Cigarette Price Minimization Strategies in the United States: Price Reductions and Responsiveness to Excise Taxes

Pesko, Michael F.; Licht, Andrea S.; Kruger, Judy

doi:10.1093/ntr/ntt068

Cited by 25 publications

(24 citation statements)

References 28 publications

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“…This is also known as the ‘pass-through rate’. The majority of the existing literature, with the exception of two papers [20,21], suggests that the overall pass-through rate of excise taxes in the United States is greater than or equal to 1.0 (also known as over-shifted) [20–27]. In addition, consistent with economic theory, global evidence has also shown that cigarette or alcohol excise taxes are not passed homogeneously to all users [20–26,28–31].…”

Section: Introductionmentioning

confidence: 99%

Does every US smoker bear the same cigarette tax?

Malarcher

O’Halloran

et al. 2014

Addiction

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Aims To evaluate state cigarette excise tax pass-through rates for selected price-minimizing strategies. Design Multivariate regression analysis of current smokers from a stratified, national, dual-frame telephone survey. Setting United States. Participants A total of 16 542 adult current smokers aged 18 years or older. Measurements Cigarette per pack prices paid with and without coupons were obtained for pack versus carton purchase, use of generic brands versus premium brands, and purchase from Indian reservations versus outside Indian reservations. Findings The average per pack prices paid differed substantially by price-minimizing strategy. Smokers who used any type of price-minimizing strategies paid substantially less than those who did not use these strategies (P < 0.05). Premium brand users who purchased by pack in places outside Indian reservations paid the entire amount of the excise tax, together with an additional premium of 7–10 cents per pack for every $1 increase in excise tax (pass-through rate of 1.07–1.10, P < 0.05). In contrast, carton purchasers, generic brand users or those who were likely to make their purchases on Indian reservations paid only 30–83 cents per pack for every $1 tax increase (pass-through rate of 0.30–0.83, P < 0.05). Conclusions Many smokers in the United States are able to avoid the full impact of state excise tax on cost of smoking by buying cartons, using generic brands and buying from Indian reservations.

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Section: Introductionmentioning

confidence: 99%

Does every US smoker bear the same cigarette tax?

Malarcher

O’Halloran

et al. 2014

Addiction

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“…The per pack price reductions associated with these strategies ranged from $0.26 for using price promotions to as much as $1 for purchasing cigarettes by the carton. The size of these price reductions may be increasing with rising cigarette excise taxes: the price reductions for carton purchasing were previously estimated at $0.68 in 2006–07 (Pesko et al, 2013) and is estimated at $0.99 in this research in 2009–10, during which time 21 states increased their cigarette excise taxes at least once and the federal government increased its excise tax from $0.33 to $1.01 a pack. Our findings suggest that price-sensitive smokers may have low-priced alternatives that allow them to continue to purchase cigarettes within their budget when facing price increases.…”

Section: Discussionmentioning

confidence: 62%

“…We performed regression analysis to account for overlapping price reductions. Except for one 2006–2007 study with limited strategies (Pesko et al, 2013), this approach has not been used in other studies of cigarette price reductions (DeCicca et al, 2010; Hyland et al, 2004; Licht et al, 2011a; White et al, 2005; Xu et al, 2013). We also focus on the strategy of price promotions by investigating if individuals receive differential price reductions from this strategy depending on cigarette brand.…”

Section: Introductionmentioning

confidence: 99%

Per-pack price reductions available from different cigarette purchasing strategies: United States, 2009–2010

Xu¹,

Tynan²,

Gerzoff³

et al. 2014

Preventive Medicine

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Objective Following cigarette excise tax increases, smokers may use cigarette price minimization strategies to continue their usual cigarette consumption rather than reducing consumption or quitting. This reduces the public health benefits of the tax increase. This paper estimates the price reductions for a wide-range of strategies, compensating for overlapping strategies. Method We performed regression analysis on the 2009–2010 National Adult Tobacco Survey (N = 13,394) to explore price reductions that smokers in the United States obtained from purchasing cigarettes. We examined five cigarette price minimization strategies: 1) purchasing discount brand cigarettes, 2) using price promotions, 3) purchasing cartons, 4) purchasing on Indian reservations, and 5) purchasing online. Price reductions from these strategies were estimated jointly to compensate for overlapping strategies. Results Each strategy provided price reductions between 26 and 99 cents per pack. Combined price reductions were possible. Additionally, price promotions were used with regular brands to obtain larger price reductions than when price promotions were used with generic brands. Conclusion Smokers can realize large price reductions from price minimization strategies, and there are many strategies available. Policymakers and public health officials should be aware of the extent that these strategies can reduce cigarette prices.

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“…18 However, for price/taxation policies to achieve the desired effect of reducing overall tobacco use among price-sensitive individuals, due attention must also be given to tobacco industry interference which might attenuate the impact of taxation measures, such as use of rebates or couponing schemes. 19 In addition, an integrative approach towards taxation of different tobacco products may be necessary to avert or reduce price-minimization strategies, such as switching to relatively cheaper products such as hand rolled cigarettes, as previously noted in South Africa. 20 This study found some striking disparities in smoking among certain population groups.…”

Section: Discussionmentioning

confidence: 99%