Tobacco Product Regulation: Most FDA Spending Funded Public Education, Regulatory Science, and Compliance and Enforcement Activities
Published: 2014-06-20T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Tobacco use is the leading cause of preventable death and disease in the United States. In 2009, the Family Smoking Prevention and Tobacco Control Act (Tobacco Control Act) granted FDA, an agency within the Department of Health and Human Services (HHS), authority to regulate tobacco products, including marketing and distribution to youth. The act established CTP, which implements the act by educating the public on the dangers of tobacco use; developing the science needed for tobacco regulation; and developing and enforcing regulations on the manufacture, marketing, and distribution of tobacco products. The act authorized FDA to assess and collect user fees from tobacco manufacturers and importers.
The Tobacco Control Act mandated that GAO review the authority and resources provided to FDA for regulating the manufacture, marketing, and distribution of tobacco products. This report examines (1) how FDA spent tobacco user fees for key activities using its authorities granted in the act, and (2) any challenges FDA encountered in using its authorities. GAO analyzed data on tobacco user fees collected and spent on key activities by FDA as of March 31, 2014; reviewed documents related to FDA's key activities, as well as relevant laws, regulations, and guidance; and interviewed CTP, public health, and tobacco industry officials.
HHS reviewed a draft of this report and agreed with GAO's reiteration of its previous recommendation that performance measures for all tobacco product reviews are needed.
section_title: What GAO Found
paragraphs: As of March 31, 2014, the Food and Drug Administration (FDA) spent about $1.48 billion (79 percent) of the $1.88 billion in total tobacco user fees it collected since fiscal year 2009. FDA spent the majority of tobacco user fees on key activities led by the agency's Center for Tobacco Products (CTP), which is funded solely by tobacco user fees. These included activities related to public education (including public education campaigns and communicating CTP activities); regulatory science (including research, product review, and developing the science to support regulations and guidance); and compliance and enforcement (including tobacco retailer inspections; manufacturer and import inspections and enforcement; promotion, advertising, and labeling surveillance; and outreach and small business assistance).
While FDA has taken steps to address some of the challenges it has faced, including challenges related to starting up a new center, it continues to face challenges, including setting and monitoring review time frames. Until recently, CTP has not had performance measures for making final decisions on new tobacco product submissions by which to assess its progress, as GAO previously recommended. FDA has announced performance measures for two of its new tobacco product review processes (to take effect in October 2014), but not for the type of new tobacco product submission that comprises the bulk of FDA's review backlog. The agency has indicated that it intends to establish such performance measures, but until it does so, the agency's ability to assess its efforts will be limited. This will be particularly pressing as FDA moves forward with plans to deem additional types of tobacco products to be subject to its regulatory authority.

section_title: Letter
paragraphs: Tobacco use is the leading cause of preventable death, disease, and  disability and is a significant contributor to health care costs in the United  States. Smoking was responsible for more than 480,000 premature  deaths annually between 2005 and 2009 among Americans 35 and older,  according to the U.S. Surgeon General. The Surgeon General also  reported that among adults who had ever smoked cigarettes daily,   87 percent had tried their first cigarette by the time they were 18 years of  age. In 2009, the Family Smoking Prevention and Tobacco Control Act  (Tobacco Control Act) granted the Food and Drug Administration (FDA),  an agency within the Department of Health and Human Services (HHS),  authority to address concerns about tobacco use by young people and to  regulate the manufacturing, marketing, and distribution of tobacco  products using a public health standard. The act provides FDA with a  range of authorities, such as restricting tobacco sales to minors and  setting tobacco product standards. The Tobacco Control Act represents  the first time that FDA has had the authority to regulate tobacco products.
The Tobacco Control Act established the Center for Tobacco Products  (CTP) within FDA as the entity responsible for implementing the act.  CTP was formed in 2009—the first new center within FDA in 21 years—  and it implements the act by educating the public on the dangers of  tobacco use; developing the science needed for tobacco regulation;  developing and enforcing regulations on the manufacture, marketing, and  distribution of tobacco products; and performing other activities. To  support FDA’s tobacco regulation activities, the Tobacco Control Act  authorized FDA to assess and collect user fees—the sole source of  funding for CTP’s activities— from each tobacco manufacturer and  importer subject to FDA’s regulation.
The Tobacco Control Act mandated that GAO review FDA’s authority and  resources to regulate the manufacture, marketing, and distribution of  tobacco products. This report examines (1) how FDA spent tobacco user fees for key activities using its authorities granted in the Tobacco Control  Act and (2) any challenges FDA encountered in using its authorities  granted in the Tobacco Control Act.
