Wells Fargo second annual e-cig conference – some reflections

I participated as a panel member in the Wells Fargo Securities Second Annual E-cig Conference, chaired by Bonnie Herzog, the lead […]

Photo: Clive Bates taken at Wells Fargo event 20 November 2014
The switch to 2nd generation products arrested the decline of NJOY

I participated as a panel member in the Wells Fargo Securities Second Annual E-cig Conference, chaired by Bonnie Herzog, the lead beverage and tobacco sector analyst at Wells Fargo.  It was a fascinating occasion and good moment to take the temperature of the vapour market – at least as seen through the eyes of the main American players (agenda). I’m not going to write the whole thing up, but just give some overall impressions and my reflections on and after the day.

The bigger companies are beginning to understand ‘vapour’. The industry is beginning to understand the vapour category (or VTM – Vapor, Tanks and Mods as the 2nd and 3rd generation products are referred in this forum).  Also, I think the bigger players (well, some) are grasping that it is not the same as cigarettes, and the customers think differently.  Choice, diversity, personalisation, convenience and user experience were the watchwords.  I chose the striking chart from NJOY above because it illustrates how the market is looking for 2nd generation products and ready to reward those companies that provide them in accessible form.

The pace of innovation is rapid.  The companies were show-casing new products and beefed up technology, and it felt to me like very significant progress had been made in a year. The cig-a-like is increasingly regarded more as a starter product than a destination. The barriers to having products that look very different to cigarettes are coming down as vaping becomes more common. I think anyone forecasting the future of this market needs to internalise the pace of change and try to recognise that the products will be completely different after 10 years of further innovation.  For that reason I think Bonnie Herzog’s forecast that the vapour category will surpass cigarettes within a decade is far more realistic than some suggest – by 2023 we will have very different products in play.

But the all-conquering products are not there yet. There is broad consensus that the products that will ultimately win over a majority of mainstream smokers are not yet on the market.  But there was a palpable sense that this goal is reachable given the frenetic pace of innovation and rising customer insight in the sector.  As David Sweanor put it: “someone in this audience, maybe several of you, will become billionaires. We just don’t who it will be yet“.

Convenience and ease of use is a rising focus… Companies showed modular ‘plug and play’ drip-free devices (the cartridge pen compared to the fountain pen), and there was a stress on ease of use and lack of spillage – sometimes combined with attacks on open systems. I think it is valuable to have easy-to-use systems to help new users into the category going straight to the 2nd generation products that are more likely to work for them. But there is no reason to have this at the expense of more versatile open systems.

…and a ‘razor blade model’ is emerging. This refers to the commercial model of companies like Gillette, in which they sell devices relatively cheaply and proprietary refill units with a high margin. Some companies were pursuing this, others using a ‘plug compatible’ model in which their refill could fit a range of products. The customer tends to benefit from interchangeability as this reduces lock in to one producer, allowing the customers to benefit from a wider range of innovation.

Flavours remain controversial, but understanding is growing.  The role of flavours in the e-cigarette value proposition and migration away from smoking was well articulated and the rise in the importance of non-tobacco flavours recognised.  An e-liquid company was asked if it should just rename some of the more provocative flavour names that sound like they are targeted at youth – his assertive reply was that adults like chocolate too and if he did that they’d just find new flavours to complain about – where do you draw the line?  A good, if inconclusive, answer to a good question.

…though flavour bans are still supported by some public health advocates. I was disappointed to discover that the American Legacy Foundation (“Legacy”), which has often taken thoughtful positions on harm reduction, supports a ban on flavours.  I decided to put a challenge question on this. I don’t think they have thought through the perverse unintended consequences of a ban: it would tend to diminish the vaping value proposition; close off the long term migration away from tobacco altogether for many users; stimulate a black market and DIY; harm the smaller and highly diverse non-tobacco vapour business; protect the cigarette-based business model of the tobacco industry; and probably cause more smoking, disease and death.  Legacy’s view is that the companies have a duty to show these products are not attracting children. Maybe… but I think Legacy has a duty not to recommend policies without taking account of unintended consequences. The rise in vaping in American youth has coincided with a sharp fall in smoking, so I doubt that Legacy has even set the right objective for their policy. It is perfectly possible that youth use of e-cigarettes is displacing smoking and benefiting health.  Current figures for high school users show a very encouraging trend, even if CDC tries to spin to the contrary:

Used in last 30 days by high school students
Per cent Cigarettes E-cigarettes
2011 15.8 1.2
2012 14.0 2.8
2013 12.7 4.5

Source: CDC MMWR Tobacco use among middle and high school students, 2013 (November 2014). Note most e-cig use is by tobacco users – only 0.6% was exclusive current e-cig use in high school student.

Tobacco industry thinking (1) – competing in the marketplace. The two tobacco majors who spoke articulated their rationale for being in the market.  Brice O’Brien of RAI  was good on this (I paraphrase): we have 25% of the US cigarette market, with Vuse we go after the other 75%.  Joe Murillo of Altria/NuMark made the same case based on competition: when customers switch we want to be there.  These comments reveal the essential truth not yet grasped in public health…  competition leaves the tobacco companies with no choice but to be in this market either defensively or on the offensive …and this is a good thing.  To the extent they produce second-rate products or fail to innovate they will lose out (or fail to gain) relative to other tobacco companies or non-tobacco vapour companies – competition will drive them to innovate and improve the products or become losers. Disruption arises when existing market shares realign dramatically, as a companies take bets on technologies that they hope will win or defend market share  We are about to see a big bet on ‘heat not burn’, but will it work? The customers will decide that.  However, there is another way…

Tobacco industry thinking (2) – competing through regulation. There are two ways of competing: one is in the market place and works by appealing to consumers; the other is in Washington DC and works by appealing to regulators.  The danger is that tobacco companies know they are slow off the mark and not especially innovative, and so choose to tackle competitors through regulating them off the market or by erecting barriers to entry so high that only a few large corporations are viable. Altria and Reynolds have been criticised for extensive warnings (far beyond what they place on cigarettes – see New York Times), but this trait is most apparent with Reynolds call for a ban on open systems, in the name of health, safety and category reputation.  I put it to them that this a predatory and anti-competitive bid to raise regulatory barriers to entry. Evasive answer.

