The Economic Impact of E-Cigarettes on the Healthcare Industry Research Paper

The production and consumption of cigarettes play the important role in national economies. Furthermore, it is possible to speak about the economic relationship between the tobacco industry and other industries in the United States. However, today, the market of electronic cigarettes can be discussed as even more influential in comparison to the traditional tobacco market. Electronic cigarettes, or e-cigarettes, entered the Chinese market in 2005 and the global market in 2007 (Bhatnagar et al. 1418; Gourdet, Chriqui, and Chaloupka iii37). Currently, more than 450 brands of e-cigarettes are known in the world, and these products can be purchased in stores and online easily (Bhatnagar et al. 1418). The problem is in the fact that the production of e-cigarettes increases each year, the industry develops as a competitor to the tobacco industry, and its economic effects on healthcare should be discussed in detail.

There are debates regarding the health and economic effects of using e-cigarettes as a substitute for tobacco. The purpose of this research is to discuss the literature on e-cigarettes’ economic effects on the healthcare industry and determine specific examples related to the problem. The e-cigarette market is only developing, but the analysis of economic tendencies allows for identifying several effects of the production and consumption of these devices on the healthcare industry. The examples of effects that should be discussed in the paper are the problem with the state funding, taxation, insurance issues, development of anti-smoking campaigns, changes in investment, and the work of the pharmaceutical industry.

The Problem of State Funding

There are no strict laws that regulate the production and distribution of e-cigarettes directly because there are debates regarding the nature of these products. As a result, variances in regulations of the e-cigarettes’ production and sales influence the state funding in the United States in general, and the funding of the healthcare industry in particular (Gourdet, Chriqui, and Chaloupka iii38). The Food and Drug Administration (FDA) states that “the sale of e-cigarettes should be prohibited or regulated as dangerous nicotine delivery systems that comply with the safety standards of the Federal Food Drug and Cosmetic Act (FDCA)” (Palazzolo 1). This approach to regulating e-cigarettes can lead to the protection of the healthcare industry funding in states because laws serve to preserve tax revenues (Emery et al. iii23; Gourdet, Chriqui, and Chaloupka iii38). Regulations are also necessary to preserve Master Settlement Agreement (MSA) payments that finance industries in states (Emery et al. iii24). From this perspective, the discussion of e-cigarettes as dangerous for people’s health can potentially lead to guaranteeing the further funding of the healthcare industry.

The economic effects of resolving the issue of e-cigarettes’ definition and discussing them as complementary to traditional cigarettes can be negative. The reason is that the increased sales of e-cigarettes indicate that these devices can substitute cigarettes in the market while leading to financial losses for the state funds that are associated with the decreased MSA payments (Emery et al. iii24). For example, the investment into the healthcare industry in such states as California and Arizona can decrease by 20-25% (Bhatnagar et al. 1426). According to Palazzolo, “sales from the e-cigarette market doubled from $250 to $500 million between 2011 and 2012” (1). It is also important to note that these sales will tend to increase in the future. The researchers pay attention to the fact that increases in sales are predicted and that “sales margins for e-cigarettes could grow to $10 billion by 2017, surpassing conventional cigarette sales margins” (Bhatnagar et al. 1419). From this point, the unregulated increases in e-cigarettes’ sales can result in reductions in the funds that are supported by the tobacco industry. These funds are also used for financing the healthcare system in the United States.

Taxation Issues

Moreover, it is necessary to focus on the idea of taxation in relation to the problem of e-cigarettes’ distribution. In this context, the tax revenues gained from sales of tobacco products and e-cigarettes have the main economic effects on the healthcare industry (Emery et al. iii24). While providing reasons for the necessity of regulations associated with the e-cigarettes’ production and sales, the FDA allows the taxation of the electronic devices (Palazzolo 1). When taxing e-cigarettes, it is possible to expect more profits that can be used in order to support the healthcare industry and promote the anti-smoking programs that include smoking cessation programs, therapies, and smoking prevention programs (Goniewicz, Lingas, and Hajek 134). For example, Minnesota is the first state that “explicitly applies excise taxes to e-cigarettes” (Gourdet, Chriqui, and Chaloupka iii38). However, these procedures can lead only to a 2% increase in the state’s budget.

