Philip Morris threatened by nicotine replacement products

Nicotine Patch Overview

By 1992 a number of nicotine replacement therapies had entered the market. This internal, 1992 Philip Morris presentation shows that PM was clearly threatened by these "competitor" products which, as they put it, would "accelerate decline of the cigarette industry" by "enhanc[ing] the success rate of quitters who permanently leave smoking." Moreover, PM kept track of what they termed the "Gross Industry Smoker Loss" incurred due to the nicotine replacement products coming onto the market.

Quotes
Nicotine Patch Overview [from page two of the document]

CURRENT PERFORMANCE

• Nicotine patch sales have exceeded initial expectations. 1992 estimated sales $600 - $800 million with some predicting results close to $880 million. 1993 figures to be $1 billion.

• Strong demand fueled in part by heavy ad spending featuring TV and print. Magazine only spending was $18.5 million for category with about $3-$5 million for TV in January - March 1992.

• Patch orders outstripping current capacity prompting plant expansion, new machine installation.

• Profit margins estimated at 15% after taxes - roughly in line with cigarette industry.

• Patch treatment per quitter is approximately $350.00.

[from page four of the document:]

PATCH EFFECTIVENESS

• Consumer endorsement high with 88% who would recommend to a friend.

• Initial clinical results indicate that the nicotine patch was somewhat more effective against placebos. Success rates for nicotine patch 17%-36% vs placebos at 4%-26% in impacting smoking abstinence.

• Some sort of behavior modification was administered during the clinical tests. Without some degree of psychological therapy, many experts warn that the nicotine patch is powerless.

• Nicotine gum achieved comparable results visa vis placebos. Yet, treatment is often demanding.

• Up to 30 sticks/day

• Very gradual dose reduction

• Required to keep product between cheek and gum

[from page 12 of the document]

IMPACT ON QUITTING


 * Approximately 23% or 11.7 million smokers try to quit every year.

3.5 million claim to quit in the past year.

2.4 million stay quit for the year.


 * Nicotine patch could potentially accelerate decline of cigarette industry in several ways:

Encourage more smokers to try to quit Enable more triers to actually quit Enhance success rate of quitters who permanently leave smoking

1992 QUITTING OVERVIEW [from page 18 of the document]

Smokers (millions)

[chart contains information describing the millions of smokers who tried to quit in the past year, claimed to quit in the past year and "Gross industry Smoker Loss"]