Tag: GTNF 2021

  • Ambassador James K. Glassman and Rosemary Leonard

    Ambassador James K. Glassman and Rosemary Leonard

    Photo: Malcolm Griffiths

    Ambassador James K. Glassman, former U.S. undersecretary of state for public diplomacy and public affairs, and Rosemary Leonard, a general practitioner in London, took the opportunity presented by the Global Tobacco & Nicotine Forum to introduce a report that aims to inject new imagination and ambition into the effort to reduce tobacco-related death and disease.

    According to Glassman, the fight against smoking has stalled. “There are more people smoking today than there were 30 years ago,” he noted. The current approach, he said, will only prolong the suffering. If nothing changes, 1 billion people will die of smoking-related diseases this century.

    Published by the International Commission to Reignite the Fight Against Smoking, the new report calls for society to recognize the power of technology to disrupt and tries to remedy the neglect shown to low-income and middle-income countries (LMICs).

    Smokers famously smoke for the nicotine but die from the tar—the byproducts of combustion. Innovation has resulted in technologies that can deliver nicotine in a device, the e-cigarette, that according to Public Health England and the Royal College of Physicians is 95 percent less harmful than smoking.

    Unfortunately, in all but a few countries, regulatory policy toward tobacco products is confused, contradictory and not based on current scientific knowledge, observed Glassman. 

    Glassman also expressed concern about the high levels of misinformation, not only among the general public but also among regulators and physicians.

    Leonard related the story from her practice about a patient diagnosed with chronic obstructive pulmonary disease. The patient said he had tried everything—the patches, the gum, etc.—to quit smoking but to no avail. When Leonard suggested he try vaping, the patient nearly fell from his chair. Leonard had to reiterate that anything was better than combustible tobacco.

    “Unfortunately, I am in the minority of doctors,” said Leonard. “So many just don’t know the science behind smoking … they know that tar is harmful, but they have this misperception that nicotine is harmful too.”

    Leonard said she was proud of the U.K.’s relative success reducing smoking. “We have moved from being a global leader in tobacco consumption to being a leader [in] tobacco control,” she said. And while there were many factors contributing to that success, including taxation, plain packaging and indoor smoking bans, Leonard said the U.K. had been especially fortunate with Public Health England’s hands-on approach in helping people quit and pragmatic approach toward smoking alternatives.

    “And now we must get the U.K. message to low[-income] and middle-income countries, where most of the world’s smokers reside,” she said. The idea behind the report is to open up a dialogue—to get the message across of how to best help people stop smoking.

    Among other recommendations, the report calls for risk-proportionate tobacco policies and better access to harm reduction in LMICs. It also encourages medical bodies to reestablish the leadership role of doctors in ending smoking and urges tobacco companies to have a clear plan to phase out high-risk combustible products.

  • William Gifford

    William Gifford

    Photo: Malcolm Griffiths

    Speaking through a video link at the 2021 Global Tobacco & Nicotine Forum in London, Altria Group CEO William Gifford explained why he believes it is possible to make more progress in tobacco harm reduction in the next 10 years than has been achieved over the past 50 years.

    Gifford said he was optimistic about the outlook for tobacco harm reduction in the U.S. He was encouraged not only by the U.S. Food and Drug Administration’s commitment to science but also by the growing support of tobacco harm reduction among public health advocates.

    As an example, he pointed to a recent landmark article offering a rare balanced look at vaping in the U.S. Writing in the August issue of the American Journal of Public Health, 15 former presidents of the Society for Research on Nicotine and Tobacco (SRNT) recognized the benefits of vapor products.

    Meanwhile, data from the National Youth Tobacco Survey suggest that underage vaping, while still high, shows signs of decline. Underage use of traditional tobacco products remains at historical lows. The minimum age to purchase tobacco products has been raised to 21, and many states are considering and implementing lower rates of taxation for FDA-authorized reduced-risk products. Risk-proportionate taxation is important, according to Gifford. “We must not impede consumer switching,” he said.

    Despite his optimism, Gifford also detected headwinds. He identified four areas where progress was still needed: correcting misperceptions about nicotine, ensuring that harm reduction is equitable, allowing for real and meaningful scientific engagement between industry and public health, and ensuring that harm reduction is an off-ramp for adult smokers and not an on-ramp for underage tobacco use.

    Nicotine, Gifford reminded his audience, is not the primary cause of disease and death from smoking; rather, it’s the combustion of the tobacco—so it makes sense to transition adult smokers who can’t or won’t quit from the most harmful form of nicotine consumption to a less risky alternative.

    While the risk continuum is today widely embraced by public health, the scientific community and the regulator, many smokers—the people who most stand to benefit—don’t understand the concept. Seventy-three percent of people either incorrectly believe nicotine is the main substance in cigarettes that cause cancer or are unsure. Eighty percent of surveyed physicians in a recent study strongly agreed that nicotine directly contributes to the development of cardiovascular disease, COPD and cancer. Left unaddressed, said Gifford, these widespread nicotine misperceptions could discourage adult smokers from switching to smoke-free tobacco products.

    Industry has an important role to play, he noted. “It’s on us to conduct the science and seek MRTP [modified-risk tobacco product] authorization claims to persuade adult smokers about the benefits of switching to smoke-free products,” said Gifford. “But industry alone cannot correct nicotine misperceptions,” he added. “FDA has said, ‘we need a national debate on nicotine.’ We agree; we think FDA is best positioned to lead it. That’s why we recently asked the agency to launch a targeted public education campaign geared toward adult smokers about nicotine misperceptions.”  

    Access to tobacco harm reduction must also be more equitable, according to Gifford. A recent study among Black, Asian, Hispanic and LBGTQ+ communities revealed that a greater proportion of those groups mistakenly identified nicotine as the chemical that causes cancer. What’s more, Altria’s own data shows that Black, Hispanic and female adult smokers lag behind white male adult smokers in transitioning to smoke-free products.

    A comprehensive approach to harm reduction means that all smokers, regardless of background, demographics or financial means, have equitable opportunities to reduce the harms of smoking, according to Gifford. While not claiming to have all the answers, he insisted that Altria was committed to engaging and listening.

    “We face an unprecedented opportunity for America to lead the way in shifting millions of smokers away from cigarettes if we follow the science, support innovation and clearly communicate scientifically accurate information,” he said.

    Getting the best possible science and data to guide policy decisions, he said, requires more than well-designed studies or lab work; it requires peer-to-peer engagement, review and open-minded inquiry. However, many organizations are seeking to exclude industry from scientific forums and research. For example, the National Institute on Drug Abuse discourages industry participation in harm reduction research. The SRNT recently decided to ban industry employees from attending and sharing their science at its annual conference.

