
export to foreign countries. We request comment and data on the total value of tobacco-specific
equipment, typical depreciation rates, potential resale value of various capital categories
(including land), and typical expenditures on training new employees.
Table 27. One-Time Transition Costs ($ 2023, Millions)
Capital
Labor
Total
Primary
$4,902
$2,243
$7,145
Low
$3,957
$350
$4,307
85
High
$6,467
$2,642
$9,110
b. Producer Surplus Loss
Producer surplus is determined by the difference between the price a producer receives
for their product and the minimum price they would accept. When the amount of product sold in
a market decreases, producers lose revenue, a portion of which is producer surplus. As this
proposed product standard, if finalized, is expected to result in decreases in producer surplus for
combusted products affected by this rule, this section discusses and estimates producer surplus in
the market for combusted tobacco products. In Section II.I.2, we estimate the amount of revenue
that would transfer from the tobacco market back to consumers. The policy’s reduction in
smoking prevalence is expected to lead to an associated producer surplus loss in the combusted
tobacco market. There is also expected to be a supply shift in the noncombusted product market
as a spillover effect from what is happening in the primary combusted market; some consumers
of combusted tobacco products affected by the rule substitute into the noncombusted market to
sustain their nicotine addiction. We discuss and quantify the change in the secondary-market for
non-combusted tobacco products but do not include the monetized estimates from the spillover
because the producer surplus effects may already be assessed in the primary-market analysis of
combusted tobacco products. 49 We take this approach to avoid the potential for double counting
but request comment on the extent to which the producer surplus in the noncombusted market
would be double counted.
To estimate producer surplus changes as a result of this proposed product standard, we
first consider the market structure and its impact on the magnitude of producer surplus. The
tobacco market, and particularly the market for cigarette products, exhibits a high degree of
market concentration and potential pricing power. Overall, the top three manufacturers/brand
owners account for 87.8 percent of total cigarette sales by volume in the United States (44). We
assume that in the other tobacco product markets such as non-premium cigars, pipe, and RYO
tobacco, as well as noncombusted products, similar levels of concentration exist. This level of
concentration is indicative of an oligopoly market structure. Oligopolies are challenging to assess
as the market structure can range from competitive to monopoly.
Historical evidence suggests that producer behavior in the cigarette market differs from
the typical relationship between quantity, minimum price accepted, and market price. A 1997
report prepared by the Federal Trade Commission (FTC) analyzed certain features of the tobacco
Master Settlement Agreement (November 1998). This report suggested that the proposed
settlement, particularly the antitrust exemption, had the potential to reduce competition and
enhance the ability of the cigarette companies to “coordinate” price increases (105). As observed
in more recent studies, the prices for cigarette packs have continued to rise as the number of
cigarette packs sold have decreased, with cigarette prices typically increasing following
See Ashley (109), Farrow and Rose (110), and Just, Hueth and Schmitz (111) for an explanation on potential
double counting of producer surplus when looking at spillover markets.
49
86
government policies (20; 106; 107). 50,51,52 This evidence suggests that the tobacco industry may
respond to the product standard by retaining or increasing market prices. We are uncertain about
the overall price change, which would depend on responses from both consumers and
manufacturers. We assume that price would remain constant after implementation of this product
standard, based on shifts from both supply and demand. We request comment on potential
pricing power of tobacco product manufacturers by product type and how such pricing power
may be incorporated into this analysis.
However, as we do not have sufficient data to assess producer surplus under an oligopoly
market structure, we present quantitative estimates of producer surplus under a hypothetical
competitive market with a constant price as an approximation of changes in producer surplus due
to this product standard. We then present a qualitative discussion of changes in producer surplus
under a hypothetical monopoly market structure with a constant price, which would be more
concentrated than an oligopolistic market structure. Additionally, we note that our estimates of
producer surplus represent the surplus for the entire production chain (e.g., from manufacturer to
retailer). We are unable to assess the extent to which concentration in a segment of the industry
will impact the distribution of producer surplus across the supply chain. We request comment on
the distribution of producer surplus across the tobacco supply chain, including the portion of
tobacco product sales that may represent wholesale and retail margins.
1. Producer Surplus Assuming a Hypothetical Competitive Market and a
Constant Price
We estimate the producer surplus associated with projected changes in combusted and
noncombusted tobacco product consumption assuming a hypothetical competitive market in
which price remains constant. Following the assumptions of a competitive market, we can
calculate producer surplus based on initial firm revenue, the price elasticity of supply, 53 and the
percent change in quantity in the market. We expect this proposed standard would result in
leftward shifts in both supply and demand in the combusted tobacco market. We expect demand
to have a parallel shift leftward due to consumer responses to reduced nicotine yield from
See U.S. Department of Health and Human Services (20), page 525 Figure 5.2, where the graph reflects prices
(the blue line) beginning to rise in the 1980’s as the number packs (the red line) are seen decreasing. Prices rose
significantly again after the enactment of the 2009 Tobacco Control Act and the “Special Rule for Cigarettes”
(Section 907(a)(1)(A) of the FD&C Act). https://www.ncbi.nlm.nih.gov/books/NBK99238/figure/ch5.f2/.
51
“In April 2009, the federal cigarette excise tax in the United States was increased by US$0.6167 per pack, with
US cigarette companies passing on the full amount of the tax increase and raising prices further (e.g., Philip Morris
USA raised prices on its leading brands by US$0.71 per pack and on other brands by US$0.78 per pack)” (106 p.
31)
52
“In light of the oligopolistic structure of the U.S. tobacco industry and price inelasticity of the demand for
cigarettes, the tobacco industry has the ability to raise cigarette prices by more than the increase in marginal cost of
cigarette production. Several empirical studies have found tax pass-through rates of 100% or greater in the cigarette
industry (Barnett et al. 1995; Harris 1987)” (107 p. 702).
53
Price elasticity is a measure of how the quantity supplied or demanded changes as a result of a change in price.
50
87
products with reduced content relative to current nicotine levels (that is, increased cessation and
decreased initiation), and supply to have a parallel shift leftward due to firms’ reallocating
resources away from the production of combusted tobacco products based on expectations of
consumer responses. Together, these shifts capture the projected declines in combusted tobacco
product quantity consumed. We are uncertain about the overall price change, which would
depend on the extent to which supply and demand shift relative to each other. Therefore, we
assume that the supply and demand curves shift such that price remains constant after this
proposed standard. This is shown in Figure 21 below, where we model the decrease in
equilibrium quantity, assuming that price remains constant.
Figure 21. Graph of Producer Surplus Assuming a Hypothetical Competitive Market Structure
and Combusted Tobacco Demand and Supply Shifts Under the Rule
88
Notes: D stands for demand, S stands for supply, Q stands for quantity, and P stands for price. Producer surplus
without the policy is A + B + C, and producer surplus after the policy is area C. The lost producer surplus is A + B
(= A + B + C – C). We note that our calculations depend solely on the decrease in quantity, our price assumption,
and elasticity of supply. We make no assumptions on the demand for combusted tobacco products, with curves
provided purely for illustration.
Previous empirical research has estimated the supply elasticity of tobacco farming at 7.0
(108). We use this supply elasticity to estimate the change in producer surplus in the markets for
cigarettes and cigars, along with our estimates of change in quantity in those respective markets,
and assuming parallel shifts in supply and demand such that price remains constant. We assume
producer surplus loss in the market for pipe tobacco and RYO tobacco is proportional to the
revenues of each product relative to cigarettes in the Euromonitor data in 2021, since they are
assumed to follow the same trend in cigarette smoking prevalence as discussed in the baseline
section above. 54 We request comment on this approach to producer surplus loss and on our
supply elasticity estimate.
We calculate producer surplus losses from 2025 to 2064 by taking the difference between
post-policy producer surplus and baseline producer surplus. We expect the policy to first impact
sales beginning in 2028, as seen in Figure 12 of section II.F.2. In the absence of the policy, in our
hypothetical analysis, each period smoking prevalence is declining, causing a leftward shift in
demand and a simultaneous leftward shift in supply due to firms’ expectations, resulting in
constant price, lower equilibrium quantity, and a downward trend in producer surplus at baseline
over the time horizon. In the first year, we assume the price elasticity of supply to be 7 at the
hypothetical equilibrium price and quantity in the baseline. In each subsequent year, we
dynamically calculate a new price elasticity of supply at that new equilibrium quantity with the
same price. 55 In each given year and for each policy scenario (low, primary, and high policy
impact scenarios), we calculate the relative difference between the baseline expected quantity
sold and that policy scenario’s expected quantity sold to establish the policy-induced decrease in
quantity for each year. We then calculate the producer surplus loss in each year using the
baseline firm revenue, price elasticity of supply, and the percentage change in quantity between
the baseline quantity and the quantity of the respective policy scenario. The change in producer
surplus loss, for year ‘t’, under this framework is equal to
The revenues of pipe tobacco and RYO as a percentage of cigarette revenues are 1.41 and 0.32 percent,
respectively. Therefore, we assume the producer surplus loss for pipe tobacco is equal to 1.41 percent of the loss in
the cigarette market and 0.32 percent for RYO.
54
55
. Given parallel shifts in supply, the slope of the supply curve
remains constant from the first period. Slope is established at the initial equilibrium in the first period using the
relationship,
89
We note that this calculation makes no direct use of estimates of the elasticity of demand for
combusted tobacco products, and demand curves are provided purely for illustration.
Our estimate of annualized producer surplus loss in the cigarette market ranges from
$159 million to $1,678 million, with a primary estimate of $1,435 million at a 2 percent discount
rate. Cigar market annualized producer surplus estimates range from $35 million to $251 million,
with a primary estimate of $228 million at a 2 percent discount rate. Annualized producer surplus
loss estimates for the pipe tobacco market range from $2.2 million to $23.6 million, with a
primary estimate of $20.2 million at a 2 percent discount rate. The annualized producer surplus
loss estimates for the RYO tobacco market range from $0.5 million to $5.4 million with a
primary estimate of $4.7 million at a 2 percent discount rate. We sum producer surplus losses for
cigarettes, cigars, pipe, and RYO tobacco and display the total producer surplus loss for the
combusted products affected by the rule in Table 28. Total present value of cost ranges from
$5,479 million to $54,621 million, with a primary estimate of $47,076 million at a 2 percent
discount rate. Annualized costs range from $196 million to $1,958 million, with a primary cost
of $1,687 million at a 2 percent discount rate.
Table 28. Producer Surplus Loss in the Combusted Tobacco Products Market over 40 Years in
Millions of 2023 Dollars at a 2% Discount Rate
Primary
Low
High
Discounted Total Cost (40 years)
Annualized Cost (40 years)
$47,076
$1,687
$5,479
$196
$54,621
$1,958
As discussed above, we estimate the potential gains in producer surplus in the
noncombusted market, however, we do not include these estimates in the form of a net producer
surplus impact. We omit these monetized estimates from the spillover in the secondary
noncombusted market because the producer surplus effects may already be assessed in the
primary-market analysis of combusted tobacco products. That is, the producer surplus change in
the market for noncombusted products may have been, implicitly, partially netted off from the
long-run change in producer surplus in the primary market for combusted products (109; 110;
111). We request comment on the extent to which the producer surplus impact in the secondary
market is already accounted for in the primary market estimates.
We compute producer surplus gain in the noncombusted tobacco product market with the
same methods used to estimate producer surplus loss in the combusted tobacco product market
discussed above (for example, the key change is modeled as a parallel rightward shift of the
supply and demand curves such that equilibrium quantity increases, and price remains constant).
90
As discussed in the baseline, noncombusted tobacco product use prevalence is expected to
continuously rise across the 40-year time horizon. We estimate that the policy would increase
noncombusted tobacco product use relative to the baseline due to consumers switching from
combusted to noncombusted tobacco products to sustain their nicotine addiction. The PHM
estimates a sharp uptick in noncombusted tobacco use immediately following the policy relative
to the baseline. Refer to Figure 16 in Section II.F.2 for the estimated quantity sold for smokeless
tobacco products from 2025 to 2064. Following the same methodology for estimating baseline
ENDS revenue, we estimate producer surplus gain for SLT and assume producer surplus gain in
the market for ENDS is proportional to the ratio of ENDS to SLT revenues of 0.69 in the
Euromonitor Passport data in 2021, as shown in Table 6.
Our estimate of annualized producer surplus gain in the smokeless tobacco market ranges
from $42 million to $533 million, with a primary estimate of $206 million at a 2 percent discount
rate. The annualized producer surplus gain for ENDS ranges from $29 million to $369 million,
with a primary estimate of $142 million at a 2 percent discount rate. We sum the producer
surplus gains for smokeless and ENDS to account for the entire noncombusted market and
display the total producer surplus gain in Table 29. Total present value producer surplus gains
range from $1,991 million to $25,168 million, with a primary estimate of $9,715 million at a 2
percent discount rate. Annualized producer surplus gains range from $71 million to $902 million,
with a primary estimate of $348 million at a 2 percent discount rate.
Table 29. Producer Surplus Gain in the Noncombusted Tobacco Products Market over 40 Years
in Millions of 2023 Dollars at a 2% Discount Rate
Primary
Low
High
Discounted Total Gain (40 years)
Annualized Gain (40 years)
$9,715
$348
$1,991
$71
$25,168
$902
A limitation of our approach to estimating producer surplus is that it relies on an
assumption of parallel supply curves (for every unit up to Q1*) and on an estimate of supply
elasticity which was estimated using data on tobacco growers in one state from 1950-1984. This
estimate of supply elasticity may not generalize to other producers in the tobacco industry,
including manufacturers, distributors, and retailers. More recent and regionally diverse data on
supply elasticity may also generate different results. An additional limitation is that this analysis
assesses the market as a whole. We do not have the data needed to assess the lost producer
surplus at different points along the supply chain. The degree to which intermediaries in the
market lose surplus depends on market structure and integration. Further, consumers who cease
tobacco product use are expected to purchase other goods and services, resulting in reduced
producer surplus for the tobacco industry but increased revenue and associated producer surplus
for other industries. Additionally, we reiterate that the market for tobacco is highly concentrated,
91
with a small number of firms holding the majority share of tobacco product sales. We request
comment on all assumptions and estimates in this section.
2. Producer Surplus Assuming a High Degree of Market Concentration
and Constant Price
Depending on how the tobacco market is defined, the tobacco industry could be
considered concentrated, which would imply producers could be cooperative and reach noncompetitive outcomes. Oligopolies acting in a cooperative manner may be able to realize
monopoly profits and subsequently may have greater changes in producer surplus relative to a
competitive market as a result of this proposed product standard. However, since we do not have
the data needed to estimate changes in producer surplus under a monopoly, we discuss it
qualitatively. As discussed above, we are uncertain about the overall price change, which would
depend on responses from both consumers and manufacturers. As with the hypothetical
competitive market discussed above, historic data suggest that tobacco firms that manufacture
combusted tobacco products often hold price constant after a policy shock, so we consider a
simultaneous supply and demand shift that would reduce quantity while holding price constant.
Since combusted tobacco markets are highly concentrated with only a few significant combusted
tobacco product manufacturers making up a large percentage of the market, the markets may
function closer to a monopoly structure than a competitive market. We show a monopoly
structure in the combusted tobacco market in Figure 22 below, assuming simultaneous shifts in
demand and marginal cost to illustrate how price could remain the same within a single,
undifferentiated monopoly market. As depicted in Figure 22, the change in producer surplus
would be the area B. We do not have enough information to derive the marginal cost or revenue
curves used to determine the change in price under the rule and, subsequently, cannot estimate
changes in producer surplus under this market structure. Thus, Figure 22 is used purely for
illustration. We request specific data and information on the level of concentration in the tobacco
market with and without this proposed policy, as well as data to estimate marginal cost and
revenue curves for combusted and noncombusted tobacco products.
92
Figure 22. Graph of Producer Surplus in the Combusted Tobacco Market Assuming a High
Degree of Market Concentration and Constant Price While Quantity Decreases Under the Rule
Notes: MC stands for marginal cost, MR stands for marginal revenue, D stands for demand, Q
stands for quantity, and P stands for price. A and B are names assigned to represent the regions
of the graph that define producer surplus post policy and the change in producer surplus.
c. Reading and Understanding the Rule
All entities affected by this proposed rule, if finalized, would spend time to read and
understand the final rule, resulting in a one-time cost. The current Preamble and proposed
codified together contain approximately 120,000 words; we use this as a proxy for the length of
the final rule. Consistent with HHS guidelines, we assume that industry reviewers read at the
average adult reading speed of approximately 200 words to 250 words per minute, so the time to
read and understand the regulation would range from 8 hours to 10 hours per person (64). We
93
assume that one to five people would read the final rule at each entity manufacturing or
importing affected products, wholesalers, and retail firms.
To value the time associated with reading and understanding the rule if finalized, we use
composite wages calculated from the 2023 BLS national industry-specific occupational
employment and mean wage estimates for the tobacco manufacturing industry (101). 56 We use a
mix of 50 percent management occupations (occupation code 11-0000) and 50 percent legal
occupations (occupation code 23-0000). This mix yields a composite wage of $76.98 per hour
for tobacco manufacturers, $80.64 per hour for wholesalers, and $47.39 per hour for retailers. 57
We double this to account for benefits and other indirect costs, yielding an hourly labor cost of
$153.96 for tobacco manufacturers, $161.27 for wholesalers, and $94.77 for retailers.
We estimate the cost for one reviewer to read the rule, if finalized, to range from
$1,231.68 to $1,539.60 for a manufacturer, from $1,290.16 to $1,612.70 for a wholesaler, and
from $758.16 to $947.70 for a retail firm. Depending on the number of people who read the rule,
these costs would range from $1,247.60 to $7,698 for manufacturers, from $1,244.32 to
$8,063.50 for wholesalers, and from $708.08 to $4,738.50 for retailers. As previously discussed
in Section II.E.4, we estimate that the rule if finalized would affect 293 entities manufacturing or
importing tobacco products, 1,343 wholesalers, and 145,044 retailer firms. The total costs for
reading and understanding the rule then range from approximately $112.1 million to $700.4
million with a primary estimate of $373.5 million. We assume this cost is incurred the year the
rule publishes, in 2025. Table 30 includes a summary of these costs.
Table 30. One-time Costs for Reading and Understanding the Rule ($, 2023)
Costs
Affected Entities (Manufacturers & Importers)
Affected Entities (Wholesalers)
Affected Entities (Retailers)
Number of People Reading per Entity
Word Count
Primary
Low
High
293
1,343
293
1,343
293
1,343
145,044
145,044
145,044
3
1
5
120,000
120,000
120,000
The BLS did not publish wage estimates for legal occupations within the tobacco manufacturing industry in 2022.
We use instead, the legal occupation wage reported for the beverage and tobacco manufacturing industry (NAICS
312000). Additionally, wage estimates were not provided for tobacco-specific wholesalers or retailers. As such, we
utilize the legal and management occupation wages for merchant wholesalers of nondurable goods (NAICS
4240A3) and all of retail (NAICS 44 and 45).
57
The tobacco manufacturing management occupation average wage is listed at $73.88 per hour, and the legal
occupation average wage is listed at $80.08 per hour. The calculation is 0.5 x ($73.88) + 0.5 x ($80.08) = $76.98.
For wholesalers, the management occupation average wage is listed at $71.08 per hour, and the legal occupation
average wage is listed at $90.19 per hour. The calculation is 0.5 x ($71.08) + 0.5 x ($90.19) = $80.64. For retailers,
the management occupation average wage is listed at $49.75 per hour, and the legal occupation average wage is
listed at $45.02 per hour. The calculation is 0.5 x ($49.75) + 0.5 x ($45.02) = $47.39.
56
94
Average Reading Speed (words per minute)
225
250
200
Reading Time (Hours)
8.9
8
10
Composite Wage ($ per hour) for Manufacturers & Importers
$153.96
$153.96
$153.96
Composite Wage ($ per hour) for Wholesalers
$161.27
$161.27
$161.27
Composite Wage ($ per hour) for Retailers
Cost per Entity (Manufacturers & Importers)
$94.77
$94.77
$94.77
$4,105.60
$1,231.68
$7,698.00
Cost per Entity (Wholesalers)
$4,300.53
$1,290.16
$8,063.50
Cost per Entity (Retailers)
$2,527.20
$758.16
$4,738.50
Total Costs for Manufacturers and Importers
$1,202,941
$360,882
$2,255,514
Total Costs for Wholesalers
$5,775,616
$1,732,685
$10,829,281
Total Costs for Retailers
$366,554,365
$109,966,309
$687,289,434
Total Cost
$373,532,922
$112,059,876
$700,374,228
d. Manufacturers: Reformulation Costs
This proposed product standard, if finalized, would cause a reduction in the number of
tobacco products available on the market. The development of new, compliant VLNC products
has costs to manufacturers, and tobacco products are required to go through one of several
authorization pathways to enter the market. Please see NPRM Section IX.B (“Pathways to
Market”) for a complete discussion as it pertains to this proposed product standard. After
implementation of the policy, manufacturers would face declining sales and would strategically
decide how many new VLNC products to develop. In the text below, we discuss assumptions on
the number of new VLNC products assumed to be developed under the low, primary, and high
policy impact scenarios. 58 This exercise is intended to create a proxy to estimate the number of
products that may remain post-policy and is not intended as an analysis of firm exit.
CTP experts assume that each manufacturer, on average, utilizes four different core
blends per tobacco category that they manufacture. A “core blend” represents a mixture of
tobacco to which different ingredients and processes are applied to produce a unique finished
tobacco product. We use the number of core blends as the number of formulations that would
have to be modified to comply with the proposed standard. For the low policy impact scenario,
we assume that registered firms currently producing a tobacco product category reformulate four
products for that tobacco category. There are currently 34 cigarette producing firms, 81 nonpremium and premium cigar firms, 51 pipe tobacco firms, and 25 RYO firms. We have no
information on the number of firms that only produce premium cigars, so we assume that all
firms produce non-premium cigars.
The “high impact scenario” corresponds to the scenario where the policy has the highest estimated averted
mortality (95th percentile results projected by the PHM) and the lowest (5th percentile) post-policy combusted
tobacco prevalence. For reformulation and some other costs, the “high impact scenario” or “upper bound”
corresponds to the scenario with the fewest products and thus, reflects the lowest estimate of costs.
58
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For our primary estimate, we assume that manufacturing of VLNC combusted tobacco
products would decline to a handful of firms. We use the number of firms that have a high prepolicy market share as a proxy for the manufacturing capacity that may remain on the market, as
discussed in Section II.H.1. We assume that four cigarette manufacturers and three cigar
manufacturers remain on the market. Since an average manufacturer utilizes four different core
blends per tobacco product category, as discussed in the previous paragraph, we assume that the
high pre-policy market share firms that remain on the market would reformulate four products
each. Since we lack data on the other product categories, we assume these categories are equally
concentrated and estimate that three firms remain on the market in each of the other categories.
Finally, for the high policy impact scenario, we assume that only one product from each
product category remains on the market, the minimum product variety needed to meet projected
demand remaining after the proposed rule is finalized and in effect. There is already one firm
with a VLNC cigarette on the market, so we assume that firm remains but introduces zero
additional VLNC cigarettes. We assume one product from each of the other tobacco product
categories remains on the market. See Table 31. We assume manufacturers would reformulate
these products in the year before the effective date of any final rule and would not introduce
additional VLNC combusted tobacco products later in the time horizon. We request comment on
our assumptions and estimates in this section.
Table 31. Estimated Number of VLNC Combusted Tobacco Products that are Expected to be
Reformulated and Seek Marketing Authorization Under the Policy
Number of Products
Product Type
Primary Impact
Low Impact
High Impact
1
Cigarette
16
135
0
Cigar
12
324
1
Pipe
12
204
1
RYO
12
100
1
Total
52
764
3
Note that 22nd Century Group, Inc. already produces a compliant VLNC cigarette, so no additional VLNC
cigarettes are needed to ensure that one is available on the market in the high impact scenario. We subtract 1 from
the low cigarette impact scenario to account for this, but do not do so in the primary estimate since this firm is not
one of the 4 largest cigarette firms by market share.
1
In 2019, 22nd Century Group, Inc. received FDA marketing authorization and, in 2021,
received exposure modification orders for VLNC cigarettes under the names VLN King and
VLN Menthol King. VLNC cigarettes are currently being marketed and sold to consumers in
select U.S. markets as cigarettes with 95 percent less nicotine than conventional cigarettes. These
are currently the only products on the U.S. market that would comply with the proposed nicotine
level of this product standard, if finalized. As discussed above, we expect some manufacturers to
reformulate their combusted tobacco products to comply with this proposed rule, if finalized.
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Manufacturers who choose to develop new VLNC products would have to reformulate
their NNC products. To develop VLNC products, manufacturers could choose to use a variety of
approaches to obtain the low nicotine tobacco inputs they need for production (See Preamble
Section VII.E). Regardless of the approach chosen to acquire VLNC tobacco inputs,
manufacturers may also choose to make additional changes to product formulation beyond what
is required by the proposed product standard to account for any identifiable or detectable
‘nicotine’-related impact on consumer perception or for any other characteristic affected by the
nicotine reduction process. Therefore, manufacturers may choose to compensate for this by
adding new ingredients or altering the quantity or concentration of existing ingredients added to
combusted tobacco products. We estimate the cost of reformulation for each unique blend of
compliant tobacco product expected to remain on the market following the proposed product
standard.
FDA lacks data specific to the activities and resources that would be associated with
reformulation of combusted tobacco products. Given this limitation, we estimate the costs of
reformulating non-conforming combusted tobacco products using estimates from the FDA
Reformulation Cost Model developed by RTI International (112). This model was initially
developed to support food safety and nutrition regulations that require reformulation of affected
products or induce manufacturers to reformulate because of changes in labeling requirements.
The model provides cost estimates for different types of reformulation activities and compliance
activities (such as product testing and premarket authorization of the new products) that take into
account the complexity of the product and the company size at the product formulation level
(i.e., one formula may be used to produce multiple products). In the model, the complexity of the
product is determined by several product characteristics that facilitate or complicate
reformulation processes such as number of ingredients, shelf stability, or storage condition. We
recognize that food and tobacco products are not perfectly aligned in terms of production
processes; below we describe how we use and adapt the model in the context of combusted
tobacco products as well as limitations. FDA seeks comments or data to support alternative
assumptions or estimates.
The reformulation cost estimates generated by FDA’s Food Reformulation Model are
largely driven by activities that are good proxies for what we expect to be incurred by covered
combusted tobacco product manufacturers in response to this rule. The original model includes
ten activities that food safety experts identified as key to the reformulation process. FDA tobacco
subject matter experts identified three activities that are not expected to be relevant to
reformulation activities in the context of combusted tobacco products. Specifically, we exclude
packaging assessment and development and product and package performance testing because
VLNC and NNC cigarettes can use the same type of packaging. Thus, the activities that we
include in the analysis are determining response to regulation, project management, product
reformulation, production scale-up testing, recordkeeping, analytic tests, and consumer tests (See
Table 32). Given the variation in the product complexity and manufacturing steps for each
combusted tobacco product subcategory, we find that the underlying activity cost estimates
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produced by the FDA Food Reformulation Model (112) are reasonable proxies for related costs
that may arise for combusted tobacco manufacturers affected by the proposed rule and request
comment supported by data on our estimates.
To estimate the costs of reformulation in the FDA’s Food Reformulation Model, RTI
International worked with experts to determine the typical resources (types and quantity)
required for labor, materials and utilities, analytical testing, and marketing testing, if applicable,
for each of the activities and level of reformulation complexity that were identified. RTI
International developed the estimates of market testing using information provided by three
companies that conducted studies for manufacturers. Estimates of analytical testing costs were
based on published prices from testing laboratories, and estimated market testing costs were
based on information provided by vendors. Using the estimated labor hours, wage rates, and
related testing costs, the model calculates per-formula reformulation costs for each reformulation
activity. In addition, RTI International used the simulation model @Risk to generate the 5th,
mean and 95th percentile for each of the activities. More details can be found in the model’s
documentation (112).
We recognize that food and tobacco products are not perfectly interchangeable in terms
of production processes; however, the reformulation costs model was developed with recent
(2014/2015) best industrial manufacturing practices in mind. We acknowledge that food
manufacturing standards and processes have been established and in practice for some time and
are regularly subject to review and revision given the importance of food safety to the United
States, and it is only recently that FDA has issued a proposed rulemaking to assess tobacco
product manufacturing practices (88 FR 15174, March 10, 2023) (TPMP) and move toward
standardization. For this analysis, we assume that large tobacco product manufacturers,
representing the bulk of tobacco product production capacity, adhere to industrial practices
consistent with non-tobacco product manufacturing given their scale, reach for professional
support, and the range of products produced by some of their larger parent companies. Although
the total estimates produced by the model, which include inputs like size and structure of the
food processing industry, would not be applicable to this rulemaking, the costs of individual
activities, such as process modification, product performance testing, and project management
could be applicable to any industrialized production of a consumable good. Thus, as discussed
above, we apply only individual activity costs, which FDA’s tobacco subject matter experts
believe may be generally applicable, adjusted by considerations about the complexity of the
tobacco product formulation and size of the operation, to the industry covered by this
rulemaking.
As discussed in the Preamble, FDA’s tobacco product scientists have identified multiple
methods for altering the level of nicotine in cigarettes and certain other combusted tobacco
products. FDA anticipates that manufacturers may choose to use a variety of approaches to meet
the proposed maximum nicotine level. Significant reduction of nicotine in the tobacco products
covered by this proposed product standard can be achieved principally through three main
methods: tobacco blending, chemical extraction, and genetic engineering. Other practices, such
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as modified growing conditions (e.g., discontinue the practice of topping where the flowering
head of the tobacco plant is removed to produce leaves with a significantly higher nicotine
content, increase plant density, decrease nitrogen application) as well as more novel techniques,
can also help to reduce nicotine levels. One or more of these processes can be used to achieve the
nicotine target level in this proposed product standard. The process we believe requires the
fewest changes to general manufacturing practices and could be implemented for the lowest cost
is switching from current tobacco blends to available strains of VLNC tobacco leaf. We expect
that increased manufacturer interest in purchasing new tobacco blends with lower nicotine
content will result in tobacco growers and distributors shifting tobacco crop inventories to meet
this change in demand, following regular market forces. As we expect many manufacturers to
primarily comply with this rule through changes in purchasing practices, we use the Food
Reformulation Model’s description of “major ingredient or process change” to capture the
associated burden. 59
We adapt the FDA Food Reformulation Model by using estimates of the number of new
VLNC combusted tobacco product formulations that we expect to be developed to comply with
this proposed product standard outlined in Table 31. Our estimates of the number of product
formulations that may need to be reformulated may overestimate costs if manufacturers can
create very low nicotine tobacco levels through changes in farming and curing practices prior to
blending. Alternatively, these estimates may underestimate the reformulation costs if subsequent
processing of the product is needed to alter nicotine levels or other characteristics beyond what
may be resolvable through changes in blending.
As mentioned before, cost estimates developed in the FDA Food Reformulation Model
also vary by the complexity of reformulation for each product subcategory to account for the fact
that some products are more easily reformulated than others. For the purposes of this analysis,
we assume that all combusted tobacco products are “low” complexity products. The complexity
level criteria for foods are determined based on the number of ingredients that interact with other
ingredients, and whether the manufacturing process is technologically challenging. Low
complexity products, in this context, may be described as products where the manufacturing
process is well understood, and one major ingredient is involved. For example, milk, cheese,
packaged tea bags and low-calorie carbonated beverages are considered low complexity products
because their finished product involves a manufacturing process that is predetermined, well
understood, and involves mainly one ingredient. Products where the manufacturing process is
more complex and involves few ingredients—such as regular (non-low-calorie) gum, dried fruit,
chocolate and non-chocolate candy, powdered milk, or non-carbonated beverages—are
considered medium complexity products. On the other hand, low-calorie gum, refrigerated
In the Food Reformulation Model, a “major ingredient” is defined as one that is used at high levels with functional
performance effect, food safety effect, or both types of effects (e.g., it is a macro component or it represents more
than 2 percent by weight). In the model, a change in the production process cannot happen without a change in
ingredient also occurring, but a major change in ingredient can occur without there being a change in process. A
functional performance effect includes changes to the product related to sensory characteristics observable by the
consumer. A food safety effect includes changes that can alter the product’s safety such as shelf stability.
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flavored milk or yogurt shakes are considered high complexity products because their
manufacturing involves many ingredients and highly complex processes. The reformulation cost
model also categorizes food products by acidity levels, shelf-stability and overall simplicity as
determined by the number of ingredients in the product and the number of processing steps.
Because combusted tobacco products generally have a relatively neutral pH, FDA believes this
to be an area where the model guidelines of food product categories do not fit precisely for
describing tobacco product categories. Acidity during processing and storage can have a large
impact on shelf-stability and consistency for canned and jarred food products and is not a good
indicator of manufacturing process complexity for tobacco products. Lacking a tobacco-specific
reformulation cost model, FDA’s tobacco product scientists reviewed combusted tobacco
manufacturing processes in the context of the food reformulation cost model and determined that
combusted tobacco would generally fall under the reformulation model’s low complexity
category of products, mainly based on the fact that the products are shelf-stable, consist of one
major ingredient and involve few processing steps, not unlike a packaged tea bag, for example.
Specifically, FDA tobacco product scientists have used the comparison of combusted tobacco to
packaged tea bags in terms of manufacturing complexity. This is because combusted tobacco is
largely dried tobacco leaf; cut, chopped, or shredded to varying degrees, possibly with flavors
added; and then packaged in a shelf stable form. This contrasts with other products such as
chewing gum, which are melted to strain natural impurities, mixed with sweeteners and flavors,
flattened, mixed with additional sugars, and then packaged. The melting process and chemical
mixing of additives in semi-liquid form of such products makes the overall process more
complex. As another example, non-fat dried powdered milk manufacturing begins with the raw
liquid milk, which is separated to remove cream or butterfat. The additional steps to reach a
powder form include taking the resulting separated and condensed milk and either atomizing or
spray drying the milk. Spray drying— the industry standard for a long time and still widely
used—is where the condensed milk is sprayed through a nozzle into 400-degree swirling air
where the moisture is separated from the milk particles. Those particles are collected as
powdered milk. As a manufacturing process, this is significantly more complex than combusted
tobacco manufacturing. Thus, the manufacturing process of combusted tobacco filler is quite
different than the manufacturing processes of these food products.
Next, each VLNC formulation is assumed to be equivalent to a reformulation which the
FDA Food Reformulation Model describes as a “change in production process (with an
ingredient change)”. The per-formulation costs include activities associated with determining
response to regulation, project management, process modification, product reformulation,
production scaleup testing, analytical and consumer testing, and recordkeeping. We update the
per-formulation cost from 2014 dollars to 2023 dollars using the consumer price index. In
addition, we note that the FDA Food Reformulation Model assumes a minimum of 24 months for
reformulation for small and medium companies and a minimum of 36 months for large
companies. Based on input from product formulation experts, we assume that large firms put
substantially more effort into coordinating and planning a reformulation than small firms.
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Shorter timelines can affect the availability of personnel to oversee and implement the changes,
as well as availability of supply chain sources for ingredients and equipment, and the ability to
conduct or contract research needed to implement the changes. Thus, shorter compliance periods
would incur overtime and rush charges, thereby increasing costs. We use a compliance period of
12 months (one year before the effective date), to allow firms time to reformulate and then
submit a premarket application for their new tobacco product. The report includes adjustment
factors for a 12-month compliance period (the adjustment is 1.75 for small firms, 2.25 for
medium firms, and 3 for large firms). We incorporate these adjustment factors in our estimates.
Using the per-formulation costs in Table 33 and the estimated number of new VLNC
combusted tobacco products in Table 31, we estimate total reformulation cost as shown in Table
33. Total one-time reformulation costs are estimated to be between $35 million and $9 billion,
with a primary estimate of $610 million. Most of the costs arise from cigarettes, followed by
cigar and pipe tobacco.
The estimated costs are based on several key assumptions regarding anticipated industry
response to reformulation decisions. FDA seeks comment and data supporting other assumptions
regarding industry practice for reformulating products and their associated costs discussed in this
section. First, in addition to the related activities mentioned above, manufacturers may need to
discard or export unused inventory of raw materials. The reformulation model assumes that
manufacturers would use any existing inventory of raw materials so that any potential costs of
discarding or exporting them would not be incurred. 60 If manufacturers are not able to use
existing raw materials, then the reformulation costs may be higher. Second, we assume any onetime reformulation costs are incurred in the first year after publication of the final rule, prior to
the proposed product standard becoming effective, rather than spread out over the first and
second years after publication. If additional time is available to implement a reformulation, then
costs may be lower than what we have estimated. We request comment and data on our
assumptions about the timing of costs for industry. Third, reformulation costs represented in the
model are one-time costs of reformulation, and it does not include ongoing costs that may be
associated with the reformulation. For example, if bringing the nicotine levels in compliance
requires costly modifications to tobacco blends, then combusted tobacco product manufacturers
would incur higher costs in the form of higher input prices that are not included in the underlying
assumptions of the model and would thus result in this model underestimating the costs of
reformulation. Fourth, capital equipment expenditures are not included in the model. The
underlying assumption is that manufacturers would be able to use their current capital equipment
to come in compliance. Finally, cost estimates assume that a moderate number of products are
being reformulated at the same time. If all products within a product subcategory had to be
A tobacco product intended for export is not deemed to be in violation of section 907 and can be exported under
801(e) of the FD&C Act if it (A) accords to the specifications of the foreign purchaser, (B) is not in conflict with the
laws of the country to which it is intended for export, (C) is labeled on the outside of the shipping package that it is
intended for export, and (D) is not sold or offered for sale in domestic commerce. If manufacturers were to export
raw materials and incur costs associated with this activity, the reformulation model would be underestimated.
60
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reformulated at the same time, manufacturers would incur a higher initial cost. There may,
however, also be cost savings from manufacturing efficiencies when reformulating several
related products at the same time.
Table 32. Reformulation Cost by Activity ($2023)
Reformulation Activity
Cost
Determine Response to Regulation
$164,088
Project Management
$861,302
Production scale-up testing
$1,305,689
Recordkeeping
$1,237,957
Analytical Tests
$3,765
Consumer Tests
$1,023,390
Product reformulation/process modification $7,142,088
Total per-formulation cost
$11,738,279
Table 33. Reformulation Costs by Product Category ($2023, Millions)
Primary
Low
Cigarette
$188
$1,596
Cigar
$141
$3,803
Pipe
$141
$2,395
RYO
$141
$1,174
Total
$610
$8,968
High
$0
$12
$12
$12
$35
Note: The low estimates relate to the low policy impact scenario (e.g., lowest estimate of averted deaths) from the
PHM, while the high estimates relate to the high policy impact scenario (e.g., highest estimate of averted deaths)
from the PHM.
As discussed above, there are several ways to reduce nicotine and reformulate products to
comply with this proposed product standard. We request comment on the likelihood that each
method would be used, and the costs associated with each method.
e. Labeling Cost
This proposed product standard, if finalized, would require manufacturers to include a
manufacturing code on the packaging. See Section X.C.1 of the NPRM for details on the
manufacturing code requirements. The manufacturing code would allow manufacturers and FDA
to identify the production batch of a particular finished product that has been released for
distribution. This labeling update is consistent with the labeling requirement laid out in the
TPMP proposed rule (88 FR 15174, March 10, 2023). We anticipate that the TPMP rule will
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finalize before this proposed product standard. Therefore, all potential labeling costs for this
product standard are already accounted for. 61
f. Cost to Submit Premarket Applications
Manufacturers for each new VLNC tobacco product would need to choose a pathway to
market and submit a premarket application to FDA. Section IX.B of the NPRM discusses
expected pathways to new VLNC products. We draw estimates of submission cost from the
“Content and Format of Substantial Equivalence Reports” FRIA (86 FR 55224, October 5,
2021), since we expect most reformulated combusted tobacco products to use the substantial
equivalence (SE) pathway. Table 2 of the SE FRIA presents time estimates for firms to develop
SE submissions with a primary estimate of 193.5 hours. We develop a composite wage of 75
percent Chemical Technicians (average hourly wage $39.77) and 25 percent management
(average hourly wage $83.42) from the NAICS 312200 – Tobacco Manufacturing wage data for
a composite wage, including benefits and other indirect costs, of $101.37. This gives us an
estimated cost of $19,614 per SE submission. We then apply the costs to the estimated number of
products from Section II.H.1.d. See Table 34.
Table 34. Costs to Submit SE Reports for VLNC Products ($ 2023)
Primary
Low
Hours per SE report
193.5
193.5
Composite wage per hour with
overhead
$101.37
$101.37
Cost per SE report
$19,614
$19,614
Number of SE Submission
Total cost
52
$1,019,935
764
$14,985,193
High
193.5
$101.37
$19,614
3
$58,842
Note: The low estimates relate to the low policy impact scenario (e.g., lowest estimate of averted deaths) from the
PHM, while the high estimates relate to the high policy impact scenario (e.g., highest estimate of averted deaths)
from the PHM.
If the TPMP rule is finalized after this product standard, we may expect the costs associated with Subpart F of
TPMP to be incurred (at least in part) due to the nicotine product standard. In TPMP, we may estimate one-time
labeling costs ranging between $2 million and $8 million, with recurring costs of approximately $0.5 million
(undiscounted) each year. See Table 23a of the Requirement for Tobacco Product Manufacturing Practice,
Preliminary Regulatory Impact Analysis (260). We expect labeling costs for the nicotine standard to be analogous to
Subpart F of the TPMP rule. Except, we note that this estimate of labeling costs for the nicotine standard may be 1)
overestimated because firms may exit the market as a result of the nicotine standard, so a direct transfer of costs
from Subpart F of TPMP to this rule may not be appropriate, and 2) underestimated because firms may be required
to engage in other activities analogous to other Subparts of TPMP. Further analysis would be needed to accurately
assess the scenario where the nicotine standard publishes prior to TPMP.
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We expect these costs to occur in year 1 of our time horizon, 2026, since all firms would
want to have authorized tobacco products on the market before consumers begin switching to
VLNC tobacco products at the effective date. We estimate a primary cost of $1 million with a
lower and upper bound of $59 thousand and $15 million. We request comment on this approach.
g. Testing costs
The proposed rule requires manufacturers to test every batch of VLNC tobacco product
subject to this standard. While manufacturers are required to develop their own testing
procedures, or adopt one of FDA’s suggested test methods, we make some assumptions about
testing process here to estimate testing costs. Based on consultation with FDA tobacco product
science subject matter experts, we assume the sample size a manufacturer uses for testing would
need to be of sufficient size to ensure that the margin of error for a 95 percent confidence interval
is no more than 0.06 milligrams of nicotine per gram of total tobacco.
Based on information from inspections and other FDA subject matter expertise, FDA
estimates a batch size of 24 million cigarettes or 1.2 million packs for the largest cigarette
manufacturers and 8 million cigarettes or 400,000 packs for smaller cigarette manufacturers.
However, due to estimated decreases in quantity produced as a result of the product standard, we
estimate that all manufacturers produce the smaller batch size of 8 million cigarettes or 400,000
packs after the final rule goes into effect. We request comment on the estimated batch size.
Using our estimates for cigarette product unit sales under the proposed product standard, as
shown in Figure 23, we estimate an annual production primary estimate of 155 billion cigarettes
in the first year after the effective date and 2 billion by 2064.
Manufacturers are required to develop their own approach for a statistically valid sample.
The product standard, if finalized, would establish a maximum nicotine level in a cigarette and
certain other combusted tobacco products to be less than or equal to 0.70 mg of nicotine per 1
gram of total tobacco. Therefore, we assume manufacturers would use the upper bound of a 95
percent one-sided confidence interval of 0.76 (=0.70 + 0.06 margin of error). We request
comment on this assumption. The number of samples required from each batch to meet this
standard ranges from 76 with a nicotine level variance of 0.10, to 144 with a variance of 0.19. To
meet a margin of error of 0.05, instead of 0.06, would require between 109 and 207 samples
from each batch, depending on the variance. We estimate that between 76 and 207 samples of
finished tobacco product would be tested from each batch. Our medium estimate is 113 samples,
which we estimate using a margin of error of 0.06 and a variance of 0.15. A sample refers to the
finished tobacco product in its final packaging, e.g., a pack of 20 cigarettes. FDA’s Tobacco
Products Laboratory estimates that the test costs $3.56 per sample when the sample size tested is
over 20 units.
