Reaulatory Igo= and the Grow's Tdpacw Business CONTENTS Introduction page 1 Direct Regulatory Issues page 1 Regulatory Authorities Page 2 RSgUlatCrY Rsquirelum7ts and Product innovation pa" 3 BAT and Regulatory issues Page 7 PaccurAndatiom for action within BAT Grow page 9 for coordiration of Policy (External) ... Page 11 Appendix 1 Indirect Ehvircnmental issues Appendix 2 Possible Scientific Mvelcpm*s AppertUx 3 pe@@ of Regulatmy Authorities Appendix 4 Existing Ret .julatory Procedures in Ge=wW C) L-4 CY% co co 00 BATCo document for Province of British Columbia 23 April 1999 EXULATML-ISSM AND 7ME M:KXW'S -MBACM BMD4ESS Introducticr In the 199o,s a probable scenario is that the trend of the 19801s, tending to favour the --r--Larex at the expense of the producer, will continue and way well accelerate as cther preoccupations such as East/West tensions diminish. This will lead to ix @-ingly stringent regulations controlling consumer- products, partly as a result of the activities of "green" and health-conscious pressure qroLzps, altr=xt Governments are generally reluctant to legislate for the extreme vivs of such groups, even for tobacco. However, it seas likely that the tobacco irdustry will continue to be at the forefront of such regulatory activity as is enacted and even in the absence of specific legislation consLmrs -.-411 require products that are sea to rake some concessions to these issues. E*tmples include lead free patrol, Aecaffeinated coffee, and from the tcbacco industry ultra-low tar cigarettes, and pesticide-free tobacco etc. ) . in terms off the cigarette market response to these issues will be of crucial urpor-@anca. Great cpporbauties will arise for the manufacturers who best anticipate are respond to the constraints imposed in the rarket place, althcugh in addi,:don to product innovation support may be necessary for N- existirg brands. The contrave--sy C74er BARCLAY arose principally from a Rdlip Morris view that it was an -ri-c-ative and successful contenider in the ultra low tar segment, which would be----we increasirgly important as regulatory pressure forced tar ceilings do.T.-weards. 7his paper seeiks to identify the regulatory issues which will directly impact on the Group's tobacco business in the next ten years, and concludes with proposals fcr their management. In addition tharre are other aspects of Regulatory Issues to be considered. ibe rcre gener-al aspects of an envixonmentally-conscicus world will have important implications in the 1990s for all industries. For example, the agreement to reduce emissions of fluorocarbons (CFIC's) has already had direct effects within the BAT Grap i.e. the decision to discontinue the G-13 expansion p---xx?ss. 7his area will be considered in Appendix 1. Finally, there --ay be other events or scientific deveJLcp=uTts which ray or may not be taken up by regulators, and which nay riot be directly related to the Lrdustry, but which could have indirect effects and may influence total sales. By their nature, such events (e.g. a dramatic increase in the incidence of AIDS or a major scientific breakthrough undermining current attitudes to the cause of disease) are both difficult to forecast and almost impossible to controls As it is debatable whether they strictly fall within the scope of regulatory issues they are briefly considered in Appendix 2. oirect Reaulatcry Issues Mxistira and Anticipatedi the followirc t--Vics are considered to fall within this area, all of which relate to prrdLct development. 1. (a) Ce-;, inas for deliveries of individual smoke components in mainstream C) w.-cke ind associated methods for measuring delivery (Tar, nicotine, cartcn ronmcide and such other smoke components wiuch ray be ident-fied by regulatory authorities). cc co BATCO document for Province of British Columbia 23 April 1999 2 (b) Ceilings for deliveries of individual smalm components in sidestream smoke (again tar, nicotine etc' 2. Evaluation of novel processes; wtiich may be used in future cigarettes against ri and considerations of reasonable safety. 3. Further evaluation of additives, agrochemicals, or any other chemical added to tobacco at any stage prior to sale. 4. Cigarettes with low burn propensity. 5. Biological tests for measuring "tar," quality. 