To examine how FDA spent tobacco user fees for its key activities using  its authorities granted in the Tobacco Control Act, we analyzed data on  tobacco user fees collected through March 31, 2014, such as the  amounts collected by FDA and the amounts spent by CTP’s offices. We  also interviewed agency officials and reviewed agency documents,  including budget justifications, reports to Congress, performance reports,  and agency documentation of CTP’s activities to identify the key activities  the agency carried out. We analyzed spending data provided by FDA for  these activities for fiscal years 2010 through the first half of fiscal year  2014 (March 31, 2014) and planned spending for fiscal year 2014.Spending for key activities included actual spending and an estimated  distribution, generated by FDA, of personnel costs across activities within  each individual CTP office. For our analysis, we included spending for the  tobacco-related work of FDA’s Office of Regulatory Affairs (ORA) with  CTP’s compliance and enforcement activities, since ORA assists CTP by  conducting select activities. Other tobacco-related spending by CTP and  FDA, including spending on information technology infrastructure and  centralized funding for, among other things, furniture, office equipment,  and center-wide training; spending for rent and rent-related activities; and  the tobacco-related spending of FDA headquarters, including the Office of  the Commissioner was not included in our analysis of spending by key  activity. We assessed the reliability of FDA data we received by reviewing  related documentation, performing data reliability checks (such as  examining the data for missing values and checking values against other  documentation), and interviewing CTP officials. After taking these steps,  we determined that the data we used were sufficiently reliable for our  purposes.
To examine any challenges FDA encountered in using its authorities  granted in the Tobacco Control Act, including whether FDA faced  limitations in its authority to regulate tobacco products, we reviewed  relevant laws, tobacco-related regulations and guidance, and the key  activities undertaken by FDA to carry out the Tobacco Control Act. We  reviewed documents and interviewed agency officials, public health  stakeholders, an association representing state and territorial health  officials, and tobacco industry stakeholders—including representatives of  tobacco manufacturers and tobacco retailers—to obtain information on  any challenges FDA encountered, including any challenges associated  with limitations in its authorities or resources.
We conducted this performance audit from September 2013 to June 2014  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.
subsections: section_title: Background
subsections: section_title: FDA’s Authority to Regulate Tobacco Products
paragraphs: The Tobacco Control Act provides FDA with the authority to regulate  cigarettes, cigarette tobacco, roll-your-own tobacco, and smokeless  tobacco products, as well as the authority to deem other tobacco products  to be subject to FDA’s regulatory authority. Under the act, FDA has the  authority to issue regulations controlling the manufacture, marketing, and  distribution of tobacco products. The act also places limitations on FDA’s  regulatory authority over tobacco products. For example, the Tobacco  Control Act prohibits FDA from banning all tobacco products in certain  categories, lowering nicotine yields to zero, or raising the minimum age to   The Tobacco Control Act includes provisions  purchase tobacco.requiring FDA to regulate tobacco products using a public health  standard, which takes into account the risks and benefits of tobacco  products on both users and non-users of tobacco products. This standard  is unique to FDA’s regulation of tobacco products, as other products  regulated by FDA, such as drugs and medical devices, use a “safe and  effective” standard.
FDA executes its regulatory authority under the Tobacco Control Act  through CTP. CTP’s Office of Health Communication and Education  (OHCE), Office of Science (OS), and Office of Compliance and  Enforcement (OCE) have primary responsibility for developing the public  education, regulatory science, and compliance and enforcement  infrastructure for the tobacco program and carrying out the associated  activities. CTP has additional offices that support the activities of these  offices (see table 1).
In addition to establishing CTP, the Tobacco Control Act required FDA to  reissue regulations originally published in 1996 that, among other things,  banned cigarette sales to minors. The act also banned all flavors except  tobacco and menthol in cigarettes and directed FDA to issue regulations  requiring the display of graphic warning labels depicting the negative  health consequences of smoking on cigarette packages and  advertisements.
The Tobacco Control Act also requires that manufacturers of new tobacco  products submit information—for example, a statement of the product’s  ingredients—to FDA and receive marketing authorization before  introducing those new tobacco products into the U.S. market. The act  established three pathways for FDA’s review of new tobacco product  submissions: (1) the Substantial Equivalence (SE) pathway, which is for  new tobacco products that have the same characteristics as a predicate  tobacco product that is already legally marketed or has different  characteristics that do not raise different questions of public health;  (2) the Exemption from SE pathway, which is for new tobacco products  with minor modification of another product marketed by the same  manufacturer; and (3) the Premarket Tobacco Product Application  (PMTA) pathway, which is for new tobacco products that do not meet the  criteria for the other two pathways. The act also required manufacturers  to submit applications to FDA to market modified risk tobacco products  (MRTP), which are products that are sold or distributed for use to reduce  harm or the risk of tobacco-related disease associated with commercially  marketed tobacco products. CTP is responsible for reviewing new  tobacco product submissions and MRTP submissions and determining  whether manufacturers may introduce the products in those submissions  to the U.S. market. §§ 6, 101(b), 123 Stat. at 1783, 1791 (codified at 21 U.S.C. §§ 387d(a)(3), (e)).  Manufacturers are required to report HPHC data at least 90 days prior to introducing a  tobacco product that was not on the market on June 22, 2009. and recommendations about the impact of menthol cigarette use on the  public health not later than one year after its establishment.