Is vapour cannibalising tobacco industry margins…? Companies are primarily interested in maximising medium term profitability (or more formally, the discounted value of the future profit stream). The more they make, the faster and more sustainable the transition from smoking to vaping is likely to be. The tobacco companies are interested in the combined profit pool of their tobacco products and vapour products, not in keeping people smoking as some naive public health commentators believe. So all other things being equal, the best outcome is that they replace profits from combustible cigarettes with more profitable vapour products as that will expedite transition.   The question is: does the migration from one to the other degrade or enhance profitability? Bonnie Herzog’s view is that a shift into vapour products from their core business would be margin-enhancing overall. Many assumptions have to go into that view, of course, and it matters primarily to those trying to estimate the value of firms.  However, even if margins are actually squeezed, it’s not as if the tobacco companies have a choice if the customer is drawn to a different product: they make no profit from customers who defect to other manufacturers’ vapour products.

Vapour industry immaturity on display: the big prize is the tobacco market, not market share in the vapour market. There were signs that several of the non-tobacco companies would be quite happy to have the FDA damage or kill their competitors. For example, those relying most on ‘bricks and mortar’ retailing might favour bans on internet sales, those with few flavours are quite happy to see most flavours banned. I think this is a sign of immaturity and a narrow view of their market place. All the sales/volumes figures presented at the conference included only firms and products in the vapour category.  While understandable, this creates an illusion about the real competition, which is actually with the dominance of cigarettes/tobacco – bearing in mind the US tobacco market is about $85 billion and worldwide about $800 billion. If the vapour companies took a ‘bigger pie‘ approach to the vapour market, rather than a ‘bigger slice‘ approach, they would tend to hang together more.  They would focus on reducing regulatory burdens and increasing commercial freedoms more generally, rather than trying to use regulatory tactics to stifle competition and shaft competitors within the vapour sector.

FDA’s regulatory sledgehammer is nuts.  The FDA’s Pre Market Tobacco Application process is likely to be the route most products go through for approval, and this imposes massive burdens. According to one experienced regulatory affairs specialist, each application would mean: “seven or possibly eight figure costs depending what they insist on“. Such an expensive and time-consuming process will kill the vast majority of the products and firms in the market, and destroy the rapid pace of innovation we see today.   Many take comfort that companies with PMTA applications in place within two years of the rule being made can keep their products on the market.  But this is very short-sighted: the category needs clarity that there will be a working regulatory model, not merely a work-around for an unworkable regulatory model.  The key question is can the PMTA process be adjusted to be proportionate to the very low level of risk posed by vapour products? An abbreviated or ‘light-touch’ system is essential. If they don’t do that, they’ll end up with something as botched and dysfunctional as they have in Canada. There are faint signs of FDA recognition of this issue and openness to a more proportional (i.e, realistic) approach coded into questions FDA posed in the proposed deeming rule consultation and in recent remarks from the FDA’s Center for Tobacco Products Director, Mitch Zeller. Let’s hope so: this remains the critical business risk facing this category in the United States, and could have very negative health consequences.

Unintended consequences. My own presentation (slideshare – below) focussed on my current favourite themes: that regulation comes with unintended and harmful consequences; that regulators and the public health community are not rigorous about evaluating or even acknowledging these; and that there is a ‘sweet spot’ of regulatory intervention that builds confidence without damaging the value proposition or forcing a destructive retrenchment onto the industry.  The second part is that an unholy trinity of (1) bureaucratic, loss averse regulators; (2) predatory businesses; (3) public health’s “useful idiots”; is in operation.  This forms a system which fails to recognise benefits, exaggerates risks and ignores unintended consequences, allowing the system to be ‘played’ for commercial advantage in a way ultimately runs counter to public health and provides the cigarette-based business model of the tobacco industry with shelter from competition.

What would a rational regulator do? The moderator of the regulatory panel asked the panellists what a rational regulator, he presumed arriving from another planet, should do. Good question: I suggested four things:
  1. Be far more rigorous about unintended consequences – these dominate the impacts you will have, given nothing too much is wrong at present
  2. Take a few sensible regulatory initiatives – quality standards for liquids, electrical safety, child-resistant containers etc – that do not force traumatic restructuring on the industry, but clean out cowboys and rogue products, and raise confidence of consumers.
  3. Ensure the regulatory framework promotes rather that obstructs innovation, as this will be key to the advance of the vapour category into a large share of the tobacco market
  4. Take responsibility for candid communication of risk in a way the consumer can understand the dramatic difference between combustible and non-combustible or vapour… and please resist any urge to exaggerate or invent risks in the name to manipulate behaviour.
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35 thoughts on “Wells Fargo second annual e-cig conference – some reflections”

  1. Clive, since when have you joined the club of regulators?
    I´ll tell you one thing, even though I´m pointing out the obvious here.
    Once you get on the way from cigalikes to 2nd and 3rd generation devices, you easily move on to DIY vaping.
    Making your own coils and mixing your own liquids costs only 20-30 cents per 10ml.
    But that´s only while we buy our ingredients in pharmacies, where a liter nicotine free base costs about $10.

    ANY kind of regulation will do exclusively one thing, it will drive the price up.
    ANY attempt to regulate against those cheap 1 liter bottles will cause another of these things you call “unintended consequences”.
    Nocotine free PG and VG are available on every farm in the world, they are used in cattle rearing as a food additive and there they cost 20 cents per liter.
    That´s maybe not pharmacy grade, but then, from a given price difference on nobody will care.

    In short, IFFFFFF anyone wants to to cut us vapers off our cheap sources, we will only go for even cheaper ones.
    There is just NO WAY anyone, whether tobacco companies or states could keep their cash flow up, so forget the tobacco companies helping us to get to good products, they will do anything they can to get the DIY off the market.

  2. Pingback: Wells Fargo second annual e-cig conference &nda...

  3. One might argue that,with the 17 applicable directives and a diligent Trading Standards authority,we are already at or beyond the regulatory ‘sweet’ spot.It may be TC’s ideology that is positioning the agenda in the wrong place

    (I am,as always,just being deliberately awkward!)

    1. Thomas, Dodderer

      Actually, the ‘sweet spot’ is not incompatible with the existing EU directives – some specific standards can be crafted from the generally applicable legislation like general product safety. I started my presentation by saying that no regulation at all would be better than every scheme so far proposed. But I do believe that the optimum point can is not pure laissez faire, but a series of basic protecting and guarantees to underpin confidence – mostly crafted from consumer legislation.

  4. We are in for an interesting time I think. The dialogue of which we are all part, is going to take a new turn. I, for one, have more questions than answers. What worries me is that we are entering a period where the debate is likely to become ever more divisive. if vapers fragment and begin falling out over the issues, we will lose our voice.

    1. Don’t worry – this is just emergent behaviour!I’m not sure too many in government are listening anyway.The TPD Art 20 is proceeding as drafted albeit with a few ‘i’s and ‘t’s to complete – there has been no obvious recognition by DH/PHE that it may not be the best solution.

      Ms Addison’s claim that DH were only ‘lukewarm’ to a product with the potential to save 5m UK lives(Professor Britton) was telling as to where their heart lies.

      Things will of course change should TW succeed – but by then we may have a Labour government who may have better earmuffs than the Tories!

  5. Device innovation continues at a breathless pace, but the liquids are still pretty much unchanged and do not satisfy most smokers who try the product.

    This is next big step forward (if it is to come at all).

    1. Do you have any actual evidence that shows that the current liquids do not satisfy “most smokers who try the product” ?

      The liquids have a basic recipe which works with the device, why would there need to be changes in the basic recipe ?

      Dr Farsalinos has been doing a lot of research on flavourings over the last year, and this has led to a number of companies changing the type of flavourings used in the liquids they produced, due to consumer demands for liquids that do not contain various chemicals, such as diacetyl. As more research is done, no doubt that more changes will come to reflect consumer demands and tastes.

      There is a vast number of liquid flavours, as well as percentages of various ingredients, including the nicotine level, pg and vg percentages, which reflect individual tastes and needs, this is one of the most important reasons why vaping is so successful, because people can choose their own nicotine level, and flavours to suit their individual tastes and needs.

      1. Well the data is clear that most smokers who try e-cigarettes/vapor don’t stay with them.

        If you simply compare the number of percentages of smokers who have tried vapor with the sales of vapor, it’s clear most smokers pass on vapor.

        Now, if your point is, how do I prove the liquid is the problem as opposed to the device, that’s sort of a fair question….. BECAUSE THE PRODUCTS TASTE TERRIBLE is my answer. Even the leading brands — Mark Ten, Blue, Vuse etc — their tobacco flavors are bad.

        That’s why I say liquid must improve.

        Now, you can make the Flavorista argument that there is some great lychee martini out there you are vaping, but I think it’s also clear most smokers want tobacco flavor.

        1. Why taste terrible? They are just different from smoked tobacco taste. And there are some great tobacco e-liquids, so everybody can choose their favorite. But that is a also a problem – there are thousands of them.

  6. I’d just like to point out here that currently Wikipedia’s e-cigarette page is a Stan Glantz’s dream-come-true.

    It misrepresents even WHO’s report against e-cigs, reports the most positive and definite review reviews as “suggests EC may be safer than smoking,” refers to “particles” right in the start, has a most ugly photo for vaping and refuses to allow change. They just removed UK’s pro-ecig PH organisation’s statements in order to reduce clutter.

    I think we can not expect reporters to report positively when their 1st stopn may be Wikipedia.

    1. Uri – it’s just worth pointing out that there is no They on Wikipedia – or rather, there are lots of Theys working on the production of articles, sometimes collaborating and sometimes (as in the case of the e-cigarette article) mostly competing.

      It is indeed a sad example of a page that has fallen victim to point-making at the expense of actually being useful to readers.

      But if you look at the associated Talk page (where Wikipedia editors discuss issues with the article) you will see that the medicalisation of the topic, and the emphasis on possible health risks, has been very contentious and had many critics within the Wikipedia community.

  7. Gregory Conley

    I posed the same question to Dr. Abrahms after he was quoted in a few newspapers saying he was “disappointed” FDA didn’t ban flavors. His reply was essentially the same you received. I emailed him back and never received a response.

    At a FDLI conference earlier this month I asked a Legacy employee (Dr. Villanti) how she could justify a flavor ban when the studies we do have show that adults are using flavors AND those using the flavors report that the products are an important element in helping them stay smoke-free. Her response was to refer to the literature on cigars. I suggested that maybe Legacy should be researching flavors before they endorse a ban, to which she responded, “We can’t be expected to do that research.”

    Dr. Abrahms supported the FDA’s attempt to ban e-cigs from 2009 to 2011 and has never admitted that would have been a public health disaster. Go back and read some of his journal articles on the subject. He’s also in full support of the deeming reg.

    Bill Godshall has theorized that Dr. Abrahms’ support of e-cigs is part of a thinly veiled effort to make pro-harm reduction advocates like you, myself, Bill, CASAA, etc. look like extremists. Not sure if I believe it yet, but it would make sense.

    (typed on my phone so pardon any typos)

    1. I think it is better to take people at face value unless you have evidence of malign intent or it looks obvious. I have more respect for people willing to change their view, than those who think it is important to defend their view at all costs. If you work for a large organisation, you have to manage the situations where your own position may differ from the institutional stance carefully.

