Proceedings of the Standing Senate Committee on
Social Affairs, Science and Technology
Issue No. 20 - Evidence - April 6, 2017
OTTAWA, Thursday, April 6, 2017
The Standing Senate Committee on Social Affairs, Science and Technology, to which was referred Bill S-5, An Act to amend the Tobacco Act and the Non-smokers' Health Act and to make consequential amendments to other Acts, met this day at 10:31 a.m. to give consideration to the bill.
Senator Kelvin Kenneth Ogilvie (Chair) in the chair.
[English]
The Chair: Colleagues, I am calling the meeting to order.
[Translation]
Welcome to the Standing Senate Committee on Social Affairs, Science and Technology.
[English]
I am Kelvin Ogilvie from Nova Scotia, chair of the committee. I will ask my colleagues to introduce themselves, starting on my right.
Senator Seidman: Judith Seidman from Montreal, Quebec.
Senator Stewart Olsen: Carolyn Stewart Olsen, New Brunswick.
Senator Raine: Nancy Greene Raine from British Columbia.
[Translation]
Senator Petitclerc: Chantal Petitclerc, from Quebec.
[English]
Senator Hartling: Nancy Hartling, New Brunswick.
Senator Dean: Tony Dean, Ontario.
The Chair: I'll remind us that we are here meeting with witnesses with regard to Bill S-5, An Act to amend the Tobacco Act and the Non-smokers' Health Act and to make consequential amendments to other Acts.
I will remind you that as we start today we will be doing one question per round and continue for as many rounds as we can get questions in.
For the witnesses, I will encourage you to keep any preambles short. You can assume we have read all the documents that have been provided to us. We have a great deal of background information, as you know, in that regard.
I am going to ask my colleagues to specifically direct their questions in the first instance. As you have been informed, if the other witness wishes to come in on it, signal through the chair that you would like to add something.
With that, I am going to welcome you and invite you to present in the order that you are listed on my agenda. In the first instance, I'm going to invite Mr. Daniel David, Chairman, Electronic Cigarette Trade Association of Canada, to present. Mr. David, please.
Daniel David, Chairman, Electronic Cigarette Trade Association of Canada: Thank you, Mr. Chairman. I want to thank the committee members for inviting us to present our thoughts on Bill S-5. I am here as a representative of the Electronic Cigarette Trade Association of Canada, or ECTA.
ECTA is a self-regulatory organization for the vapour products industry, active since 2011. During this time we have developed and implemented regulations and compliance standards that respond directly to consumer needs, evolving technology and trends, and the ever-growing body of scientific research on vaping and harm reduction.
Our members voluntarily submit to ECTA requirements and uphold the highest standards in retail, manufacture and wholesale. We recognize and embrace the critical need for an appropriately regulated vapour product industry. We continually develop standards and policies through direct interaction with scientists, researchers, policymakers, industry experts and consumers.
ECTA is committed to the implementation and the continuous evolution of our program. We constantly improve our standards in proportion to concerns raised through the scientific study, product development and consumer demands about product quality.
Two years ago, we became aware of new studies indicating that a compound commonly used in e-liquid flavouring was likely harmful for inhalation. We incorporated that compound into our testing protocols and set thresholds based on consultation with qualified experts. This resulted in higher quality e-liquid produced and available for sale. It also helped to set new quality benchmarks for the entire Canadian industry.
As devices advance, we have seen an increase in the number of battery failure incidents directly related to a lack of consumer education. ECTA reacted by setting a requirement for our members to include warning inserts with the sale of certain device categories.
More recently, there have been incidents leading to injury from improperly stored batteries. In response, ECTA joined forces with CVA to create Battery Safety Week. Through this initiative, we developed safety information and educational details that are distributed free to every vape product shop in the country. We created 50,000 battery storage cases for vapers to hold spare batteries, avoiding the potential for injury.
Trends, technology and science in vaping constantly change and directly impact the efficacy of vapour product regulation. ECTA is uniquely qualified in this area. We are working with CVA to develop certification and accreditation programs designed to complement and support the evolution of federal regulation but, more importantly, reinforce industry compliance.
We will launch an online certification course to ensure operators and employees have central product and safety knowledge and comply with provincial and federal vapour product regulations. We will also launch a rigorous accreditation program for manufacturers and vape product shops to ensure and maintain standards compliance while streamlining, reporting and auditing.
While we fundamentally support regulation for the industry we do have some concerns regarding Bill S-5. In 2014, I presented to the HESA committee detailing reasons for the creation of purpose-built regulations for vaping products as a harm reduction consumer product. This recommendation was echoed by numerous presenters. We were encouraged that the HESA report recommended a new legislative framework.
Bill S-5 sets a new vapour product framework within the Tobacco Act. In so doing, we believe that regulating vapour products within the act is flawed based on the close alignment to tobacco products. To explain, tobacco legislation was crafted with the purpose of discouraging use and preventing new uptake as a critical matter of public health. This approach is clearly appropriate, considering that cigarettes are the most deadly legal consumer product on the market.
Vaping is a revolutionary harm reduction alternative. Like any other harm reduction product vaping is not completely without risk, but its placement under the Tobacco Act, no matter how well crafted, can never achieve the appropriate balance of risk versus reward.
We believe the long-term goal should be the proper classification of vaping products as a harm reduction product. Science is catching up to vaping and its role in harm reduction. It is in this context that we strongly urge this committee to include a mandatory, two-year review in the legislation.
The vapour product industry in Canada is growing exponentially. Where once it was operated exclusively by ex- smokers and small start-up businesses, it is fast evolving into a fully regulated, mainstream industry. Although vapers and our businesses have been working toward this for many years, we are also well aware that the tobacco industry has been eagerly awaiting the same legislation. Until this bill passes and regulations are in place this industry remains largely devoid of any tobacco industry vaping products.
We further believe that Bill S-5 gives a market advantage to large tobacco corporations by virtue of a market authorization process. In effect, this provides an advantage to the only sector with the intent and resources to develop market authorized vapour products, the tobacco industry.
I'm specifically referring to the following sections of the act. Section 30.43 prohibits the promotion of vaping products that compare the health effects to those of tobacco products. All scientific evidence concludes that vaping is less harmful in terms of relative risk. This section eliminates the use of the single most important reason to switch from smoking to vaping, while making an exception for corporations with the resources to obtain market authorization.
Bill S-5 also gives an unfair advantage to market authorized products in the form of promotion by means of the name of a product. We do not believe there is evidence that market authorization can provide, for example, for the promotion of blueberry cheesecake where the other paths in the market could not.
If there is a genuine concern for promotion of flavour categories deemed enticing for youth, the terms of schedule 3 should be the same for all vaping products. We therefore suggest that the exception for prescription vaping products in schedule 3 be removed.
In order to ensure vapour product shops provide truthful and accurate flavour descriptions to adult smokers and vapers while supporting the purpose of the act and related prohibitions, we are submitting an amendment for section 30.48. This would be the addition of the phrase "in a place to which young persons have access'' at the bottom of the section.
This change would only permit customer access to descriptions in schedule 3 via age-restricted vapour product shops. Regulations can further define the manner in which these descriptions may be provided.
Canada is uniquely positioned. We are recognized as one of the world leaders in terms of promoting harm reduction. Vapour products represent a significant addition to harm reduction that will only be fully realized with fair and balanced legislation. We have the advantage of an unprecedented level of communication and collaboration among government, vape industry and consumers, each with the same goal of making responsible choices that have a positive impact on personal and public health. Creating good, well-balanced legislation for vaping as a harm reduction alternative to smoking is perhaps the best we can do to eliminate the single most preventable cause of death and disease in Canada.
Thank you for your time. I look forward to your questions.
The Chair: I will now turn to Shai Sinnis, Board Member, Canadian Vaping Association. Welcome.