6. Biochemical tests for meas=ing interactions With the eriviroment (e.g. measurement of EM adducts). Underlying these specific regulatory matters are the more general smoking and health issues of which the following am those frequently raised by regulators: (a) Associations be sroking or environmental tobacco smoke and disease. (b) ctupensation. (c) Addiction. Recrulatory Authorities In most cases the ultimate regulatory authority is the Government of the country enacting legislation which regulates the industry. However, them are frequently advisory bodies who initiate proposed legislation and who may be prepared to consider the views of the tobacco industry at various stages before the legislation is finalized. Direct contact with politicians is also possible. In some cases the industry is regulated on a voluntary basis with sme opportunity for modifying the p-p- I basis of the agreement, notably in the United Kingdom. in many countries organizations exist or are set up, to monitor the legislation e.g. in determining that tar omilings are not exceeded. Such organizations, although set up to police the legislation, are frequently consulted, especially when legislation is amnded, and again contact with them rmy be beneficial. 1his paper assumes that in many countries, therefore, there will be some dialogue with Regulatory Authorities and that them may be advantages in doing so. in many cases such discussions are mandatory. However, geographical variations in culture =ist be identified and taken into account. Pbr exarrple in the uK the irdeperdwt scientific Oommittee prefer an ongoing discussion with mvvf acturem prior to, during and mAx;equent to, the evaluation of novel processes. Failure to respond could lead to the inpositim of an exceedingly darm-ding test schedule. on the other hand there is practically no dialogue in the LISA. The specific requirements of regulatory authorities world wide are identified in Appendix 3, together with details (utiere known) of advisory bodies, and organizations delegated to police the regulations. The more general inplicatiom for prah& develcpmt are disass@ next. co co BATCo document for Province of British Columbia 23 April 1999 3 Regulatory Pz-auirements and Product Lnnovation Straightforward regulatory matters such as a requirement that the pack skx7ws deliveries of tar and nicotine arising either through legislation or by voluntary agreement must be ccmplied with. 7hese are fully detailed in Appendix 3 to this note- However, the greatest opport=Uties exist for companies who anticipate future regulatory requirements and who have products ready to caqply with any changes which may be required. In saw cases, ongoing dialogue with regulatory authorities (as in the UK) gives a clear indication of possible future requirements and may even lead to unsound proposals being abandoned (again in the UK, the bxbistry- views on the lack of relevance of "short tam 11 biological tests such as the "Ames" test, proposed for use in rw@@ products on the UK market %.vxe accepted, at least in the short term). 7he current scenario of Pagulatory Ptequirerents on regional basis is as follows: United. Kirxzdam- The system here is unique. The Independent Scientific cormittee (almost exclusively medically qualified) have in their terms of reference a requirement to give advice to the Gover.-mient and Industry. 7he Goverment then negotiate directly with irtImtry aid scme of the O=vaitteesl reconverdations are accepted by both parties as the basis of a binding voluntary agreement. However, the irdustry (or individual caqmnies) can approach the Carmittee directly an specific issues. 7he fourLh report (1988) of the Independent Scientific Comittee made the following recommendations 6ftich relate to future product development: (1,2 General policy] Quote 3. The sales weighted average tar yield should not be more than 13mglcigarette by the end of 1988 and should continue to decline with a target of 12 mg1cigarette by the end of 1991. (Para 12) 4. The tar yields of new brands should continue to be subject to a ceiling defined as the sales weighted average tar yield of the middle and low-to-middle tar brands during the preceding six-month survey period. (para 13) . S. As soon as possible there should be an upper limit of 16 mg tar per cigarette placed on existing brands on sale, reducing to 15 mg after two years and becoming 14 mg for ALL brands after four years. (para 31) 6. While the overall aim should be towards reductions in the tar: nicotine ratio this should not be through the enhancement nor solely through the maintenance of present-day middle range nicotine levels (around 1.3 mglcig,rette). In general the sales weighted average nicotine yields should fall, and on the lines of the suggestion made in our Third Report (para 20) there should continue to be some brands available to the public with nicotine yields below I mg and with tar yields reduced to a proportionately greater e.itent (below 8 mg). (p a ra 34) L4 C71% co co 1@0 rQ BATCo document for Province of British Columbia 23 April 1999 4 7. Manufacturers should take steps to reduce carbon monoxide yields of all brands of cigarettes and the yields of new brands should be subject to a ceiling defined as the sales weighted average carbon monoxide yield of brands in the middle and