A New Study Has the Potential to Kill the E-Cigarette Market

Anyone who has been watching the electronic-cigarette, or e-cig, debate knows that a key argument used to support possible regulation is the belief that e-cigs normalize, or encourage, the action of smoking. As of yet, this has been nothing but hot air from health campaigners and government agencies. But a new study has released groundbreaking data showing that there is in fact a link between the use of e-cigs and traditional cigarettes among US adolescents.

For tobacco companies like Altria Group (NYSE: MO  ) , Lorillard (NYSE: LO  ) , Reynolds American (NYSE: RAI  ) , and Philip Morris International (NYSE: PM  ) , this conclusion is -- in a word -- disastrous. 

Groundbreaking study
JAMA Pediatrics is the oldest continuously published pediatric medical journal within the United States, founded in 1911. According to one of the journal's studies, adolescents who have or are using e-cigs are less likely to have given up smoking than those who did not use e-cigarettes. The authors of this study are Lauren Dutra and Stanton Glantz, two prominent opponent of e-cigs; this does bring into question the bias of the study, although there is no denying that the process wasn't thorough. The study relied upon data from 40,000 adolescents who completed surveys carried out by the Centers for Disease Control and Prevention. Overall, the authors concluded that:

...[the] use of e-cigarettes does not discourage, and may encourage, conventional cigarette use among U.S. adolescents.

Still, critics say that while the study does show a correlation between smoking and e-cig use, there is no evidence to show that the use of e-cigs will directly lead to smoking. Unfortunately, this study comes at a time when the U.S. Food and Drug Administration is preparing regulations and controls for the juvenile e-cig market within the United States.

Starting to apply pressure
At present, e-cigs are for the most part unregulated, allowing companies to aggressively market them and claim that e-cigs are relatively safe. This approach can't be used with conventional cigarettes. However, opposition to e-cigs is building, and an unlikely backer is funding the move against these reduced-risk products.

Indeed, one of the biggest forces working against the introduction of e-cigs is big pharma. Now, this will come as no surprise to some: Big pharma profits from treating disease, including diseases stemming from smoking. If  there is less disease to treat, then their profits will fall, which is bad news for shareholders.

In addition, big pharma is highly active in the nicotine-replacement therapy, or NRT, market. NRT includes such items as nicotine gum, lozenges, and patches; GlaxoSmithKline (NYSE: GSK  ) is the leading marketer of these products within the United States. Obviously, if smokers who are in the process of quitting turn to e-cigs rather than NRT, GlaxoSmithKline will lose revenue. It's likely that big pharma could use this study to increase pressure on the FDA to regulate e-cigs.

Furthermore, it would also seem as if GlaxoSmithKline has support from the U.S. Food and Drug Administration; in particular, Mitch Zeller, a former anti-tobacco lobbyist who was appointed head of the FDA's center for tobacco products earlier this year.

Now, Zeller should not be taking sides in this argument. But according to an article published in The Wall Street Journal back in 2009, Zeller disclosed that he:

...provides consulting support to GlaxoSmithKline consumer health through Pinney Associates on an exclusive basis on issues related to tobacco dependence treatment.

This pharmaceutical consultancy has regulatory authority over competing products, including e-cigs.

Thought of as a good thing
On the other hand, there is an enormous amount of support for e-cigs. Throughout November and December, more than 35 organizations, including public health advocates, lawyers, and physician groups, petitioned Washington, D.C.'s Office of Management and Budget. They lobbied to stop a rule which would bring e-cigs under the control of the FDA (this rule was proposed by the FDA).

If e-cigs were brought under the control of the FDA, the administration could potentially require companies to implement a host of protocols, including: register and pay fees, list the ingredients in their products, obtain prior approval for new products, and restrict online sales and marketing to children.

The OMB has not had a meeting over the matter since Jan. 17, so it is likely that an outcome is due to occur in the near future.

Future under threat
Obviously, this threat from the FDA is a huge risk to the young e-cig market within the US; therefore, Lorillard and Altria have made moves to diversify while the going is good.

Specifically, Altria recently purchased Green Smoke, an international e-cig company with a distribution network and sales in the US and Israel. Meanwhile, Lorillard has acquired a British e-cig developer, although this does mean the company must compete with tobacco industry behemoth British American Tobacco, which has launched its first e-cig product in its home market.

In addition, Altria and Reynolds have made inroads in the NRT market within the US, both offering types of tobacco gum. Reynolds also has several smokeless snuff offerings, which are still registering strong demand. This is nothing new; it just helps set the company apart from its peers.

As a result, all will not be lost for these companies if the FDA moves against them. Smaller e-cig companies, however, could potentially be snuffed out overnight, as regulations benefit the industry's larger players.

Tobacco companies make GREAT dividend stocks
One of the dirty secrets that few finance professionals will openly admit is the fact that dividend stocks as a group handily outperform their non-dividend paying brethren. The reasons for this are too numerous to list here, but you can rest assured that it’s true. However, knowing this is only half the battle. The other half is identifying which dividend stocks in particular are the best. With this in mind, our top analysts put together a free list of nine high-yielding stocks that should be in every income investor’s portfolio. To learn the identity of these stocks instantly and for free, all you have to do is click here now.