    “In this situation, nobody wins—not science, not good policy and certainly not adult smokers,” said Gifford. “We stand by our science and make it a point to welcome good faith scrutiny. If there is one lesson we all learned during the pandemic, it is the importance of science-driven communications.”

    Gifford related how he’s often asked when the last cigarette will be smoked in the U.S. “The honest answer: It depends,” he said. As variables, he cited industry innovation, regulatory legislative policy, whether adult smokers can get the smoke-free products they like and whether adult smokers get accurate information on smoke-free products.

    “But I am confident we can make real progress if we engage, listen and act,” he concluded.

  • The Fork in the Road

    The Fork in the Road

    Photo: Malcolm Griffiths

    Following the virtual conference in 2020, which had been forced online by the coronavirus pandemic, the GTNF was pleased to once again welcome delegates in person in 2021. The Rosewood Hotel in London hosted 162 delegates Sept. 21–23, with an additional 720 participants following the speeches and discussion panels online.

    The event attracted both industry representatives and stakeholders from other sectors, including government, civil society and the legal profession. In addition, GTNF 2021 generated considerable interest among the media, with representation from prominent outlets such as The Wall Street Journal, Bloomberg and Le Monde.

    Below is a sampling of the 2021 GTNF keynotes and panel discussions. For additional coverage of the event, please click here.

    To read what delegates had to say about the ninth Conference of the
    Parties to the Framework Convention on Tobacco Control that is scheduled
    to take place this month, please click here.

    Matt Ridley: The importance of innovation

    Matt Ridley, who is a member of the U.K. Parliament’s upper house, ended his presentation by saying the All-Party Parliamentary Group for Vaping, of which he is a member, had recently urged the U.K. government to attend this year’s Conference of the Parties to the World Health Organization’s Framework Convention on Tobacco Control and, while there, use its relatively independent post-Brexit voice to argue strongly against the e-cigarette prohibitionists and in favor of scientific evidence and the harm reduction argument. “I don’t know whether we will be listened to by the U.K. government on this, but we are going to try and get this point across because I think it’s … it’s a moral one, and I think we have a duty to try to win the point,” he said.

    This will have gone down well with many of the conference participants, who will have agreed with Ridley’s earlier comment that the WHO’s war on vaping was “positively unhinged” and flew in the face of evidence that it reduced smoking. And here he illustrated his point by quoting Chris Snowden of the Institute of Economic Affairs as saying the WHO had doubled down on its hostility to vaping even as real-world evidence continued to show smoking rates declining as vaping rates increased.

    Ridley’s was the first keynote presentation of the event, and, while it did not contain much else that was new, it ran through most of the underlying issues causing concern to the vaping industry, and it did so with panache. He covered, among other subjects, the assessment of relative risk and its relationship with the concept of harm reduction, innovation and the main ideas that motivated some people, including some public health professionals and politicians, to want to ban the technology underpinning vaping.

    The first motivation, he said, was down to the inappropriate application of the precautionary principle in answer to the question, “What if this technology turns out to have unknown risks?” While that question was valid, he added, in the case of vaping, the answer was that it would be better to take the small risk that there were unknown hazards than the known risks that there were large hazards. The second motivation was a general hatred of all things related to nicotine, which was deeply ingrained in the culture and underlined by the involvement of tobacco companies in the vaping industry.

    The third motivation was self-interest. The pharmaceutical industry had a nice little earner called nicotine-replacement therapy, and since its patches and gums didn’t work very well, the market for them remained limitless. And the fourth motivation was simply down to the urge to ban. Some people loved to disapprove, and they were able to come up with all sorts of specious arguments about why they disliked e-cigarettes and why, therefore, they should be banned.

    Ridley, an author whose books have sold more than a million copies and been translated into 31 languages, added to his output in 2020 with the publication of How Innovation Works, and part of his presentation looked at the way in which innovative products often initially meet with considerable opposition. Margarine, he said, had been opposed by dairy producers, refrigerators by natural ice suppliers, tractors by the people who went under the name of the Horse Association, umbrellas by hansom cab drivers, coffee by vintners and the telephone by what sounded like an old curmudgeon worried that this then-new contraption would destroy private life if it were not restricted. (Of course, with most of us now suffering daily from the debilitating effects of vacuous, secondhand mobile conversations, it might be worthwhile revisiting the old curmudgeon’s complaint.)

    The audience, I think, will have been struck by two things in relation to these examples. One, obviously, is that they are all from the distant past. The other is that whereas nearly all of them involve people trying to protect their self-interests, those self-interests comprised their livelihoods and none of their actions threatened to cause direct harm to others. So while the opposition to these products and services can be likened to the opposition to vaping, there is an important difference because unjustified opposition to vaping does directly threaten the well-being of others: current smokers.

    Given that this session report starts with Ridley’s last words, it might be appropriate if it ends with his first words: a gentle plug for his latest book. It had been co-authored by a brilliant molecular biologist at Harvard, Alina Chan, he said, and it was called Viral: The Search for the Origin of Covid-19. “You can buy it in all good bookstores from the middle of November,” he added helpfully.

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    Stefan Bomhard: Putting the consumer first

    Across all industries, the Covid-19 pandemic has been one disruptive force, which drove government intervention, accelerated consumer trends and, as a result, spurred further innovation. The tobacco and nicotine industry, which finds itself in a period of rapid change, has been no exception: Controversial policy led to bans on combustible cigarettes as seen in South Africa, but at the same time, growing health consciousness has led to an increased interest in reduced-risk alternatives.

    Stefan Bomhard, who previously worked in the alcohol industry and joined Imperial Brands as CEO in July 2020 from Inchcape, a global distribution and retail leader in the premium and luxury automotive sectors, shared his views on the longer term transformation of the tobacco and nicotine industry, looking at how stakeholders could collectively be best at making a reality of a healthier future. He observed parallels between the vaping sector and the automotive industry, where manufacturing for many years had been seeking to improve the efficiency of the 160-year-old technology of the combustible engine. “Then climate change became the climate crisis, and the e-engine meant a complete turnaround,” he said.

    Innovation, Bomhard emphasized, can happen only if supported by private sector efforts. As regulation of reduced-risk products (RRPs) edges toward prohibition, unintended consequences such as illicit trade arise. “The industry has to step up and present continuously better choices for consumers,” Bomhard said. “Smokers need to be perceived as informed people who want to make informed choices. There is no single route to tobacco harm reduction, but a billion individual paths.”

    Imperial Brands, which in the past 25 years developed from a domestic player into an international player, sees its role in this development in delivering a better experience for consumers. “From my experience, small players can flourish with the right mindset,” he said.