low-to-middle tar bands during the preceding six-month survey period. (pars 20) 8. Government and the tobacco industry should consider what further action could be taken to persuade more smokers to favour low tar brands. (pars 33) And, on a longer term basis:- 9. There should be further investigation of the possibility of developing a range of short-term tests to predict the carcinogenic activity of smoke from modified products. (pars 40) 10. The investigation of yields of other smoke components as identified in the Third Report (pars 27) in representative cigarette types should continue. (pars 43) II. The Committee should continue to scrutinize all new developments: and in addition to the regular determinations of tarICOInicotine carried out by the Laboratory of the Government Chemist, there should be studies in newly emerging products of the composition of particulate and gaseous phases of the smoke and of the effect of different smoking patterns on yields and human uptake. (pars 44) 16. The tobacco industry should pursue research into ways of reducing the amount, irritancy and other deleterious properties of sidestream smoke from all tobacco products. (pars 73) Unquote while the future of these ".. andatims is uncertain (partly bemuse of the unresolved future nature of the relaticrshdp, if any, between the = and the EEC), if adopted by the UK Government they would set very clear lines within which future product innovatiom would have to be targeted and validated. For exavple recommendation 11 would require a considerable investment in Aerosol Physics and Respiratory Rrysiology to caqxtently explore the identified area. Generally speaking the influence of the ISC is greatest in member countries of the Commonwealth - Germany In Germwiy some ton Government organizations are responsible for the regulatory issues that relate to the Ttbacco Industry. These are identified in Appendix 4. As an example of work that could impinge directly on future product development the Federal Health Institute itsamt) is investigating specific substances contained in tobacco smoke (Nitrosmines, BenFpyrw* and Formaldehyde) and there is a proposal for a hybrid list of sTTiok( (the so called "Thuraux Index) to be developed as well as Y tiom for lower tar to nicatum ratios. There is also legislation in respect of maximum residue levels for 11 pesticides, recommended levels for a further 71 pesticides, and a further limit for non-registered pesticides. 0 in Gerrany discussions with Regulatory Authorities are possible but are nearly (__4 always carried out on an informal basis by scientists who bridge the gap C7% between Lndustry and Ifirdeperx*.nt" regulatory authorities. 00 co BATCo document for Province of British Columbia 23 April 1999 5 The influence of German regulations is greatest in Europe. For example, the Medical Board in Finland have given a favourable response to the use of German regulations for additives in Finland. Other aMMM Countries Existing Regulatory requirements in other European countries vary considerably for example With regard to tar ceilings and the use of additives (in some countries there are no regulations for additives). Besides Germany, Italy i,,- unique arong European countries in having a legal reqUrement for mximL= residue levels for pesticides. However, the EEC Draft directive on tar ceilings is likely to wAmrcede local requirements in 1990/1991. The EEC view on tobacco additives is not yet known. EFrA Countries While anti ==kLng pressures am extremely high, regulatory requirements vary considerably from Finland on the am hand (Tar ceilings similar to those proposed in the Emc to Austria on the other (Tar ceiling of 25 mg) EMC llhere is a draft directive in the EEC for tar ceilings of 3.5 ng by the end of 1992 and 12 nq by the end of 1997, exefft*-ion being made for Greece. If this passes through the subsequent stages of the EDC legislative procedures it Will have to be implemented by EBC countries in 1990/1991. The EEC Ccmission, in the context of the Europe Against Cancer programs (domment CCM (86) 717 final) has also proposed that them should be reorientation of tobacco pro@icn tawards 'less toxic varieties". The carrussicn of the EEC is also interested in Methods of detecting EM (cellular genetic material) damaging agents in humans and have issued the following statement U=Ough P. Sourdeau, Erivircnment and Ncn-rR=lear Energy Research, Directorate-General for Science, Research and Development, C=udwian of the European cbmunities, Brussels, Belgium: ,m-,e European cznmwdties have iq=tant regulatory responsibilities for environmental protection. 