How to Structure Nicotine Markets in the Techno Era

From: Ian Irvine

To: Health Canada

Date: May 27, 2026

Re: How to structure nicotine markets in the techno era

I spend two days in Europe last week at an industry conference that showcased technological innovation in the field of nicotine delivery and use.

The innovation concerns how nicotine can be consumed without killing the users. I met doctors and pharmacists, politicians and lobbyists, producers and users, and journalists. All hundred or so of us had our conference costs paid by the sponsors – Philip Morris International, which is not alone among the major tobacco producers seeking to transition from cigarettes to lower risk products (though readers may entertain a degree of skepticism).

The occasion prompted me to think about ways that the nicotine market in Canada could be made better if we are to reduce deaths from the cancers, strokes and heart attacks that attend smoking.

As an economist I think about how individuals respond to market structure and how governments, with that knowledge, can influence the structure with a view to improving health.

As an economist I also bring a harm-reduction philosophy to the analysis of markets, meaning: can we improve health substantially without becoming prohibitionists? For example, how can we promote low-alcohol beer at the summer barbecue, or low-alcohol spritzers at bars? The key element is ‘low’.

Lower risk nicotine comes in the form of vaping devices, oral pouches and heated tobacco products. Vaping has two million adherents in Canada. Heated tobacco products form a minuscule part of nicotine consumption. Oral pouches are becoming popular in many markets worldwide.

Let’s look at the Canadian pouch market, noting that the epidemiological research indicates these products are at least one order of magnitude less risky than cigarettes. The Royal College of Physicians, for example, puts the risk of vaping at less than 5 percent of cigarette risk. Research also puts the risk from pouches at perhaps 1 percent of the risk from cigarettes – though overuse of pouches can irritate the mouth and sometimes cause lesions.

The central paradox of today’s pouch market in Canada is that these extremely low-risk products can only be obtained in a pharmacy, from behind the counter, yet cigarettes (“use as directed and this product may kill you”) are available in every gas station and corner store. Would we ever think of putting low-alcohol beer and low-alcohol spritzers into a barriered environment and putting gin, whiskey and vodka in the supermarket?

Yet that is what the prior Minister of Health decided several years ago. The decision declared that the lowest risk nicotine products would not have the access that cigarettes have. Potential users suffer as a consequence.

A young pharmacist from Alberta was a member of a key panel discussion at my conference. He stressed that many pharmacies choose not to carry pouches, thus denying potential users the opportunity to switch from smoking through this channel.

In Canada pouches require Health Canada approval before going on the market if they are to get the status of a quitting device under the Natural Health Product Regulations. This takes time, a lot of time. While several applications are in process, at present we have a de facto restricted monopoly (though Health Canada has recently approved a second smaller producer), which drives up prices.

It is essential to get relative pricing right in this market. At present users are paying almost the same price for pouches as for cigarettes, even though pouches carry no excise duties whereas about two thirds of the price of cigarettes is due to excises.

Here is the necessary to-do list.

First, try to speed up approvals for pouches.

Second, allow them to be sold at the same locations as products that are 100 times as dangerous.

In Sweden, the location of my conference, pouches are ubiquitous, cigarettes are almost nonexistent. And even though the Swedes have much higher nicotine use rates that Canada, they have the lowest tobacco-related morbidity and mortality rates in Europe by a country mile. We must keep in mind the adage that it is combustion that kills and nicotine that brings users back for more. For reduced harm nicotine products, we need to increase accessibility, reduce their cost, and inform users about relative risks. It is not sufficient that Health Canada simply posts on their website that new-generation products are safer. Health Canada is not on the news feed of very many smokers.

World No Tobacco Day, which arrives on Sunday, should not just be positioned as a prohibitionist undertaking; it should be an occasion where users are informed about the relative risks of different products, and one where our federal government reflects on the need for legislative reform.

Ian Irvine, an economics professor at Concordia University, is a research fellow at the C.D. Howe Institute and has worked as a consultant on alcohol and tobacco to both the private sector and the federal government.

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The views expressed here are those of the author. The C.D. Howe Institute does not take corporate positions on policy matters.