D. Meshaila Sinnis, Board Member, Canadian Vaping Association: Mr. Chairman and committee members, I thank you for the opportunity to present today on this important piece of legislation, Bill S-5. We have submitted a formal report for the committee's consideration.
I want to take my allotted time to emphasize some points in my submission. I boast no status as an authority by reason of special skill, training or specialty on vaping or harm reduction. What I do have is considerable knowledge of the industry, being one of the founders of the Canadian Vaping Association. We have a considered opinion about the industry. We advocate the views and aspirations of hundreds of thousands of vapers across Canada.
I will offer no opinion. Nor will I make any conclusions. My comments are based on qualified research our organization has procured from clinical, legal and public policy experts.
That noted, from its humble beginnings six years ago vaping in Canada has grown exponentially. The number of vape product shops has grown throughout Canada, with a current estimate of retail outlets and manufacturing facilities numbering over 800, representing well over 5,000 employees, serving hundreds of thousands of customers and generating over $350 million in revenue.
Please understand that the growth of this industry has not been the result of expensive marketing campaigns. It has been a direct result of a substantial demand for these products by millions of smokers in Canada seeking an alternative to cigarettes.
The vast majority of vape product shop owners, manufacturers of e-liquids and advocates in Canada are much like me: former smokers who, having switched from smoking to vaping, realized the potential of the so-called disruptive technology and the benefits that vaping provides as a safer alternative to smoking.
I would respectfully assert that our membership has taken substantial risks to pursue a mission very much aligned with Bill S-5. Many people would assert a different path of fighting government on what they believe is a right to vape. We believe that working with government on making this bill makes good sense.
In many ways we believe Canada is a role model for other countries in developing and implementing effective ways at reducing the harms of smoking, with Canada's smoke-free legislation being a cornerstone of that effort. Canada has taken on the mantle once again by implementing suitable and effective legislation that ensures adult smokers have access to products that can substantially reduce the harm that cigarette smoking is known to cause.
We are pleased that Health Canada provided leadership at COP7 by not agreeing to prohibit vaping like the World Health Organization pressured so many other countries to do. To make a category in the bill for vaping is not only welcome. It creates an opportunity for Canada to regulate effectively. We are looking forward to working with you to that end.
The CVA based its thinking on our continued review of the growing body of evidence, including qualified literature, studies and research on vaping, of which much. We are convinced that vaping is a better choice by orders of magnitude over smoking and has potential for dramatically reducing disease and death caused by smoking.
The task of your committee is to review the debates and the intent of this legislation and deliberate on the bill with objectivity. We have met with several of your committee members in advance and offered our advice. To that end, we provide our considered and qualified amendments to the bill going forward.
Let me explain. Recent studies in the aggregate have suggested that vaping is less harmful than smoking. The minister herself lifted our own CVA messaging, suggesting in her media statement in November of last year when the legislation was announced that "science is catching up with vaping.'' On that point we would advise that the legislation include a mandatory two-year review so that the science and research that are underway reach lawmakers in a timely fashion such that you can regulate appropriately.
With respect to regulation, we have been working closely with our Electronic Cigarette Trades Association and other educational organizations on the development and implementation of an accreditation and certification programs on a national level. The patchwork of regulation from provincial legislation initiatives across Canada has confounded the industry while it has waited for this milestone to occur.
Bill S-5 offers a national framework for retail and manufacturers of vape products. Because CVA is the national voice for the industry, we have taken on the mantle to create standards on technology and products, all of which my colleague at ECTA has described to you in his presentation.
With respect to health benefits, evidence shows that e-cigarettes are an effective harm reduction tool. In fact many clinical and academic experts will likely testify to that. I can say that the technology has improved over the years. Bill S-5 as written threatens the industry's ability to maximize the public health benefits of encouraging cigarette smokers to switch to less harmful e-cigarette technology. We urge the committee to look at amending this prohibition. We have provided alternative wording in our written submission.
In proposed sections 30.48 and 30.49 the bill makes reference to flavours and identifies in schedule 3 a list of flavour types about which there will be a prohibition on their promotion and possible manufacturer.
It's ironic that for the very reason this bill has been initiated, that is to make vaping products more acceptable to smokers to reduce harm, there is a prohibition on satisfying flavours to encourage it. It's baffling the bill would lay out such prohibition when it's so obviously necessary to allow such flavours in helping smokers transition to vaping.
Certainly, we can help at CVA by having the industry commit and submit through ECTA on a balance with respect to flavouring. I suggest that we in the industry need to be more innovative, and we will be. A stark example is the flavour anise, which has similarities in taste to licorice and is satisfying to vapers but is not a confectionary.
We encourage the committee to look at further balance in this portion of the bill. CVA is more than available to assist Health Canada in that regard. We have submitted a proposal to that end in our written submission.
I take a moment, sir, to respectfully ask your committee to consider the establishment of an industry advisory committee. We have presented our proposal in our written submission. I urge you to give it consideration. It is innovative and demonstrates our willingness to work alongside the regulators.
CVA fully agrees that regulation is needed. However, the goal of these regulations should be ensure that maximum benefits are realized while minimizing potential harms. We are concerned that Bill S-5, as it is written, will have substantial impacts on an industry that is growing as an alternative to smoking and consequently on the very constituents who seek to make a less harmful choice.
The CVA wholeheartedly agrees that sales should be restricted to minors. We can see that restricting its use in public spaces is inevitable. We agree that certain lifestyle promotion or advertisements are not appropriate. We believe our amendments ensure that youth are not able to access these products. The use and acquisition of vaping tools are limited to public areas that minors are prohibited from entering. Additionally, these amendments would provide adult smokers with access to the assistance provided by qualified vape product shop employees, which can be crucial to the success of a smoker looking for an alternative to cigarettes.
Vaping technology has catapulted in quality by leaps and bounds. Research, too, has debunked the myths that permeated mainstream media about vaping. Because the technology is getting better, vaping may prove to be an effective breakthrough in anti-smoking.
I would hate to see the promise of this breakthrough dashed, marginalized or even forced underground by what seems to be a crusade of misinformation about the effectiveness of vaping of those who in our view should be the champions for its effective and responsible use as a tool to get smokers off harmful cigarettes all together.
I thank you for your attention. I look forward to your questions.
The Chair: I'll remind everyone that this session will end no later than 11:30 a.m. I'm going to open up the floor to questions from my colleagues.
Senator Petitclerc: I thank both of you very much for your presentations. Everybody can agree on the objective of Bill S-5 when it comes to protecting our youth and at the same time providing access to vaping for smokers.
Promotion of flavour may be appealing to our youth. You talked about a bit, but I want to hear you more about the restriction. It is my understanding that it is not the chemical mix and the flavour itself that will be banned. It is really the promotion of it. From the outside, it seems like people will adapt to it. They will adapt to the new names.
I want to hear about that because it seems to be something vapers are very passionate about. I want to understand it a bit better. Why is the nuance so important to you in terms of the name when the flavour will remain?
Ms. Sinnis: Basically, at this point, I agree there is a certain adaptation level when it comes to flavouring. It's not so much the current vapers that we are concerned about. Of course we all have our favourite liquids that we may be using.
However, I'm more concerned about the people who will be walking into the shops that are switching. They don't know what is available. I understand, as our taste buds change within four to five days, the tobacco liquid that we started with is rank. People do not want to use this.
How are they to navigate to something they will like? They won't be able to because they will not know it exists. It will push them and force them back to buying traditional cigarettes, which is something we want to avoid at all costs. If that means we are to have a cheesecake liquid then it's a cheesecake liquid. If it's prohibited for children to enter stores, that marketing aspect should not extend into the stores. It comes with a certain education level, which is something we need to address as an industry, for especially those who want to switch.
