• June 19, 2024

The Dilemma of Diversification

 The Dilemma of Diversification

While lambasted by anti-smoking activists, the tobacco industry’s move into pharmaceuticals may well turn out to be a positive for public health.

By Cheryl K. Olson

“The pharmaceuticalization of the tobacco industry.” This awkward phrase comes from a 2017 Annuals of Internal Medicine article referring to industry moves into noncombustible nicotine products. But recently, it’s gaining some literal truth. Legacy tobacco companies are stepping up diversification into pharmaceutical ventures.

Given that their current business direction is stalling, new adjacent opportunities that let tobacco companies use their specialized knowledge (say, of the tobacco plant genome or lung physiology or means of delivering substances) make sense. It may seem counterintuitive, or ethically iffy, for these companies to start offering solutions to problems they helped create. But they may frankly be well placed to do so because of their deep expertise. The criticisms of current industry moves into medical research and pharmaceuticals, such as Philip Morris International’s acquisition of Vectura and Fertin Pharma, seem more rooted in emotion than in practical concerns about effects on public health.

A Tour of Recent Criticisms of Diversification

Let’s review some recent criticisms and attempt to separate the moral from the practical. Take this September STAT+ article by Olivia Goldhill, titled “Tobacco Giant Philip Morris is Investing Billions in Health Care. Critics Say It’s Peddling Cures for Its Own Poison.”

The tone of the article makes ordinary business behavior sound sinister. Vectura Fertin Pharma, a firm combining two companies previously acquired by PMI, was “quietly incorporated.” PMI has been “racking up patents and taking over healthcare companies, an unlikely pivot that has accelerated dramatically in the past year.” PMI has also been “poaching considerable regulatory and pharma expertise.” All this in the article’s first two paragraphs.

The recent move by Matt Holman, who was director of the Office of Science at the Food and Drug Administration’s Center for Tobacco Products (Goldhill mislabels him as head of the CTP), to a position at PMI is described as a “move that shocked public health and tobacco researchers.” Why the surprise? Employees cycling from the FDA to the pharmaceutical companies they reviewed is commonplace; back in 2016, Time magazine called it “a revolving door.”

When PMI purchased Vectura, best known for making asthma medicine inhalers, the Reuters headline read, “Philip Morris seals deal for U.K.’s Vectura despite health group concerns.” The chief executive of Asthma U.K. and the British Lung Foundation stated, “There’s now a very real risk that Vectura’s deal with big tobacco will lead to the cigarette industry wielding undue influence on U.K. health policy.”

The U.S. reaction was similar. A joint statement by the presidents of the American Lung Association and American Thoracic Society called the acquisition a “reprehensible choice” by PMI. They were concerned that PMI might use Vectura’s inhalation technologies “to make their tobacco products more addictive.” They raised the prospect that PMI “could further profit from the disease their products have caused by now selling therapies to the same people who were sickened by smoking.”

The idea of cigarette companies profiting from conditions such as asthma and lung disease was reportedly also raised by British government officials, with the U.K. business minister asking for information on PMI’s plans for Vectura.

A deliberate company strategy to invest simultaneously in selling addictive poison and in peddling cures for that addiction would indeed be reprehensible. Is that what’s happening here? Or are tobacco companies making effortful attempts to find paths to replace the profits from cigarettes with profits from products that don’t harm and might improve public health?

Time will tell. PMI’s website states, “We are focused on our mission to one day stop selling cigarettes.” The Guardian newspaper’s coverage noted that while the Vectura acquisition was part of PMI’s smoke-free vision, “the company still makes about three-quarters of its $28 billion in annual revenue from ‘combustible’ products that involve the burning of tobacco.” 

Critics of the tobacco industry didn’t always take such a dim view of moves away from cigarettes. A quick search in Google Scholar for “tobacco industry diversification” brought up this 1985 piece by Alan Blum in the New York State Journal of Medicine. He stated, “Some health professionals believe that criticism of tobacco companies for promoting cigarette smoking should be tempered because they have become conglomerates that are diversifying into nontobacco products and services. By encouraging such diversification, it is reasoned, health professionals can help expedite the phasing out of smoking while tobacco companies can have an opportunity to replace the resultant lost revenue.”

Blum’s concern was that this belief among “individuals working to eliminate smoking may be misguided.” This was not because those individuals saw industry diversification as a potentially positive step. Rather, he thought diversification wasn’t happening fast enough. Blum noted that tobacco companies were not decreasing investment in cigarette manufacturing and that “the percentage of total profit accounted for by tobacco sales is still the highest of all sources of revenue for tobacco companies.”

“Those It Employs [or] Funds Are Therefore Banned”

PMI’s announced acquisition of Vectura triggered efforts to exclude its employees and their research. The Drug Delivery to the Lungs conference terminated Vectura’s sponsorship. A Thorax editorial titled “Vectura and Philip Morris: The leopard has not changed its spots” stated that “The tobacco industry, those it employs and those it funds are therefore banned from membership of professional societies, including the British Thoracic Society (BTS).” The BTS would “exclude the tobacco industry as a legitimate partner in science and education,” including “publishing in respectable journals” and collaborations with universities. The editorial warns that “Vectura employees will need to consider their future.”