Read/Post Comments (3) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 22, 2014, at 11:19 AM, pupmastermp3 wrote:

    "...[the] use of e-cigarettes does not discourage, and may encourage, conventional cigarette use among U.S. adolescents."

    THE REST OF THE STORY

    The authors of this study make one of the most cardinal errors in all of epidemiology. They ignore the principle that "correlation does not equal causation."

    Here, they find a correlation between e-cigarette use and higher and more sustained levels of smoking. But because this is a cross-sectional study, they cannot determine which came first. In other words, what is the direction of the causal relationship? Does the e-cigarette use precede, and cause, the smoking? Or does the smoking precede, and cause, the e-cigarette use?

    The problem is that in this cross-sectional study, there is no way to determine the direction of the observed relationship.

    The authors admit this in the paper. They write: "This is a cross-sectional study, which only allows us to identify associations, not causal relationships."

    Furthermore, later in the paper they reinforce this point more specifically, writing: "the cross-sectional nature of our study does not allow us to identify whether most youths are initiating smoking with conventional cigarettes and then moving on to (usually dual use of) e-cigarettes or vice versa...".

    Thus, the authors readily acknowledge that it is impossible from this study to determine whether or not e-cigarettes lead to smoking or whether smoking leads to e-cigarette experimentation.

    Nevertheless, this does not stop the authors from drawing a conclusion. They conclude, despite their acknowledged inability to draw such a conclusion, that: "e-cigarette use is aggravating rather than ameliorating the tobacco epidemic among youths."

    In other words, despite acknowledging that they cannot tell from their study whether e-cigarette use precedes smoking or whether smoking precedes e-cigarette use, they nonetheless draw the conclusion that e-cigarette use precedes smoking.

    In my view, there is only one possible explanation for this: Dr. Glantz is no longer playing by the rules of science. He is now a man on a mission: to destroy the e-cigarette industry and to remove e-cigarettes as an option for smokers trying to quit. He has apparently drawn the pre-determined conclusion that e-cigarettes are aggravating the tobacco epidemic among youth, and he will stop at nothing to draw this conclusion and disseminate it to the public.

    Apparently, the science no longer matters. You can acknowledge that a study does not allow you to determine the direction of a relationship, but then go ahead and draw such a conclusion anyway. Frankly, this is junk science, and it is just as bad as what we have attacked the tobacco industry for doing in years past.

    Whether e-cigarette use precedes smoking or smoking precedes e-cigarette use is a critical question, but it is one which needs to be answered through longitudinal research. We need studies that follow the trajectory of teen tobacco/e-cigarette use over time. That is the only way to determine which comes first.

    The problem with what Dr. Glantz has done is that he is already disseminating the "answer" to this important research question without having actually done the research. That obviates the need to do the research because it is too late. The answer has already been disseminated, and it is going to affect important public policy as well as clinical decisions.

    Another problem with what Dr. Glantz has done is that it is fundamentally dishonest. He is essentially lying to the public about the science regarding electronic cigarettes. He knows full well - as he acknowledges in the paper - that this study provides no answer regarding whether e-cigarettes precede and lead to smoking or whether youths who are heavier and more dependent smokers are more likely to experiment with e-cigarettes. Nevertheless, he is telling the public that he has answered the question and that the answer is that e-cigarette use precedes and leads to smoking. This is tantamount to lying to the public.

    The rest of the story is that this is what the tobacco industry used to do. It is not how we in tobacco control should be conducting our business.

    by Dr. Michael Siegel

    Professor in the Department of Community Health Sciences, Boston University School of Public Health.

  • Report this Comment On March 22, 2014, at 3:49 PM, ezmoose wrote:

    I switched to E-Cigarettes over four years ago. Now, I can ride my bicycle hours-on-end without losing my breath. That's all the convincing I need.

    I question the true motives of those adamantly opposed to E-Cigarettes. They seem to cling onto what little derogatory information (factual or not) they can dig up in their blind damnation of E-Cigarettes while turning a blind eye to any and all supportive studies.

    You would think most people would embrace a product that has the potential to drastically reduce cancer, emphysema and myriad other diseases connected with smoking.

    Open-minded people do balanced research.

    Here's some links to get started.

    http://acsh.org/tag/e-cigarettes/

    http://www.tobaccoharmreduction.org/interviews.htm

    http://casaa.org/

    Or not...

  • Report this Comment On March 23, 2014, at 5:08 PM, kronstantinople wrote:

    A study in which the admittedly biased authors conclude that e-cigs "may" encourage conventional cigarette use among adolescents is certainly not going to "kill" --- or even wound -- a thriving, dynamic industry. Of course, we need to protect young people from any harmful or addictive product, but kids represent such a miniscule part of the e-cig market, that even if all of them were hypnotised into being positively revolted by e-cigs, it wouldn't make a noticeable dent in the market.

    Anyway, why would kids use a despised, filthy, lethal, extremely expensive product, when e-cigs are more attractive in every way -- including coolness.

    The headline and premise are sensationalistic and inaccurate.

    I don't see how anything but a study proving e-cigs are more harmful than tobacco could kill the industry, and even that might not do it, since people are having such a blast with all those flavors and vapor.

    We need research and sensible regulation -- not hyperbole.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2886035, ~/Articles/ArticleHandler.aspx, 8/20/2014 6:11:29 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement