Test your tobacco control knowledge!

How well have you been following tobacco control events in Canada? Take 10 minutes to test your knowledge of recent events.

Bragging rights are a short quiz away!....(and yes, there are some trick questions).

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1. In March 2020, British American Tobacco changed its logo.
What slogan did it adopt?
a) We've come a long way, baby
b) Accelerating Delivery
c) A better tomorrow
d) I'd rather switch than fight
e) A taste you can call your own

2) The federal government recently made public its tax revenues from tobacco sales in 2018-2019 and its budget for tobacco control for 2020-2021.
Which of the following statements are true?
a) For every $1 in federal tobacco tax revenue, 1 cent will be spent on tobacco control.
b) For every Canadian smoker, the federal government will spend less than $10 per year on tobacco control.
c) The average Canadian smokers pays about $700 per year in federal tobacco taxes.
d) Federal Government revenues from tobacco sales are increasing faster than industry revenues.

3) In January the Council of Chief Medical Officers of Health recommended that governments adopt several measures to prevent youth vaping.
Which of the following did they not recommend?
a) ban all flavoured vaping products and then provide regulatory exemptiosn for a minimum sets of flavours.
b) limit nicotine levels in vaping products to a maximum of 20 mg/ml.
c) tax vaping products in a manner consistent with maximizing youth protection while providing some degree of preferential pricing.
d) promote e-cigarettes as a form of harm reduction.
e) increase the minimum age for tobacco and vaping to 21 years.

4) In December the results of the Canadian Student Tobacco Alcohol and Drug Survey were released. In only one province the rate of youth vaping had not doubled over the past 4 years.
Which province was that?

5) Plain packaging of tobacco products came fully into effect in Canada in February 2020.
Which of the following countries has not yet implemented plain packaging? (A bonus point to identify those countries which require plain packaging of e-cigarettes).
a) Turkey
b) Uruguay
c) Saudi Arabia
d) Israel
e) Singapore

6) At least 40 countries do not permit the sale of electronic cigarettes as consumer products.
Which of the following statements is not true?
a) These countries represent about one-third of the world's population.
b) Among these countries are several with advanced tobacco control strategies, including one-third of the countries which have passed plain-packaging regulations for tobacco.
c) These countries are found in each of the World Health Organization's 6 regions.
d) These countries include member states of the European Union.

7) Which of the following trademarks were not recently registered by a tobacco company in Canada?
a) World of White
b) Cool Flow
c) Press and Roll
d) Voke
e) True me

8) How many Canadian provinces have implemented a tax on vaping products?

9) The Lung Association and Heart and Stroke are sponsoring PSA to encourage governments to protect kids from vaping.
What products do they use to make their point? (no peeking!)
a) Pokemon
b) Lego
c) Ice-cream
d) My little pony
e) Fidget spinners

10) Which of the following are cities in Canada not authorized to regulate?
a) minimum prices on cigarettes
b) flavourings in vaping products
c) minimum separation distances between tobacco retailers
d) moratorium on new licenses to sell tobacco or vaping products
e) a regulatory fee to pay for cleaning up filters and e-cigarette waste

11) Which of the following countries do not allow retailers to set their own prices for tobacco products?
a) China
b) Brazil
c) France
e) Japan
e) Sweden

12) The number of tobacco retailers has fallen in Canada by how much since 2000?
a) 10%
b) 15%
c) 20%
d) 25%
e) 30%

13) Which of the following statements are not true?
a) For every post office outlet, Canadians have access to 4 tobacco retailers.
b) Canada has more tobacco retailers per capita than the United States.
c) Canada has more tobacco retailers per capita than France.
d) Canada has more than twice as many tobacco retailers as it has gas stations.

14). British American Tobacco announced that around the world it was changing the brand name of its e-cigarettes from VYPE to VUSE (the name which previously was used only in the United States).
Why did they do this?

15) Canadian provinces are currently in the 7th month of mediation talks with tobacco companies to settle the lawsuits filed by provinces over the past 2 decades.
Which of the following is not true?
a) the provinces have claimed in excess of $600 billion in health care costs related to the companies' wrongful actions.
b) neither the Canadian companies nor their foreign owners has put money aside to cover the payments they may be required to make as a result of lawsuits.
c) the lawyers representing most of the provinces are working on a contingency basis, with agreements that will pay them up to 30% of any settlement amounts.
d) the provinces have sought advice from the health and medical communities on how to use the lawsuits to reduce smoking.

