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![Analysts
We remain very bullish on the vast potential of e-cigs given the
rapid pace of innovation. [We believe] that the benefits of e-cigs
are becoming increasingly apparent to consumers, helping to
drive trial and repeat purchases aided by stepped-up advertising
and a lot of internet “buzz”
Wells Fargo](https://image.slidesharecdn.com/e-cigsummit-bates-12nov13-131118053714-phpapp01/85/Regulation-why-less-is-more-E-cigarette-Summit-12-November-2013-Clive-Bates-presentation-23-320.jpg)
![Analysts
We remain very bullish on the vast potential of e-cigs given the
rapid pace of innovation. [We believe] that the benefits of e-cigs
are becoming increasingly apparent to consumers, helping to
drive trial and repeat purchases aided by stepped-up advertising
and a lot of internet “buzz”
Wells Fargo](https://image.slidesharecdn.com/e-cigsummit-bates-12nov13-131118053714-phpapp01/75/Regulation-why-less-is-more-E-cigarette-Summit-12-November-2013-Clive-Bates-presentation-23-2048.jpg)
Uploaded byClive Bates
Regulation: why less is more... E-cigarette Summit 12 November 2013 - Clive Bates presentation
The document discusses the potential role of e-cigarettes in harm reduction for smokers, highlighting personal experiences of quitting smoking using e-cigarettes. It presents various scenarios regarding future smoking and nicotine product populations, emphasizing that effective regulation can influence consumer choices and product innovation. Analysts express optimism about e-cigarettes' ability to overtake traditional cigarettes while cautioning that over-regulation could stifle innovation and market competition.
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Regulation: why less is more... E-cigarette Summit 12 November 2013 - Clive Bates presentation
- 1. Regulation: when lessis more Counterfactual www.clivebates.com @clive_bates
- 2. WHO – 1billion deaths
- 4. I smoked for45 years and tried every NRT product available, none of them worked. I continued to smoke even though my health was getting worse, resulting in COPD and using oxygen daily. September 2011 I discovered e-cigarettes and they worked. It was like someone handed me a miracle. In less than a week I stopped using regular cigarettes. I haven’t had a tobacco cigarette since. Unsolicited comment left on www.clivebates.com
- 5. From WHO TobaccoAtlas 2006 edition
- 6. The Endgame? Billion adults> 15 years Projected global adult population growth 9.0 8.0 Adult population 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 2010 2015 2020 2025 2030 2035 Smokers: WHO Tobacco Atlas 2006. Population: UN 2040 2045 2050
- 7. The Endgame? Billion adults> 15 years Projected global adult population growth 9.0 8.0 Adult population 7.0 6.0 5.0 4.0 3.0 Smoker population at constant prevalence 2.0 1.0 0.0 2010 2015 2020 2025 2030 2035 Smokers: WHO Tobacco Atlas 2006. Population: UN 2040 2045 2050
- 8. The endgame? Billion adults> 15 years Scenarios for future smoker population 2.5 Constant prevalence (28%) 2.0 1.5 1.0 0.5 0.0 2010 2015 2020 2025 2030 Scenario – 15% global prevalence by 2050 2035 2040 2045 2050
- 9. The endgame? Billion adults> 15 years Scenarios for future smoker population 2.5 Constant prevalence (28%) 2.0 1.5 Global smoking prevalence declines to 15% 1.0 0.5 0.0 2010 2015 2020 2025 2030 Scenario – 15% global prevalence by 2050 2035 2040 2045 2050
- 10. If all goeswell Billion adults > 15 years Scenarios for future smoker population 2.5 Constant prevalence (28%) 2.0 Contested by tobacco control 1.5 Global smoking prevalence declines to 15% 1.0 HARM 0.5 0.0 2010 2015 2020 2025 2030 2035 2040 2045 2050
- 11. The endgame –a nicotine product contest? Billion adults > 15 years Scenarios for future nicotine markets 2.5 Constant prevalence (28%) 2.0 Contested by tobacco control 1.5 Global nicotine prevalence declines to 15% 1.0 Contested by nicotine products 0.5 0.0 2010 2015 2020 2025 2030 2035 2040 2045 2050
- 12. How far couldlow-risk nicotine products go? Billion adults > 15 years Scenarios for future nicotine markets 2.5 Constant prevalence (28%) 2.0 Contested by tobacco control 1.5 Global nicotine prevalence declines to 15% 1.0 Contested by low risk nicotine products Global smoking prevalence declines to 5% 0.5 Cigarettes and other combustible tobacco 0.0 2010 2015 2020 2025 2030 2035 2040 2045 2050
