Juul disregarded early evidence it was hooking teens

Juul executives knew young people were flocking to its breakthrough e-cigarette shortly after it went on sale in 2015, a former manager tells Reuters. Its nicotine blend was so potent, engineers devised a kill switch to limit the dosage – but the idea was shelved.

The San Francisco startup that invented the groundbreaking Juul e-cigarette had a central goal during its development: captivating users with the first hit.

The company had concluded that consumers had largely rejected earlier e-cigarettes, former employees told Reuters, because the devices either failed to deliver enough nicotine or delivered it with a harsh taste. Developers of the Juul tackled both problems with a strategy they found scouring old tobacco-company research and patents: adding organic acids to nicotine, which allowed for a unique combination of smooth taste and a potent dose.

Employees tested new liquid-nicotine formulations on themselves or on strangers taking smoke breaks on the street. Sometimes, the mix packed too much punch – enough nicotine to make some testers’ hands shake or send them to the bathroom to vomit, a former company manager told Reuters.

In the end, it worked. The formula delivered nicotine to the bloodstream so efficiently, in fact, that the company’s engineers explored features to stop users from ingesting too much of the drug, too quickly. Juul’s founders applied for a patent in 2014 that described methods for alerting the user or disabling the device when the dose of a drug such as nicotine exceeds a certain threshold.

One idea was to shut down the device for a half-hour or more after a certain number of puffs, said Chenyue Xing, a former Juul scientist who helped patent its liquid-nicotine formula. The concern stemmed in part from the fact that a Juul – unlike a cigarette – never burns out, Xing said in an interview.

“You hope that they get what they want, and they stop,” she said. “We didn’t want to introduce a new product with a stronger addictive power.”

The company never produced an e-cigarette that limited nicotine intake. Xing was not directly involved in the engineering of the device and said she didn’t know why the firm did not adopt a dosage-control feature.

Juul Labs Inc is now the central player in a broader controversy sweeping the United States over the safety of its products along with those of a wave of high-nicotine imitators. The rise of Juul sales tracks closely with an epidemic of teenage nicotine use that has brought a hail of criticism and regulatory scrutiny on the company.

Congressional investigators, state attorneys general and health advocates have so far focused on whether Juul targeted young people through its marketing and the dessert-like flavors of some Juul nicotine liquids, such as creme brulee or mango. But a Reuters investigation has found that, from the company’s earliest days, insiders discussed and debated concerns over more fundamental attributes of the product: its potency and addictiveness.

The breakthrough “nicotine salts” formula that made the Juul e-cigarette so addictive – and ignited the company’s explosive market-share growth – made Juul especially attractive to teenagers and other new users who otherwise would never have smoked cigarettes, according to interviews with more than a dozen tobacco researchers, pediatricians, and a Reuters review of Juul patents and independent research on nicotine chemistry. The device delivers the drug more efficiently than a cigarette, according to emerging academic research into Juul’s formula and the company’s own patent documents.

In written answers to questions from Reuters, Juul said that it never intended to attract underage customers. The company acknowledged it needed to “earn back the trust of regulators, policymakers, key stakeholders and society at large” in light of a surge in youth vaping to “unacceptable” levels.

Juul declined to comment on why it never installed the features it considered to limit nicotine intake. It said it designed its products to mimic the experience of cigarettes because that was key to getting smokers to buy them. Citing studies it commissioned, the company said Juul users have far more success in quitting smoking than those who tried earlier e-cigarettes.

The firm seldom mentioned nicotine in early consumer marketing, which featured young, hip models and sold the product as a stylish alternative to cigarettes. But the company’s sales force – tasked with convincing reluctant retailers to give Juul shelf space – emphasized the device’s unique addictive power by showing store owners charts depicting how the Juul device delivers nicotine to the bloodstream as efficiently as a traditional cigarette, said Vincent Latronica, who headed sales and distribution for the company on the U.S. East Coast from 2014 until early 2016. That argument became a central selling point, Latronica said, allowing the young company to overcome retailer skepticism of early e-cigarettes and to break into sales channels long dominated by tobacco companies.

“Everyone wanted it,” Latronica said.

Juul did not answer questions from Reuters on why the company emphasized the addictive qualities of its product to retailers and downplayed them in advertisements to customers.

Flavors drive e-cigarette use among high schoolers

High school students like fruit, mint and candy flavors of e-cigarette nicotine liquids far more than tobacco flavors, survey data shows. Regulators have pressured Juul and other vaping device makers to stop offering flavors that appeal to children.

Inside the company, the first signs that Juul had a strong appeal to young people came almost immediately after the sleek device went on sale in 2015, according to the former company manager, who spoke on condition of anonymity. Employees started fielding calls from teenagers asking where they could buy more Juuls, along with the cartridge-like disposable “pods” that contain the liquid nicotine.

The calls and other early signs of teenage use kicked off an internal debate, the manager said in an interview. Some company leaders, including founder James Monsees, argued for immediate action to curb youth sales. Monsees served as chief executive and a company director at the time. The counter-argument came from other company directors, including healthcare entrepreneur Hoyoung Huh and other early investors, the former manager said. They argued the company couldn’t be blamed for youth nicotine addiction because it did not intentionally advertise or sell to teens, said the manager, who had direct knowledge of the internal discussions.

“Clearly, people internally had an issue with it,” the manager said, referring to sales of Juuls to teenagers. “But a lot of people had no problem with 500 percent year-over-year growth.”

