1% of a $900 Billion Market Has Health Officials Baffled

By Hank Campbell — Mar 28, 2016
We here at ACSH are in a health war against smoking, not a war with Philip Morris or Altria or any other tobacco group. So if Big Tobacco can make money selling something besides cigarettes, great -- that is exactly what we have long said they should be doing. Meanwhile, nicotine, while addictive but relatively harmless by itself, is actually helping save lives, as it's being used by those who make their money in the cigarette business to get out of it.

If 20 years ago you had told the American Council on Science and Health that tobacco company stocks would be outpacing the S&P 500 by 600 percent for investor return in the two-year period leading into 2016, we'd have thought you were proposing some bizarre science-fiction story. While I understand the power of addiction, that is only an issue for smokers; and future generations would be far more aware of the dangers of smoking and not become smokers, I'd have argued.

"Smoking is an IQ test by now," I'd have said, "no one will be doing it then." That's because young people would be smarter and learn from our mistakes, and not get addicted to nicotine and keep smoking.

And it's partly come true, smoking has plummeted. Among Americans, anyway. In plenty of other countries, smoking is still being done by over 40 percent of the population. But I'm not at the Russian Council on Science and Health, I'm at the American one, we've done our job well. And I don't begrudge tobacco companies their existence, I am in a health war on smoking, and not a war on Philip Morris or Altria or any other tobacco group. So if tobacco companies can make money selling something besides cigarettes, great, that is exactly what we have long said they should be doing. Yay capitalism.

What I could not have predicted then -- I don't think anyone could have predicted -- is that the addictive aspect of nicotine, relatively harmless by itself, would end up saving a lot of lives, and would be used to encourage the companies that make their money in the cigarette business to get out of it.

Yet that has gradually happened and that success has policy makers and much of the public baffled. It puzzles a lot of our allies in the "War on Smoking" as well, so much so that long-time friends are making the perfect the enemy of the good, and have begun preaching "abstinence only" about nicotine as smoking has declined. Rather than embracing all approaches to stopping people from inhaling the 200 toxic compounds contained in cigarette smoke into their lungs, they want to vilify things with nicotine; well, only some of them. That is what is happening with e-cigarettes, despite the fact that those are only a tiny fraction of the smoking alternatives market, which is just 1 percent the size of the $900 billion retail tobacco market.

You've probably seen them on the streets by now. They look sort of like a cigarette, that is the intent. They mimic the behavior and the motions of cigarettes but rather than emit carcinogenic smoke, they have nicotine vapor created by heat. The vapor has flavors. Unlike other cessation products, the idea is to replace one aspect -- the smoke -- with something that isn't carcinogenic. But the motion of smoking, and the psychological aspects involved, are the same. Gradually, the nicotine would be less important and people are weaned off without the huge failure rates of going "cold turkey" -- just giving up cigarettes entirely.

Nicotine was only ever really a medical problem in that its addictive qualities kept people smoking, and the smoke is what kills people. Let's be honest, coffee would not be an $80 billion per year business if not for the caffeine either. Using that example, if coffee turns out to cause cancer and a whole host of other diseases, it would be ridiculous for quasi-religious anti-coffee fundamentalists to claim people must go cold turkey from caffeine. It would be dooming cessation to failure. Instead, health proponents would say try decaf, put some cream in your coffee, gradually dissociate the caffeine from the flavor of the coffee.

Yet going cold turkey - abstinence only - is exactly what quasi-religious anti-smoking fundamentalists are advocating about cigarettes. You must quit smoking their way, not using whatever way works. And anyone who disagrees and advocates for ending smoking using what works must be a shill for Big Tobacco.

This has led to a great deal of...

Policy Confusion

Obviously the hope is that no one will start smoking now, and that those who did start will want to quit and simply can't because they are addicted to nicotine; for that, smoking cessation techniques such as patches, gums or e-cigarettes will work.(1) Yet we know that human behavior doesn't behave that way, some people do not want to quit and have no intention of quitting. What to do about them? Ban cigarettes? Okay, we can pretend there wouldn't be a criminal organization running a black market catering to the millions of "casual criminals" we just created, yet that would be unconvincing to anyone who understands the human condition. As we saw with alcohol in the 1920s, Prohibition only changes behavior for a few. Taxes are another favorite piece of confirmation bias. Raise them and fewer people smoke - look, the curves between higher taxes and lower smoking rates match! - so raise them some more.