- 13. How far couldlow-risk nicotine products go? Billion adults > 15 years Scenarios for future nicotine markets 2.5 2.0 1.5 1.0 This boundary matters most for public health 0.5 0.0 2010 2015 2020 2025 2030 2035 2040 2045 2050
- 14. The endgame: analystview Consumption of e-cigs may overtake traditional cigarettes in the next decade … and they’ll only evolve and improve as time goes forward. Bonnie Herzog, Wells Fargo Securities, 2013
- 15. The endgame: analystview Consumption of e-cigs may overtake traditional cigarettes in the next decade … and they’ll only evolve and improve as time goes forward. Bonnie Herzog, Wells Fargo Securities, 2013
- 16. 50:50 by 2030 Billionadults > 15 years ”Modified Herzog scenario" for future nicotine markets 2.5 Constant prevalence (28%) 2.0 1.5 Global nicotine prevalence declines to 15% 1.0 "E-cigarettes overtake cigarettes by 2030" 0.5 Global smoking prevalence declines to 5% 0.0 2010 2015 2020 2025 2030 2035 2040 2045 2050
- 17. Who is this? MitchZeller (now) Director of the Center for Tobacco Products FDA
- 18. Harm reduction equation Harmreduction = Reduced risk x Number who switch Product toxicity & other risks Product attractiveness Consumer preference
- 19. Harm reduction equation Harmreduction = Reduced risk x Number who switch Product toxicity & other risks Product attractiveness Consumer preference
- 20. Harm reduction categories– risk estimates Crude estimate of risk – Cigs = 100 120 100 80 60 40 20 0 Cigarettes Heat not burn Smokeless E-cigs NRT
- 21. Focus on theright relative risk More regulation Lower risk regulated e-cig 0 10 0 e-cigarettes “unregulated” e-cig 10 0 100 cigarette
- 22. Harm reduction equation Harmreduction = Reduced risk x Number who switch Product toxicity & other risks Product attractiveness Consumer preference
- 23. Analysts We remain verybullish on the vast potential of e-cigs given the rapid pace of innovation. [We believe] that the benefits of e-cigs are becoming increasingly apparent to consumers, helping to drive trial and repeat purchases aided by stepped-up advertising and a lot of internet “buzz” Wells Fargo
- 24. Regulation comes ata price Fewer, duller innovations Less personalisation Slower innovation pace Trusted brands & firms destroyed Greatly reduced variety & niche products Increased cost Boring branding & marketing Oligopoly & reduced competition Reduced appeal Black market, DIY
- 25. Harm reduction equation Harmreduction = Reduced risk x Number who switch Trade offs Conclusion 1. The perfectly risk free product that no-one wants scores badly in the harm reduction equation Conclusion 2. A diverse range of products with substantially reduced risk lets each smoker decide which product is best
- 27. Triple negative Tough onharm reduction
- 28. Specialised medicines language Consistentdrug dosing Adverse drug reactions Safety Quality Treats or prevents disease Efficacy
- 29. Getting tough onharm reduction? Counter-productive Harm reducing Safety Safest possible Safe enough Quality Control processes (eg. GMP) Proportionate standards Efficacy Regulator decides Consumer decides Labelling Warns of danger Encourages switching Marketing Like medicines Like consumer products Bans on use Fear of ‘renormalisation’ Normalise harm reduction Retail Pharmacies / as tobacco General sales Age restrictions Adults Makes little real difference Taxation Like tobacco Fiscal incentive to switch
- 30. What do analyststhink…? We believe many current suppliers would struggle to meet medical standards, and for the UK they may have to by 2016. Big players with deeper pockets would survive and prices could rise – a hugely preferable outcome for Tobacco. BNP Paribas Tougher regulation, as well as providing a relative advantage to their e-cigarette divisions, would result in higher prices for ecigarettes – which could also benefit tobacco companies by limiting their attraction for smokers and slowing the decline in tobacco sales. Fitch
