30. al. a-01 9PT PCPS-DU6 5-::13 ;:Cl~ FORSCHEUNG & E.'~ŒWICKLUNGiQUAL®:TA'T Bahrenfeld, 29/01/1990 Pz Dr. R.E. Tt4crnton B'o ATC millbank c=,nents to ,*Regulatory issues and the Group's Tobacco 3u3J.aess` Dear Ray, Reflecting to a large extend the discussions being an integral part of the recent RFG-meetings you are pointing out in your draft position paper important aspects o! ragulatory issues, their market implications, the cc-ordination of BAT'S activities, and possibilities of approaching regulatory authorities. In accordance to the RFG-decisions BATCF's position is "to ensure that BAT acts with a common policy, centrally co-ordinated after having discassed potentiala. markat implIcacioas, competitive advantages, legal necessities, etc. of all involved CAC's at a very early stage and having agreed to a bast possible strat6gy among the companies and providing a most possible accordance. This should be strengthened especially in the paragraph on "raccm-mendation for Coordination of Policy", thus making clear, that the agreed policy would be formulated by Corporate RAD after parallel discussions and agraament with all people mentioned in the' list (p. 11, # 2). To ensure the link to marketing requirements of tha different co.npanies and as short as possible cime dalay it may help, to h%ve (;-al.egates from each CAC acting as associate Corporate RbD mar-hers CD parcicipating in this task. C:) Url QI BATCo document for Legal Services: Health Canada 20 October 1999 70. 01 It. 50 '. ~- : Qz Ef:,T ~~!:j ~--io ;:L:-- For dealing wich specific reguiatory issues it was sz;ggested, ~.- do this by sharinq the effort amonq the CAC's using the as opr-i:ra regarded routas and people involved and especially zonsidering experiences Erom the past and most promising rcutes. This also makes clear, that guidelines for recruiting of people, their qualification and selecticn should he dawr and people must be iden-cified. The setting of BAT's policy should follow guj-deli.,jes agreed on at the RPG-conterances and ap;~rovzd by the TSR-7. -this again would support fast and suited reaction to sudden developments. For deriving a policy the main to-pics of general exzerna! development should be taken into account, like ETS, EEC- directiwas, addiction issue. More detajjeo~ poincs snould he -lef: to a more speci!ic strategy (e.g. agreed with the RFG) . A list ot these. always would not be complete, th,us creating che darger of omtittiag important points. -Ahis would also avoid sens-itive wordinq and a too close involvement into product deve-lopment issues. favourab, for a markez dr4iven cornpany to Furthermore it seems not . le keep internal and external acri-,rit-4es separate. There are plenty of influences in both directions. So their coordination r,*-Iould be done togetber. Some minor ntecessary com-mer-ts (2.q. the role of DIN, being a .neutral" standard4zation body with a BAT-Chairman4'providing relatively direct access :c governmental bod-Jes) s*nall be left to are more detailed discussion in. future, because they are not necessary fQr deriving the overall policy. 1! you have any f,~rthar questions, please contact me. With kind regards Sincerely Dr. S. Kausch C) c:) (il CD CD BATCo document for Legal Services : Health Canada 20 October 1999 - I - REGULATORY ISSUES AND THE GROUP'S TOBACCO BUSINESS Introduction In the 1990's a probable scenario is that the trend of the 1980's, tending to favour the consumer at the expense of the producer. will continue and may well accelerate as other preoccupations such as East/West tensions diminish. This will lead to increasingly stringent regulations controlling consumer products, maintenance of "green" or "environmental" pressures, and general consuaer interest in this area. It seems likely that the tobacco industry will be at the forefront of such regulatory activity because of the historical negative attitude of Governments towards this industry, and even if specific legislation is not enacted consumers will require products that are seen to make some concessions to environmental issues (e.g. lead free petrol, decaffeinated coffee etc.). This will lead to a dynamic state of the cigarette market and response to these issues will be of crucial importance. Great opportunities will arise for the manufacturers who best anticipate and respond to the constraints imposed in the market place. The controversy over BARCLAY arose principally from a Philip Morris view that it was an innovative and successful contender in the ultra low tar segment, which would become increasingly important as regulatory pressure forced tar ceilings downwards. This paper seeks to identify the regulatory issues which will directly ijapact an the Group's tobacco business in the next ten years, and concludes with proposals for their management. In addition there are two other aspects of Regulatory Issues to be considered. The more general aspects of an environmentally-conscious world will have important implications in the 1990's for all industries. For example, the agreement to reduce emissions of fluorocarbons (CFC's) has already had direct effects within the BAT Group i.e. the decision to discontinue the G-13 expansion process. This area will be considered in Appendix 1. Finally, there may be other events or scientific developments which may or 46 may not be taken up by regulators, and which may not be directly related to the industry, 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 control. As it is debatable whether they strictly fall within the scope of regulatory issues they are briefly considered in Appendix 2, although the three areas are not necessarily mutually exclusive. Direct Regulatory Issues (Existinx and Anticipated) The following topics are considered to fall within this area, all of which relate to product development. 