Warwick Policy Lab Briefing Note: E-Cigarettes
January 2016
Headlines
WPL study on e-cigarettes reveals usage by a substantial minority of smokers adversely
affects their quitting rates significantly lowering overall benefits that some commentators
have emphasized. 1
Our research suggests that relatively low cost policy changes to the regulation of ecigarettes could lead to substantial additional benefits as health related expenditures and
lower productivity costs of smoking are diminished.
Our proposals should not be seen as anti-e-cigarettes; on the contrary we view them as
products that for many smokers make quitting the habit easier than alternative quit aid
products currently available on the market.
Recommendations
Our policy recommendations apply to e-cigarette products that contain nicotine and to
retailers selling such products. They are aimed at emphasising the association of ecigarettes with a desire to cease smoking and at lowering visual priming effects that cause
many current smokers to regard e-cigarettes as a convenient complement to real cigarettes.
They are as follows:
(i)
(ii)
(iii)
(iv)
(v)
1
In stores selling nicotine replacement therapies (NRT), e-cigs should only be
available when positioned alongside NRT brands and sufficiently away from
screened areas storing conventional cigarettes;
A prohibition on the advertising of e-cigs at points of sale and on the screens
used by retailers to keep out of sight conventional cigarettes;
In stores exclusively selling e-cigs and related products and in venues catering to
e-cig usage (such as vape cafes and bars), vendors must display prominent
information about NHS Stop Smoking services and make clear to clientele that
NRT alternatives to e-cigs may also help those seeking to cease smoking;
Packaging of e-cig products should contain a message printed visibly on the
exterior about the dangers of smoking traditional cigarettes and internet
addresses for NHS Stop Smoking services; and
Avoid applying additional taxation on e-cigs so as to maintain their relative
affordability so as to appeal to the large numbers of smokers wishing quit.
The Warwick Policy Lab (WPL) is based within the Department of Economics at Warwick University. It is codirected by Professor Abhinay Muthoo and Siobhan Benita. The WPL has been looking at e-cigarettes in a
project led by Chris Doyle working closely with Daniel Sgroi, David Ronayne and Laura Sochat. Contact
Christopher.doyle@warwick.ac.uk
Study
It is well-known and well-documented that the smoking of cigarettes costs lives and imposes
a huge resource burden. According to the NHS, smoking is responsible for one in five deaths
in adults over 35 in England. 2 It is estimated that smoking cost the NHS around £2.7 billion
in 2006 alone and this is before lost productivity costs associated with absenteeism from
work are taken into account.3
Thus it is not surprising that governments expend considerable resources on measures
aimed at deterring smoking. In the final decades of the twentieth century, policies designed
to deter smoking reaped much success and smoking rates among persons aged 16 years and
older in the UK declined from 46% in 1974 to 19% in 2013. 4
In addition to government interventions, numerous anti-smoking and quit aid products have
emerged in the private sector to meet the needs of the 67-74% of smokers in Britain who
want to quit the habit of smoking. 5 These products, available for purchase and/or on
prescription, are intended to ease the cost of withdrawal and may contain nicotine, in some
instances they are also designed to target cravings. NRT and prescription medications take
many different forms including tablets, patches, nasal sprays, mouth sprays, gum, lozenges
and inhalators.
In the mid-2000s a significant product innovation occurred in China with the development
of electronic cigarettes. E-cigs are inhalator devices that mimic real cigarettes by producing
a vapour (aerosol) that is potentially less harmful than tobacco smoke. 6 Many e-cigarettes
contain nicotine and its presence in vapour generates the nicotine hit.
Since their development, e-cigs have become enormously popular and it is estimated that
around 2.1 million or more adults use them in Great Britain, of which some 1.3 million use
both tobacco and e-cigs.7 It is also estimated some 29% of current smokers use e-cigs. 8 The
popularity of e-cigs likely reflects several factors including perceived lower health risks
compared to tobacco and the fact they do not produce smoke or odours associated with
real cigarettes and hence may be used in places where smoking is banned.