- 31. What do analyststhink…? We believe many current suppliers would struggle to meet medical standards, and for the UK they may have to by 2016. Big players with deeper pockets would survive and prices could rise – a hugely preferable outcome for Tobacco. BNP Paribas Tougher regulation, as well as providing a relative advantage to their e-cigarette divisions, would result in higher prices for ecigarettes – which could also benefit tobacco companies by limiting their attraction for smokers and slowing the decline in tobacco sales. Fitch
- 32. European Parliament –amendment 170 • • • • • • • • • • • • • • • Requires medicines regulation if claim made Requires Article 17 notification regime otherwise Emphasises general safety requirement Applies Article 16 – cross border distance sales Applies advertising directive 2003/33/EC and audiovisual services 2010/13/EU Information leaflet Warning “this product is intended for use by existing smokers. It contains nicotine which is a highly addictive substance” Warning size - 30% or 40% (Council =30%) and specification from Article 10 30mg/ml threshold – “are not placed on the market” (?medicine) Age restriction (no less than 18) Restriction on additives – application of Article 6.4 (vitamins etc) No tobacco branding Allows flavourings Requires sales allowed ‘outside pharmacies’ Review
- 35. Purpose built regulationfor e-cigs / NCPs 1. Accountabilities – responsible person 2. Disclosure and notification regime 3. Labeling and consumer information 4. Safety assessment and product file 5. Contaminants / purity 6. Prohibited ingredients 7. Specific standards for vaping devices CEN/ISO 8. Updating: review & technical committee 9. Marketing (like alcohol?) – mostly member state 10. Retail sales age restriction – member states 11. … public vaping?
- 36. Harm reduction equationwith population effects Harm reduction = Reduced risk x Number who switch - Extra smokers + Extra quitters Gateway to smoking Dual use Reduced quitting Normalising smoking Gateway exits Complete cessation Extra quitting Normalising non-smoking
- 37. Conclusion • Be positiveabout the (vast) potential • Put the (minor) risks in perspective • Regulate as though the 1 billion matter most
- 38.
Editor's Notes
- #4 The WHO said a billion deaths would arise from tobacco in the 21st century. The picture visualises one billion pennies – five stacks each the size of a bus… Suppose the objective was to reduce those piles to the extent possible, perhaps with the added objective of doing it faster. Come to think of it, that should be THE objective for tobacco control. What would you do?a. Prevent people starting in the first place - often naively favoured as it seems to deal with the problem at source... But this is a slow acting measure - it may take 40 years to show up in the mortality numbers, and overlooks existing 1.4 billion smokers. In any case is difficult to do without reducing adult-smoking (ie. kids smoke because adults do and most child-focussed interventions just create reasons to reject and rebel against adult authority and add to the definition of the smoking a desirable rite of passage to adulthood.) In any case. this strategy (if it works at all) may work disproportionately for the better off kids who would quit by the time they are 40 anyway and so avoid 95+% of the excess mortality risk. So you need to be very careful about relying excessive on this strategy.b. Existing smokers: Smoking/nicotine cessation - through tobacco control and medical intervention. But this requires users to overcome addiction hurdle and give up benefits and success rates are very low (. Despite years of trying this, smoking rates in the EU remain at 28%, with high knowledge of the risks.c. Existing smokers: Harm reduction - switching to low risk nicotine products. Leaving the almost harmless nicotine addiction in place - along with its benefits and absence of costs to users - but almost eliminating the harm. This has potential for rapid transition and uptake amongst those most at risk of joining the billion.I submit that if you were on performance related pay to reduce that one billion, then you'd be attempting all three, but you’d be making the most aggressive use of harm reduction you possibly could.