Using these assumptions, estimates, and testing costs, we estimate the testing cost per
batch ranges from $269 to $737, with a medium estimate of $404. The PHM estimates that the
first year the policy would impact cigarette quantity sold is 2028. We assume that the first-year
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testing would take place is 2028, with a total of 7,270 batches required to be tested in the primary
estimate. We estimate that by 2064, 246 batches would require testing. We show estimated
number of batches required for testing below in Figure 23. We assume that the testing costs of
affected combusted products that are not cigarettes are proportional to the revenues of each
product relative to cigarettes in the Euromonitor data presented in Table 6.
Figure 23. Estimated Batches Required for Testing from 2025 to 2064 Under the Low, Primary,
and High Policy Impact Scenarios
Table 35 shows the estimated annual testing cost for cigarettes. The estimated annualized
testing cost for cigarettes ranges from $2 million in the low impact scenario to about $0.09
million in the high impact scenario with a primary estimate of around $0.31 million at a 2
percent discount rate.
Table 35. Testing Costs for Cigarettes over 40 Years in 2023 Dollars at a 2% Discount Rate
Primary
Low
High
Discounted Total Cost (40 years)
Annualized Cost (40 years)
$7,478,745
$314,125
$47,956,037
$2,014,264
$2,239,748
$94,075
Note: The low estimates relate to the low policy impact scenario (e.g., lowest estimate of averted deaths) from the
PHM, while the high estimates relate to the high policy impact scenario (e.g., highest estimate of averted deaths)
from the PHM.
Table 36 shows the total cost of testing for all covered tobacco products, which includes
cigarettes shown in Table 35, RYO tobacco, non-premium cigars, and pipe tobacco. The total
annualized testing cost for all covered tobacco products ranges from $2.2 million in the low
impact scenario to $0.1 million in the high impact scenario at a 2 percent discount rate.
105
Table 36. Testing Costs for All Covered Tobacco Products over 40 Years in 2023 Dollars at a
2% Discount Rate
Primary
Low
High
Discounted Total Cost (40 years)
Annualized Cost (40 years)
$8,223,977
$345,426
$52,734,695
$2,214,979
$2,462,932
$103,449
Note: The low estimates relate to the low policy impact scenario (e.g., lowest estimate of averted deaths) from the
PHM, while the high estimates relate to the high policy impact scenario (e.g., highest estimate of averted deaths)
from the PHM.
The number of batches and the variance of the nicotine level per batch are uncertain. We
request comment on the number of batches that would require testing, the number of samples per
batch to meet the required confidence interval, and the cost of the testing method.
2. Costs to Consumers
a. Withdrawal Cost
As a result of this product standard many people who use combusted tobacco products
will quit tobacco entirely. As discussed in NPRM Section IV.A, nicotine is addictive and,
therefore, many who quit the use of nicotine products could experience withdrawal symptoms
including cravings, irritability/anger/frustration, anxiety, depressed mood, difficulty
concentrating, increased appetite, insomnia, and restlessness (113). We estimate the cost of
experiencing withdrawal for those who quit all tobacco products, however, we qualitatively
discuss withdrawal costs for those who switch to VLNC tobacco products, as these products may
have mitigating effects on withdrawal symptoms, or those who switch to noncombusted products
as it is unclear if these consumers switch immediately or have a failed quit attempt before
switching. Overall, withdrawal costs are very small relative to the health gains from quitting
smoking, which are discussed in Section II.G and include improvements in mental health
(reduced depression, anxiety, and stress) and quality of life compared with continuing to smoke
(97).
1. Withdrawal Symptoms and Cravings
The experience of nicotine withdrawal can manifest in two ways: withdrawal symptoms
and cravings. Nicotine withdrawal symptoms are generally recognized to include
irritability/anger/frustration, anxiety, depressed mood, difficulty concentrating, increased
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appetite, insomnia, and restlessness. 62 Such symptoms typically emerge within the first 1-2 days
following abstinence, peak within the first week, and last 2-4 weeks in total duration (114). The
physiological basis of nicotine withdrawal is linked to the status of individuals’ nicotine
receptors in the brain, which appear to return to their normal state after 6-12 weeks of abstinence
(115). The evidence noted here and discussed in more detail in the NPRM (IV.A) suggests that
the strongest nicotine withdrawal symptoms can often appear quickly following nicotine or
tobacco cessation and the duration of these symptoms last for a relatively limited time.
Therefore, we assess the impacts of nicotine withdrawal over a short period of time.
While other nicotine withdrawal symptoms are associated with a relatively distinct
trajectory over time, the trajectory of tobacco product craving is considerably more variable
among individuals (116; 117; 118). Generally, craving has been shown to peak soon after
quitting and then gradually decrease to baseline levels (i.e., levels observed while smoking)
within the first week (117). However, for some individuals, prolonged cravings may persist
intermittently for several years before eventually dissipating (119). These intermittent cravings
are often in response to smoking cues such as certain environments or behaviors that can trigger
impulses to again seek tobacco products. Given that cravings are most intense for most
individuals in the first few weeks following cessation and occur concurrently with other physical
and psychological nicotine withdrawal symptoms, we discuss the cost of cravings qualitatively.
We request comment and research that may inform an analysis of the impacts such cravings may
have on the quality-of-life following cessation experienced by people who quit all tobacco
product use.
2. People Who Quit All Tobacco Use
To identify the population who may experience nicotine withdrawal symptoms, we use
the PHM results to project the number of people using combusted tobacco products who would
quit all tobacco use in the first year following the proposed product standard. The PHM projects
a median of 4.3 million people who currently use combusted tobacco products would quit all
tobacco product use in the first year under the proposed product standard, with a 90 percent
prediction range of 45,000 to about 15.6 million. This estimate includes individuals who
exclusively use combusted tobacco products at baseline as well as those who dual use with
noncombusted tobacco products who then quit all tobacco product use under the proposed
product standard.
Given the previous discussion of duration of nicotine withdrawal symptoms, we estimate
a single, one-time impact of nicotine withdrawal symptoms attributable to the proposed product
standard for the population projected to quit all tobacco product use. We quantify this impact by
These symptoms have been recognized and attributed to nicotine and tobacco withdrawal since the 1980s (DSM3) (257) and remain the standard set of symptoms used for identification of tobacco and nicotine withdrawal (113).
62
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multiplying an estimate of the loss in quality of life experienced during nicotine withdrawal by
the expected duration of these symptoms to produce estimates of the loss of quality-adjusted life
days (QALDs). We monetize these impacts using a dollar value of a QALD. Recognizing that
the number and types of nicotine withdrawal symptoms may vary widely across individuals, we
allow for variance in our calculations in two ways. First, we split the population who are
projected to quit all tobacco product use in the PHM into three nicotine withdrawal groups: 1)
those who may report more nicotine withdrawal symptoms (i.e., report four or more physical or
psychological withdrawal symptoms (120)), 2) those who may report fewer nicotine withdrawal
symptoms (i.e., report fewer than four nicotine withdrawal symptoms), and 3) those who may not
report any nicotine withdrawal symptoms while abstaining from tobacco product use. Second,
we allow the loss in quality of life and duration of symptoms to vary across the individuals in
each group. To estimate the total impact of nicotine withdrawal costs for the population who
quits all tobacco product use, we perform a Monte Carlo simulation for each severity group
individually and then sum across groups.
To identify the population withdrawal groups, we first rely on an analysis of data from a
large, nationally representative sample of U.S. adults (National Epidemiologic Survey on
Alcohol and Related Conditions, NESARC). In looking at Wave 1 (2001-2002) and Wave 2
(2004-2005) NESARC data, Garcia-Rodriguez et al. (121) found that 78.5 percent of individuals
who reported tobacco product abstinence at Wave 1 of data collection also reported ever wanting
“to stop or cut down on your tobacco product use” prior to their Wave 1 abstinence (GarcíaRodríguez et al., 2013). 63 Additionally, 65.2 percent of the participants in this study who were
abstinent at Wave 1 of data collection reported “having experienced withdrawal symptoms when
stopping or cutting down on tobacco use.” 64 Another study of NESARC data covering the same
years reported an additional breakdown relating to past year withdrawal symptoms, with 4,415
individuals who reported at least one withdrawal symptom in the past year (65.1%) and 1,048
individuals who reported a withdrawal-related relapse in the past year (15.3%) out of a sample
size of 6,911 individuals who were fully abstinent from tobacco use at the time of the survey
(122). This additional information of past year withdrawal-related relapse reported in this paper
could potentially inform the severity of withdrawal symptoms experienced. For this analysis, we
use the Garcia-Rodriguez et al. (2013) study and assume that 65.2 percent of individuals
projected to cease all tobacco product use under this proposed product standard would also
experience at least one reportable nicotine withdrawal symptom. We request comment, including
additional data and studies, that may inform this analysis.
From the study paper, this statistic is drawing from responses to “in your entire life, did you ever more than once
want to stop or cut down on your tobacco use?”
64
In Garcia-Rodriguez et al. (121), “having experienced withdrawal symptoms when stopping or cutting down on
tobacco use” is based on response to the following question in the NESARC: “after stopping or cutting down on
your tobacco use, did you ever (a) feel depressed, (b) have difficulty falling asleep or staying asleep? (c) have
difficulty concentrating? (d) eat more than usual or gain weight? (e) become easily irritated, angry, or frustrated? (f)
feel anxious or nervous? (g) feel your heart beating more slowly than usual? (h) feel more restless than usual?”
63
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A study on abrupt cessation in 630 regular smokers that evaluated prevalence of tobacco
withdrawal symptoms found that of the people who were abstinent from smoking and reported
withdrawal symptoms, approximately 49% endorsed four or more withdrawal symptoms (i.e.,
met the DSM-III-R criteria for nicotine withdrawal) (120). Based on this study, we assume that,
of the 65.2 percent of those abstinent from smoking who experience any reportable nicotine
withdrawal symptoms, a little less than half (32 percent = 65.2 percent x 49 percent) would
experience more nicotine withdrawal symptoms and the remainder (33.2 percent = 65.2 percent x
51 percent) would experience fewer nicotine withdrawal symptoms. We request comment on
these data sources, estimates, our approach, and additional data and studies.
We utilize disutility values that measure the loss in quality of life associated with several
chronic diseases that may function as proxies for some of the symptoms of withdrawal, including
anxiety disorders and mood disorders (including depression) (123). Because the literature on
how to estimate utilities (i.e., changes in quality of life) associated with disease conditions
indicates that “there is no standardized method and a lack of consensus on how to estimate the
utilities of comorbid disease conditions” (123), we apply the quality measure of one of the most
widely reported withdrawal symptoms: anxiety (114). Additionally, we use the available measure
of disutility of chronic disease for all anxiety disorders as a proxy for the relatively short-term
nicotine withdrawal anxiety symptom. 65,66 Using recent empirical evidence on disutility
experienced with chronic anxiety disorders (123), we assume that those individuals estimated to
have more nicotine withdrawal symptoms experience an average quality-of-life loss of 0.053,
with a standard deviation of 0.002. We assume that those individuals estimated to have fewer
nicotine withdrawal symptoms experience an average loss in quality of life that is half of what
those with more significant withdrawal symptoms experience, or 0.0265, with the same standard
deviation of 0.002. We seek comment on this approach and request additional studies and data to
It is important to note the limitations with using any particular anxiety disorder as a proxy for the anxiety
symptoms experienced with tobacco withdrawal to draw conclusions on the quality-of-life or cost of illness impacts
of tobacco withdrawal. The term “anxiety disorders,” as used by Song et al. to calculate disutility experienced with
anxiety, only encompasses the corresponding International Classification of Diseases, Ninth Revision (ICD-9)
diagnostic codes that fall under the Clinical Classifications Software (CCS) Diagnosis Category Code 651 (123).
Therefore, the Song et al. analysis of the impacts of anxiety disorders, and resulting disutility scores adopted in this
analysis, does not include the impacts associated with the diagnosis codes related to tobacco use or withdrawal.
Anxiety disorders are mental health diagnoses based on specific DSM-5 criteria that differ significantly from the
tobacco withdrawal diagnostic criteria. As a result, the quality-of-life impacts of the conditions examined by Song et
al. may be different than the quality-of-life impacts of the anxiety symptoms experienced with nicotine withdrawal.
66
In section II.G.2, we qualitatively discuss the morbidity effects associated with improvements in mental health
from smoking cessation. By 6 months of abstinence, most people who smoked cigarettes report less psychological
distress than they experienced while they were still smoking (95 pp. 517-578) and showed improvements in
measures of mental health compared with those who continued to smoke, including psychological well-being,
anxiety, positive affect, cognitive functioning, energy, sleep adequacy, self-esteem, and sense of mastery (96). In
studies of quality-of-life impacts after quitting, people who formerly smoked cigarettes reported no deterioration in
quality of life and were more likely to see improvements and many people who no longer smoke cigarettes also
reported that they were “happier” after quitting than they were before (98; 99).
65
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inform this analysis, including more specific quality-of-life measures for nicotine withdrawal, or
other disutility measures.
As described above, withdrawal symptoms typically emerge within the first 1-2 days
following abstinence, peak within the first week, and last 2-4 weeks in total duration (114). For
this reason, we assume that the duration of nicotine withdrawal costs for individuals across the
withdrawal groups with non-zero losses in quality of life follow a triangular distribution with a
minimum of 1 day, maximum of 30 days, and mode of 3 days.
Next, we multiply the expected loss in quality of life by the duration of withdrawal
symptoms to produce estimates of the loss of quality-adjusted life days (QALDs). For those that
report more withdrawal symptoms, we expect per-person QALD losses to range from 0.14 to
1.26, with a primary estimate of 0.55. For those who experience fewer withdrawal symptoms, we
expect per-person QALD losses to range from 0.07 to 0.63, with a primary estimate of 0.27.
The dollar value of a QALD is calculated by dividing the value of a quality-adjusted life
year (QALY) by 365 days. We use the value per QALY set by HHS Guidelines (1). The value
per QALY depends on the discount rate used by the analyst, and we calculate nicotine
withdrawal costs using 2 percent discount rates. For 2027, the first effective year of the policy, if
finalized, the value per QALY using a 2 percent discount rate is approximately $608,512 in 2023
dollars. The value of a QALD is thus $608,512/365, or approximately $1,700.
Using the identified withdrawal groups, the estimates of the loss in quality of life for each
grouping, the distribution of expected nicotine withdrawal symptom duration, and the estimated
value of a QALD, we estimate the impact of nicotine withdrawal costs for the population who
currently smoke and subsequently quit all tobacco use in the first year to be $1.4 billion (with a
low of $15.4 million and a high of $9.2 billion).
3. People Who Switch to VLNC Exclusively
The PHM projects some of the population of people who smoke NNC tobacco products
would switch to exclusive use of VLNC tobacco products, and thus continue using combusted
tobacco products, in the year following the effective date of a final rule. The peer-reviewed FDA
scientific assessment discussed in the Preamble provides an in-depth assessment of existing
literature and research on the impacts of VLNC combusted product use on nicotine withdrawal
and craving (see NPRM Section VII.B.11). Although some studies suggest brief and extended
exposure to VLNC cigarettes can suppress craving and withdrawal just as effectively as NNC
and usual brand cigarettes, there are several aspects of the available literature limiting our ability
to quantify this effect and therefore the potential impact of nicotine withdrawal symptoms in this
population. Studies that report quantitative data permitting an assessment of withdrawal at
baseline (i.e., abstinent from tobacco) compared to withdrawal after use of VLNC cigarettes,
often consist of specific participant populations, have small sample sizes, and/or use
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methodologies that vary widely. These study characteristics limit our ability to make
generalizations of the specific degree of withdrawal mediation for both symptom existence and
intensity or reliable comparisons between studies.
Overall, we recognize that this population of people who exclusively smoke VLNC
combusted tobacco products are among the population that FDA expects to significantly reduce
their nicotine consumption following the effective date of a final rule. We request comment,
including data, studies, or other information, which may inform FDA assessments of the
potential impact of withdrawal symptoms experienced by those individuals switching to
exclusive VLNC tobacco product use.
4. People Who Switch Between NNC Products
Among the population that continues to use NNC products following the product
standard, either noncombusted or illicit, we qualitatively discuss potential nicotine withdrawal
costs. Many consumers who currently use combusted tobacco products may switch directly to an
available NNC tobacco product under the proposed product standard to continue nicotine
consumption and, therefore, not experience nicotine withdrawal. Some people who currently use
combusted tobacco products may first attempt to quit all tobacco product use before switching to
an available NNC tobacco product. 67 These consumers may experience withdrawal costs during
their quit attempt. However, the PHM projects tobacco product use transitions on an annual basis
and does not differentiate, in a given year, between populations who switch directly to other
NNC tobacco products and populations who switch to other NNC products after a quit attempt;
therefore, we discuss nicotine withdrawal costs for this population qualitatively.
We request comment, including data, studies, or other information, on withdrawal
symptoms and severity for people who switch directly to other available NNC tobacco products.
We also request studies and data, on the potential population of individuals who may attempt to
quit before switching to other NNC tobacco products, the duration of such potential quit attempts
following the proposed product standard, as well as the comparability of nicotine withdrawal
symptoms between people who switch to other available NNC tobacco products and people who
switch to exclusive VLNC use that may result from this proposed product standard.
5. Summary
Overall, we recognize that for people who quit tobacco and nicotine consumption,
nicotine withdrawal can represent a significant short-term impact. We value the impact of
nicotine withdrawal for people who quit all nicotine consumption following this proposed
product standard to be $1.4 billion (with a low of $15.4 million and a high of $9.2 billion). We
request comment on our estimates of quantified withdrawal costs for those who quit all tobacco
67
For a full discussion of cessation and relapse, see section IV.C of the NPRM
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product use following the proposed standard, including studies and data regarding withdrawal
symptom duration; the percentage of people who experience withdrawal symptoms when
quitting; and the severity, type, and cost of such withdrawal symptoms. We also qualitatively
discuss nicotine withdrawal costs for people who continue to smoke using VLNC combusted
tobacco products or switch to other available NNC tobacco products. We request comment on
withdrawal symptoms, duration, and severity for people who continue to smoke VLNC
combusted tobacco products or switch to other available NNC tobacco products, including the
percentage of people who may attempt to quit before continuing to use a tobacco product
following the proposed standard.
b. One-Time Search Costs
Adult consumers who switch from a NNC tobacco product to a substitute tobacco
product or those who try other tobacco products before quitting or search for a nicotine
replacement therapy would incur search costs to look for substitute products in the year after the
effective date (2027). Search costs may include the time it takes a person who formerly smoked
cigarettes to research substitute products, including talking to other people who use tobacco
products or nicotine replacement therapy, searching for reviews on the internet and social media,
reviewing tobacco product or nicotine replacement therapy packages in the store, and assessing
the value of products that were purchased. We lack data to estimate the opportunity cost to
search for alternative products. Thus, we assume all adult covered tobacco product consumers
would incur a one-time search cost equal to between 0.5 and 1.5 hours of free time. We request
comment on possible sources of data on potential search costs and on our assumption.
To monetize these impacts, we adopt a value of time based on after-tax wages. Our
approach matches the default assumptions for valuing changes in time use for individuals
undertaking administrative and other tasks on their own time, which are outlined in an HHS
report on “Valuing Time in U.S. Department of Health and Human Services Regulatory Impact
Analyses: Conceptual Framework and Best Practices” (124). We start with a measurement of the
usual weekly earnings of wage and salary workers of $1,115.75 (101). We divide this weekly
rate by 40 hours to calculate an hourly pre-tax wage rate of $27.89. We adjust this hourly rate
downwards by an effective tax rate of about 17 percent, resulting in a post-tax hourly wage rate
of $23.15 (124). We use this value for our low estimate and double it for our high estimate,
$46.30. We use $34.73 as our primary estimate, the average of the low and high estimates.
We estimate the baseline number of affected individuals by using the estimates and
trends described in our baseline section on prevalence trends (Section II.E.1). For cigarettes, we
use estimates of the population of adults who exclusively smoke cigarettes from the PHM
(people who smoke cigarettes – people who dual use cigarettes and noncombusted tobacco
products) in the one year following the effective date of this proposed rule, if finalized. Our
estimate for people who exclusively smoke cigarettes is around 23.9 million individuals. We
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assume that individuals who use RYO tobacco are included in these estimates of people who
smoke cigarettes. We also assume that the trend for pipe tobacco follows the trend for cigarettes.
So, we estimate that there are around 337,000 affected people who smoke pipe tobacco. We
estimate the number of people who smoke non-premium cigars to be around 17.4 million. We
multiply the number of affected individuals for each product category by the estimated search
time (low of 0.5 hour to high of 1.5 hours, 1 hour primary) with the corresponding per hour wage
rate (low of $21.97 per hour to high of $43.94 per hour, $32.96 per hour primary). We estimate
that the rule may result in approximately $1,446 million in one-time consumer search costs with
a lower and upper bound of $482 million and $2,893 million. Table 37 summarizes the estimates
of one-time search costs.
Table 37. One-Time Search Costs by Tobacco Product Category ($ Millions, 2023)
One-Time Search Costs ($ millions)
Primary
Lower
Upper
Exclusive Cigarette
$830.6
$276.9
$1,661.1
Non-Premium Cigar
$604.1
$201.4
$1,208.3
Pipe
$11.7
$3.9
$23.4
Total
$1,446.4
$482.1
$2,892.8
c. Utility Change for Consumers
Regulations that restrict availability or access to a product or that raise its market price
may lead to changes in consumer surplus or consumer utility. For fully informed, rational
consumers, consumer surplus reflects the difference between their willingness to pay for a
product and the price they actually pay in the marketplace. A rational consumer is one whose
choices maximize their utility, i.e., an individual who, when presented with a decision, chooses
the option that maximizes their welfare. Circular A-4 (2023) states that regulatory impact
analyses should consider including “gains or losses in consumers’…surpluses” as part of the
economic analysis. This reduction or “loss” reflects consumers’ diminished utility (i.e., a
reduction in the sense of satisfaction or usefulness consumers obtain from using the good, above
and beyond what they pay for it).
For people who use combusted tobacco products, early economic models explored the
premise that people who use these products are rational in their decision-making about smoking,
fully informed about the risks associated with smoking, and derive benefit from smoking above
the price they pay; however, more recent works have added nuance that moves beyond these
simplifying assumptions. There is a lack of consensus within the peer-reviewed economic
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literature regarding how to account for changes in consumer surplus when analyzing the effect of
regulations on tobacco products, which are highly addictive and generally initiated before
adulthood—considerations that bear on assumptions of consumer rationality. We note that this
proposed product standard would set the maximum level of nicotine in covered tobacco products
to minimally addictive or nonaddictive levels, potentially addressing some of the many
challenges identified below for covered products. See Section II.B for additional discussion.
In general, economic research has recognized significant challenges with modeling
demand for tobacco products and associated changes in utility. These potential challenges
include:
•
•
•
•
•
the addictive nature of tobacco products;
cigarette smoking initiation during adolescence when the brain is not yet fully
developed;
the developing nature of information about the health harms of smoking;
tobacco product demand based on demand for other perceived benefits of
smoking (derived demand); and
the regret expressed by people who currently smoke cigarettes, desire to quit, and
nicotine’s negative impact on successful quitting.
These challenges are discussed in more detail in the following sections. In Appendix C,
we provide a review of the literature and approaches to modeling tobacco product demand and
associated changes in consumer surplus.
1. Addictive Nature of Tobacco Products
Tobacco use is the leading preventable cause of disease and death in the United States
(3). Tobacco products also contain the highly addictive substance nicotine. Summarizing years of
research and analysis in the field of smoking and tobacco product use, numerous SGRs from
1988 through 2024 have documented the many ways in which nicotine affects the brain and
nicotine addiction drives smoking behavior. Seeking to address the primary question of why
people smoke and use tobacco products, the 1988 SGR (titled “Nicotine Addiction”) laid out
primary criteria for dependence, including “highly controlled or compulsive use,” “psychoactive
effects,” and “drug-reinforced behavior.” 68 The report established three main conclusions: “1)
Cigarettes and other forms of tobacco are addicting 2) [n]icotine is the drug in tobacco that
causes addiction; and 3) [t]he pharmacologic and behavioral processes that determine tobacco
addiction are similar to those that determine addiction to drugs such as heroin and cocaine” (7).
Speaking specifically to behavior and patterns of use, the report notes that “[p]atterns of tobacco
The 1988 SGR further expands, stating that “[h]ighly controlled or compulsive use indicates that drug-seeking and
drug-taking behavior is driven by strong, often irresistible urges. It can persist despite a desire to quit or even
repeated attempts to quit” [ (7) at p.7-8].
68
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use are regular and compulsive, and a withdrawal syndrome usually accompanies tobacco
abstinence” (7). The 2020 SGR discusses smoking cessation, asserting as a starting point that
“[n]icotine addiction is now increasingly emphasized as a main driver of both the initiation and
continuation of smoking” (6). Most recently, the 2024 SGR found that “menthol and other
flavorants may potentiate the addictive effects of nicotine” and that “[r]educing nicotine in
cigarettes and other combustible tobacco products to minimally addictive or nonaddictive levels
should reduce tobacco use among many population groups experiencing tobacco-related
disparities” (55).
The National Institute on Drug Abuse (NIDA) includes tobacco and nicotine among
commonly used drugs (125), stating that nicotine stimulates "the adrenal glands to release the
hormone epinephrine (adrenaline)” (126) and “activates reward pathways in the brain” (127) and
that “[f]or many tobacco users, the long-term brain changes induced by continued nicotine
exposure result in addiction.”
As DiFranza et al. (2002) discuss, the onset of nicotine dependence is “the point of
experiencing loss of autonomy over tobacco use” (128). Multiple studies have shown that
symptoms of nicotine dependence can arise early after youth start smoking cigarettes, even
among people who infrequently smoke cigarettes (129; 130; 131). 69 Further, a Federal court
ruled that the major U.S. cigarette companies “have designed their cigarettes to precisely control
nicotine delivery levels and provide doses of nicotine sufficient to create and sustain addiction”
(Tobacco Control Act 2009, §2(49) (reciting findings of fact in U.S. v. Philip Morris USA, 449
F. Supp. 2d 1 (D.D.C. 2006), aff’d in relevant part, 566 F.3d 1095 (D.C. Cir. 2009)).
The research presented above shows that combusted tobacco smoking is driven primarily
by nicotine addiction and its resulting drug-reinforced and compulsive behavior, making it
difficult to disentangle the consumption driven by addiction from the consumption that may be
driven by rational or unbiased demand, meaning that determining the point at which addiction
overtakes the choice to continue to smoke cigarettes poses a significant challenge.
2. Cigarette Smoking Initiation During Adolescence When the Brain Is
Not Yet Fully Developed and How Most Addiction Begins in
Adolescents
Based on over 50 years of published and peer-reviewed scientific evidence and data, the
2014 SGR concluded “[m]ost first use of cigarettes occur by 18 years of age (87%), with nearly
all first use by 26 years of age (98%)” (3). Previous SGRs indicate that the percentage of people
initiating tobacco product use before the age of 18 has remained mostly constant. The 1994 and
2012 SGRs on smoking and health note that almost 90 percent of adults who currently smoke
The 1988 SGR (7) on page 9 states that the terms “drug addiction” and “drug dependence” are “scientifically
equivalent and refer to the ‘behavior of repetitively ingesting mood-altering substances by individuals.’” We note
that referenced studies may employ one or both terms; thus, we use both terms interchangeably here.
69
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regularly initiated smoking before age 18, and 99 percent initiated smoking before the age of 25,
which is the approximate age at which the brain has completed development (19; 20). As nearly
all people who smoke cigarettes begin before age 25, the approximate age at which the brain has
completed development, such people are more vulnerable to developing nicotine dependence (3)
(6; 132; 20). The report further notes that adolescence and young adulthood represents a time of
“immaturity in consequential thinking, impulsivity, and decision-making skills” (20). Data
reflect continued initiation by youth—the 2019 National Survey on Drug Use and Health
(NSDUH) found that each day approximately 1,500 youth (those under the age of 18 years) and
2,600 young adults (those aged 18-25 years) first smoke a cigarette (133). More recently, a 2022
NSDUH report indicated that during 2022 a total of 437,000 adolescents aged 12 to 17 and
791,000 young adults aged 18 to 25 initiated cigarette smoking in the past year, with only around
10 percent of past year initiates (122,000) doing so after age 25 (134). Furthermore, almost three
fourths (71.4 percent or 965,000 people) of the 1.4 million people who smoke cigarettes in 2022
who initiated in the past year did so before the age of 21 (134).
In the literature that discusses consumer welfare loss for individuals prevented from
initiation, there is support for the position that consumer welfare losses for individuals prevented
from initiating tobacco product use should not be considered within a welfare analysis (135; 136;
137). As summarized by Cutler et al. (2015), “because people deterred from starting to smoke
never develop a special taste for tobacco products, they are able to get equal or better
satisfactions from consuming other products, so a regulation that deters them from starting to
smoke entails no utility loss” (135). In a later paper, Cutler et al. (2016) state:
“...the strong ‘taste’ for cigarettes generally grows out of having become addicted to
cigarettes. Thus, people who do not start consuming the good will not value it as highly
as current users. If the average person deterred from starting to smoke finds a
consumption bundle without cigarettes to be no less satisfying than one that includes
them, a regulation that deters them from starting to smoke will cause no utility loss”
(137).
Youth who smoke cigarettes are likely to enter adulthood with established nicotine
dependence, compromising the ability to choose cigarette smoking in the absence of addiction.
As Chaloupka et al. (2015) state, “most smoking initiation takes place during adolescence or
young adulthood among individuals who are often less than fully aware of the health and
economic consequences of smoking” (138). The authors conclude that “the decision to initiate
smoking [among youth] is an irrational decision and any changes in their conventionally
calculated consumer surplus resulting from changes in their tobacco use… should not be
counted...” (138).
3. Developing Nature of Information About the Health Harms of
Smoking
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Since the first SGR published in 1964, evidence of the negative health consequences of
cigarette smoking and secondhand smoke has expanded dramatically. As noted in the 2010 SGR,
there is “overwhelming and conclusive biologic, epidemiologic, behavioral, and pharmacologic
evidence that tobacco use is deadly” (24). The health conditions established to be causally linked
to cigarette smoking in the 2014 SGR are in addition to the more than 40 unique health
consequences of cigarette smoking and exposure to secondhand smoke determined by earlier
studies (3).
Many of the economists developing methods of analysis of consumer surplus effects have
attempted to generate some proxy for fully informed and nonaddicted rational consumers who
are able to accurately assess available information on the negative health harms of tobacco
product use. However, new information about the health harms of tobacco product use continues
to be identified. Additionally, research has shown that being a member of specific populations is
associated with having lower knowledge of the negative health consequences of smoking (see 85
FR 15638, Mar. 18, 2020 – Tobacco Products; Required Warnings for Cigarette Packages and
Advertisements for a more detailed discussion). How such ongoing information development is
assimilated by different individuals, updating their judgment about the risk of tobacco product
use as new information about health harms continues to be identified, and incorporated into
modeling results presents additional challenges and sources of uncertainty.
4. Tobacco Product Demand Based on Demand for Other Perceived
Benefits of Smoking (Derived Demand)
Often, the nature of tobacco product experimentation and initiation into regular use,
especially in adolescents, is based on demand for other perceived benefits of tobacco product use
rather than demand for the tobacco product itself (e.g., weight loss, social status, peer effects that
may have positional externalities). This makes it difficult to model the demand for tobacco
products separate from the demand for other perceived benefits of use. Evidence of this derived
demand comes from surveys in which adolescents are asked about their motivations for initiating
smoking (139; 140; 141).
Over time, the original derived demand rationale for tobacco product use (such as peer
acceptance) may no longer be relevant, but people who use tobacco products may be unable to
stop due to the development of addiction. This suggests an additional explanation of derived
demand: nicotine. In addition to the people who use tobacco products’ demand for nicotine,
sensorimotor stimuli (e.g., smell/taste of smoke, inhaling/exhaling, airway sensations such as
“throat hit”) repeatedly occur during smoking tobacco products that contain nicotine (142). The
sensory aspects of smoking, such as taste and sensations of smoking (e.g., “throat hit”), though
initially unpleasant, become reinforcing because they have been paired repeatedly with nicotine
exposure (143). These stimuli often act as secondary or conditioned reinforcers that contribute to
the smoking “reward” and dependence (142; 144) and may also serve as another source of
derived demand. Thus, it is difficult to disentangle the demand for combusted tobacco products
117
from the demand for other perceived benefits of smoking, demand for nicotine, demand for the
addiction-associated sensorimotor stimuli, or demand for simply avoiding withdrawal. We
request comment on issues of derived demand associated with tobacco initiation and continued
use.
5. Regret Expressed by People Who Currently Smoke Cigarettes, Desire
to Quit, and Cognitive Bias
The significant level of regret experienced by most people who smoke cigarettes also
plays a role in welfare analysis. It is difficult to estimate unbiased demand, and in particular
consumer surplus, when most people who smoke cigarettes state that they regret having ever
started smoking and wish to quit. Adults who use tobacco products, most of whom want to quit,
are often unsuccessful because of the highly addictive nature of these products (145). More
recently, analyses of 2022 NHIS and 2018-2019 Tobacco Use Supplement to the Current
Population Survey (TUS-CPS) data indicate that 67.7 and 76.6 percent of adults who smoke
cigarettes wanted to quit (146; 147), respectively, while 2022 NHIS data (146) and 2018-2019
TUS-CPS data (147) show that 53.3 and 51.3 percent, respectively, of adults who smoke
cigarettes in the United States actually made a quit attempt within the past year. However, an
analyses of NHIS and TUS-CPS data for these years indicate that only 8.8 and 7.5 percent of
adults had successfully quit smoking cigarettes, respectively (146; 147).
A study by Pechacek et al. (148) found that “more than 80 percent of current smokers
report high (22.5 percent) or very high (59.8 percent) discontent due to inability to quit,
perceived addiction and regret about having started to smoke”. The authors conclude that “the
proportion of smokers who might be characterized as having a preference to continue smoking
are greatly outnumbered by addicted, discontent, and concerned smokers who want to quit and
regret ever having started to smoke” (148). These people “could have a substantial net welfare
gain if new regulations helped them escape their concerns about the health effects from
continuing smoking” (148). These surveys of people who smoke cigarettes consistently reflect
that smoking preference and smoking behavior do not align, meaning empirical evidence shows
that their decision utility is not aligned with their experience utility (terms that are now common
in behavioral economics) and confirms the cognitive biases in the demand further complicating
estimation of consumer surplus loss or gain. 70
6. What Role Does Nicotine Play in Discussions of Consumer Surplus
for Combusted Tobacco Products?
As addressed by the potential challenges above, it is difficult to disentangle the
consumption driven by nicotine addiction from that which may be driven by demand for
Decision utility refers to an individual’s perceived utility prior to experience, whereas experience utility is the
realized utility after making the decision to consume a particular product.
70
118
combusted tobacco products. Thus, modeling consumers’ willingness to pay for addictive
products and, in particular, isolating the value consumers place on the key characteristic of an
addictive product—the nicotine level—is a major source of uncertainty regarding the estimation
of consumer utility.
To the extent that the demand for combusted tobacco products stems from the demand for
nicotine or other combusted product attributes, substitutes for these attributes are readily
available (e.g., other tobacco products or VLNC combusted products). Substitute products could
potentially provide the same or more consumer surplus for some people who, due to a status quo
bias, 71 continued using combusted tobacco products because these products were the tobacco
product with which they initiated (149). However, people currently using combusted tobacco
products who continue to use VLNC combusted products or premium cigars will not experience
the health benefits associated with reduced consumption of combusted tobacco products.
Following the reduction in nicotine to minimally addictive or nonaddictive levels, current
combusted tobacco product consumers can choose to continue the use of minimally addictive or
nonaddictive combusted tobacco products, cease all tobacco product use, or switch to another
NNC tobacco product. For instance, these consumers could seek nicotine from smoking
cessation products (e.g., NRTs) and/or continue obtaining nicotine from other tobacco products
such as ENDS or smokeless tobacco.
However, it is difficult to distinguish between the reasons people who smoke may
continue to demand minimally addictive or nonaddictive combusted tobacco products following
implementation of a proposed product standard. Continued consumer demand after
implementation of the product standard could reflect a step toward “unbiased” demand or simply
be an artifact of former addiction. Studies of VLNC cigarettes show that some people who
smoke will continue to use the product even without enough nicotine to sustain addiction. While
this may represent some partial “unbiased” demand, it might also be a byproduct of previous use
of an addictive tobacco product including the pairing of sensorimotor stimuli with nicotine
consumption that may be reinforcing on its own for some length of time. Sensorimotor stimuli
(e.g., smell/taste of smoke; airway sensations; holding the cigarette) repeatedly occur when using
smoking products that contain nicotine (150). These stimuli often act as secondary or
conditioned reinforcers that contribute to the smoking “reward” and dependence (150). As
discussed in more detail in the Preamble (Section VI.A.3.c), this conditioning can suppress
craving and some withdrawal symptoms even in the absence of nicotine.
Additionally, consumers may mistake the reduction in the addictive properties of the
product for some other change that impacts other characteristics of the product. It is difficult to
determine if any “taste” differences or “liking” are the result of actual changes to the product,
In their influential 1988 paper, Samuelson and Zeckhauser (149) discuss “status quo bias,” or a bias towards
maintaining one's current or previous decision. The authors further note that “…the initial purchase and use of a
brand significantly increase the likelihood of repurchase in a subsequent consumption decision. Clearly, status quo
effects contribute to this behavior.”
71
119
beyond the loss of addictiveness and the effects one associates with the nicotine consumption.
Studies that have used the same research cigarette, but with variations in the nicotine level, found
that the decrease in “liking” for cigarettes tracked the decline in nicotine level (151; 152). In
other words, as the nicotine level declined, demand also declined. However, in a study of people
who smoke cigarettes comparing their usual brand with research cigarettes having a similar level
of nicotine, the same decline in “liking” was not seen, suggesting that taste or flavor perceptions
for the research cigarette were similar to the participant’s usual brand (153), which suggests that
the “liking” of a cigarette is largely connected to nicotine content rather than brand or packaging
in this study. In addition, study participants reported higher positive product ratings when told
that they were receiving a nicotine-containing cigarette, regardless of the actual nicotine content
of the cigarette (154; 155; 156; 157; 158). Note that these studies imply that “taste” or “flavor”
perceptions are associated with nicotine level, making it difficult to identify how much a
reduction in nicotine level might impact demand or reflect “unbiased demand”.
While the proposed rule does address one significant source of “internalities” in the
market for combusted tobacco products (addiction to nicotine), it is important to note that this
rule does not fully address information asymmetries or provide additional ways to improve
consumer understanding of the health effects from combusted tobacco product use. As such,
some information-related “internalities” may persist in creating “bias” in the demand for
combusted tobacco products even with this proposed product standard.
7. Summary
FDA does not believe that any reasonable consideration of consumer utility change, even
if such a change were negative, would change our Executive Order 12866 determination that
benefits associated with this rule clearly justify the costs. 72 While FDA believes that consumer
utility change can be considered qualitatively for the product standard, we do not estimate the
direction or magnitude of any potential consumer utility changes due to the high level of
uncertainty and challenges regarding approaches to consumer surplus estimation. This
conclusion is driven by the findings noted above, including that: a) cigarette and other
combusted tobacco product use is driven primarily by nicotine addiction; b) the vast majority of
adults who smoke cigarettes and other combusted tobacco products become addicted to nicotine
at young ages, before the brain has completed development; c) many who smoke did not fully
understand the information available about the health harms of smoking when they began
FDA reiterates that the benefits of this rule are expected to be very large. For example, the present discounted
value of avoided premature deaths due to secondhand smoke exposure alone, for which estimating changes in
consumer surplus would not apply under any scenario (since these benefits are an externality), is $1,692 billion (at a
2 percent discount rate), while the present discounted value of total costs is $1.58 billion (at a 2 percent discount
rate). This is in addition to the value of all prevented premature deaths and qualitative benefits arising from firsthand
smoking. As should be clear, while we are not able to quantify the value of any consumer utility changes, we do not
believe that any reasonable consideration of such impacts would affect the determination that benefits associated
with this rule justify the costs.
7272
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smoking, and many still do not fully understand this information today; d) a person who smokes
cigarettes’ original derived demand rationale for tobacco product use (such as peer acceptance)
may no longer be relevant to an individual, and it is difficult to disentangle the demand for
cigarettes from the demand for other perceived benefits of smoking, including simply avoiding
withdrawal symptoms; e) evidence of regret shows that the decision utility of people who smoke
cigarettes is not aligned with their experience utility; and f) the role of nicotine specifically,
including the possibility that switching products could provide the same or more utility for some
due to status quo bias.
Given the challenges and uncertainties outlined above, and the breadth of literature and
approaches discussed in Appendix C (Consumer Surplus), this regulatory impact analysis
qualitatively discusses, but does not quantitatively estimate, changes in consumer surplus
stemming from the proposed product standard. We continue to research these issues and request
comment and/or data to assist in future application of potential modeling approaches.
3. Government Enforcement Costs
a. Federal Enforcement Costs
With a new product standard, we expect some reallocation of CTP’s resources to enforce
the standard. Thus, we estimate the opportunity cost to reallocate these resources.
The cost of enforcement includes one-time tasks such as updating inspector training
materials and websites to reflect the new product standard. In addition, there could be ongoing
costs for detecting violations through in-person inspections of tobacco manufacturing
establishments and retail distribution outlets, as well as additional monitoring of retail internet
sites. CTP currently undertakes these inspection and monitoring activities while enforcing the
Tobacco Control Act. We anticipate that CTP investigators may include additional criteria to
monitor for non-compliance in covered tobacco products during inspections and investigations.
The enforcement of the proposed rule, if finalized, would also include investigating, drafting,
and processing warning letters and taking enforcement actions as necessary, such as civil money
penalties, criminal prosecution, seizure, and injunction.
Based on subject matter expertise, CTP estimates that 13 to 30 full-time equivalent (FTE)
employees would be required for the enforcement activities described above in the first two years
after the effective date of this proposed standard, if finalized. From year three onward, CTP
estimate that 11 to 23 FTE’s would be required for ongoing enforcement. We use an annual
wage based on an Agency-wide estimate of the average cost for FTE employees to value this
effort. The fully-loaded (inclusive of benefits and other indirect costs) cost per FTE in 2023
equals $320,080. Therefore, we estimate that the annual cost of enforcement in year 1 and 2 after
the effective date ranges from $4.2 million to $9.6 million, with a primary estimate of $6.9
million. From year three onward, we estimate that the annual cost of enforcement ranges from
121
$3.5 million to $7.4 million, with a primary estimate of $5.4 million. While existing staff could
conduct this work they are considered as costs because we are shifting our resources to better
serve the needs of the Agency. We note that these costs would not affect the total amount of user
fees, overall FDA accounting costs, the size of the federal budget, or the amount of tobacco
industry user fees. The TCA requires that industry user fees fully fund our regulation of tobacco
products. Therefore, these costs represent an opportunity cost for Agency resources.
We note between our counting of potentially affected combusted tobacco products
(Section II.E.4.b) and our proxy estimates for the number of combusted products that may
reformulate and seek marketing authorization following the proposed product standard (Section
II.F.4), this proposed rule has the potential to decrease FDA enforcement costs after the first few
years by reducing the number of tobacco product records inspectors may need to review during
inspections, decreasing the number and frequency of combusted tobacco products being
imported, and reducing the number of product listing submissions in TRLM NG.
In addition, FDA may work with federal partners to help identify and enforce against
illicit markets if they develop. For example, as we have in the past, we may work with the U.S.
