Cloudy future for vape shop owners

Sean Robinson, owner of District Vape in Washington, D.C., likes to say he could have bought a house with the money he spent on cigarettes. The 48-year-old from Virginia smoked for 31 years and failed repeatedly to quit — until an "off-beat" friend introduced him to vaping.

He hasn't smoked a cigarette since, and his experience inspired him to open his own shop. It's one of the 8,500 vape shops in the U.S. that collectively generated $900 million in 2014, according to market analysts at Wells Fargo.

"I'm trying to save lives," says Robinson.

But Robinson is afraid he'll soon be out of business as the D.C. council prepares to vote June 30 on a new budget that would tax vapor products like cigarettes — an excise tax currently set at 70% (the same rate at which tobacco is taxed). Robinson's products are already more expensive than a pack of cigarettes; a small bottle of juice is around $12, while a pack of cigarettes is just over $10.

But while some see vaping — the act of heating nicotine-infused liquid to evaporation and inhaling the vapor — as a safer alternative to smoking, others see it as having unknown health risks and the potential to addict a new generation of young people to nicotine.

A spike in vaping among teens — corresponding to a downturn in cigarette use — has led to calls for higher taxes on all vapor products and greater attention from public health organizations. The number of U.S. high school students using vaporizers tripled from 2013 to 2014, according to a report from the Centers for Disease Control and Prevention. The report also found the number of high school students smoking cigarettes fell from 15.7% to 9.2% from 2013 to 2014, the largest year-over-year decline in a decade.

Teens are not the only group in which vaping has exploded. A new Reuters/Ipsos poll released earlier in June found that 10% of U.S. adults vape — almost four times higher than a government estimate in 2013.

The D.C. budget proposal for 2016 is among the first legislative moves by public health groups and government at the state and federal levels to tax and regulate the vapor industry like the tobacco industry.

State legislatures in North Carolina and Minnesota have already passed laws raising taxes on vapor products, while the Food and Drug Administration announced plans in early 2014 to bring all vapor products under the supervision of its Center for Tobacco Control.

The market for vapor products will be worth $3.5 billion by the end of 2015, says a report by Bonnie Herzog, a senior analyst at Wells Fargo. According to her report, brick-and-mortar vape shops will generate $1.2 billion of the $2 billion generated by VTMs/e-juice. The other $1.5 billion belongs to e-cigarettes, the cigarette lookalikes.

Both the American Legacy Foundation, a public health foundation dedicated to youth smoking prevention, and the American Heart Association favor taxing vapor products at a favorable advantage to cigarettes — a rate that would discourage teens from buying vaporizers but not a current smoker— to incentivize a switch from combustible tobacco.

But the exponential growth of an unregulated industry selling nicotine delivery devices — one without consistent product standards for components and consumables — has raised some concerns in the public health community.

Some public health groups have questions about the ingredients used in e-juice, namely the propylene glycol, which can produce formaldehyde — a known carcinogen — when overheated.

Others are concerned about the presence of liquid nicotine in the juice, which can cause sickness in children if swallowed — an issue which has prompted calls for labeling restrictions and child-proof containers.

And even medical studies that suggest vaping is safer than smoking acknowledge that vapor is not without toxicants, albeit at far lower levels than cigarettes.

Which is why the AHA and the American Legacy Foundation currently support regulations that address marketing, youth access, labeling, quality control and standards for contaminants.

Public health organizations like the Campaign for Tobacco-Free Kids, the Centers for Disease Control and the American Cancer Society Cancer Action Network have pushed aggressively for taxation and FDA supervision.

But the small business owners in the vapor industry say that they're not trying to attract children, and that they're being unfairly grouped with the big tobacco companies.

"It seems like these taxes are trying to punish the wrong people," says Cynthia Cabrera, director of the Smoke-Free Alternatives Trade Association (SFATA), which represents about 500 businesses in the non-big tobacco supply chain.

"Right now, these products are primarily bought in stores run by adults and sold to adults by other adults," says Cabrera, whose organization already requires child-proof caps, appropriate labeling, and bans on sales to minors from its members.

Cabrera worries that the decision to lump vapor in with tobacco products will squeeze these businesses out of the fledgling industry they helped to create.

Her organization does not oppose outright regulation nor age restrictions, but policies that affect the health of brick-and-mortar vape shops, like indoor air bans at shops — which would interfere with shop owners' ability to let customers sample flavors — and excessive taxation, are onerous.

Groups like the American Cancer Society Cancer Action Network (ACSCAN) hear the echo of big tobacco's claims at the beginning of the anti-smoking campaign, and say their concerns are over-exaggerated.

"We've raised taxes on tobacco more than 110 times across 42 states since 2002, and tobacco is still available and selling," says Cathy Callaway, associate director of state & local campaigns for ACSCAN, which believes more research needs to be done by the FDA before vaping can be categorized as a harm-reduction tool.

But Robinson says, "We don't have those kinds of profit margins. If you're going to lump us into that category, we won't survive."