- #7 One of the biggest drivers of the future for tobacco is population growth. This shows the adult population growing by over 2.6 billion by 2050. Smoking rates have been historically slow to change because it is cultural embedded – new smokers join because of the existing smokers setting the pattern in society (‘normalising’ smoking), so it is hard to get rapid changes as the ‘flow’ of new smokers is going to be proportional to the ‘stock’ of smokersHow much people smoke will depend on many things – population, growth of income, policy interventions, alternatives etc. At global level there are pressure upwards and downwards: will policy measures and better information prevail, or will Chinese women begin to smoke like Chinese men? The bottom line shows what happens if smoking sticks at 28% prevalence – rising from about 1.5 billion in 2010 to 2.2 billion in 2050. This is based on data from 2003 and projections made in the WHO Tobacco Atlas 2006 version
- #8 One of the biggest drivers of the future for tobacco is population growth. This shows the adult population growing by over 2.6 billion by 2050. Smoking rates have been historically slow to change because it is cultural embedded – new smokers join because of the existing smokers setting the pattern in society (‘normalising’ smoking), so it is hard to get rapid changes as the ‘flow’ of new smokers is going to be proportional to the ‘stock’ of smokersHow much people smoke will depend on many things – population, growth of income, policy interventions, alternatives etc. At global level there are pressure upwards and downwards: will policy measures and better information prevail, or will Chinese women begin to smoke like Chinese men? The bottom line shows what happens if smoking sticks at 28% prevalence – rising from about 1.5 billion in 2010 to 2.2 billion in 2050. This is based on data from 2003 and projections made in the WHO Tobacco Atlas 2006 version
- #9 We can’t make predictions really – but we can think about how these numbers might vary. The chart shows the constant prevalence line from the previous chart (rescaled0. For this scenario we assume this is the worst case… in fact it could rise – this would set world smoking prevalence at the current EU level. The lower line look at what happens if smoking prevalence globally falls to 15% - more or less the best claimed smoking prevalence in the world.
- #10 We can’t make predictions really – but we can think about how these numbers might vary. The chart shows the constant prevalence line from the previous chart (rescaled0. For this scenario we assume this is the worst case… in fact it could rise – this would set world smoking prevalence at the current EU level. The lower line look at what happens if smoking prevalence globally falls to 15% - more or less the best claimed smoking prevalence in the world.
- #11 Without taking too many liberties, we can redraw these as public health challenges… maybe this is what could be achieved using the traditional techniques of tobacco control (maybe)… this would be challenging requiring sustained 1.3% per annum decline in smoking prevalence (note not 1.3 percentage points).We characterise the top area as the contribution of tobacco control – getting prevalence to 15% world wide – no mean feat..!Below that is residual smoking – and this can be loosely characterised as aggregate ‘harm’ (in fact it is a little more complicated because harm depends on lifetime consumption for each individual).
- #12 We can also this of this as a market place – the bottom segment is the market for people who would carry on smoking – but in future this will be contested by new nicotine products far more strongly…These include smokeless tobacco, e-cigarettes and new nicotine products, and novel tobacco products – including ‘heat not burn’ tobacco products
- #13 Given that we don’t ask users of these products to quit using nicotine, the primary motivation for smoking, and these products like e-cigarettes have been growing very rapidly achieving widespread consumer acceptance, with numerous advantages to the user (health, wellbeing, cost, anti-social impacts) we might expect them to have a considerable impact. There is proof of concept: in Sweden for example about half of males tobacco use is through snus and it has less than half the smoking prevalence of the EU (13% compared to 28%). In some areas of Sweden smoking has fallen to very low levels. The green wedge is a scenario and ‘made up by me’… It is not a forecast… but I think it is a more likely and promising for an ‘end game’ for smoking than most of the other ideas.
