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Big tobacco and Chemist Warehouse battling to gain market share in Australia’s pharmacy vape market

Australia’s e-cigarette laws have created a new, lucrative market. (Unsplash: Shurov)

In short:

Despite restrictions on other sellers under the new law, pharmacies have been slow to take up e-cigarette sales, selling just 3,500 e-cigarettes without a prescription in one month.

Chemist Warehouse is a strong shareholder in Liber Pharmaceuticals, which has vowed never to target the recreational market.

What’s next?

There have been calls for stricter taxes on e-cigarette sales, similar to those in the UK and Canada, rather than just a goods and services tax (GST).

Pharmacy chain Chemist Warehouse and tobacco giants have become unexpected rivals in the battle for market share among Australia’s nicotine-addicted smokers and e-cigarette users.

Regulations introduced by the federal government have created a lucrative new market for e-cigarettes sold through pharmacies.

The laws shut down dozens of small e-cigarette sellers across the country, restricted the sale of products to pharmacies, whether or not they contained nicotine, banned disposable e-cigarettes and restricted flavors.

The market is not small. A report last year estimated that 3.5 million Australians aged 14 or over smoke or vape.

Smoking remains more common, at 8.9% of the population, while vaping is only 7.3.

But vaping rates have been rising among young people, who are satisfying their addiction through the black market, which continues to thrive due to a lack of proper regulation.

‘Making criminals and pharma a lot of money’

Despite the regulatory advantage, pharmacists are reluctant to sell these products without a prescription, or at all.

According to Senate estimates, 3,500 e-cigarettes were sold without a prescription in the first month of the new law.

Andrew Gourley, a vaper and former online vaping business owner, was forced to shut down part of his business because of the law.

Mr Gourlay was highly critical of Australia’s approach to e-cigarette laws, which differ from other countries such as the UK and Canada that allow retail sales and tax the products.

“I don’t think they’re going to achieve anything other than making a ton of money for criminals and pharmaceutical companies,” he said.

Big Tobacco and Chemist Warehouse battle for share of Australia's pharmacy e-cigarette market

Andrew Gourley was forced to shut down his online e-cigarette business after the federal law took effect in July. (ABC News: Scott Jewell)

Mr Gourlay found it difficult for e-cigarette users he knew to buy regulated products.

“Some stores will have stock ready for you to order and you’ll have it in a few days.

“Others may have stock, but your selection is limited. Others simply refuse to sell it.”

However, e-cigarette manufacturers expect access to e-cigarettes through pharmacies to improve as concerns about legal liability ease and the Therapeutic Goods Administration (TGA) publishes guidance for pharmacists.

Big Tobacco and Chemist Warehouse battle for share of Australia's pharmacy e-cigarette market

Anthony Tassone of the Pharmacists Association said pharmacists remain unhappy with the federal government’s e-cigarette laws. (ABC News: Darryl Torpy)

Who are the big players?

The TGA lists about 1,000 e-cigarette products on its website that can be legally sold in pharmacies.

However, no e-cigarette companies have yet to complete the TGA’s quality, safety, efficacy or performance evaluation process and are therefore considered unapproved goods, placing e-cigarettes in the same category as medical cannabis, MDMA and psilocybin.

Vapes now available in pharmacies without a prescription

The photo shows a teenager’s hand holding an e-cigarette.

Big Tobacco and Chemist Warehouse battle for share of Australia's pharmacy e-cigarette market

Australians aged 18 and over can now legally purchase e-cigarettes without a prescription.

Companies are vying for market share with millions of potential customers and an expensive product — a monthly supply of medical e-cigarettes can cost more than $300, including the device and a daily supply of nicotine liquid capsules.

Big tobacco companies own some of the world’s leading e-cigarette brands, with Philip Morris International (PMI) expecting about half of its global revenue to come from e-cigarette products by 2025.

In Australia, Philip Morris International has been targeting smaller, established pharmacies with its VEEV brand of e-cigarettes. Last year it was reported that the company was offering 80% profit margins in exchange for supply agreements.

Australian company Liber Pharmaceuticals is expected to become a market leader with its product Nicovape Q.

Liber Pharmaceuticals, run by former investment banker and lawyer Richard Lee, has pledged never to sell drugs to the recreational market and has powerful backers.

The company’s shareholders include Chemist Warehouse, lobby group The Strategic Counsel, whose chief executive is former Coalition health minister Michael Wooldridge, and George Tambassis, president of the Victorian branch of the Australian Pharmacists Guild (and former national president.

Big Tobacco and Chemist Warehouse battle for share of Australia's pharmacy e-cigarette market

Chemist Warehouse supports e-cigarette manufacturer Liber Pharmaceuticals. (AAP: Bianca De Marchi)

Liber’s strong relationships give the company access to the country’s largest pharmacy chains and suppliers.

