Impact of cigarette minimum price laws on the retail price of cigarettes in the USA

Abstract

Introduction Cigarette price increases prevent youth initiation, reduce cigarette consumption and increase the number of smokers who quit. Cigarette minimum price laws (MPLs), which typically require cigarette wholesalers and retailers to charge a minimum percentage mark-up for cigarette sales, have been identified as an intervention that can potentially increase cigarette prices. 24 states and the District of Columbia have cigarette MPLs.

Methods Using data extracted from SCANTRACK retail scanner data from the Nielsen company, average cigarette prices were calculated for designated market areas in states with and without MPLs in three retail channels: grocery stores, drug stores and convenience stores. Regression models were estimated using the average cigarette pack price in each designated market area and calendar quarter in 2009 as the outcome variable.

Results The average difference in cigarette pack prices are 46 cents in the grocery channel, 29 cents in the drug channel and 13 cents in the convenience channel, with prices being lower in states with MPLs for all three channels.

Conclusions The findings that MPLs do not raise cigarette prices could be the result of a lack of compliance and enforcement by the state or could be attributed to the minimum state mark-up being lower than the free-market mark-up for cigarettes. Rather than require a minimum mark-up, which can be nullified by promotional incentives and discounts, states and countries could strengthen MPLs by setting a simple ‘floor price’ that is the true minimum price for all cigarettes or could prohibit discounts to consumers and retailers.