2
http://www.nhs.uk/Conditions/Smoking-%28quitting%29/Pages/treatment.aspx
Page 44 in Statistics on Smoking, England 2015 at http://www.hscic.gov.uk/catalogue/PUB17526/stat-smokeng-2015-rep.pdf
4
ONS at http://www.ons.gov.uk/ons/publications/re-reference-tables.html?edition=tcm%3A77-380033
5
Page 31 in Statistics on Smoking, England 2015 op cit
6
In a government commissioned report published earlier this year researchers argue that e-cigs are much less
harmful than smoking tobacco, see E-cigarettes: an evidence update : A report commissioned by Public Health
England, by McNeil, A. et al Institute of Psychiatry, Psychology & Neuroscience, National Addiction Centre,
King’s College London, UK Centre for Tobacco & Alcohol Studies at
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/457102/Ecigarettes_an_evid
ence_update_A_report_commissioned_by_Public_Health_England_FINAL.pdf
7
Use of electronic cigarettes in Great Britain, Action on Smoking and Health (ASH), July 2014 at
http://www.ash.org.uk/files/documents/ASH_891.pdf A more recent estimate suggests as many as 2.6 million
e-cig users in the Britain, see “Use of electronic cigarettes (vapourisers) among adults in Great Britain” May
2015, ASH at http://www.ash.org.uk/files/documents/ASH_891.pdf
8
HSE13 cited in Statistics on Smoking, England 2015 op cit
3
At present e-cigarettes are subject to light regulatory oversight and treated much like other
consumer products. From 2016 within the EU e-cigarettes will, however, be subject to
greater scrutiny with greater restrictions placed on advertising, labelling and product
characteristics. 9
However, the EU’s revised Tobacco Products Directive (TPD) prescribes regulation that is
uniform in character – a one-size fits all approach – and as a result could amplify some
adverse effects due to what we identify as complementary use. For example, the TPD
directs that packaging of e-cigarettes carry labels indicating that nicotine is a highly
addictive substance. Although factually correct, such a message may reinforce the idea to
some smokers that e-cigarettes are a convenient complement to real cigarettes and result in
quit rates that are lower than might otherwise have been the case.
The meteoric rise in the popularity of e-cigs has sparked a heated policy debate. On one side
many public health commentators have argued that they are an effective quit aid and
illustrate this by reference to survey evidence showing many ex-smokers having used e-cigs.
On the other side of the debate, concerns have been raised about the potential harm of ecigs and gateway effects – the latter being the situation whereby e-cigs might lead users to
conventional tobacco smoking. A good overview of this debate has been published by the
TH Chan Harvard School of Public Health. 10
For many, e-cigs offer a means to quit smoking cigarettes – they are regarded as a substitute
for real cigarettes. However, for some smokers, e-cigs offer the convenience of nicotine
consumption at times and in places when smoking cigarettes may be difficult or impossible.
Research conducted by the WPL has looked into the characteristics of e-cigs usage and in
an online survey of persons that smoke cigarettes and use e-cigs (so-called dual-users) we
found around 37% regard consumption of e-cigs to be complementary to cigarette
smoking. In another survey conducted by ASH (see note footnote #8) around 32% of dual
users (persons who smoke cigarettes and use e-cigs) regarded the products as
complementary.
In other words, a substantial minority of smokers (around one-third or more) appear to be
using e-cigs as a way to sustain cigarette smoking and in effect reinforce their smoking
habit. This is concerning because up until the emergence of e-cigs, tax policies aimed at
raising the direct cost of smoking (e.g. due mainly to taxation cigarettes became 30% less
affordable over 2004-14 in the UK) and designed to deter smoking (largely prohibitions) had
reaped considerable returns as the data on smoking prevalence summarised above show.
However, following the arrival of e-cigs, such policies may be less effective; particularly at
influencing the smoking habits of those who have to date continued to smoke cigarettes.
In general most anti-smoking measures are designed to make smoking appear unattractive
(deterrence) and through taxation make the habit relatively costly. Regulations focus
especially on the way cigarettes are presented to the market (age restrictions, advertising
9
See article 20 in The Tobacco Products Directive 2014/40/EU at
http://ec.europa.eu/health/tobacco/products/revision/index_en.htm
10
See The E-Cig Quandary at http://www.hsph.harvard.edu/magazine-features/e-cigarette-quandary/
restrictions, product positioning constraints, product packaging messages, etc.) and also on
where cigarettes may be used with bans in force in respect of smoking in public spaces.
