Prohibition or profit motive?Competing visions for the endgame

Global Forum on Nicotine6th June 2015

Clive BatesCounterfactual

www.clivebates.com

Global cigarette consumption - still rising

Data source: Ng M, Freeman MK, Fleming TD, et al. Smoking prevalence and cigarette consumption in 187 countries, 1980-2012. JAMA 2014; 311: 183–92.

19801982

19841986

19881990

19921994

19961998

20002002

20042006

20082010

2012 -

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Global cigarette consumption 1980-2012

Billi

on p

iece

s

Total cigarette consumption

Global cigarette consumption - still rising

Data source: Ng M, Freeman MK, Fleming TD, et al. Smoking prevalence and cigarette consumption in 187 countries, 1980-2012. JAMA 2014; 311: 183–92.

19801982

19841986

19881990

19921994

19961998

20002002

20042006

20082010

2012 -

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Global cigarette consumption 1980-2012

Billi

on p

iece

s

Developing countries

Developed countries

The Big Idea

The Lancet – March 2015

2040 ‘endgame’ – the story so far

Data source 1980-2012: Ng M, Freeman MK, Fleming TD, et al. Smoking prevalence and cigarette consumption in 187 countries, 1980-2012. JAMA 2014; 311: 183–92. Curve forced to zero with linearly increasing rate of decline from 2012

19801983

19861989

19921995

19982001

20042007

20102013

20162019

20222025

20282031

20342037

2040 -

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Global cigarette consumption - phase out by 2040

Billi

on p

iece

s

2040 ‘endgame’ – eliminating tobacco

Data source 1980-2012: Ng M, Freeman MK, Fleming TD, et al. Smoking prevalence and cigarette consumption in 187 countries, 1980-2012. JAMA 2014; 311: 183–92. Curve forced to zero with linearly increasing rate of decline from 2012

19801983

19861989

19921995

19982001

20042007

20102013

20162019

20222025

20282031

20342037

2040 -

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Global cigarette consumption - phase out by 2040

Billi

on p

iece

s

2040 ‘endgame’ – reducing to 5 percent adults

Data source 1980-2012: Ng M, Freeman MK, Fleming TD, et al. Smoking prevalence and cigarette consumption in 187 countries, 1980-2012. JAMA 2014; 311: 183–92. Curve forced to zero with linearly increasing rate of decline from 2012

19801983

19861989

19921995

19982001

20042007

20102013

20162019

20222025

20282031

20342037

2040 -

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Global cigarette consumption - phase out by 2040

Billi

on p

iece

s

The standard kit bag (FCTC)

Endgame through prohibition

Endgame: How tobacco control sees it…

1. Prohibition

Prohibitions

• No quality standards• No consumer protection• Limited or bad consumer info• No ‘marketing’ controls• No tax revenue• Enforcement costs• Police credibility / compliance• Disproportionate penalties• Corruption in law enforcement• Users harmed by criminalisation• Ultimately regulated by violence• Criminal supply chain diversifies• Gateway?

2. Smoke free generation

It may be prohibited but is definitely not gone

Cigarettes Marijuana0

5

10

15

20

25

15.7

23.4

Marijuana and cigarettesUS high school prevalence 2013

Percent

Source: CDC MMWR Youth Risk Behavior Surveillance — United States, 2013Current use: used at least once in last 30 daysApproximately age 14-18 – grade 9-12

3. Sinking lid

Q0

P0

P1

Q1 Quantity

Price

Lid

Tax

4. Reduce nicotine in cigarettes

5. Expropriation

Big Tobacco: half a trillion dollars

PMI Altria BAT JTI ITC (India)

Imperial Reynolds Lorillard0

20

40

60

80

100

120

140

Market capitalisation – April 2015 (billion US dollars)

Total = $550 billion

Charter of Fundamental Rights of the European Union

Everyone has the right to own, use, dispose of and bequeath his or her lawfully acquired possessions. No one may be deprived of his or her possessions, except in the public interest and in the cases and under the conditions provided for by law, subject to fair compensation being paid in good time for their loss. The use of property may be regulated by law in so far as is necessary for the general interest.

Fifth Amendment: Takings or Just Compensation Clause

…nor shall private property be taken for public use without just compensation.

What’s the right thing to do?

Right thing to do?• Legitimate objective• Appropriate relationship between citizen and state• Respect for rights, property, liberty• Harm principle

Right way to do it?• Unintended consequences• Proportionate• Non-discriminatory• Evidence based

Endgame through profit

Much safer recreational nicotine delivery

Vapour products

‘Heat not burn’ tobacco

Smokeless tobacco

Novel nicotine products ‘Crossover’ NRT

Inhalers

+ 25 years innovation to come

Multi-criteria estimate of nicotine product harms….

Nutt DJ et al Estimating the Harms of Nicotine-Containing Products Using the MCDA Approach – European Addiction Research March 2014

Harm reduction categories – risk continuum?

