Tobacco Control’s Nervous Breakdown

In his groundbreaking 1997 book, The Innovator’s Dilemma, Clayton Christensen defined the concept of “disruptive innovation.” The term is often used carelessly, but disruptive innovation has several characteristics that apply in today’s tobacco and nicotine market. In essence, it is a theory of how entrants to a market can challenge incumbents by focusing on unmet needs using novel business models exploiting simple enabling technologies.

In the nicotine market, the lithium-ion battery provided a critical enabling technology with sufficient power and energy density to replace combustion with electrical heating to create an inhalable aerosol in a compact and convenient form. Once the concept took off in the early 2010s, the technology rapidly evolved through at least four major generations during the decade. The disruption has never stopped, and the emerging incumbents in the vape industry now face disruption from disposable single-use vape products. It isn’t just technology; the business model has changed and adapted over time, embracing user-driven innovation, new retailing models such as specialized vape shops and international e-commerce, and a pro-health marketing proposition spread through social media.  

A new wave of innovation is now breaking with the rapid rise of oral nicotine pouches. This newer trend may prove even more disruptive—a low-tech, low-cost nicotine delivery with negligible health consequences, no intrusion on others and none of the stigma attached to tobacco. Through vaping, consumers have deconflated tobacco and nicotine use and are now primed to adopt this technology.

The regulatory environment also played a critical role, but more for what it didn’t do than what it did. In the United States in 2009, the U.K. in 2010 and the European Union in 2013, there were failed attempts to classify and regulate vaping products as medicines. Several core pharmaceutical regulation concepts are hostile to vaping. Vaping products are not smoking cessation therapies but pleasurable consumer alternatives to smoking that require nicotine delivery equivalent to cigarettes. Medicine regulators are not at ease with pleasure, or what they would call “abuse liability,” yet pleasure is integral to their success as consumer products.

Let’s delve deeper and ask who is disrupted and how.

First, the incumbent tobacco companies. In the standard model of disruptive innovation, these giants would be caught off guard by fast-moving entrants bringing new technology to a vanguard of early adopting consumers, rapidly changing the market dynamics. This would be felt most keenly as a loss of “pricing power” (the ability to raise prices to compensate for declining cigarette volumes) and a squeeze on margins and revenue in the profitable incumbent cigarette business. This should happen as the existing customer base of people who smoke is exposed to a wide range of low-cost alternatives without many downsides. So far, I don’t think this squeeze on the cigarette business has happened to anything to the extent it might have and still could, even though the companies have entered these markets and developed heated-tobacco products. The reason is that regulators are slamming on the brakes in response to activist and political pressure—disrupting the disruption. Regulatory excess has combined with activists and academics working tirelessly to nurture false risk perceptions and reinforce doubt about the wisdom of stopping smoking by switching to a reduced-risk product. The tobacco industry has been protected from the most severe disruption with the unintentional help of the tobacco control mainstream.

Second, disruption has wrong-footed regulators and legislators. In response to rapid changes in the market, regulators and legislators have blundered in without first understanding (or perhaps without caring about) the complex adaptive system in which their rules would be applied. Because the new products function as economic substitutes for cigarettes, we expect three primary responses to excessive regulation: more smoking than there otherwise would be, more illicit trade in the new products, and consumers adopting risky workarounds, such as mixing their own flavored e-liquids. For example, limiting nicotine strength in the European Union made it harder to bring to market the pod devices that have been successful in reducing smoking in the United States. Flavor bans in the United States made vapes less appealing and caused more people to smoke, in some cases including young people. The prescription-only availability of vapes in Australia has led to a chaotic, lawless mess, with more than 90 percent supplied via informal, illegal channels. With their mission to protect the young from vaping, regulators forgot that in a world without vaping, many young people would smoke and, therefore, are benefiting from vaping.

Third, the rise of the confident consumer. Consumers are the primary beneficiaries of the radical reduction in health and welfare detriments of smoke-free products. We are used to smokers burdened with regret, challenged with stigma and punished by anti-smoking policies. But all of that is driven by the health implications of smoking and the policy response that started in the early 1960s. How does the recreational nicotine consumer change if they are no longer troubled by the health and welfare implications of nicotine use and related policies? Simple economic theory suggests that if the costs and nonmonetary detriments of nicotine use fall, then demand will rise. It is likely, in my view, that there will be new users of nicotine who would never have become smokers in the absence of much safer products. For some, that is profoundly disturbing. For me, it is almost an inevitable consequence of having far lower risks and there being a latent demand for the real or perceived hedonistic, functional and therapeutic benefits of nicotine. Public morality may be shocked, but more people (of any age) using much safer products should not cause a public health crisis—we would be moving to substance use more like drinking coffee.

Fourth, the existential threat to the tobacco control complex. The public discussion of the emerging landscape of low-risk consumer products seldom focuses on the interest group that is most vulnerable to disruption: the mainstream of tobacco control. It is a complex of interests comprising nonprofit activists, academics, medical and health societies, major institutions (such as the World Health Organization or the U.S. Food and Drug Administration), philanthropists and research-funding bodies. The problem for the mainstream of tobacco control is that without serious harm, the whole movement loses its purpose and its reason to exist. When it comes to low-risk alternatives to smoking, this complex is profoundly confronted by the threat of having nothing to control, no case for intervention and no reason to be. It is a powerful incumbent interest group challenged by new technology, new suppliers and new consumer confidence.

As a result, the mainstream of this interest group has rejected tobacco harm reduction as a strategy for addressing its own notional goals of reducing death and disease from tobacco use. Instead, it has mounted a rear-guard defense based on a range of strategies, including the following: