Clear The Air News Tobacco Blog Rotating Header Image


As an attorney general, I sued the tobacco companies. ExxonMobil is nothing like them.

I was one of 46 state attorneys general who signed the tobacco Master Settlement Agreement in November 1998. On behalf of New York’s taxpayers, I filed one of the suits that eventually pushed the cigarette makers to settle. I can tell you from experience that our fight against the tobacco industry has almost nothing in common with today’s campaign by several state attorneys general against ExxonMobil — despite what supporters of the effort would like you to believe.

In the case of tobacco, we made a powerful argument that decades of lying by the companies had led to intractable addiction of millions of Americans who suffered devastating illnesses and death, all of which cost the states billions every year in Medicaid expenses. In the current action, a group of Democratic attorneys general, acting as part of a campaign launched by well-heeled special interest groups and financial backers of alternative energy companies, have a different goal: using the power of state attorneys general to curb honest debate. (Disclosure: My law firm is representing two New York state municipalities that are challenging the siting of wind turbine projects on the shore of Lake Ontario.)

The tobacco campaign was highly successful. The settlement agreement included not only direct payments to the states (currently $9 billion a year) but also imposed severe marketing restrictions to limit outreach to young smokers. Largely as a result, the proportion of high school student smokers dropped from 36 percent in 1997 to just 16 percent in 2013; adult smokers, from 25 to 17 percent. I was proud to play a major role in holding tobacco companies responsible for the damage they caused and in setting America on a healthier path. We had a clear, convincing legal case and a noble cause. The same cannot be said for attorneys general involved in the current crusade.

It’s unlikely they will be successful in their legal actions, and their actions may have already chilled free speech in this country.

ExxonMobil was subpoenaed last fall by New York Attorney General Eric Schneiderman (D) in an effort to find out whether the company misled investors and the public on the impact of climate change. Massachusetts joined in. Then, in March, the Virgin Islands, a U.S. territory, started investigating ExxonMobil, as well as think tanks and other institutions that received the company’s support, under an anti-racketeering law. Later that month, 16 state attorneys general, all Democrats, held a news conference under the banner, “AGs United for Clean Power,” to announce they too will pursue energy companies that challenge the global-warming orthodoxy.

But increasingly, Schneiderman appears to be on his own. Last week, Claude Walker, the attorney general for the Virgin Islands who opened a racketeering probe of ExxonMobil, withdrew his subpoena. And Maura Healey, attorney general for Massachusetts, delayed action on her own subpoena of ExxonMobil, meaning that case has paused.

It is important to note that the fight against the tobacco industry was bipartisan and that never, during our battle to require the tobacco companies to meet their obligations, did we align ourselves with the industry’s business competitors. In the current campaign, the attorneys general have linked up with investors in renewable energy in an unseemly alliance that presents serious conflicts of interest. As a June 15 letter signed by 13 AGs critical of their colleagues noted, “The media event [in March] featured a senior partner of a venture capital firm that invests in renewable energy companies. If the [AGs’] focus is fraud, such alignment by law enforcement sends the dangerous signal that companies in certain segments of the energy market need not worry about their misrepresentations.”

Attorney General Schneiderman’s theory is apparently that ExxonMobil pulled the wool over America’s eyes by manipulating public opinion. “There is confusion,” he said, “sowed by those with an interest in profiting from the confusion and creating misperceptions in the eyes of the American public.” One could argue that the same confusion and misperception has been caused by alternative energy proponents. Causing confusion — if that’s what happened — is hardly a crime, but to hold one party to a national debate to a higher standard tilts the debate unfairly in the other direction.

Opinions newsletter

Thought-provoking opinions and commentary, in your inbox daily.

Notably, the attorney general is pursuing his investigation under the Martin Act, a sweeping New York law that I know well. It gives the attorney general broad subpoena power, and it allows charges to be filed even without evidence that the defendant intended to commit fraud. It is a powerful tool to protect investors but can have unintended negative implications to the very investors it seeks to protect.