    While keen to transform the tobacco industry, Bomhard insisted Imperial Brands remains 100 percent committed to combustible cigarettes. “They are the core business for building a harm-reduced company, as they finance the investments in tobacco harm reduction,” he noted.

    To transform Imperial Brands, he explained, additional capacities have been built, including increased research of consumers’ needs. The company hired its first consumer product officer earlier this year. Products will be improved based on the findings of consumer studies. At this point in time, consumers have chosen heated-tobacco products over vaping, according to Bomhard, so Imperial Brands focuses on offering products in that segment.

    Furthermore, a number of new executives have joined Imperial Brands, bringing in new capabilities and contributing to the development of a new, more innovation-headed mindset in the organization. The focus is on the question of how employees can play a practical role in driving innovation, Bomhard pointed out.

    In addition to harm reduction, he went on, the industry had other important challenges, inclusive of supporting better lives for farming communities, transitioning to a lower carbon business model and reducing waste. “The future of the industry will without doubt have twists and turns,” he said. “For me, having enjoyed a career in a variety of fast-moving industries, each one of them facing major structural changes, the year with Imperial has enforced my first impression that right now, there is no more dynamic sector than tobacco and nicotine.”

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    Panel: What is Next for Tobacco and Nicotine

    The vaping industry faces many challenges. The road to a viable future for these products must pass through sensible regulations based on science. In the current environment, unfortunately, this will be challenging, according to speakers on the GTNF plenary panel The Fork in the Road: What is Next for Tobacco and Nicotine. Misperceptions surrounding nicotine and vaping products, the panelists agreed, are furthered by the mass media’s “wonton disregard” for the science behind the tobacco harm reduction potential of electronic nicotine-delivery systems (ENDS).

    One speaker noted that in addition to many countries banning or erecting insurmountable barriers to vaping products, well-funded anti-nicotine activists are attacking the people who are bringing reduced-risk products to adult combustible cigarette smokers trying to quit smoking. These groups are opposed to the tobacco harm reduction that science and innovation can bring.

    All of these activities together only serve to enhance the vaping industry’s problem: the massive public misperception that vaping is as deadly as smoking cigarettes. The fact that a significant number of physicians mistakenly belief that nicotine, rather than combustion, is responsible for smoking-related illness, bodes ill for the perceptions among the general population. “If physicians believe this, imagine the views of the average smoker in Kenya or Chicago, Illinois, or in Australia,” one speaker said.

    While anti-nicotine activists have done their share to misperceptions, the vaping industry too is partly to blame, according to one panelist. The ENDS industry can do a lot more than feel helpless or complain, this speaker noted. Innovation in harm reduction cannot occur without the vaping industry’s support. That means responsible marketing, combating illicit trade, limiting youth access and making sure that the ENDS industry is doing what it can to prevent underage use.

    Panelists also expressed concern about the direction of the vapor market in the wake of the U.S. Food and Drug Administration’s marketing denial orders (MDOs), with some describing a “Wild West” scenario. After receiving MDOs, some companies have turned to synthetic nicotine because that product currently is outside of the agency’s jurisdiction. A panelist said that the FDA’s “scorched earth” approach to flavored products is only creating bigger problems in the market, adding that if a market isn’t regulated, there is still going to be an unregulated illicit market that has the potential to be more deadly than that for combustible tobacco.

    “Nobody wants kids to take up the products … it’s a very significant responsibility that we in industry be there to be the stewards of that concept in generating science and evidence,” a panelist said. “We should all be proud of the good science that is being generated … that is our responsibility: to generate and publish and participate in the scientific debate and pursue reasonable regulation. What is reasonable? I don’t know. It’s not going to be nothing. We all have to get over it and figure out what is the right way forward so we can go back to helping the consumer and making sure we’re only serving smokers who are looking for alternatives to combustibles.”

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    Amanda Wheeler: Continuing the fight

    Amanda Wheeler got involved in the vapor business after a personal tragedy. Despite a cancer diagnosis, she was unable to quit smoking for years—until she discovered vapor products. Eager to share her success with others, Wheeler and her husband, Jourdan, opened JVapes, an e-liquid manufacturer and retail store in Prescott, Arizona, USA, in 2012.

    The business was successful, quickly expanding to multiple locations across three states. Wheeler was helping her customers quit smoking combustibles and became increasingly involved in advocacy.

    In October of 2020, Wheeler and fellow business owner Char Owen created the American Vapor Manufacturers Association (AVM) to help small businesses navigate the U.S. Food and Drug Administration’s onerous premarket tobacco product application (PMTA) submission process. The organization also engaged in federal lobbying and sought to provide reduced-cost scientific testing and expert regulatory compliance advice to members preparing PMTAs.

    The deadline for submitting PMTAs to the FDA was Sept. 9, 2020. Wheeler submitted timely applications and was allowed to keep her products on the market for up to one year while the FDA reviewed her submissions. But on Sept. 9, 2021, Wheeler received a marketing denial order (MDO). The regulatory agency appeared determined to put the company she and her husband had built, along with the industry she passionately defended, out of business.

    That day, the FDA issued MDOs to more than 130 companies, requiring them to pull an estimated 946,000 products from the market. The bloodbath continued in the following weeks. At press time, the FDA had issued 323 MDOs accounting for more than 1,167,000 flavored electronic nicotine-delivery systems (ENDS). As of Sept. 28, not a single ENDS had been approved.

    “[The] FDA knew that they didn’t have the time or the resources to give our products fair consideration, but instead of asking for help, they let the 9/9 deadline pass and left the more than 500 companies subject to their decision in an unstable and probably untenable position,” Wheeler explained. “The FDA’s arbitrary ruling effectively criminalizes thousands of long-standing businesses in communities all across the country. Those entrepreneurs now have to junk their inventory, fire their employees, stiff their investors, and defer their dreams.”

    Wheeler said she was standing up for the “little guy”—the thousands of small business owners who manufacture, distribute and retail open system products in vape shops all over the United States. She explained that her business and other AVM members made every attempt within their means to comply with the FDA regulations. It was an expensive process. It was also a system designed for small businesses to fail from the very beginning, she said.

    “My company personally submitted several hundred thousand pages of documents to the FDA in an attempt to comply with this one premarket tobacco application standard. The [FDA’s] decision doesn’t just make a mockery of that earnest work. It also makes the more than 10 million Americans who made the switch to vapor products—in our vape shops, with our liquids—into outlaws, too,” said Wheeler. 

    Wheeler said the FDA, in an act of “regulatory arson,” was creating a tobacco-led monopoly over the vaping industry, as only the companies with the deepest pockets stand a chance to survive the agency’s cumbersome PMTA process.

    She also focused on what she perceived to be one of the biggest challenges facing the industry today: misinformation. “There is one other group I want to address with my time here. It’s the activists and the press who—whether because they are misguided or malicious—spread the falsehoods and distortions that directly led to this tragic outcome,” she said.

    The biggest victims of the FDA’s actions, according to Wheeler, are the vapers who will now struggle to acquire the products that have helped them stay off of cigarettes. Wheeler vowed she would continue to fight for her customers and fellow business owners. “Even through their dismay, I am hearing a constant refrain: We are not going to stand for it,” she noted.

    “We will be at the FDA’s doorstep demanding answers or forcing them through Freedom of Information Act laws and the courts. We are not surrendering our business or abandoning vapers to cigarettes,” she said. “As we say in Arizona, this is more than just a fight. It’s going to be a reckoning.”

    Joe Murillo and Todd Cecil: The regulator’s view

    When the U.S. Food and Drug Administration began issuing marketing denial orders (MDOs) for vapor products, the industry was understandably shocked. Many companies that had submitted timely premarket tobacco product applications by Sept. 9, 2020, had expected to first receive a deficiency letter and not immediately an order to remove their products from the market. Some MDO recipients complained the agency had “moved the goalposts” by suddenly requiring studies that it had previously said were not required.

    At least three companies have filed lawsuits over their MDOs. All are accusing the agency of making “arbitrary” decisions and not reviewing the submitted data according to the statutes. In a “fireside chat” between Joe Murillo, chief regulatory officer for Juul Labs, and Todd Cecil, deputy director of the Office of Science for the FDA’s Center for Tobacco Products, during the recent GTNF in London, Cecil acknowledged the missing data that caused the flurry of MDOs is not required by the statutes that regulate tobacco products.

    When asked what the “level of expectation” the FDA had in deciding whether to issue a deficiency letter or an MDO after a premarket tobacco product application (PMTA) was moved into scientific review, Cecil said that the agency followed “a randomized approach” to choose the applications the FDA would work on.

    “The randomized approach identified a number of manufacturers’ products that went into this scientific review, and we … evaluated them from top to bottom,” he said. Cecil noted the agency began to see in some applications that “tended to have problems or missing materials that we needed in terms of benefits [of flavors]; that we learned we have to have that benefit piece … that evaluation that we spent several months working on taught us what we had to look for to be able to [conduct] a full scientific review.”

    Cecil said that the agency just figured “if we know going right in that there are pieces missing, why will they go through a deficiency process and with a very short turnaround expecting to get back a full study that wasn’t completed previously?” So, instead of issuing a deficiency letter as required by statute, the FDA just handed out MDOs because the agency knew that it would take a company a significant amount of time and expense to conduct the new required longitudinal and cohort studies. Cecil was then asked why the agency filed the applications in the first place.

    “We had to make a determinant how can we streamline this evaluation and determine those products that have at least the bare minimum for us to do a real and complete evaluation,” Cecil said. “This evaluation is not a standard. It is not a de facto standard or anything else. This is information that we need to see, but it’s not a requirement. An RTF [refuse to file] are those things that are required by the statute. And these studies are not necessarily required by the statute.”

    The FDA has also been facing an unprecedented amount of scrutiny on how its handling of regulation of electronic nicotine-delivery system (ENDS) products and the PMTA process. Numerous health groups, anti-nicotine groups, states attorneys general and even members of Congress have criticized the FDA and demanded action. When asked if the FDA’s actions were influenced by these groups, Cecil said the agency focuses on science.

    “We’re science-based,” he said. “We need look at what is presented to us in the application and in the laboratory. That is what we’re most focused on. If there is new data out there and that new data is brought to our attention through one of these [groups], then that’s fine. We would be happy to get those up and understand the bigger picture, all of the data … We need to evaluate those as scientifically or make a determination based upon that science.”

    Only 100,000–200,000 products remain under FDA review. Of the 6.7 million submitted PMTAs, all others have received either a refuse-to-accept, an RTF or an MDO response. Cecil denied the agency was making a “categorical policy decision as opposed to an application-by-application decision” about flavored products. “We are stating that we understand that there is a significant youth initiation risk that comes from flavored ENDS products,” he said. “We are, in fact, reviewing all of those, and what we have found as we’ve done our reviews is that none of the literature is sufficient to demonstrate that there is not a youth initiation risk for individual flavors.

    “We see that tobacco has a lower initiation risk. We see that menthol has some issues with it, and we are going to be evaluating that as we go forward. However, all of the data points to the flavored products as having significant youth initiation concerns. So what we’re looking for is an adequate indication that there’s a benefit on the other side of the equation. This is not a decision that we aren’t going to accept flavored products. Absolutely opposite. We need to ensure that there is concrete and robust data that demonstrates that there is an existing user benefit for those products.”

    Cecil declined to say when more MDOs would be issued or when the agency would rule on major products, such as Juul, NJOY, blu and Vuse. “We continue to work diligently,” is all he would say. “There are a number of products that are well along. But no, I can’t tell you how many are those ones, but there are some that we’re hoping to move forward in the short term.”

    The FDA’s recent action against flavored e-liquids does not mean that the FDA will never approve a flavored e-liquid, according to Cecil. He said that the rejected applications just lacked the required information that those products met the agency’s “appropriate for the protection of public health” standard. “You are welcome to reapply once you have addressed the issues that we provided to you,” he said. “And we will reevaluate that at a future date.”

    Investment Panel: A New Case for Tobacco

    Despite the rough ride for tobacco stocks in recent years, the investment case for tobacco and nicotine remains strong, according to the participants in the Global Tobacco and Nicotine Forum (GTNF) 2021 investors panel. Under the direction of Eric Bloomquist, four prominent tobacco analysts—Jonathan Fell of Ash Park Capital, Rupert Wilson of Strategic Business Consulting, Pieter Vorster of Idwala Research and Gaurav Jain of Barclays—debated the outlook for tobacco in a rapidly changing business environment. Even as the industry suffered from Covid-19-related fallout, its legendary pricing power remained intact and continued to deliver profit growth and cash flow. With supply chain disruptions affecting many sectors, tobacco has even become a safe hiding place again, one panelist ventured.

    That said, some companies have clearly done better than others. Those with greater exposure to noncombustible products are attracting higher valuations than those with a lower portion of their revenues coming from that business, and the panelists debated whether that discrepancy would prompt investors to pressure the underperformers to “get their act together.” Not everybody was convinced. As one participant pointed out, shifting the world’s 1.1 billion smokers to noncombustibles is a very long-term project. “Realistically, there is time for the companies who don’t have the right strategy to eventually get there,” he said. A word of caution was also uttered against compromising the cash flow machines: The transition to less risky nicotine products requires lots of investment, and many of those funds are still generated by sales of traditional cigarettes.