Company leaders also clearly understood the long-term benefit of young users on its bottom line, the manager said. It was well-known that young customers were “the most profitable segment in the history of the tobacco industry” because research shows that nicotine users who start as teenagers are the most likely to become lifelong addicts.

In its written answers to Reuters, Juul said that Monsees “did not recall” the internal debate in 2015 over whether to take action to stop youth sales. Huh and other board members who served at the time of the company’s product launch did not respond to requests for comment. Board member Harold Handelsman declined to comment, citing pending lawsuits against the company.

Juul declined to make Monsees or company co-founder Adam Bowen available for interviews.

Following the product’s launch, it took nearly three years – and pressure from regulators and U.S. senators – before Juul in April 2018 announced what it called a “comprehensive strategy” of measures to curb youth sales. By that time, a leading U.S. government youth tobacco survey showed that more than 3 million U.S. high school students – one in five – had tried an e-cigarette in the prior month. More than a quarter of those vaped at least 20 days a month. The latest available data from the same survey, in September 2019, shows yet another increase: More than one in four high schoolers – 27.5% – reported using e-cigarettes in the previous month.

The measures to prevent youth sales and use came two days after the U.S. Food and Drug Administration (FDA) announced a nationwide crackdown on underage sales of Juul products. The company committed $30 million for youth prevention efforts, including distributing educational materials to retailers and conducting research into technologies to prevent youth sales.

Asked why the company did not act sooner, Juul noted two measures to curb youth sales that it took half a year earlier, in August and September of 2017: raising the minimum age for online purchases through Juul’s website to 21 even though some states allow retail sales to anyone over 18, and starting a “retail monitoring program.” The company repeated that it now needs to earn back the public’s trust and said the firm “reacted to the information that it had, and increased its youth prevention measures as more data came out over the years.”

The former manager’s account of the early debate over young users contradicts repeated statements from executives that the firm was caught off-guard by teenage addiction beginning last year – “completely surprised,” as Chief Administrative Officer Ashley Gould put it in a CNN interview.

That narrative is further undermined by two prominent tobacco researchers who told Reuters that they explicitly warned Juul’s founders and a top company scientist about the potential for youth e-cigarette abuse. Neal Benowitz at University of California-San Francisco, said he told Gal Cohen, the company’s director of scientific affairs, that widespread teen use could wreck the company’s business.

“Look, the one thing you have to do is make sure that this doesn’t get into the hands of young people,” Benowitz recalled telling Cohen about a year after the product launch. “If it spreads among kids, this product could be dead.”

Juul declined to comment on whether tobacco researchers warned company leaders about youth e-cigarette addiction. Cohen and Gould did not respond to requests for comment.

This inside account of Juul’s early inaction on youth addiction comes as the company faces mounting pressure from regulators. CEO Kevin Burns departed in September after a dizzying series of bad headlines for Juul and the industry: an outbreak of mysterious lung illnesses tied to vaping; an FDA warning about the company’s unauthorized health claims; and a proposed Trump administration ban on all e-cigarette flavors except those mimicking natural tobacco.  Juul last month voluntarily halted online sales of flavors such as mango and fruit in the United States after earlier pulling them from retail stores. The company still sells the controversial flavors in many other markets globally.

The firestorm around Juul also led to the abandonment of merger talks between Philip Morris International Inc and Altria Group Inc, which has a 35% stake in Juul after a $12.8 billion investment last year. Altria last week had to write down that investment by $4.5 billion, citing the regulatory risks.

Altria declined to comment for this story, noting that it purchased its stake about a year ago, well after Juul developed its products.

Several state attorneys general and a U.S. congressional oversight committee are also investigating whether Juul marketed its products to underage users. Monsees and other company leaders have said they regret some of the company’s early marketing but maintain it targeted customers in their mid-20s to early 30s.

As youth e-cigarette use continues to rise – after a long decline in teenage cigarette smoking – doctors, scientists and researchers are grappling with how to treat nicotine addiction among teenagers. Emerging research suggests serious risks to the developing adolescent brain.

The combination of a “very, very addictive” product and a developing brain has dangerous implications, said Bonnie Halpern-Felsher, a professor of pediatrics at Stanford University’s medical school. “Rather than your brain getting pleasure from exercising or relationships, your brain becomes rewired to get pleasure from nicotine,” she said.

Juul did not comment on the research into how e-cigarettes harm teenagers. It said it has launched a “robust scientific program to assess the harm-reduction potential of Juul products, including their impact on the individual user” as part of a larger effort to comply with FDA regulations.

For William Smith, a high school senior in Newburyport, Mass., Juul became an obsession that occupied most of his waking hours, leading to near-failing grades and wild mood swings. He first tried it in the summer of 2017 while playing video games at a friend’s house and soon couldn’t shake the craving. A year later, he was vaping a pod or more every day – an amount of nicotine equivalent to a pack of 20 cigarettes.

“It honestly controlled me,” Smith said. “It’s almost like I was going insane.”

Tapping cigarette industry research

One late night in 2004, company founders Monsees and Bowen were brainstorming for their master’s thesis in product design at Stanford University. They went to smoke cigarettes outside the design school studio, as they often did, and started questioning how such a successful yet low-tech consumer product – a burning stick of plant material – could have changed so little over time, according to the origin story the founders have told in speeches, interviews and promotional videos.

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November 5, 2019