Casey Costello’s tobacco tax cut plan stalled as device pulled from shelves

NZ First Minister Casey Costello's plan to encourage people to switch to Heated Tobacco Products (HTPs) has hit a major snag with the sole supplier Philip Morris forced to pull its device from sale.

Associate Health Minister Costello slashed the excise tax by 50 percent on HTPs at a cost of up to $216 million, in a bid to encourage people to switch to the product as an alternative to smoking.

Philip Morris has a monopoly in the HTP market in New Zealand with its IQOS, where sticks of tobacco are heated to a vapour rather than burned.

But the IQOS device is classified as a vape and has been caught by Labour's regulations forcing devices to have removable batteries and child safety mechanisms, which finally kicked in on 1 October.

Documents show Costello tried to have the regulations delayed for two years. But the Cabinet only agreed to a six month delay from the original date of 21 March.

The IQOS is not compliant with the regulations for devices to have removable batteries and child safety mechanisms.

RNZ has seen Philip Morris emails sent to suppliers saying the IOQS is "unavailable for purchase due to a regulatory change on 1 October 2024 affecting vaping devices".

The sticks of tobacco that are inserted into the IQOS - the tobacco which received the 50 percent excise tax cut - are still being sold for customers who have an existing device.

Philip Morris did not respond to questions about how long they would take to get a compliant device on the market.

In a statement the tobacco giant would only say that "we always comply with all necessary regulations, including on electronic devices".

Costello's plan is to have more than 7000 people switch to HTPs, which she sees as part of the solution to Smokefree 2025.

She claims HTPs have a "similar risk profiling to vapes" but official advice says the "evidence is clear that HTPs are more harmful than vaping" and also that there is no evidence they work for smoking cessation.

Costello says she has got her own "independent advice on the efficacy of HTPs as a smoking cessation tool" but she has declined to be interviewed and would not say where that came from.

Prime Minister Christopher Luxon has backed Costello, yesterday telling RNZ the excise tax cut plan was a "12 month trial" to "see how it goes" with HTPs lowering smoking rates.

Luxon said he had not seen the "independent advice" Costello used to push the policy through Cabinet, but he was confident it was credible. It was up to Costello to release it, he said.

Costello's regulation delay request

In a March Cabinet paper Costello says the previous government's requirements for removable batteries and child safety mechanisms - a bid to reduce the availability of single-use vapes - "were unsuccessful." She asked for a two year delay and a review of the regulations "to ensure they align with the Coalition Government's objectives."

In her argument for a delay, Costello made reference to difficulties international players in the nicotine industry may face with the regulations.

"It is likely that higher quality vaping devices used by former adult smokers will soon be unavailable domestically as high-end manufacturers that cater to international markets may not make New Zealand specific models," she wrote.

RNZ asked Costello's office if the passage referred to the Philip Morris IQOS device but she did not directly address that question.

"The policy is blind as to whether particular suppliers or retailers are impacted in any way," Costello said in a statement to RNZ.

Costello said the six month delay was to "ensure there wasn't a sudden lack of available vapes" and also allowed her to review regulations overseas and align the changes with a bill now before a select committee.

Philip Morris has also had to withdraw a vaping product, the VEEV ONE, from sale because it is not compliant with the new regulations.

Anna Stewart from Vape Free Kids previously told RNZ the main company that wasn't ready for the new regulations was Philip Morris, a claim backed up by suppliers and retailers spoken to by RNZ.

Costello did not address a question from RNZ asking whether any other companies would have been affected.

She has consistently said she has no association with the tobacco industry and it has not influenced her decisions.

Two people who held senior positions in the New Zealand First party now work in corporate affairs and communications roles with Philip Morris.