E-cigarette users should be concerned about proposed FDA
regulations that may eliminate most brands of these potentially life-saving
cigarette alternatives, leaving only those products marketed by large tobacco companies
with the resources to complete expensive FDA applications.
Who is responsible for the pending e-cigarette regulatory nightmare?
A brilliant analysis of e-cigarette regulation titled
“Bootleggers, Baptists and E-Cigarettes” has been published online (
here) by
economists and legal scholars from Clemson University (Bruce Yandle), the
University of Texas at Arlington (Roger Meiners), Case Western Reserve
University (Jonathan Adler) and George Mason University (Andrew Morriss, now at
Texas A&M).
A shorter version with
Adler as lead author appeared last year in Cato’s flagship publication,
Regulation (
here).
I’ll use quotes from both in this column.
According to Yandle and colleagues, “Durable regulation
emerges most often when there are two distinctly different special interest
groups that seek the same policy outcome. One group takes the moral high ground
by pursuing a public-interested goal [Baptists] and gives the cooperative
politician the ability to justify his actions on normative grounds. The other
[Bootleggers], seeking the same policy outcome, is motivated by pecuniary
interests, hopes to feather its nest, is often willing to share some of the gains
with the politicians who deliver the goods, and does not generally conspire
with its publicly interested counterpart that seeks the same regulatory goal.”
Yandle developed this concept in 1983, and he recently authored
a comprehensive book on the subject (
here).
He labeled the two groups “in homage to the
political pairing of unlikely interests that was successful in championing laws
that shuttered liquor stores on Sunday…the two interest groups would never form
a visible coalition in the strict sense of the word. They merely sought the
same outcome and were willing to struggle mightily to succeed.
At the height of its success, this powerful
pairing entirely shut down the legal sale of alcoholic beverages in counties,
states, and—during Prohibition (1920-1933)—the nation as a whole.”
Yandle and colleagues identify the Baptists and the
Bootleggers undermining the nascent e-cigarette market. “Private and public health officials…are the
Baptists in this story… Based on what is
known about the health effects of e-cig use, it would seem e-cigs might be
hailed as an advance in public health insofar as they offer cigarette smokers a
safer product. Even small reductions in
the number of smokers or the amount of tobacco products smokers consume would likely
produce substantial gains for public health. Yet e-cigs have been greeted with
scorn by health researchers who focus on what is not known about e-cig health
effects rather than what is known.”
The Bootleggers are a more diverse group. They consist of cigarette manufacturers,
which “have
an incentive to either enter the e-cig market themselves,
suppress competition from upstart e-cig manufacturers, or both.” They are joined by “Pharmaceutical companies
that make NRT products…They have benefitted from government encouragement that smokers
use their products to aid in smoking cessation and government limitations on information on tobacco harm reduction through
the use of e-cigs or smokeless tobacco products. [emphasis mine] Insofar
as e-cigs are an alternative for smokers to satisfy their nicotine cravings, they are a threat to the profitability
of NRT products. This is particularly so given recent
research suggesting that NRT products
do not help many smokers quit.”
Perhaps more surprising, state governments are also
Bootleggers, as “Tobacco sellers have become, in effect, tax collectors.” The booty includes excise taxes that have skyrocketed
over the past ten years, and payments made from smokers to cigarette
manufacturers to the states courtesy of the 1998 Master Settlement
Agreement. Yandle et al. note that “Some
states securitized all or part of the MSA cash flow by selling tobacco revenue
bonds so they could immediately spend the present value of the future
revenue. The sale of tobacco bonds
created a new group of Bootleggers—the bondholders and the state agencies that
issued the bonds—with intense interest in the future fortunes of the tobacco
companies, their sales, and any competitor that might reduce those revenues.”
This is a powerful coalition arrayed against
e-cigarettes. “There is an obvious irony
here. To the extent that e-cigs provide
a less hazardous alternative to consumers who seek to break their smoking
habit, Bootlegger/Baptist induced regulations that limit e-cig competition and
evolution bring with them a social cost measured in lost opportunities to
improve human health. Going further,
regulatory actions that limit e-cig marketability introduce uncertainty for
yet-to-be-discovered smoking alternatives that might also threaten the market
share of traditional tobacco and smoking cessation products. For the sake of
human health and freedom of choice, such innovation should be welcomed, not
chilled.”
The Campaign for Tobacco Free Kids, the American Cancer
Society, the Centers for Disease Control, the National Institutes of Health and
the Food and Drug Administration (Baptists) are aligned in a powerful coalition
with tobacco and pharmaceutical manufacturers and state governments (Bootleggers)
against e-cigarettes. There is more than
just irony here. The e-cigarette is a
“disruptive innovation” that not only “threatens the established order”, but
holds the potential to help millions of smokers quit. If this unholy alliance triumphs, public
health is doomed.