      So I would look for signs that anyone is open minded and working to influence their organisation, even if you wish they’d gone further and faster.

      1. This is what Dr. Abrams wrote and published in JAMA in January.

        “A balance between under regulation and over regulation is achieved by flexible and discretionary use of product standard, modified risk, and cessation regulations. Aggressive post marketing surveillance should be used to detect unintended consequences. Applying overly burdensome, expensive regulatory hurdles to e-cigarettes could stifle innovation and favor the market domination of tobacco companies, which potentially promote dual use of cigarettes and e-cigarettes to minimize losing market share for their primary cigarette products. Independent e-cigarette companies (ie, not subsidiaries of tobacco companies) are more likely to have the goal of eliminating combusted cigarettes.”

        Besides a potential difference on which are the most concerning “unintended consequences”, it could have been a paragraph in your conclusions.

        Thank you, for the write up of the conference.

    2. I don’t really understand the debate regarding flavors. We have evidence of ~0 continuous use among never-smoking teens (the tin % of past 30 day use not really meaningful as it includes one-time triers, but ASH data shows continuous use is non-existent).

      So what are all these organizations thinking when they claim that there’s no evidence that flavors don’t attract teens? Why does the simplest of evidence have no bearing on these people?

  8. Go go go Clive! Full support for reasonable middle ground focusing on quality standards. Production, ingredients and product safety.

  9. Clive wrote:

    “I was disappointed to discover that the American Legacy Foundation (“Legacy”), which has often taken thoughtful positions on harm reduction, supports a ban on flavours.”

    Except that Legacy has vehemently opposed tobacco harm reduction since 2007 when it began opposing smokeless tobacco for THR. In 2009, Legacy joined forces with Big Pharma funded CTFK, ACS, AHA, ALA and AAP in advocating FDA’s unlawful e-cig ban, and those groups filed multiple legal briefs with Judge Richard Leon and the DC Court of Appeals.

    Legacy’s Dave Abrams also urged the FDA to require smokeless tobacco manufacturers to conduct dozens of unwarranted studies costing $10 million or more in order to submit MRTP applications (which FDA would need to approve) before they could truthfully claim that smokeless tobacco is less hazardous than cigarettes, I was urging FDA to truthfully inform all smokers that smokeless tobacco is far less harmful alternative to cigarettes, and called Abrams’ proposal a “$10 million truth tax”. Swedish Match recently submitted the first and only MRTP application to FDA (which was 100,000+ pages) for various brands of snus.

    And during the past year, Legacy’s Abrams and Cobb have repeatedly advocated for the FDA deeming regulation, including last month’s NEJM column that falsely claimed e-cigs may benefit public health in the future (but only if the products are first regulated by the FDA), and that urged the FDA to speed up implementation of ts proposed regulatory scheme.
    Just last week, Legacy’s NEJM was hawked on medpagetoday
    Swift FDA Action Urged to Regulate E-Cigs

    But in fact (as Legacy is fully aware), FDA’s proposed regulation for e-cigs would ban >99.9% of e-cig products currently on the market (including all Premium Vaporizer and e-liquid products that are more effective for smoking cessation and less expensive than cigalikes), and would give the entire e-cig industry to the Big Tobacco companies to market their inferior and more expensive cigalike e-cigs including Altria’s MarkTen, Reynolds’ Vuse, and Lorillard’s blu.

    But the Big Tobacco companies shouldn’t be blamed for endorsing FDA’s proposed regulation that would give the e-cig industry to Big Tobacco. Rather, the blame should go to those who lobbied FDA to ban e-cigs in 2009 and who have been lobbying for the FDA e-cigarette regulation since 2011, including Legacy, CTFK, ACS, AHA, ALA, AAP and their allies in Obama’s DHHS (i.e. FDA, CDC, Surgeon General, etc.)

    Also please note that Bonnie Herzog makes her money by urging investors to buy and/or sell publicly traded cigarette company stocks. Since there are just several very small publicly traded e-cig companies, Wall St tobacco stock analysts are very bullish on Altria, Reynolds and Lorillard cigalikes, and (like Altria, Reynolds and Lorillard) strongly support FDA’s proposed e-cigarette regulation.

    That’s also a reason why I and other US vaping advocates (who support Premium Vaporizers and e-liquid, and who strongly oppose FDA’s proposed e-cig reg/ban) weren’t invited to speak at Bonnie Herzog’s conference.

    1. Before you keep creating neato theories about a Wells Fargo Conference

      or tutoring with:

      “Bill Godshall has theorized that Dr. Abrahms’ support of e-cigs is part of a thinly veiled effort to make pro-harm reduction advocates like you, myself, Bill, CASAA, etc. look like extremists. Not sure if I believe it yet, but it would make sense.”

      You guys might look at what you published out for everyone to see on CASAA’s Facebook. And consider how its a net negative to E-Cig advocacy to publish it. Schmuckiesque at best.


      Or how about pushing out testimony and somehow ties Vaping rights into Abortion debate! Wooo-hoooooo

      With a statement so improperly crafted, it pretty much will piss off anyone who has a strong stance on either side of the Abortion issue. Maybe next suggest that we cut Social Security benefits?

      “During my Q&A, a councilwoman asked me why I appeared angry. I responded by saying the bill threatened public health, that many lives were at stake, that the Health Commissioner and bill sponsor made many false fear mongering claims, and that the campaign to ban e-cigs and vaping under the guise of protecting children was similar to past campaigns to ban birth control and abortion under the false guise of protecting women’s health. Greg said that my latter statement “almost caused a riot”. http://www.e-cigarette-forum.com/forum/legislation-news/564164-baltimore-md-indoor-use-ban-retail-placement-2.html#post14323743

      or perhaps, just perhaps, you were never on the radar, your theories false, totally unrelated……..and you still don’t get supply-side analyst information is not just about trading stocks, its about disruptive technologies and private companies, and how they can effect negatively mutual funds holdings, or flow into private funding opportunities.