Mr. David: To echo what Ms. Sinnis says, we understand the implication here. Flavour names would be restricted but also their descriptions as well. One of the critical parts of vaping is the range of flavours. Many vape shops carry upward of 100, 200, or even 300 different types of flavours.
Everybody has different tastes. Some of the most important ones are in those categories. The critical thing we're looking for here is not advertising blueberry cheesecake on TV or describing it or anything like that. When our customers come in and they want to know what a non-descriptive named flavour actually tastes like, we want them to have reasonable access to a decent description.
We're not asking to be able to post that all over the place, but if they can come into an age-restricted vape product shop they should be able to have access to an accurate description without having to fumble around with the wording of it. That was kind of the point of the amendment we submitted.
Senator Seidman: My question is addressed to both of you. Perhaps Mr. David could start and Ms. Sinnis could continue.
Health Canada and the U.S. Surgeon General statistics for 2015 indicate that 25 per cent of youth aged 12 to 19 years old have tried e-cigarettes. There is an expressed concern though there is not yet sufficient evidence that e- cigarettes might serve as a gateway to nicotine addiction for a new generation of users and renormalize smoking.
I would like to ask you about two aspects that might be incorporated in the legislation to potentially address this fear, this issue. One has to do with the levels of nicotine in the liquid used for vaping. We all know that nicotine is an extremely addictive substance. In fact it could be toxic. Currently in this legislation there are no set concentration levels.
I'm wondering as experts with long-time experience in the vaping area if you have some comment specifically about the e-liquid and the nicotine content levels. My other issue has to do specifically with advertising and marketing. The legislation, Bill S-5, has looser advertising and marketing restrictions than tobacco use itself. Although this legislation adds and amends the Tobacco Act to include vaping, the marketing and advertising aspects of it are not as tight as they are for tobacco.
I would like you to address both those aspects.
Mr. David: With regard to the nicotine level in e-liquid, one thing that needs to be considered is that there are vast ranges of different types of devices. Some are more powerful and some are closed systems. Some of these devices are more effective at delivering nicotine than others.
My recommendation from our organization would be to have a higher level of something around 24 milligrams per millilitre of nicotine, which is really quite high. It also addresses smokers who chain-smoke about two packs of cigarettes a day. They really need that to supplement their nicotine. It also allows for the less effective but more convenient devices that don't produce as much vapour or don't deliver as much vapour when inhaled.
Going too low would be harmful in the sense that it doesn't cover everybody who really needs that level of nicotine. Going too high is certainly unnecessary. When the industry first started there was liquid that went up to 36 milligrams, which is unnecessary. My recommendation would be along those lines.
For marketing and advertising, as Ms. Sinnis said in her presentation, the effectiveness of this industry isn't due to large marketing campaigns as it is. There is a lot of word of mouth and primarily advertising and marketing within a vape shop. It is certainly essential to be able to share information on flavour descriptions and to talk about different things, having posters on the wall and that type of thing.
You really shouldn't have the same level of strict marketing prohibitions for vaping as you would for smoking. Vaping is the harm reduction alternative. It should never be restricted in the way that smoking would be. It is good and it should go a bit further in allowing more promotion, primarily in vapour shops.
Ms. Sinnis: In response to marketing and advertising, I would say definitely and echo much of what Daniel said. I would have to say that a lot of what may be perceived as marketing within this industry comes from the consumer levels. From the industry standpoint it's mostly informational marketing to market this product as a harm reduction tool. Our marketing comes in ways of studies and science from doctors and from scientists.
With respect to the gateway theory question, the most effective study to refute what you said was actually placed by CIHR and conducted by the University of Victoria. It does state that at this current time, with the science available, there is nothing to support the claim that this is driving youth to smoking.
That's something I want to make sure everybody understands. We do not at all want this product in the hands of minors. We definitely agree on that point. That's why we want to ensure that marketing stays on the informational side of things.
Senator Stewart Olsen: I will be very direct with you. I don't like this legislation. I don't think that we are monitoring new products in vaping the way we should be. We have a permissive government looking to legislate and legalize marijuana. This is steps along the way to make everything easier and more accessible to our children and our adults.
I recognize that you're responsible and that you're doing your best in an industry. I thank you for the information that the World Health Organization is advising people not to go the route that our government is taking.
However, I would see one positive outlook, and I'd like both of you to give me a brief answer. Have you thought of taking the responsibility of informing the public of the warnings, and perhaps the hazards, and how to try to avoid these if they use your products?
Mr. David: With regard to education or informing the public, certainly through our organization a lot of our information is publicly available on our website. It's very informative with regard to our e-liquid testing standards, what is tested for and why; quality control and those different kinds of elements; and any concern like battery concerns. All the material we develop and release to manufacturers and vendors is publicly available.
We encourage all of our members to send their clients to the ECTA website. Even the materials included with our product warning inserts show the website and where to go to find out more information. Education is key, absolutely. It is part of what we need to be able to continue. One of the best avenues for that is through vaper product shops.
Ms. Sinnis: With the CVA we do look to ECTA as regulatory standards to produce those studies. As well we work with our own experts. We make sure that this information is available to everyone.
When it comes to the educational aspect, this is something the bill will prohibit if an amendment isn't made. Again, the educational aspect of this is key. Some 37,000 Canadians die every year. We want to ensure that number finally reduces after decades. We have a product here, a tobacco harm reduction tool that can and will, but we need to have the freedom to educate our consumers and the public, even non-vapers and non-smokers, so they understand what the product is and that it reduces harm.
Senator Dean: I'm listening carefully to the interesting discussion we're having at this committee. It seems to me there is one way of looking at this. We're talking about an appropriate balance between a harm reduction model and a regulatory model. There is clearly a third element in the mix. The growing commercialization of this practice and this industry introduces some other interests, if I can call it that way. We have some economic interests thrown in there. In the end the government and the Senate will have to figure out what is the right calibration between those things.
There's no doubt that harm reduction is a growing part of an approach toward tackling addictions and substance abuse. That is what we're talking about here, I think. We know that harm reduction is used fairly extensively but that tends to go hand in hand with fairly tight regulation.
There is not an inconsistency in my mind. I am thinking in terms of policy practices and regulatory practices between those two things coexisting. It doesn't have to be one or the other. The question is: What's an appropriate mix?
Some would say, and I would include myself in this group because of the experience of dealing with the aftermath of workplace injuries that are arguably more preventable, that harm reduction is a really good thing; but when we're talking about risk and public health and safety we shouldn't be going too far down the harm reduction route without thinking about an appropriate and in some cases tough approach to regulation.
What's your reaction to that? That's the dilemma that policy-makers and decision-makers will be confronted with at the end of the day, at least in my mind. What's an appropriate balance? We're seeing different perspectives on that. What's your reaction to that?
Mr. David: I would fundamentally agree with basically everything that you've just said. With a harm reduction product like vaping our suggestion would be, yes, tough regulations. Those should really focus on product quality and quality control, ensuring that the few ingredients in the e-liquid are accurate, that proper education and warnings of certain things are on packaging: for example, the e-liquid contains nicotine and you can't drink it. These are tight regulations in the sense that you can't put anything you want on the label of a bottle. You have to have certain information.
I would agree that to an extent it should be very strict. The liquids should be regularly tested. There are provisions within the bill for emissions testing, product testing and ingredient limitations. Those are absolutely good things to do.
Where the balance really comes in is ensuring that the regulations don't go so far as to push things a bit more where we can't get the message out, where we can't provide information to smokers who are curious and looking to make the switchover.
Regulations for marketing and advertising should only be targeted to adult smokers. This product is designed for adult smokers, so that should be the only target. We have to be careful with that balance so that there's no indication or anything else that this product is the same as tobacco, that they're equal in any way. We should be able to clearly state that this is a harm reduction product because that's what attracts people from smoking over to vaping.
Ms. Sinnis: There is something I wanted to add, and it did come up with labels. ECTA, as we stated, has been dealing with self-regulatory standards for the entire industry. In 2013, they actually designed a label. Most vendors across Canada are using this label that falls under the CCCR, Consumer Chemicals and Containers Regulations.
It has first aid information. It explains not to ingest and not to leave around children. The poison control symbol is on the front of the bottle. The bottles also have childproof lids. They're tamper-proof as well. In this way we can ensure that we are taking preventative measures.
Most parents are not apt to leave something lying around. However, it happens. That's why they have gone as far as they have to create this. Not only is the bottle safe with its childproof lid, but they also have the first aid requirements so that parents know what to do should something be ingested.
Senator Frum: Ms. Sinnis, at the end of your presentation you referred to e-cigarettes as a responsible tool to get smokers off harmful cigarettes. That seems clear, and I agree with you there.
However, Senator Seidman cited a statistic of 25 per cent of youth having tried it. There are also FDA statistics from the U.S. saying there are three million youth users of e-cigarettes, kids who are in middle and high schools. In the FDA report, 81 per cent of youth users of e-cigarettes pointed to appealing flavours as the main reason why they took up e-cigarettes in the first place.
I heard the point you made: How do you get smokers to move from conventional cigarettes to e-cigarettes? They have to be appealing. Mr. David may have made that point that they need to have these appealing flavours or they won't switch. We also know that these products appeal to young, underage people, these appealing flavours.
How you would find the balance between those two things?
Ms. Sinnis: Again, I'm not a scientist, so I won't sit here to refute science, but to compare the Canadian industry to the United States industry is apples and oranges. Truly it is. Their way of marketing is something that Canada hasn't done. Much like their billboards and the marketing they have put out, whether it be on TV or online, is not something that Canada has displayed. We have been pretty responsible, and that was with a lot of help from ECTA coming out early in the game to give responsible advice to companies.
When it comes to the flavouring it's not appealing to get them to vape. Your taste buds change very quickly and anybody who vapes can attest to this. Generally, vapers will start with a tobacco flavoured e-liquid. Personally I did not. I started with a candy bar. That was mine. After smoking two packs a day, that flavour worked for me. That's what worked. I tried it and wow, that was it, but most people don't know what to go to. At first they will walk in and they will tell you, "I'm not going to smoke a fruit. I'm not going to smoke a cake,'' but after four or five days their taste buds change. Their smell comes back and they don't know what to do. You will see them pleading with you, "This is awful. I want to smoke. I don't like this. You didn't tell me it was going to be this awful.'' That's where the flavour aspect comes in.
Do I think that there are issues with labels? Absolutely. Like I said, the CCCR compliant labels being restrictive is key. This provides them with the name of the flavour. It provides them with first aid and the company name. It is very plain, but it still gives them certain branding without going too deep. To create the balance, I think the way we have to go is by looking at some of ECTA's regulations.
Mr. David: I would actually say that a lot of what is established in this bill is adequately appropriate to strike that balance, in the sense that we're setting age restrictions for the product itself. Some of our recommendations go even further with vaper product shops restricting entry to youth only.
One of the key areas for people making the switch is at a vaper product shop because they have the experience and knowledge to be able to detail their consumers. The controls on media advertising and age-restricted use, along with what is there for limiting flavour, very descriptive flavour names, are more than adequate.
Senator Hartling: I'm a former smoker of many, many years ago, so this is a whole new world. I find with people I know who smoke that it's an insidious addiction and they would do anything to quit.
When you talk about going into a vaping shop and harm reduction, are the people educated in a way that they can help us look at the steps you can take to quit? Also, what about the costs and things like that? What would be the process? What would happen if I went in, and I was still smoking, and I said, "Help me, I want to quit?''
Mr. David: You obviously enter the store and indicate that's what your goal is. We would probably have a bit of a discussion of your level of knowledge, what you've heard about vaping and that kind of thing.
Essentially, the process to switch over would be asking questions like how much you smoke, how long you've smoked, what kind of size device are you looking for, and those kinds of simple things.
One of the key aspects of this actually being successful, however, is again: We're back to the flavours. When a lot of people first make the transition over, they start with a tobacco flavour. It kind of eases that transition process. A lot of people also go to fruits and other flavours as well. It's going through all the different flavours, finding what the individual would like, and actually physically testing it in the store. I know there are some provinces where you can't do that, but that is also critically important to the process. Once you go through the flavour selection process you get into the nicotine levels.
What we would do as a vaping products store is detail the levels. If you smoke a pack of cigarettes a day, in our experience people who smoke a pack of cigarettes a day typically go with either a 6-milligram or 12-milligram e-liquid, and that's milligrams from millilitres.
On the side of doing that detail with customers, that's part of our certification process that is in development right now to standardize what information should be relayed consistently across the country and to ensure that all the staff know what they're supposed to be talking about and any limitations for provincial and federal regulations that may be on them.
Senator Hartling: What about the cost compared to that of a pack of cigarettes?
Mr. David: The cost is probably in the range of 50 to 80 per cent below that of smoking. The initial investment is quite a bit. It can range from $80 to $300. It depends what you want to get. The average would be about $120 to start up.
Once you have that kit, the maintenance is really just purchasing more liquid for it. That can range between $20 and $40 a month. The maintenance is quite low compared to what you would pay for cigarettes.
Ms. Sinnis: When I look at cost, the average smoker today for the economy line of cigarettes spends approximately $4,825 annually as a pack-a-day smoker, whereas the average vaper that's switched from a pack a day to an electronic cigarette pays $400 annually. This is just for buying bottles of liquid and continuing on.
[Translation]
Senator Mégie: I have a question I would like to ask you in French. First though, I would like to clarify something that I think I misunderstood. Mr. David, you said that the price of nicotine might have to be increased for vaping products up to 36 milligrams. Is that correct?
[English]
Mr. David: No, the 36 was where the industry started seven years ago. Over time, that nicotine level has gone down. Nobody uses anything that high. What I was referring to was the retail sale of the product. We're going down in nicotine concentration.
[Translation]
Senator Mégie: Thank you, that is reassuring. So what we know is that, in the stop smoking program, heavier smokers start at 21 and then drop down from 21 to 14 to 7, depending on the number of weeks suitable for the person. Can any members of your staff offer advice to properly manage this aspect? Stop smoking programs often include follow-up by a health professional to see how the person is doing and whether they can tolerate the treatment. That is all part of it. Has your staff received the necessary training to manage that?
[English]
Mr. David: They are certainly well trained. This is quite an experienced industry at this point. That being said, we are not health care providers. We do not design or custom tailor a cessation program for our customers. It's based on the personal need or desire of that customer, that vaper.
Perhaps they want to take aside two months and say, "I'm going to start vaping but in two months I'm done smoking and I'm done vaping.'' If they're asking specific questions on how to achieve it, we can lead them in the sense of you would want to step down from the high level to the mid-level to the low level. It's certainly up to them to choose which method they want to go.
What you are explaining is really more the cessation side, which is not the method that we deal with this.
[Translation]
Senator Mégie: The reason for encouraging people to use vaping is often to help them make the transition from cigarette smoking to no tobacco. If the result with vaping is the same as if they were smoking, I do not see how it helps. I get the sense that all the flavours, such as "chewing gum,'' are just a way to conceal the fact that the product contains nicotine. I am not sure.
[English]
Mr. David: Certainly. However nicotine is not carcinogenic. Nicotine is not the part of smoking that does any damage to your body. It's the result of combustion and combustion-related chemicals that actually causes damage. It's the tar buildup. The nicotine certainly is addictive. Don't get me wrong on that, but that's not really the major concern from smoking. It's the combustion-related chemicals.
Senator Raine: I want to direct my questions to the subject of advertising and promotion that could be defined as being directed at children and youth. I'm wondering how you differentiate between marketing directed to adults and marketing directed to youth.