In the case of tobacco, we found that the companies knew about the life-threatening, addictive nature of smoking but covered up that knowledge. In the case of global warming, ExxonMobil began research as early as the 1970s and was open about what it found in more than 50 papers published in scientific journals between 1983 and 2014, according to company documents. ExxonMobil’s scientists have participated in the U.N. Intergovernmental Panel on Climate Change since its inception and were involved in the National Academy of Sciences review of the third U.S. National Climate Assessment Report.

In its news pages, even the New York Times, a forceful environmental advocate, has drawn a clear line between the tobacco and energy industries. Reporters Justin Gillis and Clifford Krauss wrote in a Nov. 5 article, “In the 1950s and ’60s, tobacco companies financed internal research showing tobacco to be harmful and addictive, but mounted a public campaign that said otherwise. . . . The history at ExxonMobil appears to differ, in that the company published extensive research over decades that largely lined up with mainstream climatology.”

The tobacco companies were deceivers. ExxonMobil has been open. But that doesn’t seem to matter to the politicized attorneys general pursuing the company. A chilling impact on public debate is not in our collective interest.

UN officially acknowledges tobacco makes the world poorer

The United Nations General Assembly last week formally adopted the Sustainable Development Goals (SDGs), a 17-point plan to eradicate global poverty, which also formally recognised the negative impact of tobacco consumption on health, wealth, and development around the world.

The the SDGs, the UN pledged to combat continued mainstream use of tobacco, particularly through the implementation of the World Health Organization Framework Convention on Tobacco Control (FCTC).

The FCTC is the first global health treaty; its objective “is to protect present and future generations from the devastating health, social, environmental and economic consequences of tobacco consumption and exposure to tobacco smoke.”

“It is our hope that the SDGs will raise the profile of the FCTC and provide desperately needed resources for poor countries to fully implement it,” said Laurent Huber, executive director of Action on Smoking and Health (ASH), a DC-based health organization.

The SDGs are a 15-year plan to reduce poverty across the globe. They follow on the Millennium Development Goals (MDGs), adopted in 2000 and which are replaced at the end of 2015. But the SDGs are not simply a continuation of the MDGs.

Key differences relating to tobacco include:

· The new recognition of the growing impact of noncommunicable diseases (NCDs) on health and poverty, especially in low and middle income countries. Tobacco is the leading risk factor for NCDs.
· The SDGs apply to all UN members, including high income countries like the US. While Americans enjoy one of the highest standards of living in the world, there are still pockets of poverty among several socio-economic groups. This disparity is especially true for tobacco use, which is increasingly becoming a disease of the poor in the US.
“We have made important progress in combatting tobacco in the 50+ years since the 1964 US Surgeon General’s report made the first official connection between tobacco and disease clear,” said Dr Alfred Munzer, chair of ASH. “However, tobacco still costs over half a million lives and over three hundred billion dollars a year, just in America. The global toll of 6 million lives is staggering. This is unacceptable.”

The World Health Organization estimates that, unless urgent action is taken, tobacco will cost one billion lives this century.

The SDGs serve as a roadmap for global development, including international assistance. The SDGs will come into force on January 1, 2016. The individual targets to track its implementation and success are still in draft form but will be revealed publicly once approved.

Suing tobacco firms for health care costs is constitutional: appeals court

Court upholds law that makes it easier for province to sue

The Quebec government has the constitutional right to sue tobacco companies to recover health care costs, Quebec’s Court of Appeal ruled on Monday.

The judges of the Court of Appeal upheld the March 5, 2014 ruling by Robert Mongeon of the Quebec Superior Court, and dismissed the appeal from tobacco firms.

The ruling only applies to whether attempting to recover the cost of health care and damages related to tobacco is constitutional. It does not concern the lawsuit filed by Quebec in 2012 against Imperial Tobacco, JTI-Macdonald and Rothmans, Benson & Hedges.

The suit asked for more than $60 billion to reimburse the costs incurred from caring for Quebec residents with illnesses linked to tobacco products.

The law, which took effect in June 2009, lays down specific rules for the government to recover money.

Law is still ‘severe’, judges say

The judges did not consider the arguments of the tobacco companies, who claimed they were not getting a fair trial due to the “cumulative effect” of the rules prescribed by law.

However, the law is “particularly severe” for tobacco companies and “significantly reduces” the burden of proof from the government, according to Judge Geneviève Marcotte.