  10. The first two sentences of Legacy’s PR lobbying piece last month (touting Abrams and Cobbs NEJM op/ed) made the same claim about FDA regulation of e-cigs

    “The popularity of E-cigarettes could lead to the “demise” of cigarette smoking and save thousands of lives, but not until they are proven safe and are regulated by the U.S. Food and Drug Administration (FDA). That’s the message from two Georgetown University Medical Center researchers in a perspective piece published Oct. 16 in the New England Journal of Medicine.”

    Meanwhile, in another article, Cobb portrays himself as a consumer health advocate for smokers and vapers by claiming some smokers won’t switch to e-cigs unless/until FDA imposes the deeming regulation because they don’t trust the current “black market” e-cigs that might “blow up”, and that more smokers will switch to vaping if/when FDA imposes the deeming regulation (even though it would ban >99% of e-cig products now on the market).

    “A new controversial opinion piece goes so far as to suggest that e-cigarettes could bring about the “demise” of traditional smokes, and save thousands of lives in the process. The only thing holding these smokeless devices back from much wider use is that people know they aren’t regulated, and so some are less likely to use them, according to Dr. Nathan Cobb”

    “When you go and you buy a black-market TV, you have no idea if it’s going to work like you think it’s going to work. You have no idea who made it, if it’s real, if it’s going to blow up,” said Cobb, who went on to say that the same thing is true of e-cigarettes.

    While I strongly agree with Clive that THR advocates should welcome pro THR statements about e-cigs by those who previously urged FDA to ban the products and have greatly exaggerated e-cig risks and denied their health benefits, those who have been lobbying for the FDA deeming regulation are NOT representing the interests of smokers, vapers, secondhand smokers or public health (even if they say some truthful things about e-cigs to promote themselves as THR advocates to the news media).

    I’m also very pleased that Bonnie Herzog has generated lots of news saying that e-cigs could surpass cigarette sales in a decade, even though she laughed at me in 2010 when I told her that same thing (when urging her to support e-cigs).

    Back on March 17, 2010, I wrote (and ECITA posted) at:
    “If the number of vapers and e-cigarette sales continue growing at similar rates, another million cigarette smokers will switch to vaporizers in 2010, and sales may surpass the estimated $600 million in combined sales of nicotine gums, lozenges and patches. And if e-cigarette usage and sales continues growing at similar rates in future years, the number of e-cigarette users and sales could surpass smokeless tobacco products in several years, and could surpass tobacco cigarettes within a decade.”

    I’m also pleased that Bonnie began acknowledging the huge PV and e-liquid market a year ago (after I had sent her lots of info on them since 2010) after she previously estimated that cigalikes comprised all $1.7 billion in US e-cig sales last year, and that she’s subsequently changed her US sales estimates several times to recently acknowledge that PVs and e-liquid sales are greater an cigalike sales ($1.5B vs $1B).

    But Herzog and executives at Altria, Reynolds, and Lorillard all know (especially since I’ve been telling them weekly for the past two years) that the FDA deeming regulation would protect cigarette markets and benefit cigarette companies because it would ban >99% of e-cig products now on the market (including all PVs and e-liquid) and because it would give the e-cig industry to Big Tobacco companies (and perhaps NJOY).

    Smokefree Pennsylvania’s 110 page comment analyzing the scientific and empirical evidence on e-cigs, citing dozens of false and misleading fear mongering claims about e-cigs by Obama’s DHHS, and urging the FDA to reject its proposed Deeming Regulation is at: http://www.regulations.gov/#!documentDetail;D=FDA-2014-N-0189-80846

    Regarding EW’s post, I consider the ongoing campaign to demonize and ban e-cigs and vaping (under the false guise of protecting children) very similar to past (and ongoing) campaigns to ban birth control products and legal access to abortion (under the guise of protecting women’s health), and past campaigns to demonize and ban alcohol and marijuana (also under the false guise of protecting children and public health).

    Also, the day before I made that comment at the Baltimore City hearing (where the Baltimore Health Commissioner falsely claimed five times that e-cig companies were clearly target marketing their products to addict youth), the Texas legislature enacted a law that banned half of the already small number of abortion clinics in the state (under the false guise of protecting women’s health), which generated national news stories. Thankfully, the courts recently struck down that TX law because it violated the rights of women.

    1. Bill I think it obvious that if the executives Altria, Reynolds, and Lorillard all want ‘regulation’ it is because it suits their commercial interests and the interests of their sahare holders (that is after all their job). Strange thing is when the tobacco control mob seem to be happy to be in bed with those same executives.

  11. Godshall:

    1. Linking the abortion cause in comparison to Vaping is error. The outrage you saw reflects this. You said you wanted to use a stunt, but its not a good method.

    2. People who want to protect unborn babies, believe a life is being snuffed out. 6 month old premature babies, survive and are Expected to grow up fine.

    3. Children all grow up to adults, Vaping is a for adults, but mothers are going to be concerned, for reasonable reasons. The argument to stop adult activities for the sake of children not strong, its bad public policy. But these mothers are true believers. You approach is to push these mothers into a corner. Nature predicts that outcome.

    4. Adoption of analogs occurs VERY often in adolescence. For you to imply the mothers have no valid concerns, is naive.

    5. People who want to protect unborn babies, believe a life is being snuffed out. 6 month old premature babies, survive and are Expected to grow up fine. Abortion is a wedge issue, and divides. Using it, is a way to turn off ears, and lose support, for no reason, where support could have been gained.

    6. Following a woman out after her testimony, to laugh and video tape her and post it on Facebook, and call her a zealot. Is Error, and the outcome is all downside, it has no upside. What could be the upside, to you and Conley doing that? Do you even think about the net effects? Do you not think that video is not being used to swing “undecided”? Best case is that woman knows nobody, never was a speaker on anything before, is unaffiliated, can not share a link, or even access the internet. Zero upside, means don’t do it.

