Month: November 2022

Product Stewardship

Photo: Chris Ferenzi Photography

Product stewardship, which in general means the responsibility of a manufacturer for his product, is something everyone has a stake in. Regulators make sure that consumers get a product that is in a form that is supposed to be in accordance with its specifications. Because of their reputation and consumer experience, companies pursue the same goal.
More definitions of what product stewardship stands for in their respective companies were provided by panelists in the GTNF Product Stewardship panel discussion. Stefanie Miller, vice president of global scientific engagement at Juul Labs, said that when people outside the nicotine industry thought about product stewardship, labor conditions and the environment tended to be at the forefront of conversations. “At Juul, however, we’re presently in a major fight for our company because many people don’t understand the potential health benefits realized by having our product on the market.” Unlike Wall Street, where Miller worked as a tobacco industry analyst before joining Juul, Juul bases its decisions on science, she emphasized. “As product stewards, we must study every facet of our products so that we can have an open and honest discussion about how they impact adult smokers looking for less harmful alternatives. And we must hold to account those who propagate misinformation.”
As a toxicologist, Donna Smith, associate fellow of preclinical within regulatory sciences for Altria Client Services, said she worried about the individual health risk of a product. Given the right regulatory framework, she argued, the reduced-risk product (RRP) category could make a greater impact in this next decade than has been seen in the last 50 years. In her view, product stewardship consisted of three phases: First, the “identify” stage where the chemical ingredients of the product and their quality are assessed. Second, the calculation phase, during which the substances you have added to the product and the things the product is producing are determined so that the results can be compared to published values that are used in the same sense of evaluation, as is common for drugs, cosmetics or foods. Third, the “investigate/validate” phase, where your product is put through whatever biological testing the manufacturer feels necessary to demonstrate that this particular product doesn’t increase harm to the consumer. “Knowing what goes into their product and managing suppliers properly is the most important thing any manufacturer can do.”
As senior manager of global scientific engagement at Philip Morris International, Carrie Wade, who has a background in opioid addiction research, said she was sitting between the regulatory and product teams making sure everything runs smoothly. Her role in product stewardship is building trust with the stakeholders so that consumers are aware of what PMI is doing. “One thing I’d like to see improved is to reach harder-to-reach people who benefit the most from tobacco harm reduction (THR),” she related. “People with a lower socioeconomic status smoke more and die earlier. We can help them with a diversification of products and more affordable and appealing products that are less out of reach for these people.”
For Elaine Round, vice president of scientific and regulatory affairs at RAI Services Company, product stewardship starts with ingredients and safety assessments of devices and their components and requires a comprehensive quality management system as well as a postmarket surveillance system to monitor and address adverse events that may happen. “All these components go into FDA [U.S. Food and Drug Administration] applications and are being scrutinized by the agency,” she said. Product stewardship, she added, was ensuring that the reduced-risk products her company brought to market had maximized their harm reduction potential and offered the biggest possible benefit to the adult smoker.
Panelists agreed that there is still room for improvement. When Miller still worked at Wall Street, she observed how nicotine companies were unable to communicate the problem of e-cigarette or vaping product use-associated lung injury to regulators. For Round, getting a product to market is a major challenge, especially in the U.S. “RRPs are almost held to higher standards than other industries’ products because of the tobacco industry’s past,” she said.
By working in the field of product stewardship, panelists pointed out, they had been able to make a difference. Smith mentioned her team’s ability to have a lot of the infrastructure and expertise in place to move to where they see the consumer is going. Round related her pride after she and her team had put their first premarket tobacco product application together. Miller saw it as positive that Juul gets a lot of its science published. “It’s good to see it’s treated like any other legitimate science. This is the result of amazing product stewardship surrounding the product.”
To maximize efficiency of product regulation, panelists suggested to introduce consensus-type standards as are already in place for drugs and medical devices and to make sure that product standards were clearly communicated. No. 1 on their wish list, however, is the implementation of a standard for a product’s appropriateness for the protection of public health.