BONUS Question

16) Why did we circulate this quiz?

Answers 

1. c) A better tomorrow. Accelerating Delivery was a slogan used by BAT in recent years, the others are advertising slogans for cigarettes.
2. All but d) are true.
3. d) The council made no reference to harm reduction.
4. There was no increase noticed in New Brunswick because the survey was not previously conducted in that province.
5. e) Singapore's regulations do not come into effect until July 2020, when it will be the 14th country to have put this in place. Israel has required plain packaging of e-cigarettes since January 2020.
6. d) EU members are required to permit the sale of e-cigarettes.
7. d) VOKE. That trademark was abandoned by tobacco company BAT, and has been picked up by Kind Consumer.
8. a) Only British Columbia has implemented a tax on vaping products. Nova Scotia will implement its tax in September 2020. Alberta has said it will impose a tax, but has not yet set a date.
9. c) Ice-cream. The campaign is called "Get the scoop".
10. Cities have the power to impose all these regulations. 
11. Japan, Brazil and France restrict retail competition for cigarettes by establishing the price which retailers must charge for each brand.
12. e) In 2000, there were approximately 40,000 tobacco retailers in Canada, compared with 28,000 in 2018 - a 30% reduction
13. B is not true. In the USA there are about 115 tobacco retailers for 100,000 people, compared with 71 in Canada.
14. We don't know either. Give yourself a point. 
15. d) Despite requests for meetings, none of the provinces has agreed to or initiated public consultations on resolving these lawsuits. 
16. To encourage you to take note of our recently-released information products, linked below.

Score

However you scored, give yourself perfect marks for caring enough to try. 

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Information on these and other current topics in tobacco can be found in our newly-released documents:

Tobacco in Canada Environmental Scan - March  2020	Tobacco Retailing A scan of available regulatory approaches - March 2020	Responsibilities & Powers of Ontario Municipalities to address tobacco use - March 2020

Calculating the profits of tobacco companies in Canada

How much do tobacco companies make in Canada? 

Answering that question became more difficult about a decade ago, after all three of the traditional tobacco companies (BAT-Imperial Tobaco Canada, PMI-Rothmans, Benson and Hedges, and JTI-Macdonald) became fully-owned subsidiaries of multinationals and the fourth (Grand River Enterprises) remained a privately held operation.

Over the past year, however, data on the earnings of some of these companies has become available from a number of sources. Using the data sources detailed below, we can now estimate that:

• The gross revenue from cigarette sales of all tobacco companies (including Grand River Enterprises) was more than $4 billion in 2019. 
• Including estimates for excise taxes ($7 billion +) and retail mark-up (10%), Canadians likely spent in excess of $13 billion on cigarettes in 2019. 
• The gross revenue from all tobacco sales of the three major tobacco companies was around $3.4 billion in 2019. 
• From this, the 3 major companies cleared about $1.36 billion in 2019.
• The estimated average profit per cigarette was over $0.05 cents, or more than $1 per package. 

Data sources:

Mandatory reports to Health Canada:

Tobacco companies are required to make periodic reports to Health Canada, including monthly data on the amount of each brand and type of tobacco they sell and "the Canadian dollar value of sales, including the excise duty." All companies legally operating in Canada are required to make these reports, including Grand River Entperprises, operating from Mohawk lands.

In the data released in the early new year, Health Canada identified that gross sales revenue (exclusive of excise tax and operating costs) on sales of 23.9 billion cigarettes was $4.19 billion (gross revenue of $0.18 per cigarette). This average would include all companies and all sales, including exports and duty-free.

In previous years, Health Canada has identified that cigarette sales represent about 94% of the value of the tobacco market, and that the three major companies receive 91% of the sales. 

Reports to investors:

It has been many years since tobacco companies routinely provided investors with financial data about their Canadian operations. (See historic note below.)

Yesterday, however, Philip Morris International reported on 12 weeks of sales in 2019. For the period before it "deconsolidated" its Canadian operation on March 22, 2019, it sold 1 billion cigarettes in Canada that were trademarked to Rothmans, Benson and Hedges in Canada, and declared operating revenues were USD 181 million (equivalent to CAD $250 million).