Mr. David: It's actually a good question. At one point in time our organization was attempting to define that lifestyle type of advertising as well. Drawing that line is kind of difficult.
I would say that marketing and advertising routes that use a delivery method that by its very nature is targeted at adults should be open and available. Having primetime TV commercials and that kind of thing wouldn't be. This is where some of the restrictions with the way we understand it seem to be appropriate within the bill. Defining the line of what's attractive to youth and what isn't is a difficult question to answer, because my perception of what would be attractive to somebody that's young might be quite different from anyone else's.
The Chair: Ms. Sinnis, do you have anything to add?
Ms. Sinnis: Yes and no. When it comes down to it, are you talking about the actual marketing of the product or the promotion of the flavours? Those are two totally different aspects that we are looking at.
Senator Raine: I would say anything that makes young people think it's cool to vape.
Ms. Sinnis: When I look at this as a mom of four I can't decide what they think is cool. Kids will do what they wish to do, but when it comes down to flavourings, for example, I didn't lose my taste buds the moment I became an adult. Most of us enjoy cake on our birthdays. As adults, if we want to go as far as saying, when we consume an alcoholic beverage we use a flavour additive to lessen the strength and the flavour of that.
A kid ma, by all intents and purposes like cheesecake, but most of us do as well. When it comes down to the flavour aspect and asking what a kid will like, kids like everything. When it comes down to marketing publicly, I don't think it's necessary to have television commercials promoting a sexy lady in a red dress vaping an electronic cigarette. If there's any marketing going on, much like any other adult advertisement it should be done late at night, if at all.
Senator Raine: Marketing now isn't just print ads, television, billboards and point of purchase. It's also online and it's done with Disney cartoon characters and testimonials by Justin Bieber or whomever. What do you think should be the parameters around that kind of testimonial marketing to make taking up vaping by children and youth less intense or less desirable?
Ms. Sinnis: The bill covers a lot of that. Really it does when it comes down to lifestyle promotion. If there's any enticement it comes from lifestyle. When we look at social media, when we look all the platforms, as companies we can lay out a framework for them to follow. At a consumer level that's something we're going to have to do as well, but we have to rely on those platforms, not on us, to be able to do that.
When it comes down to it the bill for the most part actually finishes this once and for all and will make the advertisement appropriate.
The Chair: I think we can't resolve this any further. They have given you the answer they have, and we'll move on.
Senator Petitclerc: If you allow, I have one short question and then a question. Is that okay?
The Chair: As the sponsor of the bill I will give you a little extra leeway here.
Senator Petitclerc: My short question is: I understand that you focus on harm reduction, but it is also a market and a product, and profits will come from that. I was pleased to hear, Mr. David, your saying that the only people you want to market to are adult smokers.
I did not hear you, Ms. Sinnis, on that. I would like to know: Are you in line with that? We're not trying to build a new market; it's for smokers.
Ms. Sinnis: Absolutely, 110 per cent.
Senator Petitclerc: Mr. David, on your website it says the entire industry is deeply threatened by Bill S-5. I want to hear you on that. That's pretty intense. How is the industry threatened by the bill?
Mr. David: With the bill, as it is right now, it's very broad in scope. This takes into account not just the bill itself but the accompanying regulations. When we get down to that phase, things can go from what seem to be fairly reasonable, that of Bill S-5 having some amendments in it, to something where the restrictions could be so onerous that the domestic homegrown industry we have right now couldn't really afford to participate and it would drive things underground into a black market.
It's really a general concern with the direction of this bill. Flavours are a big aspect of this and being able to provide accurate, factual information is critical.
The website is referring to that context. It's the full scope of what the bill is as written but also within the regulations and the intent.
The Chair: Unfortunately, we are out of time. We need time to get turned around for the next witness panel. I want to thank our witnesses for being with us this morning and for the questions my colleagues have asked to elicit responses in areas important to us as we review this bill.
Witnesses, I will urge you to move out of the room quickly. If anyone who wants to ask you questions, take it outside.
Colleagues, in this session we have two groups appearing before us. I'm going to call them in the order that I have them listed. I remind you again that it is one question per round and this session will end no later than 12:30.
Eric Gagnon, Director, Government and Regulatory Affairs, Imperial Tobacco Canada Ltd., is first on my list. Mr. Gagnon, please go ahead.
[Translation]
Eric Gagnon, Director, Government and Regulatory Affairs, Imperial Tobacco Canada Ltd.: Thank you for this opportunity to comment on this bill, which is extremely complex and addresses two very different issues: vaping products and packaging and product standardization. Given the bill's complexity, I invite you to review our brief in order to better understand our position. My comments today will be more general in nature.
[English]
No one can disagree with the government's public health objectives to reduce the harm related to cigarette consumption and, most critically, to prevent youth from smoking; not even a tobacco company. Kids should not smoke, period. There are known health risks associated with smoking, and cigarettes should only be consumed by adults that have made an informed decision knowing all the risks.
This is why Imperial Tobacco Canada supports reasonable and evidence-based regulations, especially the ones aimed at keeping tobacco products out of the hands of Canadian youth. However, we oppose regulations that will not achieve any of the stated health objectives, particularly those that will be counterproductive. We also believe reduced harm nicotine products can play an important role by encouraging adult smokers to switch to alternative sources of nicotine with potentially lower health risks.
Therefore, we welcome the intent in Bill S-5 to legalize vaping products across Canada. This bill is a good first step in that direction but it is incomplete without a proper regulatory framework.
Following its enactment, Health Canada's number one priority should be to introduce vaping regulations promptly to ensure that the health of consumers is not compromised by poorly manufactured and potentially dangerous products.
In addition, the bill's provision that limits manufacturers and retailers from communicating to consumers are problematic. Restricting promotion of these reduced harm products will make it harder for adult consumers to understand the potential benefit of switching. In our submission we suggest reasonable amendments to these restrictive provisions. If public health is the ultimate goal those amendments need to be incorporated.
Moving on, we strongly oppose those provisions of the bill that seek to standardize not only tobacco packaging but even cigarettes themselves. We have a number of reasons for doing so.
First, these measures violate our trademark rights. As a business involved in the sale of a legal product, we have the fundamental right to use our trademarks.
Second, packaging and product standardization will make it impossible for consumers, retailers and even law enforcement officials to distinguish a legal product from an illegal one. Canada already faces a huge contraband problem, with parts of Ontario now seeing more than 50 per cent of the market made up of illicit tobacco. According to the RCMP there are over 50 illegal cigarette factories in Canada, with enough collective capacity to take over the supply of the entire Canadian market.
There are hundreds of organized crime groups dealing in illegal tobacco. These groups collect and pay no taxes and flaunt tobacco control laws. They sell cigarettes at a fraction of the legal price and have no qualms about selling their products to underage Canadians.
If these measures pass it will provide a template for organized crime groups to flood the Canadian market with contraband and counterfeit products. Some say that Canada is immune to an increase in illicit trade because of graphic health warnings and excise stamps on legal products. As you will see in our submission, warning labels and excise stamps already appear on illegal products, including, incredibly, baggies of cigarettes.
A third reason for opposing plain packaging is that it simply doesn't work. The only country that this policy has been fully in place for a long period of time is Australia. Despite what some groups will tell you, the truth is that according to data from the Australian government's National Drug Strategy Household Survey there has been no acceleration in the smoking rate decline in that country since it introduced plain packaging. Smoking incidence in Australia, like in Canada, was already declining year on year and that trend did not accelerate after plain packaging.
In Canada, tobacco packages already have graphic health warnings that cover 75 per cent of the package surface. They are hidden from public view on display at retail. No evidence has been offered that the remaining branded area of the pack impacts a person's decision to start smoking.
Health Canada wants to go even further and standardize the appearance of cigarettes themselves inside the pack, suggesting that a tiny trademark or a marking on a cigarette is somehow an inducement to smoking.