November 1, 2022
Clearing the Air: Policy That Better Serves Society

Photo: Chris Ferenzi Photography

The opening panel of this year’s GTNF looked at the challenges in shaping a sensible regulatory framework for reduced-risk products. The way researchers silo disciplinary expertise certainly is a contributing factor to the regulatory space for tobacco harm reduction (THR) being so polarized, argued Sam Hampsher-Monk, managing director at BOTEC Analysis. “Often, empirical research is presented in a decontextualized way,” he said. “Publishers of scientific media seem to look for articles on e-cigarettes true to the motto ‘the more extreme, the better,’ thus sacrificing the middle ground.”
Scientists, too, tend to surround themselves with people who think like them, he added, which leads to the creation of echo chambers. “With e-cigarettes specifically, part of the problem is that we’re using unexamined moral judgements to interpret the available evidence, but when we do this, we need to provide reasons for whatever judgement we make. As this rarely happens, an analytical conversation will quickly move to a subjective one.”
Hampsher-Monk said that no scientific contribution should be taken for face value but needed to be scrutinized regardless of authorship.
Empirical economist James Prieger, a professor of economics and public policy at the School of Public Policy at Pepperdine University, said that in other industries, such as telecommunications, it was common and unproblematic that economists were paid by companies to do research, whereas in tobacco research, any sort of funding from the industry or even indirectly from the industry was being ignored. However, the more people produce data, the better, he pointed out. “The industry has access to data that I as an academic could never replicate. On the other hand, I as an academic have access to arguably some more brain power. Put the data out there, and let it go through some refereeing process.”
For a recent study looking at the barriers to THR, Pritika Kumar, senior fellow for integrated harm reduction policy at the R Street Institute, spoke to social workers, psychologists, nurses and several harm reduction (HR) coalitions across the U.S. as well as physicians working in HR coalitions. The obstacles highlighted by participants included physicians lacking the training and experience of leading these conversations with patients other than advising them to quit or call a quit-line number. HR coalitions, which are funded by departments of health, should be tobacco-free, which has often led to bizarre rules; one doctor in a HR coalition told Kumar that people could bring their syringes but not their vapes. “The problem is that messaging around safer nicotine products is so inconsistent,” Kumar said. “While at the FDA’s website there are some hints at THR, the CDC’s [Centers for Disease Control and Prevention] site is all about how harmful these products are. Physicians don’t get clear information, which would be extremely important.”
Prieger stated that physicians and others needed sources of information that they could hand on to patients. He described the difference between the U.K. and the U.S. in the treatment of pregnant smokers: In the U.K., pregnant smokers having trouble quitting smoking during the first trimester receive a printed sheet with information about e-cigarettes and why pregnant smokers should switch. By contrast, in the U.S., the Pediatrician Association explicitly states that e-cigarettes are not safer.
Misconceptions about THR prevail in many parts of the world and have a big impact on decision makers in a situation where, as surveys have shown, 70 percent of doctors believe that nicotine causes cancer. To meet this challenge, the stakeholder groups that THR advocates are talking to need to be broadened, Kumar said. “The narrative is currently shaped by public health or well-funded public pressure groups. I see that politicians gravitate toward data that makes sense to them based on their constituents, not so much policy that is really informed by science. Policymakers have no idea how things unfold in enforcement.”
Ironically, THR products face most resistance among legislators in low-income and middle-income countries, where large parts of the population consume harmful forms of tobacco. In Russia, Indonesia, China, India and Bangladesh combined, there are about 700 million people who smoke combustible cigarettes. Most of these countries have banned e-cigarettes or enacted policies not favorable to THR. As moderator Sudhanshu Patwardhan, director of the Center for Health Research and Education, suggested, there seem to be only two policy options—either a free, Wild West-style market or a prohibitive market.
Hampsher-Monk rejected the thought of such a false dichotomy, though, saying that politicians often simply copy neighboring countries’ regulatory decisions. However, regulators need to make sure that the unintended consequences of their decisions don’t outweigh the benefits and avoid a replication of failures elsewhere. He explained that with smoking and nicotine use being complicated issues, it is rather unlikely that two populations will respond in the same way to the same regulations.
Panelists agreed that, in their endeavor to protect youths, health authorities greatly neglect the requirements of adult smokers seeking to switch to less hazardous alternatives. To the latter, flavors are an important criterion, so flavor bans hinder harm reduction efforts. On the other hand, studies have shown that the combustible cigarette and e-cigarette markets for youths are linked; a higher excise tax on vaping has shown to increase youth smoking. “The idea of protecting the children is diametrically opposed to helping adult smokers quit,” Hampsher-Monk concluded, “because if you forego a chance to help adult smokers quit, they will continue to model smoking to their children.”

November 1, 2022
Kingsley Wheaton

Photo: Chris Ferenzi

Kingsley Wheaton, chief growth officer at BAT, posed an interesting question at the recent GTNF. “So, we must be even more courageous, speak to the outside world further still and come together even more,” he said near the end of his presentation. “Greater collaboration is key. Is it time, for example, for the GTNF to move from the networked forum that it is to operating more like a fully fledged NGO [nongovernmental organization]?”
Such a suggestion certainly provides something to ponder. For instance, while I take it that, since the suggestion was put forward by BAT, such an NGO would be legally viable, how would it be viewed by those cynical of the tobacco/nicotine industry’s motives and skeptical about the direction of travel of tobacco harm reduction (THR) as mapped out by those who participate in GTNFs?
I imagine that the suggestion was prompted by a concern that, whereas the concept and application of THR principles have weaved and are weaving a certain magic, the spell might be broken without further impetus, without further change. Indeed, the word change was used 12 times in the presentation.
But why is change necessary? After all, Wheaton told his audience that “[i]n the U.K., the U.S., Canada, France, New Zealand, Japan and Sweden, the needle is moving toward tobacco harm reduction.” In the U.K., Japan and Sweden, he said, more than half of BAT’s revenues now come from new-category products while across Europe that figure was more than 20 percent.
Well, change is necessary, I guess, because, on the flip side, globally, the needle stubbornly refuses to move fast enough. Overall, five-sixths of the company’s revenues still come from combustible products.
Of course, there are any number of general and country-specific issues determining why the countries named have moved the THR needle further than many of those not mentioned have, and many of those issues cannot be addressed by the tobacco/nicotine industry. Indeed, it was evident, listening to the presentation, that the industry cannot, on its own, end tobacco smoking. Far from it. “Can we look forward to a day when BAT sells its last cigarette?” Wheaton asked, before answering, “Yes, I think that is indeed within long-range view. But it will require more than just the efforts of industry or governments.”
Even the development and marketing of less risky tobacco and nicotine products is not just down to the industry, I guess. There is no point in developing products whose viability will fall foul of unhelpful regulation in a significant number of countries. I caught the end of the GTNF panel discussion on innovation at which the moderator ended the session by bewailing the fact that the innovations that had been discussed were unlikely to be introduced in the U.S. because of regulatory hurdles in that country. And the U.S., remember, is one of the countries that is counted among those that are moving the THR needle.
Most of the suggestions that Wheaton put forward as being necessary to reinvigorate THR have been made before but have proved devilishly difficult to implement. For instance, Wheaton made the point that in order to allow consumers to make informed decisions about what types of tobacco/nicotine products to use, public health needed to communicate risk accurately, and the industry needed the marketing freedoms to be allowed to communicate responsibly the benefits of switching from higher risk products to lower risk products. This is true, but while there is some movement in some countries toward such positions, in many countries, official information about the risks associated with tobacco and nicotine products is generally confusing and, in some cases, misleading.
While it was a little disappointing, I thought, that Wheaton did not spend time discussing the relative environmental merits of the various tobacco and nicotine products on offer, which the engaged consumer would also seek, he did make the point that the industry needed to demonstrate that it can change sustainably. This is correct in my view. There is little point in prolonging the lives of individuals if we are going to help bring forward the death of humanity at large.
BAT has a good record when it comes to research into lower risk products, and Wheaton made the point that science was the key to unlocking the potential of industry transformation from selling higher risk tobacco products to selling lower risk nicotine products. But he will know as well as anybody that not all the “science” points in the same direction because not all research is conducted in a scientific manner. At least one other GTNF session was taken up with a presentation demonstrating that the findings of some research funded by the U.S. Food and Drug Administration were not supported by the evidence but were nevertheless likely to influence regulations.
Wheaton admits that he doesn’t have all the answers. But he has laid down the challenge. “It is no longer the time for talk but time to act because tobacco harm reduction is too important for us not to,” he said.
“Ladies and gentlemen, we are standing at a crossroads. It’s either more of the same, more ‘quit or die,’ more path of least resistance, or we can chart a new course with tobacco harm reduction as our goal.”–George Gay
The full text of Wheaton’s presentation is available here.

November 1, 2022
Choosing Wisely

Photo: manovankohr

Are choices key to successful switching?

By Cheryl K. Olson and Willie McKinney

Like many people who smoke, Doug Halterman wanted to quit. “I tried other ways, even prescription drugs, and nothing worked.” When he decided to try vaping, “At first, it was a research and development stage. I had to figure out what ones best acted like a cigarette,” he recalled. “I started with menthol tobacco. I then liked the fruit flavors because it helped stay clear of cigarettes. After vaping fruity flavors, cigs tasted absolutely disgusting.”
Halterman’s story of switching is one of several dozen generously shared via emails from members of the Consumer Advocates for Smoke-free Alternatives Association (CASAA). This exploration of what drives change was triggered by anecdotes and research suggesting that encountering and trialing a range of alternative nicotine products, or rotating among an engaging mix of options, can be key to ditching smoking. The typical successful quitting journey seems less like a thruway and more like a meandering river. The U.S. Food and Drug Administration’s Center for Tobacco Products’ approach to researching switching, described in its Final Rule guidance, assumes simple choices and straight lines.

The Wrong Framework?

Premarket tobacco product application (PMTA) behavior studies are supposed to describe likely changes (and related health risks) created by the marketing of a single novel tobacco product of a particular flavor and nicotine strength. This is not unlike studies the FDA’s Center for Drug Evaluation and Research (CDER) reviews, comparing effects of a new drug to a placebo on particular symptoms or endpoints.
In a September 2021 PMTA Technical Review Summary available online, the FDA laid out a new standard that flavored electronic nicotine-delivery system (ENDS) products must meet. Balancing concerns about youth uptake demands “acceptably strong evidence that the flavored products have an added benefit relative to that of tobacco-flavored ENDS in facilitating smokers completely switching away from or significantly reducing their smoking.” What kind of evidence? “Most likely product specific evidence from a randomized controlled trial (RCT) or longitudinal cohort study.”
Again, it’s like testing whether a medicine to treat gout or acne is superior to the current standard therapy, except it casts tobacco flavoring (the taste of cigarettes) as the standard and mango or vanilla as the unproven alternative.
Does an approach that may work for “safe and effective” prescribed drug authorizations make as much sense for a balance-of-risks consumer product standard? Does the CDER mindset serve well the end goal of moving people off combustibles? This pharma-influenced standard may be the wrong tool to address tobacco product effects.
Comments from people’s real-world switching experiences (see sidebar) suggest that a test-in-isolation model fails to capture a lot of key information that could accelerate the move away from smoking and its unacceptably high risks of disease and death.
Unlike pharmaceuticals and devices approved by other FDA centers, nicotine consumer products are not prescribed as a course of treatment. Tobacco users looking to switch aren’t making comparisons among two (or three) options. They meander through shops and gas stations, picking up nicotine products at will and whim. Many use multiple products to suit situations or prevent boredom. They learn through trial and error: How does this product work? What does it do for me? How does it fit into my life? And they choose again.
Another problem: As Neil McKeganey of the Center for Substance Use Research pointed out recently, it’s not clear by how much the FDA values youth vaping prevention over adult smoking cessation. How obviously better would a flavored product need to be at helping smokers switch, compared to a tobacco flavor, to offset concerns about youth appeal? The recent longitudinal study of Juul, where over half of participants switched completely from cigarettes at one year, found that what flavor smokers chose did not significantly affect success.

Missing Variables

Most studies aren’t designed to address the power of choices. Even large surveys that support the importance of flavors in switching tend to collapse flavors into categories (like “sweet” for fruit and candy) and ask about main flavor used, obscuring the paths taken by individual quitters. But there are tantalizing hints. For example, a six-week switching study of tobacco-free pouches found a link between trying more flavors and fewer daily cigarettes smoked. A 2018 study of MarkTen found that smokers who switched completely used more flavors.
Based on her experience researching oral and vapor product behaviors (including MarkTen), “Most smokers don’t successfully switch and sustain their switching through one product category,” said Jessica Zdinak, chief research officer at Applied Research and Analysis Consulting. She notes that academic studies of smoker transitions often leave out important variables, such as previous quitting experiences or stressful changes in life circumstances.