section_title: Tobacco User Fees
paragraphs: The Tobacco Control Act requires FDA to assess user fees on  manufacturers and importers of tobacco products that are subject to FDA  regulation based on their market share and specifies that tobacco user  fees can only be applied toward FDA activities related to the regulation of  tobacco products.collected is specified in the act for each fiscal year, beginning in fiscal  year 2009 (see table 2), and the total amount does not vary based on the  number of tobacco products under regulation.
section_title: FDA Spent Nearly 80 Percent of User Fees Collected, Mostly for Public Education, Regulatory Science, and Compliance and Enforcement
paragraphs: FDA spent nearly 80 percent of the tobacco user fees collected as of  March 31, 2014, with more than half of its spending occurring in fiscal  year 2013. The majority of FDA’s spending was for activities related to  public education, regulatory science, and compliance and enforcement,  with spending for public education and regulatory science activities  exceeding spending for compliance and enforcement activities.
subsections: section_title: FDA Spent 79 Percent of User Fees Collected, Mostly in Fiscal Year 2013
paragraphs: As of March 31, 2014, FDA spent about $1.48 billion (79 percent) of the  $1.88 billion in tobacco user fees collected (see fig. 1).FDA’s spending—$868 million—occurred in fiscal year 2013.
section_title: Most Spending Was for Public Education, Regulatory Science, and Compliance and Enforcement Activities
paragraphs: About 79 percent ($1.17 billion) of user fees spent as of March 31, 2014,  on tobacco-related activities was for activities related to public education,  regulatory science—which includes product research, product review, and  regulation and guidance support—and compliance and enforcement.  These activities were carried out by OHCE, OS, and OCE, respectively.  Most of the spending was for public education and regulatory science  activities, with nearly all of the public education spending occurring in  fiscal year 2013. (See fig. 3.)
Spending for FDA’s public education activities has focused on   (1) developing and launching public education campaigns to educate  consumers, particularly youth, on the dangers of tobacco use and   (2) communicating information on CTP activities to the public. As of  March 31, 2014, 89 percent ($450 million) of the $508 million FDA spent  on tobacco public education activities went to develop and launch public  education campaigns (see fig. 4). Almost all of this spending   ($430 million) occurred in fiscal year 2013, when FDA awarded task  orders for its public education campaigns.
In February 2014, FDA launched its first youth tobacco prevention public  education campaign, targeting at-risk youth. FDA plans to launch four  additional campaigns targeted at rural; multicultural; lesbian, gay,  bisexual, and transgender; and American Indian/Alaska Native youth in  fiscal years 2015 and 2016. According to CTP officials, CTP has been  working with contractors to develop research plans and create campaign  materials for its media campaigns. The task orders for the 5 youth public  education campaigns—which were awarded in fiscal year 2013 after the  agency spent about 2 years developing an acquisitions infrastructure— account for nearly $314 million of the $450 million spent on public  education campaign efforts since fiscal year 2010. According to FDA, the  agency focused its public education campaigns on youth prevention  because tobacco use is almost always initiated and established during  adolescence. The goal of the public education campaigns is to reduce the  number of youth who experiment with tobacco use to ultimately reduce  the number of future tobacco users.
FDA’s first public education campaign, “The Real Cost” campaign, targets  youth from ages 12 to 17 who are open to smoking or already  experimenting with cigarettes. The campaign launched nationally in a  variety of media outlets, including online, and is expected to run for at  least 1 year. Campaign messages are intended to make the target  audience aware of the risks of smoking by highlighting consequences  that, according to FDA, concern youth, such as loss of control due to  addiction and health effects like tooth loss and skin damage.Additionally, the campaign will include messages that specifically address  the health consequences of menthol cigarettes.
FDA also awarded an evaluation contract in an effort to determine the  impact of its youth public education campaigns. Baseline evaluation  began in fiscal year 2014, prior to the launch of the first campaign.  According to CTP officials, additional evaluations will be conducted at  various intervals appropriate for each of the campaigns and evaluation  results will be used to assess changes in key tobacco-related knowledge,  attitudes, beliefs, and behaviors over several years to determine if  exposure to the campaigns is associated with a decrease in cigarette  smoking among youth.
In addition to its youth-targeted public education campaigns, FDA has  funded two additional public education campaigns, one targeting  consumers at the point-of-sale and one for retailer education. Point-of- sale campaign materials target adults who are social smokers and adult  smokers who are ready to quit. FDA’s “Break the Chain of Tobacco  Addiction” campaign was developed by CTP in fiscal year 2010 and  provides retailer education designed to encourage voluntary compliance  with all FDA regulations. Task orders for these campaigns totaled an  additional $84 million of the $450 million spent on public education media  campaigns since fiscal year 2010. Like FDA’s youth-targeted campaigns,  FDA officials stated that the agency plans to evaluate these campaigns to  determine their impact.