Department of Justice to initiate enforcement actions for injunctive relief against tobacco product
manufacturers and retail distribution outlets that illegally manufacture, sell, and/or distribute
violative products, and seizure of violative products.
b. State and Local Enforcement
If the proposed rule is finalized, it would prohibit the supply chain distribution and retail
sale of non-compliant tobacco products under federal law. It would not prohibit or criminalize
the possession or use of such products by individual consumers. State and local law enforcement
agencies do not enforce the FD&C Act and FDA regulations under that Act. Thus, we do not
estimate costs for state and local jurisdictions to enforce this proposed rule. Due to the lack of
enforcement authority, this proposed product standard, if finalized, also should not impact State
and local law enforcement work or priorities. To the extent any existing State and local laws
would be violated by the manufacture, distribution, sale, possession, or use of tobacco products
that do not comply with this product standard, or if new State and local laws are enacted, if
resources are limited, law enforcement generally possesses the discretion to not prioritize
enforcement of those laws in favor of enforcing laws that have higher priority. We acknowledge
that the proposed rule has the potential to impact illicit trade in non-compliant products, but FDA
does not anticipate that the rule will induce a surge in illicit trade for the reasons described in
Section IX.D of the proposed rule; if as small in magnitude as anticipated by FDA, the potential
impacts that illicit sales of non-compliant products might have on State and local law
enforcement agencies would be outside the scope of this analysis. We request comment on the
potential impacts on state and local enforcement.
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c. Costs for Premarket Review of New Tobacco Products
Each new VLNC product would need to choose a pathway to market and submit an
application to FDA. Section IX.B of the NPRM discusses expected premarket application
pathways for new VLNC products that comply with this product standard, if finalized. We use
estimates of FDA review times from the SE FRIA, since we expect most products to use the SE
pathway (159)(86 FR 55224, October 10, 2021). We use the SE FRIA Table 9 to estimate of 133
hours for FDA to review an SE application. We apply the fully loaded FDA hourly wage rate of
$153.88 per hour to get the per SE review cost of $20,467. We then apply the per SE cost
estimate to the number of expected VLNC products from Section II.H.1.d. See Table 38.
Table 38. Premarket Review Costs (2023 USD)
Primary
Hours to Review an SE report
133
FDA Wage
$153.88
Cost per SE Review
$20,467
Number of SE Reports
52
Total Cost
$1,064,267
Low
133
$153.88
$20,467
764
$15,636,539
High
133
$153.88
$20,467
3
$61,400
Note: The low estimates relate to the low policy impact scenario (e.g., lowest estimate of averted deaths) from the
PHM, while the high estimates relate to the high policy impact scenario (e.g., highest estimate of averted deaths)
from the PHM.
We expect these costs to occur in year 1 of our time horizon, 2026, since all firms would
want to have authorized products before consumers begin switching to VLNC tobacco products
at the effective date. We estimate a primary cost of $1.1 million with a low impact scenario cost
of $15.6 million and a high impact scenario cost of $0.06 million. We request comment on this
approach.
4. Summary of Costs
Using a 2 percent discount rate, the present value of the quantified costs of the proposed
rule are approximately $57,964 million (with a lower bound of $19,259 million and an upper
bound of $76,149 million). The corresponding annualized costs of the proposed rule are
approximately $2,077 million (with a lower bound of $690 million and an upper bound of $2,729
million).
Table 39. Summary of Present Value of Quantified Costs (Millions of 2023 Dollars over a 40Year Time Horizon, 2 percent discount rate)
Present Value Costs
Cost Category
Industry
Primary
Economic Transition Cost
$7,005.0
123
Low
$4,222.4
High
$8,930.9
Producer Surplus Loss
Consumer
Government
Enforcement
Costs
$47,076.1
$5,478.7
$54,621.5
Reading and Understanding the Rule
$373.5
$112.1
$700.4
Manufacturers: Reformulation Costs
$598.4
$8,792.2
$34.5
Cost to Submit Premarket Applications
$1.0
$14.7
$0.1
Testing Costs
$8.2
$52.6
$2.5
Withdrawal Costs
$1,366.5
$14.8
$8,883.3
Search Costs
$1,390.2
$463.4
$2,780.5
$143.8
$92.5
$195.1
$1.0
$15.3
$0.1
$57,963.9
$19,258.8
$76,148.7
Federal Enforcement Costs
Costs for Premarket Review of the New Tobacco Products
Total Present Value Quantified Costs
Table 40. Summary of Annualized Quantified Costs (Millions of 2023 Dollars over a 40-Year
Time Horizon, 2 percent discount rate)
Annualized Value Costs
Cost Category
Primary
Economic Transition Cost
$151.3
$320.1
$1,687.2
$196.4
$1,957.6
Reading and Understanding the Rule
$13.4
$4.0
$25.1
Manufacturers: Reformulation Costs
$21.4
$315.1
$1.2
Cost to Submit Premarket Applications
$0.04
$0.5
$0.002
$0.3
$1.9
$0.1
Withdrawal Costs
$49.0
$0.5
$318.4
Search Costs
$49.8
$16.6
$99.6
$5.2
$3.3
$7.0
$0.04
$0.5
$0.002
$2,077.4
$690.2
$2,729.1
Testing Costs
Consumer
Government
Enforcement
Costs
High
$251.1
Producer Surplus Loss
Industry
Low
Federal Enforcement Costs
Costs for Premarket Review of the New Tobacco Products
Total Annualized Quantified Costs
I. Transfers Caused by the Proposed Rule
We analyze the amount of excise taxes and combusted tobacco product revenues that
would have been associated with purchased NNC products in the absence of the rule. Consumers
who quit use of tobacco products (or do not initiate) are expected to use the transferred value to
purchase non-tobacco products (including savings). If the proposed rule is finalized, we expect
transfers from (1) the Federal Government and State Governments to consumers in the form of
124
reduced excise tax revenue 73, and from (2) affected tobacco product manufacturers in the form of
reduced revenue.
The proposed product standard would limit the addictiveness of the most toxic and
widely used tobacco products and is estimated to reduce overall consumption of tobacco
products. This reduction would lead to reduced tax revenue for governments that tax tobacco
products. We do not include excise tax transfers associated with purchases of VLNC tobacco
products by former consumers of NNC tobacco products in our analysis of transfers.
In addition to excise taxes, most jurisdictions also collect sales taxes on tobacco
transactions. We expect that reductions in sales tax collections are likely to be offset as
consumers would increase purchases and consumption of other taxable products, which may
include VLNC tobacco products. We therefore do not expect State sales tax revenue collections
to be affected by the proposed rule.
We also do not estimate change in other transfers that may occur between people who
smoke and Federal and State governments, such as medical costs and other financial effects of
smoking, in this section (see discussion in II.G.4.a).
1. Estimation of Federal and State Excise Tax Revenue Transfers
In Section II.E.5, we estimate baseline Federal excise tax revenues over a 40-year time
horizon. Using estimates presented in Table 10 through Table 14 and applying the three policy
projections (low impact scenario, primary impact scenario, and high impact scenario) from the
PHM (discussed in Section II.F of this analysis), we estimate the total undiscounted value of
transfers from the Federal Government in the form of reduced excise tax collections. We utilize
the PHM to calculate the percentage change in the number of people who use the covered
tobacco products from the baseline to the estimated number of people who use these products in
the three estimated policy scenarios (see Section II.E.1). This yields a percentage change in the
number of people who use these products for each covered tobacco product (cigarettes, nonpremium cigars, smokeless products, and pipe/RYO products) over the 40-year horizon of this
analysis. We then scale each estimate of baseline excise tax revenues by the corresponding
percentage change in people who use these products to yield estimated excise tax revenues for
the three policy scenarios. We subtract the estimated excise tax revenue under these policy
scenarios from baseline excise tax revenues to yield the estimated transfer of excise tax revenues.
We estimate that the 40-year cumulative total undiscounted value of the transfer of
federal excise tax revenues is approximately $55.5 billion in the low policy impact scenario,
$150.7 billion in the primary policy impact scenario, and $158.9 billion in the high policy impact
scenario for cigarettes; $8.6 billion in the low policy impact scenario, $22.0 billion in the
“In April 2009, the federal cigarette excise tax in the United States was increased by US$0.6167 per pack, with
US cigarette companies passing on the full amount of the tax increase and raising prices further (e.g., Philip Morris
USA raised prices on its leading brands by US$0.71 per pack and on other brands by US$0.78 per pack)” (106 p.
31). Therefore, we expect excise taxes to be transferred back to consumers.
73
125
primary policy impact scenario, and $23.0 billion in the high policy impact scenario for covered
cigars; -$1.1 billion in the low policy impact scenario, -$2.4 billion in the primary policy impact
scenario, and -$3.9 billion in the high policy impact scenario for smokeless tobacco; and $1.9
billion in the low policy impact scenario, $5.1 billion in the primary policy impact scenario, and
$5.4 billion in the high policy impact scenario for pipe/RYO products. Table 41 through Table
44 present baseline estimates of affected tobacco product sales and Federal excise tax revenues,
as well as excise tax transfers under the three policy impact scenarios, over a 40-year time
horizon for affected cigarettes (Table 41), cigars (Table 42), smokeless tobacco products (Table
43), and pipe/RYO tobacco products (Table 44).
Table 41. Transfer of Federal Excise Tax Revenues Under the Proposed Product Standard Under
the Low, Primary, and High Policy Impact Scenarios (Change in Overall Cigarette Excise Tax
Revenues)
Year
Count
Year
Year 0
2025
Year 1
2026
Year 2
2027
Year 3
2028
Year 4
2029
Year 5
2030
…
…
Year 39 2064
Year 40 2065
Total
Volume
Sales of
Cigarettes
(Millions
of Sticks)
176,358
164,714
155,114
146,258
138,083
130,565
…
51,430
51,063
3,367,342
Sales
Volume in
Pack
Equivalen
ts
(Millions)
8,818
8,236
7,756
7,313
6,904
6,528
…
2,572
2,553
168,367
Federal
Excise Tax
Rate (2023)
$1.01
$1.01
$1.01
$1.01
$1.01
$1.01
…
$1.01
$1.01
-
Baseline
Federal
Excise Tax
Revenue
($2023,
Billions)
$8.9
$8.3
$7.8
$7.4
$7.0
$6.6
…
$2.6
$2.6
$170.1
Transfer of Federal Excise Tax
Revenues ($2023 Billions,
Undiscounted)
Low
Primary
High
Transfer
Transfer
Transfer
$0.3
$4.4
$7.3
$0.5
$5.6
$6.9
$0.7
$5.9
$6.5
…
…
…
$1.4
$2.5
$2.6
$1.4
$2.5
$2.5
$50.0
$135.9
$143.2
Table 42. Transfer of Federal Excise Tax Revenues Under the Proposed Product Standard Under
the Low, Primary, and High Policy Impact Scenarios (Change in Overall Cigar Excise Tax
Revenues)
Year
Count
Year 0
Year 1
Year 2
Year 3
Year 4
Year 5
Year
2025
2026
2027
2028
2029
2030
Volume Sales
of Cigars
(Millions of
Cigars)
7,716
7,716
7,716
7,642
7,568
7,493
Federal
Excise Tax
Rate (2023)
$0.10
$0.10
$0.10
$0.10
$0.10
$0.10
Baseline
Federal Excise
Tax Revenue
($2023,
Billions)
$0.8
$0.8
$0.8
$0.8
$0.8
$0.7
126
Transfer of Federal Excise Tax Revenues
($2023 Billions, Undiscounted)
Low
Primary
High
Transfer
Transfer
Transfer
$0.03
$0.1
$0.1
$0.5
$0.6
$0.7
$0.8
$0.7
$0.7
…
…
Year 39
2064
Year 40
2065
Total
…
5,045
4,971
256,484
…
$0.10
$0.10
-
…
$0.5
$0.5
$25.6
…
$0.3
$0.3
$8.6
…
$0.5
$0.5
$22.0
…
$0.5
$0.5
$23.0
Table 43. Transfer of Federal Excise Tax Revenues Under the Proposed Product Standard Under
the Low, Primary, and High Policy Impact Scenarios (Change in Overall Smokeless Excise Tax
Revenues)
Year
Count
Year
Year 0
2025
Year 1
2026
Year 2
2027
Year 3
2028
Year 4
2029
Year 5
2030
…
…
Year 39 2064
Year 40 2065
Total
Volume Sales
of Smokeless
Products
(Millions of
Units)
2,421
2,576
2,696
2,811
2,918
3,017
…
3,721
3,740
126,006
Federal
Excise Tax
Rate (2023)
$0.08
$0.08
$0.08
$0.08
$0.08
$0.08
…
$0.08
$0.08
-
Baseline
Federal Excise
Tax Revenue
($2023,
Billions)
$0.2
$0.2
$0.2
$0.2
$0.2
$0.2
…
$0.4
$0.4
$12.2
Transfer of Federal Excise Tax Revenues
($2023 Billions, Undiscounted)
Low
Primary
High
Transfer
Transfer
Transfer
-$0.06
-$0.06
-$0.06
…
-$0.02
-$0.02
-$1.1
-$0.1
-$0.1
-$0.1
…
-$0.04
-$0.04
-$2.4
-$0.2
-$0.2
-$0.2
…
-$0.1
-$0.1
-$3.9
Table 44. Transfer of Federal Excise Tax Revenues to Under the Proposed Product Standard
Under the Low, Primary, and High Policy Impact Scenarios (Change in Overall Pipe/RYO
Excise Tax Revenues)
Year
Count
Year
Year 0
2025
Year 1
2026
Year 2
2027
Year 3
2028
Year 4
2029
Year 5
2030
…
…
Year 39 2064
Year 40 2065
Total
Volume Sales
of Pipe/RYO
Products
(Millions of
Units)
56
53
50
48
45
43
…
20
20
1,168
Federal
Excise Tax
Rate (2023)
$5.38
$5.38
$5.38
$5.38
$5.38
$5.38
…
$5.38
$5.38
-
Baseline Federal
Excise Tax
Revenue ($2023,
Billions)
$0.3
$0.3
$0.3
$0.3
$0.2
$0.2
…
$0.1
$0.1
$6.3
Transfer of Federal Excise Tax
Revenues ($2023 Billions,
Undiscounted)
Low
Primary
High
Transfer
Transfer
Transfer
$0.01
$0.2
$0.3
$0.02
$0.2
$0.2
$0.03
$0.2
$0.2
…
…
…
$0.1
$0.1
$0.1
$0.1
$0.1
$0.1
$1.9
$5.1
$5.4
Using the same methodology, we multiply baseline State excise tax revenue from
affected tobacco products in each year from Table 45 through Table 48 by the assumed
127
percentage of State excise tax revenue. By applying the same three policy scenarios (low,
primary, and high) of transfers, we estimate an undiscounted value for affected cigarettes, cigars,
smokeless products, and pipe/RYO products. We estimate the cumulative 40-year total
undiscounted value of transfers from State governments in the form of reduced excise tax
collections of approximately $104.9 billion in the low policy impact scenario, $285.1 billion in
the primary policy impact scenario, and $300.4 billion in the high policy impact scenario for
cigarettes; approximately $16.1 billion in the low policy impact scenario, $41.2 billion in the
primary policy impact scenario, and $42.9 billion in the high policy impact scenario for cigars;
approximately -$2.0 billion in the low policy impact scenario, -$4.5 billion in the primary policy
impact scenario, and -$7.2 billion in the high policy impact scenario for smokeless products; and
approximately $3.1 billion in the low policy impact scenario, $8.3 billion in the primary policy
impact scenario, and $8.7 billion in the high policy impact scenario for pipe/RYO products.
Table 45 through Table 48 presents baseline estimates of affected tobacco product sales
and State excise tax revenues, as well as excise tax transfers under the three policy impact
scenarios over a 40-year time horizon for cigarettes (Table 45), cigars (Table 46), smokeless
products (Table 47), and pipe/RYO (Table 48).
Table 45. Transfer of State Excise Tax Revenues Under the Proposed Product Standard Under
the Low, Primary, and High Policy Impact Scenarios (Change in Overall Cigarette Excise Tax
Revenues)
Year
Count
Year 0
Year 1
Year 2
Year 3
Year 4
Year 5
…
Year 39
Year 40
Year
2025
2026
2027
2028
2029
2030
…
2064
2065
Total
Volume
Sales of
Cigarettes
(Millions
of Sticks)
176,358
164,714
155,114
146,258
138,083
130,565
…
9,793,879
9,759,731
581,116,7
93
Sales
Volume in
Pack
Equivalents
(Millions)
8,818
8,236
7,756
7,313
6,904
6,528
…
29,937
29,833
168,367
Average
State
Excise
Tax
Rate
(2023)
$2.12
$2.12
$2.12
$2.12
$2.12
$2.12
…
$2.12
$2.12
-
Baseline
State Excise
Tax Revenue
($2023,
Billions)
$18.7
$17.5
$16.4
$15.5
$14.6
$13.8
…
$5.4
$5.4
$356.8
Transfer of State Excise Tax
Revenues ($2023 Billions,
Undiscounted)
Low
Primary
High
Transfer
Transfer
Transfer
$0.7
$1.2
$1.5
…
$3.0
$3.0
$104.9
$9.3
$11.8
$12.4
…
$5.2
$5.2
$285.1
$15.4
$14.5
$13.7
…
$5.4
$5.4
$300.4
Table 46. Transfer of State Excise Tax Revenues Under the Proposed Product Standard Under
the Low, Primary, and High Policy Impact Scenarios (Change in Overall Cigar Excise Tax
Revenues)
Year
Count
Year
Volume Sales
of Cigars
Average
State Excise
Baseline State
Excise Tax
128
Transfer of State Excise Tax Revenues
($2023 Billions, Undiscounted)
(Millions of
Cigars)
Year 0
2025
Year 1
2026
Year 2
2027
Year 3
2028
Year 4
2029
Year 5
2030
…
…
Year 39
2064
Year 40
2065
Total
7,716
7,716
7,716
7,642
7,568
7,493
…
5,045
4,971
256,484
Tax Rate
(2023)
$0.19
$0.19
$0.19
$0.19
$0.19
$0.19
…
$0.19
$0.19
-
Revenue
($2023,
Billions)
$1.4
$1.4
$1.4
$1.4
$1.4
$1.4
…
$0.9
$0.9
$47.8
Low
Transfer
$0.1
$0.1
$0.1
…
$0.5
$0.5
$16.1
Primary
Transfer
$1.0
$1.1
$1.2
…
$0.9
$0.9
$41.2
High
Transfer
$1.4
$1.4
$1.4
…
$0.9
$0.9
$42.9
Table 47. Transfer of State Excise Tax Revenues Under the Proposed Product Standard Under
the Low, Primary, and High Policy Impact Scenarios (Change in Overall Smokeless Excise Tax
Revenues)
Year
Count
Year
Year 0
2025
Year 1
2026
Year 2
2027
Year 3
2028
Year 4
2029
Year 5
2030
…
…
Year 39 2064
Year 40 2065
Total
Volume Sales
of Smokeless
(Millions of
Units)
2,421
2,576
2,696
2,811
2,918
3,017
…
4,396
4,418
148,848
Average
State Excise
Tax Rate
(2023)
$0.15
$0.15
$0.15
$0.15
$0.15
$0.15
…
$0.15
$0.15
-
Baseline State
Excise Tax
Revenue
($2023,
Billions)
$0.4
$0.4
$0.4
$0.4
$0.4
$0.5
…
$0.7
$0.7
$22.6
Transfer of State Excise Tax Revenues
($2023 Billions, Undiscounted)
Low
Primary
High
Transfer
Transfer
Transfer
-$0.1
-$0.1
-$0.1
…
-$0.04
-$0.04
-$2.0
-$0.3
-$0.2
-$0.1
…
-$0.1
-$0.1
-$4.5
-$0.4
-$0.3
-$0.2
…
-$0.1
-$0.1
-$7.2
Table 48. Transfer of State Tax Revenues Under the Proposed Product Standard Under the Low,
Primary, and High Policy Impact Scenarios (Change in Overall Pipe/RYO Excise Tax Revenues)
Year
Count
Year 0
Year 1
Year 2
Year 3
Year 4
Year 5
…
Year
2025
2026
2027
2028
2029
2030
…
Volume Sales
of Pipe/RYO
(Millions of
Units)
56
53
50
48
45
43
…
Average
State Excise
Tax Rate
(2023)
$8.72
$8.72
$8.72
$8.72
$8.72
$8.72
…
Baseline State
Excise Tax
Revenue ($2023,
Billions)
$0.5
$0.5
$0.4
$0.4
$0.4
$0.4
…
129
Transfer of State Excise Tax Revenues
($2023 Billions, Undiscounted)
Low
Primary
High
Transfer
Transfer
Transfer
$0.02
$0.3
$0.4
$0.03
$0.3
$0.4
$0.04
$0.3
$0.4
…
…
…
Year 39 2064
Year 40 2065
Total
20
20
1,168
$8.72
$8.72
-
$0.2
$0.2
$10.2
$0.1
$0.1
$3.1
$0.2
$0.2
$8.3
$0.2
$0.2
$8.7
We discount the streams of Federal and State excise tax revenue transfers presented in
Table 41 through Table 48 using a 2 percent discount rate to estimate the present value and
annualized values of Federal and State excise tax revenue transfers. The present value of total
Federal excise tax revenue transfers from the proposed product standard is approximately $37.9
billion (low policy impact scenario), $111.9 billion (primary policy impact scenario) and $118.0
billion (high policy impact scenario), totaled over all affected tobacco product categories at a 2
percent discount rate. The annualized value of total Federal excise tax revenue transfers is
approximately $1.4 billion (low policy impact scenario), $4.1 billion (primary policy impact
scenario), and $4.3 billion (high policy impact scenario) at a 2 percent discount rate.
The present value of total State excise tax revenue transfers from the proposed product
standard is approximately $77.9 billion (low policy impact scenario), $230.2 billion (primary
policy impact scenario) and $242.8 billion (high policy impact scenario), totaled over all affected
tobacco product categories at a 2 percent discount rate. The annualized value of total State excise
tax revenue transfers is approximately $2.8 billion (low policy impact scenario), $8.4 billion
(primary policy impact scenario), and $8.9 billion (high policy impact scenario) at a 2 percent
discount rate. These estimates are summarized in Table 49.
Table 49. Present and Annualized Value of Federal and State Excise Tax Revenue Transfers
Under the Low, Primary, and High Policy Impact Scenarios
Category
Discount Transfers of Federal Excise Tax Transfers of State Excise Tax
Rate
Revenue ($2023, Billions)
Revenue ($2023, Billions)
Low
Primary
High
Low
Primary
High
Undiscounted
$59.4
$160.6
$167.6 $122.1 $330.0
$344.8
Value
Present
2%
$37.9
$111.9
$118.0
$77.9
$230.2
$242.8
Discounted
Value
Annualized
2%
$1.4
$4.1
$4.3
$2.8
$8.4
$8.9
Value
The present value of total Federal and State excise tax revenue transfers from the
proposed product standard is approximately $115.8 billion (low policy impact scenario), $342.1
billion (primary policy impact scenario) and $360.8 billion (high policy impact scenario), totaled
over all affected tobacco product categories at a 2 percent discount rate. The annualized value of
total Federal and State excise tax revenue transfers is approximately $4.2 billion (low policy
impact scenario), $12.5 billion (primary policy impact scenario), and $13.2 billion (high policy
impact scenario) at a 2 percent discount rate. These estimates are summarized in Table 50.
130
Table 50. Present and Annualized Value of Total Excise Tax Revenue Transfers Under the Low,
Primary, and High Policy Impact Scenarios
Category
Discount
Total Transfers of Excise Tax Revenue ($2023,
Rate
Billions)
Low
Primary
High
Undiscounted Value
$181.5
$490.6
$512.5
Present Discounted Value
2%
$115.8
$342.1
$360.8
Annualized Value
2%
$4.2
$12.5
$113.2
In Section II.G.4, we discuss medical cost savings due to reductions in smoking and
smoking-attributable illness. Xu et al. (70) uses data from the 2010-2014 Medical Expenditure
Panel Survey and 2008-2013 National Health Interview Survey to estimate the portion of annual
healthcare spending potentially attributable to cigarette smoking. Their results suggest that,
during 2010 to 2014, 11.7 percent of U.S. healthcare spending each year was attributable to adult
cigarette smoking. Translating this smoking-attributable fraction into dollars, the authors
estimate that smoking may have accounted for more than $225 billion of total healthcare
spending in 2014. With respect to public healthcare expenditures, the authors find “[m]ore than
60% of annual smoking-attributable healthcare spending in the U.S. was paid through public
health insurance programs, including either Medicaid, Medicare, or other federal health
insurance programs,” with Medicaid and Medicare alone paying for more than half of the
smoking-attributable expenditures ($125.7 billion dollars in 2014) (70).
While we do not separately estimate reductions in smoking-attributable medical costs due
to this product standard (as noted in Section II.G.4), we expect Federal and State governments
would realize benefits from medical cost savings that reduce public healthcare expenditures and
offset the transfers of tax revenues estimated in this section.
We request comment on this analysis, including estimates of the portion of excise tax
transfers back to consumers that may be spent on products subject to excise tax, such as other
tobacco products.
2. Transfer of Revenue from Tobacco Products Market to Consumers
Under the proposed product standard, covered tobacco product manufacturers’ revenues,
exclusive of excise taxes and lost producer surplus estimated in Section II.H.1, would transfer
from covered products manufacturers to consumers. We expect that some consumers would use
the transferred value to purchase VLNC tobacco products manufactured by the same entities. For
this analysis, we do not consider consumer purchases of VLNC tobacco products to result in a
net transfer of revenues, as these purchases would stay within the market for covered tobacco
products. We estimate transfers from the covered tobacco products market to consumers who
purchase other tobacco products authorized for market or other non-tobacco goods and services.
131
In Section II.E.5, we estimate baseline sales (revenues) in the affected tobacco product
market over the 40-year time horizon used in analysis of the proposed rule. Similarly, we
estimate baseline Federal and State excise tax revenues from affected tobacco products over the
40-year time horizon in II.E.5 and lost producer surplus from Section II.H.1. From these
sections, we use the estimates in Table 10 through Table 14 (baseline revenues and excise taxes)
and subtract baseline total Federal and State excise tax revenues from baseline tobacco product
revenues in each year to generate annual estimates of affected tobacco product revenues,
exclusive of excise taxes. This adjustment is summarized in Table 51 through Table 54 for
affected cigarettes (Table 51), cigars (Table 52), smokeless tobacco products (Table 53), and
pipe/RYO tobacco products (Table 54).
Table 51. Baseline Industry Revenue Projections for Affected Cigarettes, With and Without
Excise Taxes ($2023 Billions, undiscounted)
Year
Count
Year 0
Year 1
Year 2
Year 3
Year 4
Year 5
…
Year 39
Year 40
Year
2025
2026
2027
2028
2029
2030
…
2064
2065
Total Product
Revenue (Billions)
$80.8
$76.3
$72.5
$68.9
$65.6
$62.4
…
$28.5
$28.4
Total Product Excise Tax
Revenue (Billions)
$27.6
$25.8
$24.3
$22.9
$21.6
$20.4
…
$8.0
$8.0
Total Product Revenue, Exclusive
of Excise Taxes (Billions)
$47.6
$45.4
$43.6
$41.8
$40.1
$38.6
…
$20.5
$20.4
Table 52. Baseline Industry Revenue Projections for Affected Cigars, With and Without Excise
Taxes ($2023 Billions, undiscounted)
Year
Count
Year 0
Year 1
Year 2
Year 3
Year 4
Year 5
…
Year 39
Year 40
Year
2025
2026
2027
2028
2029
2030
…
2064
2065
Total Product
Revenue (Billions)
$8.5
$8.4
$8.2
$7.4
$7.0
$6.7
…
$1.5
$1.4
Total Product Excise Tax
Revenue (Billions)
$2.2
$2.2
$2.2
$2.2
$2.2
$2.1
…
$1.4
$1.4
Total Product Revenue, Exclusive
of Excise Taxes (Billions)
$6.1
$5.9
$5.8
$5.0
$4.7
$4.3
…
$0.7
$0.2
Table 53. Baseline Industry Revenue Projections for Affected Smokeless Tobacco Products,
With and Without Excise Taxes ($2023 Billions, undiscounted)
Year
Count
Year 0
Year
2025
Total Product
Revenue (Billions)
$22.3
Total Product Excise Tax
Revenue (Billions)
$0.6
132
Total Product Revenue, Exclusive
of Excise Taxes (Billions)
$21.0
Year 1
Year 2
Year 3
Year 4
Year 5
…
Year 39
Year 40
2026
2027
2028
2029
2030
…
2064
2065
$23.8
$24.9
$25.9
$26.9
$27.8
…
$40.6
$40.8
$0.6
$0.6
$0.7
$0.7
$0.7
…
$1.0
$1.0
$22.4
$23.5
$24.4
$25.3
$26.0
…
$37.1
$37.3
Table 54. Baseline Industry Revenue Projections for Covered Pipe/RYO Tobacco Products, With
and Without Excise Taxes ($2023 Billions, undiscounted)
Year
Count
Year 0
Year 1
Year 2
Year 3
Year 4
Year 5
…
Year 39
Year 40
Year
2025
2026
2027
2028
2029
2030
…
2064
2065
Total Product
Revenue (Billions)
$3.4
$3.2
$3.0
$2.9
$2.7
$2.6
…
$1.2
$1.2
Total Product Excise Tax
Revenue (Billions)
$0.8
$0.7
$0.7
$0.7
$0.6
$0.6
…
$0.3
$0.3
Total Product Revenue, Exclusive
of Excise Taxes (Billions)
$2.5
$2.4
$2.2
$2.1
$2.0
$1.9
…
$0.9
$0.9
This estimate of market revenue excluding excise taxes may be further split between
manufacturers, distributors, and retailers; however, we estimate that manufacturers capture the
largest portion of revenues and assume affected tobacco product revenues, exclusive of excise
taxes, represent manufacturer revenues. We apply our three-policy scenario (low, primary, and
high) range of revenue less lost producer surplus transfers away from manufacturers in each
tobacco product category and to consumers over the 40-year time horizon. We estimate that the
cumulative 40-year total undiscounted present value of this transfer is approximately $354.0
billion in the low policy impact scenario, $925.8 billion in the primary policy impact scenario,
and $970.0 billion in the high policy impact scenario for cigarettes; $16.4 billion in the low
policy impact scenario, $57.4 billion in the primary policy impact scenario, and $61.6 billion in
the high policy impact scenario for cigars; -$112.4 billion in the low policy impact scenario, $250.5 billion in the primary policy impact scenario, and -$399.8 billion in the high policy
impact scenario for smokeless tobacco products; and $16.5 billion in the low policy impact
scenario, $43.9 billion in the primary policy impact scenario, and $46.1 billion in the high policy
impact scenario for pipe/RYO tobacco products. These estimates are summarized in Table 55
through Table 58 for affected cigarettes (Table 55), cigars (Table 56), smokeless tobacco
products (Table 57), and pipe/RYO tobacco products (Table 58).
133
Table 55. Transfer of Revenue from Cigarette Product Manufacturers to Consumers over 40Year Time Horizon Under the Low, Primary, and High Policy Impact Scenarios ($2023 Billion,
Undiscounted)
Year
Count
Year 0
Year 1
Year 2
Year 3
Year 4
Year 5
…
Year 39
Year 40
Total
Year
2025
2026
2027
2028
2029
2030
…
2064
2065
Total Product
Revenue, Exclusive
of Excise Taxes and
Producer Surplus
(Billions)
$47.6
$45.4
$43.6
$41.8
$40.1
$38.6
…
$20.5
$20.4
$1,134.7
Transfer of Revenue from Affected Tobacco Product Manufacturers
($2023, Billions)
Low
Primary
High
$1.9
$3.2
$4.3
…
$11.1
$11.2
$359.5
$25.2
$32.3
$34.6
…
$19.7
$19.7
$940.6
$41.4
$39.8
$38.3
…
$20.1
$20.1
$985.5
Table 56. Transfer of Revenue from Cigar Product Manufacturers to Consumers over 40-Year
Time Horizon Under the Low, Primary, and High Policy Impact Scenarios ($2023 Billion,
Undiscounted)
Year
Count
Year 0
Year 1
Year 2
Year 3
Year 4
Year 5
…
Year 39
Year 40
Total
Year
2025
2026
2027
2028
2029
2030
…
2064
2065
Total Product
Revenue, Exclusive
of Excise Taxes and
Producer Surplus
(Billions)
$6.1
$5.9
$5.8
$5.0
$4.7
$4.3
…
$0.7
$0.2
$80.3
Transfer of Revenue from Affected Tobacco Product Manufacturers
($2023, Billions)
Low
Primary
High
$0.2
$0.3
$0.4
…
$0.4
$0.1
$16.5
$3.0
$3.8
$3.9
…
$0.6
$0.2
$57.6
$4.9
$4.6
$4.3
…
$0.6
$0.2
$61.9
Table 57. Transfer of Revenue from Smokeless Tobacco Product Manufacturers to Consumers
over 40-Year Time Horizon Under the Low, Primary, and High Policy Impact Scenarios ($2023
Billion, Undiscounted)
Year
Count
Year
Total Product
Revenue, Exclusive
of Excise Taxes and
Transfer of Revenue from Affected Tobacco Product Manufacturers
($2023, Billions)
Low
Primary
High
134
Year 0
Year 1
Year 2
Year 3
Year 4
Year 5
…
Year 39
Year 40
Total
2025
2026
2027
2028
2029
2030
…
2064
2065
Producer Surplus
(Billions)
$21.0
$22.4
$23.5
$24.4
$25.3
$26.0
…
$37.1
$37.3
$1,257.4
-$6.5
-$6.1
-$5.7
…
-$2.2
-$2.2
-$112.4
-$15.7
-$13.3
-$11.1
…
-$5.1
-$5.1
-$250.5
-$21.9
-$19.7
-$18.5
…
-$7.3
-$7.2
-$399.8
Table 58. Transfer of Revenue from Pipe/RYO Tobacco Product Manufacturers to Consumers
over 40-Year Time Horizon Under the Low, Primary, and High Policy Impact Scenarios ($2023
Billion, Undiscounted)
Year
Count
Year 0
Year 1
Year 2
Year 3
Year 4
Year 5
…
Year 39
Year 40
Total
Year
2025
2026
2027
2028
2029
2030
…
2064
2065
Total Product Revenue, Exclusive
of Excise Taxes and Producer
Surplus (Billions)
$2.5
$2.4
$2.2
$2.1
$2.0
$1.9
…
$0.9
$0.9
$53.6
Transfer of Revenue from Affected Tobacco Product
Manufacturers ($2023, Billions)
Low
Primary
High
$0.1
$1.3
$2.1
$0.2
$1.6
$2.0
$0.2
$1.7
$1.9
…
…
…
$0.5
$0.9
$0.9
$0.5
$0.9
$0.9
$16.5
$43.9
$46.1
We discount the stream of revenue transfers presented in Table 55 through Table 58
using a 2 percent discount rate to estimate the present value and annualized value of revenue
transfers from tobacco product manufacturers to consumers for all covered tobacco products.
The present value of the revenue transfer from tobacco product manufacturers to
consumers under the proposed product standard is approximately $170.6 billion (low policy
impact scenario), $546.2 billion (primary policy impact scenario), and $481.6 billion (high
policy impact scenario), discounted at 2 percent. The annualized value of revenue transfers from
tobacco product manufacturers to consumers is approximately $6.2 billion (low policy impact
scenario), $20.0 billion (primary policy impact scenario), and $17.6 billion (high policy impact
scenario), discounted at 2 percent. Estimated transfers in the high impact scenario are higher than
transfers in the primary scenario; this is driven by the estimate net negative transfers associated
with smokeless tobacco products. These estimates are summarized in Table 89.
135
Table 59. Present and Annualized Values of Revenue Transfers to Consumers from Tobacco
Product Manufacturers to Consumers Under the Proposed Product Standard ($2023, Billions)
Category
Discount
Revenue ($2023, Billions)
Rate
Low
Primary
High
Undiscounted Value of Revenue Transfer
$280.1
$791.5
$693.6
Present Value of Revenue Transfer
2%
$170.6
$546.2
$481.6
Annualized Value of Revenue Transfer
2%
$6.2
$20.0
$17.6
We total the estimated present value and annualized value of the transfers from Federal
and State excise tax revenues and tobacco product manufacturers to consumers under the
proposed product standard. The present value of all transfers is approximately $286.4 billion
(low scenario), $888.3 billion (primary policy impact scenario), and $842.4 billion (high policy
impact scenario), discounted at 2 percent. The annualized value of all transfers is approximately
$10.5 billion (low policy impact scenario), $32.5 billion (primary policy impact scenario), and
$30.8 billion (high policy impact scenario), discounted at 2 percent. These estimates are
summarized in Table 60.
Table 60. Present and Annualized Values of Total Transfers to Consumers Under the Proposed
Product Standard ($2023, Billions)
Category
Discount
Revenue ($2023, Billions)
Rate
Low
Primary
High
Undiscounted Value of Revenue
$461.6
$1,282.1
$1,206.1
Transfer
Present Value of Revenue Transfer
2%
$286.4
$888.3
$842.4
Annualized Value of Revenue
Transfer
2%
$10.5
$32.5
$30.8
We request comment on this analysis, including estimates of the portion of transfers back
to consumers that may be spent on tobacco products not covered by the proposed product
standard.
3. Tobacco Manufacturers, Distributors, Retailers, and Growers
The proposed rule, if finalized, would eliminate the revenues that firms currently receive
from the sale of certain NNC combusted tobacco products. This revenue would transfer to
consumers who could either save this money or spend it on other goods and services. We lack
information that could be used to project which sectors might benefit from this spending shift.
The distributional effects may not impact all sectors equally. For example, consumers
who continue to use tobacco products might purchase products manufactured or offered for sale
136
by the same entity that lost revenues from NNC combusted products. The extent to which those
entities could obtain lost NNC combusted tobacco profits from other products would determine
the magnitude of the distributional effect on those entities. Consumers who stop or reduce their
use of tobacco products in response to this product standard would reallocate their resources to
non-tobacco industries (or savings). In addition, employees and owners of firms that currently
produce those tobacco products would have less resources to spend elsewhere.
We expect that the product standard limiting nicotine to minimally addictive or
nonaddictive levels in certain combusted tobacco products would create transfers from retailers
to consumers. Prior to the effective date of the product standard, retailers and related entities may
continue to sell available stock of affected NNC combusted tobacco products. With many
retailers under contract to provide dedicated shelf space for tobacco products, we expect that
retailers would be stocked with other tobacco products to fill the shelf space previously reserved
for NNC products. 74 As consumers use the money they were previously spending on NNC
combusted tobacco products on other products, including non-tobacco products, some retailers
may see an overall reduction in sales while others experience an increase in overall sales. This
shift between product categories may also include ancillary sales, and people who formerly used
combusted tobacco products may change their retail habits following the proposed product
standard. We do not separately estimate transfers from retailers and distributors to consumers
because of this product standard.
This proposed rule, if finalized, may also have an effect on tobacco farmers. FDA does
not regulate production of tobacco crops. The proposed nicotine product standard is expected to
impact demand for tobacco products beyond the continued decline in tobacco product
consumption already expected in the United States. In this section, we analyze the impacts on
U.S. tobacco leaf growers due to an expected reduction in demand for combusted tobacco
products, and potential offsetting impacts of increased demand for noncombusted tobacco
products or nontobacco products. These impacts are transfers because acreage no longer used to
grow tobacco for combusted tobacco products, would be put to some other use, such as growing
tobacco for noncombusted tobacco products, growing other nontobacco crops, or a purpose
outside of agriculture.
The three primary types of tobacco used in manufacturing of all cigarettes and RYO are
bright (also known as flue-cured), burley, and oriental; dark and oriental tobacco is used in cigar
manufacturing. Bright, burley, and dark types of tobacco are grown in the United States, while
oriental tobacco type is imported, mostly from Turkey (160). Over the past five years, tobacco
leaf production in the United States has decreased from 710 million pounds in 2017 to about 447
million pounds in 2022—a reduction of over 35% (See Table 61) (161)(162). In 2022, bright and
burley tobacco production represented about 81% of total U.S. tobacco leaf production (See
These tobacco company incentive programs require retailers to follow specific product placement and advertising
placement for the manufacturer’s specific brands. Plaintiffs’ 2018 Supplemental Brief On Retail Point Of Sale
Remedy, United States v. Philip Morris USA, Inc., No. 99-CV-2496 (D.D.C. Aug. 3, 2018) (ECF No. 6276).
74
137
Table 61) (162). Additionally, in 2017 (the most recent year with data) cigar type tobacco (Types
4-6) comprised approximately 0.61 percent of all tobacco leaf production in the United States
(See Table 62) (163). Cigar tobacco accounted for less than 1 percent of the tobacco market in
2017 (163).
Table 61. United States Total Bright and Burley Tobacco Production, 2017-2022 (1,000 lbs.)
2017
2018
2019
2020
2021
Class 1, Flue-cured (Bright)
460,650 338,690 297,170 227,555 301,975
Class 3A, Light air-cured,
161,140 100,435 92,830 80,332 77,826
Types 31 and 32 (Burley)
Total U.S. Production of
Bright and Burley Tobacco
626,110 442,205 392,300 308,807 380,571
Total U.S. Tobacco Leaf
710,161 533,241 467,956 372,877 458,126
Production
Total Bright and Burley
Production as a Share of Total
U.S. Tobacco Production
88%
83%
84%
83%
83%
2022
302,640
58,607
361,247
447,367
81%
Source: FDA analysis of USDA Annual Crop Production Summary reports (161) (162).
Note: USDA Annual Crop Production Summary reports list two types of light air-cured tobacco; both Type 31 and
Type 32 are types of burley tobacco.
Table 62. U.S. Tobacco and Cigar Tobacco Production, 2013-2017 (1,000 lbs.)
2013
2014
2015
2016
All Tobacco
Cigar Type Tobacco
Cigar Type Tobacco (%)
2017
724,266
876,689
719,563
628,720
710,161
8,573
9,313
8,718
3,840
4,320
1.18%
1.06%
1.21%
0.61%
0.61%
Source: U.S. Department of Agriculture, National Agricultural Service (163)
The number of U.S. farms growing tobacco has decreased over the past few decades. In
2022, owners and employees of approximately 3,000 farms were growing tobacco—a dramatic
drop from approximately 93,000 tobacco farms in 1997 and 10,000 farms in 2012 (162). The
consolidation in the tobacco farm sector is, in part, due to two major changes in tobacco policy
that directly impacted tobacco growers: The Master Settlement Agreement of 1998 (MSA) and
the elimination of the Federal Tobacco Price Support Program. Both of these programs combined
provided over $15 billion dollars to tobacco growers to transition to growing other crops. As part
of the MSA agreement, $5.15 billion was allocated to aid tobacco growers who would suffer
losses because of declining consumption.
138
The second major change was the elimination of the Federal Tobacco Price Support
Program, a price support and tobacco quota program system for U.S. tobacco growers to assist
them in transitioning to growing other crops. The 2004 tobacco crop was the last crop year
eligible for Federal support and payments. Buyout payments to farmers began in 2005 and
continued through 2014 with total payment from the buyout program estimated to be around $10
billion (164). Since 2018, some tobacco growers have switched to hemp production as it uses the
same equipment and many of the same growing techniques as tobacco (165).
The impact of the proposed rule on U.S. raw leaf tobacco growers may be mitigated by
the demand for low nicotine content tobacco varieties. To the extent that cigarette manufacturers
use genetically modified (GM) or bioengineered (BE) tobacco to comply with the proposed
product standard and replace conventional tobacco leaf, domestic tobacco leaf growers would be
able to use current acreage to grow the low nicotine tobacco leaf for the VLNC cigarettes.
Genetically modified or bioengineered tobacco are often covered by patents which can add some
amount of cost per acre, further reducing the expected profitability of existing tobacco crop
assuming the market price of VLNC tobacco leaf is equivalent to NNC tobacco leaf. We are
unable to estimate how the potential for VLNC tobacco leaf could offset decreased demand for
NNC tobacco leaf (see NPRM section VII.E). We request comment on VLNC tobacco leaf
potential pricing.