Adding Real-World Evidence

FDA Commissioner Robert Califf has been quoted repeatedly as supporting greater reliance on real-world evidence to support drug regulation decisions. During his first stint as FDA head, Califf said at the 2016 Food and Drug Law Institute conference that “In the past, so-called ‘regulatory trials’ tended to focus on high-quality studies with detailed study procedures, restrictive inclusion and exclusion criteria and have been conducted in special study sites.” By contrast, he noted that “pragmatic clinical trials,” studies that look at treatments and outcomes in actual medical practice settings, “may be the most important source of knowledge in the future.”
Another difference from pharmaceutical products: Many alternative nicotine products have been on the market for several years. Why not consider real-life evidence, as in natural choice situations over time, for tobacco product switching behavior? Don’t throw away tried-and-tested tools but see how they fit in a new context.
Zdinak would like to see long-term randomized trials that incorporate this approach, showing the effect of having or lacking a range of options. To demonstrate the effects of flavors on switching, “What does the world look like if I’m a smoker of 30 years who enters a vape shop, and I have tobacco-flavored vapes as my sole option? Or what happens if I see citrus, mango, cinnamon, coffee and caramel?” She is currently in the design and review phase for one such realistic study.
To quote prominent researchers Dorothy Hatsukami and Dana Carroll, “Most in the tobacco control community would agree that an immediate main goal is to rapidly eliminate tobacco-related death and disease.” If regulators agree, let’s look at what obstacles are preventing smokers from switching more rapidly. That includes tailoring methods and assumptions borrowed from pharma research to suit appropriate for the protection of public health (APPH) standards and goals.

The Power of Choices: Stories from CASAA
Founded in 2009, the Consumer Advocates for Smoke-free Alternatives Association (CASAA) is a 501(c)(4) consumer nonprofit organization that aims to “ensure the availability of a variety of effective, affordable reduced-harm alternatives to smoking.”
In response to an emailed request from CEO Alex Clark, a number of former smokers took time to share their experiences of switching to vaping or other smoke-free products. One question posed by Clark was whether the variety of products was helpful in staying engaged with smoke-free options and reducing the temptation to return to smoking.
Clark himself recently switched from vaping to using pouched snus. Along with a concern that overconsumption of stimulants, such as coffee and rapid-delivery nicotine products, were triggering heart palpitations, he said, “The hands-free nature of snus fits more with my needs. And I can still get all of the different flavors when I order from Sweden.”
Here are excerpts from CASAA member comments, edited for length and clarity. No doubt, people who smoke have a range of goals and preferences that evolve in sometimes surprising ways through product exploration.
Nancy S.: “I started vaping because I was unable to stop smoking tobacco cigarettes because I am so addicted to nicotine. And I don’t want to die from lung cancer like my father did. The products I tried were exactly what I was looking for. I wanted something that tasted like a real cigarette. No funny flavors.”
Roger M.: “I love the variety of products—both hardware and e-juices. My favs are black licorice, almond and bubble gum. They say only the kids like these flavors, but I have loved them since I started vaping 12 years ago. I am now 61.”
Sara C.: I liked trying new flavors in the beginning then found my favorite [strawberries and cream] that I’ve stuck with for years.”
Marc C.: I’ve tried the patch, the gum, hypnosis, as seen on TV products, medications and counseling. Nothing worked or works for me except vaping. I want my vape to taste like an authentic tobacco vape. But I’m okay with some flavor of tobacco, like coffee, vanilla, apple or maple. Almost like a pipe tobacco assortment.”
Sean O.: “The first product I tried wasn’t all that good. Eventually, I found that using what’s called a ‘box mod,’ which takes two high-powered batteries … gave the great sensation in your throat of inhaling the same way a cigarette did. The large clouds of vapor that you can produce using these mods and tanks is incredible. [And] the variety of flavors is exactly what has kept me away from cigarettes.”
Joni L.: “The device was key for me. I chose a Vaporesso Swag because of the size. It felt close enough to a pack of cigarettes for me, and a lot of my habit was actually reaching for my smokes. My first e-juice was a house-made vanilla custard tobacco; I was afraid to go too far away from tobacco flavors because I actually believe I liked the flavor of a cigarette. After three or four days, I went back to the vape shop and bought some mixed berry-flavored juice. That was it. It didn’t take long for my cigarette cravings to go away.”
Kelly P.: “I did try a different device but went back to Juul. I liked the mint and found it better than the menthol cigarettes I had smoked. Also, Juul wasn’t one of those devices that you would blow out a cloud of smoke.”
Glenn N.: “I believe that the first ‘e-cigarette’ I bought was the first Blu. I vaped that for a couple months, but it was missing something, and I thought I would go back to cigarettes. So I started looking online. With that ProVari, I knew that I would never smoke again. I found what I needed. I started with 36 mg liquid and went down to 12 mg in about a year.”
Steve T.: “I will be 68 this year and feel I made a great decision with vaping. Access to flavors is a critical component necessary to transition away from cigarettes. I have reduced the nicotine levels from 18 mg to 3 [mg], and my Kona e-juice was replaced with dessert and blueberry flavors.”
Jessie C.: “NRT [nicotine-replacement therapy] options like snus and nicotine gum/lozenges never worked for me as more than a way to avoid smoking at an event or during a long work shift. I’m very much a tech-oriented person, so the idea of having many options was stimulating for me. At the time, CE4 atomizer [tanks] and little pens were the most accessible items on the market [and did not meet expectations]. When the Kangertech Subox Mini hit the market, I was satisfied and stuck with that.”
Cindi K.: I started vaping in 2014 not because I was looking to quit smoking but because I was avoiding convenience stores; I had just entered AA [Alcoholics Anonymous] and that is where I’d bought alcohol. Two doors down was a vapor store. I bought an eGo Tank and some tobacco-flavored e-liquid in 24 mg. I made friends in AA that were also vaping and noticed their liquids smelled much better than what I was using. I continued to be what I labeled a dual user for a few more months and decided to use flavored e-liquid and willpower to quit smoking. I also learned how to make my own flavors. I had about 12 I used in rotation and loved.”
Tanya L.: “The first product I tried was in 2013: a vanilla-flavored vape liquid, Kanger T3S tank and coils, which I still use. I like vanilla. I just had to find the best vanilla.”