According to FDA officials, the agency’s other public education activities  involve communicating CTP’s mission and regulatory activities to  stakeholders—including tobacco manufacturers, retailers, public health  stakeholders, and lawmakers, among others—and the public. FDA issues  press releases and conducts media outreach, such as outreach to  publicize tobacco regulations and the results of CTP’s compliance and  enforcement work; develops and maintains CTP’s website; develops  written materials such as frequently-asked questions and materials for  CTP events; and assists the individual offices with written  communications. In addition, FDA holds webinars to improve education  and dissemination of information to stakeholders and listening sessions to  provide stakeholders with the opportunity to make comments and raise  concerns.
subsections: section_title: Regulatory Science Activities
paragraphs: FDA spending related to regulatory science has focused on three  activities: (1) building a scientific research base, including research on  tobacco products and use patterns, (2) developing and implementing a  tobacco product review process, and (3) developing the scientific basis to  support regulations and guidance. As of March 31, 2014, about   94 percent of the $478 million FDA had spent on regulatory science  activities went to building a scientific research base on tobacco products  and tobacco use, including spending for a longitudinal study and centers  for tobacco regulatory science (see fig. 5). The proportion of spending on  regulatory science activities that has been dedicated to building the  scientific research base has remained fairly consistent since fiscal year  2010.
Building a Scientific Research Base  Since fiscal year 2010, FDA has funded scientific research to better  understand tobacco products, their impact on the health of users and  non-users, use patterns and perceptions of tobacco products, and the  effectiveness of tobacco marketing, advertising, and graphic warning   These research projects, funded by FDA tobacco user fees,  labels.have been conducted in collaboration with other federal entities, such as  the National Institutes of Health (NIH) and Centers for Disease Control  and Prevention (CDC), as well as with non-federal entities (see table 3).
FDA initiated some key long-term projects to help build its scientific  research base. For example, FDA funded a 5-year contract in fiscal year  2011 in collaboration with NIH to conduct the Population Assessment of  Tobacco and Health study through an NIH contract. The study is a  national longitudinal study of tobacco use and how it affects the  population’s health. The study’s objectives include examining reasons  why some people use tobacco and others do not, and how and why  people start using different tobacco products. According to FDA, study  findings will provide a scientific framework to inform decisions about  tobacco products and future changes in tobacco products. FDA spent  $113 million on the study in fiscal year 2011 through March 31, 2014.  FDA, in collaboration with NIH, also awarded $53 million in grants in fiscal  year 2013 to fund 14 Tobacco Centers of Regulatory Science to generate  public health research to inform tobacco regulation and to train tobacco  regulatory scientists. The Tobacco Centers of Regulatory Science  funded research including a project focused on understanding the  cardiovascular effects of tobacco use to determine the specific elements  of tobacco products contributing to cardiovascular injury, which could  ultimately help inform regulatory standards for tobacco products. FDA  expects to spend more than $273 million in funding for these research  projects through fiscal year 2018.
In addition to funding research projects to better understand tobacco  products already under FDA’s regulatory authority, in fiscal year 2013,  FDA also funded scientific research related to tobacco products not yet  under the agency’s authority, including research projects on e-cigarettes  and cigars. For example, in order to inform CTP’s regulatory efforts, the agency funded research examining consumer perceptions, attitudes, and  beliefs about new and emerging products, such as e-cigarettes and little  cigars. According to CTP officials, this research will help inform decisions  on how to regulate these other tobacco products. (See app. II for  additional examples of research projects supported by FDA spending.)
Developing and Implementing a Tobacco Product Review Process  FDA’s regulatory science activities also included establishing and  implementing processes for reviewing submissions made by  manufacturers to market new tobacco products and submissions for  marketing MRTPs, and for receiving and assessing adverse event and  product problem reports. FDA receives submissions for CTP to review  and determine whether manufacturers may introduce new tobacco  products to the U.S. market or market MRTPs. CTP developed and  implemented the review processes for such submissions, which FDA  began receiving in June 2010 and were mostly submitted through the SE  pathway.
FDA made its first decisions on SE submissions in late June 2013—about  3 years after FDA’s receipt of the first SE submission. As of March 31,  2014, FDA had made a final decision on a total of 30 regular SE  submissions,  finding 17 submissions to be substantially equivalent and  13 submissions to be not substantially equivalent to a predicate tobacco  product. FDA had made a final decision on a total of four provisional SE  submissions, finding all of them to be not substantially equivalent to a  predicate and requiring the products to be removed from the market. (See  table 4). CTP officials reported that CTP prioritized regular SE  submissions over provisional SE submissions because tobacco products  in provisional SE submissions can remain on the market legally unless  and until FDA issues an order of not substantially equivalent whereas  products in regular SE submissions cannot enter the market until FDA  issues an order that it is substantially equivalent to a predicate.
