FDA Implications for Surveillance and Evaluation

Tobacco Tax/Price Policies
and Smoking Behavior
Andrew Hyland, PhD
Roswell Park Cancer Institute
February 2, 2011
[email protected]
Underlying Premise
• Availability of low price tobacco
products is bad for public health
• Smokers who would have quit
otherwise continue to smoke when
low price options are accessible
• Cheap tobacco = more cancer, more
heart disease, more emphysema
Compensatory Model of Price Effects
No effect
Quitting
Reduction in
prevalence
Switch to discount brands
Switch to cheaper sources (e.g., Internet,
Indian reservations, “Freddy’s van”)
Tax/Price
Increase
More efficient purchases (cartons vs.
packs; greater use of promotions)
Cutting back
More efficient smoking (e.g.,
smoking more of the cig, deeper
breaths, less time out of mouth)
Tobacco Industry
Efforts to Lower Price
(e.g., promotions,
price cuts)
Reduction in
consumption
LET’S LOOK AT SOME DATA
•
What happens when states and the federal government
raise tobacco taxes???
• 20+ US states increased rates since 2009
• New York case study
• US Federal excise tax increase, April 2009
Prevalence of purchasing from low/untaxed
source by country
Prevalence of using discount/generic
cigarettes or RYO tobacco by country
2009 ITC Pack Collection Study


2009 data…9% no tax stamp, 36% tax stamp
from different state - $0.81 increase
2010 data….8% no tax stamp, 21% tax stamp
from different state – same price as 2009
Legitimate State
Tax Stamp
Non-State
Stamp
No Tax Stamp
Illegible Tax
Stamp
2009 Study Results: Proportion of
Legitimate State Tax Stamps
(from the 2009 Supplemental ITC Survey)
In New York, only 18% of
cigarette packs were
stamped with a legitimate
tax stamp from each state0
3/5
1/1
0/1
4/4
4/4
0
2/2
2/2
22/33
0
4/9
2/8
6/7
2/6
1/2
2/3
9/11
5/6
6/10 9/11 10/18
3/3 10/13
9/13
5/9
0/11
11/16
2/4
0/6
3/5 4/7
Note: Tax stamps are not
used in states:
North Carolina
North Dakota
South Carolina
7/12
3/17
3/5
3/3
1/2
1/1
0
4/5
5/7
15/19
2/2
4/11
1/1
0
4/5
0
2009 ITC Pack Collection Study

Hard to tell what impact Federal excise tax
increase has had just yet…
Average price paid per pack increased by $0.81
cents from $3.74 to $4.55
 Quit attempt rates increased from 30% to 36% but
comparable to Canadian smoker change
 CPD reduced from 20 to 18
 At both surveys, 29% reported purchasing
cigarettes at a discount or low/untaxed venue

