Watchdog Report: Secretive User Fees Feed Special Interests

FDA doesn’t like to talk about how it spends $1.24 Billion in fees it raked in

If the U.S. public health bureaucracy is ever going to regain the public trust it squandered during COVID-19, it must start with transparency. Nothing sheds light on an organization’s priorities like seeing where it spends its money.

Today, federal watchdog Protect the Public’s Trust (PPT) announced its findings from a hard-fought effort to obtain data on $1.24 billion in tobacco user fee spending by the Food and Drug Administration (FDA).

With that in mind, let’s look at a few numbers:

• Sales of electronic nicotine delivery systems (ENDS) – vapes or e-cigarettes – increased 46% from 2020 to 2023.
• The U.S. black market for illegal, unregulated, and potentially dangerous ENDS is generating approximately $3.5 billion annually for Chinese companies.

Meanwhile:

• As of June 2024, the FDA’s Center for Tobacco Products (CTP) had not approved a single new ENDS product for sale in the U.S. and had a backlog of 557,000 applications.
• Yet during that time, CTP spent $1.24 billion in tobacco user fees it collected on entities outside the federal government, including more than a half-billion dollars to a single PR firm.

Who knew doing nothing could be so lucrative? But it is, and a new report from PPT details who benefits from the windfall.

While federal agencies are funded by and accountable to Congress, some – especially in the public health bureaucracy – raise other funds by charging user fees to companies and other organizations that participate in certain programs or regulated activities. As such, user fees are not subject to the same sort of oversight as regular budget items that are subject to the normal congressional appropriations process. Accounting is opaque and agencies don’t like to say how much they take in or how they spend that revenue. That CTP is $100% funded by user fees, coupled with its notorious lack of productivity in its mission, makes it a great place to start shining the sunlight.

CTP blames its ineffectiveness on a lack of resources, even with its massive user fee income. More likely, CTP has not approved new ENDS products because the office subscribes to nicotine prohibitionism. Despite the harm reduction ENDS provide adult cigarette smokers, and despite the illegal and probably more harmful products (often designed to appeal to kids) crowding convenience stores, CTP disregards positive steps it can take, in favor of a self-funded anti-nicotine crusade through means that may exceed its statutory authority.

But that raises the question: How does FDA spend all that user fee money? PPT first sought the answer to that question via FOIA in early 2023. The FDA dodged and delayed, eventually requiring PPT to sue for what are public records. Even then the agency stalled.

Now we know why. The documents revealed that CTP, whose statutory responsibility is to regulate the tobacco industry in a manner that is efficient, lawful, and objective, may not be allocating some of these funds responsibly.

The largest recipient of tobacco user fees from FDA, more than 40 percent of the eye-popping $1.24 billion total, is True North Communications, a public relations firm, indicating that touting its accomplishments is more important to FDA than actually accomplishing its mission. Other big winners are special interest groups – some with ties to current and former FDA employees – that share its prohibitionist stance toward ENDS.

Over the course of four years, FDA awarded 17 different non-governmental organizations more than $87 million. In 2024, the FDA provided $472,756 to the Truth Initiative and $195,600 to the Campaign for Tobacco-Free Kids. As reported in June, Cathy Crosby, a former federal official at CTP, was allegedly involved in improperly soliciting gifts in the form of gala tickets hosted by the Campaign for Tobacco-Free Kids. Shortly after meeting with a board member of the Truth Initiative at the event, Crosby jumped from CTP to become the CEO of the Truth Initiative. The FDA also allocated $145,068 in user fees from tobacco companies to the Michael Bloomberg-affiliated Bureau of National Affairs, supporting its efforts in nicotine prohibition activism.

While illegal Chinese products are flooding the market and applications from responsible manufacturers are languishing in CTP approval purgatory, the FDA is putting its resources toward self-promotion and incestuous relationships with ideological allies.

“Every dollar from user fees directed towards prohibitionist special interests or agency self-promotion is wasted,” said PPT Director Michael Chamberlain. “CTP is congressionally mandated to regulate legal products, not stamp them out. That means seeing the world as it is, not as powerful, well-funded activists would have it. While CTP has dragged its feet, and lost a number of court cases because of its foot-dragging, on approving harm-reduction products from legitimate American companies, it has allowed black-market products from China to fill the void. User fees should go toward getting contraband off the shelves and expanding the choices of legitimate, legal products on them.”

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