Potential Implications for Tobacco Industry Transformation of the Acquisition of Swedish Match by Philip Morris International.

Philip Morris International's recent purchase of Swedish Match may prove to be a vital tobacco industry development. We focus on PMIs potential progress in moving from primarily selling cigarettes toward primarily selling noncombustible nicotine delivery products (NCNDPs). We also consider the potential contribution of the acquisition to industry transformation whereby other cigarette firms may potentially move toward primarily selling NCNDPs. We examine the potential impact on noncombustible nicotine delivery product use, including nicotine pouches (a major Swedish Match product), e-cigarettes, heated tobacco products, and, most importantly, on sales of the industry's staple, combustible cigarettes. We focus on the United States as a special case, where PMI is limited from entering the cigarette market. Implications: Philip Morris International's purchase of Swedish Match and policies regarding nicotine pouches (NPs) have been overlooked in the tobacco control literature. The acquisition indicates the importance of the NP market to the largest nonstate-owned tobacco company. The acquisition has the potential through pricing and marketing tactics to either encourage or discourage the use of NPs, e-cigarettes, heated tobacco products, and most importantly cigarettes. Due to its inability to sell cigarettes in the United States, PMI will have incentives to use its alternative nicotine delivery products, including its newly acquired NPs, to reduce the sale of cigarettes by other companies. However, the potential effects in other countries, where PMI does sell cigarettes, are less clear. Monitoring and analyzing tobacco company acquisitions is essential to studying future transitions in using different kinds of tobacco products, especially from cigarettes to lower-risk alternative nicotine delivery products.

Do Tobacco Companies Have an Incentive to Promote "Harm Reduction" Products?: The Role of Competition.

INTRODUCTION: Some cigarette companies have started to talk about replacing cigarettes with less harmful alternatives, which might include nicotine vaping products (NVPs), heated tobacco products (HTPs), and oral nicotine delivery products. We consider market competition as a primary driver of whether cigarette companies follow through on their stated intentions. AIMS AND METHODS: We focus on the behavior of cigarette companies in the United States. We compare competition in the pre- and post-2012 time periods, analyze the impact of the growth in NVPs on smoking prevalence and cigarette company profits, and examine the potential future role of competition. RESULTS: Since 2006, consumers have broadened their use of non-combustible nicotine delivery products (NCNDPs) to include, inter alia, NVPs, HTPs, and oral nicotine pouches. U.S. cigarette companies have acquired major stakes in each of these product categories which corresponds to a period of rapidly declining adult smoking prevalence, especially among younger adults (ages 18-24 years). The shifting dynamics of the nicotine product marketplace are also reflected in cigarette company stock prices. While cigarette companies are likely to promote HTPs and nicotine delivery products over NVPs, their incentives will be directly related to competition from independent firms, which in turn will depend on government regulation. CONCLUSIONS: Although cigarette companies will back alternatives to combusted tobacco when threatened by competition, the prospects for their lasting conversion to NCNDPs will depend on the extent of such competition, which will be influenced by government regulation of tobacco products. IMPLICATIONS: Regulations that limit competition from independent firms while also protecting cigarette company profits risk slowing or even reversing recent declines in smoking, especially among youth and young adults. Regulations that reduce the appeal and addictiveness of combusted tobacco products, such as higher cigarette taxes or a reduced nicotine standard, will encourage smokers to quit and/or switch to less harmful non-combusted forms of tobacco. The regulation of non-combustible nicotine delivery products and cigarettes should be proportionate to their relative risks, so that smokers have incentives to switch from combustibles to safer alternatives, and cigarette companies have incentives to promote safer products.

An Analysis of the Altria-Juul Labs Deal: Antitrust and Population Health Implications.

On December 19, 2018, Altria announced an offer of $12.8 billion for Juul Labs, combining the largest U.S. cigarette manufacturer with the largest U.S. e-cigarette company. This deal is currently being challenged by the Federal Trade Commission (FTC). We consider the antitrust implications. We also consider population health implications, which we argue are essential to a comprehensive analysis of the impact on consumers. Although the FTC antitrust investigation has focused on closed vaping systems, we argue that the relevant market is the broader nicotine delivery product market, which includes all vaping products along with tobacco products. With Altria having a large market share in the key nicotine delivery product submarkets and with important entry barriers, the merger potentially places Altria in a dominant position in the relevant market. In particular, competition in the vaping submarket is reduced, thereby likely to reduce the availability of less harmful alternatives to cigarettes.