1. (a) Ceilings for deliveries of individual smoke components in mainstream smoke and associated methods for measuring delivery (Tar. nicotine, carbon monoxide and such other smoke components which may be identified by regulatory authorities). CD C) BATCo document for Legal Services : Health Canada 20 October 1999 2 (b) Ceilings for deliveries of individual smoke components in sidestream smoke (again tar, nicotine etc.). 2. Evaluation of novel processes which may be used in future cigarettes against regulatory requirements and considerations of reasonable safety. 3. Evaluation of additives. agrochemicals, or any other chemical deliberately, or inadvertently, 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 measuring interactions with the environment (e.g. measurement of DNA adducts). Underlying these specific regulatory matters are the more general smoking and health issues of which the following are those most frequently raised by regulators: (a) Associations between smoking, environmental tobacco smoke and disease. (b) Compensation. (c) Addiction. Rexulatory Authorities In most cases the ultimate regulatory authority is the Government of the country enacting legislation which regulates the industry. However, there are frequently advisory bodies who draft 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 some opportunity for modifying the proposed basis of the agreement. In many countries organizations exist or are set up, to monitor the legislation e.g. in determining that tar ceilings are not exceeded. Such organizations, although set up to police the legislation. are frequently consulted, especially when legislation is amended, and again contact with them may be beneficial. This paper assumes that in many countries, therefore, there will be some dialogue with Regulatory Authorities and that there way be advantages in doing so. In many cases such discussions are mandatory. However, geographical variations in culture must be identified and taken into account. For example in the UK the Independent Scientific Committee prefer an ongoing discussion with manufacturers prior to. during and subsequent to, the evaluation of novel processes. Failure to respond could lead to the imposition of an exceedingly demanding test schedule. On the other hand there is practically no dialogue in the USA. The specific requirements of regulatory authorities world wide are identified in Appendix 3, together with details (where known) of advisory bodies, and -t!b organizations delegated to police the regulations. The more general implications for product development are discussed next. CD C:) (-n CD CD co BATCo document for Legal Services : Health Canada 20 October 1999 - 3 - BeRulatorv Recuirements and Product Innovation There are no options to the necessity of meeting straightforward regulatory requirements that have become part of legislation or have been accepted by voluntary agreement. Such existing requirements are fully detailed in Appendix 3 to this note. However, the greatest opportunities exist for companies who anticipate future regulatory requirements and who have products waiting to exploit any changes which may arise. In some cases, on going 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 industry views on the limitations of short term biological tests for ranking products have been accepted, at least in the short term). An example of opportunities which could arise in this area follow from the fourth report (1988) of the Independent Scientific Committee who made the following recommendations which relate to future product development: [1.2 General policy) 3. The sales weighted average tar yield should not be more than 13mg/cigarette by the end of 1988 and should continue to decline with a target of 12 mg/cigarette 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) 5. 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 mg/cigarette). 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 extent (below 8 mg). (para 34) 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. (para 20) 8. Government and the tobacco industry should consider what further action could be taken to persuade more smokers to favour low tar brands. (Para 33) _tb~ C:) CD CD CD C:D "0 BATCo document for Legal Services: Health Canada 20 October 1999 - 4 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. (para 40) 10. The investigation of yields of other smoke components as identified in the Third Report (para 27) in representative cigarette types should continue. (para 43) 11. The Committee should continue to scrutinize all new developments: and in addition to the regular determinations of tar/CO/nicotine 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. (para 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. (para 73) While the future of these recommendations is uncertain (partly because of the unresolved future nature of the relationship, if any, between the ISC and the EEC), if adopted they would set very clear lines within which future product innovations would have to be targeted and validated. For example recommendation 11 would require a considerable investment in Aerosol Physics and Respiratory Physiology to competently explore the identified area. In Germany some ten Government organizations are responsible for the regulatory issues that relate to the Tobacco Industry. These are identified in Appendix 4. As an example of work that could impinge directly on future product development the Federal Health Institute (Budesgesundheitsamt) is investigating specific substances contained in tobacco smoke (Nitrosamines, Benzpyrene and Formaldehyde).,w and there is a proposal for a hybrid list of smoked components (the so called "Thureau" Index) to be developed. In Germany discussions with Regulatory Authorities are possible but are nearly