Despite this, she says that it is not the role of the Appeals Court to question the choice made by the legislature.

Other Canadian provinces also have cases pending against tobacco companies for the costs of treating smokers borne by health systems.

Download (PDF, 187KB)

Govt should own up to cost of tobacco litigation

Kyla Tienhaara and Deborah Gleeson
On Tuesday, Fairfax Media economics writer Peter Martin made the startling revelation that the government’s ongoing legal dispute with Philip Morris has already cost the country $50 million (“Tobacco box legal row costs hit $50m”, July 29, p5). Martin’s information was from an unnamed source. The government has refused to disclose what is being spent, even to the Productivity Commission.

Most legal experts agree that Australia should eventually win the case. But the reasoning provided by these experts is largely based on legal technicalities. No one is suggesting that health policy is immune from challenge in “investor state dispute settlement” (ISDS).

What is also concerning is that even if the government wins it may not be able to recoup the enormous cost of defending the plain packaging legislation. We know very little about the case, which is being heard by a private arbitration tribunal behind closed doors in Singapore. But what is certain is that the arbitrators are not bound by a “loser pays” rule. What that means is that Australian taxpayers may end up footing the bill regardless.

While it is outrageous that Australia should have to spend millions defending our right to regulate a product that is expected to kill two thirds of Australia’s 2.7 million smokers, there is no question that plain packaging is a policy worth defending.

Even at this early stage, the evidence is clear: plain packaging is achieving its objectives: reducing the appeal of tobacco packs, increasing the effectiveness of health-warnings and reducing the ability of packaging to mislead people about the harm that tobacco causes. Since the introduction of tobacco plain packaging and the suite of other tobacco control measures that came in at the same time, tobacco consumption has fallen at record rates. In this context, even $50 million is money well spent.

However, while it is laudable that the government continues to fight Philip Morris despite the cost, other countries put in the same position may not have this luxury. The government of Uruguay has admitted that it would have had to give up its defence of similar tobacco packaging rules in ISDS, had it not received financial support from an non-profit organisation in the United States.

And US news reporter/comedian John Oliver revealed earlier this year that Togo, Namibia, and the Solomon Islands have all received letters from Big Tobacco threatening litigation over proposed laws. These countries would not be able to fathom a $50 million legal bill.

Given the high costs and the importance of the public policy issues at stake, it is not hard to understand why the list of opponents to ISDS continues to grow. The Productivity Commission, the Chief Justice of the High Court, a Reserve Bank board member, and the director-general of the World Health Organisation have all criticised ISDS. The Greens are firmly opposed to ISDS and at its recent party conference, Labor committed to eliminating ISDS from all existing Australian treaties if it is returned to power.

In fact, the only people in Australia that seem ready to defend ISDS are the Prime Minister and Minister for Trade and Investment.

Initially, the Abbott government suggested that it would consider ISDS on a case-by-case basis, but provided no objective criteria for how decisions on this issue would be made. Having signed agreements with Korea and China that include ISDS, the government is now faced with its biggest decision yet: whether to agree to ISDS in the Trans Pacific Partnership Agreement (TPP).

Negotiators are currently in Hawaii trying to bash out a deal to get the TPP signed before the narrow window that President Obama has to get it through Congress before the 2016 elections closes.

Statements from Andrew Robb suggest that Australia’s acceptance of ISDS is up for grabs.

The TPP is significant not just because it is big – 12 countries are involved in the negotiations – but also because the US is at the table. US corporations are the biggest users of ISDS.

One of the main reasons that Australia hasn’t yet been exposed to more ISDS cases is that the Howard government declined to accept its inclusion in the Australia-US Free Trade Agreement.

We now know how much just one case (that hasn’t even ended) can cost taxpayers. To avoid having to make such expenditures in the future to defend much-needed health and environmental policies, the government needs to reject an ISDS clause applying to Australia in the TPP.

Kyla Tienhaara is a research fellow at the Regulatory Institutions Network, Australian National University.

Deborah Gleeson is a lecturer in public health at La Trobe University. She is currently in Maui observing the TPP negotiations from the sidelines.