The past is not the future in tobacco control.

In this paper we have attempted to identify missed opportunities to change the trajectory of smoking and smoking caused diseases in America over the past 100 years. Many of the missed opportunities identified are due to the actions of cigarette manufacturers who misled the public about the dangers of cigarette smoking, the addictiveness of nicotine, and the feasibility of providing lower risk alternative nicotine delivery products to addicted smokers. An important lesson learned from the past is that treating all tobacco/nicotine products as equivalently harmful is counterproductive to public health as it only serves to protect the most lethal nicotine product - cigarettes. Since 2000, the evolving marketplace of lower risk nicotine products combined with regulatory authority over tobacco products represents a new opportunity to dramatically transform the cigarette business in ways that were never imagined when the war on tobacco was raging decades ago. However, this requires embracing risk-proportionate regulation, taxation policies, and providing consumers with accurate public messaging on product relative risks. A regulatory framework based on sound science that encourages and rewards new or existing manufacturers to invest in consumer acceptable lower risk products to replace cigarettes needs to be encouraged. The past is indeed not the future in smoking control, but it may be difficult to escape the past unless a realignment of market forces and policies can be achieved.

Estimating the harms of nicotine-containing products using the MCDA approach.

BACKGROUND: An international expert panel convened by the Independent Scientific Committee on Drugs developed a multi-criteria decision analysis model of the relative importance of different types of harm related to the use of nicotine-containing products. METHOD: The group defined 12 products and 14 harm criteria. Seven criteria represented harms to the user, and the other seven indicated harms to others. The group scored all the products on each criterion for their average harm worldwide using a scale with 100 defined as the most harmful product on a given criterion, and a score of zero defined as no harm. The group also assessed relative weights for all the criteria to indicate their relative importance. FINDINGS: Weighted averages of the scores provided a single, overall score for each product. Cigarettes (overall weighted score of 100) emerged as the most harmful product, with small cigars in second place (overall weighted score of 64). After a substantial gap to the third-place product, pipes (scoring 21), all remaining products scored 15 points or less. INTERPRETATION: Cigarettes are the nicotine product causing by far the most harm to users and others in the world today. Attempts to switch to non-combusted sources of nicotine should be encouraged as the harms from these products are much lower.

Effects of reduced-risk nicotine-delivery products on smoking prevalence and cigarette sales: an observational study.

Background: It is not currently clear what impact alternative nicotine-delivery products (electronic cigarettes, heated tobacco products and snus) have on smoking rates and cigarette sales. Objective: To assess whether access to these products promotes smoking in the population. Design and data sources: We examined associations of alternative nicotine product use and sales with smoking rates and cigarette sales overall, and in different age and socioeconomic groups, and compared smoking prevalence over time in countries with contrasting regulations of these products. For electronic cigarettes, we examined data from countries with historically similar smoking trajectories but differing current electronic cigarette regulations (United Kingdom and United States of America vs. Australia, where sales of nicotine-containing electronic cigarettes are banned); for heated tobacco, we used data from countries with state tobacco monopolies, where cigarette and heated tobacco sales data are available (Japan, South Korea), and for snus we used data from Sweden. Analysis methods: We pre-specified dynamic time series analyses to explore associations between use and sales of alternative nicotine-delivery products and smoking prevalence and cigarette sales, and time series analyses to compare trends of smoking prevalence in countries with different nicotine product policies. Results: Because of data and analysis limitations (see below), results are only tentative and need to be interpreted with caution. Only a few findings reached statistical significance and for most results the Bayes factor indicated inconclusive evidence. We did not find an association between rates of smoking and rates of the use of alternative nicotine products. The increase in heated tobacco product sales in Japan was accompanied by a decrease in cigarette sales. The decline in smoking prevalence seems to have been slower in Australia than in the United Kingdom overall, and slower than in both the United Kingdom and the United States of America among young people and also in lower socioeconomic groups. The decline in cigarette sales has also accelerated faster in the United Kingdom than in Australia. Limitations: Most of the available data had insufficient data points for robust time series analyses. The assumption of our statistical approach that causal interactions are more likely to be detected when longer-term changes are screened out may not apply for short time series and in product interaction scenarios, where short-term fluctuations can be caused by, for example, fluctuations in prosperity or product supplies. In addition, due to dual use, prevalence figures for smoking and alternative product use overlap. The ecological study design limits the causal inferences that can be made. Longer time periods are needed for any effects of exclusive use of the new products on smoking prevalence to emerge. Conclusions: We detected some indications that alternative nicotine products are competing with cigarettes rather than promoting smoking and that regulations that allow their sales are associated with a reduction rather than an increase of smoking, but the findings are inconclusive because of insufficient data points and issues with the assumptions of the pre-specified statistical analyses. Future work: As further prevalence and sales data emerge the analyses will become more informative. Accessing sales figures in particular is the current research priority. Study registration: The project is registered on Open Science Framework https://osf.io/bd3ah. Funding: This project was funded by the National Institute for Health and Care Research (NIHR) Public Health Research programme (NIHR129968) and will be published in full in Public Health Research; Vol. 11, No. 7. See the NIHR Journals Library website for further project information.