Who has the highest taxes on cigarettes? New York City. Who has created the most casual criminals and a smuggled inbound cigarette rate of 57 percent? New York City. New York City's smoking rate isn't really lower than places with much lower taxes, just the behavior of smokers has changed. We forced them into the black market with taxes. (2) We won't know about them until they show up in a hospital with lung cancer and are a huge expense for taxpayers.

Obviously bans and taxes don't work best for addictions, quitting does, but as I said, not everyone will want to quit. If we accept that we are not going to turn America into a social authoritarian nation and force them into quitting, we have to think about harm reduction. And that's where the controversy is, with some groups in a war on tobacco companies rather than smoking, and others promoting a free-for-all and inventing wild claims about how many lives they have saved.

Now, it would be great to pretend that e-cigarettes are only a smoking cessation product, the way we want to believe nicotine gum and patches are. For some they are, but like all smoking cessation techniques, none works well for all people, and that is why the Council has long advocated all smoking cessation techniques - I'm not a believer in hypnosis, but if it helps people quit smoking, I would even say try hypnosis.

For people who have no desire to quit smoking, e-cigarettes are instead an augmentation product. They can smoke when they are alone and when they are over in someone's yard at a barbecue they can use an e-cigarette without as much scorn, because e-cigarettes have the cloak of smoking cessation.

And you know what? That's okay. If someone smokes fewer cigarettes, their risk of a whole host of diseases still goes down and there will never be a disease caused by second-hand nicotine vapor. That's the idea behind harm reduction. People can't die from nicotine unless they are really trying, the same as with caffeine. And many people have used them for smoking cessation. However, as e-cigarettes have grown more popular among the public, and more reviled among the establishment, they have gotten a certain counter-culture cachet among youths, and that has become a concern. Obviously, teenagers rebel in lots of ways but the number of teens who started on e-cigarettes and moved to the dangerous kind is just statistical wobble, so fears about that are exaggerated.

E-cigarettes are also not the first cigarette alternative to bring on this concern. One funny part of the movie "Bounce" was when Gwyneth Paltrow's character said she took up cigarettes to help her shake her addiction to nicotine gum.(3)

Gwyneth Paltrow Bounce “I’m 10 days off the gum.”

But policy makers can't wrap their heads around the fact that there are differing markets serving differing needs using a common product. So we have recently seen strange claims from the Centers for Disease Control and Prevention, like that 69 percent of young people may have seen an e-cigarette ad in some form and therefore the ads caused the popularity of the things; they don't recognize that because e-cigarettes are counter-culture, they are fits of rebellion for kids and actual ads are a turn-off. Heck, when I was a kid, young men who wanted to show they were adults got a perm, but Ogilvie did not target young men, that would have killed the market.(4)

Credit: http://www.zoiksonline.com/2010_03_01_archive.html You should worry more if your child experiments with this hair than with an e-cigarette. Credit: Zoiksonline

E-cigarettes are a lot less permanent than a tattoo (or weird curly hair on men) and a lot less likely to be addictive than energy drinks.

What have anti-tobacco fundamentalists called for to prevent youths from trying e-cigarettes? Getting rid of ads and lumping in e-cigarettes with smoking. That is not evidence-based. Now, e-cigarettes have not been popular for long so we don't know the long-term effects, if any, of inhaling nicotine vapor, but we do know that overuse of caffeine has alarming effects on developing children - so if we are going to invoke the precautionary principle about kids, let's start by making known harmful products only sold to adults, including Starbucks coffee and Red Bull.

Getting rid of all e-cigarettes to prevent a few people from trying them is not a good solution. Obviously we need to have policies in place to make sure people buying products aren't being harmed - we don't want e-cigarettes to become like supplements or homeopathy - and if we are worried about kids that can involve things that everyone agrees about, like not letting stores near schools or setting minimum ages for purchase.

That hasn't been good enough, but why? If e-cigarettes even have potential to reduce harm or help people quit, why would some activists object?