Examining Products
A
B
C
A: Counterfeit
B: Authentic
Filter length
difference
C: Counterfeit
B
C
Trace elements
12
Federal tax
impact on
consumption
Federal tax
impact on
prices
BUT…double digit
growth for smokeless
Case Study: New York
New York State Cigarette Excise Tax,
1992-2010
Excise Tax (Cents)
500
400
300
200
100
0
Year
Source: New York State Department of Taxation and Finance, 2008.
Percentage of New York Smokers who Purchased
from Various Retail Sources, NYATS 2004.
100
Purchased at Least Once in Past Year
Percent (%)
80
60
Purchased "All the Time" or " Sometimes"
76
59
57
54
37
40
37
28
18
20
13
6
0
Convenience Store/
Gas Station
Low or Untaxed
Sources*
Grocery Store/
Pharmacy
Discount Store
Bar/ Entertainment
Complex
*Includes Indian reservations, out-of-state sources, the Internet, toll-free numbers, and duty-free shops.
Source: New York State Department of Health, Cigarette Purchasing Patterns among New York Smokers:
Implications for Health, Price, and Revenue, March 2006.
Percentage of New York Smokers who Purchased
from Low-Tax or Untaxed Sources, NYATS 2004.
100
Purchased at Least Once in Past Year
Purchased "All the Time" or " Sometimes"
Percent (%)
80
60
40
57
37
32
25
31
13
20
9 6
14
6 4
6
0
Any Location
Indian
Reservation
Out-of-State
Internet
Toll-Free Number Duty-Free Shop
Source: New York State Department of Health, Cigarette Purchasing Patterns among New York Smokers:
Implications for Health, Price, and Revenue, March 2006.
Average Price Per Pack of Cigarettes Among Smokers
who Frequently Purchase from Indian Reservations and
Convenience Stores, NYATS 2004.
$7.00
Price Per Pack (US $)
$6.00
$5.00
New York City
Remainder of New York State
Its like a 2 for 1
promotion!!!
$ 5.88
$ 4.52
$4.00
$ 3.09
$3.00
$ 2.38
$2.00
$1.00
$0.00
Always Purchase from Indian
Reservations
Always Purchase from
Convenience Stores
Source: New York State Department of Health, Cigarette Purchasing Patterns among New York Smokers:
Implications for Health, Price, and Revenue, March 2006.
87% of New Yorkers’ Resided within
55 miles of a Lower/Untaxed
Cigarette Source in November 2003!
Proximity and Price Differentials Make the
Difference
0-30 Miles to
Reservation
64
31-55 Miles to
Reservation
30
56+ Miles to
Reservation
15
0
10
20
30
40
50
Percent (%)
Source: New York State Department of Health, Cigarette Purchasing Patterns among New York Smokers:
Implications for Health, Price, and Revenue, March 2006.
60
70
Percent of Western New York Smokers who
Purchase Cigarettes on Indian Reservations
“All the Time”, 2005-20010
100
Percent (%)
80
60
51
59
59
2006
2007
65
64
2008
2010
40
20
0
2005
Source: Western New York Adult Tobacco Use Survey, 2005-2008. Erie-Niagara Tobacco Use Survey, 2010.
Those Who Buy Cheap Cigarettes
Are Less Likely to Quit Smoking
Behavior
% using at
baseline
Impact on Cessation at follow-up
Odds Ratio (95% CI)
Did not use low/untaxed source
Use Low/untaxed Source
90.7%
9.3%
1.00
0.69 (0.45-1.00)
Used Premium Brand
Used Discount Brand
Used RYO Tobacco
48.7%
34.9%
16.5%
1.00
0.86 (0.69-1.07)
0.76 (0.57-1.02)
Purchased pack/loose cigarette
Purchase by the carton
69.7%
30.3%
1.00
0.67 (0.52-0.87)
Did not use any behaviors
Used 1 behavior
Used 2 or more behaviors
34.8%
48.1%
17.2%
1.00
0.75 (0.61-0.93)
0.59 (0.42-0.81)
Full models are also adjusted for Country, Age, Sex, Cigarettes Per Day, Minority Status, and HSI
What is New York State’s Annual Revenue Loss from Low Taxed
and Untaxed Cigarettes?
Estimated Lost Revenue in New York
State in 2004 from Tax Avoidance.
600
$486 Million
Lost State Taxes ($ million)
500
400
Indian
Reservations
292
300
200
Internet / Phone
114
Other States
80
100
0
Lost revenue if purchased 30% of cigarettes from untaxed sources
Other States
Internet or Phone Order
Indian Reservations
Source: New York State Department of Health, Cigarette Purchasing Patterns among New York Smokers:
Implications for Health, Price, and Revenue, March 2006.
How Much Goes Uncollected in 2010?
No published data
However, its certainly increased since the tax
went up from $2.75 per pack to $4.35 per pack
Its several hundreds of millions of dollars each
year in New York State.
So What is the Impact of State and
Federal Tax Increases?




Prices increase
Reduce consumption
Promote smokeless use
Consumers change their purchase patterns



Indian Reservations provide the majority of
product in WNY
Tax avoidance decreases cessation


How depends on proximity and savings to be had
Diminishes taxes public health benefit
Hundreds of millions of dollars in tax revenue
goes uncollected each year in NY alone
What Tobacco Price Policies
Have Happened Recently?
•
PACT Law– June 2010, requires all taxes paid before
delivery
• Pay all applicable federal, state, local or Tribal tobacco
taxes and affix any related tax stamps, before
delivering any cigarettes or smokeless tobacco
products to any customer in a state;
• Comply with various state and local laws as if the
Internet sellers were tobacco product retailers located
in the same state as their customers;
• Register with the state and make periodic reports to
state tax collection officials; and
• Check the age and ID of customers both at purchase
and at delivery to stop Internet cigarette and smokeless
tobacco sales to kids.
PACT Law
Law enforcement says
stopping mail order cigarette
sales to have huge impact on
smuggling
Little empirical data…yet
Anecdotally…online cigarette
vendors expect an impact and
some have closed
Hypothesized to reduce price
differentials, boost cessation
WNY smoke shops
disproportionately impacted
Tax and Purchase Location – ITC Data from
2009 & 2010 US Pack Collection Studies
From what type of outlet was the cigarette pack that you are
sending to us purchased?
80
60
Internet sales drop from
1.9% to 1.1% but not
statistically significant
52.5
52.2
40
20
7.5
7.5
1.9
1.1
0
Fall 2009 (n=320)
Convenience Stores
Fall 2010 (n=366)
Indian Reservations
Internet
PACT Law – Some unanswered questions
- How much of an impact will
it have?
-Is the impact larger in
WNY?
-How will WNY Indian
Reservations adapt?
-How will it be enforced?
-Will it impact organized
smuggling?
-Will it impact youth
initiation?
Tax / Price Summary
• Higher prices perhaps the most effective
tobacco control strategy available to us
• Higher taxes commonly used at the state at
national level
• Biggest threat to the impact of tax policy is
‘leakage’
• ‘Leakage’ due to differential prices for
readily available product alternatives
• Most effective tax policy creates uniformly
high prices
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