Alternative nicotine-delivery products are now available which are much less hazardous than cigarettes. These include electronic cigarettes (which contain no tobacco), Swedish snus (oral tobacco with low levels of cancer-causing chemicals) and heated tobacco products. There is concern that these products attract young people to smoking and discourage smokers from quitting (i.e. increase smoking), but it is also possible that they help smokers quit and steer young people who find nicotine attractive away from smoking, or that they have no effect on smoking. To clarify which of these end results is likely, we looked at data on smoking and on the use of these alternative products over time, and also compared data on smoking from countries that have similar tobacco control history, but that either allow (i.e. United Kingdom and United States of America) or ban the sale of electronic cigarettes (i.e. Australia). As the sale of heated tobacco products increased in Japan, sales of cigarettes seem to have gone down, suggesting that this product is competing with cigarettes rather than encouraging their use. We also found that the drop in smoking may have been slower in Australia than in the United Kingdom. For young people and those on low income specifically, the reduction in smoking was slower in Australia than in both the United Kingdom and United States of America. Allowing alternative nicotine products to be sold seems to have been linked with lowered rather than increased rates of smoking. Our findings, however, are uncertain because only limited data were available. Clearer conclusions will become possible as more data on the use and especially on the sales of alternative nicotine products are collected.

A Decision-Theoretic Public Health Framework for Heated Tobacco and Nicotine Vaping Products.

Markets for nicotine vaping products (NVPs) and heated tobacco products (HTPs) have grown as these products became positioned as harm-reduction alternatives to combusted tobacco products. Herein, we present a public health decision-theoretic framework incorporating different patterns of HTP, NVP, and cigarette use to examine their impacts on population health. Our framework demonstrates that, for individuals who would have otherwise smoked, HTP use may provide public health benefits by enabling cessation or by discouraging smoking initiation and relapse. However, the benefits are reduced if more harmful HTP use replaces less harmful NVP use. HTP use may also negatively impact public health by encouraging smoking by otherwise non-smokers or by encouraging initiation or relapse into smoking. These patterns are directly influenced by industry behavior as well as public policy towards HTPs, NVPs, and cigarettes. While substantial research has been devoted to NVPs, much less is known about HTPs. Better information is needed to more precisely define the health risks of HTPs compared to cigarettes and NVPs, the relative appeal of HTPs to consumers, and the likelihood of later transitioning to smoking or quitting all products. While our analysis provides a framework for gaining that information, it also illustrates the complexities in distinguishing key factors.

Differences in cigarette smoking quit attempts and cessation between adults who did and did not take up nicotine vaping: Findings from the ITC four country smoking and vaping surveys.

