This proposed rule would require that one of up to 13 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 proposed rule would further require that, for cigarette packages, the required cigarette health 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 proposed rule would also require that, for cigarette advertisements, the required cigarette health warnings must be rotated quarterly in alternating sequences in advertisements for each brand of cigarettes in accordance with a plan approved by FDA. The proposed new cigarette health warnings would 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. Despite the informational effects of this proposed rule, there is a high level of uncertainty around quantitative economic benefits at this time, so we describe them qualitatively. The cost of this proposed 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 required cigarette health 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 proposed 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 was valued at about $0.01 (for every pack sold annually nationwide), then the benefits that would be generated by the proposed rule would equal or exceed the estimated annual costs.
Regulatory Impact Analysis
Federal Register: 84 FR 42754. August 16, 2019