(Recasts throughout; adds comment from analysts, e-cigarette makers, public health advocates)
By Toni Clarke
WASHINGTON, April 24 (Reuters) - The U.S. Food and Drug Administration proposed rules on Thursday that would ban the sale of e-cigarettes to anyone under 18, but would not restrict flavored products, online sales or advertising, which public health advocates say attract children.
The long-awaited proposal, which would subject the $2 billion industry to federal regulation for the first time, is not as restrictive as some companies had feared and will likely take years to become fully effective.
Bonnie Herzog, an analyst at Wells Fargo, said the proposal is "positive for industry."
But public health advocates lamented the fact that the proposal does not take aim at e-cigarette advertising or sweetly-flavored products, which they say risk introducing a new generation of young people to conventional cigarettes when little is known about the long-term health impact of the electronic devices.
"It's very disappointing because they don't do anything to rein in the wild-west marketing that is targeting kids," said Stanton Glantz, a professor at the Center of Tobacco Control Research and Education at the University of California, San Francisco.
FDA Commissioner Margaret Hamburg said at a briefing on Wednesday that the proposal represented the first "foundational" step toward broader restrictions if scientific evidence shows they are needed to protect public health.
That declaration worries some companies.
"The window is still open for a more draconian approach," said Jason Healy, president of Lorillard Inc's blu eCigs unit, which holds roughly 48 percent of the market. "I think the proposal shows a good science-based reaction here from the FDA, but there is a lot we have to go through during the public comment period."
Lorillard, together with privately-held NJOY and Logic Technology account for an estimated 80 percent of the market. Other big tobacco companies, including Altria Group Inc and Reynolds American Inc, are also entering the market.
E-cigarette advocates welcomed the FDA's light touch.
Dr. Michael Siegel, a professor of community health sciences at Boston University, said a ban on flavorings would have "devastated the industry, as the flavors are a key aspect of what makes these products competitive with tobacco cigarettes."
Similarly, a ban on all e-cigarette advertising "would have given tobacco cigarettes an unfair advantage in the marketplace," he said.
NO FREE SAMPLES
A law passed in 2009 gave the FDA authority to regulate cigarettes, smokeless tobacco and roll-your-own tobacco and stipulated the agency could extend its jurisdiction to other nicotine products after issuing a rule to that effect. E-cigarettes use battery-powered cartridges to produce a nicotine-laced inhalable vapor.
In the short term, the new rules would prohibit companies from distributing free e-cigarette samples, forbid vending machine sales except in adult-only venues and prohibit sales to minors.
Companies would also be required to warn consumers that nicotine is addictive, but no other health warnings would be required. The addiction warning would have to be added no later than two years after the rule is set and the e-cigarette companies would not be allowed to make health claims in any advertising.
The proposal is subject to a public-comment period of 75 days.
Vince Willmore, a spokesman for the Campaign for Tobacco Free Kids, said the proposal "by no means does everything we think needs to be done, but it starts the process. What is critical now is that they finalize this rule and then move quickly to fill the gaps."
He said the FDA should aim to establish the rule within a year, but many are skeptical the agency will act that quickly.
"The reality of these things is that every step takes years," said UCSF's Glantz. "By not addressing the youth-directed marketing it means it won't be addressed for a very long time."
Some e-cigarette companies that sell primarily through convenience stores were surprised at the lack of restrictions on online sales, since it can be difficult to verify a customer's age over the Internet.
"The Internet thing is very surprising to me," said Miguel Martin, president of Logic Technology. "It reduces the visibility of the sales of the products and the type of products that the government has awareness of."
The new rules would also require companies to submit new and existing products to the FDA for approval. They would have two years to submit applications from the time the rule goes into effect. Companies may continue selling their products and introducing new products pending the FDA's review.
In the meantime, e-cigarette companies would be required to register with the FDA and list the ingredients in their products. They would not be required to adhere immediately to specific product or quality control standards. That could come later, Hamburg said.
THE "VAPING" INDUSTRY
E-cigarettes and other "vaping" devices generate roughly $2 billion a year in the United States, and some industry analysts expect their sales to outpace the $85 billion conventional-cigarette industry within a decade.
Advocates of e-cigarettes claim they are a safer alternative to conventional cigarettes, since they do not produce lung-destroying tar, though long-term safety data is thin.
The FDA's proposal leaves many questions unanswered about how new products would be regulated over the long run. One key question relates to how products are approved.
Under current law, new tobacco products can be approved if they are "substantially equivalent" to a product that was on the market before Feb. 15, 2007. It is unclear whether any e-cigarettes were on sale before then, to be used as a benchmark.
Mitch Zeller, head of the FDA's tobacco division, said at a briefing that the agency would be seeking more information during the public-comment period on whether the "substantial equivalence" pathway is even valid for e-cigarettes.
If it is not, e-cigarette companies would have to use a different process, which would require them to prove their products are appropriate for public health, a higher hurdle to clear.
Also up in the air is the regulatory fate of some cigars. The current proposal would include e-vaping products and other tobacco products, but premium cigars may be excluded.
The FDA said it would seek public comment on whether all cigars should be regulated equally. One option proposed by the agency is to regulate them all. The other is to define a category of premium cigars that would not be subject to the FDA's authority.
Physicians said the possible exemption of premium cigars from regulation was troubling.
"Any exemption for any kind of tobacco product proven to cause lung and heart disease and cancer is unacceptable," said Harold Wimmer, chief executive of the American Lung Association.
Cigar companies, backed by some members of Congress, had lobbied heavily for a regulatory carve-out for premium cigars. In a December 2013 letter to Hamburg and Sylvia Mathews Burwell, director of the White House's Office of Management and Budget, 24 Republican lawmakers asked that premium cigars be exempt.
"As you know," they wrote, "premium cigars are a niche product with an adult consumer base, much like fine wines. The majority of people who enjoy a cigar do so occasionally, often in social or celebratory settings."
Under the proposed rule, premium cigars are considered those wrapped in whole tobacco leaf, made manually by combining the wrapper, filler and binder, have no characterizing flavor, have no filter, tip or non-tobacco mouthpiece and are relatively expensive. (Editing by Larry King and G Crosse)