Cigarettes Smokeless E-cigs NRT0

20

40

60

80

100

120

Crud

e es

timat

e of

risk

– C

igs

= 10

0

From analysis of the constituents of e-cigarette vapour, e-cigarette use from popular brands can be expected to be at least 20 times safer (and probably considerably more so) than smoking tobacco cigarettes in terms of long-term health risksProfessor Robert WestProfessor Ann McNeillProfessor Peter HajekDr Jamie BrownMs Deborah Arnott

Value proposition: a smoker’s cost-benefit analysis

1. Keep smoking

Benefit: nicotine, sensory, taste, ritual, brand-related

Cost: illness, money, stigma, addiction

2. Quit smoking

Benefit: avoid smoking harm, take control, cash savings

Cost: withdrawal, craving, sustained willpower, lost smoking benefits

3. Switch to e-cigs

Benefit: most smoking benefits*, no/minor smoking harms, personalisation, buzz, cash saving

Cost: addiction?

* Full benefits – subject to continued innovation

“Quit or die”

Global cigarette consumption - still rising

Data source: Ng M, Freeman MK, Fleming TD, et al. Smoking prevalence and cigarette consumption in 187 countries, 1980-2012. JAMA 2014; 311: 183–92.

19801982

19841986

19881990

19921994

19961998

20002002

20042006

20082010

2012 -

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Global cigarette consumption 1980-2012

Billi

on p

iece

s

Total cigarette consumption

Global cigarette consumption – trend to 2030

Data source: Ng M, Freeman MK, Fleming TD, et al. Smoking prevalence and cigarette consumption in 187 countries, 1980-2012. JAMA 2014; 311: 183–92.

19801982

19841986

19881990

19921994

19961998

20002002

20042006

20082010

20122014

20162018

20202022

20242026

20282030

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

f(x) = − 1.46227882648661 x² + 86.4190175336997 x + 4888.93401759531R² = 0.993220971257086

Global cigarette consumption and trends – parabolic trend

Billi

on p

iece

s

Global

Cigarette consumption continues on trend

Consumption 2010-2030 on parabolic trend projection from 1980-2012 data from Ng M, Freeman MK, Fleming TD, et al. Smoking prevalence and cigarette consumption in 187 countries, 1980-2012. JAMA 2014; 311: 183–92.

20102011

20122013

20142015

20162017

20182019

20202021

20222023

20242025

20262027

20282029

2030 -

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Extrapolation of trend (parabolic curve)

Billi

on p

iece

s Global cigarette consumption

Hypothetical introduction of new nicotine products

Consumption 2010-2030 on parabolic trend projection from 1980-2012 data from Ng M, Freeman MK, Fleming TD, et al. Smoking prevalence and cigarette consumption in 187 countries, 1980-2012. JAMA 2014; 311: 183–92.

20102011

20122013

20142015

20162017

20182019

20202021

20222023

20242025

20262027

20282029

2030 -

1,000

2,000

3,000

4,000

5,000

6,000

7,000

New non-combustible nicotine with high initial but declining growth

Billi

on p

iece

s

Low risk nicotineconsumption

Global cigarette consumption

Hypothetical introduction of new nicotine products

Consumption 2010-2030 on parabolic trend projection from 1980-2012 data from Ng M, Freeman MK, Fleming TD, et al. Smoking prevalence and cigarette consumption in 187 countries, 1980-2012. JAMA 2014; 311: 183–92.

20102011

20122013

20142015

20162017

20182019

20202021

20222023

20242025

20262027

20282029

2030 -

1,000

2,000

3,000

4,000

5,000

6,000

7,000

New non-combustible nicotine with high initial but declining growth

Billi

on p

iece

s

This boundary is harder to move.

This boundary is easier to move.

In the long term it may displace smoking

Consumption 2010-2030 on parabolic trend projection from 1980-2012 data from Ng M, Freeman MK, Fleming TD, et al. Smoking prevalence and cigarette consumption in 187 countries, 1980-2012. JAMA 2014; 311: 183–92.

20102012

20142016

20182020

20222024

20262028

20302032

20342036

20382040

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

New non-combustible nicotine with high initial but declining growth

Billi

on p

iece

s

Global cigarette consumption

Low risk nicotineconsumption

Not if, how?

Diminishing and negative returns to regulation

Net health

Net harm

Valu

e to

soc

iety

Regulatory costs, burdens and restrictions

Builds confidence

Destroys viable firms and products

Compromises design & consumer appeal

Sweet Spot

Morgan Stanley on FDA deeming regulations

The greater barriers to entry (slower approval process, higher costs, higher product standards), will ultimately take a toll onthe number of available products and rationalize the category.

This could result in the larger tobacco companies dominating the category in the future, given the burden it would place on smaller manufacturers.

Opportunity not threat

Regulator

Consumers Public health

Business Government

Find that sweet spot

Big vision, win big

Tell the truth, focus on disease

Fight for your interests and spread the word

Innovative, competitive not predatory

Enjoy the disruption!

Counterfactual

www.clivebates.com@clive_bates