Philip Morris International meets with FDA to make a case for Iqos in a patent dispute

November 10, 2021: -Philip Morris International met with the Food and Drug Administration on Friday to present its argument for why the tobacco giant and Altria should be allowed to import and sell Iqos devices in the U.S., CNBC has learned.

A well-known person with the company’s meeting said Philip Morris told the FDA that Iqos is unique in its design and ability to convert smokers. Additionally, the company that argues that the U.S. International Trade Commission overstepped its bounds, given that the FDA is in charge of regulating which tobacco products and alternatives solving, this person said.

The meeting with regulators is the recent development in a patent dispute with rival R.J. Reynolds, a subsidiary of British American Tobacco. In September, the ITC ruled that the Iqos device infringed on two of Reynolds’ patents. The Biden administration conducts a 60-day administrative review until November 29 to decide if the sale and import of the cigarette alternative will be banned.

Altria launched the Iqos device in the U.S two years ago. Still, it began the development of the product more than a decade before Philip Morris International was spun off from the company. The device heats tobacco without burning it, which gives users the same rush of nicotine without as many toxins as smoking a cigarette.

Philip Morris is selling the device in dozens of international markets and has granted Altria a license to sell it in the U.S. While Iqos don’t represent a huge portion of Altria’s U.S. business, it’s part of the shift of the company away from traditional tobacco products, seeing falling demand.

The U.S. Trade Representative will recommend President Joe Biden after listening to input from several agencies, which include the FDA, which regulates tobacco products.

“The presidential review process can disapprove of the ITC’s final determination on a few counts, and believing there is a strong case for that,” said Deepak Mishra, head of Philip Morris International’s Americas region in an interview with CNBC on Thursday.

The company’s argument for keeping selling Iqos includes the public health benefit of the device. Altria said it is counting 20,000 U.S. consumers as users of the device and thinks they could revert to cigarettes if Iqos disappears from shelves.

Mishra said this was an argument the company is planning to make as it urged the Biden administration to overturn the ITC ruling.

The next step in the administrative review is a Trade Policy Staff Committee meeting, which will happen this week, the person familiar with the meeting said. The group includes several federal agencies, including the FDA, the U.S. Department of Agriculture, and the Department of Commerce.

If the administration sides with R.J. Reynolds in the dispute, Iqos could be off U.S. shelves for months. According to Mishra, it is waiting for a decision on a separate claim from Reynolds with the U.S. Patent and Trademark Office, and that process can take another six to 12 months. Still, Mishra said the company is more optimistic about the outcome given its success in similar cases outside the U.S. British American Tobacco has pursued similar legal action against Philip Morris in 11 international markets and the European Patent Office.

Shares of Philip Morris have increased 12% this year, giving it a market value of $145 billion. Altria’s stock is up 9% simultaneously, raising its market value to $83.1 billion.