Cheryl K. Olson is a California-based public health researcher who specializes in behavioral health issues and consults on tobacco product behaviors via McKinney Regulatory Science Advisors. She spent 15 years on the faculty of Harvard Medical School.

Willie McKinney is the founder of McKinney Regulatory Science Advisors. He’s held senior regulatory roles at major tobacco product companies and served for three years as the industry representative on the FDA’s Tobacco Products Scientific Advisory Committee.

November 1, 2022
Court Stays Logic MDO

Photo: de Art

A U.S. appeals court has stayed the Food and Drug Administration’s marketing denial order (MDO) for Logic Technology Development’s Logic Power Menthol E-Liquid Package and Logic Pro Menthol E-Liquid Package, according to a NATO newsletter.
The ruling allows retailers and wholesalers to continue selling the products for the duration of the stay.
The U.S. Circuit Court of Appeals for the 3rd Circuit will now consider a further motion from Logic regarding the MDO that the company has seven days to file, according to media reports.
“The foregoing motion for a partial administrative stay is GRANTED as follows. The FDA’s marketing denial order is TEMPORARILY STAYED as to the Logic Pro Menthol E-Liquid Package and the Logic Power Menthol E-Liquid Package products. Within seven days of this order, the petitioner must file its motion for a stay pending the petition,” the order states. “The FDA’s response must be filed within 10 days thereafter.”
The temporary administrative stay will remain in effect until a panel of the court decides on Logic’s new stay motion. If no timely stay motion is filed, the clerk is authorized and directed to vacate the temporary administrative stay.
Tobacco harm reduction advocates have questioned the FDA’s reasoning behind the Logic MDO, suggesting that the agency misinterpreted youth consumption statistics.

November 1, 2022
Russia Continues to Collect Significant Tobacco Taxes

Photo: RODWORKS

Tax payments by the leading international cigarette manufacturers have provided the Russian government with at least $7.25 billion in additional income since President Vladimir Putin ordered his army to attack Ukraine, according to an analysis of Russian Treasury figures conducted by The Telegraph.
Center-Life, an anti-smoking lobbying group in Ukraine, told The Telegraph that 2020 taxes from PMI and JTI alone would fund 700 Mil Mi-24 helicopters, 1,970 T-72 tanks and 382 Sukhoi Su-25 fighter jets for the Russian army.
“It’s clearly completely wrong that these western firms continue to pay significant taxes into Russian coffers because so much of Russian state expenditure now is to fund the war in Ukraine, which is killing people in large numbers,” Bob Seely, a Member of Parliament on the Foreign Affairs Committee, was quoted as saying by The Telegraph.
Following the Feb. 24 invasion, international cigarette manufacturers announced they would end their operations in Russia, but retreating from such a major market is easier said than done. Tobacco companies have had to carefully navigate shifting regulations and avoid missteps that could prompt the government to seize the business, for example—all the while trying to protect employees from becoming targets for arrest.
Earlier this year, Philip Morris International CEO Jacek Olczak described the process as “bloody complex.” In a July interview, he said the company was unlikely to be able to leave Russia before the end of 2022.
Russia is the world’s fourth-largest cigarette market. Prior to the war, Japan Tobacco International led the market with a 36.7 percent share, followed by PMI (31.7 percent) and BAT (23.5 percent), according to Cowen & Co.

November 1, 2022
Medicago Cuts Jobs at Covid Vaccine Facility

Photo: Miljan Živković

Medicago is cutting 62 jobs at its manufacturing facility in Durham, North Carolina, USA, which played a key role in producing the company’s tobacco plant-based Covid-19 vaccine, reports the Triangle Business Journal.
In a notice to the North Carolina Department of Commerce, the Canadian biopharmaceutical company said the layoffs are the result of Medicago “restructuring its workforce to align with its changing business needs.”
Using tobacco plants, the company developed a Covid vaccine called Covifenz, which Canadian regulators approved earlier this year. The country’s government committed to purchasing 20 million doses of the vaccine with an option to purchase 56 million more.
No other country has approved Covifenz, however. The World Health Organization, meanwhile, has been reluctant to grant the vaccine emergency approval due to Medicago’s ties with Philip Morris International, which owns about a third of the biopharmaceutical company.
Headquartered in Quebec City, Medicago employs 600 people.
The company built out its facility in Durham through a 2010 partnership with the U.S. Defense Advanced Research Projects Agency, which included $21 million in funding from the federal agency. The facility features greenhouse space and an automated extraction and purification system.

