Tobacco Industry Promotions and Pricing After Tax Increases: An Analysis of Internal Industry Documents

Abstract

Background Increasing tobacco taxes, and through them, prices, is an effective public health strategy to decrease tobacco use. The tobacco industry has developed multiple promotional strategies to undercut these effects; this study assessed promotions directed to wholesalers and retailers and manufacturer price changes that blunt the effects of tax and price increases. Methods We reviewed tobacco industry documents and contemporaneous research literature dated 1987 to 2016 to identify the nature, extent, and effectiveness of tobacco industry promotions and price changes used after state-level tobacco tax increases. Results Tobacco companies have created promotions to reduce the effectiveness of tobacco tax increases by encouraging established users to purchase tobacco in lower-tax jurisdictions and sometimes lowering manufacturer pricing to “undershift” smaller tax increases, so that tobacco prices increased by less than the amount of the tax. Conclusions Policymakers should address industry efforts to undercut an effective public health intervention through regulating minimum prices, limiting tobacco industry promotions, and by enacting tax increases that are large, immediate, and result in price increases. Implications Tobacco companies view excise tax increases on tobacco products as a critical business threat. To keep users from quitting or reducing tobacco use in response to tax increases, they have shifted manufacturer pricing and developed specific promotions that encourage customers to shop for lower-taxed products. Health authorities should address tobacco industry efforts to undercut the effects of taxes by regulating prices and promotions and passing large and immediate tax increases.

Association between tobacco control policies and hospital admissions for acute myocardial infarction in Thailand, 2006-2017: A time series analysis

“…We did not find significant associations effects among the total population as observed in some other countries [46]. It could be the tax increases were not always followed by increase in cigarette prices because of industry price manipulation to buffer the price effect [47].…”

“…These diagnostic codes include both ST elevation MI (STEMI) and non-ST elevation MI (NSTEMI). The monthly AMI hospitalizations were calculated from October 2006 to September 2017 (a total of 132 months) and stratified by sex and age groups (45)(46)(47)(48)(49)(50)(51)(52)(53)(54)(55)(56)(57)(58)(59), and 60 years and over).…”

Tobacco manufacturer lobbying to undercut minimum price laws: an analysis of internal industry documents

“…In statements drafted for advocacy, they argued that ‘[s]tate unfair cigarette laws should not be used to bar manufacturer price promotions’ because if they did, ‘such promotions will be driven out of the tobacco industry’ leading consumers to purchase cigarettes in lower tax localities (emphasis in original) 90. In contrast, the company knew, based on internal research, that most consumers would not travel to lower-cost areas 91. That month, as RJ Reynolds anticipated, the Nebraska Department of Revenue determined that manufacturer promotions could not be used to reduce consumer prices under existing law 92…”

Illicit Tobacco in Lithuania: A Cross-Sectional Survey

“…There is a long and well-described tradition of the TI to use the threat of the illicit trade to compromise such evidence-based policies as tobacco tax and price regulations [ 5 , 48 , 49 , 50 , 51 , 52 ], plain packaging [ 32 , 53 ], pictorial warnings [ 49 ], point-of-sale display bans [ 49 ], marketing regulations [ 54 ], flavour bans [ 49 , 55 ], pack size restrictions [ 56 ]. TI in particular often claims that taxes on tobacco products drive the illicit trade [ 5 , 57 , 58 , 59 , 60 , 61 ], although there is a vast amount of evidence showing a limited relationship between higher tobacco prices and size of the illicit market [ 14 , 62 , 63 , 64 , 65 , 66 ]. In fact, illicit trade can be minimized even in the presence of increased taxes if effective monitoring and enforcement is in place [ 67 , 68 , 69 ].…”