- #14 Some people may object that there is no need for the green wedge, this can all be done with yellow. Maybe, but probably not. People do like nicotine – it is a long-standing, widely-used, legal recreational drug that has benefits to the user (mood stabilisation, stress relief, and may ease some psychiatric conditions) and does very little harm to the user. In any case, the health difference between being in the green wedge and the gold wedge isn’t that much and not something we should care that about from a public health perspective. Some people do care about the upper boundary – but it’s usually because they have an ideological concern about people taking any sort of drug – though they will often be indifferent to their own caffeine and alcohol use.
- #15 Let’s look at what others are saying – a couple of Wall stanalysists
- #16 Let’s look at what others are saying – a couple of Wall stanalysists
- #17 Let’s take some liberties with Bonnie Herzog’s quoteAssume she means the global tobacco marketAssume the ‘in the next decade’ means by 2030 rather than in the next ten years.I’ll plot the green wedge using those….In face the curve is slightly steeper than the one I presented as ‘made up by me’ earlier.
- #18 We’ll start with this quote… it seems pretty reasonable … and it is by the new head of tobacco at the FDA – in fact writing in the Tobacco Control ‘end-game’ supplement mentioned earlier before he got the big jobJust one alarm bell on this – the ‘cleanest and safest form’… really? What if no-one wants to use it? Is something 99% less dangerous than smoking okay, but something 97% unacceptable? What we need is high ‘participation’ – a large number switching to products much less dangerous than cigs without being too pedantic about comparison between 99% and 97% less. To think a bit more about this, I’d like to consider a ‘harm reduction equation’
- #19 Don’t worry if you aren’t mathematical… this is just codifying common sense….The simple idea is that a the impact of reduced risk alternative to cigarettes is the risk reduction per user multiplied by the number of users who switch. Both terms are important. The first term is really determined by toxic exposure arising from continued nicotine use – a product characteristic. For e-cigs and snus this is 95-99% - at least 20-fold improvement… The second term is why we don’t want to be too prescriptive and end up dissuading people from take the 95-99% reduction and carrying on with the greatest danger. That’s why alarm bells should ring when there are plans to restrict reduced risk only to the ‘cleanest and safest’ - or there are plans to ban things that might make these products attractive – like flavourings – or to have regulators control ingredients – or attempt to remove all residual toxins (some of which might be important for flavour)The consumer and mechanisms of market competition should be the primary driver of what makes these products attractive – not regulators who may insist they are safe at the expense of making them less attractive[The equation could be elaborated to have a second term… those that use the reduced risk products who would otherwise have stopped completely. Not shown here because the residual risk is so low – the reduced risk products are not that much difference to quitting completely].
- #20 Don’t worry if you aren’t mathematical… this is just codifying common sense….The simple idea is that a the impact of reduced risk alternative to cigarettes is the risk reduction per user multiplied by the number of users who switch. Both terms are important. The first term is really determined by toxic exposure arising from continued nicotine use – a product characteristic. For e-cigs and snus this is 95-99% - at least 20-fold improvement… The second term is why we don’t want to be too prescriptive and end up dissuading people from take the 95-99% reduction and carrying on with the greatest danger. That’s why alarm bells should ring when there are plans to restrict reduced risk only to the ‘cleanest and safest’ - or there are plans to ban things that might make these products attractive – like flavourings – or to have regulators control ingredients – or attempt to remove all residual toxins (some of which might be important for flavour)The consumer and mechanisms of market competition should be the primary driver of what makes these products attractive – not regulators who may insist they are safe at the expense of making them less attractive[The equation could be elaborated to have a second term… those that use the reduced risk products who would otherwise have stopped completely. Not shown here because the residual risk is so low – the reduced risk products are not that much difference to quitting completely].