E-cigs fall outside most of the current regulations targeting cigarettes and thus present an
opportunity for a significant minority of smokers to sustain nicotine consumption in a
manner that mimics smoking cigarettes. Furthermore, advertising restrictions on e-cigs
have to date been minimal and the Committee of Advertising Practice (CAP) in the UK has
only issued guidance in relation to e-cig advertising. E-cigs companies are able to advertise
products on radio, TV and in printed media and via sponsorship including of sport venues
and sports teams (associating the product with healthy pursuits) and have made use of high
profile celebrities in the form of tacit or in some cases explicit endorsement of e-cigs. 11
Unsurprisingly such marketing and use of e-cigs in public spaces has led others to call for ecigs to be regulated in much the same way as real cigarettes. 12 Indeed, numerous
organisations have banned the use of e-cigs (e.g. most airlines, Starbucks, Transport for
London, among many others) and the Advertising Standards Authority has banned some
forms of e-cig advertising. 13 Others, however, have argued and continue to argue
vociferously against making such interventions. 14
Survey evidence, including ours, show that e-cigs serve the needs of at least two distinct
types of smoker: (i) those wishing to quit and view e-cigs a substitute for real cigarettes and
who may have unsuccessfully tried other means to quit in the past, what we call substitute
types and (ii) those with no immediate desire to quit and who find them a useful
complement to their smoking habit, what we call complement types. Our survey evidence
suggests that the split amongst those who smoke cigarettes and use e-cigs is roughly 63%
substitutes and 37% complements. 15
It is the presence of a significant minority of complement types that raises policy concerns.
If e-cigs act to sustain smoking habits on the part of a substantial minority, this could
continue to impose a considerable burden on health related expenditures and public
finances. Furthermore, e-cigarettes also make measures designed to deter traditional
11
Leonardo DiCaprio, Johnny Depp, Katherine Heigl among others have been showcased by e-cig companies as
using e-cigs, see for example http://e-cigaretteuk.org.uk/celebrities-that-smoke/ When the revised TPD
comes into force in May 2016, there will be more restrictions on advertising.
12
An example of such a position was expressed by the American Heart Association in 2014 at
http://newsroom.heart.org/news/american-heart-association-issues-e-cigarette-recommendations. The
British Heart Foundation has adopted a softer but nevertheless cautious approach towards e-cigs calling for
additional regulations at https://www.bhf.org.uk/~/media/files/publications/policydocuments/policy_statement_e-cigarettes_for_sitecore.pdf
13
E-lites adverts featuring a baby in the presence of an adult using an e-cig were banned in September 2013,
see https://www.asa.org.uk/Rulings/Adjudications/2013/9/Zandera-Ltd/SHP_ADJ_219706.aspx#.VksbJ-LkZ-4
14
For example, the UK e-cig firm Totally Wicked (which also operates in the US and Germany) is challenging in
the courts the revised EU Tobacco Products Directive due to come into force next May as “disproportionate
and inappropriate”, see http://www.theguardian.com/society/2015/oct/01/uk-e-cigarette-firm-fights-euvaping-laws-in-european-court.
15
Chris Doyle, David Ronayne and Daniel Sgroi (2015) E-Cigarettes: The Extent and Impact of Complementary
Dual-Use, Warwick Economics Research Paper series in collaboration with the Warwick Policy Lab, October
2015 at
http://www2.warwick.ac.uk/fac/soc/economics/research/workingpapers/2015/twerp_1064_doyle.pdf
smoking less effective. Offset against these effects, of course, are the benefits associated
with substitute types who successfully quit smoking as a result of e-cigs – which is an aspect
often highlighted in marketing led promotions for e-cigs. For example, in the FAQs
displayed for the brand of KiK e-cigs in the UK it presents the following:
“Will KiK help me stop smoking? KiK products are aimed at the enjoyment of the user. Most
KiK products do contain nicotine so you may find it suppresses your appetite for tobacco
products.” 16
Much of the public policy debate in the UK has tended to place an emphasis on the benefits
of e-cigs and has largely downplayed costs associated with use by complement types. This is
in large part due to a lack of evidence regarding the scale of dual-use and in small part
because selling the upside of any story is more compelling. Our work is an attempt to make
some serious headway in disentangling the costs and benefits of e-cig usage across these
two types.
