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Why the tobacco industry is bad for public health (beyond the obvious reasons)

2 March 2011

This post summarises recent examples of how the tobacco industry seeks to block policies promoting public health.

1. Flexing its legal muscle

In the US, tobacco companies are reportedly taking the Food and Drug Administration to court trying to block release of a report, produced by an FDA advisory panel, which may recommend a total ban on menthol-flavoured cigarettes. The R.J. Reynolds Tobacco Company and Lorillard have filed suit against the government agency charging “conflicts of interest and bias” among panel members.


2. Creating false diversions

Thanks to Simon Chapman, Professor of Public Health at the University of Sydney, for this analysis of the industry’s latest attempt to divert our attention.

Simon Chapman writes:

The tobacco industry knows on which side its bread is buttered, and over the years, its regular squealing about tax rises have told us all that tax increases cause painful falls in tobacco consumption – precisely the point!

Cigarette prices have an elasticity of around -0.4, meaning that a 10% in retail price rises cause a 4% fall in overall consumption, caused by both quitting and reducing use.

Low income groups like children and the poor have even higher responsiveness to price rises, with elasticities of up to -1.2 (12% fall for 10% price rise).

The 2010 Rudd government excise rise was one of the biggest on record and roundly applauded by public health groups. The tobacco industry has shifted its main attack on tax rises from being a concerned friend to the poor (“prices rises hurt the poor .. so keep the price low!”) to the idea that they generate significant black markets.

This week, an industry-commissioned Deloitte report has trumped another industry-commissioned 2010 PriceWaterhouseCoopers report on the size of the illegal tobacco market in Australia.  In 2010, PWC estimated this at 12.3% of all tobacco then consumed in Australia: that’s right, get your heads around this one: 1 in 8 cigarettes and roll-your-owns are purchased illegally, they want us to believe!

Globally, an upper limit of 8.5% of tobacco sold is estimated to be black market, with most of this occurring in nations with high corruption indexes like much of Africa and former Soviet states. Our local tobacco industry is saying that Australia is near the top of that league. Who would have thought!

Now Deloitte has gone one better.  To quote the release:

A Deloitte report into illegal tobacco in Australia revealed taxpayers are losing out on almost $1.1 billion in excise revenue as the illegal tobacco market grows rapidly. The report estimated that 2.68 million kilograms of illegal tobacco products were sold in Australia during 2010, equivalent to 15.9% of the total legal tobacco market. Organised crime gangs importing loose leaf tobacco, counterfeit and contraband cigarettes are now the fourth largest tobacco player in Australia just behind Imperial Tobacco which holds 17% of the legal market. British American Tobacco spokesperson, Scott McIntyre said the annual report highlighted the worrying upward trend in black market tobacco which pays no excise duty to the Government, is unregulated and often carries no health warnings.

Contrast these findings of the 2007 National Drug Household Survey, which found that only 0.2% of the population (around 33,000 people) used black market tobacco more than half the time. The tobacco industry continues to blow self-serving smoke.

Try and picture this: unlike the Federal police who are charged with busting those who sell illegal tobacco and have in the past made arrests that have seen fines running into the millions, masses of ordinary smokers are apparently somehow able to do a better job in finding out where these all these illegal outlets are.

Look at all the legal cigarette packs that you see in thousands of legal outlets .. divide that by 6 and imagine that that is approx the number of outlets that these industry sponsored reports would have us believe are out there.

• PS from Croakey: See how The Daily Telegraph fell for the industry spin – hook, line and sinker…


3. FOI-ing the living daylights out of health departments (freedom of information)

Documents tabled recently in Senate Estimates hearings reveal how FOI requests from tobacco companies are costing the Federal Department of Health and Ageing a small fortune (drop me a note if you’d like a copy of these, and see this previous Croakey post for more background).

The documents, which have been circulated by Senator Rachel Siewert, show that the Department has spent months negotiating with British American Tobacco Australia and Philip Morris Limited about their FOI requests around the Government’s plans for plain packaging of cigarettes.

In a recent media statement, Senator Siewert said six people are being employed at taxpayer expense specifically to deal with these tobacco company requests.

The Senate Estimates Hearings documents showed that in one case, negotiations between DoHA and a tobacco company resulted in the Department’s initial estimate of an FOI charge of $1.47 million being reduced to $367,106 as the scope of the request was narrowed.