November 1, 2022
Philip Morris Expands Operations in Lithuania

Photo: krivinis

Philip Morris International is expanding the production capacity of its factory in Klaipeda, Lithuania, following the suspension of its operations in Ukraine, reports Interfax, citing a company statement.
The multinational will reportedly construct a new production building connected to its existing storage facilities.
The Klaipeda factory will manufacture products intended for Ukraine, the company said. The project will cost €3.5 million and is expected to be completed toward the end of 2023.
On Feb. 25, PMI announced the suspension of its activities in Ukraine, including at its factory in Kharkov, due to Russia’s military invasion.
Ukraine accounted for around 2 percent of the multinational’s cigarette and heated-tobacco shipments in 2021 and less than 2 percent of PMI’s total revenue, according to the company.

November 1, 2022
Differential Progress
Photo: Nopphon

Will the valuable insights revealed in the Tobacco Transformation Index accelerate tobacco harm reduction?

By George Gay

The second biennial report on the Tobacco Transformation Index (TTI), which details the findings of two further years of research into the efforts made by the world’s 15 largest tobacco companies to reduce the harm caused by the consumption of their products, was launched at the recently staged GTNF. The 140-page 2022 report evaluates tobacco companies’ actions across six business functions, designated “categories” and 35 underlying indicators that are said to cover “measures indicative of harm reduction ….”
Of the 15 tobacco companies examined, three are state controlled, nine are publicly traded (including Egypt’s Eastern Co., in which the government owns a majority stake), and three are privately held. Together, they are said to account for about 90 percent of global tobacco product volume sales. The geographical sweep of the index takes in 36 countries spread across the globe and accounting for about 85 percent of the global population of adult smokers.
Erik Bloomquist
The report contains a huge amount of information, clearly presented and backed with a statistical methodology that aims for transparency and, despite its robust nature, is open to review. The global nicotine and tobacco investment analyst and consultant Erik Bloomquist, who is chairman of the TTI’s technical committee, said during the GTNF investor panel, which he chaired, that everybody should be visiting the TTI website because it contained a “fantastic” amount of “incredibly valuable” information.
Meanwhile, a press note issued on Sept. 28 by the TTI, which is a Foundation for a Smoke-Free World* initiative and whose research partner is Euromonitor International, said research had demonstrated “differential progress toward harm reduction across the 15 largest tobacco companies,” and highlighted:
That high-risk products made up about 95 percent of retail sales volume across the 15 largest tobacco companies during 2021, with reduced-risk products (RRPs) making up 5 percent;
That tobacco harm reduction (THR) momentum was developing across a subset of the 15 companies, albeit to varying degrees; and
That with companies having been analyzed across the six categories and 35 indicators on their actions to reduce the harm caused by tobacco use, Swedish Match was found to have been making the most relative progress.
The press note went on to list the following takeaways from the 2022 index findings:
“Only Swedish Match sells a greater volume of RRPs than substantially more harmful combustibles, due in most part to the popularity of its snus in Sweden and nontobacco nicotine pouches in the U.S. …
“Four index companies directed the majority of capital and R&D investments toward RRPs. In addition, five index companies, including three state-owned entities, made incremental investments or early indications of movement toward future production of RRPs during the review period.
“However, tobacco companies are … failing to invest in harm reduction in low-[income] and middle-income countries, with the vast majority of sales for their RRPs concentrated in markets with the highest disposable income. Notably, RRPs are banned in a number of countries around the world.”
For those who like lists, the 2022 index’s overall scores set the companies’ relative rankings as follows, with their 2020 relative rankings in parenthesis: Swedish Match 1 (1), Philip Morris International 2 (2), Altria Group 3 (4), BAT 4 (3), Imperial Brands 5 (5), Japan Tobacco Group 6 (6), KT&G Corp. 7 (7), Swisher 8 (8), ITC 9 (9), China National Tobacco Corp. 10 (10), Vietnam National Tobacco Corp. 11 (12), Tobacco Authority of Thailand 12 (11), Eastern Co. 13 (13), Gudang Garam 14 (14) and Djarum 15 (15).
As can be seen, there was little shifting of positions, but the devil is in the details, and there was more relative movement in each of the six categories that were researched: strategy and management, product offer, product sales, marketing policy and compliance, capital allocation and expenditure, and lobbying and advocacy. And this differentiation is seen as important, though, in fairness, it has to be set against any number of factors, some of which, such as portfolios, companies have control over, and in respect of some of which, such as regulations, they are largely at the mercy of outside forces, especially those companies operating mainly in countries that ban RRPs. And there are some factors that might be seen as sitting in between. Increases in sales of higher risk products, for instance, are seen as negatives.

Sense of Proportion

The report clearly has some important information, which is likely to become even more valuable in the future if, as seems likely, more of the 15 companies engage with the TTI. Six companies, mainly the multinationals, provided feedback in respect of the 2022 report.
Nevertheless, I have reservations about what is going on here. Glancing through the minutiae of the huge report and the 84-page methodology that defines the way the report’s data is arrived at, I couldn’t help wondering whether we weren’t in danger of losing our sense of proportion, even losing track of our objectives. To a large extent, tobacco transformation is pushing at an open door because consumers undoubtedly want the choices that new-generation products offer, and the business case is compelling.
David Janazzo
But what truly concerned me as somebody living in a country whose economy is being systematically tanked by the last remaining devotees of trickle-down economics was that the TTI seemed to be embracing trickle-down THR. For instance, the TTI was described in the Sept. 28 press note as having been created “to accelerate the reduction of harm caused by tobacco use by ranking the world’s 15 largest tobacco companies on their relative progress or the lack thereof.” From ranking tobacco companies in this way to accelerating THR sounds to me like a bit of a stretch. Certainly, it seems to beat something of an indirect path toward THR.
In fairness, though, I should say that the TTI program officer, David Janazzo, in his insights introduction to the 2022 report, added that part of the purpose of the index was “to inform the public about the activities of the tobacco industry that influence achieving a smoke-free world.” Such an undertaking, if it could be achieved, would certainly have a more direct influence. But I don’t see that happening. The report talks of “stakeholders,” but that term is not defined, and whereas, as far as I have been told, it potentially includes everybody, such a claim to inclusivity falls a little flat if you try to imagine smokers around the world engaging with a 140-page report and an 84-page methodology. Unsurprisingly, currently, stakeholders are largely confined to tobacco/nicotine companies, researchers and investors.

