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FDA Calculates “Lost Enjoyment” Costs of E-Cigarette Rules

Cost-benefit analysis viewed as radical by some.
June 3, 2014

NEW YORK – As U.S. health regulators consider what rules to impose on electronic cigarettes, in their tally of costs and benefits they have placed a value on the lost pleasure consumers may suffer if they used the products less or not at all.

According to a report from Reuters, the U.S. Food and Drug Administration says in a little-noticed document released alongside its April proposal for e-cigarette regulation that the projected benefits of the new rules — which also apply to cigars, hookahs and other vapor products — should be cut by 70% to account for the deprivation consumers would suffer.

That means if the agency puts a value of $100,000 on the longer and improved life that might be achieved by deterring someone from smoking, then it would cut that benefit assessment to $30,000 because of the pleasure they lost. The approach is regarded as radical among those who have done cost-benefit studies for regulators.

Some public health advocates warn it will help the tobacco industry argue that the cost of complying with restrictions on new nicotine products exceeds any benefit to the public, making it easier to scuttle those rules. They also fear it could be applied more broadly to regulation of other products, such as food and alcoholic beverages.

Under a 1993 executive order signed by then President Clinton, U.S. regulators are required to show that the benefit of a regulation would exceed its costs. A proposal that would make a manufacturer spend $1 billion to avert $100 million in pollution costs, for instance, would likely not see the light of day.

But with novel tobacco and nicotine products, the FDA is putting its thumb on the cost-benefit scale in a way no other agency has before, according to current and former regulators and economists who specialize in such studies. The FDA used the same lost-pleasure analysis when it assessed the costs and benefits of requiring graphic warning labels on tobacco.

In response to questions from Reuters, an FDA spokeswoman said that even with the inclusion of the lost-pleasure factor, the benefits of its proposed e-cigarette regulations will still exceed the costs. She also said the tobacco industry did not pressure the agency to include it in the analysis, which was conducted by in-house economists with no input from political appointees. The cost-benefit analysis of the FDA’s e-cigarette proposal was written by the agency’s economics staff.