Transcript Frank Chaloupka - Consumer Demand

The Demand for and Supply of
Cessation Products & Services
Frank J. Chaloupka
University of Illinois at Chicago
Demand for Cigarettes
• Extensive econometric research on
cigarette demand
– Higher cigarette prices reduce smoking
• 10% price increases reduces overall cigarette
consumption by 4%, adult prevalence by 2%
– Stronger tobacco control policies reduce
smoking
• Smoke-free air policies
• Comprehensive tobacco control programs
– Some populations more responsive to
prices and policies
Smoking Cessation
• Consistent with more limited
econometric research on cessation
– Higher cigarette prices induce smokers to
quit smoking
• 10% price rise
– increases probability of quit attempt by 10-12%
– Increases probability of successful quit by 1-2%
– Reduces duration of smoking by 10%
– Stronger workplace smoke-free air policies
induce employed smokers to quit
Demand for Cessation Products
• Few economic or other studies examine
demand for cessation products
– Over-the-counter availability
• Hyland et al. (2005) – COMMIT data; OTC availability
raised use of patch and gum by about 60% among smokers
• Hu et al. (2000) – OTC availability had negative but
insignificant impact on cigarette sales
• Keeler et al. (2002) – OTC availability significantly raised
sales of patch (78-92%) and gum (180%)
• Chaloupka and Tauras (2004) – OTC availability
significantly reduces cigarette sales
Demand for Cessation Products
• NRT Prices
– Series of studies by Tauras and colleagues
(2003, 2004, 2005a, 2005b)
• Scanner-based sales data for 50 US markets
• Negative and significant own-price effects
– Very responsive to product-specific prices (elasticities
centered on -2.00)
– Overall demand relatively responsive to average NRT
prices (elasticity around -0.8)
• Cross-price effects suggest complementarity
between patch and gum
• Negative impact on cigarette demand
Demand for Cessation Products
• NRT Advertising
– Tauras et al. (2005a)
• Quarterly scanner-based sales and gross-ratings
point data for 50 US markets, 1996-2002
• Generally find positive and significant impact of
advertising on patch sales
– Doubling of Nicoderm advertising would raise sales by
3-16 percent
– Smaller impact for other products
Demand for Cessation
• Cigarette taxes/prices
– Tauras et al. (2003, 2005a,b)
• Generally find that higher cigarette prices raise
demand for NRT
– 10% cigarette price increase raises NRT demand by 48%
– Chaloupka et al. (2004)
• July 2002 increase in Illinois cigarette excise tax
significantly increased volume of calls to state
quitline (2-3 fold increase in call volume)
– Very short-lived
1350
4.25
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4.15
950
4.05
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3.95
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3.85
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3.75
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10 11 12
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Quitline Calls
Price per Pack
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Price per
Pack (June
2004 dollars)
Calls to
Quitline
Cigarette Price and Quitline Calls - Illinois,
2002-2003
Demand for Cessation
• Tobacco Control Policies
– Hyland, Cumming and colleagues (2005a, b, c; 2006)
• Distribution of free patches to New York state and New York
city smokers
– Vouchers and direct product provision
– 1 week, 2 week and 6 week supply
– Funded by state tobacco control program
• Followed implementation of cigarette tax increases and
comprehensive smoke-free air policies
• Smokers calling New York State Smokers’ Quitline eligible
to participate
• Various advertising/promotional strategies coupled with
extensive news coverage
Demand for Cessation
• Tobacco Control Policies
– Hyland, Cumming and colleagues (2005a, b,
c; 2006)
• Significant increase (20 fold) in calls to state
Quitline
– brief follow-up counseling call attempted
• 6-month quit rates significantly higher for those
receiving free NRT
– 33% vs. 6% for NYC (6 week supply)
• Higher quit rates among NRT recipients who
received follow up counseling call
– 38% vs. 27% for NYC
Demand for Cessation
• Summary
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Lower prices raise demand
Increased availability raises demand
Increased advertising raises demand
Stronger tobacco control policies raise
demand
– Support from comprehensive programs raises
demand
Supply of Cessation Products
• Little empirical evidence on supply of
cessation products or services
• Cessation Products: Market structure
– Highly concentrated industry
• Limited availability of various products
• Little to no price competition
– Highly regulated industry
• Entry difficult
• Constraints on marketing (product, price,
promotion, placement and packaging)
Supply of Cessation Products
price
supply
demand
quantity
Supply of Cessation Products
price
supply
supply’
demand
quantity
Supply of Cessation Products
• Increased competition would:
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Reduce price
Increase availability
Increase marketing efforts
Increase product differentiation
• All would increase use of products
Supply of Cessation Products
• How might competition be increased?
– Fast-track for approval of new products and
generic versions of existing products
– Approve OTC sales of additional products
– Allow wider distribution
• Convenience stores and other outlets where
cigarettes are sold)
– Allow greater variation in packaging/pricing
• “daily” doses at lower out-of-pocket cost
– Allow more aggressive marketing efforts
Supply of Cessation Products
• Risks from increased competition?
– To firms
• Reduced R&D, fewer new products
– Less profitable to develop new products
• Perceived ineffectiveness
– More widespread use by less committed quitters could
raise perception that products are not effective and
reduce appropriate use in long run
– To public health
• Misuse of cessation products
• Increased tobacco use
Supply of Cessation Services
• Impressions:
– Cessation counseling and related services widely
available
• Some are free to consumer (e.g. quit lines and industrysponsored telephone counseling)
– Often publicly funded (e.g. quit lines)
• At risk as funds allocated to tobacco control programs
reduced
– Not well marketed
• Limited funding for marketing of cessation services
• at risk to extent that funds for state/other countermarketing efforts reduced
– Rarely tied to economic incentives
• E.g. vouchers, insurance coverage
Supply and Demand
• Summary:
– Demand for cessation products responsive to
prices, availability, and marketing efforts
– Demand for products/services responds to
tobacco control efforts
– Efforts to increase competition in product
market would promote product use
– Better marketing of cessation services
coupled with economic incentives would like
increase use of these services