by Carl V Phillips
Continuing this series. Sorry about the cheesy title. But it never hurts to have a reminder that Sweden is the most important population in the annals of tobacco harm reduction. (Click here to get ABBA-rolled.)
The sale of cigarettes generates an enormous amount of net revenue. Truly enormous. A pack of cigarettes costs tens of cents to produce and sells for 5, 10, or even 20 dollars in places where most readers of this blog live. Manufacturers and merchants keep some of that. But the vast majority of those purchase prices are taxes. In the order of 90% of the net revenue accrues to governments. Few consumers realize this, perhaps because unlike most other sales, excise, and value-added taxes, these taxes are intentionally never broken out. Look at a the receipt from purchasing cigarettes, and it does not tell you that most of what you just paid was tax.
With so much money at stake, it is not surprising that those profiting would try to defend their income. It turns out, however, that those who score the bulk of the money — which funds general government expenses just like income taxes — have only recently been particularly motivated to be anti-THR. Consumers practicing THR by switching to smokeless tobacco were few in number in North America, fewer still Europe outside Sweden, and even less everywhere else. Moreover, in North America, smokeless tobacco users are forced to pay similar taxes (usually somewhat less than on cigarettes, though more in some places). It would have been a serious threat to government revenuers if the public learned about THR, and thus began to object to it being disincentivized via those taxes, but that was not yet a risk so a few educated switchers mattered little.
Enter e-cigarettes, and government revenue started to face a serious threat. Though smokeless tobacco sales still dwarf e-cigarette sales, the switching rate — the number giving up smoking in favor of the substitute — is currently considerably higher for e-cigarettes. Very few jurisdictions have excise taxes on e-cigarettes. It is easy for consumers to evade such taxes via black or grey markets, which means that even if taxes were imposed, they could never be nearly as high as they are on traditional tobacco products without triggering massive evasion. Figuring out how to even define a tax for open-system e-cigarettes (one that is not easy to work around) is difficult, thus the revenuers have a particular interest in preventing THR via open-system vaping.
And, of course, the political mobilization of vapers causes a lot of — usually successful — pushback against tax proposals. Moreover, this has had the spillover effect of creating CASAA and a few other THR advocates who also fight smokeless tobacco taxes. That is an uphill battle, but at least it has been joined. (For a long time, this was practically a one-man fight, in the person of Bill Godshall, who was remarkably successful in his home state of Pennsylvania — there is no excise tax on smokeless tobacco there.)
Thus the e-cigarette phenomenon has put governments in the scary position of having to find other revenue rather than just gouging poor smokers and smokeless tobacco users. For government officials concerned about revenue, THR is just collateral damage. Few of them actively want THR to fail, in contrast with anti-tobacco extremists. (Some government agencies like CDC and the National Institutes of Health were long-ago captured by the extremists and so are a different story; the revenuers might appreciate the political cover they offer, but do not share their motives). Today’s THR movement is very inconvenient for government revenue, resulting in government officials who have no hatred of THR per se being motivated to try to discourage it.
Of course, government officials do not personally profit from taxes. But they do want to get reelected (for some unfathomable reason) and have to deal with an electorate that likes having schools, bridges that do not fall down, and such, but still punishes legislators for trying to raise the revenue to pay for them. Thus the temptation to brutally tax the “sinners” is overwhelming. The revenue threat from THR makes many legislators happy to become useful idiots by uncritically accepting the blatant lies from those who are actively anti-THR, which provide them with political cover.
If the money did accrue to the decision-makers themselves, the state anti-THR efforts would be pretty overwhelming (and so do not expect to see THR in places like China or Thailand for a very, very long time). But a steady stream of that revenue does accrue personally to tobacco controllers. A portion of those taxes is typically earmarked for them to pocket. There are also other channels by which they acquire tax money, such as the recent FDA grants (those “user fees” that the tobacco companies are forced to pay to FDA are effectively yet another tax).
In the USA, the taxes on cigarettes grew slowly at first as a result of tobacco controllers pushing for them as a method of discouraging smoking[*]. They took a huge jump in 1998 with the Master Settlement Agreement, which was mostly just a ~50 cent/pack national sales tax on smokers, though those who imposed it managed to trick people into believing it was a fee paid by the manufacturers. It is paid to the states, with huge earmarks for tobacco controllers. That was the moment of transformation of the tobacco control movement into the tobacco control industry, which I will discuss later in the series. The taxes then continued to increase massively, and now there is barely even a pretense that they are about anything other than increasing government revenue.
