Chair: So welcome to this final session. And again we’ve got one speaker and then we’ll have another expert panel. So it gives me great pleasure to introduce our final speaker today who you’ve met on the panel just now, Deborah Arnott, Chief Executive of Action on Smoking and Health who is going to talk about harm reduction, the profit motive and tobacco industry tactics. Thank you.
D Arnott: Right, well I’d better start at the beginning. Thank you for waiting for me. Being at the end of the day is not always a great benefit in these things.
I’m going to talk about harm reduction, the profit motive and tobacco industry tactics and why caution is necessary. I’m going to start by explaining a bit about our background.
ASH is funded primarily by the British Heart Foundation and Cancer Research UK and we also get funding from the Department of Health for work to help implement the tobacco control, with the implementation of the Tobacco Control Plan for England.
We don’t accept money from the tobacco industry, from the pharmaceutical industry and we would not accept money from the e-cigarette industry either because we have positions on policy issues and we don’t want them to be affected by commercial interests. I’m speaking on behalf of ASH but also I have to say it was difficult to get people from the public health community who have serious concerns about the e-cigarette issue to speak today. And so I am also speaking on behalf of that community, which otherwise wouldn’t really have been represented today. And I have to give my thanks particularly to Anna Gilmour, who would have been here today but was unavoidably detained at another event and Sylvie Peters, because my presentation does rely on research they’ve done.
Right, so what is the profit motive? Well according to Wikipedia, and my husband works for Wikipedia so this must be right, the profit motive is an economic concept which posits that the ultimate goal of a business is to make money. Well, nothing wrong with that. So accordingly businesses seek to benefit themselves and all their shareholders by maximising profits. And that’s a perfectly justifiable position but it means that when one is talking about public health, one has to take that into account in looking at how one regulates. And although I’ve worked in tobacco control for ten years, I’ve spent most of my working life in other places and in other industries and I was a financial journalist and I worked for the Financial Services Authority trying to help redress the effects of ineffective regulation of financial products, which led to a lot of distress and a great deal of financial loss to millions of people, most recently through payment protection insurance, which was after my time, but also through endowments, through pension misspelling, etc., etc. So I’m very cognizant of the fact that regulation has to be appropriate but that lack of regulation has serious potential risks.
So tobacco, well tobacco is, to put it in words that were originally used about the television industry, which is another industry I worked in, a licence to print money. It’s no accident that tobacco companies are the most profitable consumer companies in Europe, because tobacco is highly addictive but legal.
So if we look, and this is research by Anna, the earnings before interest, tax, depreciation and amortisation, which is a good indicator of profitability, BAT 33.7%, Imperial 39.5%, these are figures for 2010. While Diageo are the only other business that comes anywhere it, 31.8%. And the normal figures are much lower, between 10 and 15%. So it’s a very, very profitably industry and in fact any business which can sell nicotine legally has a potential to make massive amounts of money out of its target audience.
Now, the tobacco industry has a very bad track record and there are people in this room who know about this because they work in the tobacco industry. And I love some of the quotes that have come out over the years, particularly this one, ‘We don’t smoke that shit, we just sell it. We reserve that right for the young, the poor, the black and the stupid.’ And a quote from another RJ Reynolds executive who says, ‘We were targeting kids. And I said at the time it was unethical and maybe illegal but I was just told it was company policy.’ He remembers someone asking, ‘Just who exactly were the young people that RJ Reynolds was targeting? Junior high school kids or even younger?’ The reply was, ‘They got lips, we want them.’ So and again, and this is from another company, ‘If you’re really and truly not going to sell to children you’re going to be out of business in 30 years.’
And the tobacco industry is moving in quite rapidly to e-cigarettes. And that’s not a surprise because it’s an evolving business. It’s at a fairly early stage now but it’s at the stage where you start to see consolidation. So we’ve seen nico-ventures, owned by BAT. Intellicigs being bought up by BAT. Blu, one of the really big American e-cigarette companies is now owned by Lorillard. And most recently, Imperial Tobacco has bought up Dragonite and Skycig were bought up by Lorillard in October.
And there are lessons from history and this comes from research by Anna Gilmour about the tobacco industry and its attitude to harm reduction. And this comes from tobacco industry documents revealed in litigation. The interest in smokeless tobacco started in the 1970s and some in the public health community, and it’s been mentioned here earlier today, have seen smokeless tobacco as a real possible benefit to public health. But that wasn’t how the tobacco industry saw it.
BAT repeatedly scoped opportunities in western Europe but what were those opportunities for? The opportunities were to provide the opportunity to make new profits rather than cannibalise existing profits from cigarettes, by targeting smokers who, due to health concerns were considering quitting. Who were also targeted, by the way, by low tar cigarettes, another attempt at reducing harm which never really worked.
