Electronic Cigarettes have now been on the worldwide market for about 6 years and in relative full force on the US market for about 2 years. Many companies are popping up to sell the electronic cigarette to the many smokers in the US. Even though we have our own brand, Instead Electronic Cigarettes, we believe that competition is good.

I mention this as an example of an emerging market in the US. In these times of financial fluctuation it would seem more important than ever to have new and innovative businesses. Before we discuss that, let’s first get this out of the way: The electronic cigarette has not been proven to be safe or an effective smoking cessation device. There was the e-cig study in New Zealand done by Murray Laugesen and there are currently at least 2 vapor tests being done in the US and to date there have not been any reported side effects from users, but nonetheless there is not enough evidence, according to the FDA, that the e-cigarette is safe or even safer than tobacco cigarettes. Now that we can all agree to move past the “is it safe” question, let’s look at the market.

The tobacco market is vast. For instance “the company [Phillip Morris] sold 235 billion cigarettes in the United States for a profit of $3.3 billion” (from Big Tobacco’s Global Expansion). With the new FDA Tobacco Bill, competition within this huge market may be limited.

In economic terms, the electronic cigarette would be considered a substitute. Some would argue it is a complimentary product to tobacco cigarettes because many smokers use both. However smokers don’t use them at the same time and one doesn’t make the other better. The e-cig is an obvious substitute for a tobacco cigarette.

A product that is an economic substitute to tobacco cigarettes, contains no tobacco, and is sold by small American businesses. Sounds like just what the doctor ordered? Not according to many at the FDA. They believe it should be a pharmaceutical quit smoking device. Why? I am sure the answer is more complicated than this, but the FDA is funded by the Pharmaceutical companies. “More than half of the FDA’s budget is now funded by the pharmaceutical and device companies it is supposed to regulate.” (from Healthcare Reform on About.com)

Why not just do the testing to prove that it is safe? Well, that is not what the FDA wants. They want clinical trials to prove that not only is the e-cig safe, but that is helps people quit smoking. First, I believe the electronic cigarette is too much like smoking to help people quit. Many smokers may move to only using their e-cig, but this is not what a quit smoking product is. For instance, nobody suggests that smokers should continue using nicotine gum for years and years. It is meant to ween smokers off of nicotine until they no longer use cigarettes or nicotine gum.

Second, the clinical trials they want cost millions of dollars and take years to complete. Not only does this mean that the product would be taken out of the hands of those who currently use it, but it would virtually eliminate any small US company from being in the market. Instead, it would be a profit center for large pharmaceutical companies.

Lastly, making electronic cigarettes only available in pharmacies would limit it’s market potential. Products in pharmacies are, for all intensive purposes, not subject to market influences. They have a monopoly. Nicotine gum is expensive. Not to make, not to ship, but to buy. The cost of paying the FDA for the right to sell it is so high that it limits who can sell them. Thus, using nicotine gum is more expensive then smoking. And of course, like any business would do, the pharmaceutical companies do everything they can to keep substitutes off the market. Can you image if someone came out with nicotine gum that was sold in gas stations for $2 a pack? The stuff sold in pharmacies would be sitting on the shelf for a long time.

So why is this bad? The electronic cigarette is the first product ever that has the potential to significantly cut into the tobacco market. Putting it into a pharmacy means a disadvantage. Raising the price of e-cigarettes and drastically limiting where they can be sold will mean less smokers will use it.

Reasonable regulation is necessary and will occur, one way or the other. But having a government agency place restrictions that are so tight and expensive they only allow large corporations to play in the market is just about as Un-American as it gets.

2 thoughts on “The Electronic Cigarette Market

  1. Unless public opinion in favor of keeping the e-cig market loosely regulated reaches a tipping point in the mass media big pharm and tobacco will get their restrictive regulations passed, new taxes will be be enacted, and your e-cig habit will be brought into the $3 to $10 per day range. Small retailers will sell prefilled cartos as singles or in 5 and 10pks with the proper tax stamps affixed. By 2015 100mg e-liquid will be a black-market item at $10/ml. Better stock up while you can.

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