• PMI defines net revenues as "operating revenues generated from the sale of these products, including shipping and handling charges billed to customers, net of sales and promotion incentives and excise taxes."  
• PMI retains the trademark for some of the brands sold by RBH in Canada, including the high-selling discount brands Next and Philip Morris.  

Information from lawsuits:

Some financial information was released during the class action trial whose ruling precipitated the CCAA actions. In 2015 ruling Justice Riordan disclosed some information from financial records the companies had insisted remain confidential:  [1071]  For ITL, the five-year average of before-tax earnings between 2009 and 2013 is $483,000,000.  For RBH, it is $460,000,000.  JTM's "Earnings from operations" for the period average $103,000,000.  The Quebec Court of Appeal later made public annual reports for 2013 and 2014 for Rothmans, Benson and Hedges and Imperial Tobacco Canada. 

Filings in the CCAA Proceedings:

For over a year now, the three largest tobacco companies operating in Canada have been operating under the provisions of the federal Companies' Creditors Arrangement Act. This unusual circumstance was triggered when the Quebec Court of Appeal upheld a lower court ruling against the companies, ordering them to pay several billions of dollars to Quebec smokers whose cancers and lung disease could be attributed to the companies' wrongful actions in previous years.

The CCAA process has effectively stopped the clock on all the lawsuits against the companies, while they attempt to arrive at a settlement with all of the provinces, class actions and others suing them. One of the requirements imposed on the companies for the privilege of this ceasefire is a requirement to stop sending their earnings to their parent companies and to reveal their financial picture each time they ask the court for an extension to the stay.

This information was provided for 45 weeks of operation 2019 and can be found in a series of Monitor's reports for each company (listed below). Each accounting firm uses somewhat different categories to state income and expenses, in ways that impede consolidating the data.

Links to data sources

Imperial Tobacco Canada Ltd.

2019 to 2013 reference to earnings in Justice Riordan's ruling - 2015 QCCS 2382 (para 1071)
2014 earnings statement: Blais Létourneau appeal document 
2017 and 2018 earnings statement. Application record. (page 688) 
3 week period ending April 14. Monitor's Second Report (page 14)
8 weeks ending June 9, 2019. Monitor's Fourth Report (page 6)
14 weeks ending September 15, 2019. Monitor's Fifth Report (page 7)
20 weeks ending February 2, 2020. Monitor's Seventh Report (page 8)

Rothmans, Benson and Hedges

2009 to 2013 reference to earnings in Justice Riordan's ruling - 2015 QCCS 2382 (para 1071)
2014 earnings statement: Blais Létourneau appeal document
2018 earnings statement.  Application Record (page 80)
12.5 weeks ending June 9, 2019. Monitor's Second Report (page 20)
14 weeks ending Setpember 15, 2019. Monitor's Third Report (page 14)
20 weeks ending February 2, 2020. Monitor's Fifth Report (page 12)

JTI-Macdonald

2019 to 2013 reference to earnings in Justice Riordan's ruling - 2015 QCCS 2382 (para 1071)
2017 earnings statement. Application Record (page 141 and 211)
12 week period ending June 14, 2019. Monitor's Fourth Report (page 10)
13 week period ending September 13, 2019. Monitor's Fifth Report (page 13)
20 week period ending January 31, 2020. Monitor's Seventh Report (page 11)

Historic note:

For decades, two of the companies (Imperial Tobacco Canada Ltd and Rothmans, Benson and Hedges) were components of Canadian publicly-traded corporations (Imasco and Rothmans Inc). As such, they submtited annual reports and other documents with stock-market authorities. After they became fully-owned subisidaries (Imperial Tobacco acquired by British American Tobacco in 2000 and Rothmans Benson and Hedges acquired by Philip Morris International in 2008), these reports were no longer required. The records, however, remain available on the SEDAR website (Rothmans Inc and Imperial Tobacco).  The third-largest company, now JTI-Macdonald, was never publicly traded. It was a private company owned by the Stewart family until 1974, when it was sold to Reynolds and subsequently re-sold to Gallaher and then Japan Tobacco. Through all those structures, the revenues and profits of that company have rarely been disclosed.

E-cigarette taxes: A global snapshot

Earlier this month, we reported on taxes on cigarettes in Canada, and also on heat-not-burn tobacco sticks.* This post reviews Canadian tax measures on e-cigarettes (vaping products), and compares with those in other jurisdictions.

Vaping taxes in Canada:
Currently, the federal government does not impose taxes on e-cigarettes, other than the GST at the rate imposed on all consumer goods.