To target smokers in smoke-free environments which were growing from the 70s onwards, first in the United States and then elsewhere, and a new generation of better educated, not interested in smoking. And interest was driven by concern about the threat of regulation. The objective was not to cannibalise smoking, we have no wish to aid or hasten any decline in cigarette smoking. Deeper involvement is smoking is 'strategically defensible'. To market the range to younger urban consumers as an alternative way to enjoy tobacco.
And then came a turning point. And that was when the Institute of Medicines study, Clearing the Smoke, was published and it was, the investigation started in 99, and they wrote to the tobacco industry in 2000 about tobacco harm reduction. And the tobacco industry was delighted. From then on there was a major change in rhetoric on harm reduction. Prior to 1999 there were no tobacco transnational documents or corporate materials that mentioned the term, “HR,” or “harm reduction,” and one has to remember that there are millions of these documents that came out through litigation.
From that point on we see a gradual increase in the use of the term, “harm reduction,” and it started to be incorporated in corporate messaging as a PR platform. In BAT’s first social report in 2001/2, harm reduction was mentioned twice. By 2010, there were 247 mentions. What were they looking for? Dialogue and access.
Create dialogue with an access to the public health community, including scientists and policy makers. So David Davies, from Philip Morris, suggested his company could be a positive contributor, indeed a partner in shaping future policy for tobacco. And it was a way to get a seat back at the table, a seat they’d lost through their behaviour over the last 50 years prior to that.
Rehabilitate their image as a responsible business, so BAT’s corporate affairs, CORA, identified reduced harm produce as a reputation management initiative in June 2000, one of six areas in which BAT had the opportunity to demonstrate we can meet reasonable expectations.
So what are my conclusions from that then? To be fair, Anna Gilmour’s conclusions, which I agree with, is that the tobacco companies’ original interest was based a potential for creating a new form of tobacco use to prevent the decline in smoking, and young people were a key target. They ultimately only invested went the public health community showed interest, yet, while they’ve invested in smokeless tobacco, and maximised the PR and policy influence opportunities, there’s little evidence of a genuine business interest. And what they’ve been able to do is largely eliminate the competition in the tobacco and nicotine market maintaining the status quo in favour of highly profitable cigarettes.
And there’s a risk the same thing will happen with E-cigarettes. One of the questions is, will medicines regulation favour the tobacco industry, because if that’s the case, why would I support medicines regulation being as how I don’t want the tobacco industry to dominate this market. Well, it could well favour large well-funded companies, but actually that consolidation is already happening. It’s typical of the stage of development of the industry, and it’s extremely likely to carry on, in fact, I would say inevitable, whether or not we see medicines regulation or not or whether or not we see regulation or not. The tobacco industry has an imperative. There is a fear of the Kodak moment. You know, Kodak, that company that dominated the photographic business which overnight almost went from that to being completely outplaced by digital cameras. Wells Fargo, and Clive quoted Well Fargo earlier, think that the tobacco industry will develop a meaningful presence because of their war chests of cash to invest, retailer presence which ensures broad scalable distribution, expertise at building successful brands, and vast marketing databases of adult tobacco consumers. They’re ideally placed to take over this market and that’s what we’re seeing happen. Is the only concern tobacco industry involvement?
Well, actually, no. I mean, the tobacco industry because of the documents revealed through litigation, we know a lot more about their behaviour, and the product they sell is unusual for a consumer product if not unique in that it kills half of all its users, but actually, they’re just a profit maximising industry like any other. It’s just their product is so much worse. So, other businesses behave the same. Maximising profit is the driver for commercial interest. Maximising profit equals encouraging uptake. So that’s why I think that while we’re not seeing a problem at the moment, I will agree with that and I’ll show you some data on that in a bit, that we need regulation. We need regulation that’s fit for purpose and I think there’s general agreement on that. It’s a potentially a highly addictive and toxic product.
The interests of business, public health and consumers are not the same. The industry wants to maximise sales and maximise profit. Smokers want a safer alternative to smoking. For many of them it’s something which will help them quit, and that’s what they want, that’s what our survey’s show. Public health wants safer alternatives for smokers too, but they want to prevent new entrants. So we need to regulate the product and its promotion to protect consumers and minimise uptake amongst non-smokers and in particular young people. Will E-cigarettes renormalise smoking?