The treatment Vectura’s employees received is far from unique. Ian Fearon, director of whatIF? Consulting, has conducted research in a variety of settings and helps manufacturers write up their scientific data for publication. “The barriers to publication for tobacco companies and independent ENDS [electronic nicotine-delivery system] manufacturers are high, with many journals flatly refusing to even accept a paper to undergo peer review,” he said. “One major irony is the ‘we need the industry to be transparent’ phrase, yet the reality is that the number of journals willing to publish manufacturers’ data, despite its potential importance in assessing public health impacts, is small and diminishing.”

Fearon noted the criticism Juul received for “buying out” a 2021 special issue of the American Journal of Health Behavior to fully present their findings, which were a comprehensive examination of the potential impact of Juul on public health. Such publishing fees are common in academia; Juul even paid extra to make the articles free to all readers.

Derek Yach, formerly with the World Health Organization and the Foundation for a Smoke-Free World, equates the opposition based on the tobacco industry’s past bad practices to the 1980s U.S. boycott of Nestle. “That pushed NGOs [nongovernmental organizations] and WHO to vilify them for decades despite changes in their marketing way back,” he said. “To this day, in many public health leadership settings, Nestle is a real villain, regardless of all they have done to change. I suspect that playbook will apply here too.”

Yach sees the downside of diversification as less about ethics and public health and more about the practical difficulties. “It’s all about company focus and the inevitable clash of cultures—a pharma culture versus a tobacco company one, for example—and as a result, the ability to manage the transition.”

David Sweanor

Thinking About Diversification: A Conversation with David Sweanor

David Sweanor of the Centre for Health Law, Policy and Ethics at the University of Ottawa has long monitored tobacco company behavior.

Tobacco Reporter: Why are you interested in the issue of tobacco companies diversifying into things like pharmaceuticals?

Sweanor: My main interest is public health policy: How do you end up with a healthier population? Is this doing anything that’s going to create poorer health—in which case, there’d be a need to oppose it or try to regulate it in some way? Is it going to be neutral in terms of public health? Then, who cares who owns these companies?

If it’s something that could actually be good for public health, then we should be supporting it. And there’s reason to believe this could be the case. When companies have loads of resources to throw at something, and if this signals more of a move to transformation within the industry, it would be incredible for public health.

If they are working on [inhalation] technologies for lower risk alternatives to cigarettes, we have the potential for enormous breakthroughs. If we can get any of the major companies to really switch to being all-in on risk reduction, it would completely change the environment. The impact globally would be remarkable and happen very quickly.

If you want to get tobacco companies to switch to being in favor of transformation, the last thing you want to do is prevent them from doing things that would aid transformation. If you’re trying to get automobile companies to switch to electric cars, don’t prevent them from buying companies with battery technologies. You’re forcing them to continue to focus on internal combustion engines.

What do you see as valid and invalid criticisms of this diversification?

No valid ones immediately come to mind. If they were buying up technology that gave a far better alternative to cigarettes and then trying to kill that, then yeah.

It’s easy to talk about the invalid criticisms. A really good example of that is in Canada, where Medicago, based in Quebec City, developed a vaccine for Covid-19. In developing countries, this vaccine would work well because it doesn’t need to be stored at cold temperatures. Philip Morris has an indirect holding of about 30 percent in Medicago. Anti-tobacco groups attacked the government for approving the vaccine, and WHO refused to approve it.

What’s the thinking behind that? It’s saying: We don’t like this company because we think it’s done bad things in the past. To deal with this, we’ll prevent them from doing good things now. They created an epidemic of disease from smoking that became larger and lasted longer than it should have. So we’re going to prevent them from doing things that could reduce this epidemic of disease from Covid to make it last longer than it should.

Are people following the principles of the Enlightenment or the Inquisition? So much now with mainstream anti-tobacco groups is the latter. We don’t care about the quality of your work; we won’t give you a platform to discuss or debate it. That some affiliation you have is more important than the knowledge you bring is pretty reprehensible. It’s like saying Roman Catholics are not allowed to express their views.

What do you see as potential benefits to public health from this diversification? For example, Matt Holman’s new position as vice president of U.S. scientific engagement and regulatory strategy at PMI.

Look at the counterfactual. If they don’t do that, the only people working in cigarette companies working on transformation spent their careers working on and understanding and benefiting from cigarettes. If General Motors says, “we’re hiring engineers who understand electric mobility rather than hydrocarbons,” isn’t that a good thing? How can you transform if all the people in senior positions have their expertise in internal combustion engines?

We see this in high tech all the time; one company will buy another to get the expertise of their employees. You need them at the table when you make decisions on where to go with the next generation.–C.K.O


In the main article above, I stated that the boycott of Nestle from the 1980s has had a lingering negative effect on WHO and many public health leaders’ views of the company many decades later. This despite Nestle being a global leader in addressing food insecurity, sustainable agriculture and the use of 21st nutrition science (see the company’s 2021 annual report).

In the second half of October, Nestle’s past came back to haunt the company. The WHO Foundation, set up to build innovative private public partnerships, banned future Nestle contributions despite having originally accepted  a grant for their work on addressing Covid-19.

The WHO Foundation already bans contributions from tobacco and arms manufacturers though it is unclear how “tobacco” is defined. Does it include governments with state monopolies? Does it include standalone e-cigarette, or nicotine pouch companies? Does it distinguish between companies where revenue from reduced risk products is increasing while combustible revenues are decreasing? Probably not.

Labelling companies as good or bad is the far easier option. But that option that ignores serious transformation and the opportunity to nudge and support the good emerging faster.

Derek Yach