Malawi’s forests going up in smoke as tobacco industry takes heavy toll

Malawi is reliant on tobacco for 60% of foreign earnings, but while demand is falling the cost of environmental damage caused by the industry is rising

For cigarette smokers and tobacco growers, the sight – and sweet smell – of the Chinkhoma auction house near Kasungu in central Malawi is heaven. Tens of thousands of metre-cubed bales of golden leaf, each with enough tobacco to make more than 50,000 cigarettes, cover the floor of a warehouse the size of three football fields.

Malawi, now the poorest country in the world according to the World Bank, depends on tobacco as a cash crop. Chinkhoma, in the heart of the tobacco-growing Central region, is where much of it is sold before being exported and made into cigarettes.

However, while tobacco is central to the economy, there is a high price to pay. The industry contributes greatly to the destruction of forests, with millions of trees required for the drying barns involved in air- and heat-curing. The cost also includes floods, changed rainfall patterns, and a reduction in food growing.

This year, bales are selling for about $200 (£128) each. This represents about three months’ labour for a smallholder farmer. The 160kg of – air- and heat-cured– tobacco that Chinkhoma and its sister house at Limbe, outside the capital Lilongwe, are expected to sell in the next month, will earn the country about $350m.

But as people in rich countries cut back on smoking and emerging economies like the Philippines, Indonesia and Brazil place higher taxes on cigarette sales, Malawi faces declining demand for its “green gold”.

International sales have held up, but on 21 July the government hit out at anti-smoking campaigners, saying tobacco played a vital role in the development of African countries like Malawi, Zambia and Zimbabwe, and warning that the western anti-smoking lobby risked plunging some of the poorest people in the world into further economic peril.

Allan Chiyembekeza, the agriculture minister, accepted that tobacco harmed health, but said it “is not alone in causing diseases”.

The impact of the industry is evident in the reduction of trees cut down or tobacco curing or construction of barns

Custom Nyirenda, Malawi’s principal forest officer
“Tobacco does not stand alone in this. Other habits derived from the consumption of agricultural products are dangerous. Alcohol is addictive and leads to even higher social costs than tobacco consumption, sugar added to food leads to diabetes and obesity, butter leads to increased cholesterol. We cannot accept the discrimination and we need to stand united and resist it,” said Chiyembekeza at an international tobacco meeting in Lilongwe.

According to Graham Kunimba, head of the Tobacco Association of Malawi (Tama), tobacco is a strategic crop for some African countries. In Malawi, the industry is the second largest employer, with more than 350,000 farmers and their families, 70,000 hired labourers and 10,000 people in leaf-processing factories dependent on it, he said.

“Why is the target on tobacco products and not on other products which may have a negative impact on health, including sugar? This is not done in good faith but to punish poor countries like Malawi who rely on tobacco for its economic growth,” he said. “In the end, the people who suffer most from this situation are the tobacco farmers, who support a very large part of Malawi’s agricultural production.”

Campaigns to introduce plain cigarette packets in some countries, including Britain and France, will only drive prices down further and lead to illegal sales because the packets will be easy to copy, he said.

“The manufacturers of tobacco products will no longer have an interest in supplying a product which has a brand value. This will inevitably lead to the use of cheaper tobacco and drive down the price of leaf tobacco,” he said.

Malawi devotes more than 5% of its farming land to the crop – the highest percentage globally – but its impact contributes to a deforestation rate that is the fourth fastest in the world. Most trees are cut for fuel and charcoal, but tobacco is also an important factor. In 1990, more than 47% of the country was tree-covered, but by 2010 16.9% had been lost.

The government accepts tobacco is a major driver of deforestation. “The impact of the industry on natural resources is visible in tobacco-growing districts. This is evident in the reduction of trees which have been cut … either for tobacco curing or construction of tobacco barns,” Custom Nyirenda, the principal forest officer in the ministry of natural resources, energy and mining, told Al Jazeera last week.

According to Philip Morris, manufacturer of cigarette brands like Marlboro and Benson & Hedges and one of the largest buyers of Malawian tobacco, it takes 10kg of wood to dry 1kg of tobacco.

In a statement, the company, based in Switzerland, said: “The average amount of wood needed to dry tobacco is currently 10kg of wood/kg of dry tobacco. PMI and [local NGO] Total Land Care have created cooperatives to plant more than 90m trees and bamboo on farms and communal lands, helping to reduce Malawi’s deforestation.