Available raw tobacco leaf may be used in an extraction process to create reconstituted
VLNC tobacco. Liquid nicotine, a by-product of the extraction process, may also be used for the
production of e-liquids used in e-cigarettes. Additionally, such available existing leaf may be
exported to other markets.
The changing landscape of the tobacco farm sector over the past several decades in
response to declining demand and policies supporting transition away from tobacco leaf growing
are expected to mitigate the impact of the proposed rule on tobacco leaf growers. Potential
cultivation of low nicotine content varietals, tobacco used in noncombusted products, or other
high-value replacement agricultural products may also mitigate the impact of the proposed rule
on U.S. raw tobacco leaf growers. For additional discussion of the cultivation methods for low
nicotine content varietals see Preamble Section VII.E. We request comment, including additional
data or studies, regarding impacts of this proposed rule on U.S. tobacco farmers and the U.S.
farming industry as a whole.
4. Impact on Tobacco User Fees
Changes in tobacco product user fees are not a social cost of the rule; instead, reallocation
of user fees between and within tobacco product classes represent a transfer between tobacco
companies (or segments within one company if they produce multiple product categories).
However, the increased burden of user fees could impose an additional strain on individual
businesses already facing economic transition costs estimated in Section II.H.1.a. A decrease in
139
market share resulting from the proposed product standard and, thus, a decrease in assessed user
fees collected from a particular tobacco product class results in a corresponding reallocation of
user fees assessed for manufacturers and importers of other tobacco product classes subject to
user fees. We note that estimating changes in any user fee assessments for any particular entity
that manufactures or imports both combusted and smokeless tobacco products is challenging.
Similarly, any decrease in market share and, thus, user fees collected from domestic
manufacturers and importers within a tobacco product class subject to user fees results in a
reallocation of user fees to other domestic manufacturers and importers within that class. This
analysis focuses on the allocation by product category rather than by specific manufacturers who
may manufacture or import tobacco products in multiple categories.
We expect this proposed product standard, if finalized, to significantly reduce cigarette,
RYO tobacco, cigar, and pipe tobacco use and increase use of smokeless and ENDS products as
some consumers switch from covered products to non-covered tobacco products. Therefore, we
expect the amount of user fees paid by cigarette, RYO tobacco, non-premium cigar, and pipe
tobacco manufacturers and importers to decline, while the amount of user fees paid by
manufacturers and importers of smokeless (snuff and chewing tobacco) to increase. While ENDS
products are subject to FDA authority and are impacted by the proposed product standard, FDA
does not currently have the authority to assess user fees on manufacturers of ENDS products. We
note that a single manufacturer may produce tobacco products across a range of tobacco product
classes that are subject to user fees, resulting in net transfers of user fees within firms. As seen in
Table 83, there are 143 total tobacco product manufacturers on the market (excluding
manufacturers that only produce ENDS), 125 of which produce only combusted products, 10
produce only smokeless products, and 8 produce both combusted and smokeless products. To the
extent that large manufacturers may operate in both combusted and noncombusted tobacco
product categories, this analysis cannot predict how their overall user fee assessments may
change under the proposed product standard.
Figure 24. Tobacco Product Categories Classifications by Covered Product and User Fee
Classification
Subject to User Fees
Not Subject to User Fees
Subject to the Nicotine
Product Standard
-
Cigarettes
Cigars
RYO
Pipe tobaccoA
Not Subject to the
Nicotine Product
Standard
- Smokeless (Snuff, chewing
tobacco)
140
- ENDS
As discussed above our data on pipe tobacco includes waterpipe tobacco; however, waterpipe tobacco is
not subject to this product standard.
A
Because tobacco revenues would decline as a result of the product standard while the
total amount of tobacco user fees assessed declines in real 2023 dollars only as a result of
projected inflation, we expect the user fee assessment per category as a percent of post-tax
revenue to increase significantly. As discussed in the baseline section, Section II.E.6, user fee
assessments by product category are determined by the total amount of federal excise tax
collected on each product category. See Table 63 for the estimated dollar valued owed by each
product class under the primary policy scenario.
Table 63. Total Projected Primary Policy User Fee Allocation by Product Category, Following
the Proposed Product Standard (2023, $)
Year
2025
2030
2035
2040
2045
2050
2055
2060
Cigarettes
605,563,358
484,925,700
196,730,409
154,744,600
149,600,174
146,257,019
143,135,993
140,589,093
Total Allocation for
RYO
Cigars
Pipe
3,703,374
62,842,681 4,143,691
2,965,604
55,929,812 3,318,203
1,203,122
28,104,752 1,346,168
946,354
26,221,973 1,058,872
914,893
28,587,948 1,023,670
894,447
30,001,265 1,000,794
875,360
30,261,949 979,437
859,785
29,645,454 962,010
Smokeless
12,447,642
128,287,301
440,917,796
480,450,260
479,586,137
478,569,800
478,968,289
480,013,994
To evaluate the impact of the proposed rule on user fees, we use the approach discussed
in Section II.E.6. Table 63 and Figure 25 shows that most of the user fee obligation moves to
smokeless products once the proposed rule is implemented and prevalence rapidly moves from
combusted to noncombusted products.
Figure 26 shows the difference between the policy and baseline scenarios for the percent
of user fees owed by each product category.
141
Figure 25. Percent of Total User Fees Owed by Product Category
142
Figure 26. Percent Change of Total User Fees by Product Category – Difference Between Policy
Scenario and Baseline
143
Overall, this proposed product standard, if finalized, would cause a shift in user fee
obligations from combusted product manufacturers to smokeless tobacco product manufacturers.
The primary policy scenario results in an annualized transfer of user fee assessments from
combusted to smokeless tobacco firms of $333 million at a 2 percent discount rate. In the low
impact scenario, the annualized transfer of user fee assessments is $26 million at a 2 percent
discount rate. In the high impact scenario, the annualized transfer of user fee obligation is $461
million at a 2 percent discount rate.
Additionally, while the proposed product standard may result in a decrease in total
tobacco spending and revenue (all classes), the TCA specifies the total amount of user fees
assessed, subsequently resulting in a higher ratio of user fee assessments as compared to post-tax
revenue for each product category. We note that all of these assumptions are based around
several critical assumptions, including an assumption that market prices of both combusted and
noncombusted tobacco products remain constant (in real dollars) over the years following the
144
proposed product standard. As discussed with more detail in section II.H.1.0 (Producer Surplus
Loss), the tobacco industry generally operates in an oligopolistic manner and retains pricing
power resulting in relatively frequent price increases. Increases in tobacco prices would increase
manufacturer revenue and reduce any proportional impact of a user fee assessment. Additionally,
to the extent that a manufacturer may operate in both combusted and smokeless tobacco product
categories, this analysis cannot predict how their overall user fee assessments may change under
the proposed product standard.
By 2037, in the primary impact scenario, the relative user fee burden has leveled out to
about 21.2 percent of post-tax revenue for cigarettes, 34.9 percent of post-tax revenues for RYO,
31.7 percent of post-tax revenue for cigars, 6,8 percent of post-tax revenues for pipe tobacco and
2.4 percent of post-tax revenue for smokeless products. See Figure 27. Since tobacco revenues
are already decreasing at baseline, in 2037 policy impact on user fee obligation is about 19.5
percent of post-tax revenue for cigarettes, 32.1 percent of post-tax revenues for RYO, 29.2
percent of post-tax revenue for cigars, 6.3 percent of post-tax revenues for pipe tobacco and 2.2
percent of post-tax revenue for smokeless products. See Figure 28. We note that each firm may
produce multiple product categories or may have lines of business outside of the tobacco
industry. This analysis does not reflect the percent of total firm revenue owed in user fees, but
rather the percent of the tobacco product-derived revenue within a tobacco product category that
may be assessed in user fees.
Since the total user fee assessment assigned to each class of tobacco products for a given
fiscal year is based on the class’s tax burden for the most recent calendar year, the first year that
the policy impacts producers and importers they are paying user fees based on the pre-policy
world with post-policy revenues. In both the low and primary impact scenarios revenues drop off
quickly but over several years, such that the user fee obligation as a percent of revenue from the
tobacco category ramps up to a relatively stable point about 15 years after implementation.
However, based on the PHM’s predicted impact on combusted prevalence, in the high impact
scenario revenues drop off so rapidly in the first year of market impact that user fees spike to
well over 100 percent of revenue for the combusted product categories before stabilizing to
levels comparable to the primary policy scenario.
145
Figure 27. Percent of Post-Tax Revenue of a Product Category Needed to Meet User Fee
Obligation Post (Primary) Policy
146
Note: The scale for the “High Impact Scenario” figure differs from the other two.
Figure 28. Percent of Post-Tax Revenue of a Product Category Needed to Meet User Fee
Obligation Difference Between Primary Policy and Baseline
147
Note: The scale for the “High Impact Scenario” figure differs from the other two.
As noted above, although this is not a social cost, the increase in user fee burden would
increase the financial constraints on domestic manufacturers and importers. This financial
constraint would impact all firms subject to user fees including firms with covered products and
smokeless products. While we lack information to fully assess firms’ shutdown point, we note
that for firms that manufacture or import combusted tobacco products declining revenue and
relative growth of user fee obligations are likely to create additional strain. We expect smaller
firms to have lower net profit margins than large firms. See Section III below for a more
complete discussion of the impacts of the product standard on small entities.
148
We note that this analysis assumes that there are no changes to the user fee structure or
federal tax structure during the time horizon of the analysis. As part of its budget requests since
fiscal year 2020, FDA has requested that Congress provide the Agency with authority to assess
and collect user fees for all regulated products, including ENDS products. Congress may choose
to update the user fee structure or tax structure at any time, which would alter our analysis. We
are unable to assess any potential action by Congress. We request comment on how this policy
may impact user fees and the burden they have on firms.
J. Analysis of Regulatory Alternatives to the Proposed Rule
We analyze several alternatives to the proposed rule: extending the effective date to six
years, including waterpipe tobacco in the proposed standard, allowing for a gradual reduction in
nicotine, and allowing for acceptance testing of the nicotine level.
1. Gradual Reduction in Nicotine
FDA is proposing an immediate nicotine reduction rather than a gradual (i.e., stepped
down) approach. In this analysis, we assess the alternative of a gradual reduction. Specifically,
we consider a two-step scenario where in 2027 a first step down in nicotine becomes effective
and, four years later, in 2031 the final nicotine level, in line with this proposed rule, is
implemented.
a. Literature on Gradual versus Immediate Nicotine Reduction
Most studies comparing dependency outcomes between immediate nicotine reduction via
VLNC cigarettes and gradual nicotine reduction find evidence that switching to VLNC cigarettes
decreases dependence (32; 166; 11; 167; 168). Further, evidence suggests that immediate
nicotine reduction is more likely to lead to decreases in dependence than gradual reduction (32;
166; 169). We expect that there would be little or no compensatory smoking of VLNC cigarettes
under the proposed immediate approach, while evidence suggests that a gradual approach could
lead to compensatory smoking as the nicotine levels are reduced but remain above VLNC levels
(32; 166). Therefore, the gradual reduction approach could lead to increased combusted tobacco
consumption and, consequently, increased morbidity and mortality during the reduction period
relative to the proposed immediate reduction approach. We request comment on these data
sources and our assumptions.
b. Gradual Reduction Alternative Estimation
From the literature on immediate versus gradual nicotine reduction, it is evident that
consumers are likely to compensate with more cigarettes until nicotine levels have been reduced
to nonaddictive or minimally addictive levels and consumers can no longer compensate by
149
smoking more (see Section VII.C of the NPRM). Although there may be increases in quantity of
affected tobacco products sold resulting from increases in intensity among smokers, the PHM
does not capture this change quantitatively. As such, we assume that the policy has no impact on
smoking prevalence under the gradual reduction alternative in the first step and consequently, no
change in quantity of affected tobacco products. We request comment on these data sources and
our assumptions.
Under the gradual reduction alternative, we assume that costs for firms to reformulate
products, submit premarket applications to FDA, and the cost for FDA to review these
applications will be incurred both in 2026 and 2030 relative to only once in the main analysis. In
the low, primary, and high impact scenarios for the first nicotine reduction step, we assume there
are the same amount of VLNC products reformulated as there are in the low impact scenario of
the main analysis, along with the corresponding costs to submit premarket applications and for
FDA to review. See section II.H.1.d for the number of VLNC products reformulated, section
II.H.1.d for reformulation costs, section II.H.1.f for application submission costs, and section
II.H.3.c for government review costs. We also assume that in 2027, consumers incur search costs
associated with a decrease in the number of products on the market. We estimate that search
costs to consumers for the first nicotine reduction step are half of the search costs for each
respective impact scenario of the main analysis. See section II.H.2.b for search costs. In the
second nicotine reduction step, we assume that firms incur the same costs for reformulation,
application submission, and the cost for FDA application review as in the main analysis. We
assume that in 2031, consumers incur the same search cost as in the main analysis. Lastly, we
assume firms incur the one-time cost of reading and understanding the rule upon its publication
date in 2025, one-time economic transition costs one year prior to the second step of nicotine
reduction in 2030, and that consumers incur a one-time withdrawal cost in 2032. Recurring costs
of nicotine content testing to firms and government enforcement costs begin in 2028, and
recurring changes in producer surplus begin in 2032. See Table 64 for the sequencing of costs in
the gradual reduction scenario.
Table 64. Sequencing of Costs Associated with Gradual Reduction
Affected
Entity
Firm
Type
Reading and
Understanding
Economic
Transition
Reformulation
Application
Submission
Nicotine
Testing
2025
Publication
2026
2027
Step 1
2028
2029
2030
2031
Step 2
2032
to
2064
X
X
X
X
X
X
X
X
X
150
X
X
Producer
Surplus*
Govt
Consumer
Review
X
X
X
Enforcement
Withdrawal
Search
X
X
X
X
X
X
X
X
*Note: Producer surplus represents the net effect of firms, which includes losses to firms selling combusted tobacco products
affected by the rule as well as gains to firms selling noncombusted tobacco products
Under the gradual reduction alternative, 40-year annualized benefits range from $197
billion to $855 billion, with a central estimate of approximately $787 billion, discounted at 2
percent. Annualized costs under this alternative range from $0.9 billion to $2.4 billion, with a
central estimate of approximately $1.9 billion, discounted at 2 percent. Annualized transfers of
excise tax revenues from Federal governments to consumers under this alternative range from
$1.1 billion to $3.3 billion, with a central estimate of approximately $3.2 billion, discounted at 2
percent. Annualized transfers of excise tax revenues from State governments to consumers under
this alternative range from $2.2 billion to $6.9 billion, with a central estimate of approximately
$6.5 billion, discounted at 2 percent. Annualized transfers of revenues from firms to consumers
under this alternative range from $4.9 billion to $14.0 billion, with a central estimate of
approximately $15.7 billion, discounted at 2 percent. The present and annualized values of the
gradual reduction alternative and the difference between the proposed rule and the gradual
reduction alternative are summarized in Table 65.
151
Table 65. Summary of Benefits, Costs, and Transfers for the Gradual Reduction Alternative
($2023 Millions)
Difference
Between Gradual
Reduction
Alternative and
Proposed Rule
Gradual Reduction Alternative
Discount
Rate
Primary
Low
High
Primary
$21,953,457
$5,498,042
$23,860,498
-$8,657,159
$786,789
$197,044
$855,136
-$310,264
$51,754
$25,784
$66,148
-$6,209
$1,855
$924
$2,371
-$223
Transfers: From Federal Governments to Consumers
Present Discounted
2%
$88,537
Value
Annualized Value
2%
$3,173
$30,160
$93,300
$1,081
$3,344
-$919
Transfers: From State Governments to Consumers
Present Discounted
2%
$181,747
Value
Annualized Value
2%
$6,514
$61,897
$191,697
-$53,020
$2,218
$6,870
-$1,900
$135,902
$4,871
$391,147
$14,018
-$118,118
-$4,233
Benefits
Present Discounted
Value
Annualized Value
2%
Costs
Present Discounted
Value
Annualized Value
2%
2%
2%
Transfers: From Firms to Consumers
Present Discounted
2%
Annualized Value
2%
$438,936
$15,731
-$25,632
Table 66 (analogous to Table 41 in section II.H) presents the annualized costs associated
with the gradual reduction alternative broken down by category. Although some costs are
reduced in this alternative, much of that is offset by increased costs associated with
reformulation, submission, and premarket review of additional products.
Table 66. Summary of Annualized Quantified Costs under Gradual Reduction Alternative
(Millions of 2023 Dollars over a 40-Year Time Horizon, 2 percent discount rate)
Annualized Value Costs
Cost Category
Industry
Primary
Economic Transition Cost
Producer Surplus Loss
152
Low
High
$231.9
$139.8
$295.7
$1,157.6
$143.0
$1,330.5
Reading and Understanding the Rule
$13.4
$4.0
$25.1
Manufacturers: Reformulation Costs
$334.9
$606.2
$316.2
$0.56
$1.01
$0.528
$1.2
$1.9
$1.7
Withdrawal Costs
$39.0
$0.4
$252.1
Search Costs
$70.9
$23.6
$141.9
$4.6
$3.0
$6.4
$0.58
$1.06
$0.551
$1,854.8
$924.1
$2,370.7
Cost to Submit Premarket Applications
Testing Costs
Consumer
Government
Enforcement
Costs
Federal Enforcement Costs
Costs for Premarket Review of the New Tobacco Products
Total Annualized Quantified Costs
On net, we expect the gradual reduction approach to have lower benefits than the
proposed rule. We also expect transfers of Federal and state excise tax revenues to consumers
and transfers of user fees owed by combusted tobacco firms to noncombusted tobacco firms to
be lower than with the proposed rule.
2. Change the Effective Date
The proposed rule, if finalized, would become effective 2 years after publication of the
final rule. In this analysis, we consider an effective date of 6 years (See Table 67). For the 6-year
effective date, we use much of the same approach as the Gradual Reduction in Nicotine
Alternative as estimated in Section II.J.1. As discussed in the gradual reduction alternative, we
do not estimate health benefits until nicotine levels reach minimally or non-addictive levels. So,
while the gradual reduction and 6-year effective date are different from a policy standpoint the
impacts are similar. We estimate the 6-year effective date to have the same benefits as the
gradual reduction alternative and the same costs except those associated with the first round of
reformulation. We assume that the change in effective date does not have a substantial impact on
the baseline. Specifically, we assume for this analysis that no tobacco regulation issued prior to
the publication of this final rule other than the Menthol and Cigar Flavors Product Standards, that
would result in major changes to the tobacco market.
Given that smoking rates are declining at baseline the policy has a lower averted
mortality impact with a longer effective date. We expect costs to decrease because 1) the costs
also occur further in the future and 2) some of the costs are lower because combusted tobacco
prevalence is declining at baseline which results in lower lost producer surplus. However, given
the relative magnitudes of the monetized benefits and costs of this rule, the decline in benefits far
exceeds the reduced cost burden.
The 6-year effective date has a decrease in annualized value of the monetized benefits
relative to the 2-year effective date of approximately $310 billion at a 2 percent discount rate.
The monetized annualized costs under this alternative decrease by $558 million and a 2 percent
discount rate.
153
Table 67. Benefits and Costs Under the Alternative Effective Date of 6 Years ($ Millions, 2023
$)
Primary
Low
High
Difference between
Proposed Rule and
Alternative Compliance
Date
Primary
$21,953,457
$786,789
$5,498,042
$197,044
$23,860,498
$855,136
$8,657,159
$310,264
$42,403
$1,520
$16,706
$599
$57,077
$2,046
$15,561
$558
Alternative Compliance Date
Benefits
Present discounted Value
Annualized Value
Costs
Present discounted Value
Annualized Value
3. Include Waterpipe Tobacco
FDA considered including waterpipe tobacco products within the scope of this proposed
product standard and received comment that waterpipe tobacco use among young people may
cause similar or more severe health effects than cigarette smoking. A waterpipe smoking session
typically lasts 20 to 80 minutes, with a person using the waterpipe taking 50 to 200 puffs, while
smoking a cigarette typically takes 5 to 7 minutes, with a person who smokes cigarettes taking 8
to 12 puffs. (170; 171). However, FDA decided to not include waterpipe tobacco products in this
proposed standard because the Agency has determined that waterpipe tobacco involves
profoundly different use behaviors than combusted cigarettes, which makes it an unlikely
substitute for cigarettes. Findings from 2024 NYTS data suggest that 0.7 percent of middle and
high school students reported using waterpipe tobacco within the past 30 days (172). Data drawn
from the 2022 NHIS suggest that 0.8 percent of adults reported daily or occasional pipe,
waterpipe, or hookah smoking, while 13.9 percent of adults reported ever smoking a pipe,
waterpipe, or hookah. Because the NHIS survey data asks one combined question about whether
respondents have smoked regular pipes, waterpipe, or hookah, these prevalence estimates may
overstate the number of individuals who currently or have ever smoked only waterpipes.
Waterpipe tobacco is significantly less likely to be smoked daily. Multi-wave PATH
Study data (173) (Wave 1, 2013-2014; Wave 2, 2014-2015) indicates that among adults who
used waterpipes in the past year, 77.1 percent report less than monthly use in Wave 1, and 44.9
percent report less than monthly use in Wave 2. In Wave 3, 0.1 percent of youth, 0.3 percent of
young adults, and 0 percent of adults reported daily waterpipe use (174). For comparison, 59.1
percent of adults in the 2018 NHIS who smoke cigarettes report daily use (175).
Our analysis of the costs of the proposed rule uses Euromonitor Passport data, which
includes waterpipe tobacco (shisha) in its definition of pipe tobacco. We therefore expect that
154
our estimates of the costs of the proposed product standard partially consider the waterpipe
tobacco market. Due to the low prevalence of waterpipe smoking and its profoundly different use
topography, we do not expect the inclusion of waterpipe tobacco to significantly impact
estimated benefits of the proposed product standard; however, we lack data that would allow us
to quantify this impact. Specifically, we lack data on the extent to which waterpipe tobacco use
leads to morbidity or mortality. Further, we lack data on the extent to which waterpipe use may
be used as a substitute for other NNC combusted tobacco products if this standard is finalized.
We request comment on these topics.
4. Allow for Acceptance Testing of the Nicotine Level
This proposed rule, if finalized, would require product testing on each batch of finished
cigarettes and certain other finished combusted tobacco products prior to commercial distribution
in the United States to prevent nonconforming tobacco products from entering the stream of
commerce and reaching consumers. This regulatory alternative would allow manufacturers to
test tobacco filler and other ingredients for nicotine prior to putting them in the finished product
or in final packaging through incoming and in-process acceptance activities. Incoming
acceptance would confirm that incoming materials from suppliers (e.g., cut filler, cigar wrapper)
meet established specifications using purchasing documents such as a Certificate of Acceptance
(COA). In-process testing would allow manufacturers that manufacture their own materials to
demonstrate, through testing, that their products meet established specifications. Regardless of
when testing occurs, however, it would remain the manufacturer’s responsibility to ensure that
finished tobacco products subject to this proposed nicotine yield product standard comply with
the proposed maximum nicotine content set forth in proposed §1160.10.
Under this regulatory alternative, manufacturers who use the same filler for different
finished tobacco products would be able to test finished products that apply to multiple different
finished products without additional samples. For these products that use the same filler, the
ability to test the filler rather than every batch of finished tobacco product reduces waste of final
packaged products. We calculate testing costs using a batch size of 24 million cigarettes, or 1.2
million packs, as a proxy for running samples of filler over larger batches relative to the main
analysis of 8 million cigarettes, or 400,000 packs. Refer to Section II.H.1.g for a detailed
explanation of estimating testing costs in the main analysis.
Table 68 below displays the testing cost estimates for allowing acceptance testing of
nicotine levels as well as the difference between costs for acceptance testing and the final
product testing requirement used in the main analysis. At a 2 percent discount rate, annualized
acceptance testing would cost $1,476,653, $230,284, and $68,966 less in the low, primary, and
high estimates relative to final product testing.
155
Table 68. Summary of Testing Cost of Nicotine Level with Acceptance Testing at a 2% Discount
Rate over a 40 Year Time Horizon
Cost for Acceptance Testing All Affected Combusted Products
Primary
Low
High
Discounted Total Cost
$2,741,326
$17,578,232
$820,977
Annualized Cost
$115,142
$738,326
$34,483
Difference between Acceptance Testing and Final Product Testing
Primary
Low
High
Discounted Total Cost
Annualized Cost
-$5,482,651
-$230,284
-$35,156,463
-$1,476,653
-$1,641,954
-$68,966
This regulatory alternative would present multiple challenges and potentially would
increase government costs to enforce this product standard. One such challenge would be in
evaluating premarket tobacco product applications with multiple nicotine COAs (e.g., COAs for
Bright, Burley, and Oriental tobacco leaf inputs). The COAs for one finished tobacco product
may include multiple different test methods using different detectors (i.e., an instrument used to
measure how much nicotine is present). Each of these test methods would need to be validated
for precision, accuracy, selectivity, and sensitivity to ensure they are fit for purpose. In addition,
for each test method, the manufacturer would need to submit sufficient information about the
nicotine testing so FDA could fully evaluate the submitted data. Finally, unless every COA was
reported in identical units of nicotine concentration for each ingredient, component, and part of
the finished tobacco product, there may not be a clear or reliable way to calculate the total
nicotine concentration in the finished tobacco product other than testing the final, finished
tobacco product (as required by the proposed rule).
As discussed in the proposed rule, the scope of this nicotine product standard would
include components and parts of cigarettes and certain other combusted tobacco products,
meaning that reliance on acceptance testing of some, but not all, materials used to manufacture a
covered tobacco product may not accurately represent the total nicotine content in the finished
tobacco product. For example, nicotine may be added to cigarette paper, or the mouthpiece or
filter of a cigar. Similarly, additives used in the manufacturing process, such as the processing of
reconstituted tobacco or modified tobacco after acceptance, may impact the total nicotine content
of the finished tobacco product. Another potential complication is that cross-contamination of
manufacturing equipment containing nicotine residues that are not properly cleaned can affect
the nicotine content of finished tobacco products.
Due to challenges related to premarket review of acceptance activities as well as the
potential for the nicotine content of the finished tobacco product to vary based on subsequent
manufacturing practices after acceptance activities, the Agency has determined to not adopt this
alternative and proposed that each batch of finished tobacco products be tested to determine the
total nicotine content of the finished tobacco product. We request comment and data on the
156
comparative costs and benefits that might be associated with allowing for acceptance testing in
lieu of batch testing of the finished tobacco product.
K. Distributional Effects
1. Specific Populations
The quantified benefits and costs of the proposed product standard across the U.S.
population and industry are discussed in Section II.G and II.H. FDA expects that the public
health benefits of this rule would be particularly pronounced for specific populations, including
children and adolescents; Black, non-Hispanic American Indian/Alaska Natives (AI/AN), and
other racial and ethnic minority populations; individuals with lower socioeconomic status (SES),
household income, and educational attainment; individuals with behavioral health disorders,
including mental illness and substance use disorders; and individuals who identify as lesbian,
gay, bisexual, transgender, queer, intersex, and other sexual and gender minority populations
(LGBTQI+). Similarly, the quantified costs of the proposed product standard, such as withdrawal
costs and search costs, may also be disproportionately incurred by specific populations.
Withdrawal costs, relating to degree of addiction and intensity of use, may follow the distribution
of health benefits and be particularly pronounced for those specific populations whose patterns
of tobacco product use differ from the general population. Additionally, individuals in specific
populations with less access to information may incur higher hourly search costs as they may
expend additional time seeking information on substitute products.
a. Children and Adolescents
Data indicate that nicotine has stronger rewarding effects in adolescents than in adults,
and that the adolescent brain is more vulnerable to developing nicotine dependence (20).
Additionally, the earlier individuals begin smoking, the less likely they are to quit successfully
(176). Evidence suggests that adolescents who use tobacco and initiate tobacco use at earlier
ages are more likely to report symptoms of dependence than those who initiate at older ages
(129). Further, the 2010 SGR notes that adolescents report symptoms of dependence even at low
levels of cigarette smoking and may be particularly vulnerable to addiction (24). FDA expects
that this proposed product standard, if finalized, would have significant benefits for youth and
young adults by reducing the risk that those who experiment with cigarettes and certain other
combusted tobacco products would progress to regular use as a result of nicotine dependence.
See Section II.G.1.c for an analysis of benefits from avoided smoking-related SIDS deaths and
Section II.M.7 for an extended analysis of the impacts due to this proposed product standard on
youth. We request comment on the impacts of this proposed product standard on youth.
157
b. Race and Ethnicity
Black adults, and in particular Black men, experience the highest rates of incidence and
mortality from many tobacco-related cancers, such as lung and bronchial cancer and head and
neck cancer, compared to those from other racial and ethnic groups (177; 178; 179). Deaths from
other tobacco-related conditions such as heart disease, stroke, and hypertension are higher among
Black individuals compared to other racial and ethnic groups regardless of tobacco use status
(180; 181; 182; 183; 184; 185). Compared to persons identifying as non-Hispanic White,
Hispanic and Black persons smoke fewer cigarettes and are more likely to be people who do not
smoke daily, yet have greater risk of lung cancer morbidity and mortality (186; 187; 188; 189;
190; 191; 3; 192). Additionally, AI/AN populations have the highest cigarette use prevalence
(193) and are more likely to suffer disproportionate rates of tobacco-related death (194).
The 2014 U.S. SGR reported 2,326,810 annual deaths among the U.S. population aged 35
and older, of which 437,400 deaths were attributed to cigarette smoking (3). While this provides
a population level estimate of smoking-attributable mortality, we are unable to determine a
distribution of smoking-attributable mortality across race and ethnicity from this data. Thus, to
estimate reductions in mortality risk for specific populations, we take the following approach.
First, we establish adult smoking prevalence by race and ethnicity using data from the 2021
NHIS, shown in column 1 of Table 69 (195). 75 Then, we use CDC WONDER data to determine
the percent of the adult population that each race and ethnicity group represents, shown in
column 2 of Table 69 (196). Combining smoking prevalence with the prevalence of the
associated race and ethnicity group in the overall US population, we calculate the distribution of
the smoking population across race and ethnicity. For example, total smoking prevalence in 2021
NHIS is 11.5% and smoking prevalence among the non-Hispanic White population is 12.9%
(column 1 of Table 69). The non-Hispanic White population accounts for 61.6% of the US adult
population in that year (column 2 of Table 69). Therefore, the non-Hispanic White population
represents 69.2% ([=12.9% x 61.6%] / 11.5%) of the smoking population in 2021. The share of
the cigarette smoking population by race and ethnicity is shown below in Table 69.
Table 69: Cigarette Smoking among Adults in the US by Race and Ethnicity, 2021
(1)
Cigarette
(2)
(3)
Smoking
Percent of Adult
Percent of Smoking
Race, Ethnicity
Prevalence
Population
Population
We use the Sample Adult dataset of the 2021 NHIS. Current cigarette smoking was defined as smoking 100 or
more cigarettes during a person’s lifetime and now smoking cigarettes “every day” or “some days” and adjusted for
nonresponse by removing respondents with indeterminate smoking status (i.e., “unknown if ever smoked” and
“smoker current status unknown”). Race and ethnicity were defined using the variable “HISPALLP_A.” We
calculate the cigarette smoking prevalence by race and ethnicity in column 1 of Table 69 by applying the Final
Annual Weight, WTFA_A, to general national estimates.
75
158
White (non-Hispanic)
Black/African American
(non-Hispanic)
Asian (non-Hispanic)
AIAN (non-Hispanic)
Hispanic or Latino
Other
Total
12.9%
61.6%
69.2%
11.7%
5.4%
19.0%
7.7%
14.9%
11.5%
12.3%
6.0%
0.7%
17.3%
2.0%
100.0%
12.6%
2.8%
1.2%
11.6%
2.6%
100.0%
To account for differences in mortality by race and ethnicity, we leverage the age-adjusted
all-cause death rates from CDC WONDER, shown in column 1 of Table 71 (196). 76 Ageadjusted all-cause mortality for adults in the United States in 2021 was 1,106 deaths per 100,000
people. The age-adjusted all-cause death rate among the non-Hispanic White population was
1,126, which relative to the US population is a ratio of 1.02 (1,126 / 1,106). For each race and
ethnicity group, we multiply the ratio of age-adjusted all-cause deaths among that race and
ethnicity group relative to the total population (column 2 of Table 71) by their share of the
smoking population (column 3 of Table 71) and normalize the values to compute an age-adjusted
distribution of deaths weighted by smoking prevalence across race and ethnicity (column 4 of
Table 71). We multiply this distribution by the cumulative avoided tobacco-attributable mortality
estimated by the PHM over the period from 2025 to 2064 to estimate an approximate distribution
of tobacco-attributable avoided deaths by specific population (column 5 of Table 71). We
assume these weights computed in 2021 remain representative over the 40-year time horizon of
our analysis. For example, the PHM model estimates there to be 1,786,164 avoided premature
deaths from 2025 to 2064 (Median estimate—50th Percentile). Thus, we estimate there to be
approximately 282,968 (1,786,164 x 15.8%) cumulative avoided smoking-attributable deaths for
the non-Hispanic Black population resulting from the policy over this time frame. A similar
approach yields 26,858 cumulative avoided smoking-attributable deaths for the non-Hispanic
AI/AN population and 170,095 cumulative avoided smoking-attributable deaths for the
Hispanic/Latino population by 2064. We present a summary of these estimates by race and
ethnicity in Table 71. While we adopt these assumptions, we note that rates of smokingThe rates of almost all causes of disease, injury, and death vary by age. Age adjustment is a technique for
"removing" the effects of age from crude rates so as to allow meaningful comparisons across populations with
different underlying age structures. Age-adjusted rates are calculated by applying the age-specific rates of various
populations to a single standard population. Standard age-adjusted rates (calculated with standard populations) are
only available for Ten-Year Age Groups and the lowest age band that captures adults 18+ ranges from 15-24 years.
Thus, to be inclusive in our analysis of all adults in the US population, the data used from CDC WONDER ranges
from 15 to 85+ years of age. However, we note that the PHM estimates tobacco-attributable avoided deaths for
adults aged 35+. For a more detailed explanation of how age-adjusted death rates are computed in CDC WONDER,
please refer to https://wonder.cdc.gov/wonder/help/ucd-expanded.html#.
76
159
attributable mortality may differ from smoking prevalence across race and ethnicity and may
vary over time. Thus, estimates presented in Table 71 represent an approximation of tobaccoattributable mortality avoided by specific populations under this proposed rule. We request
comment on these assumptions and additional data on the distribution of tobacco-attributable
deaths across race and ethnicity.
Table 70. Cumulative Tobacco Attributable Avoided Premature Deaths Under the Product
Standard for Specific Adult Populations from 2025 to 2064
Race, Ethnicity
White (nonHispanic) 1
Black/African
American
(non-Hispanic)
(5)
Distribution
of Tobacco
Attributable
Avoided
Deaths by
Specific
Population4
(1)
Age-Adjusted
Death Rates
per 100,000
(2)
Ratio of AgeAdjusted Death
Rate to Total
Population
(3)
Share of
Smoking
Population
(4)
Smoking
Prevalence
Weighted
Distribution
of Deaths3
1,126
1.02
69.2%
70.3%
1,256,331
1,395
1.26
12.6%
15.8%
282,968
580
0.52
2.8%
1.5%
26,563
1,392
1.26
1.2%
1.5%
26,858
911
0.82
11.6%
9.5%
170,095
567
0.51
2.6%
1.3%
23,348
1,106
1.00
100.0%
100.0%
1,786,164
1
Asian (nonHispanic) 1
AIAN (nonHispanic) 1
Hispanic or
Latino1
Other (nonHispanic) 2
Total
1 These categories exclude deaths for individuals recorded as having “More than one race.”
2 This category includes remaining non-Hispanic populations, including those listed as more than one race and populations where Hispanic origin was “Not Stated.”
3 We note the distribution of deaths is computed using smoking prevalence across race and ethnicity and may not represent smoking-attributable mortality by race and ethnicity.
The distribution was also normalized to ensure estimates presented in column 4 total to 100 percent.
4 Tobacco attributable avoided deaths in column 5 are calculated by multiplying the smoking attributable death weights in column 4 by the 1,786,164 cumulative avoided
premature deaths due to the product standard by 2064 (Median – 50th Percentile estimate from a PHM modeling scenario that incorporates the impacts of a menthol product
standard in the baseline).
Using data from the 2008-2019 Medical Expenditure Panel Survey linked to the National
Health Interview Survey, Valdez and Encinosa (73) estimate that Hispanic, Black, Asian, and
other non-Whites and multi-race people who have ever smoked spent an excess of $1,697 per
adult smoker on annual medical care when compared to adult never smokers, while non-Hispanic
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White ever smokers spent less than half the amount or an excess of $985 per adult smoker. The
share of total healthcare spending attributable to smoking was estimated to be 6.2 percent among
non-Hispanic White adults and 10.2 percent among Hispanic, Black, Asian, and other non-White
and multi-race adults (65% larger than the non-Hispanic White population’s estimated spending).
Based on their inflation-adjusted estimates, the authors also suggest that if a tobacco regulation
averted 100,000 individuals from initiation into smoking, cost savings would be $151 million per
year for 100,000 Hispanic, Black, Asian, and other non-White and multi-race adults averted from
smoking, $87 million or 135 percent more per year than the $64 million saved per year for
100,000 non-Hispanic White adults averted from smoking.
Disparities in secondhand smoke exposure exist across various environmental settings,
and inequities in places where members from underserved communities are likely to reside,
spend time, and work may influence secondhand smoke exposure (197). Findings from 20112018 NHANES data indicate that non-smoking, non-Hispanic Black respondents had higher
overall levels of secondhand smoke exposure. Evidence from 2013-2016 NHANES data indicate
that non-Hispanic Black respondents are more likely to be exposed to secondhand smoke in
homes other than their own compared to non-Hispanic White respondents (198). Data from the
2010 and 2015 NHIS show that workplace secondhand smoke exposure is disproportionately
high among non-Hispanic Black respondents and Hispanic respondents.
Research has found that retail advertising for tobacco products, including cigarettes and
other combusted tobacco products, is more common in neighborhoods with greater proportions
of Black residents and households with lower income (199; 200; 201). Additionally, storefront
and outdoor tobacco marketing, as well as point-of-sale marketing, are disproportionately present
in Black, Hispanic/Latino, AI/AN, and low-income communities (202; 199; 203; 201; 204; 205;
206; 207). Tobacco industry marketing tactics include culture-specific imagery, traditional
practices, and cultural events targeting specific racial and ethnic groups. For instance, tobacco
industry documents revealed the use of American Indian imagery such as traditional headdresses
and other cultural symbols in cigarette branding and the portrayal of harmful stereotypes of
Native people in cigarette advertising (208). The historical and cultural significance of traditional
tobacco was used to validate the authenticity of commercially available cigarettes, thus
exploiting the traditions of Native people to encourage cigarette use (208). Moreover, tobacco
companies market cigarettes to specific racial and ethnic populations by sponsoring cultural
events (e.g., Cinco de Mayo, Chinese New Year, Black History Month) (209).
FDA expects that the proposed product standard, if finalized, would have significant
benefits for the aforementioned populations. Because these populations experience higher
incidence rates of tobacco-related disease, higher rates of secondhand smoke exposure, and are
disproportionately targeted by marketing by tobacco companies, we expect that the proposed will
have increased benefits for these groups. We request comment on the benefits to these specific
populations. We also request comment on the effects experienced by any other specific
populations not mentioned here.
161
c. Socioeconomic Status, Household Income, and Educational
Attainment
Disparities in tobacco-related morbidity and mortality have also been observed for
population groups with lower SES, household income, and educational attainment. Studies have
consistently shown a strong relationship between lower SES and prevalence of cigarette and
other combusted tobacco product smoking, such that higher educational attainment and total
family income are inversely associated with smoking prevalence (210; 211; 212). Individuals
with lower levels of household income and educational attainment bear a disproportionate
burden of heart disease, stroke incidence, and mortality (213; 214). Cigar smoking also occurs
disproportionately among individuals of lower educational attainment and lower annual
household income (215; 216). People who exclusively use RYO tobacco tend to be of lower
socioeconomic status, older, and male; however, young adults who smoke cigarettes also use
RYO for financial reasons (35).
Findings from 2011-2018 NHANES data indicate that non-smoking respondents living
below the poverty level had the highest levels of secondhand smoke exposure (27). Data from
the 2010 and 2015 NHIS show that secondhand smoke exposure in the workplace also varies
across population groups and is disproportionately high among lower education, lower income
workers 77 (217).
FDA expects that the proposed product standard, if finalized, would have significant
benefits for individuals with lower socioeconomic status, household income, and educational
attainment who disproportionally bear the burden of smoking-related disease, are more likely to
be exposed to secondhand smoke, and are disproportionately targeted by tobacco companies’
marketing. We request comment on the effects and additional data associated with
socioeconomic status, household income, and educational attainment.
d. Mental Illness and Substance Use
Research has shown that individuals with behavioral health conditions and other medical
comorbidities have higher prevalence of combusted tobacco use compared to those without these
conditions and have increased risk of tobacco-related morbidity and mortality (218; 219; 220; 3;
221). The prevalence of cigarette smoking is higher among adults with mental health symptoms
or substance use (222; 223; 224; 225), resulting in increased risk for tobacco-related morbidity
and mortality (226). Data from the 2014 NSDUH show cigarette smoking prevalence is higher
among persons with mental health and/or substance use problems than among persons who do
not report these conditions (38.5 and 15.4 percent, respectively) (225). Similarly, 26.9 percent of
adults who report depression currently smoke cigarettes, compared to 11.8 percent among those
Prevalence of exposure to secondhand smoke decreases across the observed education categories (less than high
school; GED or high school; some college; college or higher) and observed income categories (0-$34,999; $35,000$74,999; $75,000-$99,000; $100,000 and above) (216).
77
162
who do not report depression (222). Additionally, findings from the 2021 NHIS show that 28.1
percent of individuals reporting serious psychological distress also reported smoking cigarettes,
compared to 10.9 percent of individuals not reporting serious psychological distress (227).
Analyses of data from the 2015 and 2016 NSDUH also show that cigarette smoking is
significantly more prevalent among persons who use cannabis and alcohol as compared to those
who do not report using these products (223; 224). Tobacco industry documents show that the
tobacco companies have strategically marketed their products to people experiencing
homelessness and people with mental illness (228; 229).
FDA expects that the proposed product standard, if finalized, would have significant
benefits for specific populations that disproportionately use affected tobacco products and
experience the highest incidence rates of tobacco-related disease, including mental health
disorders and substance use disorders. We request comment on the effects and additional data
associated with mental illness and substance use.
e. LGBTQI+ Individuals
Industry documents showed that tobacco companies were aware of the higher prevalence
of tobacco use among LGBTQI+ groups compared to the general population (230; 231). The
LGBTQI+ community is targeted by cigarette marketing through direct and indirect advertising,
community outreach and promotions, and event sponsorships (230). Study findings indicate that
individuals who identify as lesbian, gay, or bisexual are more likely to report smoking cigarettes
as compared to those who identify as heterosexual (232; 210; 233; 234). Among adults in the
2021 NHIS, cigarette smoking was more prevalent among persons identifying as lesbian, gay,
and bisexual versus those identifying as heterosexual (15.3 and 11.4 percent). Further, among
adults in the 2022 wave 4 PATH Study data, individuals who identify as transgender or gender
diverse have current cigarette/e-cigarette/cigar use rates ranging from 32.6 percent to 39.7
percent (235). FDA expects that the proposed product standard, if finalized, would have
significant benefits for specific populations that disproportionately use affected tobacco
products, including LGBTQI+ individuals. We request comment on the effects and additional
data associated with LGBTQI+ individuals.
2. Impact on Tribal Governments
The proposed product standard, if finalized, would apply to all manufacturers of
combusted cigarettes, cigarette tobacco, RYO tobacco, cigars (including little cigars, cigarillos,
and large cigars, but excluding premium cigars), and pipe tobacco (other than waterpipe
tobacco), including those manufacturers that are tribally-affiliated or operating on tribal land.