Liber’s website says its Nicovape Q product is the only nicotine vaping product supplied by pharmaceutical wholesalers Symbion, Sigma and API, giving the company access to 5,500 pharmacies in Australia.

These wholesalers supply major chains including Chemist Warehouse, TerryWhite Chemmart, Priceline, Soul Pattison, Amcal, Guardian and PharmaSave.

However, franchise owners can choose to stock other brands. A TerryWhite pharmacy visited by the ABC last month was selling Philip Morris International’s VEEV 20 mg/ml e-cigarettes, the legal nicotine limit for over-the-counter sales.

‘Inhalation company’ Liber distances itself from big tobacco

In an interview with Business Insider, CEO Richard Lee described Liber as an “inhaler company” and insisted the company’s profitability did not depend on whether people continued to use it.

Instead, Mr Li said he wanted to see people “turn to fresh air” and that Liber’s “profitability depends on saving lives.”

Liber’s marketing pitch is that, unlike some of its competitors, it is not backed by Big Tobacco.

Big Tobacco and Chemist Warehouse battle for share of Australia's pharmacy e-cigarette market

Liber Pharmaceuticals CEO Richard Lee works with well-connected investors to gain market share for his e-cigarette products. (ABC News: Andrew Altree-Williams)

However, the company’s head of regulatory affairs and shareholder, Stuart Prichard, did work for Philip Morris International for 11 years, from 2002 to 2013.

When asked about this, Mr Lee told the Business Daily: “He actually played a significant role in helping us understand and ensure that our business practices would not, or be perceived to, abuse the supply chain in the way that the tobacco industry historically did.

Global expansion plans are in the works, and gaining a foothold in what is known as the world’s most strictly regulated e-cigarette market is likely to be a good starting point for convincing overseas governments to allow products in.

Referring to statistics on adult tobacco users, Mr Lee said: “There are one billion smokers in the world and 1.6 million smokers in Australia who want to quit.

“For every smoker who quits using my product, they know five other people who could benefit from it.

“At the end of the day, if all I’m doing is helping people get rid of problems that are going to kill them in the long run, then the economics make sense.”

Online bulk-billing services prescribe vapes

The emergence of online e-cigarette prescription platforms has boosted the growth of this nascent industry. Since e-cigarette companies cannot sell their products directly to consumers, doctor recommendations are crucial to gaining market share.

An online search reveals more than a dozen online platforms that only provide e-cigarette prescriptions to eligible patients.

About half of these platforms advertised that they provided “free” or “no-cost” therapeutic e-cigarette prescriptions that could be used as a smoking cessation tool.

Weakened vaping ban will still curb access for young people, public health officials say

Photo of young woman wearing headphones and smoking an electronic cigarette.

Big Tobacco and Chemist Warehouse battle for share of Australia's pharmacy e-cigarette market

Leading health officials say the federal government’s deal with the Greens to ease the ban on e-cigarettes, which will come into effect next week, is “disappointing” but will still have a huge impact on young people’s access to them.

In fact, taxpayers fund this service through Medicare bulk billing.

Liber owns the online platform Smoke Free Clinic.

The company’s chief medical officer and shareholder, David Busby, and its chief toxicologist, Autumn Bernal, appear on the Smoke Free Clinic’s website, which advertises “100% bulk phone consultations” provided by two online scripting services, hubMed and My Quit Clinic.

ABC booked a telephone consultation with hubMed and was recommended Liber’s Nicovape Q product and a two-month prescription because “it is not associated with big tobacco companies” and is available at drugstore chains.

Mr Li told Business Liberty that Liber does not have any contractual relationship, financial arrangement or cross-shareholding with prescribers, who he said could also recommend other products in brick-and-mortar pharmacies.

Mr Lee said: “We created the Smoke-Free Clinic when the 2021 framework was launched because there was no independent platform providing information on how e-cigarette products could fit into smoking cessation toolkits.

“We don’t want patients to go to prescription platforms that have financial incentives to provide certain products.”

The other five online e-cigarette-specific script platforms we investigated do not require a telephone consultation to prescribe e-cigarettes.

Instead, users are asked to fill out an online questionnaire, which the site says will be reviewed by a doctor.

Eligible patients who have tried other methods to quit smoking or vaping will receive a prescription via email for up to 12 months. Some will direct you to purchase the product through their own online pharmacy and credit your consultation fee toward your first purchase.

While investigating this, we entered our health insurance card details into two websites – MyDuke and QuitClinics – and both gave us a prescription after filling out an online questionnaire.

MyDuke, which sells Philip Morris International’s VEEV e-cigarettes and other international brands, directed us to its website to complete the purchase.

QuitClinics recommends purchasing the New Zealand product ALT e-cigarette through its online pharmacy.

Should Australia have a ‘vape tax’?