In addition to conducting reviews of submissions, FDA designed and  implemented a system in fiscal year 2013 to receive and assess tobacco  product adverse event and product problem reports to inform the  agency’s regulation of tobacco products. The reports are submitted by  tobacco product consumers and healthcare professionals using the  FDA/NIH Safety Reporting Portal. CTP’s OS has been systematically  assessing the adverse events, product quality problems, and product use  errors included in the reports to inform FDA regulation of tobacco product  development, manufacture, and marketing. According to CTP officials, the  ongoing assessment of the reports is critical to identifying and  understanding risks, especially as the tobacco industry develops novel  products in response to market and regulatory influences. For example,  the assessment of adverse events reported by a large and diverse  population of consumers may reveal problems that were not anticipated  while the product was being used in research studies.
FDA’s regulatory science activities also include developing the scientific  basis to support regulations and guidance for the tobacco industry,  including proposed regulations to deem additional tobacco products to be  subject to FDA’s authority and guidance on reporting and submission  review. According to FDA officials, from fiscal years 2010 through 2013,  much of FDA’s initial work to develop tobacco regulations and guidance  focused on activities related to requirements in the Tobacco Control Act,  including activities to develop regulations on menthol flavoring in  cigarettes and guidance for industry’s reporting of HPHCs in regulated  tobacco products.
FDA has evaluated the science of menthol in cigarettes to determine what  action, if any, the agency will take to regulate menthol. In March 2011,  FDA received the Tobacco Products Scientific Advisory Committee report  on menthol in cigarettes, which found that the removal of menthol  cigarettes from the marketplace would benefit public health in the United  States. Following the report, FDA conducted an additional, independent  evaluation on the effects of menthol in cigarettes, which resulted in similar  conclusions. On July 24, 2013, FDA issued an Advanced Notice of  Proposed Rule Making to obtain comments or other information that may  inform the regulatory actions FDA might take with respect to menthol in  cigarettes.to the notice.
According to CTP officials, FDA is reviewing the responses  FDA also worked on developing guidance for HPHCs. In August 2011,  FDA issued a public notice listing 96 HPHCs in tobacco products and  tobacco smoke that research indicated were harmful or potentially  harmful to health. Based on public comment and FDA’s review of the scientific literature, FDA published a list of 93 HPHCs in April 2012.Also, in March 2012, FDA issued draft guidance for industry on reporting  on these HPHCs. FDA also conducted research required by the  Tobacco Control Act to ensure it publishes a list of HPHCs that will not be  misleading to the public. Based on this research, the Tobacco Products  Scientific Advisory Committee and FDA’s Risk Communication Advisory  Committee made recommendations on further research and strategies  FDA might use to effectively communicate the HPHC information to the  public. Although FDA planned to publish a proposed regulation to  implement the Tobacco Control Act requirements related to the testing  and reporting of HPHCs by December 2013, it has not done so.
FDA also issued guidance for industry on other topics, including the  recommended components of product review submissions and the  product review process. For example, in January 2011—about 2 months  prior to the statutory deadline for submitting provisional SE submissions— FDA issued a guidance document for tobacco manufacturers to use for  making SE submissions, and in September 2011 FDA issued a draft guidance document with responses to frequently asked questions for SE  submissions. According to CTP officials, in fiscal year 2014, FDA plans  to issue final guidance on frequently asked questions for SE submissions  and draft guidance for investigational tobacco products.
section_title: Compliance and Enforcement Activities
paragraphs: FDA’s tobacco compliance and enforcement activities have been focused  on (1) tobacco retailer inspections; (2) inspections and enforcement of  domestic manufacturers and imported tobacco products, and  determinations of eligible predicate products in SE submissions;   (3) surveillance and review of tobacco promotions, advertising, and  labeling; and (4) outreach and small business assistance. As of March 31,  2014, about 68 percent of the $181 million FDA spent on compliance and  enforcement activities was for tobacco retailer inspection activities (see  fig. 6), which has accounted for the majority of compliance and  enforcement spending each year since fiscal year 2010.
To help ensure that U.S. retailers are in compliance with tobacco laws  and regulations, FDA began awarding contracts to states and territories in  fiscal year 2010 to implement its tobacco retailer inspection program.of March 31, 2014, FDA had awarded over $91 million in contracts for  retail inspections.