A high proportion of e-cig use by complement types matters considerably for policy design.
If too much emphasis is placed upon the benefits of e-cigs among substitute types, then
policy is likely to lead to relaxed attitudes towards e-cigs (in terms of usage and marketing)
and a fiscal regime that would likely support lower taxation of the e-cigs relative to
cigarettes. Such policy responses would facilitate benefits among substitute types, but
could also result in unintended greater costs by making e-cigs a cheaper and more
accessible product for complement types.
The policy conundrum therefore is how to balance the competing needs of the two different
types of user. Notwithstanding we emphasize in our work that e-cigs nevertheless result in
net benefits. For this reason we are not looking to recommend draconian regulation of ecigs and would not step as far as treating them as equivalent to traditional cigarettes. Such
moves would be mistaken and socially costly. On the other hand, the current liberal
environment and that anticipated following the implementation of the revised TPD are, in
our view, likely to be sub-optimal in that they allow for too many complement types to use
e-cigs as a way of sustaining smoking habits, leading to higher health related expenditures
than necessary.
What is needed are policies that promote the benefits associated with e-cigs, that we and
others have identified and are associated primarily with substitute types, but at the same
time reduce where possible the costs associated with usage amongst complement types
The presence of the two distinct types of e-cigs users makes it difficult to apply standard
economic instruments to meet the common objective of lowering smoking prevalence and
rates of smoking. For example, lowering the price of e-cigs via subsidy might lead more
substitute types to quit, a clear benefit, but equally it might lead more complement types to
continue smoking, a clear cost. While the net effect may be positive, other policy measures
could lead to greater benefits for society.
16
http://www.kik.co.uk/kik-faq
Policy should focus carefully on the environment governing the marketing, sale and use of ecigs so that substitute types are encouraged to use e-cigs and complement types are
deterred. In general we are looking at the choice architecture, the structure of the retail
environment that acts to prime smokers to regard e-cigs as either substitutes (a positive)
and or complement (a negative) to real cigarettes. These effects work via cues.
A cue effect is known as priming in psychology: an implicit memory effect in which exposure
to one stimulus influences the response to another stimulus. An example of priming might
be a visual cue that leads a complement type to crave smoking a cigarette when observing
an e-cigarette or marketing for e-cigarettes. Visual cues are particularly important in this
regard and could lead to context priming. The role played by cues in affecting consumer
behaviour has been an area of much interest in recent years in economics. 17 Cue effects
have also been studied in relation to cigarettes and nicotine addiction; Carter et al (2006)
produced a very influential paper that led to important changes to laws in the UK that
prohibit retailers from making cigarettes visible on in-store shelfs.18 The figure below
shown on the CounterTobacco.org website emphasizes cue effects: 19
In our view, policy should look carefully at how e-cigs are positioned in retail environments
(including pharmacies), at their marketing and in particular at their relationship with
cigarettes and NRT products. For substitute types, e-cigs are more likely to be perceived as
a quit aid and thus it seems sensible to have regulations in place that restrict access to e-cigs
in retail environments alongside NRTs and away from cigarettes. This is not the case today,
as e-cigs are typically positioned by retailers directly alongside cigarettes.
17
See the seminal work by David Laibson (2001) “A Cue Theory of Consumption”, The Quarterly Journal of
Economics, 116 (1): 81-119. doi: 10.1162/003355301556356
18
Carter et al (2006) “A Psychometric Evaluation of Cigarette Stimuli Used in a Cue Reactivity Study” Nicotine &
Tobacco Research 8 (3): 361-369. doi: 10.1080/14622200600670215 at
http://ntr.oxfordjournals.org/content/8/3/361.short
19
Source: http://countertobacco.org/why-retail-tobacco-control-important
Furthermore, there is an ongoing proliferation of new retail stores exclusively selling e-cigs
and vape related products, and new bars and clubs catering to e-cig usage. 20 These new
retail outlets are very often conspicuous and in many cases are aiming to attract persons
who might otherwise have been unable to smoke or use an e-cig in other venues such as in
pubs and cafes. Their appearance and accessibility is likely to appeal to both substitute and
complement types, but from a longer-term business perspective complement types would
likely be more appealing customers.
