Tobacco giant eyes NV as market for new product, and eyes lawmakers for favorable tax treatment

Phillip Morris International is marketing IQOS as a device that heats a tobacco “heatstick” into a nicotine-containing vapor but without combustion, fire, ash or smoke. (Photo: Philip Morris International)

Representatives from an international tobacco giant have begun pitching to Nevada state lawmakers a new product they describe as a safer alternative for cigarette smokers.

They’re not hoping the lawmakers will give their new-to-market “heated cigarettes” a puff puff. They are hoping the lawmakers will pass legislation next year to tax them at a lower rate than they do traditional cigarettes.

Philip Morris International (PMI) is preparing to launch their IQOS heated tobacco systems in the United States. Reuters reported earlier this year the company is market testing in Austin, Texas with a goal of a broader rollout in 2025. As part of those efforts, PMI has hired lobbyists in multiple states, including, we know now, Nevada.

In a presentation on Tuesday to lawmakers on the Joint Interim Standing Committee on Revenue, PMI Director of Scientific Engagement Brian Erkkila described their heated tobacco product as a safer alternative to cigarettes. IQOS is a device that heats a tobacco “heatstick” into a nicotine-containing vapor but without combustion, fire, ash or smoke.

PMI advertises the experience and taste as similar to a combustible cigarette, but with upwards of 95% less of the harmful chemicals associated with cigarettes.

While no specific legislative asks were made Tuesday, Eddie Ableser of Tri-Strategies — the Nevada-based government affairs firm working with PMI — told lawmakers the company is looking to start a conversation about how the product should be taxed.

“The intent is not a complete absolution of harm,” he told the lawmakers. “It’s harm reduction. How do we move and target the current cigarette smokers in Nevada? How can we move them onto a harm reduction product that helps them?”

He added, “We develop tax policy generally to motivate consumers one way or the other.”

Many incorrectly assume IQOS would automatically be considered what Nevada tax policy calls an OTP, “other tobacco product,” which includes vaping devices and is taxed at 30% of the wholesale price. But heated tobacco products are generally considered cigarettes by most tax codes.

“When you look at the definition, any rolled stick of tobacco is considered a cigarette,” Ableser said in an interview with the Current . “That’s a different tax rate (than OTPs).”

In Nevada, cigarettes are taxed the equivalent of $1.80 per pack. That puts Nevada in the middle of the pack (25th highest) when it comes to tax rates for cigarettes, according to the anti-nicotine nonprofit Truth Initiative.

According to the Organized Crime and Corruption Reporting Project , PMI has successfully lobbied at least 10 countries to tax their heated cigarette product at a lower rate than traditional cigarettes, using the argument that the product is far less harmful and less worthy of any kind of  “sin tax.”

Philip Morris International began as a subsidiary of Philip Morris Companies (now Atria Group) but broke away into a separate company in 2008.

PMI first launched IQOS in Japan a decade ago and has since expanded into dozens of other countries. Intellectual property litigation has kept the product out of the U.S. market, according to Alexandra Wich, a senior manager of state regulatory and public policy at PMI, but those issues have been resolved.

The U.S. Food and Drug Administration gave PMI the greenlight to market their products as reducing exposure to the harmful chemicals produced by combustible cigarettes, concluding that “the net population-level benefits to adult smokers outweigh the risks to youth .”

More than 30 million adults nationwide still smoke cigarettes, according to the FDA.

Ableser and Erkkila emphasized that IQOS is intended for current cigarette smokers, differentiating it from vaping products that have been increasingly criticized for marketing to non-smokers and children.

Erkkila told lawmakers the IQOS heat sticks are only available in a small number of “flavors” — meaning different tobacco blends, as well as a menthol variant.

“No pink bubble gum or cherry or any of those things you might see in an e-cigarette,” he added.

Erkkila said a menthol variant is important because menthol smokers are much more likely to switch to a smoke-free product that also has menthol.

But the idea that PMI intends to only reach current smokers of combustible cigarettes is widely criticized by anti-tobacco and anti-vaping groups. Campaign for Tobacco-Free Kids, American Cancer Society Cancer Action Network, American Heart Association, American Lung Association and Truth Initiative have together argued to the FDA that heated tobacco products will be marketed in the U.S. as they have been in other countries — “as a fun lifestyle product.”

“ There is serious risk that IQOS will join e-cigarettes in addicting a new generation of kids,” the groups wrote in a joint statement after the FDA decision on marketing.