Tobacco retailer inspections, according to FDA officials, include  undercover purchases to determine if retailers are selling to minors or are  engaging in other practices prohibited under the Tobacco Control Act and  its implementing regulations, such as the restriction on sales through  vending machines and the ban on cigarettes with certain characterizing  flavors, such as grape, coconut, and chocolate. If violations are identified,  FDA may issue a warning letter or take enforcement action, such as  assessing civil monetary penalties or imposing no-tobacco-sale orders. Warning letters are the agency’s principal means of notifying retailers of a  first time violation and are used to encourage prompt voluntary  compliance. If subsequent violations are found during re-inspection, FDA  may initiate administrative action that can result in the imposition of a fine,  or civil monetary penalty, based on the number of violations and period of  time within which they occurred. For example, at one retailer that had  already received a warning letter for a violation, inspectors found two  additional violations less than a year later—for selling tobacco products to  minors and failing to verify the age of a person purchasing tobacco  products. As a result, FDA assessed a civil monetary penalty against this  retailer for three violations within a 24-month period.
FDA may impose a no-tobacco-sale order prohibiting the sale of tobacco products at  retail outlets that have committed repeated violations of the law. § 103(c), 123 Stat. at  1835 (codified at 21 U.S.C. § 333(f)(8)). According to FDA officials, other enforcement  actions can include seizures, injunctions, and criminal prosecution.
FDA plans to collaborate with tribal communities to contract with the agency to enforce  regulations on tribal lands. According to FDA, the agency has contracted with an  American Indian-owned company to further its efforts to collaborate with American Indian  tribes and gain insight on the best approaches to disseminate information about the  Tobacco Control Act to Indian tribes and to tobacco retailers located on tribal lands. conducted, resulting in issuance of more than 14,000 warning letters and  1,347 civil monetary penalties. While FDA plans to contract with  additional states and territories in fiscal year 2014, according to FDA  officials, the agency is in the process of contracting with third parties,  including private entities, to facilitate inspections in those states and  territories not currently under contract. According to FDA, it awarded one  new contract to a private contractor in April 2014 to facilitate retailer  inspections in Florida and two additional third-party contracts in May 2014  to facilitate retailer inspections in North Dakota and South Dakota. CTP  officials said that in addition to third-parties, CTP has its own inspectors  on staff to inspect in states not currently under contract with FDA. As of  March 31, 2014, the office has completed more than half of the planned  100,000 retailer inspections for fiscal year 2014.
In addition to awarding contracts, FDA developed training programs for  state and territorial inspection officials to ensure inspections are  performed in accordance with FDA requirements. Specifically, according  to CTP officials, CTP’s OCE is responsible for providing technical support  through periodic conference calls with inspection program coordinators,  conducting annual in-person training regarding changes to the program,  and requiring annual refresher training for inspectors. As of March 31,  2014, OCE reported training inspectors in all states and territories  awarded contracts for retailer inspections, with more than 1,000 program  coordinators and inspectors trained in fiscal year 2013. The office also  developed a system for collecting and tracking information during  inspections called the Tobacco Inspection Management System.  According to OCE officials, inspectors use their mobile devices to upload  data into the system, which is subsequently reviewed by OCE for  potential violations. When appropriate, OCE issues enforcement actions.
Manufacturer and Import Inspections and Enforcement  FDA conducts inspections of registered domestic manufacturing facilities,  oversees imported tobacco, and determines the status of the predicate  product cited in SE submissions. Beginning in fiscal year 2012, FDA has  conducted biennial inspections of tobacco manufacturing facilities—FDA’s  ORA conducts these inspections with the support of OCE as subject  matter experts. According to FDA, the agency inspects manufacturing  facilities for compliance with Tobacco Control Act requirements, including  product and ingredient listing; packaging, labeling, and advertising  requirements; and marketing authorization for new or modified risk  tobacco products. As of March 31, 2014, FDA conducted 116  inspections at 100 registered manufacturing facilities. According to FDA  officials, no warning letters have been issued or other enforcement  actions taken as a result of manufacturer inspections.
FDA also implemented an import compliance program for tobacco  products beginning in fiscal year 2012. According to FDA officials, ORA and U.S. Customs and Border Protection review imported tobacco  products, conduct field exams, and maintain import bulletins and alerts  that identify tobacco products in violation of the Tobacco Control Act. Any  tobacco product found to violate regulatory requirements may be refused  entry into the United States. For example, imported tobacco products that  are labeled or advertised as “light,” “mild,” or “low,” and cigarettes that are  labeled as having certain characterizing flavors other than tobacco and  menthol, such as strawberry, grape, and vanilla, may be detained. As of  March 31, 2014, FDA published four import alerts, including one for  flavored cigarettes; one for regulated tobacco products using “light,”  “mild,” or “low” in advertising or labeling; one for smokeless tobacco  products without the required warning label; and one for tobacco products  found to be not substantially equivalent—and refused the entry of two  tobacco product imports.
