Addicts are great customers, they have a huge appetite for your product and they keep coming back.
That of course is the market-driven view of public health. A coherent national public health policy should consider the evidential impact of measures on the health of its citizens.
The last few years have indeed seen a public health which appears to have been somewhat determined by the phenomenon of ‘corporate capture’, such as the interests of corporates rather than public health physicians. This is of course partly a reflection of the current government in office, and spans across a growing number of policies including obesity, packaging of cigarettes, and pricing of alcohol.
A buzzword in management circles has been ‘disruption‘. It is felt that early digital cameras suffered from low picture quality and resolution and long shutter lag. Quality and resolution are no longer major issues and shutter lag is much less than it used to be. The convenience and low cost of small memory cards and portable hard drives that hold hundreds or thousands of pictures, as well as the lack of the need to develop these pictures, also contributed to the successful adoption of these disruptive technologies. Digital cameras have a high power consumption (but several lightweight battery packs can provide enough power for thousands of pictures).
According to Wikipedia, a disruptive innovation “is an innovation that helps create a new market and value network, and eventually goes on to disrupt an existing market and value network, displacing an earlier technology”. It is a term used to describe changes that improve a product or service in ways that the market does not expect.
Disruptive technologies have created new industries and new markets. They have also rendered others obsolete and outdated. They provided consumers with something they did not know they wanted. The economist Joseph Schumpeter referred to this process as “creative destruction.” Early investors in these companies certainly took on a lot of risk. There was no way to know whether or not an idea would be profitable. After all, these ideas had no track record.
The American investment banking firm Goldman Sachs earlier this year released a list of eight disruptive themes that have the potential to reshape their categories and command greater investor attention in the near future. Electronic cigarettes were listed as one of these eight markets investors should keep an eye on, for their potential to transform the tobacco industry.
As described in “E Cigarette Forum”,
The little vaping companies that make alternative devices may not make it into the fortune 500 or onto the boards of the NYSE, but they will survive because they have a passionate clientele. They’re like the little mammals that scurried around the massive feet of the dinosaurs at the end of the Jurassic, 65 million years ago, just as the big guys were about to go belly up. Bet on the little guys. They’ll survive.
On October 8th 2013, the European Parliament is to vote on a proposal to regulate the devices as if they were medical products. E-cigarettes (“e-cigs”), which allow users to inhale nicotine-laced vapour instead of tar-clogged smoke, are a growing market, set to top $1bn in the next three years. Smoking is falling in most rich countries, but “vaping” is rising. In Europe, 7m people are thought to be using e-cigs, which vaporise a solution containing nicotine without the toxins from burning tobacco. Sales of e-cigs in America may treble this year, according to figures from Bonnie Herzog of Wells Fargo, a bank. She thinks their consumption could overtake that of ordinary cigarettes in a decade.
An “e-cig” is composed of a mouthpiece, a liquid nicotine cartridge, a heating element and a battery. When the user inhales on the e-cig, the heating element is activated. The liquid nicotine cartridge is heated and creates a vapor. This is what the user inhales. It is odourless. It doesn’t contain any of the other chemicals or tar found in traditional cigarettes.
E-cigs may be far safer than normal cigarettes and at least as good at getting people to quit smoking as nicotine patches and gum, but they too are based on that addictive substance. Manufactured by hundreds of suppliers using materials from China and elsewhere, the quality and labelling of e-cigs on sale are known to be uneven.
E-cigs can be smoked indoors. Once again, there are no noted effects of secondhand vapour. The vapour that is exhaled has little to no odour. Bar and club owners may even be becoming fans of e-cigs. Users who buy them are more likely to stay in the bar and consume more drinks than they otherwise would. This may add to the ‘coolness’ and convenience factor of these disruptive new products. There are a number of possible suggested benefits.
There is a noted reduction in side effects commonly reported by smokers. Some of these side effects are shortness of breath, dry mouth and headaches. Along with reduction of side effects, there is no secondhand smoke. The vapour that the user exhales quickly vanishes and does not appear to cause harm to bystanders.
A ‘quick reference guide’ for ‘smoking cessation services’, from NICE, published in February 2008 gives an overview of what was perceived then could or should be offered on the NHS to help people give up smoking. This evidence-based guidance presents the recommendations made in ‘Smoking cessation services in primary care, pharmacies, local authorities and workplaces, particularly for manual working groups, pregnant women and hard to reach communities’. It provides a rationale for who could provide smoking cessation services (as it predates the £3bn top-down reorganisation, it refers to a critical rôle for PCTs and SHAs), what pharmacotherapies might be prescribed and for whom (and where they should not be prescribed), which patient groups might be beneficially targeted, and how effectively educational and training resources might be allocated.
It is no secret that despite public health efforts the popularity of electronic cigarettes has increased at a rapid pace in recent years. E-cig sales have doubled in the last two years and they are estimated to reach $1billion in retail sales in 2013. According to a Gallup poll, 74% of smokers want to quit, and Goldman Sachs analysts believe the electronic cigarette is “the most credible alternative to conventional cigarettes in the market today”.
This investment giant estimates electronic cigarettes could reach $10 billion in sales over the next few years and account for over 10% of the total tobacco industry volume and 15% of the total profit pool by 2020. In April 2012, one of the big cigarette companies threw its hat in the ring. This was Lorillard, maker of Newport and other cigarette brands. They spent $135 million on the purchase of blu e-cigs. They’ve seen a lot of success with the brand. Sales have grown from $8 million in in the second quarter of 2012 to $57 million in the second quarter 2013. This is a gain of more than 600%. Lorillard claims they hold around 40% of the total e-cig market share. So of course Big Tobacco is eager to get in on the act, and as Hargreaves notes, cigarette manufacturers Lorillard, Reynolds American, Imperial Tobacco, British American Tobacco, and Altria are all bringing out e-cigs, along with newer companies like Vapor and privately-held NJOY.
