Smoking costs

Vaporing is in the government’s sights, meaning it's important to look at the money trail

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How much does smoking really cost?
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Simon Miller
On 15 June 2013 10:05

Another day, another dose of control freakery in Westminster. This time the Medicines and Healthcare products Regulatory Authority has announced that the government wanted to regulate all nicotine-containing products.

There has been a lot of nonsense around e-cigarettes recently; schools have banned them and there have even been accusations of ‘second-hand’ nicotine. But children aren’t using them. Hell, even Ash’s own figures say that. E-cigarettes are generally used by smokers: those who want to give up and those who have given up and don’t want to lapse.

There are some very sound reasons why there should be more investigations into vaporing as there are still unknowns over the long-term effects of what is essentially the inhalation of dry ice. There are rogue elements out there that sell extremely dangerous products, but we already have the Trading Standards Authority in place. Surely that august organisation would be able to test to see if there are harmful chemicals in e-cigarettes or dodgy products?

Smoking – and cessation of it – is big business. Never mind what tobacco companies earn – think what the taxman and pharmaceutical companies get out of it. According to its latest figures, the government gets £9.9bn from tobacco taxation but this revenue could come under attack if the upward rise in vaporing continues.

Next year could see e-cigarette sales reach £250m in the UK with 1.3m users. If all of these were smokers, or those cutting down, that’s a tenth of the smoking population. Can you imagine the ‘joy’ in the Treasury if nearly a billion pounds was taken from them?

Don’t believe the bean counters when they say that it is not an income generator; taxation has seen revenues rise by over £1bn in just 10 years – and that’s with a 0.4 percent drop-off rate each year.

In addition, the bean counters say that income is hit by tobacco smuggling. It is estimated that 11.6 percent of all internationally-traded cigarettes are smuggled and that tobacco smuggling costs the Treasury in the range of £1.1bn to £3bn a year.

Never mind the simple cause and effects issue surrounding this – higher taxes, people look for cheaper elsewhere – HMT still gets around £7bn more in revenue than what is spent on “tobacco-related” diseases according to the government’s own figures. Of course, a billion here or there isn’t a lot in terms of national budgets but that seven billion or so does provide a lot of beds and equipment if the government could hypothecate the taxation.

So I presume, financially, that the Treasury won’t be too upset to see e-cigs become a licensed product, with the subsequent price hike and potential prescription charges. But there is another group that could do very well out of this as well.

Pharmaceuticals are very keen on smoking cessation. In the US, it has been reported that $446m has been spent supporting organisations that wanted smoking bans in public places and when the global market is estimated to grow to $4.6bn by 2016, it is understandable that such support and lobbying goes on.

In the UK, retail sales of NRT smoking cessation aids grew by 4 percent in 2011, to reach £117m. McNeil Healthcare (UK) led the market with a 37 percent total value share for its Nicorette brand while GlaxoSmithKline’s Niquitin ranked second and Novartis Consumer Health UK’s Nicotinell third, with 30 percent and 20 percent respectively.

And the money-go-round doesn’t stop there. How much do you think cessation drugs cost the NHS each year? I’m talking about just the product, not the armies of cessation advisers and leaflets and helplines; just the drugs.

Just four years ago, the cost of prescribing smoking cessation drugs in primary care was £61.5m. Today that breaks down per person to £79.70 for bupropion, £163.80 for varenicline, and £69.16 for Nicotine Replacement Therapy over 12 weeks (buporopion is a nine week course).

And do you know what’s daft about all of this? None of them work. The long-term cessation rates of patches, gums and such like are in single figures. That’s because the addiction is still there.

If you want to give up, you have to want to. Replacing one input device with another does not remove the addiction, no matter what the adverts claim. And it is something that e-cigarette companies cheerfully accept. After all, as Ecit points out, if that was the case, then that would actually mean that tobacco products were medicines.

So far so nice for pharmaceuticals but it would be a pain if those e-cigs suddenly became popular and started denting into the profits wouldn’t it? Ah.

This is not about deliberate corruption or collusion but instead that hideous form of corporatism where the loudest voices lead to a result that can only benefit those companies – and revenue raisers for that matter – who control the market.

Just like energy, the fact that there wasn’t a choice for the consumer benefitted those companies.

And when a product rolls onto the market that you can get from any newsagent, then market share and income comes under attack. And when a company comes under attack it uses its influence on policy makers. Again, this is not corruption; it is an innate business instinct.

There have been raised voices over the “privatisation” of the NHS but as was saw last week, it is the commoditisation and corporatism of health practices in both policy and practice that is starting to worry observers more.

Private does not necessarily mean bad, but to commoditise health in a way that can only benefit providers is exactly what has happened elsewhere. As always it is corporatism that is the real threat.

Simon Miller is a contributing editor to The Commentator. Follow him on Twitter @simontm71

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