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January 24th, 2017:

Tripling tobacco taxes: Key for achieving the UN Sustainable Development Goals by 2030

Since the World Health Organization (WHO) adopted the Framework Convention on Tobacco Control (FCTC) a decade ago, over 180 countries have signed the treaty. Progress has been made in expanding the coverage of effective interventions–more than half of the world’s countries, with 40% of the world’s population have implemented at least one tobacco control measure, and despite increasing global population, smoking prevalence has decreased slightly worldwide from 23% of adults in 2007 to 21% of adults in 2013. How can greater reductions in smoking be achieved in the next decade and contribute to reaching the health and social targets of the UN Sustainable Development Goals (SDGs) by 2030? We review some key issues in the epidemiology and economics of global tobacco control.
Smokers face a three-fold higher risk of death versus otherwise similar non-smokers, resulting in a loss of at least one decade of life. While the hazards of smoking accumulate slowly, cessation is effective quickly. People who quit by age 40 get back nearly the full decade of life lost from continued smoking; quit by 50, get back six years; quit by 60, get back four years. Cessation is now common among adults in high-income countries. For example in Canada there are over 1 million more ex-smokers than just a decade ago. However, due in large part to the marketing and pricing strategies of the tobacco industry, cessation remains a major public health challenge in most low and middle-income countries (LMIC) where 85% of smokers live.

Global annual cigarette sales rose from five trillion cigarettes in 1990 to about six trillion today. Cigarette production has increased by 30% in China since 2000, which consumes 40% of the world’s cigarettes. Global tobacco industry profits of about $50 billion – or $10,000 per tobacco death – enable it to access finance officials, fund pricing research, and run interference against tobacco control–summarised wonderfully by comedian John Oliver. Serious control of tobacco must counter these strategies on the basis of robust health, social and economic data that document the negative societal impact of tobacco use.

WHO has recommended a 30% reduction in smoking prevalence by 2025, which would avoid at least 200 million deaths by the end of the 21st century among current and future smokers. The only plausible way to reduce smoking to this extent would be to triple tobacco excise taxes in most LMICs. A tripling of the excise tax would roughly double the retail price and reduce tobacco consumption by about 40%. As of 2015, WHO reported that only 28 LMICs had comprehensive policies covering counter advertising, restrictions on public smoking, and on appropriately high taxes, and that few had made progress on raising taxes.

The common strategy of tobacco producers is to lobby governments to keep cigarettes affordable by keeping tax hikes below the rate of income growth, and by taxing different cigarettes at different rates to enable smokers to change to cheaper brands or lengths. Smart taxation needs to simplify taxes by adopting, ideally, a high, uniform excise tax on all types of cigarettes (both filter and nonfilter) to reduce downward substitution (let’s not forget, all cigarettes will kill you!). The Government of India has recently made modest tax reforms in this direction, the 2015 tobacco tax adjustment in China is reducing consumption and increasing fiscal revenue, and in 2016 World Bank teams supported the work of government teams in Armenia, Colombia, Moldova and Ukraine for the undertaking of comprehensive tax reforms that were approved by Parliaments, including reforms on tobacco tax structures and rate levels—additional work is being supported in other countries worldwide. Smart taxes can follow the example of Canada’s tax hike of about 5 cents a pack in 2014, as well as the Sin Tax Reform (both tobacco and alcohol) in the Philippines of 2012 that helped mobilize domestic resources to fund the expansion of universal health coverage. There have been other successes: Botswana, Ecuador, Mauritius, Mexico, and Uruguay, where local political champions, paired with expert taxation advice, achieved large tax hikes. South Africa also raised taxes in the last decade and has curbed consumption per adult by half.

Non-price interventions also play an important role as they help to reduce the social acceptability of tobacco use. Young American women took up smoking in large proportions in the 1960s and 1970s due in part to aggressive advertising (“The “Virginia Slims” epidemic”). Advertising bans or restrictions are likely one reason why young Chinese or Indian women have not yet done so. Australia has adopted plain packaging, and other countries are starting to follow this example. Simple questions on past smoking status to death certificates or to verbal autopsies could enable low-cost monitoring of the consequences of tobacco use in many populations.

Governments and international agencies with accumulated know how and expertise in data sciences such as the World Bank Group and OECD along with WHO could also help countries create accessible and independent sales, revenue and smuggling data sources as a basis for rational tobacco tax policy. Country finance officials should refuse advice from tobacco lobbyists to avoid falling into conflict of interest situations, as WHO recommends for health officials.

Implementing the FCTC more effectively in the next decade is required to raise cessation rates in LMICs. The World Bank recommended taxation as the core strategy in its 1999 publication, Curbing the Epidemic: Goverments and the Economics of Tobacco Control. Similar recommendations follow in recent reports on tobacco taxation by WHO, and by the International Monetary Fund. Building upon accumulated evidence and country experiences, a tripling of the worldwide excise tax might be the only way to achieve the 2030 UN Sustainable Development Goal of reducing non-communicable disease deaths by 30%!

Jamaica to evaluate WHO’s call for heavy taxation on tobacco industry

Health Minister, Dr Christopher Tufton says he along with stakeholders will be evaluating the call by the World Health Organisation (WHO) for heavy taxation on the tobacco industry.

Addressing the WHO’s Executive Board in Geneva, Switzerland, yesterday Director-General, Dr Margaret Chan, said heavy taxation is one way of controlling tobacco use.

According to Tufton, Jamaica, which is a member of the WHO board, shares the concerns about the financial costs to treat tobacco-related illnesses and the associated cost to public health, globally and nationally.

