Economics Webinar - Just What the Doctor Ordered?
The Benefits and Costs of E-cigarette Regulation in Australia

Countries across the world have adopted a variety of policies related to the sale of e-cigarettes. Public  health officials seek to balance the benefits from making e-cigarettes available to help adult smokers  quit with the potential costs of youth vaping. On October 1, 2021, Australia adopted a novel regulatory  approach and made e-cigarettes with nicotine available only with a physician prescription. We study  how this regulatory approach affects vaping, smoking, and smoking cessation. Our first evidence comes from online surveys we have been conducting to track Australian smokers’ and vapers’ knowledge about the regulatory change and e-cigarette availability. Less than half of the sampled smokers and vapers were aware of the prescription requirement, and almost half of current vapers report obtaining ecigarettes without a prescription. Many respondents report that their recent purchases of e-cigarettes might have been unrecorded, under-the-counter purchases from retailers who do not enforce the prescription requirement. To develop additional evidence on how availability affects choices, we collected stated preference data from online discrete choice experiments (DCEs) conducted in the fall of 2021 and 2022. In each round, 600 Australian adult smokers and vapers made hypothetical choices between e-cigarettes, combustible cigarettes, and quitting. We experimentally varied the attributes of the e-cigarette option, including the legality of e-cigarettes without a prescription. We use the DCE data to estimate mixed logit models of consumers’ product choices. We estimate that the prescription requirement shifts consumer choices from non-prescription e-cigarettes to e-cigarettes with a prescription; we do not find evidence that the prescription requirement changes consumer choices about cigarettes or quitting. We find that even when non-prescription e-cigarettes are described as legal and available at the same price, many consumers prefer e-cigarettes with a prescription; we estimate that consumers value the prescription status at AUD 6.32/pack. We also estimate that that the illegality of non-prescription e-cigarettes creates substantial utility losses for many consumers, valued at AUD 7.90/pack for an illegal retail market and AUD 8.56/pack from an illegal street market. The welfare of adult smokers and vapers is maximized by a policy that repeals the prescription requirement but allows consumers to voluntarily purchase prescribed e-cigarettes. The compensating variation in income for such a repeal is AUD 3.14 per purchase. The benefits to adult smokers and vapers from the repeal of the prescription requirement need to be balanced against potential costs of youth vaping.