[*It is worth noticing that governments are funding a bunch of pseudo-scientific “researchers” whose job includes providing justification for the government to grab more revenue. If you detect a certain similarity between this and the billionaire-funded “think tanks” whose mission is to provide pseudo-scientific political cover for policies that enrich billionaires, you are not mistaken. It is also worth a reminder that the tobacco control claim that has the most immediate bearing on taxation — that smokers cost society money when they damage their own health — is patently false. You can manipulate the numbers so they look like there is a tiny increase in healthcare costs in isolation, though even this is pretty dubious. But this is swamped by the reduction in other consumption due to earlier mortality (or in government accounting terms, by pension savings). So in reality, smokers are being taxed extra even though the health problems they suffer actually save everyone else money.]
The lavish tax funding flowing to tobacco controllers is directly responsible for various blights, like the deluge of anti-tobacco junk science and various illiberal and costly anti-tobacco-use policies. It did not create anti-THR; the anti-THR opinion leaders, motivated by NIH Syndrome and extremism, were already there. But it did increase their absolute power and probably redoubled their desperation to not be shown up by successful THR, and no doubt heightened their fantasies that they have so much power they can bring about their “endgame”. It also increased their relative power within tobacco control by creating another motivation to oppose THR: If THR succeeds, the money will dry up. This is not just because it would diminish the flow of cigarette taxes. Even if THR products were heavily taxed, the money would stop flowing to tobacco control; there would be little interest in giving them absurd sums of tax money if the products most people were using caused very little harm.
As noted in the previous post, the extremists who are desperate to achieve a tobacco-free world actively prefer people keep smoking because it is better for that goal. With massive funding at stake, the now massively expanded population of tobacco controllers — most of whom have no skills that could command such income and job security anywhere else — are financially dependent on people smoking rather than adopting THR. A THR revolution could dramatically reduce smoking rates below the level necessary for sustaining a lucrative tobacco control industry in less than a generation.
This may seem like a rather odd observation to make about people whose activities are ostensibly intended to reduce smoking. But keep in mind the glacial pace of smoking reduction and the trivial impact all of those policies have. Without THR, they can be pretty sure they can coast to retirement. You might find it even odder that the same people who talk about the “endgame” are also comfortable in their job security, but we know that doublethink is not exactly rare in the tobacco control world.
It is also worth noting that non-governmental funding creates similar incentives. The American Cancer Society, American Lung Association, et al. get a lot of donations and bequests thanks to people dying from smoking, in addition to their direct tobacco control funding. An executive of one of those organizations was notoriously overheard issuing a profanity-laced complaint about e-cigarettes hurting their fundraising.
In fairness, if offered the magic-wand option of losing their job because everyone switched to a low-risk alternative, some (though far from all) people working in tobacco control would be willing to pack up their desk and go home. A few truly decent people in the bunch would even be willing to give up their jobs to get a few hundred people to quit smoking who would not have otherwise done so, realizing that this probably exceeds what they would otherwise accomplish during the course of their career. But the choice about whether or not to be evil is never quite so clear as in children’s stories or philosophy exercises that include magic wands. If you apportion it out, each person actively supporting anti-THR does own responsibility for hundreds of people not quitting smoking. But the money makes it easy to quietly agree to be a useful idiot, choosing to believe the lies that interfere with the most promising methods of smoking cessation and perpetuate the lucrative busy-work methods. To paraphrase Sinclair, it is not nearly as difficult to get someone to believe nonsense when that nonsense keeps his salary flowing.
The picture is even worse if we move beyond the rich countries to places where the WHO holds sway. The WHO is thoroughly captured by the anti-THR extremists, whose tendencies are further amplified by WHO exemplifying European grandees’ tendency toward feudalism. In poor countries, many government officials dream of sucking-up enough to get a cushy WHO job, and even the non-venal ones are beholden to the WHO to pay for important programs that genuinely help their people, and so are forced to just go along with the absurd (when starvation and infectious disease are serious problems) anti-tobacco agenda, including anti-THR.