Three Canadian provinces have indicated that they intend to set tax rates for vaping products which are higher than for other goods. One of these taxes is already in place:

• British Columbia applies HST at a rate of 20% tovaping devices and liquids since January 1, 2020.
• Alberta announced in October 2019 that it would tax vaping products, and set the tax rate at 20% in its February 2020 budget, although it did not specify an implementation date.
• Nova Scotia announced in its February 2020 budget that it would impose a specific tax of $0.50 per millilitre for liquids, and a 20% tax on devices, effective September 15, 2020. 

Vaping taxes in the United States:
23 U.S states apply taxes to electronic cigarette devices or the nicotine liquids that are used with them, as do a small number of municipalities. A number of approaches have been adopted. Some impose a tax on the value of the product (ad valorem tax), ranging from 15% (Illinois) to 95% (Minnesota and Washington DC). Others impose a tax on the amount of vaping liquid sold (specific tax), ranging from $0.05 per ml to $1.20 per ml (Chicago). Some jurisdictions blend both tax approaches. A table showing tax rates is available here. 

Vaping taxes in other countries:
More than two dozen countries impose taxes on e-cigarettes, although in some cases the tax rate is set low or even at zero. A list of countries, and the rates charged, is available here. 

Some innovative approaches are among these examples. Two countries (Croatia and Kazakhstan) apply a zero rate tax. This does not produce any revenues, but it does provide government with information on the market size and growth. South Korea applies four types of taxes on e-cigarette products, including a tax directed to support health promotion activities and to address the costs of disposing the waste from the products.

The rationale for e-cigarette taxes:

A year has passed since the World Bank published its review on E-cigarettes: Use and Taxation, in which it reviewed the evidence and noted the "challenging" environment for e-cigarette tax policy. Since this review, additional research has also become available:

• a U.S. study of retail sales finding that a 10% increase in vaping taxes was associated with a 26% reduction in sales of vaping devices and an 11% increase in tobacco sales. (Whether any cross-substitution was among former smokers or dual users or young people was not explored in this study).  
• a 2020 review by the California Legislative Analyst's office of a proposed new tax, identifying key policy questions for legislatures and suggesting that differential taxes be charged for products associated with youth use. 
• a 2019 study of the impact of Minnesota's tax, finding that its higher e-cigarette was associated with fewer smokers quitting between 2012 and 2015 than in areas without taxes. (The impact on young people was not evaluated).
• a 2020 study comparing the impact of regulatory (and tax) measures in various U.S. states on e-cigarette initiation and tobacco smoking on individuals 18-24, 25-24 and older. (Taxes were associated with an impact, as were other measures). 
• a(nother) 2020 study comparing e-cigarette regulatons and tax measures across  U.S. states on e-cigarette use among individuals over 18, finding taxes was associatesd with reduced use among those 18-24.

Resources and additional reading:

• The Public Health Law Center, which also provides links to enabling legislation.
• European Commission. Review of taxation in EU. 2019
• The Vapour Products Tax data centre. 
• PSC Fact Sheet.  2020
• World Bank. E-cigarettes: Use and Taxation: 2019
• Louisiana. Office of Public Health. Health Impacts and Taxation of Electronic Cigarettes. 2018
• California. Budget 2020-21. Taxation of E-cigarettes.  February 2020. 
• C. Cotti et al. The effects of e-cigarette taxes on e-cigarette prices and tobacco product sales: Evidence from retail panel data. 2020. 
• Saffer, H et al. E-cigarettes and adult smoking: evidence from Minnesota. 2019. 
• J. Jun et al. Do state regulations on e-cigarettes have impacts on e-cigarette prevalence? 2020. 
• Y. Du et al. Association of Electronic Cigarette Regulations With Electronic Cigarette Use Among Adults in the United States. 2020

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* The information on heat-not-burn taxes has been corrected. British Columbia has delayed changing its tax on these products as a result of COVID-19. The legislation authorizing those changes was not passed by the legislature at the time the tax was due to come into effect (April 1). 

Preliminary results of Canada's first Randomized Clinical Trial for e-cigarettes as cessation device

Last week viewers of the American College of Cardiology's virtual annual scientific session were able to see the initial results of the first large Canadian randomized clinical trial of e-cigarettes as a cessation device. Thanks to the ACC's sharing of this event and Youtube technology, a 6-minute synopsis of his presentation is available to all.