INTRODUCTION: There is mixed evidence as to whether nicotine vaping products (NVPs) can help adults who smoke transition away from cigarettes. This study investigated if self-reported attempts to quit smoking and smoking cessation, over a period of either 18 or 24 months, differed between respondents who initiated nicotine vaping versus those who did not. Outcome comparisons were made between those who: (1) initiated vaping vs. those who did not; (2) initiated daily or non-daily vaping vs. those who did not; and (3) initiated daily or non-daily vaping between surveys and continued to vape at follow-up (daily or non-daily) vs. those who did not initiate vaping. METHODS: This cohort study included 3516 respondents from the ITC Four Country Smoking and Vaping Surveys (Australia, Canada, England, United Sates), recruited at Wave 1 (2016) or 2 (2018) and followed up at Wave 2 (18 months) and/or 3 (2020, 24 months). Adults who smoked daily at baseline and did not have a history of regular vaping were included. Initiation of vaping was defined as beginning to vape at least monthly between surveys. Respondents indicated whether they made an attempt to quit smoking between surveys. Smoking cessation was defined as those who self-reported no longer smoking cigarettes at follow-up. RESULTS: Relative to those who did not initiate vaping, initiation of any daily vaping between surveys was associated with a greater likelihood of smokers making a cigarette quit attempt (p < 0.001) and quitting smoking (p < 0.001). Among smokers who attempted to quit smoking, initiation of daily vaping was associated with a greater likelihood of being abstinent from smoking at follow-up (p = 0.001). Respondents who initiated vaping between surveys and were vaping daily at follow up were significantly more likely to have attempted to quit smoking (p < 0.001) and to have quit smoking (p < 0.001) than those who did not initiate vaping. Respondents who initiated non-daily vaping did not differ significantly from those who did not initiate vaping on any of the outcome measures. CONCLUSIONS: Daily NVP use was associated with increased attempts to quit smoking and abstinence from smoking cigarettes. These findings are consistent with the concept that complete cigarette substitution may be more likely to be achieved when smokers vape nicotine daily.

Responses to potential nicotine vaping product flavor restrictions among regular vapers using non-tobacco flavors: Findings from the 2020 ITC Smoking and Vaping Survey in Canada, England and the United States.

INTRODUCTION: Some jurisdictions have implemented nicotine vaping product (NVP) flavor restrictions because of concerns about rising adolescent use. However, little is known how these restrictions may impact adult vapers. This study describes the level of support and predictive behavioral responses to a hypothetical NVP ban on non-tobacco flavors among regular adult vapers who only use flavors that would be banned. METHODS: Data came from 851 regular vapers (all current or ex-smokers) participating in the 2020 ITC Four Country Smoking and Vaping Survey in Canada, England, and the United States (US). A random sample of respondents in each country received and completed the questions about flavor bans: (1) do you support or oppose a ban on all non-tobacco flavors; and (2) what would you do if all flavors were banned, with the exception of tobacco in the US, and tobacco and menthol in Canada and England. Those who used tobacco-flavored or unflavored NVPs were excluded from all analyses, and additionally, vapers of menthol flavor in Canada and England were excluded from Aim 2. RESULTS: Overall, 53.6% of vapers were strongly opposed to flavor bans, 28.2% were opposed, 9.3% were in support, 3.6% were in strong support, and 5.2% did not know. Predicted behavioral responses were: 28.8% would continue vaping an available flavor, 28.3% would find a way to get their banned flavor(s), 17.1% would stop vaping and smoke instead, 12.9% said that they would stop vaping and not smoke, and 12.9% do not know what they would do. Responses to a potential flavor ban largely varied by smoking and vaping status, and by the level of support of a flavor restriction policy. CONCLUSIONS: At this time, it is not clear what net population-level consequences would occur if non-tobacco flavored NVPs were prohibited. While a majority of vapers in this study opposed this policy, and many vapers would not be willing to switch to available flavors, there was considerable variability in predicted behavioral responses.

The case for OFSMOKE: how tobacco price regulation is needed to promote the health of markets, government revenue and the public.

