NEW JERSEY LEGISLATION WOULD ALLOW FOR SALES OF FLAVORED VAPE PRODUCTS,

HEFTY LICENSING FEE

May 14, 2020

By: Lindsey Stroud

KEY POINTS:

  • A4001, and companion bill S2399, would allow only licensed vapor businesses … to be permitted to sell container e-liquid with a characterizing flavor.

  • The legislation imposes a $5,000 annual licensing fee, as well as the creation and maintaining of “an electronic database that is to track all container e-liquid with a characterizing flavor.

  • The legislation also calls for the “development of a standardized tracking feature to be included on all container e-liquid with a characterizing flavor.

  • The legislation also bans certain types of vapor product designs, including devices that are designed to look like a “flash drive or universal serial bus drive.”

  • In 2018, the vapor industry’s total economic impact was more than $565 million. In the same year, the vapor industry created 2,119 direct vaping-related jobs, generating over $91 million in wages. Further, in 2018, New Jersey received more than $41 million in state taxes attributable to e-cigarettes and vaping devices.

  • New Jersey spends very little of existing tobacco monies on tobacco control programs. For example, in 2019, the Garden State received an estimated $919.6 million in revenue attributable to tobacco taxes and settlement payments. In the same year, the Garden State dedicated only $7.2 million, less than one percent, of state funds to tobacco control programs, including education and youth prevention.

  • The most recent state data on youth e-cigarette use is from the 2016 New Jersey Youth Tobacco Survey. In 2016, 21 percent of New Jersey high school students had ever used an e-cigarette and only 9.6 percent reported using vapor products on at least one occasion in the 30 days prior to the survey.

  • The $5,000 annual license fee is an exorbitant rate compared to the licensing fees for combustible cigarettes. As of the 2020-2021 fiscal year, in New Jersey, the “annual fee for a [cigarette] retailer or vending machine is $50 (per location).” The “fee for a [cigarette] manufacturer’s representative license is $5.

  • Between January 1, 2018 and October 1, 2019, the FDA performed 7,932 tobacco and vapor retailer inspections with minors attempting to purchase age restricted products.

    • Only 850, or 10 percent, resulted in sales of tobacco and vapor products to minors.

    • Among the sales to minors, only 150 of the 850 sales (17 percent of failed inspections and 1 percent of all inspections) resulted in the sale of an e-cigarette to a minor.

    • Of the failed e-cigarette inspections, only 11 retailers had “vape” or “vapor” in their store name, compared to 17 failed inspections in 7-Eleven retailers in New Jersey.

After banning the sale of flavored vapor products, legislation has been introduced in the Garden State that would permit the sales of flavored e-liquid at age restricted stores. A4001, and companion bill S2399, would allow “only licensed vapor businesses … to be permitted to sell container e-liquid with a characterizing flavor.”

The legislation imposes a $5,000 annual licensing fee, as well as the creation and maintaining of “an electronic database that is to track all container e-liquid with a characterizing flavor.” The legislation also calls for the “development of a standardized tracking feature to be included on all container e-liquid with a characterizing flavor.” Further, the legislation would ban certain types of vapor product designs, including devices that are designed to look like a “flash drive or universal serial bus drive.”

The legislation is a welcome relief to the vapor industry. In January, Gov. Phil Murphy signed Senate Bill 3265, which banned the sales of flavored e-cigarettes and went into effect in April, 2020, but vape shops in New Jersey had already shut down prior to the ban going into effect.

The ban on flavors is a blow to a multi-million-dollar industry in the Garden State. In 2018, the vapor industry’s total economic impact was more than $565 million. In the same year, the vapor industry created 2,119 direct vaping-related jobs, generating over $91 million in wages. Further, in 2018, New Jersey received more than $41 million in state taxes attributable to e-cigarettes and vaping devices.

Not only have flavored vape products boosted New Jersey’s economy, their use could actually alleviate the Garden State’s budget by reducing smoking-related health care costs. A 2015 study in State Budget Solutions analyzed electronic cigarettes’ impact on Medicaid spending. The author estimated Medicaid savings could have amounted to $48 billion in 2012 if e-cigarettes had been adopted in place of combustible tobacco cigarettes by all Medicaid recipients who currently consume these products.