Presentation on the E3 trial

In short, this study found that after 12 weeks of treatment, those who used e-cigarettes with nicotine to quit smoking  were twice as likely to be cigarette-free at the end of treatment as were those who received only counselling. Data on longer-term outcomes are still being collected.

The E3 Trial

Dr. Mark Eisenberg of McGill University heads the only registered Canadian randomized clinical trial (RCT) to evaluate the efficacy and safety of electronic cigarettes as cessation devices. The "Evaluating the Efficacy of E-Cigarette Use for Smoking Cessation (E3) Trial was first registered with the international database of clinical trials in 2015 with the following purpose:

The Evaluating the Efficacy of E-Cigarette Use for Smoking Cessation (E3) Trial will be the first large trial to address the important issue of e-cigarettes for smoking cessation in Canada. The trial will randomly assign participants to receive nicotine e-cigarettes and minimal counseling, non-nicotine e-cigarettes and minimal counseling, or only minimal counseling for 12 weeks. Participants will then be followed for one year to see which (if any) group is more likely to have quit or reduced their smoking. Information about potential side effects and safety will also be collected. The E3 Trial will provide law-makers and the public with important information about the use of e-cigarettes for smoking cessation.

This experiment was designed to measure how many people had stopped smoking after one year (7-day point prevalence smoking abstinence at 52 weeks). Although many quit attempts fail after the one-year mark, this is the time frame commonly used to measure successful long-term quitting. The study also aimed to identify how many cigarettes were smoked by those who didn't quit, any adverse effects and whether or not participants had occasionally relapsed during the trial ("continuous abstinence").

The Canadian Institutes for Health Research was a major funder of the project, providing $1.1 million for the study between 2015 and 2019.

Dr. Eisenberg's early results

Dr. Eisenberg found that e-cigarettes with nicotine when used with counselling were twice as effective as counselling alone, and that 1 in 5 would-be quitters who used e-cigarettes with nicotine had stopped using cigarettes after the 3 month treatment period, compared with 1 in 10 among those who received only counselling.

Results from the E-3 trial

The study was cut short after Dr. Eisenberg and his team experienced "prolonged delay in e-cigarette manufacturing." Although the primary endpoint was moved back from 52 weeks to 12, Dr. Eisenberg explained that he will be following study participants and will report on their smoking behaviour at the one-year mark.

Results from the E-3 trial

How do Dr. Eisenberg's results compare with other trials of e-cigarettes?

In its description of the study design published last month Dr. Eisenberg's team provides an up-to-date summary of the issues and evidence surrounding e-cigarettes as cessation devices, including an Appendix which identifies previous studies.

These include:
* 2013 study in New Zealand finding 7.3% quitting among e-cigarette users at 6 months
* 2013 study in Italy among smokers not intending to quit.
* 2016 study of young adult smokers in the USA who were not intending to quit.
* 2017 study of smokers in the USA who were not intending to quit.
* 2018 study of adult smokers in the USA some of whom received free e-cigarettes in addition to usual care but did not quit in higher numbers.
* 2018 study of lung cancer screening patients in Italy where 25% of those who received e-cigarettes were abstinent at 12 weeks.
* 2019 study of adult smokers using the UK stop smoking services of whom 18% were abstinent at 1 year.
* 2019 study of men in South Korea among whom 65% were abstinent at 12 weeks (as were the NRT group).
* 2019 study of smokers in New Zealand of whom 35% of those who received both patches and e-cigarettes were abstinent at 6 months.

The variety of results in these studies point to the challenges identified by the Surgeon General this spring - with so many different types of e-cigarettes on the market - a heterogeneous market -- it is more difficult to make scientific determinations about what works and what doesn't. 

The e-cigarette used in Dr. Eisenberg's study was manufactured by NJOY and was developed as a standardized research e-cigarette. How it compares with JUUL, or Vype or other products on the market -- which have higher amounts of nicotine and which use salts to boost delivery -- is a whole other research issue.

Importantly, in his video presentation, Dr. Eisenberg was not bullish about his results. While he said the results were "very very good" he also cautioned "There's no question that e-cigarettes are not a magic bullet for smoking cessation. It's much better than counselling alone, but even so we are looking at almost 80% of individuals who are still smoking to some extent at 12 weeks."