Under Section 905 of the FD&C Act, owners and operators of domestic establishments engaged
in the manufacture, preparation, compounding, or processing of a tobacco product or tobacco
163
products are required to register with FDA and to list their products. However, FDA does not
require information on tribal affiliation or tribal ownership as part of our TRLM NG data. Under
Section 704 of the FD&C Act, FDA inspects such establishments registered under Section 905 of
the FD&C Act, to evaluate whether the establishments, including those that are tribally-affiliated
and/or operating on tribal land are in compliance with the FD&C Act and FDA’s implementing
regulations. Therefore, because persons submitting registration and listing data to FDA under
Section 905 of the FD&C Act do not designate whether they are tribally-affiliated and/or
operating on tribal land, FDA’s estimate is based on the addresses of registered establishments
engaged in the manufacture, preparation, compounding, or processing of tobacco products; its
determination of whether the address is on tribal land; and inspection history. 78
Of domestic manufacturers potentially affected by the product standard, FDA estimates
that there are 12 manufacturers that are tribally-affiliated and/or operate on tribal land, all of
which manufacture products affected by this product standard. The majority of these
establishments are believed to be individually, rather than tribally, owned, though it is not clear
what, if any, revenue from such individually-owned establishments on tribal lands may go to
tribal governments.
We do not have information about the manufacturing volume of these establishments.
However, the 12 establishments referenced above as tribally affiliated and/or operating on tribal
land are small entities, based on data from Dun & Bradstreet, the number of employees included
in establishment inspection reports, or FDA’s determination based on receipt of submission
information under timelines for small-scale tobacco product manufacturers. We request comment
on our estimates of the potential impacts of the proposed product standard on manufacturers,
including those that are tribally-affiliated or operating on tribal land.
3. Regional Effects
If finalized, the proposed product standard would affect the demand for covered tobacco
products. We expect that this would disproportionally affect the regions of the United States that
have a disproportionately high rate of combusted tobacco product use, as well as have a
disproportionate impact on the regions where tobacco is grown and produced to supply the
combusted tobacco market.
Table 71 shows tobacco leaf production in the U.S. over time by state. U.S. bright and
burley type tobacco leaf growers are primarily located in seven states, most of which are in the
FDA’s Registration and Product Listing database may provide an over- or underestimate of the number of
domestic establishments engaged in the manufacture, preparation, compounding, or processing of tobacco products
operating on tribal land. Information in the database is confirmed upon inspection, at which time FDA may request
that the person who registers under Section 905 of the FD&C Act update registration and/or product listing
information. As an example of how the registration information may provide an overestimate, some firms may have
erroneously registered establishments not engaged in the manufacture, preparation, compounding, or processing of
tobacco products, such as certain warehouses, due to confusion.
78
164
South (Georgia, Kentucky, North Carolina, Pennsylvania, South Carolina, Tennessee, and
Virginia) (See Table 72). The largest share of tobacco leaf production in a single state is that of
North Carolina; based on USDA Annual Crop Production Summary reports, North Carolina
accounts for approximately 56 percent of domestic tobacco leaf production by weight. We
therefore expect these regions and states to be disproportionately affected by decreased demand
for tobacco products as a result of the proposed product standard.
Table 71. U.S. Tobacco Leaf Production, 2017-2022, (1,000 lbs.)
State
2017
2018
2019
2020
Georgia
26,250
23,750
18,900
19,355
Kentucky
183,300
134,370
123,390
102,395
North Carolina
360,040
251,925
234,700
178,727
Pennsylvania
18,990
17,400
14,300
13,440
South Carolina
25,200
22,140
15,770
6,600
Tennessee
43,000
39,610
30,490
27,940
Virginia
53,381
44,046
30,406
24,420
United States
710,161
533,241
467,956
372,877
2021
13,090
110,515
244,270
14,020
12,045
30,225
33,961
458,126
2022
12,600
96,640
249,672
13,020
11,600
33,965
29,870
447,367
Source: FDA analysis of USDA Annual Crop Production Summary reports (162)
Table 72. Bright and Burley Tobacco Production by State, 2017-2022 (1,000 lbs.)
2017
2018
2019
2020
2021
2022
Class 1, Flue-cured (Bright)
Georgia
26,250 23,750 18,900 19,355 13,090 12,600
North Carolina
358,600 250,800 234,000 178,200 243,950 249,400
South Carolina
25,200 22,140 15,770
6,600 12,045 11,600
Virginia
50,600 42,000 28,500 23,400 32,890 29,040
United States
460,650 338,690 297,170 227,555 301,975 302,640
Class 3A, Light air-cured, Types 31 and 32 (Burley)
Kentucky
129,150 80,000 77,900 68,250 66,000 50,400
North Carolina
1,440
1,125
700
527
320
272
Pennsylvania
10,350
8,800
6,500
7,000
7,000
3,250
Tennessee
18,000
9,010
6,400
3,875
3,750
4,185
Virginia
2,200
1,500
1,330
680
756
500
United States
161,140 100,435 92,830 80,332 77,826 58,607
Source: FDA analysis of USDA Annual Crop Production Summary reports (162).
Note: USDA Annual Crop Production Summary reports list two types of light air-cured tobacco; both Type 31 and
Type 32 are types of burley tobacco. We present production by State in this table, aggregating both types of burley
tobacco.
165
We expect this proposed standard to increase demand for noncombusted tobacco
products. Smokeless tobacco products use fire-cured tobacco leaf. So, raw leaf tobacco growers
in Tennessee and parts of Kentucky and Virginia, where fired-cured tobacco leaf type is grown
may experience increased demand for their tobacco crop. In 2019, 6,500 acres of fire-cured
tobacco were harvested in Tennessee, almost 64% of total tobacco acreage harvested in the State.
In Kentucky, 8,000 acres of fire-cured tobacco were harvested in 2019, or 15% of total tobacco
acreage harvested in the State. Parts of Virginia also are dedicated to the fire-cured tobacco
cultivation. We request comment, including additional data or studies, regarding geographic
impacts of this proposed rule on raw leaf tobacco growers in the United States.
The prevalence of cigarette smoking varies by State. Based on data from the Behavior
Risk Factor Surveillance System in 2019, the lowest prevalence of cigarette use among adults is
in Utah at 7.9 percent, and highest in West Virginia at 23.8 percent. 79 The number of people who
smoke cigarettes does not vary exactly with prevalence because of differences in population size
by state. However, in general, we expect that there may be disproportionate impacts on certain
states, based on level of baseline cigarette prevalence. We request comment on the differential
impacts this product standard might have on different regions of the United States.
L. International Effects
We expect that the proposed rule, if finalized, would have the same impact on foreign
firms that sell products in the U.S as domestic firms. While foreign firms do not bear the burden
of user fees, we expect affected importers will pass on user fee costs to foreign firms so they will
face similar impacts overall as domestic firms. We use the Tobacco Import data from 2021 80 to
evaluate the distribution of dollar sales of imports across countries and product categories. See
Table 73. On its own, the highest value tobacco import category is premium and non-premium
cigars. The sum of cigarette tobacco, cigarettes, smokeless tobacco, RYO tobacco, and
components is approximately $881 million, which is less than the value of premium and nonpremium cigar imports, at $1,327 million. The sum of the value of ENDS products and ENDS
components is approximately $1,188 million, still less than the value of cigar imports but greater
than the value of cigarette and cigarette-related imports.
We also present the major countries of origin, by percent of the value of imports in Table
73. Brazil, Turkey, and the Dominican Republic are responsible for the largest value of cigarette
and cigarette-related imports. The Dominican Republic is a major source of premium and nonpremium cigar imports. China is the major source of ENDS and ENDS components imports.
See https://www.cdc.gov/statesystem/cigaretteuseadult.html
Prepared by U.S. Food and Drug Administration, June 9, 2023. Data is supplied by the import filer and is not
verified by FDA.
79
80
166
We lack the data to predict how international markets would respond to the rule, but in
general we expect the Dominican Republic to experience larger than average negative effects of
the rule, based on our data on tobacco imports. However, given that we cannot break cigar
imports down by premium and non-premium, the extent to which cigar imports from the
Dominican Republic may be disrupted is unclear. On the other hand, China may experience
larger than average positive effects under the proposed standard, if finalized, as we expect the
prevalence of ENDS product usage to increase over the time horizon. Similarly, demand for
smokeless products may increase imports of these products under the proposed product standard,
if finalized, potentially increasing imports of smokeless tobacco products, primarily from
Sweden and India. Attributing the effects of the rule to specific countries is uncertain. We
request comment on anticipated international effects of the rule.
Table 73. Value of Tobacco Imports in 2021 (2022 USD, millions) and Major Trading Partners
Value (Millions USD)
Major Trading
Partners (Percent of
total imports by
declared value)
Cigarette Tobacco
$339.00
Brazil (29%); Turkey
(22%)
Cigarettes
$143.72
Canada (56%); Turkey
(21%)
Smokeless Tobacco
$63.36
Sweden (37%); India
(37%)
RYO Tobacco
$40.92
The Dominican
Republic (61%)
Cigarette Component, Part, or Accessory
$157.54
France (23%); The
Dominican Republic
(14%)
RYO Tobacco Component, Part, or Accessory
$216.49
Spain (31%);
Indonesia (31%)
$1,326.88
The Dominican
Republic (57%);
Nicaragua (26%)
Cigar Component or Part
$32.90
The Dominican
Republic (36%);
Indonesia (29%)
Pipe Tobacco
$18.02
Denmark (49%)
Cigar
167
Waterpipe Tobacco
$41.75
United Arab Emirates
(87%)
Waterpipe Tobacco Component or Part
$9.48
China (61%)
Electronic Nicotine Delivery System
$366.53
China (97%)
Electronic Nicotine Delivery System
Component/Part
$821.07
China (95%)
Nicotine Delivery Product
$54.98
India (40%);
Switzerland (28%);
Sweden (24%)
Pipe, Pipe Component or Part
$9.90
China (47%); Italy
(17%)
Grand Total
$3,642.52
M. Uncertainty, Sensitivity, and Extended Analyses
1. Estimates of this Proposed Standard without Adjusted Baseline
The PHM was initially developed to model the impact of the nicotine product standard
prior to the development of the Menthol and Cigar Flavors Product standards. Therefore, we
present an additional analysis of the nicotine product standard in the absence of the Menthol and
Cigar Flavors Product Standards. We use the same methods described in the main analysis
above, but using baseline PHM output that is not adjusted for the Cigar Flavors or Menthol
Rules. In Table 74 we present the total annualized and present value for the costs, benefits, and
transfers under this alternative baseline assumption and the difference between these estimates
and the estimates in the main analysis. The present and annualized values are higher here than in
the main analysis because under this alternative baseline, the people who are expected to quit as
a result of the Menthol or Cigar Flavors Product Standard would still be smoking. We request
comment on these estimates.
168
Table 74. Summary of Benefits, Costs, and Transfers at a 2% Discount Rate Without Adjusting for Menthol and Cigar Flavors
Proposed Rules ($2023 Millions)
Unadjusted “No Menthol, No Cigar Flavors”
Baseline
Primary
Low
High
Present Discounted Value
Annualized Value
Present Discounted Value
Annualized Value
Present Discounted Value
Annualized Value
Present Discounted Value
Annualized Value
Present Discounted Value
Annualized Value
Present Discounted Value
Annualized Value
Difference between Proposed Rule and Unadjusted
Baseline
Primary
Low
High
Benefits
$37,070,042
$9,875,979
$40,500,827
-$6,459,426
-$2,244,034
$1,328,552
$353,945
$1,451,508
-$231,499
-$80,424
Costs
$83,962
$24,322
$106,977
-$25,998
-$5,064
$3,009
$872
$3,834
-$932
-$181
Transfers: Federal Governments to Consumers
$114,954
$39,813
$123,498
-$784
-$1,147
$4,120
$1,427
$4,426
-$28
-$41
Transfers: State Governments to Consumers
$235,471
$81,463
$253,284
-$703
-$1,999
$8,439
$2,920
$9,077
-$25
-$72
Transfers: From Firms to Consumers
$806,539
$288,785
$739,586
-$249,485
-$114,811
$28,906
$10,350
$26,506
-$8,941
-$4,115
Transfers: From User Fees owed by Combusted Tobacco to Noncombusted Tobacco
$8,483
$633
$12,735
$798
$101
$304
$23
$456
$29
$4
169
-$7,280,493
-$260,925
-$30,828
-$1,105
-$3,152
-$113
-$5,582
-$200
-$248,425
-$8,903
$131
$5
2. Sensitivity Analysis of PHM Modeling Assumptions
The PHM output included several sensitivity analyses considering baseline conditions
without adjusting for the menthol and cigar flavors proposed rules. These analyses accounted for
the following: an increase in noncombusted product initiation; different assumptions of people
who smoke cigarettes switching to noncombusted products per year; decrease in cigarette
smoking initiation; lower and higher noncombusted product mortality risk compared to baseline;
different assumptions for dual product use mortality risk; and changes in baseline mortality rate
projections. In general, these various assumptions in the PHM are discussed in detail in Section
VIII.D.1 and Table 6 of the Preamble of the Proposed Rule. We have re-produced Table 6 from
the Preamble below as Table 75.
Table 75. Impact of Varying Unadjusted Baseline Assumptions on Projected Smoking
Prevalence and Avoided Mortality and Morbidity by 2100. Median (5th, 95th Percentiles)
Estimates
Projections Through Year 2100
Cigarette
Cumulative
Cumulative
Scenario
Smoking
Tobacco-Attributable
Life Years
Prevalence
Mortality Avoided
Gained (Millions)
(Millions)
(%)
0.2
4.3
76.4
Main scenario
(0.1, 1.9)
(1.6, 4.6)
(26.5, 82.5)
Baseline noncombusted tobacco product trajectory
Increased
0.2
4.3
76.5
noncombusted
(0.1, 1.9)
(1.6, 4.6)
(26.7 82.5)
initiation
50% increased
0.13
4.2
74.9
complete switching
(0.06, 1.7)
(1.7, 4.5)
(28.6, 80.7)
100% increased
0.12
4.2
73.6
complete switching
(0.06, 1.5)
(1.8, 4.4)
(30.3, 79.0)
Baseline smoking initiation trajectory
25% decrease in
smoking initiation
0.13
4.1
72.9
during the period 2021(0.1, 1.6)
(1.5, 4.4)
(24.3, 79.0)
2030
Baseline smoking cessation
10% increase in
0.15
4.0
70.9
smoking cessation
(0.1, 1.8)
(1.5, 4.3)
(24.9, 76.4)
Baseline noncombusted mortality relative risk (RR)
Higher RR than main
0.2
4.3
75.0
scenario (RR=1.3)
(0.1, 1.9)
(1.6, 4.6)
(26.0, 81.4)
Lower RR than main
0.2
4.4
77.2
scenario (RR=1.1)
(0.1, 1.9)
(1.6, 4.7)
(26.9, 83.2)
Baseline dual use RR
170
Cumulative
QALYs Gained from
Reduced Smoking
Morbidity (Millions)
53.1
(27.5, 54.4)
53.1
(27.5, 54.4)
51.9
(29.0, 52.9)
50.8
(30.2, 51.6)
45.2
(22.9, 46.4)
50.1
(26.3, 51.2)
53.1
(27.5, 54.4)
53.1
(27.5, 54.4)
Dual use RR is 18%
0.2
greater than for
(0.1, 1.9)
cigarette smoking
Dual use RR is the
average of cigarette
0.2
and noncombusted use
(0.1, 1.9)
RR
Dual use RR is equal to
0.2
the noncombusted use
(0.1, 1.9)
RR
Baseline mortality rate projections
Keep mortality rates
0.2
constant starting at
(0.1, 2.0)
2060
4.3
(1.6, 4.6)
75.9
(25.0, 82.4)
53.1
(27.5, 54.4)
4.3
(1.6, 4.6)
77.0
(28.6, 82.6)
53.1
(27.5, 54.4)
4.3
(1.6, 4.6)
77.6
(30.7, 82.7)
53.1
(27.5, 54.4)
4.7
(1.9, 5.1)
77.9
(28.2, 83.9)
53.0
(27.4, 54.2)
3. Illicit Trade and Adverse events
In Section II, we use the PHM primary illicit trade scenario that assumes 5.9 percent of
people who are predicted to quit smoking in the PHM output would instead continue smoking
NNC combusted tobacco products through an illicit market, and 2.6 percent of youth and young
adults would seek to smoke NNC cigarettes via illicit trade (2). The 5.9 percent estimate is based
on findings from the International Tobacco Control United States Survey (227), estimating that
5.9 percent of U.S. citizens who smoke cigarettes last purchased cigarettes from low-tax
locations. The PHM also presents estimates under two alternate illicit trade assumptions about
the proportion of people who smoke cigarettes who would use illicit cigarettes instead of quit
smoking. Specifically, the PHM considers a low-end estimate of 3.8 percent based on 2017
estimates of illicit trade volume in cigarettes from Euromonitor International (236). This estimate
excludes inter-state smuggling for purposes of tax avoidance. The PHM uses 21 percent as a
high-end estimate based on the difference in non-compliance rates between reduced nicotine
intervention groups (78 percent) and control groups assigned to NNC cigarettes (57 percent) in
clinical trial data from Nardone et al. (237) and Donny et al. (32). Participants had easy access to
legal NNC cigarettes when the trial was conducted. The difference in non-compliance rates
reflects the increased likelihood that participants assigned to VLNC cigarettes would seek NNC
cigarettes that are easily accessible. This estimate of 21 percent also represents the high-end of
the range of illicit cigarette sales in the U.S. estimated in the National Research Council report
(238). Finally, the PHM incorporates changes in smoking initiation assuming that youth and
young adults who would have initiated NNC cigarettes (in the absence of a rule) would seek to
smoke NNC cigarettes via illicit trade. We request comment on these estimates and assumptions.
The model also uses findings from an expert elicitation developed to gauge the impact of
Menthol Cigarette Product Standard in the United States (37), which indicate that among people
ages 12-24 who would have otherwise initiated menthol cigarette use, 2.6 percent (primary
171
estimate) would initiate illicit menthol cigarette use (experts’ estimates ranged from 0 percent
(low estimate) to 10 percent (high estimate)).
The PHM estimates of illicit trade do not include any countervailing health impacts,
beyond the change in prevalence. That is, the PHM assumes that the health risks of illicit NNC
combusted tobacco products is the same as the risks of NNC combusted products legally
marketed without the proposed standard. We request comment and data on any health impacts
associated with illicitly traded combusted tobacco products or the availability of products and
components that individuals could use to boost nicotine in a combusted product for their personal
consumption.
In our main analysis, which uses the primary level (5.9 percent of smokers may divert to
use of NNC cigarettes, and 2.6 percent of youth and young adults would seek to smoke NNC
cigarettes) of illicit trade for benefits estimates, we estimate the total present value of benefits of
the rule to be approximately $30.6 trillion discounted at 2 percent. Assuming a low level of illicit
trade (3.8 percent of smokers may divert to use of NNC cigarettes, and 10 percent of youth and
young adults would seek to smoke NNC cigarettes), that same measure is approximately $30.7
trillion, which is an increase of approximately 0.3 percent. Assuming a high level of illicit trade
(21 percent), total benefits are estimated to be $29.7 trillion (discounted at 2 percent), which is a
decrease of approximately 3 percent.
The level of illicit trade also affects our low and high estimates of benefits. In general,
assuming a low level of illicit trade would increase our low estimates by 6.4 percent, and
increase the high estimates by 0.1 percent, compared to the primary level of illicit trade.
Conversely, assuming a high level of illicit trade would decrease our low estimates by 47
percent, and decrease the high estimates by 1 percent, compared to the primary level of illicit
trade.
Our estimates of the benefits of the rule are not generally sensitive to the level of illicit
trade assumed in the PHM. A notable exception is in the case of a high level of illicit trade, the
lower bound estimates are 47 percent lower than the estimates we use in our main results.
Nonetheless, the primary estimates of benefits are roughly similar across all illicit trade
scenarios.
Table 76. Total Benefits (All Mortality + Morbidity, 2023 USD Billions) Comparing Illicit Trade
Scenarios Under the Low, Primary, and High Impact Policy Scenarios
Total Benefits (All Mortality + Morbidity) (2023 USD Billions)
Primary Illicit Trade Scenario1
Present Value 2%
Primary
Low
High
$30,611
$7,632
$33,220
172
Annualized Value 2%
$1,097
$274
$1,191
Present Value 2%
$30,720
$8,121
$33,256
Annualized Value 2%
$1,101
$291
$1,192
Present Value 2%
$29,685
$4,055
$32,901
Annualized Value 2%
$1,064
$145
$1,179
Low Illicit Trade Scenario2
High Illicit Trade Scenario3
5.9 percent of smokers may divert to use of NNC cigarettes, and 2.6 percent of youth and young adults would seek
to smoke NNC cigarettes.
2
3.8 percent of smokers may divert to use of NNC cigarettes, and 0 percent of youth and young adults would seek to
smoke NNC cigarettes.
3
21 percent of smokers may divert to use of NNC cigarettes, and 10 percent of youth and young adults would seek
to smoke NNC cigarettes.
1
We note that we estimate costs in the main analysis using the zero illicit trade PHM
output to ensure that we do not attribute any illicit market sales to the participants in the legal
marketplace. We do, however, note that there could be varying levels of enforcement costs
across the illicit trade scenarios. Enforcement costs are a small fraction of total costs and
subsequently would not change the overall impact of this product standard. We request comment
on enforcement costs under different levels of illicit trade.
4. Effect of the Policy with Other Tobacco Control Policies
In recent years, state and local tobacco control policies have proliferated. In this section,
we summarize policies in two areas: increasing the minimum age for sale of tobacco products
and implementing excise taxes on ENDS products. In addition to the policies discussed here, we
note that there have been state and local policies banning characterizing flavors in tobacco
products; however, some of these policies may be superseded by the Menthol and Cigar Flavors
Product Standards, if finalized. The Menthol and Cigar Flavors Product Standards are already
built into the baseline of our analysis.
The first policy trend noted above is increasing the minimum age for sale of tobacco
products. By July 2019, seventeen states and over 475 localities had increased the minimum age
of sale to 21 (239). Then, in December 2019, the President signed the Further Consolidated
Appropriations Act, 2020 (Pub. L. 116-94, div. N, tit. I, subt. F, sec. 603, 133 Stat. 2534, 312324), making 21 the minimum age of sale at a national level. The PHM includes tobacco use
173
inputs from 2020, accounting for early impacts of the increase in the minimum age of sale. We
request comment on methods and evidence—for example, extrapolation from state-derived
empirical evidence, such as (240) —that might be relevant in accounting for increasing numbers
of cohorts being subject to the increased minimum age of sale.
The second recent policy trend has been for states to collect excise taxes on ENDS
products and other changes to the ENDS landscape. As of October 2022, 30 states, the District of
Columbia, and Puerto Rico have enacted excise tax legislation for ENDS products (241; 242).
This proposed rule, if finalized, may increase ENDS use due to those who smoke NNC cigarettes
and certain other combusted tobacco products switching to ENDS products and therefore
generate additional tax revenue in these jurisdictions. In 2021 and 2022, FDA issued negative
marketing determinations for many ENDS premarket tobacco product applications, which
required the products to be taken off or not introduced to market. 81
This complicated patchwork of rules makes it difficult to estimate the exact impact of this
proposed rule, if finalized, given that the baseline set of tobacco control policies varies across
jurisdictions and continues to evolve. Moreover, we anticipate that additional jurisdictions may
enact rules that would limit access to various tobacco products prior to a nicotine final rule. This
suggests that the proposed rule, if finalized, may have a smaller impact than we estimate if newly
enacted state or local policies deter combusted tobacco consumption. We request comment on
how state and local policies may impact our analysis.
However, while state and local policies are important, we note that they can potentially
be avoided by simply making purchases outside of the locality with the tobacco control policy. A
national rule provides a more uniform product standard, making compliance and enforcement
approaches more consistent.
5. Estimating Monetized Benefits with VSL Range
In the analysis in Sections II.G, we report a range of health benefits that result from the
primary, low, and high PHM output and use the central VSL to monetize these benefits. In Table
77, we include a sensitivity analysis of the total monetary value of health benefits using a range
of VSL and value per QALY estimates. Specifically, we simulate VSL using a triangular
distribution with minimum, maximum, and modal values specified by the low, high, and central
VSL values provided by HHS (64) and multiply the simulated VSL by the estimated averted
deaths predicted by the PHM. We use the same simulation approach to value the QALYs gained
by multiplying the estimated QALYs gained from the PHM by a simulated value per QALY.
Total benefits using a central VSL are presented again, along with the total benefits using
the full VSL range. See Table 77. The present discounted value of benefits using the central VSL
81
https://www.fda.gov/tobacco-products/market-and-distribute-tobacco-product/tobacco-products-marketing-orders
174
ranges from approximately $7.6 trillion to $33.2 trillion, with a primary estimate of $30.6 trillion
at a 2 percent discount rate. The present discounted value of benefits using the simulated VSL
ranges from approximately $7.2 trillion to $41.8 trillion, with a primary estimate of $27.7 trillion
at a 2 percent discount rate. The annualized values of the primary estimates are approximately
$1.1 trillion using a 2 percent discount and central VSL and $994 billion at a 2 percent discount
rate and simulated VSL.
Using the full range of VSL values to value premature averted mortality results in a
greater range of benefits, with a slightly smaller primary estimate due to the shape of the
distributions of averted mortality and VSL.
Table 77. Total Benefits Using Central and Simulated VSL Values (2023 USD, Billions)
Total benefits using the primary VSL
Primary
Low
High
Present Value 2%
$30,611
$7,632
$33,220
Annualized Value 2%
$1,097
$274
$1,191
Total benefits using a range of VSL
Primary
Present Value 2%
$27,722
Annualized Value 2%
$994
Low
$7,210
$258
High
$41,815
$1,499
6. Sensitivity Analysis on the Value per Statistical Life
In our main analysis, we monetize benefits of the proposed rule from tobacco-attributable
mortality avoided using a VSL approach. Our primary estimates apply HHS’s central estimate of
VSL. This central estimate reflects the mid-point of measured population willingness to pay for
mortality risk reductions reported in several revealed-preference studies, stated-preference
studies, and a meta-analysis identified in an HHS-commissioned review of the VSL literature
(243). We address uncertainty in measurements of population willingness to pay for mortality
risk reductions by applying a range of VSL estimates when reporting our range of benefits in a
previous sensitivity analysis (See Section II.M.5). For reference, the low and high estimates of
VSL are about 47% and 152% of the central estimate of VSL, respectively. 82
Several additional sources of uncertainty could result in VSL estimates that differ from
those used in the main analysis of benefits for this proposed rule. In this section, we discuss the
2021 HHS Guidance “Valuing COVID-19 Mortality and Morbidity Risk Reductions in U.S.
HHS’s estimates of VSL are based on low, central, and high estimates from the literature review of $4.2 million,
$9.0 million, and $13.7 million, reported in 2013 dollars. HHS updates these estimates for inflation and real income
growth to produce a range of year-specific VSL estimates. The magnitudes of the low, central, and high estimates of
VSL have a constant ratio. As an example calculation, $4.2 million / $9.0 million ≈ 47%.
82
175
Department of Health and Human Services Regulatory Impact Analyses” that explores a
quantitative adjustment to the VSL in the context of assessing polices that result in large risk
reductions, such as those associated with COVID-19. Several characteristics of the risks
associated with tobacco-attributable mortality may differ from the types of risks typically
considered in VSL studies, which might introduce bias into our benefit estimates. Individual
characteristics of the population experiencing the benefits of the proposed rule may also differ
from the typical population underlying studies that estimate VSL, which could also introduce
bias.
First, the mortality risks associated with long-term tobacco product use are substantial.
The PHM, adjusted to account for the potential impacts of the Menthol proposed product
standard, projects a baseline annual average of about 41.4 million U.S. adults will use cigarettes
and noncombusted tobacco products over the 40-year time horizon, with a baseline annual
average of about 272,564 tobacco-attributable deaths, excluding deaths from secondhand smoke.
As a rough comparison that ignores the timing and duration of the cumulative exposure to risk
from tobacco use, these estimates indicate an average of about 0.66% of people who use
cigarettes and noncombusted tobacco products will die of tobacco-related diseases every year. 83
This annual mortality risk, about 1 in 152, exceeds the types of risks considered in most of the
studies that underlie the HHS VSL estimates, which are generally on the order of 1 in 10,000 .
Hammitt (244) suggests that policies addressing mortality risks of this magnitude can potentially
exceed the magnitude of the risks for which monetizing benefits using the VSL approach is
appropriate, without considering adjustments to the choice of VSL (244). In the context of
recommending an approach to assessing policies that address risks associated with COVID-19,
ASPE noted that “the average rate at which an individual is willing to pay for risk reduction
(willingness to pay divided by the risk reduction) decreases as the risk reduction increases,” and
provided the following guidance for HHS analysts developing regulatory impact analyses (245):
“Under the standard theoretical model underlying VSL, the rate does not fall very sharply
until the individual’s willingness to pay rises to 10 percent or more of his or her ability to
pay… While the relationship between willingness to pay and the size of the risk reduction
depends on the assumptions used in the calculations (especially the income elasticity of
VSL), the rate is not likely to decrease substantially until the risk change exceeds about 1
in 1,000; for larger risk reductions, the ratio of willingness to pay to risk reduction will be
much smaller than VSL. Since most analyses conducted by HHS are likely to yield
mortality risk changes smaller than 1 in 1,000, no adjustment in the VSL for the size of
the risk reduction will be needed. In the rare case that a policy leads to a larger risk
change, analysts may wish to follow the approach in Hammitt (244) to adjust VSL in
sensitivity analysis.”
Therefore, we request comment on whether and how VSL estimates should be adjusted to
address large mortality risk reductions specifically for the population of those who use tobacco
products.
83
272,564 / 41,419,769 ≈ 0.66%.
176
7. Estimated Monetized Benefits from 2065 to 2100
a. Estimated Avoided Premature Mortality from 2065 to 2100
While the analysis in Section II.G.1 monetized avoided premature mortality up to year
2064, this section estimates benefits of avoided premature mortality in later years. We use the
extended output from the PHM for the years 2065- 2100 which falls directly after the 40-year
time horizon used in the main analysis. Given the structure of the PHM we are unable to
distinguish averted mortality that occurs from averted initiation rather than quitting or switching
between tobacco products. Therefore, we note that, given the extended time frame analysis only,
most of this section’s averted mortality come from averted initiation but some may come from
tobacco product cessation and switching. This section’s analysis predominantly captures
mortality benefits due to avoided youth initiation.
As noted in the Institute of Medicine report on raising the minimum legal sale age to 21,
impacts on youth related to reductions in smoking-related mortality would “not be observed for
at least 30 years after the increased MLA takes effect” (176). Therefore, the additional years
(2065 – 2100) capture the increasing impact of the rule on individuals who would be youth
during the time horizon of the analysis and would therefore avoid initiation. The PHM’s
endpoint is 2100, therefore we choose this as the endpoint of this analysis.
In the NPRM, we discuss evidence that the adolescent brain is more vulnerable to
developing nicotine dependence than the adult brain, and the earlier an individual begins
smoking the less likely they are to quit (246). The maximum nicotine content requirement
proposed in this product standard to address nicotine yield would help make cigarettes and
certain other combusted tobacco products minimally addictive or nonaddictive, limiting the
number of youth and young adults who move beyond experimentation, develop nicotine
dependence, and progress to regular use and reducing their risk for smoking-related diseases.
See Figure 29. Across the 2065-2100 time horizon, annual averted tobacco-attributable
mortality relative to baseline is estimated to decrease from approximately 55,000 in 2065 to
approximately 35,000 by 2100.
177
Figure 29. Tobacco-Attributable Averted Mortality for Years 2065 - 2100
Although we present the extended modeling output directly following the 40-year time
horizon used in the main analysis, estimates in each year depend on how the population changes
during the preceding periods; as such, the estimates over 2065-2100 are a direct consequence of
outcomes occurring over the initial 40 years and do not represent an independent set of results.
Looking across an extended time horizon, the PHM predicts a cumulative total of approximately
4.3 million tobacco-attributable deaths avoided from tobacco product cessation, avoided
initiation, and switching to noncombusted tobacco products by 2100. See Figure 30.
178
Figure 30. Cumulative Tobacco-Attributable Averted Mortality by 2100
b. Extended Analysis of Monetized Benefits
We use the same approach described in Section II.G to monetize the averted mortality
described in the previous section. Specifically, we multiply the estimated averted premature
mortality by a central value of VSL as recommended by HHS (64).
We summarize our monetized averted mortality in Table 78. The present discounted
value using a 2 percent discount rate of total avoided deaths, including those from averted youth
initiation, ranges from approximately $8.5 trillion to $19.8 trillion, with a primary estimate of
$19.1 trillion.
As discussed above, benefits from 2065 to 2100 are lifetime benefits that accrue mostly
to individuals who would be youth, and subsequently avoided initiation, during the initial 40year time horizon of the analysis. Therefore, we continue to annualize using our initial 40-year
time horizon. Using a discount rate of 2 percent, we estimate that the annualized value of
benefits, including those from reduced youth initiation, ranges from $303 billion to $707 billion,
with a primary estimate of $684 billion.
179
Table 78. Present Discounted Value and Annualized Value of Quantified Benefits from 2065 to
2100 (2023 $ Billions)
Primary
Low
High
Present Value 2%
Annualized Value 2%
$19,079
$8,463
$19,732
$684
$303
$707
8. Accounting for Effects on Capital
Regulations that displace or induce capital investments at a point in time may affect
present and future consumption differently than regulations that increase or decrease
consumption at a point in time. This arises because the return on capital need not equal the social
rate of time preference, as taxes on capital, other economic distortions, risk premia, and missing
markets can create a sustained divergence between these rates of return and among rates of
return to different capital.
The analytically preferred method of handling temporal differences between benefits and
costs is to adjust all the benefits and costs to reflect their value in equivalent units of
consumption before discounting them. This approach to discounting is sometimes called the
“shadow price” approach. Drawing from the recommended rates in OMB’s Circular A-4 (247),
for the main analysis we use a shadow price of capital of 1.0, which reflects an economy with
perfect capital mobility, and for this sensitivity analysis we consider a shadow price of 1.2 which
reflects a closed economy with no foreign capital flows.
We identify economic transition costs, producer surplus, and reformulation cost as the
impacts that are most likely displace capital investments. We do not evaluate the shadow price of
capital for VSL gained from averted mortality as we already discuss uncertainty around VSL in
Section II.M.5. We analyze the shadow price of capital by multiplying the undiscounted flow of
costs with capital implications by 1.2, then discounting all benefits and costs by our standard 2
percent discount rate. See Table 79. We note that even at the upper bound of the shadow price of
capital this policy still has benefits that far outweigh the costs.
Table 79. Shadow Price of Capital Analysis (Applied only to Costs, Millions of 2023 Dollars)
Primary
Low
High
Present Discounted Value
Annualized Value
Costs: Assuming SPC=1
$57,964
$2,077
$19,259
$690
$76,149
$2,729
Present Discounted Value
Costs: Assuming SPC=1.2
$68,900
$22,958
$88,866
180
Annualized Value
$2,469
$823
Difference between SPC of 1 and SPC of 1.2
Present Discounted Value
-$10,936
-$3,699
Annualized Value
-$392
-$133
$3,185
-$12,717
-$456
9. Declines in Baseline Cigarette Product Dollar Sales and Unit Sales
In Section II.H.0.1, we estimate changes in producer surplus under the assumption of a
constant price for all combusted and noncombusted products impacted by the rule. However,
historical Euromonitor Passport data on cigarette sales and revenue between 2010 to 2021
suggest that revenues and units change at differing rates. For example, cigarette revenue
decreased at an annual rate of about 1% between 2010 and 2021 while cigarette units sold
decreased at a rate of about 3.3% for an annual increase in the price of cigarettes of about 2.4%.
See Table 80 below.
Table 80. Historical Euromonitor Passport Cigarette Revenue and Quantity: 2010 to 2021 in
2023 Dollars
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Revenue
($ millions)
$125,440
$123,093
$121,951
$119,340
$116,701
$120,017
$119,928
$118,406
$115,683
$111,799
$114,748
$110,836
Quantity
(Millions of sticks)
309,124
300,615
292,721
279,539
270,639
269,894
262,468
252,609
240,821
225,528
225,753
213,751
Average Price
(per Pack of 20 sticks)
$8.12
$8.19
$8.33
$8.54
$8.62
$8.89
$9.14
$9.37
$9.61
$9.91
$10.17
$10.37
Mean
Slope of Best Fit Line1
Slope Relative to Mean
$118,162
-$1,119
-0.95%
261,955
-8560.5518
-3.27%
$9.11
$0.22
2.36%
Year
The slope of the best fit line is the linear regression coefficient from regressing ‘year’ on ‘revenue’, ‘quantity’, and
‘average price’, respectively using the ‘least squares’ method.
1
In this sensitivity analysis, we estimate producer surplus loss experienced by firms
producing cigarettes using a baseline where annual revenues decrease at a rate of 1% and annual
units sold decrease at a rate of 3.3%. That is, in this baseline, the average price of cigarettes is
increasing annually at a rate of about 2.4% as opposed to the constant price assumption used in
the main analysis. In Section II.H.0.1, we compute producer surplus loss for combusted tobacco
firms, producer surplus gain for noncombusted tobacco firms, and the net change in producer
181
surplus for the entire tobacco market. Based on Euromonitor data, the historical trend of
increasing pricing only applies to cigarettes and not to all other tobacco products. Consequently,
we only focus on producer surplus loss for cigarettes in this sensitivity analysis. Results are
shown in Table 81 below. Annualized producer surplus losses in the cigarette market at a 2
percent discount rate for the increasing cigarette price assumption baseline range from $255
million to $1,894 million, with a primary estimate of $1,631 million. The increasing price
assumption baseline results in an additional $196 million of annualized costs or about 14%
higher than the constant price assumption in the main analysis for the primary estimate.
Table 81. Producer Surplus Loss in the market for Cigarettes under an Increasing Price
Assumption: 2025 to 2064 in Millions of 2023 Dollars
Primary
Low
Present Discounted Value
Annualized Value
Constant Cigarette Price Baseline
$40,032
$4,437
$1,435
$159
$46,807
$1,678
Present Discounted Value
Annualized Value
Increasing Cigarette Price Baseline
$45,499
$7,110
$1,631
$255
$52,851
$1,894
Difference between Constant Price and Increasing Price Baseline
Present Discounted Value
-$5,467
-$2,672
Annualized Value
-$196
-$96
III.
High
-$6,043
-$217
Initial Small Entity Analysis
We have examined the economic implications of this proposed rule for small entities as
required by the Regulatory Flexibility Act. If a proposed rule would have a significant economic
impact on a substantial number of small entities, the Regulatory Flexibility Act requires agencies
to analyze regulatory options that would lessen the economic effect of the final rule on small
entities. FDA finds that this rule will have a significant economic impact on a substantial number
of small entities. Consequently, this analysis, together with other relevant sections of this
document and the Preamble of the Proposed Rule, serves as the Initial Regulatory Flexibility
Analysis, as required under the Regulatory Flexibility Act.
Table 82. Initial Regulatory Flexibility Analysis Elements
Element
Location
Reasons action is being considered and object of the
rule
Section II.A-II.C. of the PRIA
Legal basis for the rule
182
Section I.C. of the Preamble to the Proposed
Rule
Estimate of the small entities impacted
Section II.D. and this section of the PRIA
Compliance requirements
Section II.H. and this section of the PRIA for
small business specific estimates
Significant alternatives considered
Section II.J. and this section of the PRIA
Duplicative overlapping and conflicting rules
Section II.M.2. of the PRIA
A. Description and Number of Affected Small Entities
1. Tobacco Product Manufacturers
The data on affected entities comes from CTP’s Tobacco Registration and Listing
Module Next Generation (TRLM NG) data and Dun & Bradstreet firm data (D&B). We merge
TRLM NG data with D&B firm data to identify firm-level characteristics. According to the
Small Business Administration (SBA), a small tobacco manufacturer is any firm with under
1,500 employees (248). 84 Because the tobacco manufacturing firms do not all have tobacco
manufacturing as their primary business in the D&B data and different lines of business have
varying standards to determine small businesses, we determine the number of small businesses
by relying on the D&B created small business indicator which D&B determines using the SBA
definitions and primary business for each firm. For firms that had missing data for the small
business indicator but did have data on the number of employees at the establishment, that data
was used to make the determination. We then took the following additional steps to identify
small businesses. First, we used data from D&B Ultimate Family Trees to identify TRLM NG
registered firms that are owned by larger non-small business organizations and determined them
not to be small businesses. We also used Euromonitor Passport data on Company Share of the
market to create a list of companies that control significant shares of the market for each of the
affected tobacco products. We matched Global Brand Owner and National Brand Owner names
to the TRLM NG registered firms list to identify large business when D&B lacked data. 15 firms
from the TRLM NG data did not match to D&B data.
At baseline there are 143 registered firms that manufacture affected tobacco products, of
which 102 are small, and 41 are non-small 85. Table 83 summarizes firm size based on whether
Under section 900(16) of the FD&C Act (21 U.S.C. 387(16)), tobacco product manufacturers (and importers) are
considered small if they employ “fewer than 350 employees”. Note that, “[f]or purposes of determining the number
of employees of a manufacturer under the preceding sentence, the employees of a manufacturer are deemed to
include the employees of each entity that controls, is controlled by, or is under common control with such
manufacturer”. 21 U.S.C. 387(16). However, the Small Business Administration’s definition of small is applicable
to the small entity analysis required under the Regulatory Flexibility Act.
85
Of the 158 firms that manufacture combusted and/or SLT products in the TRLM NG data, only 143 firms were
available in the D&B data, Thus some of our analysis is limited to 143 firms.
84
183
the firm produces only combusted tobacco products, only noncombusted tobacco products, or
both. There are 125 firms that produce only combusted tobacco products, of which 92 are small
businesses. There are 10 firms that produce only noncombusted tobacco products, of which 4 are
small businesses. Finally, 8 firms produce both combusted and noncombusted tobacco products,
of which 6 are small businesses. We note that this may be a lower bound number of entities due
to limitations in the data available for this analysis. We request comment on data sources and
methods for identifying tobacco manufacturing small businesses.
Table 83. Manufacturing Firms by Tobacco Product Category
Product Category
Small
Non-Small
Combusted Only
Noncombusted Only
Dual Operation
Total
92
4
6
102
33
6
2
41
Total
125
10
8
143
The distribution of the size of small firms is presented Table 84. Most small firms (69 of
102) have fewer than 10 employees.
Table 84. Distribution of Small Tobacco Manufacturers and Revenue by Employee Size in 2023
Dollars
Average Revenue per
Number of employees
Number of Firms
Firm ($)
0 to 4
5 to 9
10 to 19
20 to 49
50 to 99
100 to 249
250 to 1500
41
28
11
14
5
1
2
$220,449
$587,290
$1,842,879
$4,577,789
$13,246,993
$31,207,414
$32,060,582
Note: Data on number of firms and revenue are from Dun & Bradstreet accessed in
October 2023.
2. Retailers and Wholesalers
To estimate the number of small wholesale and retail entities that may be affected by the
proposed product standard, if finalized, we use the estimated number of tobacco-selling
wholesale and retail firms and their associated SBA size thresholds by NAICS code from Section
184
II.E.4. Incorporating 2017 SUSB employment data for tobacco wholesalers and 2017 Economic
Census data on firm and establishment counts by size of sales, value of shipments, or revenue for
retailers, we match 2023 SBA size thresholds to Census thresholds and estimate the percentage
of firms that may be small for each wholesale or retail NAICS code (47) (163). 86 For each
wholesaler and retailer NAICS code, we note that the closest Census size threshold is below the
SBA size threshold for identifying small businesses. For this reason, our estimate of the
percentage of small firms in each category likely represents an underestimate. These calculations
can be found in Table 85.