always carried out on an informal basis by scientific peers. Within Europe the EEC Commission, in the context of the Europe Against Cancer programme (document COM (86) 717 final) proposed that there should be reorientation of tobacco production towards less toxic varieties. The Commission of the EEC is also interested in Methods of detecting DNA (cellular genetic material) damaging agents in humans and have issued the following statement through P Bourdeau, Environment and Non-nuclear Energy Research, Directorate-General for Science. Research and Development, Commission of the European Communities, Brussels, Belgium. "The European Communities have important regulatory responsibilities for environmental protection. These include the protection of workers, of the general population and of the environment from risks due to environmental 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 Community." -LI. CD CZ) CD Ln BATCo document for Legal Services : Health Canada 20 October 1999 - 5 - This statement is an introduction to "Methods for detecting DNA damaging agents in Humans", 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 DNA 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. The need for monitoring these areas will be considered later. UT-and Regulatory Issues BAT objectives in relation to Regulatory Issues can be summarised as follows* 1. To ensure the future of the cigarette business.* 2. To ensure that BAT products (both new introductions of conventional products and innovative designs) comply with the requirements of regulatory authorities and/or any additional company requirements arising from BAT's assessment of the state of scientific knowledge (duty of care) meet any necessary marketing requirements and increase market share. 3. To anticipate future requirements of regulatory authorities. 4. To ensure that BAT products are disadvantaged as little as possible by the imposition of unsound testing procedures or through competitors activities. Enablinz Obiectives* 1. To be aware of the current views of regulatory authorities. 2. To establish company guidelines, particularly where there are no regulatory requirements (either in particular scientific areas or in particular countries), or for use in on-going discussions with regulatory authorities. 3. To carry out any necessary research to clarify regulatory issues. 4. To critically review the scientific literature relating to any additive or process, proposed for use in cigarettes. against regulatory requirements and company guidelines. To advise, with external consultants if necessary, on any further research necessary to complete an adequate examination of any proposed additive or process. To ensure that such necessary research is completed to acceptable scientific standards and the results appraised. 5. To put in place and use the necessary contacts etc. to achieve effective communication of the BAT position to key people. In practice it is most convenient to consider the management of this area with regard to the internal and external activities of the BAT Group. The "internal" objectives are considered to be BAT objectives 2 & 3 (Enabling objectives 1-4) and "external" objectives BAT objectives 1, 4 & 5 and enabling objective 5. Broader company objectives e.g. financial targets ommitted. 4~A CD C) U1 C) BATCO dOCUMent for Legal Services Health Canada 20 October 1999 - 6 - Internal Obiectives The BAT Group is currently organized along the following lines: Identification Largely delegated to of Existing & - - - - - - - - - - - - - - Scientific Research Anticipated Issues Group of BAT. I Relevant - - - - - - Covered by Group BAT Group External Companies, especially Research Knowledge Scientific Research Group. L - - - - - - - - - - - - - - Agreed at annual Regulatory meeting of Research Requirements Policy Group BAT Arises from BAT knowledge - - - - - - - - - Group Research Base and Programme. Guidelines Prototype New Market Products and Research Validation Coordinated at annual meeting of - - - - - Research Policy New Products Market, Group/and with I ~Xanufac~ture Research] other departments. This area, is of course, coordinated by Mr A. L. Heard and the exact organization may be subject to change but the above outline, uhich has evolved over many years, broadly meets the internal needs of the company. The following recommendations are made to improve the Company's internal activities. -r~b CD C) (il CD BATCo document for Legal Services : Health Canada 20 October 1999 - 7 - Proposed Action by Comments/Recommendations for action I- External knowledge (e.g. information obtained at BAT Group external conferences) is not always circulated effectively in the Group. This should be improved. Due to other demands on the time of Corporate R&D ALH/RET Department, Millbank the ongoing review of scientific papers is becoming increasingly difficult to maintain- 2. Coordination of the appraisal of additives across the RET Group should be introduced (agreed in principle RPG 1989, not yet implemented). 3. More work should be carried out to investigate the RB/TGM pyrolysis products of additives/materials used in cigarettes (again, agreed in principle RPG 1989). 4. Much more attention should be given to the problems ALH likely to be associated with validating potential new products. Hitherto "too little, too late" has been all too common and the history of introducing R&D projects into manufacture has been beset by problems in this area (and by others). 