“Together with our suppliers we are actively promoting the introduction of rocket barns that reduce fuel-wood consumption by 40%, to below 6kg of wood/kg of dry tobacco. We aim to convert standard curing barns to improved/rocket barns in both Malawi and Mozambique by 2017, which will result in saving the equivalent of 25m trees by 2018.”

The company said that reforestation was transforming villages. “Chitoola village in the Kasungu District was bare of trees four years ago. It is unrecognisable today with its forest cover of 50,000 trees. Its residents once had to buy wood – now they sell it to others.”


Tobacco control economics: Taxes and the poor

One of the concerns that governments raise is the regressive nature of taxes on poor smokers. As the tax increases, the share of tobacco expenditure on household income also increases, creating an extra burden on a family budget, and especially on poorer smokers. This argument holds for all goods and services. For tobacco products that are harmful to health, the regressivity counter-argument can be made by looking at the benefits and costs of a tax increase beyond the impact on family income. Evidence suggests that the poor are more sensitive to price increases, so as a result it is expected that as the tax increases, the majority of them will more likely reduce or quit smoking. In respect to poor smokers, their families and the society at large, the benefits of quitting are enormous because there will be lower health costs and more resources for other essential goods such as food and education. Moreover, governments could allocate the extra revenues generated by higher tobacco taxes to social programmes that benefit the poor such as affordable and accessible health services, health insurance and smoking cessation programmes (WHO technical manual on tobacco tax administration, 2010).

In order to address the economic arguments used against tobacco control, it is necessary to strengthen the evidence and the technical and analytical skills of government officials, academia and civil society. This will help move forward the tobacco control agenda and improve both the economy and public health.

Raising taxes on cigarettes by a THIRD would stop people smoking saving millions of lives

Lizzie Parry

2 Jan 2015

Tripling tax on cigarettes across the world would prevent 200 million premature deaths from lung cancer, experts claim.

The drastic increase in tax would cut the number of smokers by a third as prices double.

The increase would also narrow the price gap between the cheapest and most expensive cigarettes, encouraging people to quit rather than switch to a cheaper brand, a new study has found.

At the United Nations General Assembly and the World Health Organisation’s 2013 Assembly, countries across the world agreed to cut smoking rates by a third, by 2025.

The aim is to reduce the number of premature deaths from cancer and other diseases related to smoking, by a quarter.

A new study has found that tripling the tax on cigarettes across the world would prevent 200 million premature deaths from lung cancer, pictured. The drastic tax would cut the number of smokers as prices would double, experts said

Cancer Research UK said 42,000 people were diagnosed with lung cancer in the UK in 2010, and less than 10 per cent survive the disease, for at least five years after diagnosis.

In 2010, 34,900 people died from the disease.

Previous research has shown those people who start smoking when they are young continue to do so throughout adulthood, and have two to three times the mortality rate of non-smokers.

An average of 10 years of life is lost from smoking, with many of those dying still in middle age – meaning on average they lose around 20 years from their life expectancy.

However, the new study has found quitting smoking at a young age could help people regain almost all of the decade they may have otherwise lost.

Professor Sir Richard Peto from University of Oxford said: ‘Worldwide, around a half-billion children and adults under the age of 35 are already – or soon will be – smokers and on current patterns few will quit.

‘So there’s an urgent need for governments to find ways to stop people starting and to help smokers give up.

‘This study demonstrates that tobacco taxes are a hugely powerful lever and potentially a triple win – reducing the numbers of people who smoke and who die from their addiction, reducing premature deaths from smoking and yet, at the same time, increasing government income.

‘All governments can take action by regularly raising tobacco taxes above inflation, and using occasional steep tax hikes starting with their next budget.

‘Young adult smokers will lose about a decade of life if they continue to smoke – they’ve so much to gain by stopping.’

The researchers said controlling tobacco marketing is also important in helping people quit their habits, with the government considering following Australia and switching to plain packaging.

Dr Prabhat Jha, director of the Centre for Global Health Research of St. Michael’s Hospital and a professor in the Dalla Lana School of Public Health at the University of Toronto, said: ‘Death and taxes are inevitable, but they don’t need to be in that order.