    7. Herzog is pretty well known, she was a high profile analyst during the heady 97-01 bubble, when blodgeting a stock price goal, actually worked. She is one of the very few who first rose up in that era, that remains a large voice in 2014/5. So when you think its your emails to her, or a quick comment in a conference, is what has put her on the potions, she recommends and informs to…really does not comprehend or acknowledge the research she generates. Its not all about you.

    8. Cobb and Abraham are doctors, and miss lots of none medical stuff. They say: “”Nicotine replacement works — it doubles quit rates” Quit rates are very low, and it ignores how motivated one is to use an NRT vs just cutting down. Just because they have doubts on flavors, does not mean they are working as counter-operations in the department of subversion via science. Which is how I read your tutoring of Conley as the best theory. Conley not so sure, but thinks it makes sense. Heavy sigh. If you read their article you need to really focus on how they are talking about flavors, because they call out cigarettes, which has a legal definition, and they call out combustion products, and they also call out E-Liquid. There contentions are not uniform across the board. Menthol cigarettes are carved out already.

    9. The >99.9% theory being pitched remains based on apples and aardvarks math, mixing things and crunching numbers improperly. Every Cigalike maker, the large ones, are into tank liquids, and selling them. When nobody was watching the EGO became the cigalike. For the better part of 2 years, V2 has been selling mini clearomizers fitted on top of KR808 batteries. Refillable tanks in true true cigalike form. Selling E-Liquids.

    The FDA estimates there are 3392 existing products in the liquid (1675) and finished products (1717). If you look at the flavors of some of the Midsized companies, they have 1000+ ingredient variations. So either there is some sort of aggregations or rollup within an individual vendor that the FDA is accounting for. Or there estimates are entirely wrong, on product count and product applications. The FDA does not comprehend the total market, and will have updated that based on comments. They have very little faith in their estimates in Electronic Cigarettes, and they say it often in the deeming.

    10. The FDA states they will not regulate hardware devoid of E-Liquid. The amount of effort spinning wheels on this topic, seem to cause fear, instead of focusing on the real item. E-Liquid. No e-liquid equals no Vaping.

    People actually have been told they are going to raw 18650 lithium batteries. CASAA thinks they will regulate Provari MODs. What would the compliance be on these. Do not eat the battery, it is not safe to eat. Underwriter Laboratories will likely concur. Phillips after being confronted with the text of the deeming finally conceded, but he had to make up different reasons beyond the FDA simply having said it explicitly in writing already.

    11. What the FDA is more stuck with— is the 335K estimate for new PMTA. That is 15 times less that the 5 Million dollar number you toss out. Its not trivial, it is large, but its not 5-10 million, or as you have said, similar to a new drug application in the data they want. Enter in economies of scale, and mass production. What do you think happens if the costs are radically different (ie 15 fold greater), and the OMB approves the Deeming, and it hits the courts.

    12. Just how do you figure that SNUS is so much better than existing NRTs, and products like E-Cigs that there would be a giant mass conversion over to SNUS. And no doubt you are doing that without a study.

    Being anchored to the past, and saying I told you so in 2009, is the fallacy of psychics….and most in the skeptics societies in the UK will tell you the same. Its something that Herzog and Wallstreet is aware of also. Some are intentional, others believe themselves to be unable to be in any form of error. It works like this. You predict 100 things (100 stocks) you end up being correct on 33%. You come back on and point out the prediction, and sure enough, rewind the video, you said it just that way.

    The rest, the 66% are never spoken of again. Seldom reminded of it. Its not a problem. It works well with only predicting 2 years down the road….nobody ever checks back 2 years. You take it to a new level with I said X to this person, this person said X, therefore it was I would cause person to say X. If not for me, X would have been totally unknown to this person. A is sometimes B, B, does not equal A.

    SNUS is the past, it won it niche market, and will continue to play out. Electronic Cigarettes unlike the professing of Phillips and CASAA are safer than Chewing Tobaccos. Most users of Chew get leukoplakia, no prob says Phillips that is not cancer. Yes true. But its a negative health effect. You guys don’t consider it a negative at all. You used stuff tell them 99% +/- 1% safer.

    Godshall, at least when CASAA and Philips wanted Dr. Siegel to change his study design in order to generate an outcome they preferred, and if Siegel did not comply, and he did not, CASAA and Phillips went to trashing Siegel the man, and saying the nobody should support the study….when all of that hit. You did fall in line. That was a good stand to take.

    Godshall you clearly have skills, and drive. But its encumbered by alliance to the past battles that lost. Chewing Tobacco lost its fight, disolveables exist, and the evidence of observation in the real world, shows they are niche only. The FDA could adopt a stance like Rodu and say that anti-oxidants in Tobacoo protect against cancer to some degree….and the FDA can ST is much safer than Tobacco. But it would not change much. In the early 80s, huge bold labels across the entire side of packs said, CAUSES CANCER….smokers just kept going. SAFE, LIKE TOTALLY SAFE. Is not going to change the world (see NRT sold in retail)

    I would suggest that you jettison the past items, they are done deals, old news, and burnt out husks, dry wells, large volume meets unclogged sink drain, good money after bad. Instead re-brand to a more focused model, like vaping only, because Vaping has the confidence of being a better mousetrap, which real science (not pay to play ST stuff) will bear out. Can we not agree that all forms of analog leaf tobacco, oral and combustible, are outmoded by the disruptive technology of Vaping? I do not share in the notion that traditional oral analog ST tobacco is safer than Vaping, nearly should you, and neither should CASAA be pitching it.


    1. “I do not share in the notion that traditional oral analog ST tobacco is safer than Vaping,”

      I’m glad I read the bottom of your comment first, as it clearly signaled that there is no need for me to read the diatribe that preceded it.