Vapourlites typifies the aggressive investment into the retail space, as shown in a company
presentation from 2014: 21
Market positioning and closely related visual cue effects are very important and depending
upon the design of the regulatory environment, will likely have different effects on the two
broad class of consumer. Ideally what regulation should seek to do is facilitate a marketing
environment that nudges consumers (especially substitute types) to regard e-cigs as
replacement smoking products and a quit aid.22 For complement types, if their perception
of others’ opinions in the population is that e-cigs are quit aids, it would likely diminish their
attractiveness as a complement to smoking.
20
For example, UK (based in County Durham) e-cig brand Vapourlites opened its first retail store ‘Vape’ in
Watford in December 2014 proclaiming “This is the first store of many and we hope to bring a reliable, quality
Vape Store to more and more towns throughout the UK over the coming months.” See
http://www.vapourlites.com/blog/weve-opened-our-first-vape-store.html
21
Source: https://jj-associates.com/documents/vapourlites_presentation.pdf last visited 17 November 2015
(CDU, Customer Display Unit).
22
The idea of ‘nudge’ based policies has been popularised by behavioural scientist Richard Thaler (see
http://nudges.org/tag/richard-thaler/) leading the British government to set up a Behavioural Insights Team,
otherwise known as the Nudge Unit in 2010 see http://www.behaviouralinsights.co.uk/
We propose a set of policies that are designed to nudge users of e-cigs by favourably
influencing usage among substitute types and where possible diminishing the attractiveness
of e-cigs to complement types:
(i)
In stores selling NRTs, e-cigs should only be made available positioned alongside the
NRT brands and sufficiently away from screened shelfs storing conventional cigarettes;
(ii)
A prohibition on the advertising of e-cigs at points of sale and on the screens used by
retailers to keep out of sight conventional cigarettes;
(iii)
In stores exclusively selling e-cigs and related products and in venues catering to ecig usage (such as vape cafes and bars), vendors must display prominent information about
NHS Stop Smoking services and make clear to clientele that NRT alternatives to e-cigs may
also help those seeking to cease smoking;
(iv)
Packaging of e-cig products should contain a message printed visibly on the exterior
about the dangers of smoking traditional cigarettes and internet addresses for NHS Stop
Smoking services;
and
(v)
Avoid applying additional taxation on e-cigs so as to maintain their relative
affordability so as to appeal to the large numbers of smokers wishing quit.
By imposing regulations that restrict e-cigs as being available only at points of sale alongside
NRTs, non-smokers will more likely form beliefs that users of e-cigs are those seeking to quit
which may subtly and favourably influence attitudes among complement types. For
example, a complement type may be less inclined to use e-cigs if there is a sense that use of
the product is strongly associated with cessation of smoking – thus serving to increase the
cost of use by complement types.
In addition to restrictions on how e-cigs are positioned in the retail environment, we also
need to look at their marketing. Under current English law, retailers are not allowed to have
in sight cigarettes – they must be covered by a door or curtain of some kind. 23 Current law
however does not prohibit advertising of e-cigs on such covers and thus there is an
opportunity to prime via a visual cue that leads smokers to associate sight of e-cig adverts
with real cigarettes. A low cost and easy to enforce policy would be to prohibit any form of
e-cig advertising on retail counters and on screens covering real cigarettes. This would
immediately break any visual cue effect that might exacerbate the costs associated with
complement types.
23
Similar laws apply in Australia, Canada, Finland, Ireland, Norway and Russia among others.
E-cigarettes visibly appear alongside screened real cigarettes and adverts for e-cigs appear
on the screens hiding real cigarettes. View at a point of sale in a national major UK high
street retailer
Importantly we also recommend that the current taxation regime leading to relative
affordability of e-cigs should be maintained, so as to enables as many substitute types to
consume e-cigs.
The policies we propose are designed to reinforce the perception that e-cigs are a substitute
and hence quit-aid product – and thus appeal to substitute types more so than complement
types.
We see the adoption of these relatively simple and low-cost measures as offering potentially
huge returns without compromising the obvious benefits of e-cigs that lead many substitute
type smokers to quit smoking.
The policy recommendations from this study could lead to saving the NHS many millions
and to higher economic productivity. They go beyond the one-size fits all regulations
recommended in the EU’s revised Tobacco Products Directive coming into force in May
2016 but at the same time recognize the force for good offered by e-cigarettes.