OCE also assists OS in the tobacco product review process by  determining if the tobacco product to which the new tobacco product is  being compared in an SE submission meets the statutory requirements  for a predicate tobacco product. In fiscal years 2011 through 2013, OCE  completed over 1,350 predicate eligibility determinations. In addition,  OCE is responsible for ensuring that the tobacco products in provisional  SE submissions found to be not substantially equivalent are no longer  sold or distributed in the United States as of the date on the FDA-issued  not substantially equivalent order.
Promotion, Advertising, and Labeling Surveillance  FDA also conducts surveillance activities for the promotion, advertising,  and labeling of tobacco products. CTP’s OCE conducts routine monitoring  and surveillance of websites and social media, publications, and tobacco  industry promotion and sponsorship of events that sell, distribute,  promote, or advertise regulated tobacco products; and reviews and  evaluates regulatory submissions of tobacco product labeling, advertising,  and consumer information materials. Additionally, CTP’s OCE is  responsible for ensuring that warning statements on smokeless tobacco  product labeling and advertising are in compliance with requirements in  the Tobacco Control Act, such as the packaging and advertising bearing  the warning statement. From fiscal year 2010 through March 31, 2014,  OCE officials reported monitoring over 3,000 websites and over 68,000  issues of publications, resulting in 155 warning letters to manufacturers,  distributors, and online retailers for violations. For example, warning  letters were issued to (1) a website for selling clove cigarettes, a  regulated tobacco product containing a characterizing flavor which is  prohibited under the Tobacco Control Act; (2) a tobacco manufacturer for  promoting the sale of cigarette tobacco (a regulated tobacco product)  labeled as pipe tobacco (an unregulated tobacco product) on its website;  and (3) a manufacturer for offering its tobacco products online as “light”  and “mild” without an FDA order to market a modified risk tobacco  product.
Outreach and Small Business Assistance  In addition to the three key compliance and enforcement activities  mentioned above, CTP also conducts outreach and small business  assistance activities to help ensure compliance with the Tobacco Control  Act and regulations. OCE and its Office of Small Business Assistance are  responsible for outreach and small business assistance. According to  FDA officials, these activities include responding to inquiries from small  manufacturers and retailers and providing information on relevant tobacco  guidance and regulations, primarily through webinars that addressed  certain topics, such as common issues identified during FDA’s scientific  evaluation of substantial equivalence reports and regulations regarding  distribution of free samples of smokeless tobacco.
section_title: FDA Encountered Challenges As It Established CTP, Including Setting Review Time Frames
paragraphs: FDA faced challenges related to starting up a new center, which affected  CTP’s efforts to educate the public, build the regulatory science base, and  enforce the new law and regulations. While FDA officials indicated that  the agency has taken steps to address some of the challenges it faced— such as those related to contracting and staffing—challenges related to  building the scientific basis for regulating a previously unregulated  product and setting review time frames remain. Despite these challenges,  neither FDA officials nor public health and tobacco industry stakeholders  identified any limitations in FDA’s authority to carry out its responsibilities  under the Tobacco Control Act.
According to CTP officials, one challenge FDA encountered, but which  they believe the agency has addressed, was a lack of an acquisitions  infrastructure that would allow it to quickly award contracts for public  education activities. According to these officials, FDA had to develop a  contracting mechanism of a sufficient size and scope to allow FDA to  solicit and award large public education campaign contracts, which had  never been done by the agency before. This process also included  determining the type of contracts to award. The officials said that it took  about 2 years before two pools of contractors were established, from  which FDA could draw for future public education campaigns, delaying  public education campaigns that were originally slated to launch in fiscal  year 2012. CTP officials reported it was important to build an FDA  contracting infrastructure for these campaigns, because public education  activities are FDA’s continuing responsibility. CTP officials stated that to  decrease the toll of tobacco use on public health, public education  activities must be managed by FDA, with a sustained fiscal and personnel  commitment. While doing so delayed efforts to launch its public education  campaigns, CTP officials told us they do not expect similar delays in the  future.
Additionally, according to CTP officials, CTP’s OCE faced initial  challenges in getting up and running—in particular in setting up the  retailer inspection program, including the contracts for the program.  According to CTP officials, in a very short period of time and with limited  staff in place, CTP’s OCE had to draft an initial request for proposals to  award contracts to states and help them navigate through the contracting  process, commission state and territorial officials to conduct retail  compliance inspections, develop and implement training programs for  inspectors, coordinators, and retailers, and develop a new information  technology system to collect and report retailer compliance inspection  data. However, these officials reported that since the early stages of the  tobacco program, the center has built a strong FDA tobacco compliance  and enforcement infrastructure, and noted that if additional tobacco  products are deemed to fall under the authority of CTP, they should be  able to expand and cover them relatively easily.
