Goldman's Takeaways From The TPSAC Hearings: Ban On Menthol Cigarettes Unlikely

Goldman Sachs has published a report on America's Tobacco industry after attending day 1 of the Tobacco Products Scientific Advisory Committee (TPSAC) hearings that were concerning the impact of menthol cigarettes on public health. In the report, Goldman writes "Today's meeting revealed little incremental news. While there remains a potential headline risk as we head into the March 23 deadline of TPSAC's recommendation, we still believe that a ban or any draconian measure on menthol by the FDA is highly unlikely. In addition, TPSAC also appears to be struggling to come up with any drastic recommendation, given the limited time, lack of finished research, and the risk of a large-scale contraband market. Following are key takeaways from today's meeting." Key issues from the meeting according to Goldman are as follows: "(1) Issues around a black market a significant risk – For one, presenters pointed to the growth of a contraband market in Canada as evidence that a sizable black market could develop in the US in the event of a menthol ban. Second, the complexity of controlling a black market for menthol cigarettes is also daunting as industry experts focused on the ability for smokers to self-mentholate cigarettes or switch to menthol cigars or roll-your-owns. Third, the impact on public health could be negative since contraband cigarettes are often more harmful. The committee had a keen interest on understanding the production/distribution capacity for a black market. (2) Menthol as a "starter" cigarette remains an issue for TPSAC – The cooling effect of menthol and the possible ability to mask the harshness of nicotine are perceived to support the view that menthol is a "starter" cigarette and thus over indexes among youths. This continues to be an issue the committee focuses on, particularly as topics such as cessation, initiation and switching have all led to inconclusive or mixed results. (3) Statistics from the National Cancer Institute a marginal negative – Anne Hartman from the National Cancer Institute gave statistics showing about 40% of menthol smokers planned on quitting if menthol was banned. While this statistic could be construed as a negative to the cigarette industry at face value, we believe there is no evidence that majority of these smokers will end up quitting or even attempt to quit."