Wells Fargo 2014 E-cig conference - Bates

6. Diminishing and negative returns to regulation Net health Value to society Net harm Regulatory costs, burdens and restrictions Builds confidence Destroys viable firms and products Compromises design & consumer appeal Sweet Spot

7. Morgan Stanley on FDA deeming regulations The greater barriers to entry (slower approval process, higher costs, higher product standards), will ultimately take a toll on the number of available products and rationalize the category. This could result in the larger tobacco companies dominating the category in the future, given the burden it would place on smaller manufacturers.

8. Bureaucratic regulators Predatory companies Public health’s “useful idiots” The Unholy Trinity

9. Changing perceptions – for the worse Birth defects Lipoid pneumonia Third hand nicotine exposure Ultrafine particles Blindness Anti-freeze Poisoning Gateway

10. Winning hearts and minds? Believe e-cigs safer than cigarettes? US adult smokers 85% 65% 100% 80% 60% 40% 20% 0% 2010 2013 Tan ASL, Bigman CA. E-cigarette awareness and perceived harmfulness: prevalence and associations with smoking-cessation outcomes. Am J PrevMed 2014; 47: 141–9. Perceived e-cig risk in young British smokers Trends in electronic cigarette use in young people in Great Britain over 2013-2014 Arnott, Britton, Cheeseman, Dockrell, Eastwood, Jarvis, & McNeill ASH, CR-UK, PHE 2014

11. Science: five orientating propositions • Relative risk: at least 95% less harmful than smoking, probably lower, may be negligible risk. • Bystanders: no material health risk, possible nuisance • Adolescents: use rising with adults, vast majority of users are smokers, may be displacing smoking • Smoking cessation: combines appeal and effectiveness and improving over time – limited studies show at least as good as pharma nicotine already. • Promoting smoking: no sign of gateway effects or renormalising smoking.

Notas del editor

Starting point is that every single regulatory scheme so far proposed (FDA, EU, UK, WHO, Canada, Australia etc etc) will do more harm than good for health and the consumer. It would be better to have No regulation than the schemes proposed. This is because firstly, nothing much is going wrong, the risks are quite low at present, but the perverse unintended consequences of regulation are seldom acknowledged and never rigorously assessed by those proposing regulations. In fact these will dominate the impact of regulation.
This is the first of four examples on perverse consequences of regulation: banning flavours may damage the appeal of vaping to some users and either send them back to smoking or mean they never move in the first place. A ban may stimulate a black market or DIY which would be more dangerous than the risks that a ban is supposed to mitigate. There is no evidence these products cause teenage vaping, and even if there was, it might actually be beneficial if displacing smoking.
Bans on vaping public enclosed spaces carries risks – that part of the value proposition is degraded for smokers, that pushing smokers onto the street will bring vapers closer to smoking and increase risk of relapse – all of which is bad for health. Owners and operators should take decisions on whether to allow vaping, not legislators.
Some vaping ads will be offensive or too ‘racy’ for some… Should these ads be banned? What if they are effective in creating buzz around e-cigarettes? What if they bring a few hundred or thousand more into the category? Shouldn’t we trade off prudishness for effectiveness?
Regulators are quite capable of imposing such heaving compliance burdens and demanding so much paperwork that only the largest companies would be able to comply, and only by raising prices to recover compliance costs. Highly burdensome compliance regimes will mean it is only worth applying for relatively homogenous high volume products, so a the choice of products would collapse dramatically. The burdens would tend to protect the incumbents in the nicotine market – cigarettes already on market. It will also sponsor a black market – as has happened in Canada and Australia.
This is a conceptual representation of the discussion on perverse consequences of regulation. It plots regulatory burdens (X axis) against value to society (Y axis). Initially regulation builds confidence and gets rid of rogue products and cowboy firms, but as it gets more burdensome it compromises the value proposition and ultimately drives out perfectly viable products and firms. The art of the game is to identify the ‘sweet spot’ of regulation… much of what is under discussion is towards the far right hand side of this chart.
This comment from David Adelman of Morgan Stanley July 2014 reflects the reality of heavy regulation – it plays to the advantages of companies with strong balance sheets able to support their vapour subsidiaries through regulatory approvals, while killing off the competition. Just about everything called for by the public health community plays into this dynamic – bans, meds regulation, massive amounts of testing etc
An unholy trinity is in operation, consisting of: bureaucratic, loss averse regulators – who are blamed if something goes wrong with the thing they regulate, but are not responsible or accountable if that cause something bad to happen that they are not held responsible for – for example more smoking. predatory businesses – companies that want to use regulation to favour them and the approach to the market… big companies that want high barriers to entry, bricks and mortar businesses that want internet bans, companies with only tobacco and menthol flavours that would like all other flavours banned public health's "useful idiots” – that part of the public health community that devotes itself to exaggerating risks, ignoring benefits and remaining wilfully blind to unintended consequences – spreading fear and doubt among users and pressing regulators for ever more aversive regulation This forms a system which pushes regulatory barriers ever higher, and has the perverse effect of protecting the cigarette based business model of the tobacco industry, promoting smoking and causing disease and death… all in the name of public health.
The propaganda about e-cigarettes rains down continuously – usually consisting of cherry picked research, risks taken out of context and exaggerated, hypothetical or possible problems turning into the defining issue – often aided by spin from international organisations like WHO or irresponsible agencies like CDC.
http://www.ajpmonline.org/article/S0749-3797(14)00107-X/abstract The effect has been shocking – many smokers still do not know that vaping is much safer than smoking, and even among those who do, few realise that the risk is likely to be >95% lower. Several surveys show similar results – a worryingly high level of misunderstanding and worst of all this is getting worse over time.
This attempts to summarise what I think are four reasonable take-away conclusions on the main issues for investors or other non-specialists from the science as it stands today,

Wells Fargo 2014 E-cig conference - Bates

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Wells Fargo 2014 E-cig conference - Bates

Notas del editor