    Speculating on possible mergers and acquisitions, the panelists considered a reunification of Altria Group and Philip Morris International unlikely in the near future. As one participant pointed out, PMI has publicly committed to deriving more than 50 percent of its net revenues from smoke-free products by 2025. Because Altria currently receives a smaller share of its earnings from such offerings than does PMI, it would be harder for the combined entity to meet PMI’s target. What’s more, many PMI investors like the fact that they can currently choose whether or not they want exposure to the uncertain U.S. market—an option that would no longer be available after any merger.

    One panelist suggested Swedish Match as an acquisition target for PMI. After the recently announced separation of its cigar business, Swedish Match would offer PMI attractive complementary smokeless businesses, such as snus and modern oral, the panelist said. Others contemplated the possibility of spinoffs by Imperial Tobacco, which has announced greater focus on its core markets. The problem here, noted one panelist, would be the buyer: With all large tobacco companies keen to reduce their dependence on combustibles, there is no obvious taker for such a business—at least not among the publicly listed firms. This, in turn, led to speculation about the designs of China’s State Tobacco Monopoly, which is not accountable to shareholders—but the panelists quickly agreed it was futile to figure out “what is happening in China.”

    The discussion then turned to the impact of environmental, social and governance (ESG) initiatives on investors. Would tobacco companies’ efforts to transition smokers away from deadly combustibles prompt investors who might otherwise have shunned the sector to take another look? Panelists agreed that the Foundation for a Smoke-free World’s Tobacco Transformation Index, which evaluates tobacco manufacturers on efforts and actions relating to tobacco harm reduction, could prove to be a valuable tool for investors. Companies that are doing the most in this area are already enjoying the best valuations, one panelist pointed out. They also pointed to the entrance into the market of new nicotine companies that offer no combustibles, such as RELX and SMOORE, which have broadened the options. PMI’s recent acquisitions of pharmaceutical companies, such as Vectura, could also generate interest from a new class of investors, the analysts ventured.

    At the same time, the panelists acknowledged the challenges facing tobacco companies in escaping the tobacco “taint.” Many financial websites offer investors a dropdown menu with the option to exclude “tobacco”—a broad label that includes both companies wedded to traditional cigarettes and firms at the forefront of transitioning smokers away from such products.

    One panelist detected a marketing opportunity. Its premise would be simple: Rather than pretending tobacco companies don’t exist, such a fund could offer to invest in their depressed stocks and help them change. “That would be a useful approach for the world and an interesting proposition for investors,” he said.

    Open Mic: Tackling the Hard Questions

    One of the panelists at the final session of the Global Tobacco and Nicotine Forum (GTNF) 2021, the Open Mic, indicated that he and his colleagues were spending a lot of time trying to validate innovative ways of substantiating tobacco harm reduction. He was responding to a question about whether breaking through to those so far unconvinced about the harm reduction credentials of new-generation tobacco/nicotine products would require more research or whether a different approach was needed. It was obvious that regulators would want to see the results of high-quality studies, he said, but what was not so obvious was what kinds of studies were needed. It was known, however, that if somebody stopped smoking tobacco, they benefited from a whole world of physical improvements that could be measured; the problem was how to measure those changes effectively and in a timely manner.

    The Open Mic session lasted one-and-a-half hours and provided event participants with the opportunity to ask some challenging questions, one of which touched on the fact that in some tobacco markets, up to 35 percent of smokers are occasional or nondaily smokers, most of whom don’t use other nicotine products on days when they don’t smoke. Given this, what was the role of nicotine in moving people away from combustible products?

    One response suggested that the issue of addiction or dependence was oversimplified, as though all smokers were the same and all were addicted, an idea that was not entirely true. There had been overexposure of the problem of addiction and dependence, especially in relation to young people, when, in fact, some people were able overnight and without withdrawal symptoms to quit a smoking habit that had lasted up to 40 years. It was time for the book of addiction and dependence to be rewritten.

    Another panelist took the view that the issue of the spectrum that took in addiction, dependence and pleasure was complex, and focusing on it as if it were the main moral question that had to be grappled with was not helpful. Having such a focus was to miss the target. The target should be to reduce risk and to reduce disease. In fact, the important moral question was do physicians and members of the scientific medical community give smokers an additional option or not? Do they provide them with proper guidance on how to quit but give them the right to choose, or do they condone only the methods of which they approve?

    Broadly speaking, the Open Mic session included three panelists from the world of science and healthcare and three from the world of business, one of whom appeared remotely from China. The session started, however, with a comment from one of its two moderators, who said the 2021 GTNF was the first conference she had been at where the consumer was front and center. But there was a sting in the tail. Some consumers, she added, those who still used traditional tobacco products, were not at the center except in the sense that they were the subject of discussions on how to get them to move to one of the many new-generation products coming onto the market. In a way, the suggestion seemed to be: Where was the “T” in GTNF?

    A corollary to this question came up later when it was asked whether committed traditional tobacco users should be continually bombarded with information by those wanting them to quit or switch to less risky products or whether, at some point, it should be accepted that since they were determined to continue with their habit, they should be left alone to enjoy it. Nobody got to grips with this question, perhaps because it was too raw or because this “hard core” of smokers would make up the 5 percent who would still exist in countries that had “eliminated” smoking. Although one panelist made the point that in a relatively free world, people should be allowed to do what they wanted to do with a legal product, most merely suggested that new-generation products and the messages around them should be improved, presumably until even the hard core of smokers came on board.

    There is clearly a problem with such communications, however. One simple but insightful question asked where a smoker looking to quit should go for advice. This presents a conundrum because the tobacco/nicotine and pharmaceutical industries have financial interests in the outcome, many healthcare professionals are ill-informed and social media is crawling with conspiracy theories. One panelist made the point that it could turn out that your friend who had already benefited from switching from consuming traditional tobacco products to using new-generation products could prove to be the most important medical adviser you would ever consult.

     

  • David Levy

    David Levy

    Photo: Malcolm Griffiths

    In his keynote speech, David Levy, professor of oncology at Georgetown University in Washington, D.C., looked at the divide between public health and the industry, which, he indicated, judging from GTNF discussions, might not be as great as he had thought—although, it might be greater in some parts of the market than in others. One of the topics perhaps most overlooked in the discussion about harm reduction, he pointed out, was market structure and competition, which generally play an important underlying role. “They are not only important in understanding the use pattern itself but also in the interaction between public health policies and the industry,” he said.