I tend to distill this into messaging along the lines of: “Governments derive enormous revenue from taxing cigarettes and generally lose that when smokers switch to vaping. The tobacco control industry owes its entire existence to cigarettes, both because they get billions of cigarette tax dollars and because they are only given money because of public concern about the health impacts of smoking. Thus, the very people who lead anti-smoking efforts have a serious financial conflict of interest about succeeding. While they might consider succeeding on their own terms to be worth going out of business, this is yet another reason they are inclined to oppose THR.”
You may have noticed that I am 1700 words into this analysis without having yet mentioned corporate money. That is because that, compared to tax money, it is just not very important.
If you believed the idle chatter about e-cigarette politics, you might think that the pharmaceutical industry engineered anti-THR and it exists because of their funding. Readers of this series should already understand why attributing anti-THR mainly to money is wrong. But even to the extent that money has amplified and perpetuated anti-THR, as described above, the real money is from taxes, not competing industries. Here is a reality check: The various governments of the USA collect in the order of $50 billion each year from cigarettes sales — all pure profit — and several percent of that is skimmed off by the tobacco control industry. By contrast, worldwide gross sales of pharmaceutical smoking cessation products are less than $10 billion/year. There is simply not enough net revenue there to matter much compared to the tax revenue. If anti-THR did not exist naturally and if pharmaceutical companies wanted to create it, they might create a few anti-THR voices (and arguably they did back at the dawn of anti-THR), but they obviously could not engineer the entire enterprise.
I am not suggesting I doubt that pharmaceutical money is corrupting; there is overwhelming evidence of that across many sectors. Nor am I overlooking the fact that corporate spending is usually more precisely targeted than the boatloads of tax money. I have little doubt that corruption by the pharmaceutical industry is substantially responsible for the continuing embrace of their proven-barely-effective drugs by tobacco controllers, healthcare financiers, and regulators. Spending a bit of money to motivate claims that bad pharma products are actually good, and especially to get insurers and governments to pay for them, is a direct pathway from buying influence to increasing sales, and so clearly worth their effort. The tertiary path — encouraging tobacco controllers to discourage THR, resulting in a little bit more anti-THR, resulting in a tiny bit more smoking, resulting in a fraction of those extra smokers buying more pharmaceuticals — is clearly not worth much effort.
When given easy opportunities to support anti-THR, the pharmaceutical companies seem to take them, having their minions speak up and helping to amplify those who are already speaking up. But whatever you might think of tobacco controllers’ ethics in general, it is simply impossible to imagine that a few million extra dollars — on top of the billions of tax dollars they already get — is going to cause many of them who would not already be anti-THR to become anti-THR.
Oh, and the global pharmaceutical market is in the order of $1 trillion. Thus the entire smoking cessation sector is a drop in the bucket, so it is not as if the companies as a whole care much about this. Of course the industry is not a unitary actor, and the individuals in the smoking cessation units are focused on their own product lines. But those units are smaller than the e-cigarette industry and much smaller than the smokeless tobacco industry. So suggesting there is some David-and-Goliath story of being up against a monolithic gigantic “Big Pharma” is fairly silly.
[Update 31-jul-15: There has been an extensive discussion of this point in the comments, which are worth reading. Commentators seemed to have little doubt that it is indeed silly to suggest that defense of the smoking cessation drug market motivates much action. The suggestion was made that they have more to gain by encouraging people to smoke because that makes them sick and thus buy other drugs. I was aware of this claim, of course, but intentionally avoided it in the post mostly because it is so horrific that it is genuinely difficult to believe anyone is acting on it, and also the more technical point that it is not entirely clear that the net impact on sales is positive. More details of that can be found in the comments. Nothing that was said by proponents of this hypothesis changed my mind about this claim being highly non-convincing.
However, it was pointed out that something in between is a more compelling hypothesis: Use of any tobacco products competes with pharmaceuticals used to treat a wide variety of psychological (and a few physical) conditions. Thus pharmaceutical companies have a substantial reason to discourage both smoking and THR product use to bolster this market, which is much bigger than their smoking cessation products market. This does not require that they actually want someone to get COPD so that they can sell them drugs; they can tell themselves that their products work better than tobacco products and so they are doing good (never mind that this does not appear to be true).