It goes back to hating tobacco companies more than they love saving lives. Big Tobacco owns just two percent of the e-cigarette market, and the e-cigarette market is just a fraction of the smoking alternatives market, which is itself only 1/100th the retail size of the global cigarette market. Yet if the e-cigarette market grows, big players will either be born or enter, and so organizations and people that hate Big Tobacco more than they hate deaths from smoking have already begun their attacks.

There is one truism in economics. A successful market creates consolidation. 90 years ago there were too many car companies to count. Henry Ford went from being a mechanic for Thomas Edison to having a winter home next to him in Florida in a span of just 15 years, that drove interest in starting an automobile company.  Yet as public acceptance of cars grew, the market converged on quality products, on consistent manufacturing, and then on increased safety. That's going to happen in e-cigarettes too. Right now, someone who wants to set up a "vape" shop just buys a vat of diluted nicotine and goes to it. If the business fails, they are not going to care who buys from them, they want to not lose their money.

That's not safe. A big market means consistent, safe standards will emerge - and it means opportunities for new people to break in who can respond to the market that wants quality and trust in their purchase. We still know the name Ford, for example, but no one is buying a Murphy wagon today, while Studebaker transitioned from wagons to cars in response to changing demand, keeping their company going for over 100 years.

So two things can happen if e-cigarettes take off: An e-cigarette equivalent of Google or Ford will emerge or a company like RJR will switch to it.(5) Either way, it will be better for consumers. Why would RJR like e-cigarettes when they replace cigarettes? In the world of conspiracy theories, big companies buy new technology and kill it to preserve their market. That's a great story to repeat but in reality quite rare.

In actuality, e-cigarettes have better margins than cigarettes. As I wrote in note (2), 70 percent of the cost of a cigarette is taxes. And they are obviously safer. So if every smoker switched to e-cigarettes, tobacco companies would make more profits and cause less harm.(6) That's a win for everyone.

Credit: National Post

Evangelists against Big Tobacco hate them so much they don't care who loses in their Pyrrhic victory. And activists on the fringe of the e-cigarette community get so weird and unhinged about even the most sensible regulation that they have convinced the public they are more like a cult than advocates for less smoking, so that is a turn-off.

I'm not a fan of shades of grey, in too many cases that is just disguised apathy, but there is a more nuanced approach available in this instance.

E-cigarettes are less than one percent of a $900 billion market. Even if the data are unclear for how effective vaping is in ending smoking, they are still more robust than data trying to show it causes harm. Killing a harm reduction product to keep Big Tobacco from ever entering a new market, when we should want them out of their old one, makes no sense.

It is making the perfect the enemy of the good, and our public health system will pay the price for that culture war.


(1)Strangely, e-cigarettes are not allowed to be marketed as smoking cessation devices so they are marketed in various other ways. Why any of them involve Jenny McCarthy is a mystery. It sure isn't to be appealing to young people.

(2) And loosies have made tax revenue plummet, which has led to government demanding that police crack down on black market cigarettes. The now-famous choking death of Eric Garner ("I can't breathe) at the hands of New York City police occurred because they believed he was selling "loosies" - single cigarettes - for a dollar. 70 percent of the cost of a cigarette is not for Big Tobacco, it goes to city, state and federal governments.

(3) https://youtu.be/rcJ5q5BdJi4?t=1m5s. Today that joke would easily work with claims about e-cigarettes.

(4) Not a joke. Those were a thing.

(5) Marijuana will have the same issues and opportunities for smart companies who know how to navigate the regulatory system. Like e-cigarettes, marijuana offers the same opportunities to run Big Tobacco out of business - or make their shareholders incredibly wealthy.

(6) As part of a 25-year, $246 billion settlement, tobacco companies have to fund anti-smoking campaigns. They also fund(ed) harm reduction and smoking cessation groups, including the American Council on Science and Health. Yes, tobacco companies in the recent past have given (obviously unrestricted) grants to the same Council that has been trying to put them out of business, the same way they pay for commercials telling people not to smoke. I asked the widower of the Council co-founder and my predecessor (her name was Dr. Beth Whelan) if it caused her any anxiety to take money from tobacco companies after vilifying them for so long and he said not in the least, that she felt it was about time they did something useful with their money and stopped killing people.