Federal regulations may kill Nevada vaping businesses

WASHINGTON — The fate of Nevada’s vaping industry is now in the hands of federal regulators, with some businesses fearing they may have to close their doors.

Congress granted the Food and Drug Administration new authority this year intended to close regulatory loopholes on synthetic nicotine and e-cigarettes to curb an epidemic of youth use and addiction. But vaping manufacturers and owners of retail shops say mounting regulations on flavors, synthetic nicotine and vaping devices pose economic harm to a fledgling industry.

The products, vaping businesses say, are designed as an alternative to cigarettes and to reduce known health hazards related to smoking and chewing tobacco.

“We have helped thousands and thousands of people quit smoking,” said Alex Mazzola, owner of Mob Liquid Labs in Las Vegas.

His lab once produced the peach-mango-strawberry flavored nicotine e-liquids and cartridges favored by users in their 50s and 60s. Now, he now makes the flavor with synthetic nicotine, and is seeking authorization from the Food and Drug Administration to do so.

But with the latest regulation on synthetic nicotine and flavors, Mazzola said he will likely be forced to close his business if he doesn’t get the authorization.

Government regulations have created an economic burden that owners say are forcing Nevada and Las Vegas vaping businesses to close – including two stores owned by Mazzola’s brother.

“We are a legitimate business. We are tired of fighting the FDA and regulations. We want to stay in business,” said Mazzola, who is also the president of the Nevada Vaping Association.

Regulations aimed at health

In 2019, federal law prohibited the sale of tobacco and vapor products to anyone under the age of 21. A 2020 law prohibits the sale of vaping pods and cartridges containing liquids in flavors, other than tobacco or menthol, without Food and Drug Administration authorization.

The regulations on flavors, products and the expanded authority to regulate synthetic nicotine is hailed by groups such as the Campaign for Tobacco-Free Kids, the American Lung Association and other health organizations to keep minors from getting addicted to a harmful substance.

“You’re going to see a significant reduction in youth initiation,” said Mitch Zeller, the former director of the FDA Center for Tobacco Products, at a Baltimore conference last month.

In March, the Food and Drug Administration and the Centers for Disease Control and Prevention released a study that showed that 2.5 million students, or 9.3 percent, had used tobacco or nicotine products in 2021. The study showed that e-cigarettes were the most popular device used by 2 million middle- and high-school students.

The Nevada Department of Health and Human Services cites the study and others that show vaping flavors and devices are an attraction to teenagers and helped fuel an epidemic of young users.

Effectiveness questioned

Businessman Greg Belcher, who owns three Las Vegas-area Vapeco stores, said nicotine and synthetic nicotine should be regulated, and he agrees that teens should be protected and discouraged from using those products.

But Belcher said the federal regulations do neither. Instead the government has authorized products to be sold that remain popular with young users.

“It’s ironic,” he said, because devices approved by the Food and Drug Administration are disposable, discreet and easily obtainable.

If the government was serious about regulating products, it would require them to be sold by licensed tobacco stores.

“The gas stations? C’mon. They’re notorious for selling alcohol and stuff to minors. And guess what – same with e-cigarettes – okay,” said Belcher, who started his business in 2013 after vaping allowed him to quit a 30-year cigarette smoking habit.

Congress expanded authority by the Food and Drug Administration to regulate synthetic nicotine vaping products that went into effect in April. The new authority was tucked into the $1.5 trillion spending bill passed by Congress in March to fund federal departments and agencies in fiscal year 2022, which began Oct. 1.

President Joe Biden signed the bill into law.

Rep. Frank Pallone Jr., D-N.J., chairman of the House Energy and Commerce Committee, said he wrote the legislation expanding federal authority after e-cigarette companies used loopholes to continue selling fruit-flavored, addictive synthetic nicotine products popular with teen-agers.

Under current law, companies must receive federal approval to sell devices with cartridges. But many of the applications were rejected, or are still waiting for review. Lawsuits have been filed in several states.

Tobacco-flavored and menthol cartridges and e-cigarettes, marketed to adult tobacco users, have been approved by the Food and Drug Administration, which has acknowledged studies that show the products are a safer alternative for adult smokers. But the agency recently announced it plans to ban menthol in cigarettes, and all flavors in cigars.

Anti-smoking groups wanted federal authority expanded to regulate synthetic nicotine, which was not covered under previous laws on tobacco-derived nicotine. The groups said the loophole was being used to target youth.

Nevada senators back regs

Pallone said he wrote the language to expand the Food and Drug Administration’s authority over synthetic nicotine to close that loophole. It received bipartisan support.