Mainstream economic theory outlines four main causes of market failure and it is already well established that two of these (information failure and externalities) exist in a tobacco market. A third cause of market failure, market power, is also a serious problem in many tobacco markets. Market power--combined with unintended and often overlooked consequences of tobacco tax policies, notably that gradual increases in specific taxes may allow the industry to disguise significant price increases--has, at least in high income countries, given cigarette manufacturers considerable pricing power and profits. This paper examines ways this market failure could be addressed and proposes as a solution a system of price cap regulation wherein a cap is placed on the pre-tax cigarette manufacturers' price but not on the retail price that consumers face. Well established in the utilities industry, price cap regulation would set a maximum price that cigarette companies can charge for their product based on an assessment of the genuine costs each firm faces in its operations and an assumption about the efficiency savings it would be expected to make. Such a system would achieve three main benefits. First, it would address the problem of market failure and excess profits while simultaneously allowing current tobacco control policies, including tax and price increases, to expand--thus tax increases would remain a central tenet of tobacco control policies and retail prices could continue to increase. Second, it would increase government revenue by transferring the excess profits from the industry to the government purse. Third, it would bring numerous public health benefits. In addition to addressing market power, while simultaneously allowing tobacco control policies to expand, it could offer a means of preventing down-trading to cheaper products and controlling unwanted industry practices such as cigarette smuggling, price fixing and marketing to the young. The paper outlines in some detail how such a system might be developed in the UK, while briefly exploring how it could be applied elsewhere, including in markets with state monopolies.

What Is Accounting for the Rapid Decline in Cigarette Sales in Japan?

This study describes how trends in the sale of cigarettes in Japan between 2011 and 2019 correspond to the sales of heated tobacco products (HTPs) that were introduced into the Japanese market in late 2015. Data used for this study come from the Tobacco Institute of Japan and Philip Morris International. The findings show that the accelerated decline in cigarette only sales in Japan since 2016 corresponds to the introduction and growth in the sales of HTPs.

An Analysis of the FTC's Attempt to Stop the Altria-Juul Labs Deal.

On 20 December 2018, Altria, the largest US cigarette company, announced an offer for a 35% share of the large and rapidly growing vaping product company, Juul Labs. On 2 April, 2020, the Federal Trade Commission issued a complaint that the deal was anticompetitive and should be voided. This paper analyzes the deal. We find that the deal gives Altria market power in the e-cigarette market through its support of Juul in retail stores and through the agreement not to otherwise compete in the e-cigarette market. The deal also has implications for its marketing of heated tobacco product IQOS and generally may provide Altria greater control of the broader nicotine delivery product market.

The US Cigarette Industry: An Economic and Marketing Perspective.

OBJECTIVES: Tobacco company conduct has been a central concern in tobacco control. Nevertheless, the public health community has not taken full advantage of the large economics and marketing literature on market competition in the cigarette industry. METHODS: We conducted an unstructured narrative review of the economics and marketing literature using an antitrust framework that considers: 1) market; definition, 2) market concentration; 3) entry barriers; and 4) firm conduct. RESULTS: Since the 1960s, U.S. cigarette market concentration has increased primarily due to mergers and growth in the Marlboro brand. Entry barriers have included brand proliferation, slotting allowance contracts with retailers and government regulation. While cigarette sales have declined, established firms have used coordinated price increases, predatory pricing and price discrimination to sustain their market power and profits. CONCLUSIONS: Although the major cigarette firms have exercised market power to increase prices and profits, the market could be radically changing, with consumers more likely to use several different types of tobacco products rather than just smoking a single cigarette brand. Better understanding of the interaction between market structure and government regulation can help develop effective policies in this changing tobacco product market.

An Economic Analysis of the Pre-Deeming US Market for Nicotine Vaping Products.

OBJECTIVES: Public health policies are often enacted without adequate consideration of the existing market structure or their impacts on that market structure. This paper provides context for the potential impact of regulations on nicotine vaping products (NVP) use by providing a structural analysis of competition in the US NVP market before FDA regulation. METHODS: A literature review was conducted with the aim of providing a framework for analysis that: 1) defines the market; 2) evaluates market concentration; 3) identifies entry barriers; and 4) examines firm conduct. RESULTS: The NVP market includes retail, internet sellers and vape shops. Although conventional retail became more concentrated after the major cigarette companies entered the NVP market, the vape shop and internet sectors remain substantially less concentrated, producing an overall low market concentration, with few entry barriers and competitive behavior. CONCLUSIONS: The largely unregulated US NVP market has been highly competitive, with a high degree of innovation. However, new FDA deeming regulations as applied to NVPs could make it difficult for smaller companies to remain in the market and could discourage new companies and new product innovations from entering the market.