How do Dr. Eisenberg's results compare with results from trials of other stop-smoking treatments?

Over 1,400 trials for smoking cessation methods have been registered on the clinical trial database, including several dozen in Canada. These studies have been reviewed by leading scientific panels, including:

The Cochrane Review, which has come to many conclusions about the comparative effectiveness of stop-smoking methods. In their recent advice for cessation during the COVID-19 pandemic, however, they excluded e-cigarettes from the recommended methods "as the risks associated with their use in relation to the current pandemic are not clear."

The U.S. Surgeon General's office, which recently published a special report on Smoking Cessation this past January. Within it is a 50-page review (Chapter 6) of the evidence behind interventions. While finding that "the evidence is inadequate to infer that e-cigarettes, in general, increase smoking cessation" the USSG noted that the evidence was "suggestive" that e-cigarettes with nicotine were more effective than those without.

When Health Canada approved varenicline as a smoking cessation drug in 2008, it did so based on clinical trials that found that at the same 12-week point in the trial, abstinence rates with varenicline were 44% and for buproprion were 30%. These appear to be much higher success rates than Dr. Eisenberg found with e-cigarettes.

What might Dr. Eisenberg's results mean for health regulators?

Clinical trials are most often used by health regulators when deciding whether or not to permit a drug for sale, whether to pay for it with drug-plans and whether to encourage its use as part of clinical practice.

Although e-cigarettes are already for sale as recreational products in Canada, they are not licensed as therapeutic medicines and, as far as we know, no manufacturer has requested that they be so. Because such permissions are product-specific, Dr. Eisenberg's study will not likely affect any such decision. Only manufacturers whose devices have been approved in this way may market e-cigarettes as cessation products.

Even without their registration as therapeutic products, Health Canada appears interested in the use of e-cigarettes as cessation device. It currently encourages smokers to use e-cigarettes to stop smoking cigarettes, and recently explored how to support health care providers to "have meaningful discussions with their patients about smoking cessation and alternative nicotine products." 

POR 019-19

The policy issues around e-cigarettes as cessation products are made more complex by different understandings of what "cessation" means. Some use it to describe switching from cigarettes to e-cigarettes. Others - including three quarters (77%) of the health care providers polled by Health Canada --  feel that successful quitting means ending nicotine use, not continuing to use an alternative product.

Results from Statistics Canada's recent survey on smoking and nicotine use, the Canadian Tobacco and Nicotine Survey, already show that one-third of those using e-cigarettes are doing so as a way of cutting down or quitting. The survey asked Canadians which quit methods they had tried. The results, once released, will add to our understanding of how likely quitters trying this method are to stop  using cigarettes, or how vulnerable to increasing their health risks through dual use.

Yet another Canadian RCT with information on e-cigarettes and cessation

Another CIHR-funded RCT on smoking cessation focused on the effricacy of smart-phone app on young adult quit rates. As a secondary analysis, data from this trial was used to assess the experience of those who used e-cigarettes throughout the 6 month trial (persistent users), compared with those who were found using them only at the beginning or end of the trial (transient users) and those who did not use them at all (non-users).

While the study has not apparently been published, the results were published in a 2017 Master's Thesis by Arti Saxana  They were also the subject of a web-cast presentation by Dr. Bruce Baskerville last year.

In this study, at the 6 month mark, those who had not used e-cigarettes were twice as likely to have been been abstinent from cigarettes for a month.

In most of Canada heat-not-burn cigarettes are much cheaper than regular cigarettes

This post has been corrected. As part of its COVID-19 response, British Columbia has indefinitely postponed its tax changes for these products.

Heat-not-burn (HNB) tobacco products may look like short cigarettes, but they function in a very different way. In cigarettes, it is fire (combustion) that releases the nicotine from the tobacco leaf. With heat-not-burn cigarettes, the tobacco rod is inserted into a device, where it is impaled on an electronically-heated element which vaporizes the nicotine.

These modern tobacco products were introduced to the Canadian marketplace in late 2016 by Rothmans, Benson and Hedges (RBH) under the brand names IQOS (device) and HEETs (tobacco sticks).  British American Tobacco introduced its similar ”i-glo”/”glo” product in some parts of Canada in 2017, but withdrew it in 2019. Japan Tobacco International manufactures a heat not burn device (PLOOM), but does appear to sell it in Canada.

