FDA Sends New Scare Through E-Cig Industry

The Food & Drug Administration says it is investigating a possible link between electronic cigarettes and seizures, many of which involve young adults and teens. The news sent shares of tobacco companies Altria (NYSE: MO), British American Tobacco (NYSE: BTI), and Philip Morris International (NYSE: PM) tumbling.

The industry is already facing increased regulatory scrutiny due to the popularity of the devices with teens, and a new probe heightens the risk of greater limitations. Although the FDA says it doesn't know whether there is a link between e-cigs and the medical conditions reported, the timing of new investigation indicates the agency has no intention of letting up on the pressure it is bringing to bear on manufacturers.

Seizing an opportunity

According to the FDA, it has been receiving "voluntary adverse reaction reports" about tobacco products since 1988, but last summer noticed a slight uptick in those involving e-cigs. That would coincide with when the agency began cracking down on the devices, launching a sweeping national offensive against Juul Labs, the leading e-cig maker and the owner of the No. 1 device among teens, and against the retailers who sell its devices to minors.

In addition to issuing warning notices to convenience store chains like 7-Eleven and Cumberland Farms, it also requested Juul turn over documents about the design, marketing, and ingredients found in its product so it could try to learn what made the Juul e-cig so popular with kids.

After seeing this rise in reported health problems with the devices, the FDA went back and combed its records from poison control centers and discovered that over nearly a decade, some 35 people reported having used an e-cig and subsequently suffered a seizure.

Although most people would think of a seizure as a violent shaking of the body, the FDA says it could also be a seeming lack of awareness or consciousness, or even a period of just staring blankly into space. The sufferer might not remember what happened during such an episode, and could suffer from drowsiness, confusion, or headaches afterward.

A growing divide

Thirty-five cases over a nine-year period is not a lot, a point that FDA commissioner Scott Gottlieb concedes, but because these are self-reported incidents, he also says they likely don't represent all the incidents that occurred. He believes the possible correlation warrants further investigation.

He reiterated the FDA doesn't know if electronic cigarettes were the proximate cause of the seizures, because in some cases other substances, including marijuana, were used, or there were underlying physical and health conditions present. Cases were reported by first-time users as well as those who were experienced with e-cigs, and occurred as long as one day after use, making the connection tenuous.

The FDA, though, has taken a more adversarial posture with the e-cig industry of late, demanding manufacturers come up with plans to limit teen access to the devices, then threatening to remove all e-cigs from the market if teen use doesn't fall. Gottlieb also reduced by a year the time e-cig makers have to comply with tough new FDA regulations.

He subsequently summoned executives from Altria and Juul to his offices to explain the tobacco giant's reasoning behind its $13 billion investment in the e-cig maker. Following the meeting, he publicly complained Altria made the decision based on business issues rather than out of concern for public health, which in his view undermined their resolve in reducing teen e-cig use.

Now, in the days leading up to his departure from the agency, Gottlieb has announced a new probe into the industry.

Key takeaway

A few dozen cases of seizures over nearly a decade when there have been millions of people using the devices regularly every year doesn't seem terribly alarming. Yet it makes it seem more improbable Philip Morris will earn the reduced-risk label it is seeking for its heated tobacco e-cig device -- a new e-cig technology.

Despite tobacco companies and e-cig makers being jolted by the announcement, it's possible the probe ultimately works to their benefit. If the analysis determines there is no causation, given the benefits the devices provide to those seeking to quit smoking, they may come out stronger in the end.

Of course, the investigation could go the other way, and that may lead to an even more restrictive environment for device makers.

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Rich Duprey has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.