Table 85. SBA Size Standards and Census Size Categories for Wholesale and Retail Categories,
2017
NAICS
424940
445110
Description of
NAICS
Tobacco and
Tobacco Product
Merchant
Wholesalers
Supermarkets and
Other Grocery
(except
Convenience) Stores
SBA
Standard
(employees
or $million)
Census Size
Category,
(employees
or $million)
Total
Number
of Firms
Total Number
of
Establishments
Firms
Below
Census
Standar
d
%
Small
Firms
250
200
1,285
1,513
1,240
96.5
$40.0
$25.0
40,981
65,141
28,897
70.5
445120
Convenience Stores
$36.5
$25.0
25,844
28,460
17,191
66.5
445300
Beer, Wine, and
Liquor Storesa
$10.0
$10.0
30,313
34,440
25,456
84.0
$37.5
$25.0
19,259
45,358
16,609
86.2
$36.5
$25.0
56,926
98,788
48,344
84.9
$33.5
$25.0
10,084
16,581
8,683
86.1
446110
447110
447190
Pharmacies and
Drug Stores
Gasoline Stations
with Convenience
Stores
Other gasoline
stations
452311
Warehouse Clubs
and Supercenters
$47.0
$25.0
9
8,202
0
0.0
452319
All other general
merchandise stores
$40.0
$25.0
7,857
41,241
6,284
80.0
NAICS codes changed from 2017 to 2022 for Convenience Stores (445131 in 2022), Beer, Wine, and Liquor
Stores (445320 in 2022), Pharmacies and Drug Stores (456110 in 2022), Gasoline Stations with Convenience Stores
(457110 in 2022), Other gasoline stations (457120 in 2022), Warehouse Clubs and Supercenters (455211 in 2022),
All other general merchandise stores (455219 in 2022), and Tobacco Stores (459991 in 2022).
86
185
453991
Tobacco Storesb
$11.5
$10.0
8,286
10,415
5,646
68.1
Small Business Administration size threshold available for 445310 NAICS code, which is the only detailed code
under the aggregate 445300 code.
b
We note that “Tobacco Stores” may sell a variety of tobacco products including cigarettes, cigars, tobacco, pipe,
and other smokers’ supplies. We request comment on data with additional specificity that would allow us to identify
the number of entities that only sell premium cigars.
a
In Table 86, we apply the percentage of firms that may be small from the 2017 data to
our estimates of firms that sell tobacco products in 2021 and estimate that about 113,000 small
wholesale and retail firms may be impacted by the product standard.
Table 86. Estimate of Small Wholesale and Retail Establishments with Tobacco Sales in 2020
NAICS
NAICS Description
42494
Tobacco and Tobacco Product Merchant Wholesalers
Supermarkets and Other Grocery (except
Convenience)
Convenience Stores
Beer, Wine, and Liquor Stores
Pharmacies and Drug Stores
Gasoline Stations with Convenience Stores
Other gasoline stations
Warehouse Clubs and Supercenters
All other general merchandise stores
Tobacco Stores
Total
44511
44512
44530
44611
44711
44719
452311
452319
453991
Total
Firms
with
Tobacco
Sales
1,343
Share of
Small
Firms
Small Firms
with
Tobacco
Sales
96.5
1,296
18,054
70.5
12,728
28,414
17,103
8,172
51,305
2,036
30
6,094
12,492
145,044
66.5
84
86.2
84.9
86.1
0
80
68.1
18,895
14,366
7,045
43,558
1,753
0
4,875
8,507
113,024
3. Small Governmental Jurisdictions
Small governmental jurisdictions are considered a “small entity” under the Regulatory
Flexibility Act (RFA) (see Sections 601(5-6 (5 U.S.C. 601)). Small governmental jurisdictions
are defined as “governments of cities, counties, towns, townships, villages, school districts, or
special districts, with a population of less than fifty thousand.” We do not have data to estimate
how many small governmental jurisdictions would be affected by this proposed rule.
B. Description of the Potential Impacts of the Rule on Small Entities
In this section, we separately consider impacts to small entities for the three different
types of firms as discussed above, small businesses that manufacture only combusted tobacco
186
products, small businesses that manufacture only noncombusted tobacco products, and dual
operation small businesses that manufacture both combusted and noncombusted tobacco
products. In this analysis, we project impacts to small businesses from the standpoint of how
businesses look forward to make decisions to remain in the market, assuming small businesses of
all sizes continue to operate and comply with this product standard. We note that this may differ
from assumptions and results in other parts of this regulatory impact analysis. For the purpose of
the small entity analysis, we consider all lost revenue to be a cost to the firms. We expect many
small firms selling only or primarily combusted tobacco products would decide to shut down or
shift industries rather than experience the costs of this regulation. We request comment on how
best to present the impacts to small entities.
1. Combusted Tobacco Product Manufacturers
Small businesses manufacturing only combusted products are subject to the costs to firms
as described in the cost section (see Section II.H.1). This includes the cost of reading and
understanding the rule, reformulation costs, the cost to submit pathways to market application,
testing costs as well as reductions in revenue and potentially increased user fee assessments as
discussed in the transfer section (see Section II.I).
We discuss the cost to read and understand the final rule in Section II.H.1.c. We estimate
a one-time cost of reading and understanding the rule that is incurred in year zero of between
$1,212 to $7,698 per affected entity with a primary estimate of $4,106.
To comply with the nicotine yield product standard, small entities would need to
reformulate their current products to meet the new nicotine content thresholds. Using the FDA
Food Reformulation Model, as discussed in Section II.H.1.d, we estimate the cost for a small
company to reformulate at $115,885 per product. In the upper bound (related to the high impact
policy scenario), we assume firms would reformulate 1 product. For the lower bound (related to
the low impact policy scenario), we assume firms would reformulate 4 products. We use the
midpoint of 2.5 products as the primary estimate. We multiply the cost per product reformulation
by the number of expected products to estimate the reformulation cost per small entity. We
estimate that reformulation costs for the average small entity would range between $463,542 and
$115,885, with a primary estimate of $289,714. We note that these costs may be overestimated
for some small businesses that do not engage in certain types of manufacturing activities such as
importers or re-packagers currently registered as tobacco manufactures. For example, small
business that purchase pre-blended tobacco for rolling or packaging may not incur the full cost of
a product reformulation, although they would be expected to pay a higher cost for that tobacco
due to the reformulating firms passing costs through the supply chain, which we are unable to
measure quantitatively. Reformulation costs are a one-time cost that occur in 2026 (year 1) of the
policy. See Table 87 below.
187
Table 87. Reformulation Costs per Small Entity
Primary
Number of Products
Cost per Reformulation
Total Cost
2.5
$115,885
$289,714
Low
High
4
$115,885
$463,542
1
$115,885
$115,885
Note: The low estimates relate to the low policy impact scenario (e.g., lowest estimate of averted deaths) from the
PHM, while the high estimates relate to the high policy impact scenario (e.g., highest estimate of averted deaths)
from the PHM.
Each new VLNC product would need to choose a pathway to market and submit a
premarket application to FDA. We discuss the pathways and their associated costs in Section
II.H.1.f. We assume all small entities would choose to use the SE pathway. We draw our
estimate from the “Content and Format of Substantial Equivalence Reports” Final Rule to
estimate the cost to submit one SE submission at $19,614 (159) (86 FR 55224, October 10,
2021). We estimate the cost of submitting market applications for reformulated products by
multiplying the estimated number of reformulated products under the low, primary, and high
estimates by the cost per SE submission. We estimate a primary cost of $49,035 with a range of
$78,457 to $19,614, as shown below in Table 88. Application submission costs are a one-time
cost that occurs in 2026 (year one) of the policy.
Table 88. Application Submission Costs per Small Entity
Primary
Number of Products
Cost per Reformulation
Total Cost
2.5
$19,614
$49,035
Low
High
4
$19,614
$78,457
1
$19,614
$19,614
Note: The low estimates relate to the low policy impact scenario (e.g., lowest estimate of averted deaths) from the
PHM, while the high estimates relate to the high policy impact scenario (e.g., highest estimate of averted deaths)
from the PHM.
Small entities manufacturing combusted tobacco products affected by this proposed
rule would be subject to nicotine content testing to ensure their product offerings are compliant
with the proposed product standard. Using Euromonitor Passport data on Company Share of the
market by Global Brand Owner, we assume that small entities are represented by the “Others”
category and therefore sold 4.6 percent of total volume of cigarettes in 2021. We then multiply
the small entities percentage of the market by the total number of cigarettes sold under the low,
primary, and high policy impacts, in each year of the 40-year time horizon, as shown in Figure
12. As discussed in Section II.H.1.g, we assume a batch size of 8 million cigarettes. We divide
the total cigarette volume for small entities by 8 million to compute the required number of
batches for testing each year. The testing cost per batch ranges from $269 to $737, with a
medium estimate of $404. We multiply testing cost per batch by the number of batches each year
to calculate the total annual cost of testing for small entities. To assess the impact on the average
188
small entity, we divide the total annual cost for small entities by the 92 small entities producing
only combusted tobacco products discussed above. We assume that testing costs of affected
combusted products that are not cigarettes are proportional to the revenues of each product
relative to cigarettes in the Euromonitor data presented in Table 6, consistent with the methods
for computing testing costs in Section II.H.1.g.
Table 89 shows the estimated testing cost for all combusted products produced by the
average small entity producing only combusted tobacco products. Testing is a recurring cost that
begins in 2027 and continues until the end of the 40-year time horizon. Testing costs decline
over time as fewer combusted tobacco products are manufactured and sold due to ongoing
reductions in projected smoking prevalence. We note that the ‘low policy impact scenario’ has
the highest relative combusted tobacco use prevalence and quantity of combusted tobacco
products sold and consequently has the highest testing costs for affected combusted tobacco
products. In 2028, testing costs range from $2,353 to $61 per small entity, with a primary cost of
$1,469. By 2064, testing costs range from $390 to $41, with a primary estimate of $50.
Table 89. Testing Costs for All Affected Combusted Products per Small Entity
Year
Primary
Low
2025
2026
2027
2028
2029 (5 years)
2034 (10 years)
2044 (20 years)
2054 (30 years)
2064 (40 years)
$0
$0
$0
$1,469
$679
$75
$52
$51
$50
$0
$0
$0
$2,353
$2,142
$1,377
$684
$465
$390
High
$0
$0
$0
$61
$53
$45
$44
$42
$41
Note: The low estimates relate to the low policy impact scenario (e.g., lowest estimate of averted deaths) from the
PHM, while the high estimates relate to the high policy impact scenario (e.g., highest estimate of averted deaths)
from the PHM.
We expect this proposed product standard, if finalized, to significantly reduce cigarette,
RYO tobacco, non-premium cigar, and pipe tobacco use and increase use of smokeless and
ENDS products as some consumers switch from covered products to non-covered tobacco
products. Therefore, we expect the absolute amount of user fees assessed for domestic
manufacturers and importers of cigarette, RYO tobacco, non-premium cigar, and pipe tobacco
domestic manufacturers and importers to decline, while the amount of user fees assessed for
domestic manufacturers and importers of smokeless tobacco to increase. Because combusted
tobacco revenues would decline as a result of the product standard while the total amount of user
fees collected remains fixed, we expect the user fee assessment per firm as a percent of post-tax
189
revenue to increase significantly, as seen below over the 40-year time horizon. Please refer to
Section II.I.4 of the PRIA for additional discussion on user fees.
We lack individual sales data for small businesses in order to assess individual firm user
fee obligations by product category. Therefore, we assume that the product portfolio of each
small business is proportional to the market share of total sales for each product category as
shown in Table 6. We compute the user fee obligation as a percentage of revenues for the
individual small business by multiplying the market share of sales for each product category by
the user fee obligation for that product category in each year of the 40-year time horizon. We
then take the difference between user fee obligations under the policy scenario and the baseline
to find the policy effect on user fee obligations for the average small business as a percentage of
revenue. Table 90 presents the additional user fee obligation as a percentage of revenue by year.
Increased user fee assessments as a percentage of post-tax revenue are first experienced in 2028
and range from, 0.05 percent to 111.47 percent, with a primary estimate of 1.55 percent. By
2064, they range from 2.31 percent to 17.23 percent, with a primary estimate of 15.19 percent.
Table 90. Additional Combusted User Fee Obligation as Percentage of Revenue over a 40-year
time horizon
Primary
Low
High
Year
2025
2026
2027
2028
2029 (5 years)
2034 (10 years)
2044 (20 years)
2054 (30 years)
2064 (40 years)
0.00%
0.00%
0.00%
1.55%
4.02%
17.77%
16.13%
15.49%
15.19%
0.00%
0.00%
0.00%
0.05%
0.08%
0.37%
1.20%
1.91%
2.31%
0.00%
0.00%
0.00%
111.47%
18.78%
17.51%
17.51%
17.39%
17.23%
We expect that small firms would experience long-term changes to their revenue due to
the proposed product standard, if finalized. For the purpose of the small entity analysis, we
consider all lost revenue to be a cost to the combusted tobacco manufacturing firms. We estimate
the lost revenue using reductions in smoking prevalence from the PHM under each policy
scenario relative to baseline smoking prevalence for both cigarettes and cigars. As discussed in
Section II.E.3, we assume price for each tobacco product is held constant, and therefore measure
lost revenues in each year as equal to the relative difference between baseline quantity and the
quantity under each of the policy scenarios with the assumption that each firm retains their
market share of volume of affected products after the policy. We request comment on our
approach.
190
Table 91 shows the percentage reduction in combusted tobacco product revenue relative
to baseline. The policy first impacts revenues in 2028, resulting in a 4 percent, 60 percent, and 99
percent reduction in revenue relative to baseline for the low, primary, and high impact policy
scenarios, respectively. By the end of the 40-year time horizon, revenues are reduced by 20
percent, 97 percent, and 99 percent relative to baseline for the low, primary, and high impact
policy scenarios.
Table 91. Percentage Reduction in Combusted Revenue Relative to Baseline over a 40-Year
Time Horizon
Year
Primary
Low
High
2025
2026
2027
2028
2029 (5 years)
2034 (10 years)
2044 (20 years)
2054 (30 years)
2064 (40 years)
0%
0%
0%
60%
81%
90%
94%
96%
97%
0%
0%
0%
4%
8%
11%
14%
17%
20%
0%
0%
0%
99%
99%
99%
99%
99%
99%
Table 92 presents the average cost (i.e., costs, reductions revenue) of the proposed
standard per small entity that manufacture only combusted tobacco products over the 40-year
time horizon. Annualized costs range from $5.5 million to $18.2 million, with a primary estimate
of $17 million at a 2 percent discount rate. The average small tobacco product manufacturer has
annual revenue of $2,660,851 based on the Dun & Bradstreet data used to identify registered
small firms described and presented above in Table 84. Given that these costs are averaged
across all small tobacco product manufacturers, they may represent an overestimate for firms of
the smallest size and an underestimate for relatively larger small tobacco product manufacturers.
Table 92. Estimated Average Cost per Small Combusted only Manufacturer over a 40-Year Time
Horizon at a 2% Discount Rate (2023 $)
Primary
Low
High
Discounted Total Cost (40 years)
Annualized Cost (40 years)
$406,050,497
$17,055,058
$138,110,023
$5,800,940
$432,451,739
$18,163,971
Note: The average small firm has annual revenue of $2,660,851 based on Dun & Bradstreet data presented in Table
84.
Table 93 presents the undiscounted costs as a percentage of revenue by number of
employees. Reading and understanding costs are a one-time cost that occurs in 2025 (year 0).
There is a two-year period before full implementation of the policy during which firms are
191
assumed to engage in compliance activities (such as product testing and premarket authorization
of the new products). Reformulation and application submission costs are a one-time cost that
occur in 2026 (year 1). Firms experience recurring costs of testing nicotine content, increased
user fee obligations, and lost revenues beginning in 2028 and continuing throughout the
remainder of the 40-year time horizon. For firms of the smallest size, reformulation and
application submission costs in 2026 represent a significant burden, as high as 246 percent of
revenue in the low policy impact estimate and 154 percent of revenue in the primary policy
impact estimate. As noted previously, these calculations are estimates for those small tobacco
product manufacturers that may remain in the market for combusted tobacco products. Recurring
costs gradually increase across time as lost revenue relative to baseline grows and user fee
obligations as a percentage of revenue increases. By 2064, costs of the policy are 23 percent of
revenue in the low estimate and 112 percent of revenue in the primary estimate. The high policy
impact scenario exceeds the primary policy impact scenario in all cases, so we show only the low
and primary estimates for brevity. Given the substantial estimated impacts of the proposed
standard expressed as a percentage of revenues to small entities, we anticipate the proposed
product standard would likely result in firm closures as small manufacturers of combusted
tobacco products seek alternative business opportunities. We request comment on this
conclusion.
192
Table 93. Undiscounted Costs to Small Combusted Only Tobacco Manufacturers as a Percentage of Revenue by Employee Size
Under the Low and Primary Policy Impact Scenarios in Certain Years
Year
Cost Drivers
Number of
employees
0 to 4
5 to 9
10 to 19
20 to 49
50 to 99
100 to 249
250 to 1500
2025
Reading and
Understanding
(One-time)
2026
Reformulation,
Application
Submission
(One-time)
2029 (5 yr)
2034
(10 yr)
2044
(20 yr)
2054
(30 yr)
2064
(40 yr)
2027
2028
None
Testing, Increased User Fee Assessments, Lost Revenue (Recurring 2028 to
2064)
Panel A: Undiscounted Low Cost as Percentage of Revenue
2%
1%
0%
0%
0%
0%
0%
246%
92%
29%
12%
4%
2%
2%
0%
0%
0%
0%
0%
0%
0%
6%
5%
5%
5%
5%
5%
5%
9%
8%
8%
8%
8%
8%
8%
12%
12%
12%
12%
12%
12%
12%
16%
16%
16%
16%
16%
16%
16%
19%
19%
19%
19%
19%
19%
19%
23%
23%
23%
23%
23%
23%
23%
111%
111%
111%
111%
111%
111%
111%
112%
112%
112%
112%
112%
112%
112%
Panel B: Undiscounted Primary Cost as Percentage of Revenue
0 to 4
5 to 9
10 to 19
20 to 49
50 to 99
100 to 249
250 to 1500
1%
0%
0%
0%
0%
0%
0%
154%
58%
18%
7%
3%
1%
1%
0%
0%
0%
0%
0%
0%
0%
62%
62%
62%
62%
62%
62%
62%
193
85%
85%
85%
85%
85%
85%
85%
107%
107%
107%
107%
107%
107%
107%
110%
110%
110%
110%
110%
110%
110%
2. Noncombusted Tobacco Product Manufacturers
Small businesses that manufacture only noncombusted tobacco products are expected to
experience two offsetting impacts from the rule: increased revenue from policy induced increases
in noncombusted tobacco use prevalence, and increased user fee assessments for smokeless
tobacco products as a percentage of revenues. We make a simplifying assumption in this analysis
that the representative non-combusted tobacco only manufacturer sell all noncombusted
products. As shown in Figure 16, we estimate large increases in SLT sales relative to baseline
resulting from people who use combusted tobacco products switching into the noncombusted
market following implementation of the policy. As previously discussed in Section II.H.1.b.1, we
assume increases in sales of ENDS products proportional to the ratio of ENDS to SLT of 0.69.
Since we do not have sales data by product for individual small businesses, we assume all small
entities selling only noncombusted products have a product portfolio of noncombusted products
representative for each product of the percent of noncombusted revenue in Table 6. That is, we
assume about 41 percent of sales are from ENDS and 59 percent of sales are from SLT. Table 94
shows the percentage gain in revenue relative to baseline for noncombusted products. There is a
sharp uptick in noncombusted sales relative to baseline in 2028, when the policy impact
simultaneously causes a large decline in combusted tobacco use of affected products. Revenue
gains in 2028 are 27 percent, 64 percent, and 90 percent higher than baseline in the low, primary,
and high estimates, respectively. Baseline noncombusted tobacco use is increasing annually, and
by 2064, revenue gains are 15 percent, 32 percent, and 56 percent higher relative to baseline for
the low, primary, and high estimates.
Table 94. Percentage Gain in Noncombusted Revenue Relative to Baseline
Year
Primary
Low
High
2025
2026
2027
2028
2029 (5 years)
2034 (10 years)
2044 (20 years)
2054 (30 years)
2064 (40 years)
0%
0%
0%
64%
52%
42%
37%
34%
32%
0%
0%
0%
27%
24%
22%
19%
17%
15%
0%
0%
0%
90%
78%
71%
65%
60%
56%
User fees are not assessed for ENDS products, so we compute user fee assessments as a
percentage of post-tax revenue for SLT in Section II.I.4 and multiply by 59 percent to account
for the percent of total revenues that come from SLT products as discussed above. Table 95
shows the additional user fee assessment as a percentage of noncombusted tobacco product only
manufacturer’s revenue. By 2028, additional user fee obligations as a percentage of revenue
194
range from -0.02 percent to -0.04 percent, with a primary estimate of -0.03 percent. By 2064,
additional user fee obligations as a percentage of revenue range from 0.19 percent to 1.42
percent, with a primary estimate of 1.25 percent.
Table 95. Additional Noncombusted User Fee Assessment as Percentage of Revenue over a 40Year Time Horizon
Year
Primary
Low
High
2025
2026
2027
2028
2029 (5 years)
2034 (10 years)
2044 (20 years)
2054 (30 years)
2064 (40 years)
0.00%
0.00%
0.00%
-0.03%
0.12%
1.15%
1.33%
1.27%
1.25%
0.00%
0.00%
0.00%
-0.02%
0.00%
0.03%
0.09%
0.15%
0.19%
195
0.00%
0.00%
0.00%
-0.04%
1.34%
1.42%
1.45%
1.43%
1.42%
Table 96 shows the costs to small noncombusted only manufacturers. We display the net cost of the increased user fee
assessments and the increase in revenues. We express increases to revenue as a negative percentage. For example, manufacturers with
0 to 4 employees have 27 percent higher revenue in 2028 relative to baseline. In every year, there is a net revenue increase for
noncombusted only small manufacturers due to the overcompensating increase in revenue relative to the increased user fee
assessments.
Table 96. Undiscounted Costs to Small Noncombusted Only Tobacco Manufacturers as a Percentage of Revenue by Employee Size
Under the Low and Primary Policy Impact Scenarios in Certain Years
Year
2025
Cost Drivers
Number of employees
0 to 4
5 to 9
10 to 19
20 to 49
50 to 99
100 to 249
250 to 1500
None
0%
0%
0%
0%
0%
0%
0%
2029
2034
2044
2054
2026
2027
2028
(5 yr)
(10 yr)
(20 yr)
(30 yr)
Increased User Fee Assessment, Increased Revenue
None
None
(Recurring 2028 to 2064)
Panel A: Undiscounted Low Policy Impact Net Cost as Percentage of Revenue
0%
0%
-27%
-24%
-22%
-19%
-17%
0%
0%
-27%
-24%
-22%
-19%
-17%
0%
0%
-27%
-24%
-22%
-19%
-17%
0%
0%
-27%
-24%
-22%
-19%
-17%
0%
0%
-27%
-24%
-22%
-19%
-17%
0%
0%
-27%
-24%
-22%
-19%
-17%
0%
0%
-27%
-24%
-22%
-19%
-17%
2064
(40 yr)
-14%
-14%
-14%
-14%
-14%
-14%
-14%
Panel B: Undiscounted Primary Policy Impact Net Cost as Percentage of Revenue
0 to 4
5 to 9
10 to 19
20 to 49
50 to 99
100 to 249
250 to 1500
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
-65%
-65%
-65%
-65%
-65%
-65%
-65%
Note: Negative cost represents a gain in revenue relative to baseline.
196
-52%
-52%
-52%
-52%
-52%
-52%
-52%
-41%
-41%
-41%
-41%
-41%
-41%
-41%
-36%
-36%
-36%
-36%
-36%
-36%
-36%
-33%
-33%
-33%
-33%
-33%
-33%
-33%
-30%
-30%
-30%
-30%
-30%
-30%
-30%
Table 97 presents the average costs per small entity that manufactures only
noncombusted tobacco products over the 40-year time horizon. Annualized costs range from $4.6 million to -$15.5 million, with a primary estimate of -$9.5 million at a 2 percent discount
rate. In all policy impact scenarios, small manufacturers of only noncombusted products gain
considerable amounts of revenue relative to the baseline. The average small firm has annual
revenue of $2,660,851 based on the Dun & Bradstreet data used to identify registered small firms
described and presented above in Table 84. Given that these costs are averaged across all small
manufacturers, they may represent an overestimate for firms of the smallest size and an
underestimate for relatively larger small manufacturers.
Table 97. Estimated Average Cost per Small Noncombusted only Manufacturer over a 40-Year
Time Horizon at a 2% Discount Rate (2023 $)
Primary
Low
High
Discounted Total Cost (40 years)
Annualized Cost (40 years)
-$224,911,608
-$9,446,807
-$110,440,821
-$4,638,769
-$368,764,372
-$15,488,955
Note: The average small firm has annual revenue of $2,660,851 based on Dun & Bradstreet data presented in Table
84.
3. Combusted and Noncombusted Tobacco Product Dual Operation
Manufacturers
We assess policy impacts to small dual operation manufacturers who produce combusted
and noncombusted tobacco products by assuming that half of their sales revenue is from
combusted products and the other half is from noncombusted product sales. We lack data on the
individual sales of dual operation facilities and request comment on this assumption. Thus, we
compute costs of the rule to small dual operation manufacturers by multiplying combusted only
costs by 50 percent, multiplying noncombusted only costs by 50 percent, and summing them
together. We assume that the reading and understanding one-time cost is equal to the full value
incurred by combusted only firms.
Table 98 shows undiscounted policy impact costs as a percentage of revenue for small
dual operation manufacturers. Since these facilities manufacture combusted products, they
experience one-time costs of reading and understanding the rule as well as reformulation and
application submission costs. They also have recurring testing costs, increased user fee burden,
and lost revenue associated with their combusted line of products. However, they have an
increase in revenue associated with their noncombusted line of products, which fully offsets the
additional increase in user fee burden paid for their noncombusted products. For firms of the
smallest size with 0 to 4 employees, one-time reformulation and application submission costs are
a considerable burden, accounting for up to 123 percent of revenue in the low policy impact
scenario. In the primary policy impact scenario, these one-time costs are as high as 77 percent for
197
firms with 0 to 4 employees. The recurring costs occur between 2028 to the end of the 40-year
time horizon. In the low policy impact scenario, the losses to revenue from combusted products
are outweighed by the increases in revenue from noncombusted products the first 20 years after
policy implementation. However, due to increasing user fee assessments for combusted and
noncombusted products, as well as increasing baseline noncombusted use prevalence trends, the
large losses from combusted tobacco product revenue results in large costs relative to revenue for
the final 20 years of the 40-year time horizon, ranging from 1 to 4 percent. In the primary policy
impact scenario, increased noncombusted revenues fully offset losses from combusted revenue
and firms gain revenue relative to baseline by the second year of recurring cost, in 2029. For all
remaining years of the 40-year time horizon, firms experience large costs relative to revenue
ranging from 16 to 41 percent.
198
Table 98. Undiscounted Costs to Small Dual Operation Tobacco Manufacturers as a Percentage of Revenue by Employee Size Under
the Low and Primary Policy Impact Scenarios for Certain Years
Year
Cost Drivers
Number of
employees
0 to 4
5 to 9
10 to 19
20 to 49
50 to 99
100 to 249
250 to 1500
2025
Reading and
Understanding
(One-time)
2026
Reformulation,
Application
Submission
(One-time)
2027
None
2028
2029
(5 yr)
2034
(10 yr)
2044
(20 yr)
2054
(30 yr)
2064
(40 yr)
Testing, Increased User Fee Assessment for Combusted and Noncombusted,
Lost Combusted Revenue, Increased Noncombusted Revenue
(Recurring 2028 to 2064)
Panel A: Undiscounted Low Cost as Percentage of Revenue
2%
1%
0%
0%
0%
0%
0%
123%
46%
15%
6%
2%
1%
1%
0%
0%
0%
0%
0%
0%
0%
-11%
-11%
-11%
-11%
-11%
-11%
-11%
-8%
-8%
-8%
-8%
-8%
-8%
-8%
-5%
-5%
-5%
-5%
-5%
-5%
-5%
-2%
-2%
-2%
-2%
-2%
-2%
-2%
1%
1%
1%
1%
1%
1%
1%
4%
4%
4%
4%
4%
4%
4%
39%
39%
39%
39%
39%
39%
39%
41%
41%
41%
41%
41%
41%
41%
Panel B: Undiscounted Primary Cost as Percentage of Revenue
0 to 4
5 to 9
10 to 19
20 to 49
50 to 99
100 to 249
250 to 1500
1%
0%
0%
0%
0%
0%
0%
77%
29%
9%
4%
1%
1%
1%
0%
0%
0%
0%
0%
0%
0%
-1%
-1%
-1%
-1%
-1%
-1%
-1%
Note: Negative cost represents a gain in revenue relative to baseline.
199
16%
16%
16%
16%
16%
16%
16%
33%
33%
33%
33%
33%
33%
33%
37%
37%
37%
37%
37%
37%
37%
We believe that dual operation small manufacturers of combusted and noncombusted
tobacco products would cease production of affected combusted tobacco products. Given our
assumption that 50 percent of dual operation firms’ revenue is from the sale of combusted
tobacco products, if they cease production of affected combusted tobacco products, they may
close and seek alternative business opportunities or increase their volume of sales for
noncombusted products.
Table 99 presents the average costs per small entity that manufactures both combusted
and noncombusted tobacco products as a dual operation organization over the 40-year time
horizon. Annualized costs range from $0.6 million to $1.3 million, with a primary estimate of
$3.8 million at a 2 percent discount rate. The average small firm has annual revenue of
$2,660,851 based on the Dun & Bradstreet data used to identify registered small firms described
and presented above in Table 84. Given that these costs are averaged across all small
manufacturers, they may represent an overestimate for firms of the smallest size and an
underestimate for relatively larger small manufacturers.
Table 99. Estimated Average Cost per Small Dual Operation Manufacturer over a 40-year time
horizon Under the Low, Primary, and High Policy Impact Scenario at a 2% Discount Rate (2023
$)
Primary
Low
High
Discounted Total Cost (40 years)
Annualized Cost (40 years)
$90,569,445
$3,804,126
$13,834,601
$581,085
$31,843,684
$1,337,508
Note: The average small firm has annual revenue of $2,660,851 based on Dun & Bradstreet data presented in Table
84.
4. Retailers and Wholesalers
As estimated in Section II.H.1.c, we estimate small retailers and wholesalers to face onetime costs of reading and understanding the rule of between $1,232 and $7,698 per retailer and
wholesaler. Additionally, retailers and wholesalers could face lost revenue from their combusted
tobacco product sales, although that lost revenue could, in part, be offset with increased revenue
from whatever products the consumer purchases with money previously spent on combusted
tobacco products affected by this rule or increased sales of noncombusted tobacco products.
5. Small Governmental Jurisdictions
In general, we do not believe that small governmental jurisdictions directly tax tobacco
products; however, they may receive tobacco product tax revenue from other jurisdictions. 87 Any
Small governmental jurisdictions are considered a “small entity” under the Regulatory Flexibility Act (RFA) (see
Sections 601(5-6 (5 U.S.C. 601)). Small governmental jurisdictions are defined as “governments of cities, counties,
towns, townships, villages, school districts, or special districts, with a population of less than fifty thousand.”
87
200
decrease in tobacco product tax revenue may impact these jurisdictions, although we do not have
detailed data to estimate this impact. We discuss impacts on taxes in Section II.I. We also do not
expect these entities to incur enforcement costs. State and local law enforcement agencies do not
enforce the tobacco product authorities in the FD&C Act and do not, and cannot, take
enforcement actions against any violation of FDA’s tobacco authorities, including its regulations,
on FDA’s behalf. We request comments and data on any impacts of this proposed product
standard on small governmental jurisdictions.
C. Alternatives to Minimize the Burden on Small Entities
One alternative that could reduce the impact to small entities would be a delayed
effective date for all entities. The proposed product standard has a 2-year effective date. With a
6-year effective date, manufacturers would have the same cost structure except lower one-time
reformulation costs. Following FDA’s Reformulation Cost Model, as discussed in Section
II.H.1.d, we estimate lower reformulation costs when firms have additional time to reformulate.
Under a 2-year effective date in the main analysis, we estimated the cost per reformulation to be
$115,885 for a small firm and with an extended time horizon we estimate the cost per
reformulation to be $66,220. All other costs and benefits are estimated to remain the same as in
the main analysis except that they occur 4 additional years into the future beyond the effective
date in the main analysis.
Table 100 presents the primary estimate of the discounted cost per small combusted only
manufacturer under the alternative effective date of 6 years and the difference from the 2-year
effective date in the proposed rule. While extending the effective date to 6 years would decrease
the burden on small business, it also would decrease the benefits of a final rule by delaying the
benefits for an additional 4 years. For example, public health benefits in terms of lives saved
resulting from smoking cessation would not be realized during the 4-year delay, resulting an
increase to public health costs relative to the implementation date in the main analysis.
Table 100. Costs of the Final Rule per Small Combusted Only Manufacturers in 2023 Dollars at
a 2% Discount Rate
Under 72-Month Effective Date
Present Discounted Value ($)
Cost Per Firm
$312,033,028
Annualized Value
$13,106,108
Difference between Proposed Rule and 72-Month Effective
Date
Present Discounted Value ($)
-$92,420,153
Annualized Value
-$3,881,860
Note: Negative cost represents a gain relative to baseline.
201
Table 101 presents the primary estimate of the discounted cost per small noncombusted
only manufacturer under the alternative effective dates of 6 years and the difference from the 2year effective date in the rule. Extending the effective date to 6 years increases the burden on
small business who manufacture combusted only products relative to the 2-year effective date in
the rule because it delays the increased revenues that these firms stand to receive following
implementation of the rule. In addition, it also decreases the benefits of this final rule by delaying
the benefits.
Table 101. Costs of the Final Rule per Small Noncombusted Only Manufacturers in 2023 Dollars
at a 2% Discount Rate
Under 72-Month Effective Date
Present Discounted Value ($)
Cost Per Firm
$209,635,085
Annualized Value
$8,805,158
Difference between Proposed Rule and 72-Month Effective
Date
Present Discounted Value ($)
$432,656,470
Annualized Value
$18,172,571
Note: Negative cost represents a gain relative to baseline.
Table 102 presents the primary estimate of the discounted cost per small dual operation
combusted and noncombusted manufacturer under the alternative effective dates of 6 years and
the difference from the 2-year effective date in the rule. Since the rule is a net cost for dual
manufacturers, extending the effective date decreases the burden. However, it also decreases the
benefits of this final rule by delaying the benefits.
Table 102. Costs of the Final Rule per Small Dual Operation Manufacturer in 2023 Dollars at a
2% Discount Rate
Under 72-Month Effective Date
Present Discounted Value ($)
Cost Per Firm
$260,834,056
Annualized Value
$10,955,633
Difference between Proposed Rule and 72-Month Effective
Date
Present Discounted Value ($)
Annualized Value
$170,118,158
$7,145,355
Note: Negative cost represents a gain relative to baseline.
202
203
IV.
References
The following references marked with an asterisk (*) are on display at the Dockets
Management Staff and are available for viewing by interested persons between 9 a.m. and 4
p.m., Monday through Friday; they also are available electronically
at https://www.regulations.gov. References without asterisks are not on public display
at https://www.regulations.gov because they have copyright restrictions. Some may be available
at the website address, if listed. References without asterisks are available for viewing only at
the Dockets Management Staff. Although FDA verified the website addresses in this document,
please note that websites are subject to change over time.
1. * U.S. Department of Health and Human Services, Assistant Secretary for Planning and
Evaluation. Appendix D: Updating Value per Statistical Life (VSL) Estimates for. 2021.
2. * U.S. Food and Drug Administration. Methodological Approach to Modeling the Potential
Impact of a Nicotine Product Standard on Tobacco Use, Morbidity, and Mortality in the U.S.
Center for Tobacco Products. Silver Spring, MD : U.S. Department of Health and Human
Services, Food & Drug Administration, 2025.
3. * U.S. Department of Health and Human Services. The Health Consequences of Smoking50 Years of Progress: A Report of the Surgeon General. Atlanta, GA : Centers for Disease
Control and Prevention, National Center for Chronic Disease Prevention and Health Promotion,
Office on Smoking and Health, 2014.
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V.
Appendix
222
A. Main Analysis and Section II.M.1 Analysis under 3 and 7 Percent Discount
Rates
The updated OMB Circular A-4 (247) changed the discount rate used in RIAs from 3 and
7 percent to 2 percent. We conduct our main analysis with a 2 percent discount rate to be
consistent with the updated Circular A-4 (247). However, due to this recent change and to allow
for comparison across FDA rules, we present the analysis with the alternative discount rates of 3
and 7 percent here. We present both the main analysis and the analysis with the baseline
unadjusted for menthol and cigar flavors (Section II.M.1) under these alternative discount rates.
Table 103. Policy Impact under the Main Analysis Baseline Discounted at 3 and 7 Percent
Category
Benefits
Costs
Transfers
Annualized
Monetized
$M/year
Annualized
Quantified
Qualitative
Annualized
Monetized
$M/year
Annualized
Quantified
Qualitative
Federal
Annualized
Monetized
$M/year
From/ To
Other
Annualized
Monetized
$M/year
From/ To
Other
Annualized
Monetized
$M/year
From/ To
Other
Annualized
Monetized
$M/year
Primary
Estimate
Low
Estimate
High Estimate
Units
Year
Dollars
Discount
Rate
$1,117,406
$268,259
$1,211,484
2023
7%
$1,101,433
$273,653
$1,195,427
2023
3%
Period
Covered
40
years
40 years
$2,647
$1,065
$4,181
2023
7%
40 years
$2,195
$759
$2,986
2023
3%
40 years
$4,093
$1,113
$4,430
2023
7%
40 years
$4,114
$1,332
$4,359
2023
3%
40 years
From: Federal Government
$8,427
$2,292
$9,129
To: consumers
2023
7%
40 years
$8,463
$8,975
2023
40 years
From: State Governments
$19,418
$4,294
$17,513
To: consumers
2023
7%
40 years
$19,967
$5,837
$17,672
2023
40 years
From: Retailers
$263
$17
$406
To: Consumers
2023
7%
40 years
$319
$24
$451
2023
40 years
$2,738
223
3%
3%
3%
Notes
From/ To
From: User fees owed by combusted tobacco
To: User fees owed by
noncombusted tobacco
Table 104. Policy Impact under the Unadjusted Baseline Discounted at 3 and 7 Percent
Category
Benefits
Costs
Transfers
Annualized
Monetized
$M/year
$1,475,688
Units
Year
Dollars
2023
Discount
Rate
7%
Period
Covered
40 years
$355,218
$1,458,728
2023
3%
40 years
$3,388
$1,182
$5,143
2023
7%
40 years
$3,095
$926
$4,084
2023
3%
40 years
$4,058
$1,134
$4,528
2023
7%
40 years
$4,130
$1,369
$4,470
2023
3%
40 years
From: Federal Government
$8,327
$2,326
$9,302
To: consumers
2023
7%
40 years
$8,462
$9,170
2023
40 years
From: State Governments
$25,994
$6,865
$24,565
To: consumers
2023
7%
40 years
$28,420
$26,194
2023
40 years
40 years
40 years
Primary
Estimate
Low Estimate
High Estimate
$1,348,486
$348,444
$1,334,604
Annualized
Quantified
Qualitative
Annualized
Monetized
$M/year
Annualized
Quantified
Qualitative
Federal
Annualized
Monetized
$M/year
From/ To
Other
Annualized
Monetized
$M/year
From/ To
Other
Annualized
Monetized
$M/year
From/ To
Other
Annualized
Monetized
$M/year
From/ To
$2,801
$9,608
3%
3%
From: Retailers
$231
$15
$394
To: Consumers
2023
7%
$289
$21
$445
2023
From: User fees owed by combusted tobacco
224
3%
To: User fees owed by
noncombusted tobacco
Notes
B. Literature Review on Economic Transition Costs
This proposed product standard is expected to cause a significant shift away from the
combusted tobacco industry. There are a limited number of regulations that have had a similar
impact on an industry and therefore there are limited studies and data from which to draw cost
estimates. Here, we present the relevant literature available on costs of significant industry
disruption. We note that none of these studies present estimates that would be applicable to the
context of economic transition cost for this proposed product standard. We request comment on
additional literature that may help to calibrate the transition cost estimates in Section II.H.1.a.
Citation
Product
Banned/
Restricted
Cost Estimations
Mahaffey, H., Taheripour, F. & W.E. Tyner. 2016.
“Evaluating the Economic and Environmental Impacts of a
Global GMO Ban”. Journal of Environmental Protection,
vol 7: 1522-1546.
http://dx.doi.org/10.4236/jep.2016.711127
Genetically
Modified
Organism
(GMO)
Foods
The authors evaluate the impact of a global ban
on GMOs. A global ban on GMOs would cause
food price increases ranging from an increase
of 0.27% to 2.2%, depending on the region.
Total welfare losses associated with loss of
GMO technology total up to $9.75 billion.
Vanatta, M., Craig, M. T., Rathod, B., Florez, J., BromleyDulfano, I., & D. Smith. 2022. “The costs of replacing coal
plant jobs with local instead of distant wind and solar jobs
across the United States”.
Coal
The authors evaluate the costs of switching
energy production from coal to renewable
sources (wind or solar). Switching from energy
production from one coal plant to a renewable
source would cost $6.4 million to $8.4 billion
depending on the region.
Holland, Stephen P., Erin T. Mansur, and Andrew J.
Yates. 2021. “The Electric Vehicle Transition and the
Economics of Banning Gasoline Vehicles”. American
Economic Journal: Economic Policy, 13(3): 316-44.
Gasoline
Vehicles
The authors evaluate the deadweight loss
(DWL) of several policies to promote electric
vehicles (Evs) including bans on gas vehicles,
Pigouvian tax, and quotas. There is significant
variation in DWL under different policy
options.
Pollin, R., & Callaci, B. 2019. The Economics of Just
Transition: A Framework for Supporting Fossil Fuel–
Dependent Workers and Communities in the United
States. Labor Studies Journal, 44(2), 93138. https://doi.org/10.1177/0160449X18787051
Fossil Fuels
The authors examine the cost of an effective
job guarantee program for displaced fossil fuel
workers which includes compensation
insurance, retraining, relocation, pension, and
community transition. Costs are estimated to be
between $300 – $600 million per year.
Louie, E., & J. M. Pearce. 2016. “Retraining investment
for U.S. transition from coal to solar photovoltaic
employment”. Energy Economics, vol 57: 295-302.
https://doi.org/10.1016/j.eneco.2016.05.016.
Coal
The authors examine a hypothetical case where
the coal industry shuts down and workers are
retrained into the solar photovoltaic industry
(PV). The cost of transitioning employees
ranges from estimates $5,756 to $20,863 per
person.
iScience, 25(8). https://doi.org/10.1016/j.isci.2022.104817.
225
Taheripour, F., Mahaffey, H., and E. Tyner, 2016.
“Evaluation of Economic, Land Use, and Land-use
Emission Impacts of Substituting Non-GMO Crops for
GMO in the United States”. AgBioForum, vol 19(2): 156172.
GMOs
The authors examine the economic and landuse impacts of banning GMO corn, soybean,
and cotton, in the United States. Using a
general equilibrium model simulation, their
results show a GMO ban would have
significant impacts on land use, emissions,
commodity and good prices, and economic
welfare losses. They estimate an increase in US
food spending of about $14-24 billion per year
and average US welfare losses of about $0.62.6 billion.
Lesser, W. 2014. “Costs of Labeling Genetically Modified
Food Products in N.Y. State”.
http://publications.dyson.cornell.edu/docs/LabelingNY.pdf.
GMOs/
Genetically
Engineered
(GE) food
The cost to replace GE food production with
non-GE production is estimated to range from
$11 to $103 per capita for New York State and
range from $3.6 billion to $33 billion for the
United States. Replacing all GE production
with the production of organic alternatives
would cost between $29 billion to $126 billion
for the United States.