    Levy distinguished between the industry before 2005 and after. Pre-2005, it was clear to the U.S. Federal Trade Commission, and in general, that cigarettes were a distinct market. Since the 1950s, the industry had become increasingly concentrated, with Altria gaining a 40 percent-plus market share, making it a dominant player. The industry of that time was also characterized by high barriers to entry—it effectively controlled retail shelf space, thereby limiting competition, introduced predatory pricing and used a coupon system for customer loyalty. The lines were clearly drawn; there was stability. Tobacco control had a number of policies, and their target was clear.

    Around 2005, the market started to change. Price sensitivity of consumers increased. U.S. smokers started to switch to other products, at first to little cigars and later to vaping. The market suddenly became much broader than cigarettes. “One of the most important changes was that sales of vape products took place on the internet and in vape shops—a whole new arena,” Levy explained. “Both [sales points] also played an important role in providing information on the new products.” Levy doesn’t expect the heated-tobacco products sector to see the same competition as e-cigarettes. The current tobacco market, he pointed out, showed an exceptionally steep decline in youth and young adult smokers, which have fallen by 60 percent since 2013. Levy called this a vital alteration.

    He predicted stricter policies toward cigarettes worldwide, including the introduction of health warnings, menthol bans and a higher selling age. “Pressure on cigarettes will increase,” he said. For vape products, Levy forecast, the future was uncertain. The outlook for the industry remains unclear in the wake of the marketing denial orders issued to tobacco companies after Sept. 9, according to Levy. “I don’t think it’s the final word from the Food and Drug Administration,” he said. Levy suggested the industry accept the uncertainty—which he thought was here to stay—and embrace change. The United Kingdom and New Zealand with their progressive tobacco harm reduction policies provided examples for others to follow. “Things will slowly change,” said Levy.

  • Science

    Science

    Photo: Malcolm Griffiths

    Regulators globally are becoming more understanding of what they expect next-generation tobacco products to accomplish. Regulators want manufacturers to demonstrate, on a product-specific basis, whether the vaping products are a benefit to combustible cigarette smokers. More importantly, manufacturers must ensure that vulnerable populations such as youth are not using these products.

    During the lunchtime GTNF panel “Science Driving Innovation,” one speaker also mentioned that manufacturers must be more conscious about the environmental impacts of vaping products too. The environment is a big issue in the minds of governments, regulators and society as a whole. The panelists agreed that vaping manufacturers should produce products that are environmentally sustainable.

    “Think about all the batteries that go to waste every time an e-cigarette is disposed of. What are we doing as an industry to address the fundamental questions that society and regulators are concerned about?” a panelist asked. “We need to start thinking about what views of science we need to really put our investments in [and start] focusing on going into the future.”

    Another major industry concern that should be addressed through innovation is youth initiation. One panelist said this topic should be a primary focus of scientific efforts relating to vaping products. Reduced-risk products must exist for adult smokers, so it’s imperative that the industry proactively addresses the underage use issue. “If we don’t, others will try to do it for us, and then collectively, we will all compromise the potential that [we are focusing on during the conference] today,” one panelist said. “It’s a critical balance. It’s important that we offer adult smokers an alternative, and we can also combat underage use. We can do both, and we must because there’s too much at stake if we don’t.”

    Another speaker discussed her company’s global retailer compliance monitoring program. The company sends thousands of “mystery shoppers” into U.S. retail outlets that sell its vaping products and collects data around whether the retailers are abiding by federal age verification laws and/or other local policies.

    “What we found is that retailers need help. There’s a lot going on in this world. We help them by providing information on how they’re performing, education and training, and we can also assist in changing their existing point-of-sale technology,” she said. “It can actually prompt the clerks to check ID when they’re selling an interesting new product. And it alleviates the mental burden on their end.”

    Another concern for the industry that can be addressed through innovation is improving nicotine delivery and satisfaction. That satisfaction delivered by products today is not enough to sustain the large number of people we want to see switching from cigarettes to electronic nicotine-delivery systems.

    “To achieve meaningful harm reduction, we need these products to appeal to and be affordable to most adult cigarette smokers. Which means those consumers would need to like the product and be able to afford the product,” a speaker said. “They need to be able to trust these products, and it requires a significant investment in innovation if you want to do it properly.”

  • Innovation

    Innovation

    Photo: Malcolm Griffiths

    Innovation is grounded in regulation. Regulators can either embrace innovation as a tool to support harm reduction, or they can regulate them to the point that any innovation is impossible to bring to market. During the GTNF panel Innovation as the Path to Progress, one speaker explained that the U.S. Tobacco Control Act was written with the goal that the state of public health will change over time. The idea is that as smokers quit and product standards are implemented, many may migrate to products lower on the risk continuum. As a result, as the state of public health changes, the products that the U.S. Food and Drug Administration determines to be appropriate for the protection of the public health (APPH) will also change.

    “If you think about the significance of the innovation of the e-cigarette, today we have major companies that are in the tobacco space talking about eliminating combustion altogether,” a panelist noted. “We have companies giving up their entire combustible segments, and that would not have happened, in my opinion, had it not been for the innovators.”

    Making innovative progress in the vapor industry is measured by transitioning adult smokers to noncombustible products, according to the panel. However, there are many avenues to accomplish this goal as well as numerous obstacles. One speaker offered the audience three focus areas that he described as the pillars of innovation. The first pillar is product innovation. “If the product is not satisfying, people are not going to switch,” the speaker said. “In order to get there, we will need a very disciplined, science-based approach in understanding some of the questions underlying satisfaction. As we think about innovation and product innovation, it’s important for smokers to have a range of products to choose from.”

    The second pillar is scientific innovation. There must be a comprehensive assessment of science to demonstrate that a product is APPH, and while all novel products tobacco products must be held to this high standard, it is rigorous and takes time. There are innovations in scientific methodologies that must be made, the speaker explained.

    The speaker cited dissolution methods to understand nicotine release profiles and computation of toxicology as examples of tools that can help accelerate this pathway for getting products in the market. “Along with that, I think that regulators have an opportunity to create some innovative processes,” the speaker said. “For example, establishing product standards that will hopefully help these products be reviewed in an expedited manner, and most importantly, get them in the hands of consumers.”

    The third pillar is communication. The industry needs to make clear the benefit to smokers by switching to noncombustible products. The industry needs to address the misperceptions surrounding nicotine and the wrong assumption nicotine causes cancer. “This clouds the decision-making process of adult smokers,” the speaker said. “As manufacturers in the U.S., we have to seek FDA authorization before we can communicate a modified-risk or modified-exposure order. That, too, is important but time-consuming and resource intensive. This is a responsibility for everybody to explore innovative communication approaches that can address these misperceptions.”