Quite rightly, other countries have rejected Health Canada's efforts to impose cigarette standardization based on appearance through the World Health Organization's Framework Convention on Tobacco Control, citing lack of evidence.
Based on a study from the Canadian Lung Association, 70 per cent of youth who smoke say they started because their friends smoke or they felt the pressure to start smoking. None of them said it was because there was a logo at the bottom of the pack or a trademark on the cigarette.
The best way to prevent youth smoking and reduce tobacco consumption is through proper education and awareness campaigns targeted at vulnerable populations. This is the approach taken by the United States where, without any of the extreme measures introduced in Canada and Australia, the smoking rates have declined to similar record low levels.
To conclude, I cannot finish without noting this government's contradictions when dealing with tobacco versus marijuana. The government has said that it plans to legalize marijuana because prohibition doesn't work, because legalization will protect youth and because distribution should be taken out of the hands of criminal organizations.
In contrast, Bill S-5 will only encourage the growth of the illegal tobacco market, further putting distribution into the hands of criminals. Also, the youth smoking rate in Canada is at a record low of 3 per cent according to a Health Canada study. The same study found that 17 per cent of youth had used marijuana in the past year.
Senators should ask themselves whether packaging and product standardization of tobacco is really the number one priority to protect the health of Canadian youth or if this is just a feel-good policy that will have no meaningful impact on public health. Thank you. I look forward to your questions.
The Chair: Thank you very much. I'll now turn to Rothmans, Benson & Hedges Inc. We have Peter Luongo, Managing Director; and Michael Klander, Director of Corporate Affairs. Mr. Luongo, I understand you will be making the presentation.
Peter Luongo, Managing Director, Rothmans, Benson & Hedges Inc.: Mr. Chairman, while I am here to talk to you about Bill S-5 today, I think what I'm going to tell you may surprise you.
Recently, the Government of Canada announced an objective of getting to 5 per cent smoking incidence by the year 2035. While this is achievable it's actually not good enough. I think that we can do better and achieve that goal faster. Indeed our vision is to one day stop selling cigarettes, but the question is: How do we get there?
Health experts recognize that the primary cause of tobacco-related disease is not the mere presence of tobacco and it is not the nicotine either. It is the combustion. It is the thousands of chemicals that are created in the smoke when tobacco is burned. If you eliminate the combustion and the smoke in a product that is still satisfying to adult smokers, that's where we'll see a truly impactful reduction in smoking incidence here in Canada.
Let me tell you about our newly introduced smoke-free product, IQOS. IQOS is an electronic device that heats tobacco at controlled temperatures to release nicotine, while dramatically reducing the level of harmful chemicals a user is exposed to compared to smoking.
IQOS was developed following years of research and billions of dollars of investment. Based on all of the research that has been conducted and scientific evidence compiled to date, including clinical trials and peer-reviewed studies relating to aerosol chemistry and toxicology, we are confident in saying that if you smoke cigarettes and you intend to continue to smoke cigarettes, switching to IQOS is a much better choice and is likely to present less risk of harm. In fact, over two million pages of scientific research and data, including the results of clinical trials, were recently submitted to the FDA to support our assessment on IQOS.
We understand that there may be some skepticism here. We would encourage you, the government or any outside expert to do your own research on the product, to do your own trials and to evaluate the evidence for yourselves. Ultimately, we believe that the facts and science will speak for themselves. Fundamentally, we can achieve the government's objective of 5 by 35 faster by encouraging Canadians who do not quit to switch to potentially reduced risk products like electronic cigarettes or heated tobacco products.
Why do we believe that we can do this in Canada? For one reason, there is good evidence from elsewhere in the world that this is achievable. For instance, last year Japan saw total cigarette volumes decline at nearly triple the 1.6 per cent decline that we saw in Canada. That is primarily because over one million Japanese consumers have switched from using cigarettes to IQOS. In total, worldwide, more than 1.4 million adult smokers have successfully quit combustible cigarettes and have fully switched to IQOS.
We know that there is a unique opportunity here. We can offer our customers a better choice. We can do what is right. We can leverage the strength of our business to help to achieve the goal of one day eliminating cigarettes altogether. In doing so, we can help to implement Health Canada's objectives in preventing and reducing health risks, promoting healthier lifestyles and providing information to help Canadians make informed decisions.
However, we need to be able to tell Canadian smokers that these products exist, to show them how they work, to let them know where they can purchase them, and to provide them with scientifically substantiated information so that they can make informed decisions about their personal well-being.
Unfortunately, Bill S-5 would not allow any individual, anyone, to make a comparison between two tobacco products or between a tobacco product and a vaping product, even if there is scientifically substantiated evidence that there is a difference between the products.
For example, under Bill S-5 as currently drafted I couldn't tell you that this product or any alternative tobacco or vaping product is a better choice than smoking cigarettes. I couldn't tell you that it produces no smoke. I couldn't tell you that switching completely to this product from cigarettes presents less risk of harm than continuing to smoke. Fundamentally, under Bill S-5 it would be illegal for to us provide consumers with any comparative information about the products that could imply a difference in health risks.
I want to be very clear. We're not saying that IQOS or any other smoke-free alternative is risk free. The best thing anyone can do is to quit if they are concerned about smoking-related disease, but switching completely to IQOS is a better choice than continuing to smoke. I believe the four million Canadians who smoke should have this information. More importantly, they have a fundamental right to know this information.
There is one scenario that we should all be concerned about. Can you imagine a situation where there is a product with a lower risk than cigarettes, whether it's IQOS or anything else, whether it's something we make or our competitors make or anybody makes? Now imagine a person who continues to smoke because they don't know that that product exists or they don't understand the fundamental differences between the products? I think that that would be a terrible situation and an enormous missed opportunity for public health.
In conclusion, I would like to recommend that this committee consider amendments to Bill S-5 which will allow for the communication of factual, scientifically substantiated information regarding the relative levels of harm of smoke- free products compared to smoking. I believe smokers have the right to this information, and I strongly believe they would agree with this assessment.
I would also recommend the committee consider amending the bill to better differentiate between conventional tobacco products such as cigarettes and heated tobacco products such as IQOS, with a view to permitting the latter to be categorized as a vaping product so that Canadians will understand the difference between the two.
The Chair: You are over your time. Please wind up.
Mr. Luongo: I sincerely hope that you will let us help you to achieve a smoke-free Canada.
Senator Petitclerc: My question is for Mr. Gagnon. I want you to clarify something for me. I tend to think that actions speak louder than words. I read the memoire from your organization. You are very clear that plain packaging is not a good idea for many reasons, one them being simply that it does not work.
Those are the words, but let's look at the actions. Yesterday we had many examples on different sorts of packaging. They are very diverse in terms of size, colour, style and attractiveness. We see a lot of resources, expertise and money were invested in making these different packages.
I'm trying to understand the coherence. In one way you say it doesn't work, but if it doesn't work, why spend so much energy on that packaging?
Mr. Gagnon: Thank you for the question. I think there are a couple of elements to it. Yes, we invest in the packaging, but one of the reasons we do so is that we want to make sure that like any other legal industry our products and trademarks are difficult to copy. That's why when you look at the illegal market right now the products they are selling are totally different from the ones we're selling. The format and the packages are very different. Actually, some health groups are proposing that Canada adopt the model illegal traffickers are using today, the slide and shell. That's one element.
The other element for me is that the real reason that people start smoking is not because of the pack. There is no evidence of that in every piece of research that Health Canada has cited.
"Did you start smoking because of the pack?'' The answer to that question is no. The people who start smoking do not see a package today and say, "Well, this package has red on it. I think I'm going to start smoking.'' That's not the way it works.
Yes, we invest in the brands. Once a consumer is in the market they will navigate through different brands, but the initial question is: "Has that person started smoking because of the package?'' The answer to that is: "No.'' When we say it does not work we mean it will not reduce smoking incidence in the country, nor prevent kids from starting to smoke.
Senator Petitclerc: To add to it just quickly, you say the different packaging, style and attractiveness of it do not make someone start smoking. Does it make them stay with one product more than another?
Mr. Gagnon: Like any other legal brand some consumers will use one brand versus another, but that doesn't mean they start smoking because of that.
On another point, if the challenge here is the format, let's have a discussion about the format, but that does not give the government to take away the brands or the trademarks. If the format is the issue let's have a discussion about the format, but the format is not the trademark.
If you remove that trademark, we're saying that illegal traffickers will take over this market. I know some people will say that contraband is not an issue in Canada. If you don't believe the tobacco companies, ask the RCMP, the SQ or the OPP. Ask The Department of Homeland Security in the U.S. They are on the front line and contraband is a problem.
Senator Seidman: I would like to address my question to you, Mr. Luongo. You talked about the desire to be able to discuss continuum of risk among products. It's my understanding that with Bill S-5 health claims such as the ones you propose can be made as long as they are tested for in the very same way as pharmaceuticals in Canada. Through the usual requirements for scientific evidence, based on clinical trials and approval by Health Canada, you would be able to make health claims.
Given that you already state to us that based on all the research that has been conducted and scientific evidence compiled to date, including clinical trials and peer-reviewed studies related to aerosol chemistry and toxicology, you have this degree of confidence.
Therefore I ask you: Would you not be able to submit your scientific evidence to the FDA and Health Canada and as a result have the ability to make the same kinds of health claims that any pharmaceutical product in Canada can make based on the science?
Mr. Luongo: That's a very good question because the reality is that while that pathway is available for e-cigarettes it is not available for tobacco products. One of our concerns with the bill as currently drafted is that because the IQOS product I mentioned contains tobacco, it would specifically be regulated as a tobacco product the way the bill is drafted. Therefore, it would not be able to go through the pathway that you just described.
I believe the committee should look very closely at allowing tobacco products that have tobacco but not combustion, which are smoke-free, the possibility of being regulated as vaping products. Also, there should be a process and a pathway in place to be able to make health claims.
Senator Stewart Olsen: I have a quick comment and then a question. I tend to agree with you about plain packaging. If plain packaging actually worked, I don't think we would be seeing over 50 per cent of the people in Ontario using contraband cigarettes. Obviously it's not packaging.
What is the difference between IQOS and vaping products, Mr. Luongo?
Mr. Luongo: The fundamental difference is that IQOS heats tobacco, whereas a vaping product heats a liquid that contains nicotine. One of the advantages of heating tobacco to a temperature where the nicotine is released is that it also releases the flavour from the tobacco, but you don't go to a temperature where you actually have combustion so you don't have smoke.
The benefit of that is that you get a similar nicotine delivery as a cigarette. Smokers get the nicotine they expect and the flavour profile is closer to that of a cigarette, so we find that people are more easily able to fully switch from smoking cigarettes to the IQOS product as opposed to e-cigarettes where some people have a difficult time switching and you see a lot more dual usage.
Another advantage is that because it contains tobacco people who are never smokers or who are former smokers understand that this product is not for them. That's very important to us.
Senator Stewart Olsen: I have a clarification, if I may. You did say, though, that IQOS significantly reduces the level of chemicals, so there are still harmful chemicals in the product.
Mr. Luongo: As I mentioned, it contains nicotine which is addictive. Yes, there are chemicals in the aerosol, but those levels are dramatically reduced compared to cigarettes. On average, depending on which chemicals you're looking at, you have a 90 to 95 per cent reduction in the levels of chemicals.
Senator Frum: Mr. Luongo, you said during your presentation that it is the vision of Rothmans, Benson & Hedges to one day stop selling cigarettes. My question is also related to how we would categorize IQOS. It is not a vaping product; it's a tobacco product.
Mr. Luongo: As the bill is currently drafted, yes.
Senator Frum: Because it contains tobacco.
Mr. Luongo: Correct.
Senator Frum: To push you on this idea that you want to get out of the cigarette business, Rothmans, Benson & Hedges is not in the smoking cessation business. You are the recreational product business. You just want to shift the product you're making from one type of product to another, but I have to believe because I don't think you have a plan to go out of business that you're going to be looking for new consumers for these new products.
Mr. Luongo: Given the fact that approximately four million Canadians smoke today, we can be successful as a business just by switching those people to reduced risk products.
Senator Frum: Is your total business model to simply stick with existing customers you have?
Mr. Luongo: We are focused on marketing the product to adult smokers, absolutely.
Senator Hartling: I'm curious about the product you're talking about and the cost compared to that of a package of cigarettes. What kind of costs? I find that a lot of people who smoke are often people with the least money, so I'm just wondering about that cost.
Mr. Luongo: This is a very good question because it is something that we actually wrestle with. To factually answer the question, the device has a retail list price of $125, although given that we just introduced it we have various discounts on the device to try to make it more accessible. Those discounts range from $75 to $110, so it's a fairly significant discount.
The heat sticks themselves, the consumable tobacco portion, are priced in line with premium cigarettes. The reason we think that is important is twofold: We want people to understand that the technology is different, but at the same time we don't want to make it so affordable that people who are former smokers who may have stopped smoking because of the price or youth are attracted to the product because of the price point. We really want to focus on switching existing adult smokers to the product.
Senator Hartling: And probably you don't want to lose any money, right?
Mr. Luongo: We are a business.
Senator Hartling: That would be a consideration, I would think.
Mr. Luongo: We are a business.
Senator Neufeld: I am like some others around the table. I don't think plain packaging makes any difference. In fact it might be worse. We should be talking about what the package is because we were shown some packages yesterday where there's a sleeve and it fits inside there. You don't see the graphic designs on the outside of that package or something like that.
Mr. Luongo, the vape people were here and made a presentation to us that they need candied flavours or those kinds of things to get people to go to vaping. You're telling us, at least I think, that you don't need flavours other than just the tobacco.
Can you tell me how much tobacco is actually in one of these IQOS? There's no flavour. The flavour is just straight tobacco. This marketing that you're doing is just starting out. Do you think you'll be able to sell that with no flavours other than just the tobacco flavour?
Mr. Luongo: Could I ask the chair to actually show the specific heat stick? Would that be permissible?
The Chair: You can hold it up at your seat. You can't circulate it during a meeting.
Mr. Luongo: This is the heat stick and this is the tobacco that's in it. This delivers approximately the same amount of nicotine as a reference cigarette. It's significantly less tobacco. It has a third of the tobacco that you would have in a conventional cigarette because you don't lose what you would lose in a cigarette to sidestream smoke. You can actually deliver similar experience in terms of duration, flavour and nicotine but with less tobacco.
Senator Neufeld: You can market that without flavour.
Mr. Luongo: Yes.
Senator Raine: My question is directed to Mr. Luongo. The addiction to nicotine is what is driving your consumer base to buy a product that delivers nicotine. What you're saying is your product is less harmful than smoking burning tobacco and having the fumes of the tar go in, but you're still dependent on the consumer becoming addicted to nicotine for your ongoing sales success. Would that be correct?
Mr. Luongo: No. Again, I think that by converting existing adult smokers we can have a very successful business model for a long time. There are, as I mentioned, approximately four million smokers in Canada. We think that simply converting them and gaining market share through the introduction of smoke-free alternatives that are a better choice is the right way to go.
Senator Raine: As a follow-up, then, if you look at the vaping industry they are saying they can wean people off their addiction to nicotine and have them enjoy flavours through vaping. They are also targeting that same market of four million smokers. They're saying that people don't actually like the taste of tobacco after they've tried vaping.
I'm looking at it and saying that somewhere along the line the market is going to be split in two completely different directions. How will you keep your market share? How can we be assured that you won't start to target new smokers?
Mr. Luongo: It's very difficult to lump all smokers into one category. Different smokers are going to be attracted to different types of products, whether it's the level of nicotine or the taste. As I mentioned earlier, the reality of what has been seen in markets around the world is that there are many people who try vaping products. Some of them are able to fully switch to those vaping products, those e-cigarettes, but others end up dual-using e-cigarettes and cigarettes or they end up coming back to cigarettes which at the end of the day is not a positive for public health.
What we've seen with IQOS is that on average when you look at a variety of markets approximately 60 to 70 per cent of the people who purchase the product are actually able to predominantly or fully switch over to using IQOS. That's important for us, because it's only by getting people to fully switch to these products that we can have a real impact on public health.
To the point of who will win that market share game at the end of the day, we actually have nothing against e- cigarettes. It's very possible if they are legalized through this legislation that we could introduce our own alternatives there and it will just be letting the market decide. I don't think who wins that game at the end of the day should be a concern for the committee.
Senator Petitclerc: My question will be for you, Mr. Luongo. You talked about the new product, IQOS. I went online this morning and looked at it. There was an article mentioning you in the Bloomberg Businessweek not long ago, in February. You mentioned the level of chemicals being 95 per cent less than that of tobacco.
I'm trying to get a sense because the vaping community has been very vocal about their perception of the risk of their products based on their data and studies. I'm curious. Maybe I missed it, but I can't get a sense of how much less harmful your industry considers IQOS will be compared to smoking tobacco.
What is the difference in risk? What is the difference in terms of addiction? Is it less addictive? Where does that information come from?
Mr. Luongo: To start with the addiction question, I would answer that by saying it delivers the same amount of nicotine as a cigarette. You can draw your own conclusions from that. We don't have any specific research on addiction of the product in that sense, per se.
Coming back to the question of the amount of harm reduction, this is a very complex topic. We can talk about the fact that the level of chemicals in the aerosol is reduced by 90 to 95 per cent. It is not smoke. It is just an aerosol. We know there are other benefits from a toxicological standpoint because you don't have certain harmful particulate matter.
When you want to then translate that into exactly how much does the risk decrease, it's very complex. What are you talking about? Are you talking about the risk of lung cancer, COPD or of another cardiovascular disease? To try to quantify that numerically is very difficult.
We don't want to be in a situation where we're misleading people and potentially telling them that it is less risky than it is because the product is not risk free. We need to be very clear. This is only for adult smokers. If you're a smoker and you're not planning on quitting, you should switch to it, but if you're not a smoker, if you're under age or if you're a former smoker, don't use this product. It has tobacco. It's not risk free. We know it's better than smoking, but we don't want to mislead people by exactly how much.
Senator Petitclerc: You're telling me that we don't know how much less risky it is. Therefore we have to be cautious, right?
Mr. Luongo: It's very important for the product to be regulated appropriately. As I mentioned before, the submission to the FDA that PMI made was over two million pages. There have been numerous studies. We've had 170 studies published in peer-reviewed journals on this. It's a very complex topic. It needs to be regulated appropriately. We want to make sure we at least have the ability to talk to smokers and inform them about what we know because right now there's a blanket prohibition that's very problematic for us.
Senator Seidman: Mr. Gagnon, perhaps I might ask you a question on this round. Yesterday, we heard from Gary Grant, a spokesperson for the National Coalition Against Contraband Tobacco, regarding a proposal he had to help us deal with the whole issue of contraband tobacco and acetate tow that's used in the production of cigarette filters. He was proposing that the Excise Act be amended so that there were restrictions on the importation of this product. What would your response be to that kind of a proposal?
Mr. Gagnon: To be honest, anything we can do on contraband is welcome. It is helpful if you're able to cut the supply of raw materials, but I think it needs to go further than that.
We've been asking for an inquiry, either by the House of Commons or the Senate, to bring the provinces, federal government, First Nations and the industry together to try to find a solution to eliminate contraband tobacco in the country and come up with recommendations.
Those types of measures are helpful. I also believe there's a model in Quebec that is working well. They were able to reduce illicit trade significantly and I think that Ontario needs to adopt that model quickly.
There is stuff that can be done on supply and demand, but as long as we have those illegal operations providing illegal cigarettes in Canada we will have a problem. I think an inquiry with some recommendations and with everybody around the table will help.
Senator Raine: My question is addressed to Mr. Luongo again. You mentioned that the price of IQOS would be similar to the price of a premium cigarette. What percentage of a premium cigarette is in the form of taxation to all levels of government and what percentage of an IQOS cigarette would be in taxes?
Mr. Luongo: On average for cigarettes, approximately 70 per cent of the price is tax related. For IQOS, that number is considerably lower because right now it is classified as a manufactured tobacco product other than a cigarette. It's based on how the CRA has classified the product as a smoke-free product.
Senator Raine: Could you give us the exact amount? "Considerably lower'' doesn't help.
Mr. Luongo: It is less than 10 per cent.
Senator Petitclerc: Mr. Gagnon, I can't resist asking you a question that I asked yesterday. We had with us the Canadian Convenience Stores Association and the National Coalition Against Contraband Tobacco, as you probably know. I mentioned to them the PowerPoint leak from Imperial Tobacco that was published in La Presse.
I tried to get a very simple answer from them. Many people have asked over the years, even here in the Senate. What is the nature of your relationship? More precisely, how much money do they get from you?
Mr. Gagnon: I'm happy you asked that question so I can clear the air on this. It's an old story that has been dealt with many times. The answer is yes, we are members of the Canadian Convenience Stores Association. We are a member of the national coalition. We are a member of the Canadian Chamber of Commerce. I could go on and on and on.
We will work with any third party that wants to eliminate contraband tobacco in Canada. We even reached out to the health groups that are appearing in front of you. All of them said no, probably because they have become more anti-industry than pro-health. They don't want to work with us in eliminating this problem in the country.
It is not my place to say how much is the amount, Senator Petitclerc, because different associations have different policies. Some will say; some won't. I think those questions need to be asked of them.
The only thing I would add, though, is this is a side show that has been used by the anti-tobacco lobbyists to prevent having real discussions about Bill S-5 and about the impact it will have on illegal tobacco in the country.
Senator Petitclerc: Would you not agree with me that there is a big difference in working with associations and funding?
Mr. Gagnon: I don't think so. To be fair, as a legal company we fund and we are members of different organizations in the same way that health groups are funded by private companies which also have a commercial benefit. That is part of operating in Canada and being a legal company. We have been in Canada for more than 100 years. We have been a member of many associations throughout those years and we will continue to do so.
Senator Seidman: I'd like to ask you if you're aware of any ongoing litigation around plain packaging in particular that we ought to pay specific attention to as we now try to deal with Bill S-5. Obviously it is hoped that we can do the right thing.
Mr. Gagnon: Right now, like I said earlier Australia is the first country that introduced plain packaging for a period of time. They introduced it in 2012. Since then, the U.K., Ireland and France did very recently.
When Australia introduced plain packaging they were challenged at the WTO level. That challenge has still not come to a conclusion. First of all, it would potentially be wise for Canada to wait to see what that conclusion is. The countries that have challenged Australia say that plain packaging is illegal and the WTO challenge is looking into that.
I want to stress on litigation that it's not because industry lost the U.K. appeal on plain packaging or that Australia lost that we should take for granted that Canada have the same result. It's a different constitution and a different set of laws. We continue to believe that as a legal company we have the fundamental right to use trademarks on our products.
The Chair: I think we've had a very thorough discussion. We have answers to the questions asked that at least to me were clearly understandable. I thank our witnesses for being here with us today and once again my colleagues for the questions they have put to you.
With that, I declare the meeting adjourned.
(The committee adjourned.)