Wednesday, January 5th, 2011

The power of cigarette prices

Americans are familiar with the deployment of tobacco taxes to curb smoking. Smoking among teens has declined consistently over the last 20 years, in part thanks to hefty taxes on cigarettes. When I was a smoker back in the 1990s I could buy a pack in New York City for $3.  In July of last year, the minimum price of cigarettes in the City rose to $10.80, of which $7.50 amounted to tax.

Many European countries have used similar strategies. Now The Times reports that even the Japanese – who have long resisted the non-smoking zeitgeist– are giving the strategy a try.

Some 37% of Japanese smoke, compared to less than a quarter of Americans. You can light pretty much anywhere. Yet concerned about public health –some 130,000 Japanese die of tobacco related diseases each year– and needing extra tax revenue last October the Japanese government slapped a ¥70 yen tax on each pack of cigarettes. The price of a pack rose by ¥100 altogether, to ¥400 –about $4.85.

It’s early to assess the impact of the strategy on Japanese smoking rates and health. But the initiative already had a big impact on the sales of Pfizer. Prescriptions of its Chantix antismoking drug rose to 170,000 in September from 70,000 in August. By early October, sales were so brisk that Pfizer had to temporarily suspend sales of the drug.

The drug isn’t cheap. Pfizer charges ¥60,000 yen –about $750—for a 12-week course. But the government stepped in to cover 70% of the cost.  So assuming the drug is effective in helping kick the habit, the Japanese can quit smoking at a cost of about 45 packs. Seems a pretty good deal.

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One Response to The power of cigarette prices

  1. Superb post but I was wondering if you could write a litte more oon this
    subject? I’d bee very grateful if yoou could elaborate
    a little bit further. Many thanks!

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