7hem include the protection of workers, of the general population and of the environment from risks due to erwircnmental chemicals - both 'new' chemicals and those already present in the environment. The scientific basis for such regulations is, to a significant degree, provided by environmental research at the level of the it ,This statement is an introduction to 17*thods for detecting CNA damaging agents in amgmll, IARC Scientific Publication No. 89, Lyon 1988, a review of a 1988 conference at which there were some 68 papers, 5 of which investigate smoking as a source of environmental chemicals. If specific smoke chemicals were to be found to cause a significant increase in Cm adducts in smokers then there would be enormous pressure to regulate the delivery of such materials because, regardless of the scientific arguments, this is a subject of immense concern to the general population akin to nuclear energy. M-ie reed for monitoring these areas will be considered later. with the current exception of additives, activities in the EEC may set the trend elsewtmm and this could now include Eastern bloc countries. C=> U4 01% co co %.0 BATCo document for Province of British Columbia 23 April 1999 6 As yet there has been no approach to the EBC to ascertain their attitude taw-a rds modif led products, an area in Which the UK ISC has given qualified behind-the scenes support. It is recommended that this area be explored with the EEC. LISA Therib is a voluntary agreement to show tar and nicotine deliver-as on advertisements, measurmnent being by a method agreed by the Federal Trades ccr-.dssion (FTC). In addition the Department of Health and Human Resources are currently examining a composite list of all additives used by t!-e ILTS tobacco industry. As yet they have made no comment or Judgement r-i tntis list or on individual additives. 7@iere is also a legal requirement for maximum residue limits for 16 pesticides although there are no limits for other pesticides approved for use in USA. Most recently a proposal for the regulation of the Tbbacoo Industry has been put forward by Senator Bdward mmedy, Which might irwelve ex@-wrditure of up to $200,000,000, and with a broad remit for cottral of tlie industry an issues such as the use of additives. = 7e. @' Health and Welfare Canada, a Government organization, publish listings of ccnderisata nicotine and carbon monoxide levels quarterly b.M there are no u-poex liruts. There are currently no other requiremwits. Ccmdensata, and nicotine levels are published by the TdAcco Inwtibrte of Japan, an organization repxvsenting both Goverment and Inlustry but there ars- is no requirement for upper limits. No other requirements. ARAB Countries I there are strong anti-smoking pressures led by the GoverrrwTts of it and Saudi Arabia acting through cranizations such as SAW (Saudi A= ian Standards organization). These have led to the arbitrary introduction of delivery ceilings, current makim 12 mg tar, 0.8 mg nicotine. These low figures way be reduced even further in the near fut-am (tar to a mg?). Other Countries The position varies but terids to follow that in developed countries with utich them may be scum affinity e.g. South and Latin America relate to USA and Commonwealth countries relate to UK. C) L-j C% CO co 1%0 BATCo document for Province of British Columbia 23 April 1999 7 BkT and Reaulatort Issues BAT objectives in relation to Regulatory Issues can be sixuarised as follows: 1. 7b ensure that regulatory constraints which are nat scientifically justified are not introduced. 2. 7b ensure that BAT products (both raw intratxtions of conventional products and innovative designs): (a) comply with the requirements of regulatory authorities (b) any additional ccupany requirements arising from BAT's assessment of the state of scientific knowledge (duty of care) (c) meet any necessary Marketing requiretwits (d) increase market sham. 3. 'Ib anticipate future requirements of regulatory authorities, and to try to influence them. 4. -Ib ensure that BAT products are disadvwitaged as little as possible by the inpositicn of unsound testing ptnoodurer. or through c=petitors activities. To achieve these objectives the following key activities can be identified: 1. To be aware of the current views of regulatory authorities. 2. To establish ccaparry guidelines, particularly where there are no regulatory requirements (either in particular scientific areas or in particular countries), or for use in at-goincl discussions with regulatory authorities and to carry out any necessary research to clarify regulatory issues. 3. To critically review the scientific literature relating to any additive or process, proposed for use in cigarettes, against regulatory requirements and company guidelines. Th advise, with exterml consultants if necessaxy, on any further research necessary to complete an adequate eomiinitian of arry proposed additive or process. To ensure that such necessary research is completed to acceptable scientific standards and the results appraised. 