Nevada Sens. Catherine Cortez Masto and Jacky Rosen, both Democrats, supported expanding authority to regulate synthetic nicotine, similar to regulations imposed on other addictive substances like tobacco.

Rosen, a member of the Senate Health Education Labor and Pensions Committee, supported the bipartisan compromise as balancing the right of consumers and businesses.

The legislation was hailed by anti-smoking groups.

Congress took a critical step to end the youth addiction crisis with the legislation to stop “manufacturers from using synthetic nicotine to evade FDA regulation,” said Matthew Myers, president of the Campaign for Tobacco-Free Kids, in a statement.

But advocates of vaping products, like the American Vapor Manufacturers, based in Prescott, Arizona, argue that synthetic nicotine is a positive innovation that provides a way for cigarette smokers to switch to vaping. And increasing regulations on vaping and alternative products is stunting growth of the new industry, and eliminating choices for those old enough to enjoy the products and benefits, the group says.

The U.S. vaping market was valued at $12.8 billion in 2020, and is expected to grow to $49 billion in 2026, according to Expert Market Research.

But Belcher, in Las Vegas, said expansion plans for Vapeco have been halted, because of uncertainty over federal policy and enforcement.

If the Food and Drug Administration continues to ban products, “what is Greg Belcher going to sell in his store?” asked Gregory Conley, president of the American Vaping Association based in Stamford, Connecticut. “This is not an environment where people are going to open a new business.”

Mazzola, while continuing to run his Las Vegas properties, is branching out into the mortgage industry, and electric car rentals, due to the uncertainties in the vaping industry.

In addition to the regulations, Nevada imposes a 30 percent excise tax on wholesale price of all vaping products.

Democrats in the U.S. House and White House included a vaping and e-cigarette tax in the failed $2 trillion Build Back Better Act last year.

Cortez Masto, a member of the Senate Finance Committee, got the $9 billion vaping tax provision dropped from the House-passed bill, calling it regressive tax and saying it would hurt families making less than $400,000 a year.

Businesses closing

Meanwhile, other repercussions of the vaping regulations have surfaced.

Amanda Wheeler, president of American Vapor Manufacturers, told the Review-Journal that FDA policies on vaping have actually resulted in a rise in cigarette sales for the first time in 20 years, according to Federal Trade Commission statistics.

“Last year was the first time in a long time that cigarette sales actually went up,’ Wheeler said. “It’s a reversal of a lot of progress that has been made.”

And that’s before the regulation on synthetic nicotine.

“I can tell you firsthand that scores of vaping businesses of every size are going bankrupt daily, many – many thousands in just the last year,” said Wheeler, who has shops in Arizona and Colorado.

Federal statistics do not differentiate or track business closures specific to the vaping industry. Nevada agencies also do not have figures for vaping-related businesses that have closed.

But economic impact reports by the advocacy group Vapor Technology Association, show that Nevada vaping stores, manufacturers and wholesale companies employed 973 people in 2018, before the 21-year age limit and regulations on flavored cartridges were implemented. In 2021, the number of employees in the industry dropped to 672, according to the association’s data.

And in a blow to the vaping industry, the Federal Trade Commission, which reported the increase in cigarette use after 20 years, released an April report on e-cigarettes that bolsters the argument for regulation.

“The Commission’s inaugural e-cigarette report paints a disturbing picture, especially with e-cigarettes driving an unprecedented increase in youth use of tobacco products,” said Samuel Levine, Director of the commission’s Bureau of Consumer Protection.

“The data show that this increase coincided with dramatic spikes in the market share of flavored products, higher concentrations of nicotine, and an industry attempt to evade a ban on free sampling,” Levine said in a statement.

Vaping industry proponents say enforcement should be more focused on selective products, underage users and places where they shop.

Belcher said current regulation merely hinders choices of those over 21 years of age who would benefit from vaping products, although he admits there remain health risks with that, as well.

Wheeler, Mazzola and Belcher also brought up, in separate interviews, the irony and inconsistency of government regulations that allow stores to sell fruit-flavored vodka, whisky and alcoholic beverages, coffee, marijuana and cannabis edibles.

Belcher said increasing regulation and banning vaping products will only result in pushing legal businesses out, leaving a void for a black market stocked with unregulated and potentially unsafe liquids or e-cigarettes.

“There were some pretty bad players in this industry, no doubt about it. But that’s kind of been self-cleaning here in the last few years,” Belcher said. Now, “everything is manufactured in a controlled environment. Way better than it was eight years ago,” he added.

His fight for business survival is now with federal agencies. And the demand products is not going to go away, he said

“People aren’t going to quit vaping,” Belcher said.

Contact Gary Martin at gmartin@reviewjournal.com. Follow @garymartindc on Twitter.