5. Central Coordination/Executive Control to be ALK strengthened. I* -r-1b C:> CD . CD Ln CD E3ATCo document for Legal Services : Health Canada 20 October 1999 - 8 - External Obiectives Essentially these objectives all relate to getting the BAT view on regulatory issues accepted externally as far as possible. This is done by lobbying by various organizations to target groups as discussed earlier. However, there are many organizations which do this and these are now listed: Orxanizations with BAT Involvement 1. Either directly of indirectly the BAT Group is involved with all of the following organizations, who will lobby on tobacco-related issues, but not necessarily for the BAT point of view. BAT Industries and its principal subsidiaries BAT Indu ' stries Associates (e.g. IMASCO) BATCo BATCo Subsidiaries RATCo Associaties (e.s. Skandinavisk) BATCo Friendly Companies (e.g. Tiedemann's) Manufacturers Associations (e.g. TAC) Associations of Manufacturers Associations (e.g. CECCM) INFOTAB CORESTA 2. Ormanizations without BAT rnvolvement The following organizations with whom BAT is not directly involved with will also lobby on tobacco issues. For the Industrv Against-the Tndustr T.I. (USA) A.S.H. F.O.R.E.S.T. Most medical/scientific Auth. Occasional Medical/Scientific Auth. Doctors etc. Politicians Politicians Neutral ? Standards Organizations Politicians -P~- CD CD CZ) Un BATCo document for Legal Services : Health Canada 20 October 1999 9 Discussio Given the large number of organizations who may express views on regulatory issues, some coordination is clearly necessary within the BAT group to ensure that a common view is put over, in attempting to achieve our objectives. unless there are special reasons for local variations. Within the various members of the industry, coordination of industry related activities is also desirable: if this is not possible then knowledge of competitors positions, where different from that of the BAT Group, is required. However. further difficulties &rise from: (1) Identifying issues as industry-related as opposed to BAT-related. (2) Decisions as to whether key issues fall within scientific, legal or public affairs areas, although, again, these areas are not mutually exclusive. (3) Rationalization of different interests within specific BAT companies i.e. tar minima, attitudes towards testing of Roll-Your-Own tobacco, use' of particular additives, etc. These complications further strengthen the case for central coordination. Recommendations for Coordination of Policv Since the regulatory issues discussed here have a scientific/medical basis (of increasing complexity) the starting point for the BAT response should be Corporate R&D Department. It is therefore recommended that Policy on Regulatory Issues should be set by Corporate R&D Department after consultation with the following, as necessary: (1) Chairman of BATCo (Director responsible for R&D Department). (2) Legal Department BATCo. (3) Public Affairs Department BATCo. (4) Marketing Department BATCo. (5) Leaf Department BATCo. (6) Other CAC Tobacco Companies and if appropriate BATCo subsidiaries. ALI those concerned with the implementation of the policy should be advised through No. Is that these activities must relate to the policy set out 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 communicated to No. ls by Corporate R&D Department. Implementation of Policy This will largely be carried out within individual BAT Industries or BATCo subsidiaries, and by a variety of individuals, who may or may not have scientific training. The onus must be on these individuals to consult with Corporate R&D Department if they feel unable to cope with the scientific complexity of any of the issues, and when specialist assistance (Dr- Thornton, Dr Boyse, Mr Mitchell or Mr Dymond) may be required. This applies most obviously to discussions with knowledgeable external authorities who may be hostile to the industry. It is difficult to be specific in this area but the CAC countires are most likely to have their C) own R&D staff able to assist. CD U1 Q1 BATCo document for Legal Services : Health Canada 20 October 1999 - 10 - With regard to specific organizations the following comments are made: Manufacturers Associations (a) NKA's In countries where BAT sells cigarettes BAT should be represented on these associations with the objective of getting BAT views accepted. There is one anomalous organization, TAG (UK), where BAT does not sell cigarettes. However, the indirect influence of the UK, particularly in Commonwealth countries, justifies continued membership. This should be reviewed circa 1992 with the advent of the harmonized common market and in relation to CECCH. (b) CECCH Circa 1992 there may be a case for considering whether it is necessary to belong both to CECCH and to European NMA's. At present, with for example no sign of harmonization on additives in the EEC, it will be necessary to belong to both CECCM and individual NMA's. INFOTAB On Regulatory Issues there would appear to be a strictly limited role for INFOTAB as an information disseminating organization. With the advent of supra-national NMA's (CECC,4 and Asian Consortium) it is not necessary for INFOTAB to duplicate the role of these organizations. COREST BAT Group membership is now strong with some 34 individuals involved (Appendix 5), and with a wide geographical spread amongst the companies. In recent years this organization has become more important, partly because of its delegated role in cigarette delivery measurement. We should continue to support this organization strongly but the activities of delegates, at all levels, should be led and coordinated by Corporate R&D in Millbank (ALK/RET). Qrxanizations withp_gt BAT Involvement Obviously there are no direct opportunities for influence and in the case of the T.I. in the USA, which we could rejoin, this is a risk to be considered. Giving encouragement to independent scientists to lobby regulators is a legitimate activity in this area and is being pursued (RET/SB). RET/LEW 12th January 1990 -J~111 C:) C:) BATCo document for Legal Services : Health Canada 20 October 1999