Profits of Australian e-cigarette manufacturers benefit from the lack of a specific “e-cigarette tax” – unlike cigarettes, which retail for 80 cents, regulated e-cigarettes sold in pharmacies are only subject to goods and services tax (GST).

The government also loses tax revenue from illegal sales.

Buying a vape? The rules have changed

Jill Clarke is pictured standing in front of three glasses of water with pink e-cigarettes in them.

Big Tobacco and Chemist Warehouse battle for share of Australia's pharmacy e-cigarette market

Jill’s addiction to e-cigarettes and attempts to quit have attracted millions of followers on social media. Here’s what she had to say about the changes to Australia’s e-cigarette laws.

In Australia, it is estimated that the cost to the healthcare system could be as high as $180 million per year simply because a proportion of e-cigarette users start smoking.

The study assumes that 13% of people who have used e-cigarettes but have never smoked cigarettes will switch to smoking cigarettes.

Quitline Victoria is optimistic about the federal government’s vaping laws, reporting an increase in calls to its counselling service from people struggling to quit vaping.

“Most people who call us about vaping tell us they find it extremely difficult to quit,” said David, a Quitline counselor who declined to give his last name for privacy reasons.

“In fact, there are indications that they find it harder to quit e-cigarettes than people who quit traditional cigarettes.

“They seem to vape more often than they smoke. For example, there is no end point to using e-cigarettes, as there is with smoking cigarettes.

“With a cigarette, it takes about five minutes, you know, you light it up, you draw on it, and then it goes out. With an e-cigarette, you just pick it up and use it.”

For those who vape exclusively, need a longer time to quit, or do not want to quit, the long-term health consequences are not yet known because the e-cigarette industry is still in its infancy. However, the risks of vaping include lung damage and adverse effects on cardiovascular health.

Other countries have regulated e-cigarettes differently to Australia, choosing to allow retail sales and impose e-cigarette taxes.

Andrew Gourley said Australia should follow suit.

“I think it’s a sham. Taxpayers should be getting money from this industry, not taxpayers paying for the operation of this industry,” he argued.

The UK government plans to impose a tax of £2.20 per 10ml of e-cigarette liquid from October 2026.

The tax is intended to make e-cigarettes less affordable, especially for young people, while also supporting the health care system, which is facing increased medical costs due to e-cigarette use.

Canada’s e-cigarette tax is 1.12 Canadian dollars per 2 milliliters of e-cigarette liquid for the first 10 milliliters, and 1.12 Canadian dollars per 10 milliliters thereafter.

Big Tobacco and Chemist Warehouse battle for share of Australia's pharmacy e-cigarette market

These e-cigarettes are no longer allowed to be sold in Australia. (ABC News: Scott Jewell)

Economist Saul Eslake said he would like to see heavy taxes on e-cigarettes, but acknowledged that doing so could also encourage illegal sales.

“Governments tax tobacco and other products that have adverse effects on people’s health for two reasons,” Mr Eslake explained.

“One is because governments have to raise revenue to pay for the services and other items that citizens expect from their governments, and if they don’t tax tobacco, alcohol and other items, then they have to raise more money through income tax, GST or other forms of taxation.”

He said if people were getting prescriptions for e-cigarettes for recreational purposes, it would be a taxpayer-funded problem.

“That loophole is being exploited, leading to ever-increasing tax costs, which of course need to be met through either increased government borrowing or higher taxes on other taxpayers, neither of which I think is ideal in the long run.”

Hurdle for vape makers

Taxing regulated e-cigarettes will be difficult if tobacco and illicit e-cigarette users are reluctant to switch to e-cigarettes and pharmacists are reluctant to sell e-cigarettes over the counter.

‘Tsunami’ of vapes on black market

The photo is a normal photo of a red electronic cigarette under white light.

Big Tobacco and Chemist Warehouse battle for share of Australia's pharmacy e-cigarette market

Given the number of tobacconists selling e-cigarettes across Australia, you might think it’s legal. 

Anthony Tassone, national councillor for the Victorian Pharmacists Guild, is one of about 2,000 pharmacy owners who have downloaded the employer group’s signage informing customers they will not sell e-cigarettes without a prescription.

However, his market share was evident when The Business visited the TerryWhite branded pharmacy in Liber, which offers Nicovape Q.

Mr Tassoune said chemists he had spoken to were anxious about stocking brands backed by tobacco giants, but he insisted no brand of e-cigarette should be sold over the counter until it had been approved by the Tobacco Products Administration.

Mr Tassoune said: “The Australian Register of Therapeutic Goods contains therapeutic products that have been assessed for quality, safety and effectiveness and currently in Australia there are no nicotine-containing e-cigarette products on the Australian Register of Therapeutic Goods.

“As a health care provider, that doesn’t give me the confidence to provide these products without a prescription.

“The medicines regulation system, with rigorous processes to establish quality, safety and effectiveness, has served the Australian public well for decades and for the safety of our patients, that’s what we want to see.”

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