- #23 Don’t worry if you aren’t mathematical… this is just codifying common sense….The simple idea is that a the impact of reduced risk alternative to cigarettes is the risk reduction per user multiplied by the number of users who switch. Both terms are important. The first term is really determined by toxic exposure arising from continued nicotine use – a product characteristic. For e-cigs and snus this is 95-99% - at least 20-fold improvement… The second term is why we don’t want to be too prescriptive and end up dissuading people from take the 95-99% reduction and carrying on with the greatest danger. That’s why alarm bells should ring when there are plans to restrict reduced risk only to the ‘cleanest and safest’ - or there are plans to ban things that might make these products attractive – like flavourings – or to have regulators control ingredients – or attempt to remove all residual toxins (some of which might be important for flavour)The consumer and mechanisms of market competition should be the primary driver of what makes these products attractive – not regulators who may insist they are safe at the expense of making them less attractive[The equation could be elaborated to have a second term… those that use the reduced risk products who would otherwise have stopped completely. Not shown here because the residual risk is so low – the reduced risk products are not that much difference to quitting completely].
- #26 So my point is – that there are trade offs between reduced risk and number who switch… ie between ‘cleanest and safest’ and ‘attractiveness as an alternative to smoking’ … and that leads to the conclusions on the chart
- #29 This takes the ideas of the earlier discussion and looks at the different ways regulation could assist or hinder the development of harm reduction based on low risk nicotine alternatives to smoking
- #30 This takes the ideas of the earlier discussion and looks at the different ways regulation could assist or hinder the development of harm reduction based on low risk nicotine alternatives to smoking
- #34 I have argued that the directive – even with the huge improvement made by the European Parliament is a dogs breakfast, in which the least risky products have the hardest route to market, and the safest form of tobacco – snus - is banned because it is sucked not chewed. But cigarettes can be added to the market pretty well at will. See my posting – a dog’s breakfast http://www.clivebates.com/?p=1364What I would like to see is coherent risk-based approach across the full spectrum of tobacco products.
- #35 I have argued that cosmetics regulation has a lot of useful readover to e-cigshttp://www.clivebates.com/?p=1396Both are fast moving consumer goods;Both are marketed as lifestyle products;Both are capable of making claims (eg. of eternal youth) that need justification;Both have potential human health and safety risks;Both are in contact with to the human body;Both industries have many vendors, different business models and long supply chains;Both markets rely on rapid innovation, short product cycles, and ‘creative destruction’;Both are functional and have to work properly (eg. makeup must not run, change colour etc);Both sets of consumers expect products to be the same each time they buy;Both have diverse ranges – colours and textures for cosmetics, flavours for e-cigs;The cosmetic market is huge, the e-cig market will become huge;Neither are foods or medicines (or tobacco products) and neither fit into regulatory frameworks designed for other products
- #37 Don’t worry if you aren’t mathematical… this is just codifying common sense….The simple idea is that a the impact of reduced risk alternative to cigarettes is the risk reduction per user multiplied by the number of users who switch. Both terms are important. The first term is really determined by toxic exposure arising from continued nicotine use – a product characteristic. For e-cigs and snus this is 95-99% - at least 20-fold improvement… The second term is why we don’t want to be too prescriptive and end up dissuading people from take the 95-99% reduction and carrying on with the greatest danger. That’s why alarm bells should ring when there are plans to restrict reduced risk only to the ‘cleanest and safest’ - or there are plans to ban things that might make these products attractive – like flavourings – or to have regulators control ingredients – or attempt to remove all residual toxins (some of which might be important for flavour)The consumer and mechanisms of market competition should be the primary driver of what makes these products attractive – not regulators who may insist they are safe at the expense of making them less attractive[The equation could be elaborated to have a second term… those that use the reduced risk products who would otherwise have stopped completely. Not shown here because the residual risk is so low – the reduced risk products are not that much difference to quitting completely].