The increased use of e-cigarettes can result in raising the prices for all tobacco products, changes in the taxation and regulation, and limited revenues for the healthcare industry in general. The policy-makers can focus on “an ad valorem tax, one levied as a percentage of price” (Bhatnagar et al. 1426). Nevertheless, it is important to avoid making taxes very high because e-cigarette users choose products depending on their price. For instance, “a 10% increase in e-cigarette prices would reduce sales of reusable e-cigarettes by ≈ 19% and sales of disposable e-cigarettes by ≈ 12%” (Bhatnagar et al. 1426). Therefore, the FDA resolution regarding e-cigarettes has a direct economic effect on the healthcare system and its funding in the United States.

Insurance Issues

The next example is e-cigarettes’ economic effects on the insurance industry. Any changes in the healthcare system are associated with changes in the insurance industry. The spread of e-cigarettes can affect the costs of insurance premiums for smokers because the use of e-cigarettes can be discussed as a form of the nicotine addiction (Etter and Bullen 2018). For instance, users of e-cigarettes can be required to pay 18-20% higher insurance fees in comparison to non-smokers. The rates of hospital admissions associated with problems that are caused by smoking increase annually (Bhatnagar et al. 1419). However, smokers can face challenges connected with receiving higher insurance premiums. The problem is in the fact that insurance companies are not ready to spend resources on the needs of smokers. As a result, the insurance that has the wide coverage is often more expensive for smokers than for non-smokers. From this point, the unclear status of e-cigarettes can have a direct economic effect on insurance companies that argue high risks of providing the insurance for smokers and fear to lose profits.

Therefore, the economic effects of using e-cigarettes on the insurance industry as the part of the healthcare industry can be controversial. The increased use of e-cigarettes among the public can potentially contribute to decreasing the tobacco addiction rates. However, the positive health effects of using e-cigarettes are not proved in the research (Bhatnagar et al. 1420). For example, 60% of e-cigarette users state that these devices are addictive (Goniewicz, Lingas, and Hajek 133). Thus, insurance companies can face a challenge of regarding users of e-cigarettes as smokers, and they can deprive these people of the opportunity to receive higher insurance premiums. In addition, insurance companies can also experience financial losses if they provide premiums to users of e-cigarettes who return to smoking or if insurance fees are comparably low (Etter and Bullen 2018; Goniewicz, Lingas, and Hajek 134). Therefore, it is possible to state that this problem has no proper solution today.

Development of Anti-Smoking Campaigns

The next examples of effects that require the detailed discussion are the predictable changes in the investment and support of anti-smoking campaigns. Researchers continue to conduct studies in order to examine and find the actual health effects of using e-cigarettes (Emery et al. iii19; Goniewicz, Lingas, and Hajek 134). In this context, it is important to note that if e-cigarettes are discussed as medical devices, more investment is necessary in order to supply e-cigarettes as the part of the anti-smoking therapy (Bhatnagar et al. 1419; Goniewicz, Lingas, and Hajek 135). Still, if e-cigarettes are discussed similarly to tobacco products, resources are necessary to prevent the advertising while imposing restrictions on using e-cigarettes by youth (Bhatnagar et al. 1419). Furthermore, it is important to note that sales of e-cigarettes that are promoted in the context of anti-smoking campaigns can also lead to saving costs associated with the development of nicotine replacement therapies. However, such therapies usually require additional funding. Thus, analysis of the issue indicates that both approaches to treating e-cigarettes can require more investment in the healthcare industry in order to support the anti-smoking programs in contrast to receiving the revenues from the distribution of tobacco products (Bhatnagar et al. 1421; Goniewicz, Lingas, and Hajek 133). In this context, it is possible to speak about the economic issues, as well as ethical ones.

Changes in Investment

One more significant example is the appearance of organizations and commissions that are ready to fund projects aimed at researching the impact of e-cigarettes on the people’s health. However, it is important to note that the development of the e-cigarette industry is associated with the tobacco industry because the majority of tobacco companies chose to produce e-cigarettes (Palazzolo 2). Researchers note that these companies can sponsor studies aimed at investigating the health effects of e-cigarettes (Bhatnagar et al. 1421; Munafo 377; Palazzolo 2). As a result, more physicians are inclined to agree that e-cigarettes can have positive impacts on the people’s health (Goniewicz, Lingas, and Hajek 134). While receiving the additional investments or sponsorship, researchers and practitioners can choose to unite in professional organizations. For example, these organizations can report on the necessity of funding more projects in order to address the problem of smoking in the society.