    Another area ripe for innovation in the electronic nicotine-delivery system industry is environmental sustainability. For example, e-cigarette batteries contain heavy metals. The industry must innovate battery technology that will reduce their products’ environmental impact. Responsible disposal of any product is important. Regulation can also impact environmental issues. In the U.K., for example, requiring 10 mL bottles instead of larger bottles creates more waste.

    Finally, synthetic nicotine also offers innovative advancements for next-generation products. “I think that when we talk about moving away from combustion, that is one thing, but when we talk about moving away from tobacco—in other words, giving consumers a truly tobacco-free option—that’s where science comes in,” a panelist explained. “The promise that is involved with synthetic nicotine is significant. They need to research it closely and recognize that it does provide certain benefits that perhaps the tobacco-derived nicotine does not.”

  • Frank Han

    Frank Han

    Photo: Malcolm Griffiths

    During a keynote address for GTNF, Frank Han, senior vice president of Shenzhen SMOORE Technology Co. and CEO of its FEELM business division, said that there are exciting innovations—big and small—happening every day in the vaping industry. Vaping products using FEELM atomization technology have now reached millions of users in more than 50 countries.

    “Vaporization technology is still just at the beginning; we could welcome the opportunity for innovation to create a better life together … Basic Science Innovation has been the cornerstone for sustainable growth; it is the science of atomization that we need to build as the foundation supporting the industry,” he said, speaking through an interpreter. “As a firm believer of innovation, SMOORE has integrated disciplines like engineering thermodynamics and biomedical sciences into our atomization research.”

    SMOORE has been actively learning to understand and assess the long-term health effects of vaping, according to Han. The company currently has seven research centers between the U.S. and China, “bringing in global talents” from different backgrounds. In addition to in-house R&D resources and efforts, SMOORE is also focused on partnering with leading universities to transform the company’s scientific discoveries into applied technologies. “The way vape products are manufactured is also constantly evolving; more effectively and definitely more environmentally friendly,” said Han.

    SMOORE had begun operations using the first fully automated pod production line in the world. Each new manufacturing (single) line can produce 7,200 standard vaporizers per hour, double the previous generation’s output. “We have been working with business partners to improve sustainable practices in all stages of product development, especially manufacturing with the common goal of reducing carbon footprint,” said Han.

    SMOORE is currently evaluating the underlying technology of atomization for its potential applications in other fields. “With one direction of our R&D focus on the atomization application in healthcare, I am proud that SMOORE has made progress on the research of atomized medication, along with partners from different sectors,” Han said. “The initial results are all positive. We are hoping in the near future, more and more people might be able to inhale medicines or even vaccines with atomization devices.”

    Looking ahead at the vaping industry overall, Han said that policymakers and NGOs must be inclusive. Regulation has been a heated topic recently in both the U.S. and China, and while institutional innovations to promote healthy industry development and more balanced regulations are needed, regulators must also embrace vaping as a strategy to improve public health while safeguarding against youth initiation, he said.

    “The global media must also be inclusive. We must value the media that report from an unbiased perspective, involving more people in the public dialogue on vaping, discussing the pros and cons and discovering the truth,” said Han. “I’d like to share an old Chinese saying here: ‘Though the road ahead is dangerous and difficult, we can only achieve our goals with constant efforts.’ We must press ahead with a sense of perseverance to expect a better future.”

  • Consumers

    Consumers

    Malcolm Griffiths

    For many people, the threats they face in day-to-day life are far more immediate than their long-term health. The mission of harm reduction should be to empower people to make their own choices about what products they consume and their own health decisions, even if those decisions don’t align with what public health experts would say is optimal. This was the general focus during a plenary panel discussion at the GTNF called Consumers: The Key Stakeholders.

    Most of the session centered consumers standing up and advocating for the industry, the global attacks on flavored e-liquids and growing threats from the World Health Organization (WHO), which remains suspicious of tobacco harm reduction. Panelists agreed that while some consumers prefer to remain on the sidelines, many others are willing to get organized and campaign for tobacco harm reduction and the vaping industry. “The consumer voice is very powerful,” a panelist said.

    A major concern for the vaping industry is the concerted campaign against flavors. Flavors, according to one panelist, are used to by the industry’s enemies to redirect the conversation toward children. “They’ll say vaping flavors attracts children, and then they get us to play in their playground,” he said. “It’s very different. You [consumers] have got to keep asserting that adults use flavors.”

    The WHO is a threat no matter what, the panel agreed. The global health body is now even talking about redefining smoke to include anything that’s heated and emits a vapor. “This means that any customizability of a product will be restricted and have limits on it, which basically means all the vape products will be the same,” explained one panelist. “These [recommendations] have to be resisted. The WHO doesn’t make laws, but it’s very influential, and these things can’t just be waved away.”

    The scientific studies the WHO uses to justify its negative view toward next-generation products as tools for harm reduction are “fantasy and cherry-picked” studies, according to another speaker. “The people who are against harm reduction will never sleep. They’re always working, and they’re highly funded,” a panelist said. “[Consumers] have to stay alert, and they have to stay organized because, at the end of the day, there are more consumers than there are activists against harm reduction, and we’ll vote. So, consumers really have a big role to play.”

    Consumers are the key stakeholders. However, when talking about consumers, regulators must acknowledge that not every smoker is the same, according to the panel. Many smokers don’t want to quit combustibles. “The important thing is to understand why and respect their choice,” a panelist said.

    One speaker said that the industry also needs more responsible vape reviewers on YouTube because the current ones “are absolutely appalling.” The speaker urged consumers to make their voices heard in politics. “You’ve got to have somehow to get ahold of your Parliamentarians or your politicians in your country and get them to campaign on your behalf because there are many, many consumers, but you haven’t got great voice in government, and that’s what you really need to try and get,” he said.

    At the end of the session, an audience member asked the panel if it could see a situation where consumers would sue regulators over counterproductive rules, such as flavor bans. “I have mentioned the fact that it would be interesting if someone could do a test case, but I don’t know whether that someone could come from the consumer side and sue [over regulatory action],” the panelist said. “It’s also expensive, and someone will end up having to pay if you lose.”

  • From Local to Global

    From Local to Global

    Photo: Malcolm Griffiths

    African countries tend to formulate health policies based on advice from the World Health Organization, a strategy that is problematic when it comes to tobacco harm reduction (THR) aspects of tobacco control, participants at the 2021 Global Tobacco and Nicotine Forum (GTNF) were told. The nub of the problem is that tobacco control advice is filtered through the WHO’s Framework Convention on Tobacco Control (FCTC), which was written toward the end of the last century in an attempt to deal with the ill effects of combustible tobacco. Consequently, since no attempt has been made to write a new framework relevant for the innovative noncombustible products developed this century, the WHO has no adequate framework with which to help governments regulate these new products appropriately.

