46
Bloomberg Businessweek July 27, 2020Administrationcrawledalloverthecompanyformonths
inanefforttocurba wideningyouthnicotineepidemic.And
thereinlaythepotentialperilforJuul.
In August2016,morethana yearbeforeJagwarwas
released,theFDAhadformallydeemede-cigarettestobacco
products.Thedeemingrule,asit’sknown,broughttheindus-
tryunderagencyregulationsforconventionalcigarettesand
othertobaccoproducts.Theseregulationsincludedonepar-
ticularlyimportantprovision:Manufacturerswererequiredto
securetheagency’sauthorizationbeforeputtinga newprod-
uctonthemarketormodifyinganexistingone.Therulegave
theagencybreathingroomtobuilda morerobustregulatory
frameworkfortherelativelynewdevices.Theindustrywas
effectivelyfrozeninplace.
AtthatpointJuulhadlessthan4%ofthedomesticmar-
ket,accordingtodatafromtheCentersforDiseaseControl
andPrevention,andwasbehind 16 othere-cigarettemak-
ersglobally.Freezinginplacepotentiallymeantaccepting
itsstatusasa minorplayer.It alsomeantlivingwitha sub-
pardevice,anathematoa companyborninSiliconValley,
wheretheblueprintdependsonrapidlysolvingproblems
andimprovinga productuntilpeoplecan’tresistadopting
it.Juulwasn’tpreparedtosettle.RevelationsaboutJuul’sproductchangescomeata moment
whenthecompany’sfuturerestsinthegovernment’shands.
Already,Juulis underinvestigationbymultiplefederalagen-
cies,includingtheFDA,theFederalTradeCommission,
andtheSecuritiesandExchangeCommission.Thereasons
behindthoseprobesincludequestionsaboutwhetherthe
companyillegallymarketeditsdevicestokidsandwhether
it engagedinanticompetitiveconduct.Separately,federal
prosecutorsinSanFranciscoareprobingwhetherJuulwas
truthfulinitsinteractionswiththeFDA,accordingtoa per-
sonfamiliarwiththatinvestigation.
Justascritical,Juulis preparingtosubmititsPremarket
TobaccoProductApplicationtotheFDA—essentiallya
requestforpermissiontokeepitsproductonthemarket.
E-cigarettemanufacturershavetosubmitsuchapplications
fortheirexistingproductsbySept.9.
Inresponsetorequestsforcomment,Juulprovided
writtenanswerstoa listofquestions.“Wecomplywith
therequirementsapplicabletoourproducts.Thisincludes
thepremarket-reviewprocessfornewtobaccoproducts
aswellasmodificationstosuchproductsbeforetheyare
introducedintheU.S.,”a spokesmansaidina writtenstate-
ment.“Wetakeourcomplianceobligationsveryseriously
andunderstandtheimpactofmakingunauthorized mod-
ifications. We believe our products are in compliance with
FDA regulation.”
The FDA launched its formal probe into Juul in the
spring of 2018, when the agency sent a letter to the com-
pany requesting that it hand over documents that could
shed light on the high rates of youth use and the particu-
lar youth appeal of its products. As the company’s lawyersbeganpreparingforwhatwouldinevitablybecomea period
ofheightenedscrutiny, the issue of the undisclosed mod-
ifications became a focus internally. Former Juul insiders
describe an effort to limit the amount of information given
to FDA officials about the changes, despite a growing sense
of unease among top executives. These executives and reg-
ulatory lawyers debated whether to disclose the changes to
the FDA. They did not.
The changes to Juul’s device haven’t been previously
reported. FDA spokeswoman Alison Hunt said in a state-
ment that the agency was at no point made aware that Juul
had changed the device’s internal components or firmware,
though inspectors had learned about changes to the pod.
Informed by Bloomberg Businessweek about the additional
modifications, the agency declined to take a position on
whether the changes, or their incomplete disclosure, broke
the law. Enforcement decisions are left up to the agency’s
discretion, and some legal and regulatory experts say the
FDA wouldn’t be inclined to bring down the hammer on
a company that made changes to fix a defective product,
rather than, say, making the device more addictive or more
attractive to teenage users.
Scott Gottlieb, a former FDA commissioner who
announced his departure from the agency in March 2019,
wrestled with Juul for months as he witnessed the birth
of a new youth nicotine epidemic after years of declining
tobacco usage among teens. Under his watch, the agency
assigned a team of investigators to dig into the company’s
marketingpracticesanddeveloppoliciesdesignedtostanch
whathedescribedina November 2018 statementas“aston-
ishingincreasesinkids’useofe-cigarettes.”Thedatashow-
ingrisingyouthuseofe-cigarettes, he said then, “shock my
conscience.” At the time, the FDA had grown interested in
learning everything it could about Juul, including anything
the startup might have done to make its device unusually
addictive or appealing to youth, according to another for-
mer FDA official. The agency had even probed whether Juul
had modified its device in such a way that the cloud of vapor
became more inconspicuous and therefore more easily used
by teens in a clandestine fashion, according to that person.
No such evidence was ever found.
Contrary to popular belief, and despite all the hype, Juul
was far from an overnight sensation. In 2007, Stanford grads
James Monsees and Adam Bowen started a company called
Ploom. That became Pax Labs, which developed the device
that’s now so familiar and which later spun off Juul Labs.
Even after the original Juul hit the market in June 2015, it took
months for it to make serious inroads. In time the velocity of
thecompany’sgrowthbecameimpressive—in 2017 salesgrew
morethan600%—buttwoyearsafteritscoldstart,Juulstill
accountedforlessthan10%ofalle-cigarettes sold in the U.S.
Product flaws were a limiting factor. The company
received complaints from about 150,000 users from June
2015 to September 2018, many of them involving juice
leaking from the pods into users’ mouths. One woman