In conversation: Nicolás Cuadros, senior counsel, Philip Morris International

Nicolás Cuadros talks GC through launching a smoke-free device for consuming tobacco within a regulatory framework that has yet to shake off the stigma of cigarettes.

GC: What are you currently working on in the Latin American legal team at Philip Morris?

Nicolás Cuadros (NC): When I was in charge of leading the Colombian legal department, we took a very interesting journey: the launch of a product called ‘IQOS’, a revolutionary tobacco heating system designed to heat, rather than burn a specially designed tobacco stick called Heets. I´m currently leading the South Cluster legal department for Latin-America (Argentina, Chile, Paraguay, Uruguay and Bolivia), and we´re analysing the regulatory framework for Reduced-Risk Products (‘RRPs’) – that is the term we use to refer to products that present, are likely to present, or have the potential to present less risk of harm to smokers who switch to these products versus continued smoking.

IQOS is basically inspiring us in our new vision to create a smoke-free future. We’ve been selling cigarettes for decades, we’ve been very successful, but, as you know, cigarettes have a negative externality on health – that is crystal clear. Considering that, we’ve been investing over USD 3 billion since 2008 on the development and assessment of innovative products with the potential to reduce risk compared to cigarettes, such as IQOS. All the magic happens in a huge Swiss research building, called ‘The Cube’, with more than 400 scientists and technicians working on RRPs.

The big question is: how can you continue producing a tobacco product that has the potential to present less risk of harm to adult smokers? The answer is in the combustion.

The tobacco in a cigarette burns at temperatures in excess of 600°C, generating smoke that contains harmful chemicals. But IQOS heats tobacco to much lower temperatures, up to 350°C, without combustion, fire, ash, or smoke. Heating at a lower temperature releases the true taste of heated tobacco, but because the tobacco is heated and not burned, the levels of harmful chemicals are significantly reduced compared to cigarette smoke.

IQOS is not risk-free, but according to our research, it is surely a better alternative for adult smokers who want to continue enjoying tobacco.

Additionally it is important always to bear in mind that IQOS is not for people who have quit smoking or have never smoked, and the best choice for consumers concerned about their health is to quit tobacco use altogether.

GC: Making people aware of this product must be quite difficult, because in a lot of markets there are still going to be regulatory restrictions, as it is still a tobacco product?

NC: Exactly. The problem is that the regulatory restrictions in many countries were inspired by a different product – cigarettes. When these regulations were written, regulators didn’t imagine that products such as IQOS would appear, which should be regulated in a different fashion.

We still agree that RRPs must not be targeted to minors and non-smokers, but we need a more comprehensive regulation. The world we´re living shows us more and more that regulations are rigid, but innovation and technology are dynamic. Regulations are becoming obsolete faster than ever due to market realities and technology.

GC: Are you having success in some markets in trying to change the regulations or to get around them?

NC: Over 3.7 million consumers have already chosen to switch from cigarettes to IQOS, and there are some markets in which the success is amazing, such as Japan. We´ve been dealing with regulatory uncertainty, but always trying to educate policymakers and regulators on these new products and the science behind them. The moment regulators deeply understand these new products, is the moment that a more comprehensive regulation might start to appear.

GC: Can you give examples of some of the regulatory challenges or successes you’ve had with the products so far around Latin America?

NC: In Colombia for instance, there is a law that regulates tobacco, and we launched on that regulatory framework. That was a big challenge because, for example, you have to deal with graphic health warnings that are not necessarily accurate for Heets. Those health warnings were inspired by cigarettes, and there´s a need that health authorities catch up with the reality of these new products.

GC: Are you seeing a lot of regulatory change in Latin America?

NC: I wish to see more changes in the markets I am currently leading. The more regulators deeply understand the science behind these new products, the more comprehensive regulation should start to appear. However, the scientific community, journalists, and – most important – adult smokers, are showing big interest in RRPs, and epecially in IQOS.

GC: On a day-to-day basis, what is the legal team doing to support this product?

NC: When faced with regulatory uncertainty, you must have a group of innovative and inspired lawyers.

For me, that includes three main things:

The first one is collaboration and curiosity. That means a department that is constantly asking for new ideas and new opinions, with no bureaucracy and no hierarchies. A trainee can challenge the argument of a manager, and if that happens, we are on a good path.

The second one is entrepreneurship: knowing that we cannot be an obstacle but a source of ideas, focused always on our ambition to create a smoke-free future and change the life of adult smokers.

And the third one is more agility and efficiencies. For instance, not spending 70-80% of your time doing contracts that end up as paper in the archive, and ‘nothing happened with that’. Let’s try to devote time to being more agile, to save time to think strategically.

GC: Have you had any big successes or big challenges yet in Latin America?

NC: In Colombia, IQOS is doing pretty well, and it has been launched recently in Guatemala.

GC: What are some of the biggest challenges at the moment with your traditional cigarette products?

NC: The big challenge is that we want adult smokers to switch from cigarettes to RRPs as soon as possible.

GC: Finally, is there anything that you’d like to add about what the legal team is doing in support of this product?

NC: The most important thing is to see how the legal team within PMI is working, because it’s not as lawyers traditionally do. It’s not that an internal client comes to your office and gets a stamp: ‘yes or no’.

Instead, it’s building this new environment that has no hierarchies, no bureaucracy, with space for new ideas, and space for making mistakes.

It´s also having a team that comes happy to work because it’s inspired by this new vision – where every morning you wake up and say ‘I will try to change the world a little bit, and what I do in the legal department is an important piece of this interesting adventure.’