We may get an announcement by the North Carolina judge on the industry's motion for summary judgment against the FDA this week. Remember, this was a 3-level argument; if the industry wins on any one of the three, the FDA cannot proceed with its new regulations this August. Obviously, a level I or level 2 ruling would be best.
Level 1 -- Does the FDA have authority to regulate tobacco as a drug under the general provisions of the 1938 Food Drug and Cosmetic Act? The issue here was whether Congress intended to cede control of tobacco to the FDA. If the judge says yes, he moves on to Level 2.
Level 2 -- If the FDA has authority, can cigarettes be labeled a combination drug/delivery device? Here, the issue was on the definition of drug/delivery devices -- do they promise a medical benefit, how are they viewed by consumers, would they have to be banned if approved (since they clearly are not safe). If the judge says yes, they fit the definition of drug/deleivery devices, he moves on to Level 3:
Level 3 -- If the FDA has authority, and cigarettes can be labeled drug/delivery devices, can the FDA severely restrict the industry's advertisiing and promotion programs. This is a First Ammendment (commercial free speech) issue. Industry said that new FDA rules are not narrowly tailored to the FDA's objective, which is to reduce teen smoking, and would impede its ability to communicate with adults.
If the judge rules in favor of the industry on level 1 or 2, the FDA has no authority, and the industry will have a clear victory (FDA could appeal of course). This could again trigger talks o flegislative settlement between the Administration and the industry. If the industry wins on level 3, both sides will likely claim victory. If the industry loses on all three, MO's stock price will go down. |