‘A higher tax on tobacco is the single most effective intervention to lower smoking rates and to deter future smokers.’

Dr Harpal Kumar, Cancer Research UK’s chief executive, said: ‘Worldwide, around half a billion children and adults under the age of 35 are already – or soon will be – smokers, and many will be hooked on tobacco for life.

‘So there’s an urgent need for governments to find ways to stop people starting and to help smokers give up.

‘This immensely important study demonstrates that tobacco taxes are a hugely powerful lever, and potentially a triple win – reducing the numbers of people who smoke and who die from their addiction, reducing the health care burden and costs associated with smoking and yet, at the same time, increasing government income.

‘We urge all governments, not least the UK government, to take action by regularly raising tobacco taxes above inflation, and using occasional steep tax hikes starting with the next budget.

‘Young adult smokers will lose about a decade of life if they continue to smoke – they’ve so much to gain by stopping.’

Deborah Arnott, chief executive of health charity ASH said: ‘Raising the price of tobacco through taxation is the single most effective way of reducing smoking as high prices encourage smokers to cut down and quit, and discourage young people from starting.

‘This important study should be a wake-up call to all governments since raising tobacco taxes increases revenue while also saving lives.

‘While low income countries stand to benefit most from a dramatic increase in tobacco taxes, high income countries such as the UK can also benefit from increasing taxes as part of a range of measures to further drive down smoking rates.’

The study was published in the New England Journal of Medicine.

BI: CVS’s decision to ban tobacco means next to nothing…for now

by Steven Perlberg of the Business Insider:

This morning, CVS announced it will remove tobacco products from all its stores nationwide by October 1.

That will cost the pharmacy chain an estimated $1.5 billion a year, only a tiny portion of CVS’s $123 billion in 2012 revenue.

It’s an even tinier portion of global retail sales. Excluding duty free and China (the market there is essentially closed to outside tobacco companies), global retail sales topped $554 billion in 2012, according to Citi.

And only 16% of that — $89 billion — came from U.S. sales.

So how upset are tobacco companies about CVS and its $1.5 billion? It’s hard to say.

Smokers who can’t buy their cigarettes from CVS will likely go elsewhere for their fix.

The more serious concern for big tobacco is waning demand in America. U.S. tobacco sales are decreasing as a portion of global sales.

That’s why tobacco companies have long targeted other regions as growth opportunities.

“On a volumetric basis, the global cigarette industry (excluding China and duty free) is increasingly concentrated outside of the U.S., which market accounted for 8.2% of volumes in 2012 (vs. 9.4% in 2008),” wrote Citi economists.

CVS is the first major U.S. pharmacy to ban tobacco, and the move may spur others to do so. As Wonkblog’s Sarah Kliff noted, CVS thinks this will end up being a shrewd business decision for its bottom line. Not to mention it gets positive press (and commendation from President Obama, himself a former smoker) for paving the anti-smoking way.

But with tobacco companies shifting attention to growth areas like Asia (Indonesia, Malaysia and the Phillip pines are particularly profitable), you have to wonder whether they even care about CVS.

azcentral: Tobacco sale ban by CVS praised

by Peter Corbett and Ken Alltucker for The Republic, azcentral:

CVS Caremark Corp.’s decision to stop cigarette sales drew praise Wednesday for a move perceived as putting health before profits even as skeptics wondered whether alcohol, sugary sodas and other products would be next.

CVS, the nation’s second-largest drugstore chain, announced that cigarettes and tobacco products no longer would be sold in its 7,600 drugstores nationwide as of Oct. 1.

Officials at CVS Caremark Corp. said the company’s 7,600 U.S. drugstores will stop selling cigarettes and tobacco products as of Oct 1. (Michael Chow/The Republic)

“Put simply, the sale of tobacco products is inconsistent with our purpose,” said Larry Merlo, CVS Caremark president and CEO.

CVS is the first major pharmacy chain to halt tobacco sales nationwide, but drugstores have been under pressure to end the practice for years.

In 2010, the American Pharmacists Association recommended a ban on cigarette sales in drugstores and supermarkets with pharmacies.