C. Consumer Surplus
Regulations that reduce the demand for a product or that raise its market price may lead
to reductions in consumer surplus or consumer utility. We include a brief discussion of this topic
under the heading of Costs of the Proposed Rule in section II.H.2 (Costs to Consumers). This
appendix provides additional background information and explores the challenges of addressing
potential gains and losses in consumer surplus from this proposed product standard. At a high
level, the purpose of this section is to discuss the uncertainty and practical challenges
surrounding consumer demand estimation, which complicates the ability to provide a quantified
analysis. To do so, we provide a comprehensive review of available literature on the topic of
demand and consumer surplus estimation for tobacco products and outline some of the open
questions for consideration.
For fully-informed, rational consumers, consumer surplus reflects the difference between
their maximum willingness to pay for a product and the price they pay in the marketplace. A
rational consumer is one whose choices maximize their utility, i.e., an individual who, when
presented with a decision, chooses the option that maximizes their welfare. Circular A-4 states
that regulatory impact analyses should consider including “gains or losses in
consumers’…surpluses” as part of the economic analysis (247).
As with other tobacco products, consumer behavior in the market for combusted tobacco
products is distorted by addiction, imperfect information, and internalities. Section II.B (Need for
Federal Regulatory Action) of this PRIA describes the internalities that influence demand for
tobacco products. These complexities and other challenges are discussed in the main analysis
226
II.H.2 (Costs to Consumers) and also briefly described in this appendix. The focus of this
appendix is to provide additional background, especially on relevant literature on approaches to
modeling demand and associated consumer surplus for tobacco products, which are highly
addictive and generally initiated before adulthood. A review of the literature highlights the lack
of consensus regarding how to account for lost consumer surplus in analyzing the effect of
regulations on tobacco products.
1. Summary Literature Review: Consumer Surplus in Tobacco Product Use
Early economic modelers of cigarette consumption noted that cigarette demand decreased
as price increased, similar to other products on the market, and attempted to fit a model of
rational addiction to cigarette use (249). These models simplified cigarette demand in ways that
allowed application of classic economic theory and concepts, such as consumer preference,
demand, and willingness to pay for cigarettes. Under this rational addiction approach, people
who smoke cigarettes were seen to derive a surplus from smoking equal to the difference
between the price they were willing to pay for cigarettes and the shadow, or full, price of
cigarettes. For harmful addictive goods, the shadow price includes both the market price and the
present value of future costs resulting from current consumption. Thus, under this rational
addiction approach, any reduction in cigarette use caused by regulation, seen as a cost to the
consumer, would create a loss in surplus.
However, because consumers face the internality problems discussed above, it is difficult
to disentangle consumption driven by addiction from that which may be driven by rational
demand. For this reason, there is a lack of consensus about how to quantify forgone consumer
surplus in tobacco regulation impact analyses (250). In contrast to the rational addiction
approach above, some argue that most consumers do not experience utility losses from reduced
use because they derive little to no pleasure from consumption (138; 251). The authors assert that
forgone consumption would not be a cost to consumers who regularly smoked cigarettes during
adolescence (before the legal age of smoking), as these consumers would not be considered
rational at the time of initiation. Others argue that some consumers who reduce their cigarette use
do experience some disutility (e.g., Ashley et al. (252), Cutler et al. (135), and DeCicca et al
(253)).
Even among those who conclude that some consumer utility loss exists, there is a lack of
consensus about how to meaningfully incorporate it into welfare analysis (250). As Levy,
Norton, & Smith (250) note, there is an open question of how best to quantitatively assess
welfare and lost consumer surplus when consumers are not fully-informed and rational (250).
One approach is to offset health gains by some factor intended to represent consumer surplus
loss. This approach has been used in the past where data and methods did not allow for direct
estimation of the consumer surplus change due to specific tobacco regulations. As a result,
studies have increasingly aimed to identify utility losses by comparing the demand of consumers
with and without internality problems, though doing so creates additional challenges.
227
In contrast, Levy, Norton, & Smith (250) asserts that the “correct approach to evaluating
the economic impact of regulation is to calculate changes in the welfare of a rational and fully
informed consumer, rather than first calculating the value of health gains and then offsetting
them by some amount” (250). The paper identifies three main questions framing the assessment
of welfare 88 and lost consumer surplus:
• “First, under the assumption that consumers are fully informed and rational, what is
the appropriate framework for welfare analysis of government regulations that yield
both health gains and potentially large losses in consumer surplus?”
• “Second, are consumers fully informed and rational?” [emphasis added]
•
“Third, what is the appropriate framework for welfare analysis if consumers are not
fully informed and rational?” [emphasis added]
In response to the second question, the authors note that “to date no research has
developed an empirical test that distinguishes clearly between rational and quasi-rational models
of smoking behavior” (250). In response to the third question, the authors propose a model for
performing a welfare analysis when consumers are not rational, arguing that “even if consumers
are not rational, the correct response from an economic perspective is not to abandon welfare
analysis in favor of policies that maximize health” (250). Instead, Levy, Norton, & Smith (2018)
outline further research that would help “figure out how to perform welfare analysis when
consumers are not rational” but note that they do not “claim to have solved the practical question
of how the FDA should carry out regulatory impact analysis of anti-smoking policies” (250).
2. Approaches to Modeling Demand for Tobacco Products
Several studies consider how to measure unbiased demand that reflects a rational and
fully informed consumer, as compared with biased demand based on current consumption. As
Levy, Norton, & Smith (250) note, bias increases demand above and beyond unbiased demand
levels, which could be due to many factors such as “…they do not know how bad it is for them,
do not realize how hard it will be to quit down the road, or simply cannot control themselves”.
The driving idea behind these models is that any regulation that moves consumer demand closer
to an unbiased demand curve would be welfare improving from the consumer’s perspective. We
discuss these studies to present a range of approaches. We conclude with the most recent model
by Levy, Norton, & Smith (2018) because using an unbiased demand curve appears to be an
improvement over models that do not consider the bias in tobacco product demand caused by
nicotine addiction, noting that some of the questions posed by Levy, Norton, & Smith (250)
would first need to be resolved before a model could be constructed.
We note that Levy, Norton, & Smith (249) uses the economic meaning of the term “welfare”. For purposes of this
discussion, we define welfare to be overall well-being, including economic, health, and social well-being. Although
text in this appendix may refer to the welfare of people who smoke cigarettes specifically, social welfare analysis in
tobacco regulations encompasses overall well-being of both people who smoke cigarettes and those who do not.
88
228
In the context of addictive products, a white paper drafted by the Office of the Assistant
Secretary for Planning and Evaluation at HHS (ASPE) (136) and Cutler, Jessup, Kenkel, & Starr
(135) and Cutler, Jessup, Kenkel, & Starr (137) outlines an approach for analyzing utility, or
consumer surplus, offsets to health benefits of smoking regulations based on the identification of
a subset of people who smoke cigarettes most likely to be rational – i.e., fully-informed to
choose their consumption levels in ways that rationally weigh benefits, costs, and risks – and
whose impacts should be assessed separately and differently from non-rational people who
smoke cigarettes. Cutler, Jessup, Kenkel, & Starr (135) uses several proxies for rationality,
including people who smoke cigarettes who self-report not smoking within 30 minutes of
waking 89 and those aged 30-45 with a college degree, regardless of age of initiation. The authors
assume that the 30-45 age cohort would have initiated well after the health risks of smoking
became well-publicized and use a college degree as a proxy for awareness of public
information. 90 Individuals aged 30 or below were excluded from the analysis as their education
levels had not yet been established Cutler, Jessup, Kenkel, & Starr (135). However, the authors
acknowledge that their estimated “rational” smoking rate is likely too high as “some welleducated young smokers probably initiated ‘accidentally’ in their teens and now would prefer to
quit” Cutler, Jessup, Kenkel, & Starr (135). Cutler, Jessup, Kenkel, & Starr (135) estimate uses
withdrawal costs as a proxy for utility impacts for the population of “rational” people who smoke
cigarettes. By considering these short run withdrawal costs relative to the lifetime health benefits
of quitting, they conclude that, for most regulations, “a population-level estimate of the offset
ratio will be closer to 5%” Cutler, Jessup, Kenkel, & Starr (135).
In Jin, Kenkel, Liu, & Wang (254), the authors acknowledge that an individual’s
initiation decisions are likely mistaken and that “individual failures stem from some combination
of poor information about the health consequences of smoking, other decision-making errors that
lead to imperfect optimization, and bounded self-control”. In response to irrational initiation, the
authors adopt a framework that attempts to eliminate these difficulties by considering an
individual’s decision-making process post initiation (254) (emphasis added). Simulations in Jin,
Kenkel, Liu, & Wang (254) are predicated on an assumption that past cigarette consumption is a
determinate of future demand, regardless of whether past consumption decisions were rational.
However, the authors also admit that “rational demand might be mainly driven by the value of
cigarettes as a means to reduce the utility losses from withdrawal” (254). While Jin, Kenkel, Liu,
& Wang (254) conclude—in an addendum that segments into gross and net results their primary
reduced-form estimates—that “about 94% of the gross health benefits from past anti-smoking
policies are offset by losses of consumer surplus in the cigarette market,” the authors calculate
“A widely used measure of nicotine addiction is whether the person has their first cigarette within one-half hour of
waking…” [Cutler et al. (137), citing 2014 SGR]. Smoking within 30 minutes of waking (time to first cigarette) is a
widely used measure of nicotine dependence (259).
90
The 30-45 age cohort analyzed by Cutler et al. (137) using data from the 2010-11 Tobacco Use Supplement to the
Current Population Survey from the U.S. Census Bureau would have likely reached adulthood during the 1990s. It is
unclear what public information would have been most salient to this population at time of initiation.
89
229
that about 33 percent of estimated health benefits from future, hypothetical tobacco regulations
would be offset by losses in consumer surplus from reduced cigarette use.
With respect to tobacco product cessation, these studies and others identify a subset of
people who smoke cigarettes that may be considered rational and present a wide array of
potential values for consumer surplus estimates that offset public health benefits: ranging from 5
percent to 99 percent (135; 252; 254). Chaloupka, Warner, & Acemoglu (138) identify only a
“small fraction” of people who smoke cigarettes that “made what might be interpreted as a
rational decision” to smoke, without offering an estimate of the potential size of this lost
consumer surplus. Chaloupka, Gruber, & Warner (251), however, conclude “that the ‘lost
pleasure’ from tobacco use, as represented by conventionally measured consumer surplus, should
not be included as a cost in FDA economic impact analyses of tobacco regulations”. Previous
regulatory impact analyses evaluating rules regulating the use of tobacco products have
estimated potential consumer surplus loss for those who quit as a percentage of the health
benefits attributable to the rule. For example, based on their analysis of literature, the
Department of Housing and Urban Development’s regulatory impact analysis of the Smoke-Free
Public Housing Final Rule, considered potential offsets totaling 5 percent to 33 percent of the
health benefits attributable to the rule as the consumer surplus loss associated with the rule. 91
This broad range of values for consumer surplus estimates that offset public health benefits from
cessation demonstrate the uncertainty with an offset approach, and later sections of this appendix
discuss additional uncertainty with an offset approach in the context of tobacco products.
DeCicca, Kenkel, Liu, & Wang (253) developed a two-period model based on
internalities, or the long-term costs to oneself resulting from consumption of a harmful good, to
estimate the impact of tobacco control policies on social welfare, assuming that smoking only
creates adverse health consequences in the second period, and that if people who smoke
cigarettes quit by the end of the first period, which studies have shown to be around age 40, most
of the excess mortality risk of smoking is avoided. The authors argue that “[m]ortality risks are
valued so much more heavily than morbidity risks that they dominate consumer decision-making
and social welfare calculations.” Ultimately, DeCicca, Kenkel, Liu, & Wang (253) attempts to
correct for some of the flaws in previous rational addiction modeling by allowing for the
The literature cited in the HUD RIA, which also included an analysis using the rental premium on smoke-free
apartments to estimate benefits (without the separate steps of monetizing health and longevity benefits and then
subtracting shorter-term utility loss), includes Levy, Helen, et al. (249). “Tobacco Regulation and Cost-Benefit
Analysis: How Should We Value Foregone Consumer Surplus?” NBER Working Paper No. 22471.
http://www.nber.org/papers/w22471; DeCicca, Philip, et al. (252). “Behavioral Welfare Economics and FDA
Tobacco Regulations”. NBER Working Paper No. 22718. http://www.nber.org/papers/w22718; Cutler, D. et al.
(135); Valuing Regulations Affecting Addictive or Habitual Goods. Journal of Benefit-Cost Analysis 6 (2): 247-280,
and; Jin, L. et al. (253)). Retrospective and prospective benefit-cost analyses of U.S. anti-smoking policies. Journal
of Benefit-Cost Analysis 6(1): 154-186. The utility-loss estimate of 33% of health benefits is based on a
hypothetical prospective regulation that cuts the smoking initiation rate in half, increases the smoking cessation rate
by one-third and reduces the average quantity of cigarettes smoked by one-third. HUD’s rule is not expected to have
an identical impact on smoking activity and thus the loss in consumer utility may be different than 33% of health
benefits.
91
230
existence of internalities, moving consumer surplus evaluation of tobacco policy towards directly
modeling the utility in the market.
In furthering this discussion, Levy, Norton, & Smith (250) identify the main questions
that would need to be answered in order to create an “unbiased” demand curve that represents
demand for a fully informed and rational consumer. These questions include what framework to
use in building an “unbiased” demand curve (i.e., the demand of people who use tobacco
products who are fully informed of the health effects to tobacco product use and rational in
deciding to use these products); whether tobacco product usage can be considered fully informed
and rational; and how to evaluate welfare when consumers are not fully informed and rational
(250). The authors conclude that moving consumers closer to the unbiased demand curve can be
welfare improving, while also noting the limitations of the model due to empirical challenges
estimating unbiased demand.
We note that while Cutler, Jessup, Kenkel, & Starr (135) and Jin, Kenkel, Liu, & Wang
(254) perform their analyses on the cigarette market, these methodologies would be analytically
similar to possible evaluations of dissuasion effects in the market for tobacco products. However,
Levy, Norton, & Smith (250) note challenges with these approaches, explaining that
characteristics like age and education may not properly capture differences in bias because they
are related to other characteristics, like discount rates accounting for time-inconsistency, that
likely affect smoking. These same challenges would apply to an analysis of dissuasion from
consumption of tobacco products.
While Levy, Norton, & Smith (250) present theoretical demand curves, significant
uncertainty remains regarding what unbiased demand curves for tobacco products might look
like and how they could be estimated. The peer-reviewed literature provides a wide range of
price elasticity estimates for market (biased) demand curves, and unbiased estimates are even
more uncertain. For example, Massin & Miera (255) discuss an additional source of uncertainty
with models like the ones suggested by Levy, Norton, & Smith (250). 92 Such models may tend to
construct biased and unbiased demand curves using the same price elasticity of demand, or slope.
This slope (i.e., how steep or flat the demand curve is) represents the rate of change in the
quantity of tobacco products purchased in reaction to a change in price. Addicted and nonaddicted consumers may not have the same reaction to a change in price; an unbiased demand
curve for a tobacco product may have a much flatter slope than the biased demand curve,
reflecting the behavior of the more price-conscious, non-addicted person who uses tobacco
products. Thus, assuming the same elasticity of demand for addicted and non-addicted
consumers is likely to overestimate consumer surplus (255). We request comment on this
interpretation.
Peer-reviewed models of biased and unbiased demand for tobacco products, although an
improvement on previous approaches, have yet to address such challenges. They also make
simplifying assumptions that do not fully capture the complexity of tobacco demand and
Massin and Miéra (254) appear to exclude Jin et al. (253) from the list of papers that suffer from the problems
mentioned here. However, we request comment on this interpretation.
92
231
challenges specific to a nicotine product standard, including the continued availability of
potential tobacco product substitutes.
Given these challenges and potential analytic approaches for modeling consumer surplus
for tobacco products there is significant uncertainty regarding how consumer surplus impacts
should be valued in tobacco product regulations. To conduct an analysis of biased versus
unbiased demand for tobacco products, we would need, among other things, to estimate current
unbiased market demand, the magnitude of internalities facing consumers, and the expected
demand under this proposed nicotine product standard. This product standard would only impact
one attribute of the product—the nicotine level—making it even more challenging to consider
welfare effects. Section II.H.2.c (Utility Change for Consumers) of the main analysis describes
this issue in more detail. We request comment on relevant data that could inform such an
approach or an alternative approach.
3. Challenges with Estimating Consumer Surplus for Tobacco Products
Recent advances in behavioral economics are moving the field closer toward more
reliable estimation of consumer surplus, recognizing significant challenges remain with
modeling demand for tobacco products. The challenges relating to tobacco product demand and
consumer surplus include: the addictive nature of tobacco products, initiation during adolescence
when the brain is not yet fully developed, the developing nature of information about the health
harms of smoking, tobacco product demand based on demand for other perceived benefits of
smoking rather than tobacco product attributes themselves, the level of regret expressed by
people who currently smoke cigarettes, desire to quit, and the availability of potential substitute
tobacco products. Additionally, this proposed product standard restricts the nicotine level of the
product but not other product attributes making it even more challenging to consider welfare
effects. These challenges in modeling demand for tobacco products are described in more detail
in section II.H.2.c (Utility Change for Consumers).
4. Conclusions
Given the concerns outlined in this appendix, including the complexity of modeling a
hypothetical rational demand curve for a good with an internality and cognitive bias problems,
this regulatory impact analysis does not estimate changes in consumer surplus stemming from
this nicotine product standard. This applies to people who do not smoke cigarettes who are
dissuaded from initiating the use of combusted tobacco products, to people who currently use
combusted tobacco products who quit in response to the standard, and to people who currently
use combusted tobacco products who switch to other tobacco products as a result of this product
standard. Although consumer surplus loss among people who quit or switch may not be zero,
there are a number of challenges and a lack of consensus surrounding the tools used to measure
demand for tobacco products. As a result, we discuss consumer surplus qualitatively and request
comment and/or data to assist in future application of potential modeling approaches.
232
Over the last ten years there has been a growing movement within peer-reviewed
literature looking at approaches to modeling impacts of tobacco policy on consumer surplus. The
literature has largely moved away from the utility offset method and instead has made significant
strides towards directly modeling biased and unbiased demand curves. While we believe there
will be an approach that can be used in regulatory impact analyses, there are currently still
several technical issues that need to be solved, including:
• How do addiction, imperfect information, and internalities influence the
magnitude of biased demand for these products?
• What role does the significant regret voiced by the majority of people who
currently use tobacco products play in welfare analysis of addictive goods?
• How should we estimate an unbiased, non-addictive demand curve?
• How does the consumer utility and consumer surplus provided by substitute
goods (both tobacco and non-tobacco) compare to consumer utility and consumer
surplus provided by combusted tobacco products?
• If consumer welfare loss occurs, is it a temporary transition state that occurs
during withdrawal, or does it last a lifetime?
• Given that estimating consumer surplus does not necessarily include a direct
estimate of health benefits, how can an analysis of consumer surplus present
health benefits clearly and transparently to the public?
FDA continues to encourage research and requests comment on this discussion; these
questions raised; the application of consumer surplus analysis in the context of addictive
products; the application of consumer surplus to a product standard that changes a product
attribute; and potential methods for developing and comparing biased and unbiased demand
curves for tobacco products.
D. Undiscounted Streams of Estimates and Estimates by Product Category
The following tables contain undiscounted annual streams of estimates for the 40-year
time horizon from 2025 to 2064. In subsections 1, 2, and 3, undiscounted annual streams for
costs, benefits, and transfers are presented for the low, primary, and high impact scenarios of the
main analysis. Subsections 4, 5, and 6 present similar tables but for the unadjusted no Menthol,
no Cigar Flavors baseline. Subsections 7 and 8 present undiscounted annual streams of estimates
by tobacco product category for costs and transfers, respectively. The tables of benefits in the
previous subsections present benefits both by tobacco product category and aggregated, whereas
costs and transfers are presented aggregated annually.
233
1. Undiscounted Annual Costs of the Rule for the Main Analysis
Table 105. Undiscounted Annual Costs of the Rule, Main Analysis, Low Impact Scenario ($ Millions, 2023)
Industry
Government
Consumer
Producer
Surplus
Premarket
Reading and
Economic
Premarket
Review
Enforcement
Search Withdrawal*
Year Understanding Transition Reformulation Submission Testing (loss)
2025 $112.1
$4,306.9
2026
$8,968.0
$15.0
$15.6
2027
$4.2 $482.1
$18.0
2028
$5.2
$11.5
$4.2
2029
$4.7
$32.4
$3.5
2030
$4.3
$58.7
$3.5
2031
$3.9
$87.3
$3.5
2032
$3.6
$115.7
$3.5
2033
$3.3
$142.9
$3.5
2034
$3.0
$167.2
$3.5
2035
$2.8
$190.5
$3.5
2036
$2.6
$211.9
$3.5
2037
$2.4
$228.3
$3.5
2038
$2.2
$241.5
$3.5
2039
$2.1
$253.9
$3.5
2040
$1.9
$263.8
$3.5
2041
$1.8
$273.7
$3.5
2042
$1.7
$279.1
$3.5
2043
$1.6
$283.2
$3.5
2044
$1.5
$286.5
$3.5
2045
$1.4
$288.2
$3.5
2046
$1.4
$287.5
$3.5
2047
$1.3
$287.4
$3.5
2048
$1.2
$286.8
$3.5
234
2049
2050
2051
2052
2053
2054
2055
2056
2057
2058
2059
2060
2061
2062
2063
2064
$1.2
$1.2
$1.1
$1.1
$1.1
$1.0
$1.0
$1.0
$1.0
$0.9
$0.9
$0.9
$0.9
$0.9
$0.9
$0.9
$287.7
$286.4
$284.3
$282.0
$278.1
$275.0
$272.5
$269.1
$266.5
$263.3
$260.7
$257.8
$255.5
$252.6
$249.5
$246.9
$3.5
$3.5
$3.5
$3.5
$3.5
$3.5
$3.5
$3.5
$3.5
$3.5
$3.5
$3.5
$3.5
$3.5
$3.5
$3.5
*Withdrawal costs are calculated using a quality-adjusted life-year that uses a 2% discount rate
Table 106. Undiscounted Annual Costs of the Rule, Main Analysis, Primary Impact Scenario ($ Millions, 2023)
Industry
Reading and
Year Understanding
2025 $373.5
2026
2027
2028
2029
2030
2031
Economic
Transition
$7,145.1
Premarket
Reformulation Submission Testing
$610.4
Government
Consumer
Producer
Surplus
Premarket
(loss)
Review
Enforcement Search
Withdrawal*
$1.0
$1.1
$3.2
$1.5
$0.8
$0.4
235
$2,109.2
$3,382.7
$3,770.6
$3,732.8
$6.9 $1,446.4
$6.9
$5.4
$5.4
$5.4
$1,665.8
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
2047
2048
2049
2050
2051
2052
2053
2054
2055
2056
2057
2058
2059
2060
2061
2062
$0.3
$0.2
$0.2
$0.1
$0.1
$0.1
$0.1
$0.1
$0.1
$0.1
$0.1
$0.1
$0.1
$0.1
$0.1
$0.1
$0.1
$0.1
$0.1
$0.1
$0.1
$0.1
$0.1
$0.1
$0.1
$0.1
$0.1
$0.1
$0.1
$0.1
$0.1
236
$3,527.4
$3,274.8
$3,019.8
$2,780.3
$2,562.3
$2,365.2
$2,187.9
$2,029.2
$1,888.7
$1,764.7
$1,655.1
$1,558.0
$1,471.7
$1,394.5
$1,325.3
$1,263.2
$1,207.4
$1,157.0
$1,111.4
$1,070.1
$1,032.6
$998.4
$967.2
$938.6
$912.4
$888.5
$866.4
$846.0
$827.2
$809.8
$793.7
$5.4
$5.4
$5.4
$5.4
$5.4
$5.4
$5.4
$5.4
$5.4
$5.4
$5.4
$5.4
$5.4
$5.4
$5.4
$5.4
$5.4
$5.4
$5.4
$5.4
$5.4
$5.4
$5.4
$5.4
$5.4
$5.4
$5.4
$5.4
$5.4
$5.4
$5.4
2063
2064
$0.1
$0.1
$778.8
$765.1
$5.4
$5.4
*Withdrawal costs are calculated using a quality-adjusted life-year that uses a 2% discount rate
Table 107. Undiscounted Annual Costs of the Rule, Main Analysis, High Impact Scenario ($ Millions, 2023)
Industry
Government
Consumer
Producer
Reading and
Economic
Premarket
Surplus
Premarket
Year Understanding Transition Reformulation Submission Testing (loss)
Review
Enforcement Search
Withdrawal*
2025 $700.4
$9,109.5
2026
$35.2
$0.1
$0.1
2027
$9.6 $2,892.8
$10,829.1
2028
$0.1 $5,707.5
$9.6
2029
$0.1 $5,130.7
$7.4
2030
$0.1 $4,621.1
$7.4
2031
$0.1 $4,173.5
$7.4
2032
$0.1 $3,782.2
$7.4
2033
$0.1 $3,438.7
$7.4
2034
$0.1 $3,137.8
$7.4
2035
$0.1 $2,873.5
$7.4
2036
$0.1 $2,640.3
$7.4
2037
$0.1 $2,433.9
$7.4
2038
$0.1 $2,250.8
$7.4
2039
$0.1 $2,087.5
$7.4
2040
$0.1 $1,943.8
$7.4
2041
$0.1 $1,817.5
$7.4
2042
$0.1 $1,706.3
$7.4
2043
$0.1 $1,607.7
$7.4
2044
$0.1 $1,520.0
$7.4
2045
$0.1 $1,441.7
$7.4
237
2046
2047
2048
2049
2050
2051
2052
2053
2054
2055
2056
2057
2058
2059
2060
2061
2062
2063
2064
$0.1
$0.1
$0.1
$0.1
$0.1
$0.1
$0.1
$0.1
$0.1
$0.1
$0.1
$0.1
$0.1
$0.1
$0.1
$0.1
$0.1
$0.1
$0.1
$1,371.5
$1,308.3
$1,251.5
$1,200.1
$1,153.7
$1,111.6
$1,073.2
$1,038.3
$1,006.4
$977.1
$950.3
$925.7
$903.0
$882.1
$862.8
$844.9
$828.3
$813.0
$798.8
$7.4
$7.4
$7.4
$7.4
$7.4
$7.4
$7.4
$7.4
$7.4
$7.4
$7.4
$7.4
$7.4
$7.4
$7.4
$7.4
$7.4
$7.4
$7.4
*Withdrawal costs are calculated using a quality-adjusted life-year that uses a 2% discount rate
2. Undiscounted Annual Benefits of the Rule for the Main Analysis, By Product Category
Table 108: Undiscounted Annual Averted Deaths and Quality-Adjusted Life Years Gained From of the Rule, Main Analysis, 50th
Percentile**
Year
Tobacco
Attributable*
Non-Premium
Cigar
Averted Deaths
Secondhand
Pipe Tobacco
Smoke
238
SIDS
Fire
QALYs Gained
Tobacco
Attributable*
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
2047
2048
2049
2050
2051
2052
2053
2054
2055
13,578
19,619
25,115
30,006
34,361
38,315
41,864
45,040
47,861
50,273
52,390
54,137
55,363
56,331
57,120
57,759
58,299
58,713
59,025
59,212
59,427
59,589
59,375
59,110
58,838
58,624
247
362
464
558
647
731
812
891
969
1,044
1,119
1,193
1,257
1,320
1,383
1,443
1,505
1,572
1,643
1,715
1,793
1,876
1,952
2,030
2,107
2,182
34
49
63
75
86
96
105
113
120
126
131
136
139
141
143
145
146
147
148
149
149
150
149
149
148
148
1,281
1,852
2,370
2,832
3,243
3,616
3,951
4,251
4,518
4,746
4,947
5,112
5,230
5,322
5,399
5,460
5,513
5,553
5,587
5,606
5,629
5,646
5,628
5,605
5,581
5,562
239
12
18
23
27
31
35
38
41
44
46
48
50
51
52
52
53
53
54
54
54
54
54
54
54
54
54
18
26
34
40
46
52
56
61
65
68
71
73
75
76
77
78
79
79
80
80
80
81
80
80
80
79
838,330
822,925
797,748
768,809
738,814
709,532
681,844
655,685
631,123
609,597
589,999
571,911
555,466
540,399
526,556
513,895
502,770
492,810
483,823
475,710
468,451
462,140
456,504
451,445
446,891
442,859
2056
2057
2058
2059
2060
2061
2062
2063
2064
58,341
58,176
58,070
57,843
57,725
57,420
56,425
55,496
54,660
2,259
2,348
2,446
2,547
2,653
2,753
2,818
2,886
2,958
147
146
146
146
146
145
142
140
138
5,537
5,523
5,514
5,494
5,485
5,457
5,364
5,278
5,201
53
53
53
53
53
53
52
51
50
79
79
79
79
78
78
77
75
74
439,315
436,235
433,581
431,318
429,402
428,198
427,214
426,414
425,758
*Note: "Tobacco Attributable" refers to only cigarettes and noncombusted products. Please see section II.G.1.a for additional detail
**Note: 50th percentile estimates are taken from each years’ results over the range of model outputs, therefore summing across years may result in rounding
differences and may not represent cumulative totals
Table 109. Undiscounted Annual Benefits of the Rule, Main Analysis, Low Impact Scenario by Product Category ($ Millions, 2023)
Value of Avoided Mortality
Year
2025
2026
2027
2028
2029
2030
2031
2032
2033
Value of
Avoided
Morbidity
Total
Benefits
Tobacco
Attributable*
NonPremium
Cigar
Pipe
Tobacco
Secondhand
Smoke
SIDS
Fire
Tobacco
Attributable*
All
Categories
$4,809.9
$10,917.7
$20,007.8
$30,985.0
$87.5
$201.5
$369.6
$576.9
$12.0
$27.3
$50.1
$77.6
$453.9
$1,030.4
$1,888.6
$2,925.7
$6.5
$14.7
$27.0
$41.8
$68,734.5
$80,446.3
$91,023.3
$100,128.0
$74,115.6
$92,663.2
$113,412.8
$134,806.8
$4.4
$10.0
$18.3
$28.3
240
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
2047
2048
2049
2050
2051
2052
2053
2054
2055
2056
2057
2058
2059
2060
2061
2062
2063
2064
$43,099.9
$55,701.3
$68,733.6
$82,110.6
$95,138.6
$108,131.2
$120,915.2
$133,282.8
$144,653.9
$155,579.8
$166,134.0
$176,609.5
$186,769.2
$196,470.6
$205,895.5
$214,561.5
$223,222.5
$231,606.1
$238,501.8
$245,272.2
$251,992.7
$258,735.8
$265,332.8
$272,941.2
$280,981.1
$287,764.9
$294,553.7
$301,158.7
$305,740.3
$310,421.3
$314,982.7
$812.0
$1,063.9
$1,334.4
$1,626.2
$1,927.4
$2,248.2
$2,586.4
$2,942.7
$3,292.5
$3,657.0
$4,037.4
$4,434.7
$4,849.1
$5,294.4
$5,770.5
$6,265.3
$6,793.7
$7,360.9
$7,927.7
$8,510.6
$9,124.6
$9,753.4
$10,413.2
$11,142.6
$11,954.0
$12,807.6
$13,710.3
$14,644.2
$15,498.2
$16,377.3
$17,282.2
$108.0
$139.5
$172.2
$205.8
$238.5
$271.2
$303.4
$334.6
$363.4
$391.2
$418.2
$445.0
$471.0
$496.2
$520.6
$543.1
$565.6
$587.6
$606.2
$623.4
$641.1
$659.6
$677.0
$695.2
$714.8
$732.9
$752.1
$770.0
$782.7
$794.5
$806.2
$4,070.5
$5,260.2
$6,492.5
$7,760.0
$8,991.0
$10,223.4
$11,437.1
$12,613.0
$13,699.7
$14,747.8
$15,765.3
$16,775.6
$17,757.0
$18,706.9
$19,625.1
$20,474.8
$21,322.8
$22,150.2
$22,854.1
$23,501.2
$24,170.0
$24,865.5
$25,520.2
$26,208.8
$26,948.4
$27,630.9
$28,352.8
$29,028.3
$29,505.7
$29,952.7
$30,390.8
$39.4
$51.0
$62.9
$75.2
$87.1
$99.1
$110.8
$122.2
$132.7
$142.9
$152.8
$162.6
$172.1
$181.3
$190.2
$198.4
$206.6
$214.6
$221.5
$227.7
$234.2
$240.9
$247.3
$254.0
$261.1
$267.7
$274.7
$281.3
$285.9
$290.2
$294.5
241
$58.2
$75.2
$92.8
$110.9
$128.5
$146.1
$163.5
$180.3
$195.8
$210.8
$225.3
$239.8
$253.8
$267.4
$280.5
$292.6
$304.8
$316.6
$326.6
$335.9
$345.5
$355.4
$364.8
$374.6
$385.2
$394.9
$405.2
$414.9
$421.7
$428.1
$434.4
$108,608.0
$116,381.8
$122,707.8
$128,378.6
$133,496.7
$138,335.1
$142,839.6
$146,386.9
$150,145.9
$152,942.5
$155,634.9
$157,733.6
$160,310.5
$163,052.2
$165,587.8
$167,584.4
$169,817.9
$171,704.2
$173,307.5
$175,273.2
$177,174.6
$179,133.7
$181,202.6
$183,228.4