    These points were made during the plenary panel “From Local to Global: Regulatory Policy Trends.”

    Of course, there is something odd here because the direction of policy travel—or, at least, the policy-advice travel—is in the opposite direction to that suggested in the session’s title: It goes from global to national. But that should not be interpreted as the reason for its failings. Things can fall apart just as easily when traveling in the other direction.

    In the U.S., states and other jurisdictions have imposed restrictions on reduced-risk products that have caused increases in smoking, which they were designed to reduce, and increases in sales of illicit products. But at least there is something of a bright side here if you believe that government policymaking is evidence based. In not working, these restrictions provide evidence to use against suggestions that they should be applied more widely, even at a national level.

    I’m not sure that I’m convinced in this matter, but then I come from the land where a lot of people still cleave to the idea that Brexit was a good move: the idea that by becoming more insular we would become more global.

    There is no doubt, however, that the interactions between the local and the global are complex. One presentation made the point that a main principle in respect of environmental issues was that there was a need to think globally while acting locally, something that was applicable in respect of tobacco harm reduction. The FCTC had a floor but no ceiling, so it was up to individual countries to adapt the convention’s articles to suit national, regional and local circumstances. While countries had circumstances that differed one to the other, there existed, too, internal differences. The U.K. had seen a significant reduction in the consumption of combustible tobacco products but not among its marginalized communities. And in Brazil, while tobacco smoking had fallen significantly in urban areas, this phenomenon had not been reflected in the countryside.

    One question that arises from this is, how local do you go? If you return to the title of the session, it is obvious that there is a glaring omission: smokers. OK, you might argue rightly that smokers aren’t involved in policymaking; we’re not debating in ancient Athens, but surely, they should get a look in—even a walk-on, nonspeaking part? No. The session was told it was obvious from the documents released ahead of the FCTC’s Conference of the Parties (COP9) in November that smokers, who were not at the center when the FCTC was developed, were not meant to be at the center of the upcoming debates. It seemed as though it was easier to ignore them, and this raised a social justice issue.

    Many of the presentations at the session tended toward simply describing the counterproductive nature of much tobacco and nicotine regulation, especially, but by no means exclusively, in Canada and the U.S.—counterproductive, that is, given the original objective was to drain the harm caused by the consumption of combustible tobacco products. Such regulation was focused largely on flavors and nicotine and justified often on the need to protect young people, even though there was little credible justification for such actions.

    Things are different in China, where, it was said, optimists in the electronic cigarette business broadly welcomed a move by the Ministry of Industry and Information Technology to bring these products into line with regulations governing combustible cigarettes. It was hoped that such regulation, designed in part to protect consumers, would bring clarity to the operation of an industry that had so far been largely unregulated while growing rapidly and imposing its own standards in such areas as youth protection and recycling.

    We live in interesting times, and the most interesting regulatory issue on the horizon has to be that concerning synthetic nicotine.

  • Getting to Net Zero

    Getting to Net Zero

    Photo: Malcolm Griffiths

    Globally, illicit tobacco consumption continues to rise. The organized criminal gangs behind tobacco smuggling are clever, creative and adoptive, hence concerted actions are needed to successfully combat their activities. Razvan Dina, police subcommissioner for the Directorate of Preventing and Countering Illegal Migration and Crossborder Crime within the Romanian Border Police, described how the black market in his country in 2021 had decreased in most regions as a consequence of authorities’ efforts and a communication campaign that made consumers aware that buying illicit tobacco products was no victimless crime. Romania shares a long border with non-European Union (EU) countries Moldova and Serbia, where cigarettes are up to four times cheaper. In the first half of this year, police seized 45 percent more illicit tobacco than it did in the first half of 2020.

     

    Sergio Miranda, underground economy specialist in the Quebec police force, presented the Canadian province’s widely recognized anti-black market squad program, ACCES, which was introduced in the 1990s and basically creates ad hoc financing that is given to governmental agencies to fight illicit trade and redirect users to the legal market. Consisting of undercover agents, intelligence officers and technical and strategic analysts, the task force creates medium-term and long-term investigation teams and promotes partnerships with police forces of other provinces and the U.S. The squad focuses on alcohol, tobacco, gaming and cannabis. With regard to illicit tobacco, Canada’s main problem was the massive amounts of illegally imported cut rag tobacco, which were made into tobacco products and redistributed across the border, Miranda said. With the help of ACCES and increased enforcement, the illegal tobacco market in Quebec could be reduced from 40 percent to 12 percent.

     

    Whether consumers turn to illicit products is mostly an issue of affordability, according to Lawrence Hutter, senior adviser for Alvarez & Marsal, who published a report on the topic. The study, which analyzed data from 71 countries across 15 years, representing 82 percent of global cigarette volume and 92 percent of global cigarette retail volume, found that around the world, tobacco taxation overwhelmingly was the key driver for smokers to turn to illegal products. If cigarettes became 10 percent more expensive relative to income, illegal trade grew by 7 percent, the report showed. Valuable lessons, Hutter indicated, came from Romania, Latvia and Malaysia, where sudden increases in tobacco tax caused significant spikes in illicit cigarette consumption.

     

    Sharing his 30 years of experience investigating terrorism crimes with the Police Service of Northern Ireland, Ian Monteith, global anti-illicit trade operations director at Japan Tobacco International, drew a disturbing picture of the criminals behind tobacco smuggling. Like the mafia, they deal in anything that will make them money. In Asia, he pointed out, the Covid-19 pandemic had brought about a new form of slavery—bondage labor. If people couldn’t repay high-interest loans, organized crime gangs took their children and compelled them to forced labor. Consumers who buy illegal products support this system, he stressed.

     

    In the EU, the pandemic also changed organized crime’s operations. With borders suddenly being closed, traffickers could no longer use their traditional routes and had to move illicit cigarette production into the EU. Illegal factories emerged for the first time in Belgium and the Netherlands, from where criminals targeted the high-price U.K. and Northern Ireland markets.

     

    The number of illicit plants has been increasing, and buying tobacco machinery on the internet is easy. A lot of the equipment comes from China. On the positive side, Covid-related border closures restricted the availability of illicit products, especially tobacco. The U.K. earned an extra £1.4 billion ($1.36 billion) in tobacco revenues as a result.

     

    To successfully combat illicit trade, panelists agreed, governments need to realize that well-intended tax and public health policies can inadvertently boost organized crime. They should step up enforcement and explain to the public that buying illicit products is no victimless crime. And they should forge partnerships. The battle against illicit trade can be won only through a joint effort by law enforcement, public health professionals, policymakers and legitimate tobacco companies.