4. To put in place and use the necessary contacts to achieve effective ccmunication of the BAT position to key people. In practice it is ncmt convenient to consider the management of this area with regard to the internal and external activities of the BAT Group. objective 2 and key activities 1-3 are internal activities of the BkT Group, the rwainder are external. C) L-4 C71% co co BATCo document for Province of British Columbia 23 April 1999 8 internal objectives The BAT Group should be organized along the following lines: I identlficaticn of CAC R&D Departments Existing & Anticipated - - - - - - - - - - - - Issues and Proposals for Action I Confirmation that these - - - - - - - - - - - - Tcbm= Strategy fall within Group strategy Review Tom Relevant - - - - - - Ctrve@ by G=V BAT Group EKternal C=panies, especia.11y Researrh MWwledge Scientific Research Group- L- - - - - - - - - - - - - - Agreed at annual MOetirKj of Pasearch Policy Grow BkT Arises from BAT knowledge -- - - - - - - - - Group ReseArch Base arxi PrograWle. Guidelines Regulatory Reqairaments CAC Cmq@es Activities (in appropriate in relation country) to Specific markets Prmducts Prototype Now Products Modifications to meet and Validation* changes in Plegulatory PAquiremwft or in BAT Grow Policy This ray be required at a later stage (e.g. on specific products i=ediately prior to launch). co co BATCo document for Province of British Columbia 23 April 1999 - 9 Prqxred Action by Ftg@=igm for action Within BU GMm fiWaMUM CRC Cmyaniesl 1. External knowledge (e. g. informatien obtained at BNr accup external conferermms) is riot always circulated effectively by Group companies to the centre. This skx@d be ivproved- Due to other demarzLs on the time of Corporate R&D AtH/F= DepartmeM, Millbank the arqoirq review of scientific papers is becoming increasingly difficult to maintain. 2. Coorainaticn of the appraisal of additives across the BAT Group Group &xxdd be intro*x:ed (agreed in principle M 1989, not yet iMlawnted). 3- InUoduction of system for ensuring guidelines are rat in AUVF= operating ompanies. 4. More work shculd be carried out to investigate the ALH pyrolysis prcducts of additives/rateriabs wed in cigarettes (again, agreed in principle M l9sq). 5 . More attention should be given to the problems likely to BAT Grvup be associated with validating potential now products. 6- in future Pagulatory Issues, including consideration of AUVChC their mV.&- on Product Dwaacpnent, will be given hiow es priority in the Gwoup P.&D Strategy rAetinge. CO %.C cc BATCo document for Province of British Columbia 23 April 1999 - 10 External =ectives Essentially these objectives all relate to getting the BkT view on regulatory issues accepted externally as far as possible. ads is done by lobbying by various organizations to target grays as discussed earlier. However, Ule-re axe many organizations which do this and them are rai listed: Organizations with BAT Involverent, 1. Either dixectly of indUrectly the BAT Gra* is involved with all OC the following organizations, who will lobby on tmba=o-rejated , Ysanufactxa-ers' associations my of course WM a point of view diiierent, from that of BAT, notably on regulatory issues with direct cwne=ial implications e-g- cigarette tAsting methods for BmKMM and C=rently the minimum level of tar detarminations (1, 2 or 4 mg). BhT Industries ard its principal subsidiaries BAT Inilustries Associates (e.g. DCOM) BATM BATCO II:zubsidiaries BATCO Associaties (e.g. Skandinavisk) BkTCO Friendly CmPanies (e.g. Tiedemann's) Manufacturers Associations (e.g. MC) Associations of Manufacbirws Associations (e.g. accm) n*'OTAB (main role information Aissenination) cord= 2. Organizations without- BAT involvement The following organizations with wham Bn is not directly involved with will also lobby on tobacco issues. For the Industr-i Against the InMg= T.I. (USA) and any other Manufacturers A.S.H. and similar orgwdzations Association BhT is not involved in. world-oide. F.O.R.E.S.T. & similar org. world-wide. Most medical/scientific AL*h. occasional Medical/Scientific Auth. Doctors etc. Politicians Politicians Neutral ? Standards Organizations Politicians Discussion Given the large Mxber of orgartizAtions who way express views on regulatory issues, some coordination is clearly necessary within the BAT q to roup, ensure that a ca-a-z-an view is put over unless there am special reasons for local variations. Within the various wsedbers of the industry, coord:imticn Of irdustry-related activities is also desirable: if tl'ds is not possible than knowledge of ccaq)etitors positions, %ftwe different fr= that of the BAT Group, is required. However, further difficulties arise from the rationalization of different interests within specific BAT ampnies Le. tar miniza, attitxks towards testing of Roll-Your-Own tobaoco, use of parUcular additives, QW. and these amplications An-ther strengthen the case for central coordination. co co I.