Note that this does not change the main points I originally made. Anti-THR exists due to the “natural” behavior of tobacco controllers and was clearly not engineered by outside forces. The anti-THR activists take all the money they could ever use from taxes, so a bit more money makes little difference. Still, this is a plausible story about why pharma companies would devote more than a trivial effort to helping the tobacco controllers discourage THR.]
I have talked about messaging several times, and there is no doubt that stories about the magical influence of corporate money usually plays well with naive audiences, so it might be worth keeping in the messaging as a tertiary point. It is certainly fair to say that it matters some. In particular, pharma influence matters when the useful idiots are tricked into believing that these products can help all smokers quit; this reinforces the aforementioned “we don’t need to bother with THR” belief and the extremists’ endgame fantasy. But suggesting that pharmaceutical money plays a substantial role in the existence or power of the anti-THR movement is tinfoil hat territory.
Blaming a mythical monolithic “Big Tobacco” for creating or financing anti-THR is even more a tinfoil hat. Once you extricate yourself from the thrall of tobacco control propaganda, you realize that the tobacco industry is not threatened by THR on net. The major tobacco companies (excluding the government of China, which is always a different story) have all developed or acquired promising THR product portfolios. Unlike the tobacco control and pharmaceutical industries, the tobacco industry derives no benefits from people suffering disease from tobacco use. Obviously the humane side of all people — whether in one of those industries or not — does not want that suffering to occur. But while tobacco controllers and pharmaceutical marketers derive benefits from the disease, for the tobacco industry it is pure cost. It reduces the appeal of their products which costs them customers, leads to lawsuits and other punishments, and generally makes them the bad guys.
Every tobacco company would rather sell its customers low-risk alternatives rather than cigarettes. That is importantly not the same as saying they are anxious to see all their customers switch to some low-risk alternative, which means they take some specific positions or actions that are bad for THR. From a pure business perspective, they would rather sell their customers cigarettes than have someone else sell them low-risk products, so they have plenty of incentive to try to keep their loyal cigarette customers.
Moreover, tobacco product manufacturers (including those that only make e-cigarettes) actively fight amongst themselves for THR product market share in ways that are contrary to the public interest. Manufacturers who are highly invested in one product, variety, or category have the incentive to favor it at the expense of others, whereas the public interest in THR is to elevate all products and categories up to their potential. For example, PMI is highly committed to heat-not-burn products, and so everyone else has the incentive to denigrate those. (Did I mention that the tobacco industry is not a monolith?) Reynolds is a constant thorn in CASAA’s side, actively supporting banning open-system e-cigarettes — which, of course, compete with their closed-system market leader — and calling for various restrictions that they can meet but their competitors cannot. Business decisions are seldom public-spirited.
On the other hand, some of the major tobacco companies contributed more to establishing the promise of THR than anyone else could have, and almost all are doing so now. They fund research no one else could afford. They lobby powerfully against many anti-THR regulations; while it would be delightful if CASAA could wield enough influence to cause something like HR 2058 to happen, it was not us. Some companies spent enormous sums on what were clearly bad gambles from a purely business perspective in an effort to try to expand the reach of THR (via their own products, obviously) into new populations. In sum, while it would be wishful thinking to say that tobacco companies function as full-on THR advocates, it is far closer to the truth than blaming them for anti-THR. The net effects of their actions lie somewhere in between, but pretty close to the former.
Money, money, money makes anti-THR powerful, but it is not fundamental to it. The money does motivate anti-THR efforts to a limited extent, due to the banal urge to not have to shut down their lucrative industry; this turns out to have practical implications that are quite similar to anti-tobacco extremism. But mostly it just increases the power of those who are anti-THR. The simplistic version of the money story — that anti-THR actors are just a bunch of paid mercenaries — might play well in some circles, but it is factually incorrect and thus making the claim is ethically dubious and a step down a very dangerous path. There is no reason to believe there are any suitcases full of cash at work here (well, at least outside the European Parliament). Definitely do not let the real enemy — tobacco control — trick you into blaming anti-THR on companies in the tobacco industry that are mostly allies in this fight. Acting based on false premises is a recipe for ineffectiveness, but merely perpetuating the claims is also harmful. Finally, it is also useful to understand that even the boatloads of tax money would not have the effect they do were it not for the characteristics of tobacco control I will address later in this series.
(Years later, this series continues here.)