In another case, the Department spent six months negotiating with a tobacco company to narrow the scope of its FOI requests from more than 5,800 files to 280 files. “In that case, the initial charges estimate was $637,673.50. Negotiations on the scope of the request brought that down to $100,426.17 before agreement was reached on a request with estimated charges of $25,566.49.”

The Department noted that the FOI regulations do not provide for full cost recovery and that the charges levied to FOI applicants do not reflect the real cost of completing the work: “The regulations state that staff time, regardless of the level of the officer, is chargeable at $15 per hour for search and retrieval, and $20 per hour for decision-making time. In addition, none of the costs involved in the process of negotiation, which included assessing the requests and preparing three charges estimates, are covered by the ultimate estimate of the charges for which the applicants will be liable.”

All of which is to say that Australian taxpayers are subsidising tobacco industry efforts to block public health measures.


4. Paying for political clout

Health groups are waiting to see whether the Federal Coalition will line up behind the Government’s plain packaging legislation, or whether they will support the interests of their tobacco donors (Cancer Council Australia has morebackground on plain packaging).

Perhaps Senator Eric Abetz’s questions in the Senate last year give some indication of the Coalition’s likely position.

Abetz asked the Minister for Innovation, Industry, Science and Research, upon notice, on 16 November 2010:

(1) What are the intellectual property (IP) implications of plain packaging of tobacco products?

(2) Is it correct that plain packaging may not be consistent with Australia’s IP treaty obligations?

(3) Is it correct that IP Australia has advised the Government that plain packaging would make it easier for counterfeit products to be produced and supplied on the market.

(4) Has the Minister been advised that plain packaging of tobacco products may be seen by trademark owners as a restriction on the ability to use their marks; if so: (a) where did that advice come from; (b) what was that advice; and (c) what are the implications

Senator Carr replied on 8 February, 2011:

The answer to the honourable senator’s question is as follows:

(1) Plain packaging will involve regulating the use of trademarks on tobacco products. This measure will not remove any existing trade mark registrations, nor affect the registrability of future trademarks.

(2) No. The relevant treaty, the Trade-Related Aspects of Intellectual Property (TRIPs) Agreement, allows for regulating the use of trade marks when it is justified and reasonable to do so.

(3) Yes. IP Australia advised the Government that plain packaging might increase the potential for the counterfeiting of tobacco products. However, IP Australia did not estimate the level of any likely rise.

(4) Yes.

(a) The advice came from IP Australia.

(b) The advice was that the use of trademarks can be restricted by Government when it is justified and reasonable to do so, for instance to address a public health issue.

(c) The implications are that the Government will be able to restrict the way a trade mark can be used when it is justified and reasonable to do so.

According to public health sources, it should only be a matter of weeks until the draft legislation is available for public consultation, with the bill’s introduction in the lower house expected in June or July.

By July, a Greener shade of Senate is likely to support the bill (the Greens have already indicated support), but health groups are expecting the House of Reps to be a challenge.

Some believe that the fate of the legislation may hinge on the views of the independents Tony Windsor and Rob Oakeshott.

Perhaps someone should give them the stats on the toll that tobacco takes in their electorates. Or perhaps this has already been done…

If the independents don’t support the legislation, it will make their professed concerned for rural health sound rather hollow.


5. PR spin

On this comprehensive Radio National Background Briefing report, you can hear how the industry is spinning its opposition to plain packaging, as well as analysis from journalist-turned-PR Peter Wilkinson and former industry lobbyist and current Crikey contributor Richard Farmer.

The program also canvasses former Coalition Government Minister Dr Brendan Nelson’s support for generic packaging. When interviewed for the program, Nelson (now Ambassador to the EU) declined to reiterate his opposition to political parties taking tobacco money.

He did, however, say that the tobacco industry’s most frustrating tactic is the use of third-party endorsers (as we’ve seen recently from the industry-funded Alliance of Australian Retailers and its inept efforts in this area, aspreviously described at Croakey)

We will soon know how well that cap – “third party endorser” – fits the Federal Opposition … it’s not a pretty look for any politician or political party these days. It will be interesting to see if the doctors in the Coalition will be prepared to wear it.

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