-O BATCo document for Province of BritiSh Columbia 23 April 1999 BeggmwoAtions for Coord"'tion of Policy (Extoxnall) 1. It is assumed that the broad principles of Folicl will be set by the Tlobacoo Strategy Review Ttam. 2. In cammm with MM" and health issues the regulatory issues discussed here have a sc basis of increasing complexity. Hence the focus for the BAT response should be Corporate R&D Department, working within the remit of the Tobacco Strategy Review Team. 3. Detailed Policy on Regulatory Issues for all PAT Group C=,pwiies should be set by Corporate R&D Depart:rent after camitatim with the following, as necessary: (a) chairman of BkTCO (Director responsible for R&D Departmmt) - (b) Other CAC Tcba= Companies and if appropriate BA= subsidiaries. (c) Legal Department BkTCO. (d) Public Affairs Department BAMO. (e) Marketing Department BATCo. (f) Leaf DepartmM. &XTCo. All those concerned with the implementation of the policy in individual companies should be advised through No. Is that these activities must relate to the policy set cut by Corporate R&D Department, who will have responsibility for coordinating the Group's external activities in the areas defined in this note. Position papers on Regulatory Issues will be cawunicated to No. ls by Corporate R&D Departrient. (M%is follows. Marx policy on handling Smoking and Health issues and is consistent with the fact that many Regulatory Authorities deal both with Smoking and Health Issues and the Regulatory matters defined in this paper.) S. IMlementation of Policy will largely be carried out within individual BAT industries or BATCo subsidiaries, and by a variety of individuals, who may or may not haw scientific training. me anus =ist be en these individuals to consult with Corporate R&D Department if they feel unable to cope with the scientific cccplexity of aTry of the issues, and when specialist assistance (Dr Thornton, Dr Bayse, Mr Mitchell or Mr Dymond) may be required. This applies - - - obviously to discussions with knowledgeable external authorities who maybe hostile to the industry. It is difficult to be specific in this area but the CAC countries are most likely to have their own RrxD staff able to assist. 6. With regard to specific organizations the following recommendations are made: (a) National Manufacturers Associations (NMA I s) In countries vitw-re BAT sells cigarettes BAT should be represented on these associations with the objective of getting BAT views accepted. Ihexe is one wumalous organization, TAC (UK), where MT Aces not sell cigaxettes. However, the indirect influence of the UK, particularly in Commonwealth countries, justifies continued mater-ship, This should be reviewed circa 1992 with the advent of the harmonized o=ron market and in relation to CECCM. U-4 CN co C=) BATCo document for Province of British Columbia 23 April 1999 - 12 (b) CECCK Tt,* role of NMA's rAay change in relation to regimally based organizations such as CEOCM. C=--a 1992 them may be a case for considering %twther it is rxxmssar@/ to belong both to CZaX and to a=9ean Nmhls, although in principle action at EE)c level requires C=3+-type organizations. At present, with for exmple no sign of harmmization on additives in the ESC, it would appear necessary to belong both to CBCr-M and to imL-vidual rMls. (c) 2MMD On Regulatory Issues there would appear to be a strictly limbed role for INFOM as an information disseminating orgazli=tion. (d) QORE@M BAT G=xzp mombexship is now st--a-q and with a wide geographical spread mcngst the ompanies. In recent years Uiis organization has booms more irportant, partly because of its delegated role in cigarette delivery measurenent. We should continue to support this organization strongly but the activities of delegates, at all levels, should be led and coordinated by ODrPOr&te R&D in Millbank (AUVREr). (e) CraanizatigW without MT Tnvalvg--@. (i) Natiaktl Manufacturers Associations Obviously if we are not rapers tbere are no direct cpportunities for influence and in the case Of the T.I. in the M, %rich we could rejoin, this is a risk to be comidered. (ii) Medical/Scientific Autborities, Giving go - ot Iragevent to reputable indepwdent scientists to lobby regulators is a legitimte activity and is carried out in the Group. 7. BAT CogymitNent If the BAT Group is to be an effective meater of the organizations listed above, top managermt mist recognize this and allow for the costs in tive of senior staff and money involved. REWUN/Sc 30th January 1990 co BATCo document for Province of BritiSh Columbia 23 April 1999