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Ahead of the Bell: Tobacco Hearing
Tuesday February 27, 6:45 am ET
Senate Committee to Hold Hearing on FDA Regulation of Tobacco Products

NEW YORK (AP) -- As anti-smoking advocates press for stricter tobacco controls, the Senate Health, Education, Labor and Pensions Committee will hold a hearing Tuesday at 10 a.m. EST on the need for Food and Drug Administration regulation of tobacco products.
For many years, the FDA said it did not have authority to regulate tobacco, but that changed in 1996 when the FDA reversed course and cited new evidence that some in the industry raised cigarettes' nicotine levels to ensure addiction in the millions of Americans who smoke.

After tobacco companies sued and the case landed in the Supreme Court in 2000, the court ruled 5-4 that Congress did not authorize the FDA to regulate tobacco.

In a Feb. 14 tobacco industry note, Morgan Stanley analyst David Adelman said he is not concerned by the prospect of FDA tobacco regulation as the tobacco industry operates worldwide "within an extremely wide range of tax, legal and regulatory frameworks."

"So long as government regulation is 'sensible,' it typically does not have an adverse impact on industry profitability or valuations, and it is within that context that we are not concerned by the prospect of FDA tobacco regulation," Adelman wrote.

Adelman warned, however, that although the FDA lacks tobacco regulatory authority under existing legislation, there is nothing that would bar Congress from granting the FDA the jurisdiction to regulate conventionally marketed tobacco products.

There have been such efforts during the last several years to enact such legislation, but it remains unclear whether the FDA will be granted tobacco regulatory control.

"If such authority is granted, the precise terms -- and implications -- of such legislation are similarly unknown today," Adelman said.