This final rule requires that 11 new cigarette health warnings, each comprising a textual warning statement paired with an accompanying color graphic, appear on cigarette packages and in cigarette advertisements. The final rule further requires that, for cigarette packages, these required warnings be randomly displayed in each 12-month period, in as equal a number of times as is possible on each brand of the product and be randomly and equally distributed throughout the United States in accordance with a plan approved by the Food and Drug Administration (FDA). The final rule also requires that, for cigarette advertisements, the required warnings be rotated quarterly in alternating sequences in advertisements for each brand of cigarettes in accordance with a plan approved by FDA. The final new cigarette health warnings will promote greater public understanding of the negative health consequences of cigarette smoking by presenting information about the health risks of smoking to smokers and nonsmokers in a format that helps people better understand these consequences. We describe economic benefits qualitatively. The cost of this final rule consists of initial and recurring labeling costs associated with changing cigarette labels to accommodate the new cigarette health warnings, design and operation costs associated with the random and equal display and distribution of the required warnings for cigarette packages and quarterly rotations of the required warnings for cigarette advertisements, advertising-related costs, and costs associated with government administration and enforcement of the rule. We estimate that, at the mean, the present value of the costs of this final rule is about $1.6 billion using a three percent discount rate and roughly $1.2 billion using a seven percent discount rate (2018$). If the information provided by the cigarette health warning on each cigarette package were valued at about $0.01 (for every pack sold annually nationwide), then the benefits that would be generated by the final rule would equal or exceed the estimated annual costs.
Regulatory Impact Analysis
Federal Register: 85 FR 15638, March 18, 2020