Altria and Philip Morris Stocks Decline Amid FDA Proposal

Shares of Altria Group (NYSE: MO) and Philip Morris International (NYSE: PM) saw slight declines following a New York Times report indicating that the U.S. Food and Drug Administration (FDA) is advocating for a significant reduction in nicotine content in cigarettes. Altria’s stock dipped by 0.3%, and Philip Morris fell by 0.6%. Conversely, British American Tobacco (NYSE: BTI) shares increased by 0.5%.

The FDA has initiated a public health proposal, submitted to the Office of Management and Budget, which aims to lower nicotine levels in traditional cigarettes significantly. This plan, pushed by public health advocates, faces resistance from the tobacco industry. Former FDA tobacco center director Mitch Zeller deemed this strategy a pivotal move in tobacco regulation that could save numerous lives.

However, the proposal’s future remains uncertain with the current administration nearing its end, especially as President-elect Donald Trump’s administration may oppose it. The tobacco lobby, notably Reynolds American, which contributed $8.5 million to Trump’s super PAC, is likely to challenge the proposal. While Trump is against smoking, his position on specific regulations like nicotine levels is unclear. Robert F. Kennedy Jr., Trump’s likely nominee for the health agency, has criticized federal subsidies for tobacco, questioning the support for an industry linked to health issues.

The World Health Organization noted that from 2015 to 2020, the U.S. Agriculture Department provided $437 million in subsidies to tobacco farmers. Dr. Robert Califf, the FDA’s commissioner, revealed in June 2022 the agency's goal to require tobacco companies to substantially cut nicotine in cigarettes to non-addictive levels.

The FDA confirmed that its proposed rule is being reviewed by the White House. If enacted, the rule could represent a major change in U.S. tobacco regulation, reducing the allure of cigarettes and helping smokers quit, while decreasing smoking rates—associated with around 480,000 premature deaths annually.

Earlier this year, the Biden administration retracted a menthol cigarette ban proposal due to pushback from companies like Reynolds American. The nicotine reduction draft has attracted over 7,700 public comments, prompting the FDA to refine its plan. Major cigarette manufacturers have responded by encouraging smokers to use e-cigarettes, arguing that making traditional cigarettes less appealing may essentially amount to a ban.

If advanced, this proposal could dramatically alter tobacco regulation, according to Erika Sward from the American Lung Association. The effects on nicotine levels in other tobacco products, such as cigars, hookahs, or e-cigarettes, remain uncertain.

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