        1. Actually, it is plausible but not established that smokeless tobacco products may be less risky than vaping. The reason is that the exposure pathway is different – e-cig vapour is drawn into the lungs, the residues from smokeless tobacco aren’t. To be honest it doesn’t really matter that much – the main thing is that people have options that are substantially less risky than smoking, and that they choose what works for them. For some that will be snus, for others it might be vapour or it might be both in different circumstance and it might change over time. The key thing is the difference compared to combustible products, not the difference within non-combustible – though some quality standards can easily improve these.

        2. Clive Bates:
          The reason this is an issue for me, is that as Dr. Siegel has cited that ST is associated with Cancer. This drew very strong response from Phillips/CASAA. My focus is Vaping, and I believe that ST market is mature, and will never experience the growth and adoption in cessation and replacement to analogs as E-Cigarettes.

          I am also not aware of any study suggesting that SNUS would be any more effective than NRTs in cessation or long term usage. NRTs are available for long term usage over the counter. Simply the “enjoyment” benefit that even the FDA attempts to quantify in the usage of Analogs is not replicated via Analog Oral Tobacco. I would suggest that even if the FDA changed its labels to what Swedish Match is asking for, that SNUS would not see any materially significant adoption rate.

          In the end, its established that ST has a known cancer risk. And its not shown that E-Cigs have contents that are carcinogens, and while the say the delivery is to the lungs, I don’t see the case for Cancer in E-Cigs give the above.

          Cancer vs No Cancer, seems beyond debate, for a comparsion of ONLY the two, Vaping is safer than ST….and this an established KNOWN.

  12. Didi says: Why taste terrible? They are just different from smoked tobacco taste.

    That’s the entire point — you are selling a device expressly designed to look and be used like a cigarette….. It does not seem like a large leap then to think that most folks who pay around $10 for one (say a disposable) think it should taste like a cigarette.

  13. Smokefree Pennsylvania’s 110 page comment on the FDA’s proposed “deeming regulation” at
    cited and analyzed the scientific and empirical evidence on e-cigarettes and the devastating impact FDA’s regulatory proposal (on the vaper industry and public health), cited and refuted many false and misleading fear mongering claims made about e-cigarettes (by Obama’s DHHS, Big Pharma shills and other e-cig opponents), and urged the FDA to reject its proposed Deeming Regulation (because it would protect cigarettes and threaten the lives of all vapers and smokers by banning >99.9% of e-cigs, and by giving the e-cig industry to Big Tobacco).

    I’ll be pleased to discuss any of these issues with those who are truly interested, but I won’t respond to personal attacks by trolls.

  14. Godshall:

    I have read the information in your FDA submission which is in line with your public comments on the same issues. Here are some of the items which I have written above which I am speaking to in your FDA Comments:

    You wrote to the FDA, and quoting:
    1. ““Smokeless tobacco-attributable deaths would be 1,102 (1.1%) if as many used smokeless tobacco as had smoked” Citing Systematic review of the relation between smokeless tobacco and cancer in Europe and North America, Peter N Lee and Jan Hamling, BMC Medicine 2009, 7:36doi:10.1186/1741-7015-7-36http://www.biomedcentral.com/1741-7015/7/36
    2. “Since the proposed Deeming Regulation would apply to all of the tens of thousands of different e-liquid products containing nicotine, and to all parts and components of e-cigs, the Deeming Regulation also would authorize the FDA ban all e-cig hardware, cartridges, batteries and rechargers unless and until the FDA approves New Tobacco Product applications for each of those products, which would cost millions of dollars for manufacturers to submit each application.”
    3. “FDA also estimated that each Application for Premarket Review of New Tobacco Products for an e-cig product would cost an average applicant just 5,000 staff hours (i.e. 2.5 FTE) (Table 9) and average just $333,554 (Table 21)” later saying “Realistically, each Application for Premarket Review of New Tobacco Products submitted by an e-cig company would cost successful applicants at least $3 million, and perhaps up to $20 million.”

    These are specific, and relate to the feedback and questions I raised above. So I will address them, and if you are able, you certainly will respond as you offered to.

    1. Phillips/CASAA contends that ST, Smokeless Tobacco (ie Chewing Tobacco, Traditional Analog Oral Tobaccos, SNUS) is safer than Vaping. I am suggesting this is known to be false. There is no evidence or suggestion that Vaping causes cancer. I don’t think you will make that suggestion either. Yet you say cite as your support, and maintain, the postion that if as many people who smoked analogs used ST, it would case 1,102 cancer attributable deaths. Deaths are the final measure, but not a full measure of the harms of cancer (ie those that live). ST is cancerous, certainly smaller than Analogs, as there is no combustion inhalation, yet E-Cigs do not have this cancer risk. Can you reconcile?

    So the premise that ST is safer than vaping, or even as safe as vaping, is confounded and rejected by your comments to the FDA. You also have testified to the FDA that 75% of oral cancers are attributed to Analog smoking and that ST is 1/10 of that. So 7.5% is not 1%. Please reconcile.

    2. You say in this comment that batteries and chargers and hardware without E-Liquid will be regulated by the FDA. However the FDA says clearly that the act does not give them power to regulate items that do not contain E-Liquid containing Nicotine. Your comment and position that Hardware will be regulated by the FDA is contradicted fully by the FDA. How can you maintain that position?
    3. Here you say the FDA and presented to the OMB is saying that a PMTA will cost approximately $335,000 USD. But you then say it will cost manufacturers $3 million (at least) and up to $20 million. Your numbers are radically different. It does not seem that you have any reasonable means of justifying the 3+ Million dollar number, much less the 10-20 Million dollars.

    Can you provide how you come to these numbers. And saying your numbers were correct as fact, how could the OMB allow such a variance when they are submitted to them.

    These 3 items are simple and straight forward, and are all responding directly to your quotes to the FDA. Please review and respond if able. Thank you.