Because HNB products are not “smoked”, they not considered cigarettes under tobacco tax law. Only one province (British Columbia) has established a tax category for these tobacco products. This would have had the effect of more than doubling the taxes on these products, but was postponed indefinitely on date of implementation. As a result, all provinces and the federal government currently classify these products under the same tax category that is used for chewing or pipe tobacco.

For most provinces, this means HNB tobacco products are taxed for each gram of weight. The federal government, however, taxes this category of tobacco on the basis of 50 grams of weight "or fraction of 50 grams".  This larger measure was introduced in the 2008 federal budget as a way of preventing the marketing of “kiddy packs” of smokeless tobacco. The federal tax (currently set at $7.76 for every 50 grams or fraction thereof) thus functions as a minimum price for all products which fall into the “manufactured tobacco” category.

A package of 20 heat sticks contains 6.2 grams of tobacco, compared with about 10-12 grams of tobacco in a package of 20 cigarettes. The federal tax on a package of 20 HNB sticks (if they were sold separately) is $7.76, but if sold in a carton of 160 sticks works out to $0.97 per 20 stick 'sub-unit'.  By contrast, the federal tax on a package of cigarettes is $2.48 per package, or $39.74 for 160 cigarettes.

RBH has responded to this unusual structure in tobacco law by selling its HEET sticks only in cartons or bundled packages. The two package sizes it uses are a carton of 160 sticks (containing 8 ‘sub-units’ of 20 sticks each) and a bundle of 50 sticks (packaged in 5 'sub-units' of 10 sticks each). (It has also lobbied the federal government to change the rules).

RBH has also significantly cut the price of these products. Their initial price (in 2017) was $79.00 for 160 sticks in Ontario. Last fall, the price dropped to $47 (in stores) and $50 (on-line).

What does this mean for public health?

The federal tax structure creates an incentive for manufacturers to set a large minimum package size for heat-not-burn products, although it does not force them to do so.

Although the minimum price for HNB products is higher than for tobacco (which are sold in minimum package sizes of 20), the per-unit cost is lower. HNB sticks are much less expensive than regular cigarettes.

This information is also available in a downloadable Fact Sheet. 

Cigarette taxes went up across Canada today -- by less than one-quarter of a cent per cigarette

It's no April Fools. Federal taxes were increased on cigarettes today -- from $28.43 per carton of cigarettes to $28.85, or $0.042 per package of 20 cigarettes.

This increase was not the result of a budgetary decision this year, but because of an automatic quinquennial inflation adjustment introduced in the 2014 budget, and annualized in the 2018 budget. If there had been a plan to include an additional tax increase in this year's budget, once scheduled for this past Monday, it too was disrupted by the COVID-19 suspension of Parliament.

Cigarettes are more expensive this year than last for other reasons. Provincial governments have nudged cigarette taxes forward over the past year. In February, Nova Scotia raised taxes by $4 per carton, as British Columbia had  done in January. Alberta raised taxes in October by $5.00 per carton.  To offset its cuts to the PST, Manitoba increased taxes by $1 per carton last May (2019), and has announced that it will do so again this coming July. Meanwhile, tobacco companies have also increased the price of tobacco products. In 2019, the average wholesale price of a cigarette, as reported by Health Canada, was $3.50 per pack, up 50% from $2.35 a pack in 2015 and double the average wholesale cost ten years ago ($1.70). 

These price increases do not, however, change the overall picture. Canadians pay less for cigarettes than do citizens of most other developed countries as the populous provinces of Ontario and Quebec are those with the lowest taxes. A package which sells for over $14 in Nova Scotia (which has the hghest combined taxes) will cost less than $10 in Quebec (which has the lowest).

Both business and health analysts group Canada as one of the countries where cigarette are more affordable. In a presentation to investors last year, the largest US tobacco company, Altria, illustrated that the USA was one of the most affordable cigarette markets -- but Canada was not far behind.

The World Health Organization, in its 7th WHO report on the Global Tobacco Epidemic, collected data from July 2018 on taxes applied to cigarettes and othe rproducts and also on the retail prices charged.  It found that Canada is among the 5 OECD countries with the lowest tax proportion of price (at 64% of package price, less than the recommended 75%). 

Data from WHO Report on the Global Tobacco Epidemic, and appendices. 

Related Fact Sheets:

• Tobacco Taxes in Canadian Jurisdictions, April 1, 2020
• Cigarette Pricing in OECD countries.