Relative Rankings

The TTI throws up a number of oddities, not the least of which has to do with the understandable decision to compare the 15 largest tobacco companies. Gudang Garam against BAT seems to be a total mismatch, and, given that the index is aimed at informing, in large part, potential investors, the presence of companies that are not publicly traded, though understandable from a nudge theory standpoint, nevertheless looks strange. PMI was said in the press note to be ranked second in the 2022 index and Djarum last, and while I understand that this is how the index’s methodology sees the tobacco world, I have to ask, is this a fair reflection of tobacco harm? If you constructed an index that ranked companies on the number of people worldwide who currently were harmed by consuming those companies’ products, I would guess that Djarum would move up the rankings.
It was disappointing, in my view, that the 2022 report did not cover the environmental credentials of the RRPs on offer, either relative to each other or relative to the higher risk combustible cigarettes they are supposed to replace, though I understand such matters might be covered in the third iteration of the report, which is due out in 2024. RRPs are supposed to comprise a disruptive technology and, if disruptive means anything, it surely means speedy. Is it wise to wait so long for such information to trickle down? We have on the one hand a problem with the diseases caused to individual smokers, which are tragic on an individual basis but contained, and, on the other hand, an existential environmental crisis enveloping everybody, and we seemingly choose to try to fix the first problem and not the second.
Timing is important, and one of the main weaknesses of the TTI seems to be its two-year time frame. The 2022 report took in research through the end of 2021 while the next report is due out in 2024, so this suggests that, unless interim updated TTI reports are issued, the publication schedule is going to provide a three-year drag on the incorporation of anything of significance that occurred in early 2022.
To my way of thinking, the commitment to THR is driven and will be driven by regulations and taxes, and one benefit of the index is that it might influence governments in these areas. And this is important. Taxes are currently set in some jurisdictions so that some RRPs attract revenues much greater than those of combustible cigarettes, and investors are clearly going to put pressure on companies to transform their portfolios while the profits generated by the sale of RRPs are higher than those from the sale of combustible cigarettes. Of course, you would have to be terribly naive to imagine that those same investors would keep up the pressure if the profit advantage were wiped out. There is nothing wrong with this if you believe that the market should be the ultimate arbiter of what is good, though one has to accept, too, that things might head in the other direction.
Finally, I would be concerned that the cynics will have a field day because while the TTI is listed as an initiative of the foundation, in my view, it is not spelled out prominently enough where the foundation’s money comes from: PMI. Despite the fact that the foundation is independent, those cynics will see that the number two company on the list is PMI, which is possibly about to acquire the number one company and move into the number one spot. All above board, I’m sure, but these things have to be seen from the point of view of those with different agendas.
My argument is not that the application of trickle-down THR would be socially destructive in the way that trickle-down economics has been but that it would be slow and there would be more efficacious ways of approaching THR. Why spend the foundation’s money carrying out research that is going to benefit mostly analysts, banks and pension funds that have the resources to carry out such research on their own behalf? Surely, the money should be spent on projects that will more directly help smokers. Even helicopter THR might be preferable to trickle-down THR.

*The Foundation for a Smoke-Free World is an independent nonprofit organization created in 2017 with the mission to end smoking within this generation.
George Gay is Tobacco Reporter’s European editor, but his territory spans the globe. Based in London, George has covered the tobacco industry since 1982, initially for a U.K.-based publication and since 2004 for Tobacco Reporter. George’s understanding of industry issues, combined with his keen sense of observation and dry wit, have earned him a loyal following among Tobacco Reporter’s readers.
November 1, 2022
Moving Forward

Habanos and its partners remain committed to boosting the global reputation of all Cuban cigar brands.

By Timothy S. Donahue

Cuban cigars have always had a certain mystique about them, primarily as a result of their exclusivity. Earlier this year, they moved even further out of reach for many consumers when Cuba’s state company responsible for the production and distribution of cigars, Habanos, raised prices worldwide to the levels of its premier brands in Hong Kong. In some countries, prices jumped by as much as 300 percent. The announcement triggered massive hoarding by consumers eager to stock their inventories before the price increases took effect. This in turn led to product shortages in many markets, which then prompted several retailers to raise prices even further.
The price hike was a joint decision between Habanos shareholders, including its new Chinese partner, Allied Cigar Corp. (ACC), a Hong Hong-based investment group that in 2020 purchased 50 percent of the Cuban cigar company for €1.23 billion ($1.2 billion).
The result was a perfect storm that spawned considerable amounts of misinformation. The price increases, along with the difficulties in finding cigars in some markets and the secretive nature of the relationship between Habanos and its Hong Kong partners, had rumors swirling. In an interview with Tobacco Reporter during the 55th anniversary celebration of Habanos’ Cohiba brand in September, Leopoldo Cintra Gonzalez, commercial vice president of Habanos, and Jose Maria Lopez Inchaurbe, vice president of development, insisted that there was “no such basis” for any of those rumors.
“Rumors? We are not keen to speculate about any of this,” said Gonzalez. “The new Chinese shareholders—it’s true that they are not coming from the tobacco business, but we have a very good relationship, a very good friendship. They are now starting to be part of Habanos’ future. They are very excited about our future together for sure. There are still many aspects of this business that they are learning, trying to become familiar with. But this is normal. Nothing dramatic to see.”
Inchaurbe said he had spoken with the shareholders of ACC and that it must be understood that while the cigar business may be new to ACC, marketing a luxury good is not. It’s a learning process, and ACC is excited about the Habanos product and bringing the Cuban cigar brands to new heights, he noted. “They know our brand, our product, but they joined us knowing cigars only from [the] aficionado or consumer point of view,” explained Inchaurbe. “And we are in the process of also understanding their targets and goals and explaining our business goals, which can be a learning process.”
All decisions concerning Habanos are made jointly by both companies, added Inchaurbe. He said the new global pricing structure was a common decision between the two shareholders—and one that had been considered by Habanos for some time. After all, he says, there is no cigar in the world equal to the Cuban Cohiba in terms of quality. When a product has all the attributes of a Cohiba cigar—high quality, good presentation, attractive packaging—it must be considered a very high-end luxury good indeed.
“You have a price in Hong Kong or in London that is double the price [of that same cigar] in some other countries. At the end, for the luxury cigar industry, this is a disturbance,” explains Inchaurbe. “What we are trying to do with the global Habanos pricing is, like the many various luxury items in the ‘luxury’ industry, to have a single, global price for all the consumers wherever they are. Our benchmark for Cohiba was Hong Kong, as we clearly stated, because Hong Kong [is a benchmark] for extremely high-quality luxury products.”

Seeds of Success

In fiscal 2021, Habanos earned more than $568 million while experiencing 15 percent growth compared to the previous year. Despite the global pandemic and growing inflation, at the end of 2021, Habanos was operating 20 Cohiba Atmosphere outlets, 160 La Casa del Habano shops, 1,217 Habanos Specialist stores, 2,465 Habanos Points and 486 Habanos Lounge/Habanos Terrace outlets.
When asked whether Cuba had the capacity to produce more cigars to satisfy growing demand, Inchaurbe said that the company was not going to produce “ever more cigars” just to satisfy the demand. The most important factor in producing Habanos cigars is quality, he insisted, and the company will not increase production at the expense of quality.
“The problem is a very nice problem to have,” he said. “There is a lot of demand. This is our problem, but good news.” According to Inchaurbe, demand for high-value brands, such as Cohiba, Trinidad and Montecristo, is higher than what the company can produce at the level of quality required by Tabacuba, the government arm of the Cuban cigar industry in charge of production.
Inchaurbe insists this is not due to problems in production but because cigars are a natural product where you put all the focus on quality. “In my opinion, it’s difficult to say whether the problems of shortages in some retail shops all over the world will continue because demand is too much,” he said. “But of course, together with Tabacuba, with an investment program, we are trying always, especially Tabacuba, to be able to produce more cigars with the same quality. And that is the only way we will have the ability in the future to satisfy the growing demand.”
Habanos’ goal remains to grow every year without compromising the quality of its cigars, according to Gonzalez. Over the past 10 years to 15 years, the company has averaged nearly double-digit growth. However, today, Habanos isn’t necessarily looking to build its brick-and-mortar footprint as in previous years but rather to build on the value of its current assets alongside the global reputation of the Habanos brand. Looking at the first three quarters of 2022, Gonzalez expects the company to experience growth in line with that of 2021.
“Generally speaking, the premium cigar industry is growing for all the manufacturers, all the traders, because there is a big demand,” he said. “There is a great interest in our product. And, as usual, Habanos is the leader in this demand. Our demand continues to be very strong, especially in some emerging areas like Asia-Pacific. Of course, we are also going through difficult periods like this global inflation. This could also impact our business.”
The duty-free business in particular was heavily impacted. “The duty-free channel is not yet 100 percent recovered compared to pre-pandemic levels, and duty-free is a very significant channel,” said Gonzalez. “We are lower than the pre-pandemic figures in the duty-free channel while in the domestic channel, we are growing quite well.”
Innovation is going to be a central focus for Habanos in its quest to boost production and its global presence. Gonzalez said that the company will continue launching new products, innovating its operations and trying to satisfy its clients. The company is also considering possible technological improvements in its supply chain operations to better distribute its cigars.
“We want to prevent transfers [of product] from one market to another,” he said. “That’s why in those specific brands, Cohiba and Trinidad, we decided to harmonize with Hong Kong. Habanos is innovation. It is in our DNA, it’s in our products, in our brands. It’s true; we will continue innovating, launching new products, trying to give to our clients more activities, special activities about the lifestyle and so on because this is the demand from our clients. And regarding the prices, I will say that we will continue monitoring them.”
In the end, both men agree that the true value behind Habanos and its cigars are the factory workers who produce the cigars, the retailers who sell them and the consumers who are dedicated to Habanos’ 27 brands. “We have more than 4,000 specialized point stores in the world that represent, I would say, more than 50 percent of our sales,” said Inchaurbe. “They are in charge of this ship. For us, these new retail concepts that are driving our growth, we are going to continue bringing more points into the family and strengthening the points that we already have in the market. Habanos is poised for great success.”

Timothy Donahue is the assistant editor of Tobacco Reporter. Since joining our team in January 2013, he has become not only an expert on the traditional tobacco business but also a well-respected voice in the rapidly developing vapor industry. Tim spends much of his time on the road, attending conferences and interviewing industry representatives. His networking skills, work ethic and quick mind are valuable assets to our diverse audience.

November 1, 2022