Additionally, a 2017 study by R Street Institute analyzed the reduction in Medicaid costs that would likely occur if a large number of current Medicaid recipients switched from combustible cigarettes to e-cigarettes or vaping devices. The author used a sample size of “1% of smokers [within] demographic groups permanently” switching. According to R Street’s analysis, Medicaid savings “will be approximately $2.8 billion per 1 percent of enrollees,” over the next 25 years.

The use of e-cigarettes to reduce the costs of smoking-related health care issues is overwhelmingly valuable as New Jersey spends very little of existing tobacco monies on tobacco control programs. For example, in 2019, the Garden State received an estimated $919.6 million in revenue attributable to tobacco taxes and settlement payments. In the same year, the Garden State dedicated only $7.2 million, less than one percent, of state funds to tobacco control programs, including education and youth prevention.

Flavors are integral for e-cigarettes’ usefulness. In a survey of nearly 70,000 American adult vapers, 83.2 percent and 72.3 percent of survey respondents reported vaping fruit and dessert flavors, respectively, “at least some of the time.”  

There is also little evidence that youth use e-cigarette products because of flavors. A May 2020 “research letter” published in JAMA surveyed 1,129 youth aged between 14 and 24 years old. Only 4.7 percent of respondents cited “flavors” as a reason for using JUUL, compared to 62.2 percent of respondents that reported using JUUL due to “social reasons.” This is consistent with other recent data. In an analysis of five state surveys on youth e-cigarette use, only 15.6 percent of high school students cited using e-cigarettes because of flavors.

Further, many New Jersey youth are not using electronic cigarettes and vapor products. The most recent state data on youth e-cigarette use is from the 2016 New Jersey Youth Tobacco Survey. According to those results, in 2016, 21 percent of New Jersey high school students had ever used an e-cigarette and only 9.6 percent reported using vapor products on at least one occasion in the 30 days prior to the survey. There is no information on frequent and/or daily use.

Although the legislation would rectify the ban on flavored tobacco harm reduction products, it comes at a steep price with a $5,000 annual license fee. This is an exorbitant rate compared to the licensing fees for combustible cigarettes. As of the 2020-2021 fiscal year, in New Jersey, the “annual fee for a [cigarette] retailer or vending machine is $50 (per location).” The “fee for a [cigarette] manufacturer’s representative license is $5.” As vapor products are a tobacco harm reduction tool and significantly less harmful than combustible cigarettes, regulatory burdens should reflect the reduced harm.

New Jersey lawmakers should work in conjunction with the vapor industry to remedy the states arbitrary ban of harm reduction tools. Tobacco and vapor retailers have done a good job at not selling age restricted products to minors.

According to data from U.S. Food and Drug Administration (FDA) tobacco compliance checks, between January 1, 2018 and October 1, 2019, the FDA performed 7,932 tobacco and vapor retailer inspections with minors attempting to purchase age restricted products. Of these, only 850, or 10 percent, resulted in sales of tobacco and vapor products to minors. Among the sales to minors, only 150 of the 850 sales (17 percent of failed inspections and 1 percent of all inspections) resulted in the sale of an e-cigarette to a minor. Of the failed e-cigarette inspections, only 11 retailers had “vape” or “vapor” in their store name, compared to 17 failed inspections in 7-Eleven retailers in New Jersey.

Although allowing flavors to be sold in age-restricted stores would be a welcome relief to many small business owners in the Garden State, the associated licensing fee ignores the concept of tobacco harm reduction. New Jersey lawmakers should embrace e-cigarettes as an effective stopping-smoking tool that can reduce health care costs and provide economic benefits to the state’s economy.

Nothing in this analysis is intended to is intended to influence the passage of legislation, and it does not necessarily represent the views of Tobacco Harm Reduction 101. For more information on vapor products in New Jersey, please visit Tobacco Harm Reduction 101’s New Jersey page at www.thr101.org/new-jersey.

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©2020 by Tobacco Harm Reduction 101.