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Lorillard Wins Ruling on Tobacco Panel Conflicts

By Andrew Zajac
July 22, 2014 3:42 PM EDT 1 Comments
Reynolds American agreed this month to buy Lorillard Inc., the largest U.S. maker of menthol cigarettes, for $25 billion.
Photographer: Luke Sharrett/Bloomberg
Reynolds American agreed this month to buy Lorillard Inc., the largest U.S. maker of menthol cigarettes, for $25 billion.

Lorillard Inc. and R.J. Reynolds Tobacco Co. (RAI) won a court ruling that members of a U.S. advisory board on tobacco had conflicts of interest, leading the judge to order the panel reconstituted and to bar use of its report on menthol cigarettes.

Three of the panel’s nine original voting members advising the U.S. Food and Drug Administration had consulted for drug companies on smoking cessation products and served as paid expert witnesses in lawsuits against tobacco firms, U.S. District Judge Richard Leon in Washington said. The agency evaluated conflicts involving tobacco-company ties but not anti-smoking connections of the board’s members, Leon said.

“The presence of conflicted members on the committee irrevocably tainted its very composition and its work product,” rendering its report on menthol “at a minimum, suspect, and, at worst, untrustworthy,” Leon wrote in yesterday’s ruling.

Reynolds American Inc. agreed this month to buy Lorillard Inc. (LO), the largest U.S. maker of menthol cigarettes, for $25 billion. If the deal is cleared by antitrust regulators, the transaction will leave the 400-year-old American tobacco industry with just Reynolds and Altria Group Inc. (MO) controlling 90 percent of the market.

Reynolds Tobacco on July 18 was ordered to pay a Florida woman $23 billion in punitive damages for her husband’s death from lung cancer.

Stephanie Yao, an FDA spokeswoman, said the agency was reviewing yesterday’s ruling to determine how to proceed and had no further comment on it.

Court Confirmation

“We are pleased with the result and the confirmation by the court that the rights and protections of the law afforded other companies apply to tobacco companies as well,” Bryan Hatchell, a spokesman for R.J. Reynolds, said in an e-mailed statement. Ronald Milstein, general counsel for Lorillard, didn’t immediately respond to an e-mail message after regular business hours yesterday seeking comment on the case.

While stopping short of recommending a ban on menthol in cigarettes, the Tobacco Products Scientific Advisory Committee’s 2011 report concluded that the presence of the flavoring makes it more likely that people will start smoking and less likely that they will quit, increasing smoking rates.

The FDA is considering regulating menthol and is evaluating more than 68,000 public comments on the subject submitted to the agency, according to Yao.

Flavoring Ban

The 2009 law giving FDA oversight over tobacco already bans fruit, spice and other flavorings in cigarettes deemed to have potential allure for young smokers.

Menthol was not banned immediately under the law because declaring almost one-third of the cigarette market illegal might have been too disruptive and politically unpalatable.

Tobacco companies including Lorillard and Reynolds said that banning menthol would yield no public health benefit and create a black market that would fuel organized crime.

Leon’s decision isn’t likely to have an immediate effect because a 2013 FDA menthol study by in-house experts reaches many of the same conclusions as the advisory panel’s, said Matthew Myers, president and general counsel of the Campaign for Tobacco Free Kids, a Washington-based group that advocates for reducing tobacco use.

‘Misguided’ Ruling

Nonetheless, Leon’s “misguided” ruling should be immediately appealed because it would disqualify “most of the top scientific minds” from serving on the advisory committee, Myers said.

Lorillard and Reynolds in February 2011 challenged the independence of the three panel members, researchers Neal Benowitz, Jack Henningfield and Jonathan Samet.

Only Samet, a professor of medicine at the University of Southern California and the committee’s chairman, is still serving.

“I have not seen the decision and have no comment,” Samet said in an e-mail.

Benowitz and Henningfield didn’t immediately respond to phone or e-mail messages yesterday seeking comment on the ruling.

While Samet hasn’t consulted for companies involved in smoking cessation drugs during his committee service, he earlier ran the Institute for Global Tobacco Control, which received funding from Pfizer Inc. (PFE) and GlaxoSmithKline PLC (GSK) which developed such products, according to Leon’s ruling.

Samet also got research support from GSK and “had the prospect of future fees” from drug firms, creating “appearance conflicts of interest,” Leon said.

It stands to reason that experts on reducing tobacco use would be involved in efforts to curb its consumption, Myers said. That is the charge Congress gave the FDA.

“It wasn’t to act as an impartial arbiter,” Myers said.

The case is Lorillard v. FDA, 1:11-cv-00440, U.S. District Court, District of Columbia (Washington).

To contact the reporter on this story: Andrew Zajac in Washington at azajac@bloomberg.net

To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net Fred Strasser, Andrew Dunn

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