section_title: Concluding Observations
paragraphs: In the 5 years since the Tobacco Control Act was enacted, FDA has set  up a new center and undertaken numerous activities to regulate a  previously unregulated product using a public health standard, and the  agency remains in the process of conducting research and setting up its  regulatory structure. FDA has taken some steps to address our previous  recommendation to institute performance measures for its review of new  tobacco products by establishing time frames for regular SE and  Exemption from SE submissions, as well as for MRTP submissions, and  by planning to monitor its progress towards meeting those time frames.  However, we remain concerned that the agency has not yet established  any performance measures for the more than 3,000 provisional SE  submissions, representing tobacco products that can stay on the market  unless and until FDA finds them not substantially equivalent. It is  important that the agency move forward on reviewing these  submissions—particularly, those that FDA has identified as having the  greatest potential to have a public health impact—to ensure that only  products that meet the act’s requirements are permitted to be on the  market. The agency has indicated that it intends to identify and implement  performance measures for these provisional SE submissions as it gains  more experience reviewing them. We continue to believe that until FDA  establishes performance measures including time frames for completing  reviews of the large backlog of provisional SE submissions, the agency’s  ability to operate efficiently, achieve effective results, and plan  appropriately will be hampered. This will be particularly pressing as FDA  moves forward with plans to deem additional types of tobacco products to  be subject to its regulatory authority, which has the potential to generate a  substantial number of new submissions requiring review. Similarly, it will  be important for the agency to establish time frames for submissions for  any newly deemed products, as FDA has indicated that the just-released  time frames will not apply to submissions for newly-deemed products.
section_title: Agency Comments
paragraphs: We provided a draft of this report to HHS for comment, and its comments  are reproduced in appendix IV. HHS agreed with the need for  performance measures related to its new tobacco product review  process. In its comments, the department noted several reasons why it  has been difficult for FDA to set performance measures for provisional SE  submissions. According to HHS, FDA received a large number of  provisional SE submissions in a short period of time, which required the  agency to prioritize the review process based on the complexity of the  public health concerns likely to be raised by the products under review.  As a result, HHS noted that the initial reviews are more complicated, with  unpredictable time frames. Additionally, because provisional SE  submissions were received early in CTP’s SE review process, HHS  commented that many submissions have deficiencies that require  corrections from manufacturers and further slows the review and approval  process. However, HHS noted that the knowledge gained during the  review of provisional SE submissions will inform the process in the future  and allow FDA to eventually set performance goals for these  submissions.
While we acknowledge there are complexities to the provisional SE  review process, we believe that it is critical that FDA set performance  measures for managing the review process of provisional SE  submissions, including establishing time frames for review and monitoring  progress toward meeting those time frames. Since these products can  remain on the market unless and until FDA determines they are not  substantially equivalent, it is important for FDA to effectively manage the  review of these products to fulfill its responsibility to protect the public  health.
HHS also provided technical comments that were incorporated, as  appropriate.
We are sending copies of this report to the Secretary of Health and  Human Services, the Commissioner of FDA, and other interested parties.  In addition, the report will be available at no charge on the GAO website  at http://www.gao.gov.
If you or your staff have any questions about this report, please contact  me at (202) 512-7114 or at crossem@gao.gov. Contact points for our  Office of Congressional Relations and Office of Public Affairs can be  found on the last page of this report. Other major contributors to this  report are listed in appendix V.
section_title: Appendix I: Summary of Center for Tobacco Products Offices and Key Activities
paragraphs: This appendix provides a summary of the offices that comprise the Food  and Drug Administration’s (FDA) Center for Tobacco Products (CTP),  their key activities, spending on each key activity, and examples of  activities through March 31, 2014 (see table 6).
section_title: Appendix II: Examples of Tobacco-Related Research Projects Supported by Food and Drug Administration Spending
paragraphs: This appendix provides examples of research projects supported by the  Food and Drug Administration (FDA) spending of tobacco user fees in  fiscal years 2010 through March 31, 2014. Although FDA spending  supported these research projects, in addition to FDA, other federal  agencies, such as the National Institutes of Health (NIH) or the Centers  for Disease Control and Prevention (CDC), as well as non-federal entities,  such as research institutes, conducted or had oversight over these  research projects (see table 7).
section_title: Appendix III: Positions at the Center for Tobacco Products (CTP) at the End of Each Fiscal Year as of March 31, 2014
paragraphs: Appendix III: Positions at the Center for  Tobacco Products (CTP) at the End of Each  Fiscal Year as of March 31, 2014 Office  Office of Health Communication  and Education  Office of Compliance and  Enforcement  Other CTP offices include the Office of the Center Director, the Office of Management, the Office of  Policy, and the Office of Regulations. According to CTP officials, as a result of an organizational  review, entities within the Office of Policy were reassigned as of April 1, 2014, to the Office of the  Center Director, the Office of Management, and the Office of Science.
section_title: Appendix IV: Comments from the Department of Health and Human Services
section_title: Appendix V: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Kim Yamane, Assistant Director;  Hernán Bozzolo; Sandra George; Cathleen Hamann; Erin Henderson;  and Mariel Lifshitz made key contributions to this report.