Well that’s one of the real concerns on our side. Now, we’ve done a sample, now this is not as big as our study of adults, it’s much smaller, in fact I think Martin’s in the audience somewhere, I think it’s a couple of thousands, isn’t it? So it’s not a large sample. But what it shows is that, and this is between 11 and 18, which is the legal age of purchase of tobacco, is that there’s a, certainly in 2013, a very small proportion, less than 1%, of never smokers, aged 11 to 18, who tried these products and very few regular users existed except amongst children who were using, already smoking significant numbers of cigarettes a week.
Amongst adults the same’s true. Almost no never smokers in our survey, and that was a much larger survey, that’s 12,000 amongst adults had tried these cigarettes and most of the ones who tried them were still current users but there were a significant minority of users who are now ex-smokers and that’s the prize. That’s the goal. Because as we were discussing earlier, that’s actually where you will, as a vaper, get greatest benefit, is if you’re no longer smoking.
One of the issues that’s been raised is prohibiting E-cigarette use where smoking’s prohibited and ASH has tried to take a balanced view on this. We know there are people in the public health community and also people in local government and various other places who think that this is the best to prevent renormalisation. Well, we’re saying to them, you have to ask questions about what is it you’re trying to achieve through this? What is it you think you need to control? Do you have concerns about the possibility of harm from NCPs, in which case, look at the evidence. Make sure that your policy is evidence based, not evidence free. Ask yourself the question, “Will restricting or prohibiting use of nicotine-containing products support compliance with smoke-free policies?” Do you want your policy to help to improve people’s health? But these decisions are being made all the time at the moment and we know there’s a lot of fear amongst the public health community about uptake and actually that’s another reason for needing regulation, for needing surveillance, for needing to keep monitoring this market, so we can make sure, over time, that the fears that people have do not materialise.
Right. And there’s a real concern in particular about E-cigarettes making smoking sexy again. These are some of the ads I’ve pulled off the internet and you can see that these just look so similar, I mean, for those of us who remember, because either we were old enough or because we work in the area and so we’ve looked at these ads, these just look like tobacco ads from the 1960s. And in fact, I’ve got one there which I really rather liked, “Blow in her face and she’ll follow you anywhere”. (Laughter) I don’t know what that means, but it doesn’t sound good to me. (Laughter)
So, you know, actually the advertising does need to be controlled and the adver-, in this country the Advertising Standards Authority has started to look at this and is starting to get to grips with it and is going to consult. But actually we think that a proper regulatory framework has to have proper regulation of marketing because we don’t want young people thinking that this is the way forward for them. Because actually, it is better not to be addicted to anything. You know, smoking, in and of itself, is the worst thing you can do, but actually long-term nicotine use isn’t necessarily good for you. As Robert was saying earlier, actually, not using nicotine is associated with better mental health than using it. So, regulation and marketing, what we want to see is control of advertising, promotion, and sponsorship, pre-vetting to prevent abuse, to ensure marketing limited to its rational use as Jeremy was saying earlier, and it’s rational use is amongst existing smokers. To prevent market to children, prevent promotion of smoking-like behaviour, because there is a danger there of a gateway effect developing, and to monitor sales, to see who’s buying these products and how it’s working. Is safety really an issue?
Well, I always like this, this is leather sofas from China, and the retailers who sold them have had to pay out £20 million because they packed with sachets of an anti-mould chemical to stop them going mouldy during storage, as a result of which people like this poor baby got terrible burns. Now, that’s fine because you saw that immediately and you were able to do something about it. But the problem with E-cigarettes is that these products are being inhaled and a lot of the things that are likely to do most damage to you, that damage won’t materialise for ten, 15, 20 years. That’s why we want to see regulation to make sure that the toxic substances that potentially could be in the liquid are limited. It’s not good enough to say, “Oh, well, we did a sample of this or we did a sample of that”. We need to make sure that they’re all good enough and our survey shows that vapers and E-cigarette users and smokers want products that are safe. They want to know they’re safe. That’s actually more important to the people who answered our survey than whether or not they’re effective. That’s how important it is.
So ASH wants regulation which ensures that products meets standards of quality, safety and efficacy, provision for monitoring safety in use, including over the long-term, advertising, promotion and sponsorship only to smokers, not to new users or children. And monitoring and managing emerging risks, e.g. of NCPs acting as a gateway to smoking tobacco because regulation needs to be flexible, it’s needs to evolve over time, it needs to respond to what’s happening out in the marketplace and my concern about the Tobacco Products Directive is that something will be set in stone in the Directive which then basically determines how regulation works for the next ten or 15 years. That’s not flexible. But that’s what’s likely to happen because we won’t have it revised again for a long time. And last but not least, thank you very much for listening. That’s who I am. That’s how you can contact me.
We’ve got briefings on E-cigarettes, on Ecigarette use and five questions briefing which is about trying to get people who are considering whether or not to prohibit E-cigarette use to think about what they’re trying to achieve. It’s also up there on our website. Thank you. [Applause]
Chair: Thanks very much Deborah, that was great and particularly grateful for you for coming and stepping up where other’s feared to tread, so thank you for that. Okay, we’ve got time for one or two questions for Deborah directly before we go into the panel, so I saw those two hands shoot up in the middle first.
Farrell Delman: Deborah, I enjoyed your address. Can you tell me the source of the information on the deleterious effects from E-cigs ten, 15, 20 years out? Where’s the data for that?
D Arnott: First of all, could you explain to me what the TMA is, because I know it as the Tobacco Manufacturers’ Association.
Farrell Delman: Yeah, it’s the Tobacco Merchants Association.
D Arnott: So it’s the American equivalent, is it?
Farrell Delman: It is, well, well, not because we have very few manufacturers, we have suppliers, securities, houses, analysts, some are here, who support the TMA, but it’s a broad based group but we don’t do any lobbying.
D Arnott: Well, it’s based on the fact that if it’s got carcinogens, if the liquid has carcinogens in, then actually you’re not going to see a deleterious effect immediately, it takes time. You know, and that’s where actually you have to know now in order to be able to work out what’s likely to happen ten or 15 years down the road.
Chair: Okay, a couple more hands, did you get the second person who I said? Well then there’s, at the back, sorry, I think there’s somebody in this row. I’m happy to go with whoever you choose because it’s quite difficult for me to guide you from the front.
Fraser Cropper: Thank you, Deborah, Fraser Cropper from Totally Wicked. I really enjoyed your presentation and I think there’s been an awful lot of common ground at least between where I see our business and where I see the future regulation, so I commend the vast majority of what you’ve said, particularly when it comes to advertising. One particular question though would be, what would your vision be in two generations’ time, because I will be more than happy for our business to be out of business in two generations’ time if we can stop the door on people coming into cigarettes and allow for those people who are currently smoking to allow for E-cigarettes to assist them to their grave a long time after they probably would have died if they’d continued to smoke and then in two generations leave cigarettes and E-cigarettes behind. Then I think as a leader of my small business I would have done something to contribute to a real significant public health gain. Is that the vision that you have?
D Arnott: That sounds a very good vision, yes.
Fraser Cropper: Altogether, is there some (inaudible 5:44:44)
D Arnott: Well I think that’s the point, I mean I do think that largely in this room people have very similar objectives. The point is that actually we’ve differing views about how to get there and what would be the best form of regulation.
Chair: Okay, we’ll take one more before the panel then. Somebody’s got the mic.
Ian Gregory: Deborah, thank you for an excellent, really excellent presentation, it was very, very interesting. Ian Gregory from Centaurus Communications. I’m fascinated by the issue around barriers to entry because in financial services in every industry, the higher the barrier to entry, the more concentration you’re going to get in an industry. If I was to try and create the biggest barrier to entry of all it would be called medicinal regulation. And I cannot see how it would have anything other than to concentrate power into a very small number of companies and create the result that you don’t want to happen.
D Arnott: Well, I suppose my view is that actually at the moment what we’re seeing is an evolving and emerging market, but what we’re going to see as the major barrier to entry is effective distribution systems and that in order to have effective distribution systems you need to be a large company. And that’s where we’re going to see the shake out and we’re already beginning to see it. And, for example, my local newsagent, let me just see if I’ve got the product, had, I think it was one of these on, no it wasn’t, it was another one, but another smaller product and he’s now replaced it with the NJoy product. Why is that? Because the NJoy distribution system is more effective. So I’m afraid that’s going to happen anyway. And I think that actually these products, and I do, you know, I really do think this is important, the issue is, is medicines regulation going to increase the likelihood of good products coming to the marketplace or reduce it? I actually think there’s a real problem at the moment that the manufacturers, most of them, don’t have a clue how their products work. And that actually if we’re to see successful innovation because none of these products are totally effective. They might work some of them with small groups who are users who are trying, who are innovative users as much as anything else, but the vast majority of smokers out there aren’t innovative users. I spent a lot of time talking to vapers who are not the people who’d come to this room, but, you know, friends, colleagues, people I bumped into in the street who are not actually going to be using these products and aren’t using these products. They’re using cigalikes, they want something simple and easy to use. Now we need innovation to be coming in those products, and I think you get the best innovation by forcing manufacturers to prove how their products work, so they begin to understand a bit better how they work, because I’m not convinced most of them do at the moment.
Chair: Okay, thank you Deborah. I think what we’ll do now is draw up the expert panel, so if those people who have spoken can re-join, I hope you know who you are, it’s Robert, Clive, Jean Francois, Linda and Lorien. [Pause]
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