There are, of course, risks to this growth. One realistic threat is the tightening of the manufacturing and product standards, or bring in a specific set of rules rather like those governing cosmetics. However, any government would have to be motivated to do this, and, following evidence for ‘corporate capture’ in English policy since the election of the UK Coalition government in 2010, e-cigs are likely to experience an ‘easy ride’.
But there are other considerations. Electric smokes compete with cigarettes yet do not in most places face the same restrictions, to say nothing of excise taxes. They compete with smoking-cessation products yet do not usually have to secure prior approval for products or make them to pharmaceutical standards. If they are required to do either, their price will rise, variety will fall and the uptake by consumers, who are overwhelmingly smokers, will be cut.
Furthermore, the World Health Organisation does not encourage them. America’s Food and Drug Administration is expected to propose restrictions in October. In 2009 it claimed that e-cigarettes were unapproved medical products, but a court said they should be regulated as tobacco products instead. Health authorities worldwide are struggling to deal with this new way of getting a nicotine kick. E-cigarettes are sold as leisure products and as such are covered by safety and quality standards wherever these exist and are implemented. But leaving them, like shoes or beds, to such “catch-all rules” makes some regulators uneasy. The most obvious is the involvement of the FDA. E-cig companies are anticipating that the FDA will get more heavily involved in regulating the e-cig market. This is a known risk currently being priced into e-cig dividends.
If, conversely, FDA regulation is passed, this could actually help their stock price. It would grant a degree of certainty in the minds of investors. It could also have the effect of crowding out some of the smaller players. It may also have the effect of boosting consumer confidence in the e-cigarettes. E-cigarettes, which allow users to inhale nicotine-laced vapour rather than tar-clogged smoke, are a growing market (expected to top $1billion in the next three years) but some countries including Brazil, Norway and Singapore have already banned the devices. The Medicines and Healthcare Products Regulatory Agency (MHRA) have already announced that e-cigarettes will be regulated in the UK as a non-prescription medicine. In the US, the FDA has previously warned makers for violating good manufacturing practices and making unsubstantiated drug claims.
The goal, according to Clive Bates, a former director of Action on Smoking and Health, a British campaigning group, and a tireless advocate of e-cigarettes, is not to lose the chance of millions of smokers switching in whole or in part to a relatively benign alternative. “The market is producing, at no cost to the taxpayer, an emerging triumph of public health,” he says.
In terms of the market economy, regarding the way Big Tobacco will be affected by the evolution of electronic cigarettes, Goldman Sachs predicts Lorillard will be the biggest beneficiary of the shift. after its acquisition of Blu ecigs. Blu commands 40% of e-cigarette market share and and it is expected its sales will account for 5% of Lorillard’s overall sales this year. Having a dominant e-cig brand in its portfolio puts the company in a favorable position, and could be included in even the most ‘ethical’ of pension funds in an investment portfolio.
However, perhaps the biggest threat to public health might be the market philosophy, which the current Coalition of the Conservatives and the Liberal Democrats appear to be sympathetic towards. As the Conservative Party begin their annual party conference in Manchester, it is possibly worth noting the criticism of Dr Clive Peedell, Co-Chair of the National Health Action Party, of an article by Nigel Edwards in Health Services Journal.
Peedell described that,
“In addition, market theory in the form of public choice theory rejects the idea of medical professionalism and the public service ethos. James Buchanon, “the father” of this theory admitted in a BBC documentary (“The Trap”, by Adam Curtis) that he didn’t believe in the concept of the public service ethos. Julian Le Grand famously used the “Knights and Knaves” metaphor to explain this. The solution to “rent seeking behaviour” is the discipline of the market. This would turn “pawns in queens”. The introduction of the market also explains the rise of New Public Management (managerialism), which favours narrow economic priorities and micro-management practices (e.g audit, inspection, performance indicators, league tables, monitoring and centrally imposed targets) over professional judgment [6]. (I was politicised by MMC, by the way, because I rejected its anti-professional tick box aims. It was about delivering a new breed of doctor to suit the needs of employers in the new healthcare market). And there’s more! (as Frank Carson used to say). Markets undermine the social contract between doctors and patients and damage the doctor patient relationship, because decision making becomes increasingly finance based rather than needs based. It is no coincidence that the American medical profession lost public support faster than any other profession during the rapid commercialisation of the US healthcare system in the 1970/80s.”
Libertarians might argue that citizens individually are ‘free’ to make their own choices, in the same way that ‘fat people may choose to become fatter’ due to lack of self-restraint on food. However, such crass stupidity ignores the sheer biology of how some human beings control their intake. Indeed, the first rule of recovery in substance abuse and misuse clinics in the ‘Twelve Steps’ program is for the addict to admit “powerless” over their drug of choice. Ultimately, like many of these decisions, it will come down to a cost-benefit analysis, but such sums are notoriously difficult. How much money should the NHS spend ‘from hard-working taxpayers’ money’ on such treatments, when people ‘choose to smoke’ or ‘choose to become fat’ in the rather prejudiced jaded view of the health of others? Some people might prefer this health responsibility to be offloaded who can exploit maximal rent-seeking behaviour in making a profit, in much the same way that the ‘first mover advantage’ of any Big Pharma that unlocks the secret to NHS ‘Big Data’ might become a multi-billionaire.
Deciding on the health benefits of the e-cig would have been a difficult enough job. Pile on this the consideration of this Government which knows where its priorities lie, the terrain is even more uncertain possibly.