He says any measure to discourage smoking and support public health is worth considering.

In a landmark report on the economics of tobacco and tobacco control, the WHO and the US National Cancer Institute concluded that smoking costs the global economy more than $1 trillion yearly.

The researchers also said smoking will soon kill more than six million people worldwide each year.

They show how tobacco control, through heavy taxation can save lives while generating revenues for health and development.

Will “Heat-Not-Burn” E-Cigs Kill Off Vaping?

With a more cigarette-like experience, the next generation of electronic cigarettes could make vaping obsolete.

The future of cigarettes may be “smoke free,” as Philip Morris International (NYSE:PM) says, but it is a new platform of electronic cigarettes using heat-not-burn technology that may also kill off vaping as we know it.

Not your father’s e-cig

Traditional e-cigs and personal vaping systems (PVS) heat a nicotine-infused liquid to create a vapor that is inhaled. Whether it’s a glowing point of light or a massive cloud of vapor being released that can make a user look as if he’s starring in a Cheech & Chong movie, the devices have been critiqued as falling short of being fully satisfying.

Users have complained of a chemical aftertaste from the heated e-liquid, while those nearby to someone vaping are annoyed by the billowing clouds in which they’re enveloped.

However, the new heat-not-burn technology promises to resolve both problems. By using real tobacco to deliver the flavor and nicotine hit users crave, these next-generation devices give a more cigarette-like experience to the user while emitting a vapor more confined to one’s personal space. And because they are more like combustible cigarettes than either traditional e-cigs or PVS, they may have the advantage of weaning more people off of smoking, which would be a societal gain in terms of cost and health (there are nicotine-free e-liquids available, too).

Philip Morris is even pursuing a “reduced risk” label in the U.S., which, with the help of the FDA, will give it a major competitive advantage over the competition. Yet with many of the global tobacco companies also pursuing heat-not-burn (HNB) alternatives, it’s worthwhile to look at the different products they will offer.

Philip Morris (iQOS)

For a company that produces some 850 billion combustible cigarettes annually, Philip Morris’ call for a “smoke free” future is a big deal. But since HNB products will use real tobacco, it (and the other manufacturers) aren’t really straying too far from home.

The iQOS is actually a two-part device, a tobacco-filled miniature cigarette and a heating unit. The cigarette, marketed with Altria (NYSE:MO) as Marlboro HeatSticks, is inserted into a device that looks something like a PVS, which is itself inserted into the iQOS heating device. The e-cig is heated to 350 degrees Celsius (662 degrees Fahrenheit), which differs from combustible cigarettes that burn tobacco at 800 degrees Celsius, or almost 1,500 degrees Fahrenheit. The whole device is then removed and “smoked” just as you would a combustible cigarette, and when it’s finished, the HeatStick is discarded.

British American Tobacco (iFuse glo)

Next to the iQOS, British American Tobacco’s (NYSEMKT:BTI) iFuse glo is arguably the next biggest HNB device that will be coming to market. Like the iQOS, a tobacco-filled cigarette, which it will market as NeoStiks under the Kent brand, is similarly inserted into a PVS-like device that is then inserted into the iFuse heating element.

BAT bills itself as the first international tobacco company a vapor product in the U.K., the Vype e-cig, and it followed that with an early iFuse HNB product that heated an e-liquid, but passed the resulting vapor through tobacco to give it real tobacco flavor. The glo is the next stage of development in e-cig technology, and it gives smokers a range of alternatives.

Reynolds American (Eclipse, Revo, Core)

Reynolds American (NYSE:RAI), which just agreed to be acquired by British American for $50 billion, was one of the pioneers in HNB technology with its Eclipse back in the early 1990s. It relaunched the product in 2014 as Revo, but it once again failed to gain much traction with consumers. Although it’s apparently still available in very limited quantities, Reynolds has been working on a new product called Core, which BAT was supposedly very interested in. It’s said that the delay in Reynolds agreeing to BAT’s takeover offer was related to the Core technology. Core, which is similar to Revo, recently completed the first phase of test marketing in Japan.

Japan Tobacco (Ploom Tech)

Despite Japan’s tobacco market falling dramatically over the years, heat-not-burn technology is more successful there than just about anywhere else. It is the first market manufacturers enter when launching their products. When Philip Morris introduced the iQOS there in early 2016, it quickly shot to the top, which had Japan Tobacco (NASDAQOTH:JAPAF) quickly following with its Ploom Tech HNB device. Its own products have been so successful that it has at times had to suspend taking orders for it because it couldn’t keep up. Ploom markets the cigarettes under its popular “Mevius” brand.

PAX Labs (PAX)

PAX Labs used to be Ploom Tech until Japan Tobacco bought the name and technology in 2015. Pax subsequently bought back its partner’s minority stake to focus on the PAX loose-leaf vaporizing product.

Unlike the other HNB technology, users of PAX fill the PAX device with loose-leaf tobacco and place it on a heating unit that plugs into your computer’s USB port. When the unit is hot enough, users attach a mouthpiece to it to draw in the vapor. There are three different devices — the Pax 1, 2, and 3 — that are all similar in function, plus the PAX Era, which is filled with oil. It may be one of the first purpose-built marijuana e-cigs, and it’s available in the U.S., but only in California and Colorado.

Up in smoke

Every tobacco company understands the combustible cigarette market is dying, which is why they’re broadening their horizons into electronic cigarettes and vaping products. The heat-not-burn technology, though, promises to vastly expand the manufacturers’ lifecycle as the use of real tobacco allows them to continue profiting from their primary cash crop. It might also serve to effectively snuff out any remaining vaping competition.