  15. Bill Godshall

    “9. The >99.9% theory being pitched remains based on apples and aardvarks math, mixing things and crunching numbers improperly.”
    “The FDA estimates there are 3392 existing products in the liquid (1675) and finished products (1717).”
    “10. The FDA states they will not regulate hardware devoid of E-Liquid.”

    The FSPTCA’s definition of “tobacco manufacturer” includes everyone who engages in the manufacturing, importing, labeling, packaging and/or repackaging of a “tobacco product”. More than a million different e-cigarette products have already been marketed in the US (as every bottle of flavored e-liquid ever been mixed at every vape shop is slightly different, and is thus a different product, than other bottles of the same flavored e-liquid that were previously mixed at the same vape shop).

    The FSPTCA and the FDA deeming regulation also state that “components” of tobacco products (including all PVs and virtually all their different components) are considered “tobacco products” by the FSPTCA’s definition of “tobacco products”. It is unknown if or how the FDA would enforce the many different provisions of the FSPTCA and deeming regulation on manufacturers of e-cigarette components, but the FDA could (in accordance with the FSPTCA) require a PMTA to be submitted to the FDA for every PV or even for each of thousands of different PV components.

    The only FDA estimate (for e-cigs in the deeming reg) that’s even close to reality is the agency’s estimate that 25 new tobacco product applications for e-cigs would be submitted annually. But even if FDA approved 25 new tobacco product applications annually for e-cigs, the deeming regulation would ban >99.9% of all e-cig products now on the market (as 1,000,000,000 / 25 = .0000025).

    EW wrote
    “11. What the FDA is more stuck with— is the 335K estimate for new PMTA. That is 15 times less that the 5 Million dollar number you toss out”

    There is no way a workforce of 2.5 FTE could conduct (in just one year) all of the necessary research and lab tests and write a PMTA for any e-cig product (that would be considered by FDA). It would take at least a dozen (probably two or three dozen) researchers, engineers and other FDA regulatory staff at least two years to conduct the research, lab reports and other things FDA would require for approving a PMTA.
    The only e-cig manufacturers that have those types of staff (or contractors) are Altria, Reynolds, Lorillard/Imperial, BAT, PMI, JTI, and perhaps NJOY in a year or two.

    Each PMTA application will cost more than Swedish Match spent to compile and submit its 100,000+ page MRTP application (which I predicted would cost at least $10 million to back in 2011/12 during the crafting of FDA’s MRTP guidance criteria) just so they can truthfully inform smokers that snus is less hazardous than cigarettes. I estimate that each PMTA would cost at least $20 million to submit to the FDA (just for the agency to consider, not approve, the application).

    EW wrote:
    “I do not share in the notion that traditional oral analog ST tobacco is safer than Vaping, nearly should you, and neither should CASAA be pitching it.”

    The scientific evidence has consistently found that snus and other smokeless tobacco product are 99% (+/-1%) than cigarette smoking, and unlike with e-cigs, there’s lots of scientific evidence finding that long term use of snus and US moist snuff poses negligible disease risks.

    1. Goodshall:
      Your testimony to the FDA said and I quote per official transcript:
      “Back to your question about chewing tobacco risk. Most mouth cancer, oral cancer deaths — 75 percent of all oral cancer deaths in America, according to the CDC and according to the American Cancer Society, among men are caused by cigarette smoking. The risk of mouth cancer from smokeless tobacco is about one-tenth of the risk of smoking causing mouth cancer. And most mouth cancers that do occur in smokeless users occur in people over the age of 65.”

      Some Statistics:
      Close to 43,250 Americans will be diagnosed with oral or pharyngeal cancer this year. It will cause over 8,000 deaths, killing roughly 1 person per hour, 24 hours per day. Of those 43,250 newly diagnosed individuals, only slightly more than half will be alive in 5 years. (Approximately 57%)

      So 8000 x .75 = 6000 x .10 = 600 deaths a year from Chewing Tobacco.
      So your claim that its Chewing Tobacco is safer or as safe as Vaping is wrong. Vaping is not a cause of cancer. And the 57% who get cancer, but don’t die…are not comprehended in your analysis because they are not part of the mortality count.

      Phillip/CASAA say that ST is safer than Vaping….but your own numbers don’t bear that out.

      2….The deeming says they will not regulated hardware without nicotine, and they have not even studied or analyzed how much it would cost to attempt to try. If a component like a cartridge has nicotine, they will regulate, if no nicotine, they won’t. Its in the deeming.

      3….You accept that the FDA is correct with 25 applications, but you reject the costs of 335K per application. So you, pick and choose, which things to say the FDA is credible on. The FDA does not understand very well the Vaping marketplace, they do say that in the deeming also.

      You are now saying $20 Million for applications. This number is wildly different than what the FDA is calling out for. 20 million dollars for each application is simply a giant number pulled out of the ether.

      The FDA is saying there are only 3392 products. Lets agree that number is wrong. If we accept that, we can not continue to use all the rest of the FDA estimates without factoring in the implications of the number being wrong. Bad data, multiplied by whatever other number, results in bad data. You can not enter into the equation garbage and not expect to get garbage as the end result.

      The FDA is a hurdle for sure, but it has bounds. :Wolff

  16. Bill Godshall

    Clive wrote:

    The question is: does the migration from one to the other degrade or enhance profitability? Bonnie Herzog’s view is that a shift into vapour products from their core business would be margin-enhancing overall.

    Although cigalike e-cigs typically generate similar or slightly higher profit margins than cigarettes, and have a retail price similar to or slightly below cigarettes, vapers who use Premium Vaporizers and e-liquid pay just 20%-35% of the price of cigalikes or cigarettes.

    Thus, its in the future financial interests of cigarette companies for the UK MHRA, US FDA and other governments to ban PVs and e-liquid, and its also in the cigarette companies’ future financial interests to make the regulatory approval process (for e-cig products) very expensive to sharply reduce the number of cigalike competitors.

  17. A fascinating discussion is worth comment. I believe that you need to publish more
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