San Francisco banned tobacco sales in pharmacies in 2008, a move that was challenged by Walgreens, and later expanded that to include supermarkets with pharmacies.

Boston and other municipalities in Massachusetts have similar bans.

CVS is expected to lose $2 billion annually in tobacco and ancillary sales.

Business analysts and health-care advocates say CVS will take a short-term economic hit from halting tobacco sales, but it will get a boost in public perception for staying true to its health-care mission.

Ross Muken, a health-care services analyst with the ISI Group in New York, said CVS’ move helps its credibility.

“The average citizen is skeptical of big business,” Muken said. “They don’t assume that companies will forgo profits. But in the long term, this will help (CVS) to not be in that market.”

Analyst Scott Mushkin of Wolfe Research in New York said it was unlikely that large grocery retailers with pharmacies, such as Kroger and Walmart, would halt tobacco sales any time soon, but other retailers might follow CVS’ lead.

“I think this puts pressure on Walgreens and Rite Aid,” Mushkin said. “It doesn’t make sense to give out drugs to keep people healthy and yet you’re selling them tobacco.”

CVS stands to lose about 1 percent of its $136 billion in annual revenue.

“That’s pretty small potatoes from a big company,” Mushkin said.


UCSF researcher: FDA puts economic theory over empirical evidence in its cost-benefit analysis; undermines sensible public heath regulation

from Dr. Stanton Glantz of the UCSF:

As part of the process of issuing regulations, the FDA (or any other agency) conducts a cost-benefit analysis of the proposed regulation to make sure it is worth doing.  The FDA’s ill-fated regulation on graphic warning labels was no exception.  The Agency’s cost-benefit analysis did find a very small net benefit, but that small showing was not enough to convince the courts that the warning label rule was legal in the face of a constitutional challenge.

Last month Jidong Huang, Frank Chaloupka, and Geoff Fong published an excellent paper showing that the FDA gross underestimated the benefits that graphic warning labels would have on cigarette consumption and made the point that this severe underestimation undermined the FDA’s ability to defend the warning labels in court as necessary.

Today we published a paper in American Journal of Public Health that shows how the FDA grossly overestimated the costs of reducing smoking by counting, as a substantial cost, the lost pleasure people would experience if they were not smoking.

To do this, the FDA counted the lost “consumer surplus,” a concept based on classical economics in which the value of something is completely captured by how much money people would pay for it.  Because nicotine is highly addictive people will pay a lot of money for cigarettes, so, according to the FDA’s logic, will be deprived of a lot of value if they stop (or don’t start) smoking.

While this idea may seem reasonable to some economists, it completely flies in the face of a huge amount of empirical evidence, evidence that the FDA simply ignored.

By so radically underestimating benefits and overstating costs, the FDA’s own analysis (supported, I am told, by the Office of Management of Budget), is making it particularly difficult to justify any regulation designed to protect public health.

Here is the abstract from our paper, “When Health Policy and Empirical Evidence Collide: The Case of Cigarette Package Warning Labels and Economic Consumer Surplus“:

In its graphic warning label regulations on cigarette packages, the Food and Drug Administration severely discounts the benefits of reduced smoking because of the lost “pleasure” smokers experience when they stop smoking; this is quantified as lost “consumer surplus.” Consumer surplus is  grounded in rational choice theory. However, empirical evidence from psychological cognitive science and behavioral economics demonstrates that the assumptions of rational choice are inconsistent with complex multidimensional decisions, particularly smoking. Rational choice does not account for the roles of emotions, misperceptions, optimistic bias, regret, and cognitive inefficiency that are germane to smoking, particularly because most smokers begin smoking in their youth. Continued application of a consumer surplus discount will undermine sensible policies to reduce tobacco use and other policies to promote public health.

We raised many of these issues in our public comment on the original warning label rule; clearly the FDA chose to ignore these issues then.

Last January I had some email correspondence with the FDA economist who prepared the cost-benefit analysis in the final rule in which I asked him to provide citations to the empirical evidence that supported what the agency did.  He could not point to any.

Given the FDA (and OMB most likely) refusal to consider the empirical evidence that its approach is wrong, I expect to see a similarly self-defeating cost-benefit analysis when the much-delayed deeming rule on e-cigarettes is finally released.

12 Dec 2013