$185,245.2
$187,630.7
$189,793.1
$192,133.5
$194,615.5
$197,090.6
$199,774.3
$156,856.4
$178,751.0
$199,692.7
$220,382.5
$240,141.3
$259,606.2
$278,525.7
$296,049.7
$312,687.4
$327,891.1
$342,602.0
$356,649.8
$370,846.2
$384,746.7
$398,161.6
$410,224.1
$422,550.5
$434,269.1
$444,084.9
$454,093.3
$464,041.6
$474,113.5
$484,136.7
$495,234.0
$506,890.0
$517,639.9
$528,262.9
$538,861.9
$547,288.2
$555,799.5
$564,416.2
*Note: "Tobacco Attributable" refers to only cigarettes and noncombusted products. Please see section II.G.1.a for additional detail
Table 110. Undiscounted Annual Benefits of the Rule, Main Analysis, Primary Impact Scenario by Product Category ($ Millions,
2023)
Value of Avoided Mortality
Year
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
Value of
Avoided
Morbidity
Total
Benefits
All
Categories
$736,889.7
$829,512.8
$908,966.1
$977,869.4
$1,038,737.2
$1,094,672.5
$1,146,061.8
$1,193,250.4
$1,236,439.9
$1,275,578.1
$1,311,724.1
$1,343,185.8
$1,367,180.6
$1,387,983.9
$1,406,813.5
Tobacco
Attributable*
NonPremium
Cigar
Pipe
Tobacco
Secondhand
Smoke
SIDS
Fire
Tobacco
Attributable*
$188,870.5
$275,621.7
$356,353.6
$430,019.0
$497,357.0
$560,125.5
$618,130.1
$671,684.6
$720,887.7
$764,786.0
$804,966.2
$840,123.3
$867,741.8
$891,745.2
$913,278.6
$3,437.7
$5,086.4
$6,581.3
$8,002.7
$9,364.0
$10,692.1
$11,991.9
$13,286.2
$14,587.9
$15,878.2
$17,187.4
$18,509.4
$19,699.0
$20,891.7
$22,105.7
$472.8
$690.0
$892.1
$1,076.6
$1,245.2
$1,402.3
$1,547.7
$1,681.8
$1,805.1
$1,915.3
$2,016.1
$2,104.4
$2,174.2
$2,234.8
$2,289.7
$17,824.8
$26,012.0
$33,631.6
$40,584.6
$46,940.8
$52,866.4
$58,344.9
$63,400.3
$68,049.0
$72,202.5
$76,003.3
$79,333.7
$81,966.1
$84,250.3
$86,317.9
$254.8
$371.8
$480.7
$580.1
$670.9
$755.6
$833.9
$906.2
$972.6
$1,032.0
$1,086.3
$1,133.9
$1,171.5
$1,204.2
$1,233.7
$525,591.7
$521,092.6
$510,201.4
$496,610.6
$482,007.4
$467,533.2
$453,781.6
$440,735.6
$428,467.6
$417,992.4
$408,599.7
$400,034.3
$392,416.6
$385,590.2
$379,469.7
$172.7
$252.1
$325.9
$393.3
$454.9
$512.3
$565.4
$614.3
$659.4
$699.6
$736.5
$768.7
$794.2
$816.4
$836.4
242
2045
2046
2047
2048
2049
2050
2051
2052
2053
2054
2055
2056
2057
2058
2059
2060
2061
2062
2063
2064
$932,727.8
$950,862.4
$967,195.0
$982,056.3
$995,006.7
$1,008,613.3
$1,021,481.1
$1,027,989.5
$1,033,627.5
$1,039,161.2
$1,045,745.0
$1,051,103.2
$1,058,603.1
$1,067,251.2
$1,073,695.0
$1,082,218.4
$1,087,270.9
$1,079,125.8
$1,071,969.0
$1,066,379.9
$23,309.8
$24,553.9
$25,890.7
$27,330.4
$28,826.3
$30,438.2
$32,164.9
$33,801.7
$35,492.3
$37,211.0
$38,916.2
$40,701.1
$42,723.2
$44,954.7
$47,274.5
$49,730.3
$52,129.3
$53,885.6
$55,742.6
$57,700.4
$2,339.0
$2,385.1
$2,426.6
$2,465.6
$2,498.9
$2,534.1
$2,567.5
$2,584.8
$2,599.8
$2,614.6
$2,631.8
$2,646.0
$2,665.6
$2,688.2
$2,705.4
$2,728.0
$2,741.0
$2,721.3
$2,704.3
$2,691.5
$88,176.7
$89,915.1
$91,480.1
$92,948.5
$94,203.5
$95,533.6
$96,790.0
$97,444.3
$98,008.8
$98,567.8
$99,213.6
$99,748.8
$100,490.9
$101,343.1
$101,989.0
$102,841.9
$103,333.0
$102,588.5
$101,948.1
$101,466.5
$854.4
$871.3
$886.4
$900.7
$912.8
$925.7
$937.9
$944.2
$949.7
$955.1
$961.4
$966.6
$973.7
$982.0
$988.3
$996.5
$1,001.3
$994.1
$987.9
$983.2
$1,260.3
$1,285.1
$1,307.5
$1,328.5
$1,346.4
$1,365.4
$1,383.4
$1,392.7
$1,400.8
$1,408.8
$1,418.0
$1,425.7
$1,436.3
$1,448.5
$1,457.7
$1,469.9
$1,476.9
$1,466.3
$1,457.1
$1,450.2
$374,048.7
$369,610.5
$365,911.4
$362,831.3
$360,314.6
$358,364.4
$357,071.9
$356,244.3
$355,819.2
$355,752.5
$356,068.1
$356,751.0
$357,792.6
$359,171.7
$360,869.6
$362,859.9
$365,460.5
$368,266.7
$371,252.9
$374,389.1
$1,424,026.0
$1,440,818.7
$1,456,456.3
$1,471,241.5
$1,484,508.1
$1,499,193.5
$1,513,833.9
$1,521,848.5
$1,529,353.6
$1,537,134.7
$1,546,427.3
$1,554,823.6
$1,566,177.7
$1,579,344.3
$1,590,493.9
$1,604,372.1
$1,614,947.3
$1,610,571.6
$1,607,575.8
$1,606,567.6
*Note: "Tobacco Attributable" refers to only cigarettes and noncombusted products. Please see section II.G.1.a for additional detail
Table 111. Undiscounted Annual Benefits of the Rule, Main Analysis, High Impact Scenario by Product Category ($ Millions, 2023)
Year
2025
Tobacco
Attributable*
NonPremium
Cigar
Value of Avoided Mortality
Value of
Avoided
Morbidity
Total
Benefits
Pipe
Tobacco
Tobacco
Attributable*
All
Categories
Secondhand
Smoke
SIDS
243
Fire
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
2047
2048
2049
2050
2051
2052
2053
2054
2055
2056
$323,871.1
$404,810.9
$479,297.0
$547,340.0
$610,077.8
$669,149.4
$724,043.4
$774,664.5
$820,728.8
$861,718.8
$899,934.1
$933,094.0
$958,154.3
$980,560.0
$999,320.5
$1,016,609.5
$1,033,482.8
$1,048,670.6
$1,062,725.6
$1,074,703.4
$1,087,461.2
$1,099,593.3
$1,105,263.0
$1,109,517.3
$1,113,836.7
$1,119,197.2
$1,122,748.0
$5,894.9
$7,470.6
$8,851.9
$10,186.1
$11,486.2
$12,773.2
$14,046.1
$15,323.2
$16,608.2
$17,890.1
$19,213.9
$20,556.4
$21,749.2
$22,967.4
$24,180.8
$25,400.9
$26,683.9
$28,069.9
$29,566.4
$31,125.0
$32,805.6
$34,609.7
$36,321.8
$38,079.1
$39,862.0
$41,628.0
$43,450.7
$810.8
$1,013.4
$1,199.9
$1,370.3
$1,527.4
$1,675.3
$1,812.8
$1,939.6
$2,055.1
$2,157.9
$2,253.8
$2,337.2
$2,400.5
$2,456.9
$2,504.6
$2,548.8
$2,592.0
$2,630.9
$2,667.3
$2,698.1
$2,731.2
$2,762.6
$2,777.5
$2,789.3
$2,800.9
$2,815.2
$2,824.7
$30,565.6
$38,204.4
$45,234.6
$51,657.1
$57,579.6
$63,156.6
$68,339.7
$73,120.9
$77,473.1
$81,351.0
$84,965.0
$88,107.4
$90,496.6
$92,621.3
$94,420.9
$96,087.1
$97,715.0
$99,179.9
$100,553.2
$101,715.5
$102,964.0
$104,146.9
$104,709.3
$105,152.1
$105,589.9
$106,127.3
$106,487.5
$296.2
$370.2
$438.3
$500.6
$557.9
$612.0
$662.2
$708.5
$750.7
$788.3
$823.3
$853.8
$876.9
$897.5
$914.9
$931.1
$946.9
$961.0
$974.4
$985.6
$997.7
$1,009.2
$1,014.6
$1,018.9
$1,023.2
$1,028.4
$1,031.9
244
$436.9
$546.0
$646.5
$738.3
$823.0
$902.7
$976.8
$1,045.1
$1,107.3
$1,162.7
$1,214.4
$1,259.3
$1,293.4
$1,323.8
$1,349.5
$1,373.3
$1,396.6
$1,417.5
$1,437.2
$1,453.8
$1,471.6
$1,488.5
$1,496.6
$1,502.9
$1,509.2
$1,516.8
$1,522.0
$567,423.4
$546,517.0
$527,157.8
$509,098.4
$492,140.2
$476,277.6
$461,678.3
$448,246.3
$435,660.6
$425,050.0
$415,672.4
$407,178.8
$399,627.2
$392,887.0
$386,850.3
$381,516.3
$377,163.0
$373,539.7
$370,544.6
$368,112.4
$366,246.6
$365,042.1
$364,303.6
$363,966.4
$363,986.4
$364,389.9
$365,162.9
$929,752.7
$999,499.8
$1,063,497.8
$1,121,657.9
$1,175,047.2
$1,225,484.6
$1,272,574.2
$1,316,134.0
$1,355,534.3
$1,391,326.9
$1,425,338.6
$1,454,695.0
$1,475,942.0
$1,495,089.3
$1,510,943.7
$1,525,894.0
$1,541,431.2
$1,555,942.3
$1,569,961.8
$1,582,304.3
$1,596,207.0
$1,610,198.9
$1,617,441.3
$1,623,587.5
$1,630,176.2
$1,638,278.8
$1,644,809.0
2057
2058
2059
2060
2061
2062
2063
2064
$1,129,307.7
$1,137,600.7
$1,143,770.2
$1,152,484.5
$1,154,060.3
$1,142,041.7
$1,133,199.7
$1,127,068.6
$45,553.8
$47,892.6
$50,338.8
$52,932.3
$55,316.6
$57,018.0
$58,917.6
$60,969.9
$2,842.2
$2,863.9
$2,880.7
$2,903.6
$2,908.6
$2,879.5
$2,858.3
$2,844.0
$107,148.8
$107,966.2
$108,599.9
$109,463.6
$109,650.9
$108,551.9
$107,755.0
$107,215.8
$1,038.3
$1,046.2
$1,052.3
$1,060.7
$1,062.5
$1,051.9
$1,044.1
$1,038.9
$1,531.4
$1,543.1
$1,552.2
$1,564.5
$1,567.2
$1,551.5
$1,540.1
$1,532.4
$366,297.6
$367,773.9
$369,571.6
$371,662.8
$374,364.7
$377,273.2
$380,364.9
$383,611.6
$1,655,311.0
$1,668,289.9
$1,679,378.4
$1,693,697.5
$1,700,559.0
$1,691,979.6
$1,687,280.0
$1,685,873.4
*Note: "Tobacco Attributable" refers to only cigarettes and noncombusted products. Please see section II.G.1.a for additional detail
3. Undiscounted Annual Transfers of the Rule for the Main Analysis
Table 112. Undiscounted Annual Transfers of the Rule, Main Analysis, Low Impact Scenario ($ Millions, 2023)
Year
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
Federal Tax to
Consumers
$306.2
$564.1
$786.1
$978.8
$1,140.9
$1,278.7
$1,391.3
$1,490.6
State Tax to
Consumers
$645.7
$1,176.3
$1,632.3
$2,027.3
$2,359.2
$2,640.6
$2,870.3
$3,072.8
Firm Revenue to
Consumers
-$4,395.6
-$2,485.1
-$781.4
$954.6
$2,896.3
$4,293.8
$5,399.5
$6,283.2
245
User Fees from Combusted to Noncombusted
Firms
$0.0
$5.7
$6.5
$7.5
$8.4
$9.4
$10.5
$11.8
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
2047
2048
2049
2050
2051
2052
2053
2054
2055
2056
2057
2058
2059
2060
2061
2062
2063
2064
$1,576.2
$1,638.7
$1,687.4
$1,731.4
$1,765.9
$1,799.0
$1,817.0
$1,830.3
$1,840.6
$1,845.9
$1,843.0
$1,842.3
$1,840.0
$1,842.6
$1,837.6
$1,831.0
$1,823.5
$1,810.4
$1,800.7
$1,792.5
$1,781.4
$1,773.3
$1,762.9
$1,754.8
$1,745.5
$1,738.2
$1,728.8
$1,718.8
$1,710.8
$3,247.0
$3,373.8
$3,472.3
$3,561.1
$3,630.2
$3,696.7
$3,732.2
$3,758.2
$3,778.2
$3,787.8
$3,780.9
$3,778.7
$3,773.1
$3,777.7
$3,766.9
$3,752.7
$3,737.0
$3,709.7
$3,689.7
$3,672.5
$3,649.6
$3,633.0
$3,611.7
$3,595.2
$3,576.2
$3,561.3
$3,542.2
$3,522.2
$3,506.0
$7,001.9
$7,506.0
$7,904.1
$8,234.5
$8,528.6
$8,798.0
$8,974.1
$9,097.5
$9,214.2
$9,294.9
$9,320.1
$9,357.9
$9,381.2
$9,440.9
$9,438.5
$9,441.9
$9,440.5
$9,404.8
$9,390.8
$9,381.9
$9,366.5
$9,362.4
$9,336.1
$9,328.2
$9,315.6
$9,314.4
$9,304.6
$9,284.8
$9,282.6
246
$13.4
$15.2
$17.0
$18.9
$21.0
$23.2
$25.6
$27.8
$30.0
$32.3
$34.5
$36.6
$38.7
$40.8
$43.0
$45.0
$46.8
$48.5
$50.0
$51.5
$52.9
$54.2
$55.6
$56.7
$57.9
$58.9
$60.0
$60.9
$61.6
Table 113. Undiscounted Annual Transfers of the Rule, Main Analysis, Primary Impact Scenario ($ Millions, 2023)
Year
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
2047
2048
2049
2050
Federal Tax to
Consumers
$4,910.6
$6,291.7
$6,678.2
$6,660.9
$6,483.6
$6,252.4
$6,007.4
$5,766.1
$5,536.1
$5,318.8
$5,114.6
$4,923.9
$4,748.5
$4,587.8
$4,440.7
$4,306.0
$4,182.6
$4,069.0
$3,964.5
$3,868.4
$3,779.9
$3,698.4
$3,623.3
State Tax to
Consumers
$10,160.9
$12,998.7
$13,784.7
$13,740.5
$13,367.8
$12,884.9
$12,374.2
$11,872.0
$11,393.6
$10,941.8
$10,517.5
$10,121.4
$9,757.3
$9,423.8
$9,118.7
$8,839.5
$8,583.7
$8,348.4
$8,132.2
$7,933.4
$7,750.4
$7,582.1
$7,427.1
Firm Revenue to
Consumers
$13,681.2
$24,405.3
$29,162.5
$30,417.6
$32,206.3
$31,821.0
$30,907.3
$29,791.6
$28,635.4
$27,491.1
$26,388.8
$25,303.5
$24,373.7
$23,518.3
$22,721.2
$21,999.2
$21,335.5
$20,723.6
$20,164.7
$19,651.8
$19,164.4
$18,727.9
$18,325.4
247
User Fees from Combusted to Noncombusted
Firms
$0.0
$51.2
$108.6
$185.7
$269.4
$338.0
$385.4
$413.9
$430.1
$439.4
$444.2
$445.8
$446.6
$446.0
$444.5
$442.5
$440.6
$438.9
$437.2
$435.7
$434.4
$433.2
$432.1
2051
2052
2053
2054
2055
2056
2057
2058
2059
2060
2061
2062
2063
2064
$3,554.0
$3,490.0
$3,431.0
$3,376.4
$3,325.7
$3,278.9
$3,235.6
$3,195.4
$3,158.1
$3,123.4
$3,091.1
$3,061.1
$3,033.3
$3,007.4
$7,284.3
$7,152.3
$7,030.9
$6,918.5
$6,814.5
$6,718.4
$6,629.5
$6,547.3
$6,471.0
$6,400.2
$6,334.5
$6,273.3
$6,216.8
$6,164.4
$17,966.6
$17,628.5
$17,339.1
$17,077.1
$16,826.8
$16,603.0
$16,403.4
$16,220.6
$16,059.6
$15,913.6
$15,784.2
$15,668.8
$15,571.1
$15,486.4
$431.1
$430.1
$429.3
$428.5
$427.9
$427.3
$426.8
$426.2
$425.8
$425.3
$425.0
$424.6
$424.3
$424.1
Table 114. Undiscounted Annual Transfers of the Rule, Main Analysis, High Impact Scenario ($ Millions, 2023)
Year
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
Federal Tax to
Consumers
State Tax to
Consumers
Firm Revenue to
Consumers
User Fees from Combusted to Noncombusted
Firms
$8,120.1
$7,718.7
$7,335.0
$6,978.1
$6,648.8
$6,344.3
$6,063.7
$16,793.0
$15,953.1
$15,152.5
$14,408.3
$13,721.9
$13,087.2
$12,502.6
$26,520.3
$26,716.6
$26,066.5
$25,262.9
$26,701.3
$26,171.0
$25,335.1
$0.0
$558.6
$565.0
$565.9
$564.7
$562.6
$559.5
248
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
2047
2048
2049
2050
2051
2052
2053
2054
2055
2056
2057
2058
2059
2060
2061
2062
2063
2064
$5,804.9
$5,565.6
$5,344.2
$5,138.9
$4,948.1
$4,773.6
$4,614.5
$4,469.5
$4,336.9
$4,215.2
$4,103.4
$4,000.5
$3,905.8
$3,818.5
$3,738.0
$3,663.8
$3,595.4
$3,532.3
$3,473.9
$3,419.8
$3,369.7
$3,323.3
$3,280.3
$3,240.5
$3,203.5
$3,169.0
$3,136.9
$3,107.0
$3,079.3
$3,053.5
$11,963.6
$11,465.4
$11,004.4
$10,577.4
$10,180.5
$9,817.5
$9,486.9
$9,185.6
$8,910.3
$8,657.7
$8,425.7
$8,212.4
$8,016.1
$7,835.4
$7,668.9
$7,515.7
$7,374.4
$7,244.1
$7,123.7
$7,012.3
$6,909.2
$6,813.8
$6,725.6
$6,644.0
$6,568.2
$6,497.7
$6,432.3
$6,371.4
$6,315.0
$6,262.7
$24,415.6
$23,489.4
$22,602.0
$21,757.5
$20,927.0
$20,226.4
$19,586.8
$19,010.4
$18,491.4
$18,001.1
$17,552.3
$17,145.9
$16,775.8
$16,422.8
$16,087.8
$15,789.7
$15,526.8
$15,296.3
$15,081.7
$14,892.3
$14,716.0
$14,554.1
$14,410.9
$14,283.7
$14,170.4
$14,069.4
$13,977.7
$13,901.1
$13,836.7
$13,781.5
249
$556.5
$553.4
$550.5
$547.8
$545.2
$542.8
$539.9
$537.1
$534.4
$531.9
$529.6
$527.6
$525.7
$523.9
$522.3
$520.8
$519.3
$518.0
$516.8
$515.6
$514.5
$513.5
$512.6
$511.7
$510.9
$510.1
$509.4
$508.7
$508.1
$507.5
4. Undiscounted Annual Costs of the Rule for the No Menthol, No Cigar Flavors Baseline
Table 115. Undiscounted Annual Costs of the Rule, No Cigar Flavors, No Menthol Analysis, Low Impact Scenario ($ Millions, 2023)
Industry
Reading and
Economic
Year Understanding Transition
2025 $112.1
2026
$4,306.9
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
2047
Government
Premarket
Reformulation Submission Testing
$8,968.0
Consumer
Producer
Surplus
Premarket
(loss)
Review
Enforcement Search
$15.0
Withdrawal
$15.6
$5.6
$5.2
$4.8
$4.5
$4.2
$3.9
$3.7
$3.4
$3.2
$3.0
$2.9
$2.7
$2.6
$2.4
$2.3
$2.2
$2.1
$2.0
$2.0
$1.9
250
$11.7
$36.0
$69.4
$107.0
$149.4
$192.9
$235.9
$278.4
$318.1
$352.1
$384.2
$412.6
$438.7
$460.6
$483.3
$504.6
$524.1
$541.2
$554.1
$567.0
$4.2
$4.2
$3.5
$3.5
$3.5
$3.5
$3.5
$3.5
$3.5
$3.5
$3.5
$3.5
$3.5
$3.5
$3.5
$3.5
$3.5
$3.5
$3.5
$3.5
$3.5
$517.7
$18.0
2048
2049
2050
2051
2052
2053
2054
2055
2056
2057
2058
2059
2060
2061
2062
2063
2064
$1.8
$1.8
$1.7
$1.7
$1.6
$1.6
$1.6
$1.5
$1.5
$1.5
$1.4
$1.4
$1.4
$1.4
$1.4
$1.4
$1.3
$576.2
$581.8
$589.0
$595.2
$600.4
$604.7
$608.5
$611.4
$614.4
$616.7
$618.0
$618.7
$619.6
$621.0
$619.6
$619.6
$619.0
$3.5
$3.5
$3.5
$3.5
$3.5
$3.5
$3.5
$3.5
$3.5
$3.5
$3.5
$3.5
$3.5
$3.5
$3.5
$3.5
$3.5
Table 116. Undiscounted Annual Costs of the Rule, No Cigar Flavors, No Menthol Analysis, Primary Impact Scenario ($ Millions,
2023)
Industry
Year
2025
2026
2027
2028
2029
2030
Government
Reading and Economic
Premarket
Reformulation
Testing
Understanding Transition
Submission
Producer
Surplus
(loss)
Premarket
Enforcement
Review
Consumer
Search
Withdrawal
$1,553.0
$1,665.8
$373.5
$7,145.1
$610.4
$1.0
$1.1
$4.3
$2.3
$1.3
251
$1,738.5
$3,294.2
$4,119.8
$6.9
$6.9
$5.4
$5.4
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
2047
2048
2049
2050
2051
2052
2053
2054
2055
2056
2057
2058
2059
2060
2061
$0.8
$0.5
$0.4
$0.3
$0.2
$0.2
$0.2
$0.2
$0.2
$0.2
$0.2
$0.2
$0.2
$0.2
$0.2
$0.2
$0.2
$0.2
$0.2
$0.2
$0.2
$0.2
$0.2
$0.2
$0.2
$0.2
$0.2
$0.2
$0.2
$0.2
$0.2
252
$4,431.5
$4,475.0
$4,382.1
$4,226.4
$4,046.7
$3,863.5
$3,683.0
$3,510.3
$3,347.6
$3,199.6
$3,066.1
$2,945.8
$2,836.5
$2,737.3
$2,646.7
$2,564.3
$2,488.8
$2,420.0
$2,356.8
$2,298.8
$2,245.5
$2,196.3
$2,151.1
$2,109.2
$2,070.5
$2,034.7
$2,001.7
$1,971.2
$1,942.8
$1,916.5
$1,892.0
$5.4
$5.4
$5.4
$5.4
$5.4
$5.4
$5.4
$5.4
$5.4
$5.4
$5.4
$5.4
$5.4
$5.4
$5.4
$5.4
$5.4
$5.4
$5.4
$5.4
$5.4
$5.4
$5.4
$5.4
$5.4
$5.4
$5.4
$5.4
$5.4
$5.4
$5.4
2062
2063
2064
$0.2
$0.2
$0.2
$1,869.3
$1,848.3
$1,828.8
$5.4
$5.4
$5.4
Table 117. Undiscounted Annual Costs of the Rule, No Cigar Flavors, No Menthol Analysis, High Impact Scenario ($ Millions, 2023)
Industry
Year
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
Government
Reading and Economic
Premarket
Reformulation
Testing
Understanding Transition
Submission
Producer
Premarket
Enforcement
Surplus
Review
(loss)
Consumer
Search
Withdrawal
$3,106.0
$10,829.1
$700.4
$9,109.5
$35.2
$0.1
$0.1
$0.5
$0.2
$0.2
$0.1
$0.1
$0.1
$0.1
$0.1
$0.1
$0.1
$0.1
$0.1
$0.1
$0.1
$0.1
$0.1
$0.1
253
$6,353.6
$6,132.3
$5,769.8
$5,415.1
$5,088.0
$4,789.5
$4,518.3
$4,271.5
$4,046.0
$3,839.3
$3,649.6
$3,474.4
$3,319.1
$3,180.5
$3,056.1
$2,944.0
$2,842.5
$9.6
$9.6
$7.4
$7.4
$7.4
$7.4
$7.4
$7.4
$7.4
$7.4
$7.4
$7.4
$7.4
$7.4
$7.4
$7.4
$7.4
$7.4
2045
2046
2047
2048
2049
2050
2051
2052
2053
2054
2055
2056
2057
2058
2059
2060
2061
2062
2063
2064
$0.1
$0.1
$0.1
$0.1
$0.1
$0.1
$0.1
$0.1
$0.1
$0.1
$0.1
$0.1
$0.1
$0.1
$0.1
$0.1
$0.1
$0.1
$0.1
$0.1
$2,750.0
$2,665.7
$2,588.4
$2,517.8
$2,452.9
$2,393.4
$2,338.6
$2,288.1
$2,241.6
$2,198.5
$2,158.6
$2,121.8
$2,087.8
$2,056.3
$2,027.0
$1,999.8
$1,974.5
$1,951.0
$1,929.3
$1,909.2
$7.4
$7.4
$7.4
$7.4
$7.4
$7.4
$7.4
$7.4
$7.4
$7.4
$7.4
$7.4
$7.4
$7.4
$7.4
$7.4
$7.4
$7.4
$7.4
$7.4
5. Undiscounted Annual Benefits of the Rule for the No Menthol, No Cigar Flavors Baseline
Table 118. Undiscounted Annual Benefits of the Rule, No Cigar Flavors, No Menthol Analysis, Low Impact Scenario by Product
Category ($ Millions, 2023)
Avoided Morbidity
Avoided Mortality
Year
Tobacco Attributable* Non-Premium Cigar Pipe Tobacco Secondhand Smoke SIDS
254
Fire
Tobacco Attributable*
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
2047
2048
2049
2050
2051
2052
2053
2054
2055
$4,075.7
$9,631.8
$18,165.0
$28,566.5
$40,343.4
$52,748.2
$65,977.1
$79,812.5
$93,609.4
$107,661.1
$121,817.2
$135,894.2
$149,313.8
$162,419.7
$175,775.8
$189,169.9
$202,506.8
$215,592.3
$228,631.3
$240,855.3
$253,572.2
$265,983.7
$276,876.1
$288,075.5
$299,049.0
$309,924.8
$73.8
$176.4
$332.5
$526.1
$750.6
$992.8
$1,259.8
$1,551.6
$1,857.3
$2,186.5
$2,540.8
$2,918.7
$3,298.3
$3,700.1
$4,126.1
$4,577.6
$5,058.9
$5,569.7
$6,134.7
$6,707.1
$7,334.4
$8,010.6
$8,668.8
$9,374.5
$10,110.2
$10,875.6
$10.2
$24.1
$45.5
$71.6
$101.1
$132.2
$165.4
$200.2
$234.8
$270.1
$306.0
$341.7
$375.8
$409.7
$443.7
$478.3
$513.3
$547.1
$582.0
$613.6
$646.9
$680.3
$708.1
$736.7
$765.5
$796.1
$384.7
$909.0
$1,714.9
$2,697.7
$3,811.6
$4,983.0
$6,234.8
$7,548.3
$8,853.0
$10,184.1
$11,537.2
$12,880.6
$14,168.0
$15,446.8
$16,726.9
$18,031.1
$19,350.1
$20,623.0
$21,939.3
$23,131.9
$24,388.5
$25,644.6
$26,695.8
$27,772.3
$28,858.0
$30,011.3
255
$3.7
$8.8
$16.6
$26.1
$36.9
$48.3
$60.4
$73.1
$85.8
$98.7
$111.8
$124.8
$137.3
$149.7
$162.1
$174.7
$187.5
$199.8
$212.6
$224.1
$236.3
$248.5
$258.7
$269.1
$279.6
$290.8
$5.5
$13.0
$24.5
$38.6
$54.5
$71.2
$89.1
$107.9
$126.5
$145.6
$164.9
$184.1
$202.5
$220.8
$239.1
$257.7
$276.6
$294.8
$313.6
$330.6
$348.6
$366.5
$381.6
$396.9
$412.5
$428.9
$77,297.0
$93,503.7
$108,063.2
$121,926.6
$134,882.8
$147,018.2
$157,437.6
$167,470.4
$176,298.9
$184,739.7
$193,833.6
$202,254.3
$210,319.7
$217,974.9
$224,799.8
$231,671.8
$237,968.2
$243,806.9
$249,731.1
$255,513.5
$261,119.2
$266,918.4
$272,590.0
$278,136.8
$283,826.6
$289,213.1
2056
2057
2058
2059
2060
2061
2062
2063
2064
$321,345.0
$333,705.2
$347,048.1
$359,401.8
$371,799.1
$384,226.6
$394,295.2
$405,379.0
$416,513.0
$11,688.8
$12,568.0
$13,562.5
$14,605.9
$15,676.3
$16,834.0
$17,888.1
$19,030.5
$20,150.1
$826.4
$857.2
$891.7
$924.4
$957.0
$991.7
$1,018.2
$1,047.2
$1,073.2
$31,153.2
$32,317.1
$33,614.8
$34,850.2
$36,079.4
$37,383.9
$38,383.9
$39,479.1
$40,457.9
$301.9
$313.2
$325.7
$337.7
$349.6
$362.2
$371.9
$382.5
$392.0
$445.3
$461.9
$480.4
$498.1
$515.7
$534.3
$548.6
$564.3
$578.3
$294,566.0
$300,152.8
$305,552.5
$311,244.2
$316,891.9
$322,360.9
$327,790.7
$333,047.4
$338,668.1
*Note: "Tobacco Attributable" refers to only cigarettes and noncombusted products. Please see section II.G.1.a for additional detail
Table 119. Undiscounted Annual Benefits of the Rule, No Cigar Flavors, No Menthol Analysis, Primary Impact Scenario by Product
Category ($ Millions, 2023)
Avoided Morbidity
Avoided Mortality, Monetized by VSL
Year
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
Tobacco Attributable* Non-Premium Cigar Pipe Tobacco Secondhand Smoke SIDS
Fire
Tobacco Attributable*
$172,094.0
$262,468.2
$348,636.8
$430,337.7
$506,291.6
$577,995.6
$645,406.6
$708,583.0
$232.1
$354.0
$470.3
$580.5
$683.0
$779.7
$870.8
$956.0
$564,341.2
$580,263.1
$585,469.0
$585,021.1
$581,241.2
$575,823.9
$569,971.8
$564,038.4
$3,114.6
$4,808.0
$6,380.2
$7,921.2
$9,409.8
$10,869.6
$12,309.9
$13,749.8
$430.8
$657.1
$872.8
$1,077.4
$1,267.6
$1,447.1
$1,616.1
$1,774.3
$16,241.5
$24,770.7
$32,903.6
$40,616.1
$47,785.7
$54,554.7
$60,924.1
$66,890.4
256
$157.4
$240.0
$318.8
$393.6
$463.0
$528.6
$590.3
$648.2
2038
2039
2040
2041
2042
2043
2044
2045
2046
2047
2048
2049
2050
2051
2052
2053
2054
2055
2056
2057
2058
2059
2060
2061
2062
2063
2064
$767,576.6
$820,989.2
$871,058.0
$916,311.4
$953,744.8
$987,739.2
$1,018,705.3
$1,048,325.5
$1,075,943.5
$1,101,229.1
$1,124,969.9
$1,146,453.7
$1,168,652.1
$1,189,992.8
$1,204,187.1
$1,217,628.4
$1,230,977.4
$1,245,562.3
$1,259,269.1
$1,275,458.5
$1,292,682.2
$1,307,351.4
$1,324,801.7
$1,339,659.4
$1,340,333.6
$1,341,816.3
$1,344,484.4
$15,202.2
$16,642.6
$18,114.1
$19,613.9
$20,978.2
$22,363.2
$23,760.8
$25,170.9
$26,620.6
$28,165.6
$29,804.1
$31,510.6
$33,335.9
$35,283.3
$37,139.0
$39,056.0
$41,001.0
$42,926.8
$44,950.9
$47,208.0
$49,671.8
$52,208.0
$54,877.2
$57,531.8
$59,602.8
$61,754.2
$63,968.0
$1,922.1
$2,056.2
$2,181.9
$2,296.1
$2,390.3
$2,476.5
$2,555.1
$2,630.0
$2,701.0
$2,766.4
$2,827.4
$2,882.8
$2,940.4
$2,996.2
$3,033.8
$3,069.2
$3,104.4
$3,142.2
$3,177.9
$3,220.0
$3,265.7
$3,304.4
$3,350.3
$3,389.1
$3,392.5
$3,398.3
$3,406.9
$72,461.8
$77,515.4
$82,253.4
$86,558.4
$90,112.9
$93,360.4
$96,325.1
$99,148.5
$101,823.3
$104,289.0
$106,588.1
$108,676.2
$110,848.6
$112,952.9
$114,370.1
$115,704.8
$117,031.1
$118,456.7
$119,803.6
$121,389.6
$123,112.4
$124,570.0
$126,301.3
$127,763.3
$127,894.0
$128,110.5
$128,436.8
$702.1
$751.1
$797.0
$838.7
$873.2
$904.7
$933.4
$960.7
$986.7
$1,010.6
$1,032.8
$1,053.1
$1,074.1
$1,094.5
$1,108.2
$1,121.2
$1,134.0
$1,147.8
$1,160.9
$1,176.3
$1,193.0
$1,207.1
$1,223.8
$1,238.0
$1,239.3
$1,241.4
$1,244.5
$1,035.7
$1,107.9
$1,175.6
$1,237.1
$1,288.0
$1,334.4
$1,376.7
$1,417.1
$1,455.3
$1,490.6
$1,523.4
$1,553.3
$1,584.3
$1,614.4
$1,634.7
$1,653.7
$1,672.7
$1,693.1
$1,712.3
$1,735.0
$1,759.6
$1,780.4
$1,805.2
$1,826.1
$1,827.9
$1,831.0
$1,835.7
$557,748.8
$553,365.1
$549,715.9
$546,473.3
$543,878.1
$541,900.6
$540,372.3
$539,267.2
$539,145.3
$539,686.6
$540,730.5
$542,217.2
$544,218.5
$546,836.4
$549,873.6
$553,254.7
$556,940.3
$560,979.0
$565,366.4
$570,108.7
$575,191.5
$580,586.2
$586,278.8
$592,766.2
$599,452.0
$606,305.2
$613,282.5
*Note: "Tobacco Attributable" refers to only cigarettes and noncombusted products. Please see section II.G.1.a for additional detail
257
Table 120. Undiscounted Annual Benefits of the Rule, No Cigar Flavors, No Menthol Analysis, High Impact Scenario by Product
Category ($ Millions, 2023)
Avoided Morbidity
Avoided Mortality, Monetized by VSL
Year
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
2047
2048
2049
Tobacco Attributable* Non-Premium Cigar Pipe Tobacco Secondhand Smoke SIDS
Fire
Tobacco Attributable*
$323,694.8
$414,050.8
$497,331.4
$574,755.3
$646,989.8
$714,975.7
$779,673.1
$839,508.9
$895,429.6
$946,150.8
$993,910.1
$1,036,998.3
$1,071,381.9
$1,102,975.6
$1,130,964.8
$1,157,199.3
$1,183,048.7
$1,206,832.9
$1,229,459.4
$1,249,569.2
$436.6
$558.5
$670.8
$775.3
$872.8
$964.5
$1,051.8
$1,132.7
$1,208.3
$1,276.8
$1,341.4
$1,399.9
$1,446.6
$1,489.5
$1,527.9
$1,564.3
$1,600.1
$1,633.1
$1,664.5
$1,692.9
$641,923.3
$630,780.7
$620,423.6
$610,700.7
$601,424.3
$592,675.7
$584,627.5
$577,271.6
$570,222.0
$565,318.4
$561,438.5
$558,175.3
$555,635.8
$553,685.6
$552,223.3
$551,261.6
$551,277.0
$551,915.1
$553,073.6
$554,695.1
$5,858.4
$7,584.7
$9,101.2
$10,579.3
$12,024.7
$13,445.6
$14,869.7
$16,290.0
$17,735.7
$19,179.7
$20,667.9
$22,193.6
$23,562.7
$24,963.3
$26,369.6
$27,785.1
$29,268.3
$30,859.0
$32,565.0
$34,344.3
$810.3
$1,036.5
$1,245.1
$1,438.9
$1,619.8
$1,790.1
$1,952.1
$2,102.1
$2,242.5
$2,369.6
$2,489.5
$2,598.0
$2,684.8
$2,764.4
$2,835.7
$2,903.2
$2,969.6
$3,030.9
$3,089.3
$3,142.0
$30,549.0
$39,076.4
$46,936.7
$54,245.3
$61,064.7
$67,483.9
$73,593.3
$79,248.1
$84,538.0
$89,332.2
$93,850.0
$97,942.7
$101,214.5
$104,215.3
$106,900.9
$109,445.8
$111,950.6
$114,261.7
$116,461.8
$118,449.1
258
$296.0
$378.6
$454.8
$525.6
$591.7
$653.9
$713.1
$767.9
$819.2
$865.6
$909.4
$949.1
$980.8
$1,009.8
$1,035.9
$1,060.5
$1,084.8
$1,107.2
$1,128.5
$1,147.8
2050
2051
2052
2053
2054
2055
2056
2057
2058
2059
2060
2061
2062
2063
2064
$1,270,871.8
$1,291,489.2
$1,304,622.1
$1,316,470.1
$1,328,318.7
$1,341,391.1
$1,352,814.6
$1,367,969.6
$1,384,772.5
$1,399,296.5
$1,417,155.7
$1,428,528.1
$1,424,338.1
$1,423,513.0
$1,425,036.4
$36,247.6
$38,281.1
$40,219.4
$42,208.2
$44,220.5
$46,212.9
$48,273.5
$50,616.9
$53,184.4
$55,859.6
$58,669.4
$61,316.4
$63,315.7
$65,489.1
$67,781.1
$3,197.2
$3,250.8
$3,285.4
$3,316.9
$3,348.2
$3,382.7
$3,412.8
$3,452.5
$3,496.6
$3,535.5
$3,581.8
$3,612.0
$3,603.9
$3,603.8
$3,610.0
$120,530.5
$122,550.0
$123,856.0
$125,043.2
$126,220.7
$127,524.8
$128,659.1
$130,155.1
$131,818.4
$133,282.9
$135,029.2
$136,168.0
$135,861.1
$135,858.4
$136,092.9
$1,167.9
$1,187.5
$1,200.2
$1,211.7
$1,223.1
$1,235.7
$1,246.7
$1,261.2
$1,277.3
$1,291.5
$1,308.4
$1,319.5
$1,316.5
$1,316.5
$1,318.7
$1,722.7
$1,751.6
$1,770.2
$1,787.2
$1,804.0
$1,822.7
$1,838.9
$1,860.3
$1,884.0
$1,905.0
$1,929.9
$1,946.2
$1,941.8
$1,941.8
$1,945.1
$556,812.4
$559,572.5
$562,747.4
$566,270.2
$570,095.6
$574,275.2
$578,806.2
$583,695.7
$588,929.4
$594,478.4
$600,328.2
$606,975.9
$613,826.7
$620,848.6
$628,000.3
*Note: "Tobacco Attributable" refers to only cigarettes and noncombusted products. Please see section II.G.1.a for additional detail
6. Undiscounted Transfers of the Rule for the No Menthol, No Cigar Flavors Baseline
Table 121. Undiscounted Annual Transfers of the Rule, No Cigar Flavors, No Menthol Analysis, Low Impact Scenario ($ Millions,
2023)
Federal Tax to
Year Consumers
2025
2026
2027
2028
$315.0
State Tax to
Consumers
$594.3
Firm Revenue to
Consumers
-$4,826.1
259
User Fees from Combusted to Noncombusted
Firms
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
2047
2048
2049
2050
2051
2052
2053
2054
2055
2056
2057
2058
2059
$600.7
$850.1
$1,059.0
$1,247.0
$1,406.7
$1,540.0
$1,654.0
$1,747.4
$1,816.4
$1,875.4
$1,921.0
$1,957.9
$1,984.0
$2,010.6
$2,033.2
$2,051.9
$2,065.6
$2,071.5
$2,077.8
$2,077.9
$2,071.8
$2,070.7
$2,067.6
$2,063.2
$2,058.4
$2,053.5
$2,048.0
$2,043.0
$2,037.3
$2,030.7
$2,024.0
$1,131.6
$1,600.3
$1,992.7
$2,345.6
$2,645.4
$2,895.5
$3,109.3
$3,284.4
$3,413.6
$3,524.1
$3,609.2
$3,678.1
$3,726.6
$3,776.1
$3,818.2
$3,852.8
$3,878.1
$3,888.9
$3,900.3
$3,900.2
$3,888.4
$3,886.0
$3,880.0
$3,871.3
$3,862.0
$3,852.6
$3,842.1
$3,832.4
$3,821.5
$3,809.0
$3,796.3
-$2,788.7
-$728.8
$1,317.5
$3,734.7
$5,602.6
$7,126.0
$8,432.5
$9,531.8
$10,417.4
$11,226.2
$11,879.4
$12,497.1
$13,055.9
$13,584.2
$14,062.8
$14,530.9
$14,935.5
$15,277.4
$15,609.5
$15,873.7
$16,080.8
$16,332.8
$16,538.5
$16,709.8
$16,886.6
$17,052.0
$17,200.1
$17,352.4
$17,492.3
$17,618.6
$17,745.3
260
$5.6
$6.4
$7.2
$7.9
$8.7
$9.6
$10.8
$12.1
$13.6
$15.1
$16.7
$18.3
$20.1
$21.8
$23.6
$25.5
$27.4
$29.3
$31.1
$32.9
$34.6
$36.1
$37.7
$39.3
$40.8
$42.3
$43.7
$45.0
$46.4
$47.6
$48.8
2060
2061
2062
2063
2064
$2,017.5
$2,012.1
$2,003.8
$1,997.4
$1,990.2
$3,783.9
$3,773.5
$3,757.7
$3,745.7
$3,732.0
$17,857.5
$17,976.2
$18,073.7
$18,172.6
$18,270.4
$49.9
$50.9
$52.0
$52.8
$53.6
Table 122. Undiscounted Annual Transfers of the Rule, No Cigar Flavors, No Menthol Analysis, Primary Impact Scenario ($
Millions, 2023)
Year
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
Federal Tax to
Consumers
$4,590.7
$6,292.9
$6,955.4
$7,109.0
$7,034.1
$6,853.5
$6,628.8
$6,390.9
$6,155.7
$5,927.6
$5,710.4
$5,506.1
$5,315.6
$5,140.9
State Tax to
Consumers
$8,639.8
$11,839.5
$13,083.1
$13,369.6
$13,226.9
$12,885.4
$12,461.3
$12,012.6
$11,568.9
$11,138.9
$10,729.4
$10,344.5
$9,656.1
$9,354.8
Firm Revenue to
Consumers
$10,272.8
$23,610.1
$31,169.2
$34,624.8
$37,976.4
$38,796.9
$38,805.5
$38,407.8
$37,825.0
$37,143.7
$36,415.6
$35,675.1
$34,455.3
$33,925.5
261
User Fees from Combusted to Noncombusted
Firms
$37.4
$72.3
$119.9
$178.3
$239.6
$293.4
$334.6
$363.7
$384.3
$397.7
$406.3
$415.2
$416.7
2042
2043
2044
2045
2046
2047
2048
2049
2050
2051
2052
2053
2054
2055
2056
2057
2058
2059
2060
2061
2062
2063
2064
$4,981.0
$4,833.9
$4,698.8
$4,574.3
$4,459.9
$4,354.4
$4,257.5
$4,168.0
$4,085.5
$4,009.5
$3,939.2
$3,874.2
$3,813.9
$3,758.1
$3,706.4
$3,658.5
$3,614.0
$3,572.7
$3,534.3
$3,498.4
$3,465.0
$3,433.8
$3,405.0
$9,077.6
$8,822.8
$8,588.3
$8,372.7
$8,174.0
$7,991.4
$7,822.9
$7,667.4
$7,524.2
$7,391.7
$7,269.2
$7,155.7
$7,050.6
$6,953.2
$6,863.0
$6,779.2
$6,701.5
$6,629.0
$6,561.4
$6,498.5
$6,439.8
$6,385.4
$9,656.1
$33,424.3
$32,946.5
$32,511.2
$32,106.0
$31,726.2
$31,374.9
$31,047.1
$30,743.4
$30,486.4
$30,249.9
$30,038.4
$29,849.7
$29,676.0
$29,525.8
$29,393.4
$29,271.4
$29,177.0
$29,094.8
$29,017.2
$28,958.7
$28,906.5
$28,878.6
$34,455.3
262
$417.4
$417.5
$417.5
$417.4
$417.4
$417.5
$417.8
$418.0
$418.2
$418.4
$418.5
$418.8
$419.0
$419.2
$419.4
$419.6
$419.8
$420.0
$420.2
$420.4
$420.6
$420.8
$415.2
Table 123. Undiscounted Annual Transfers of the Rule, No Cigar Flavors, No Menthol Analysis, High Impact Scenario ($ Millions,
2023)
Year
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
2047
2048
2049
Federal Tax to
Consumers
$8,865.1
$8,575.8
$8,178.8
$7,792.1
$7,430.6
$7,095.1
$6,785.5
$6,499.6
$6,235.1
$5,990.2
$5,763.3
$5,552.5
$5,359.2
$5,183.2
$5,022.7
$4,875.9
$4,741.2
$4,617.2
$4,503.2
$4,398.1
$4,301.2
$4,212.0
State Tax to
Consumers
$16,682.1
$16,134.9
$15,385.7
$14,656.2
$13,974.3
$13,341.5
$12,757.5
$12,218.4
$11,719.8
$11,258.0
$10,830.4
$10,432.9
$10,068.7
$9,736.8
$9,434.2
$9,157.6
$8,903.6
$8,670.0
$8,455.0
$8,256.9
$8,074.3
$7,906.3
Firm Revenue to
Consumers
$28,287.2
$30,809.3
$31,180.3
$31,173.5
$33,284.4
$33,326.1
$33,027.7
$32,570.8
$32,046.7
$31,505.8
$30,987.5
$30,437.8
$30,012.8
$29,621.4
$29,282.0
$28,976.1
$28,677.4
$28,397.0
$28,142.1
$27,906.4
$27,672.4
$27,477.0
263
User Fees from Combusted to Noncombusted
Firms
$0.0
$404.4
$512.6
$540.5
$548.5
$550.6
$550.4
$549.1
$547.7
$546.4
$545.1
$543.7
$542.6
$540.7
$538.9
$537.1
$535.5
$534.2
$533.1
$532.2
$531.3
$530.5
2050
2051
2052
2053
2054
2055
2056
2057
2058
2059
2060
2061
2062
2063
2064
$4,129.8
$4,053.7
$3,983.6
$3,918.5
$3,858.3
$3,802.5
$3,750.7
$3,702.8
$3,658.2
$3,616.7
$3,578.0
$3,542.0
$3,508.4
$3,477.2
$3,448.2
$7,751.3
$7,608.1
$7,475.8
$7,353.3
$7,239.8
$7,134.6
$7,037.0
$6,946.8
$6,862.8
$6,784.6
$6,711.7
$6,644.0
$6,580.7
$6,521.9
$6,467.1
$27,291.6
$27,129.2
$26,994.5
$26,862.0
$26,755.2
$26,655.3
$26,565.2
$26,500.4
$26,431.3
$26,371.7
$26,329.0
$26,297.2
$26,273.1
$26,263.6
$26,259.9
$529.8
$529.1
$528.5
$527.9
$527.4
$526.9
$526.5
$526.1
$525.7
$525.3
$524.9
$524.6
$524.3
$524.0
$523.7
7. Undiscounted Annual Costs of the Rule, Primary Estimate, By Tobacco Product Type
Table 124. Undiscounted Annual Costs of the Rule, Main Analysis, Primary Impact Scenario by Product Category ($ Millions, 2023)
Year
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
Cigarette & RYO
$349.0
$6,783.0
$2,460.4
$1,948.2
$3,094.7
$3,423.7
$3,363.8
$3,154.1
$2,904.9
$2,657.0
$2,426.1
Cigar
$19.6
$420.3
$573.7
$143.8
$251.5
$305.1
$327.8
$334.8
$334.7
$331.1
$325.8
Pipe Tobacco
$4.9
$139.2
$11.2
$27.3
$43.4
$48.0
$47.2
$44.3
$40.8
$37.3
$34.0
264
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
2047
2048
2049
2050
2051
2052
2053
2054
2055
2056
2057
2058
2059
2060
2061
2062
2063
2064
$2,217.0
$2,029.1
$1,860.9
$1,711.0
$1,579.3
$1,463.7
$1,362.4
$1,273.3
$1,194.6
$1,124.9
$1,063.0
$1,008.0
$959.0
$915.3
$876.3
$841.3
$809.9
$781.8
$756.5
$733.7
$713.2
$694.8
$678.2
$663.1
$649.5
$637.3
$626.2
$616.2
$607.3
$319.8
$313.3
$306.5
$299.7
$292.9
$286.0
$279.2
$272.4
$265.8
$259.3
$252.9
$246.6
$240.5
$234.4
$228.4
$222.6
$216.8
$211.2
$205.6
$200.1
$194.8
$189.5
$184.3
$179.1
$174.1
$169.2
$164.3
$159.5
$154.8
$31.1
$28.5
$26.1
$24.0
$22.2
$20.5
$19.1
$17.9
$16.8
$15.8
$14.9
$14.1
$13.5
$12.8
$12.3
$11.8
$11.4
$11.0
$10.6
$10.3
$10.0
$9.7
$9.5
$9.3
$9.1
$8.9
$8.8
$8.6
$8.5
265
8. Undiscounted Annual Transfers of the Rule, Primary Estimate, By Tobacco Product Type
Table 125. Undiscounted Annual Transfers of the Rule, Main Analysis, Primary Impact Scenario by Product Category ($ Millions,
2023)
Year
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
2047
2048
2049
Cigarette Cigar
$0.0
$0.0
$0.0
$0.0
$0.0
$0.0
$13,783.4 $4,261.6
$17,396.1 $5,480.3
$18,300.9 $5,786.3
$18,140.6 $5,742.6
$17,565.6 $5,676.9
$16,856.5 $5,481.1
$16,119.6 $5,250.1
$15,401.9 $5,004.0
$14,721.7 $4,758.1
$14,082.5 $4,526.0
$13,484.5 $4,307.7
$12,928.7 $4,095.9
$12,419.2 $3,896.8
$11,954.7 $3,710.0
$11,531.9 $3,536.4
$11,146.7 $3,377.6
$10,795.5 $3,221.7
$10,474.3 $3,081.3
$10,180.7 $2,951.6
$9,912.4 $2,828.2
$9,667.2 $2,706.7
$9,443.0 $2,590.8
Pipe Tobacco &
RYO
$0.0
$0.0
$0.0
$1,690.5
$2,152.3
$2,285.7
$2,285.5
$2,258.4
$2,190.9
$2,112.0
$2,031.0
$1,952.0
$1,876.2
$1,804.3
$1,736.0
$1,676.4
$1,621.9
$1,572.3
$1,527.1
$1,485.9
$1,448.3
$1,413.8
$1,382.4
$1,353.8
$1,327.7
Noncombusted
$0.0
$0.0
$0.0
-$16,163.1
-$13,611.1
-$11,368.2
-$10,253.1
-$9,324.3
-$8,877.4
-$8,484.7
-$8,135.9
-$7,811.6
-$7,516.8
-$7,242.2
-$7,004.9
-$6,791.2
-$6,597.6
-$6,438.0
-$6,289.0
-$6,149.5
-$6,031.5
-$5,923.9
-$5,825.3
-$5,749.4
-$5,670.6
266
2050
2051
2052
2053
2054
2055
2056
2057
2058
2059
2060
2061
2062
2063
2064
$9,238.1
$9,050.9
$8,879.5
$8,722.9
$8,579.6
$8,448.4
$8,328.7
$8,219.5
$8,119.7
$8,028.5
$7,945.2
$7,869.3
$7,800.0
$7,737.2
$7,680.4
$2,479.3
$2,380.8
$2,284.6
$2,196.2
$2,114.9
$2,029.6
$1,949.4
$1,874.2
$1,798.4
$1,725.1
$1,654.8
$1,582.7
$1,514.6
$1,448.7
$1,383.9
$1,304.1
$1,282.6
$1,263.2
$1,245.7
$1,230.0
$1,215.8
$1,203.1
$1,191.8
$1,181.6
$1,172.7
$1,164.8
$1,158.0
$1,152.1
$1,147.0
$1,142.8
-$5,602.1
-$5,540.1
-$5,494.6
-$5,440.6
-$5,396.1
-$5,362.9
-$5,332.7
-$5,306.0
-$5,283.5
-$5,262.0
-$5,247.6
-$5,232.2
-$5,223.0
-$5,213.7
-$5,206.7
Note: Negative values represent increases in tax revenues relative to baseline
267
| File Type | application/pdf |
| File Title | Tobacco Product Standard for Nicotine Yield of Cigarettes and Certain Other Combusted Tobacco Products |
| Subject | Preliminary Regulatory Impact Analysis, Initial Regulatory Flexibility Analysis, Unfunded Mandates Reform Act Analysis |
| Author | FDA |
| File Modified | 2025-01-16 |
| File Created | 2025-01-09 |