However, fluctuations in investing in the healthcare industry that can be connected with the development of the tobacco and e-cigarettes industries can have different effects. The expected revenues of companies, centers, laboratories, and organizations that work to develop strategies, medications, and devices for the tobacco control can decrease by 15% annually (Goniewicz, Lingas, and Hajek 134; Palazzolo 3). These medications can be effective in helping people quit smoking, but these laboratories and centers cannot compete with producers of e-cigarettes. Therefore, it is possible to predict the increases in profits of the companies that specialize in producing e-cigarettes as devices that can be used in the context of alternative anti-smoking therapies. The reason is that these companies are ready to spend millions of dollars in order to promote a new product in spite of its health effects.

Effects on the Pharmaceutical Industry

One more important economic impact of the e-cigarette industry’s development is observed with references to the pharmaceutical industry. According to Munafo, e-cigarette companies can be discussed as preserving the position between the tobacco industry, “which has a shameful history of deliberately attempt to distort the scientific record,” and the specific pharmaceutical industry, “where there are certainly financial vested interests and extensive evidence of attempts to over-state the scientific evidence for their products” (377). For instance, producers of e-cigarettes choose to spend millions of dollars in order to receive benefits similar to those ones received by pharmaceutical companies. From this perspective, the progress of the e-cigarette industry and the growth of these products’ popularity among the public have a direct economic effect on the pharmaceutical industry.

Changes in priorities in this industry are obvious. They are also noted by Munafo, who states that in spite of predictions, “most research funded by e-cigarette companies is not linked to the tobacco industry” (377). As a result, those pharmaceutical companies that support the production of e-cigarettes as medical devices expect significant revenues and additions to their annual incomes (Gourdet, Chriqui, and Chaloupka iii38). Nevertheless, there is also a group of companies that expect profits from distributing medications that are used for the smoking cessation (Goniewicz, Lingas, and Hajek 134). As a result, the increase in revenues for pharmaceutical companies that can be associated with the development of the e-cigarette industry depends on the side which is taken in the debates on these devices’ safety.

Conclusion

The existing literature on the problem of e-cigarettes’ economic effects indicates that it is possible to expect significant changes in the funding, distribution of financial resources, and investments in the healthcare industry. In spite of the fact that there are debates regarding the use and definition of e-cigarettes in the United States, the progress of this market is directly associated with the economic development of the healthcare industry. The funding of the healthcare system in states depends on the sales of tobacco products and e-cigarettes, as well as on taxes that can be received from the distribution of these devices. Moreover, the increased popularity of e-cigarettes influences such economic area as the insurance industry in the context of the wide healthcare system. The economic effects of decisions regarding the status of e-cigarettes can be noticed by insurance companies and clients whose insurance fees can be raised. Indirect economic effects on the area of supporting anti-smoking campaigns and organizations are also observed. However, the direct economic impact can be studied with references to the pharmaceutical industry where companies are divided into those ones that receive revenues from producing e-cigarettes and those ones that receive profits from producing competitive medications and medical devices. Therefore, the progress of e-cigarettes is proved to have significant economic effects on the healthcare industry.

Works Cited

Bhatnagar, Aruni, Laurie Whitsel, Kurt Ribisl, Chris Bullen, Frank Chaloupka, and Mariann Piano. “Electronic Cigarettes: A Policy Statement from the American Heart Association.” Circulation 130.16 (2014): 1418-1436. Print.

Emery, Sherry, Lisa Vera, Jidong Huang, and Glen Szczypka. “Wanna Know about Vaping? Patterns of Message Exposure, Seeking and Sharing Information about E-Cigarettes across Media Platforms.” Tobacco Control 23.3 (2014): iii17-iii25. Print.

Etter, Jean‐Francois, and Chris Bullen. “Electronic Cigarette: Users Profile, Utilization, Satisfaction and Perceived Efficacy.” Addiction 106.11 (2011): 2017-2028. Print.

Goniewicz, Maciej, Elena Lingas, and Peter Hajek. “Patterns of Electronic Cigarette Use and User Beliefs about Their Safety and Benefits: An Internet Survey.” Drug and Alcohol Review 32.2 (2013): 133-140. Print.

Gourdet, Camille, Jamie Chriqui, and Frank Chaloupka. “A Baseline Understanding of State Laws Governing E-Cigarettes.” Tobacco Control 23.3 (2014): iii37-iii40. Print.

Munafo, Marcus. “Conflicts of Interest and Solicited Replication Attempts.” Nicotine & Tobacco Research 18.4 (2016): 377-378. Print.

Palazzolo, Dominic. “Electronic Cigarettes and Vaping: A New Challenge in Clinical Medicine and Public Health, a Literature Review.” Front Public Health 1.56 (2013): 1-20. Print.