The Interplay of Policy and Markets: Prescription Vapes in Australia

May 13, 2024
Editor(s): Yolanda Ye
Writer(s): Jenny Wang, Romail Ahsan, Michael Chen

In recent years, Australia has adopted some of the most stringent tobacco and vaping regulations globally, including a pioneering prescription model for accessing vapes. This policy, aimed at curbing nicotine addiction and preventing underage vaping, represents a significant shift in public health strategy. However, while these measures seek to control nicotine use, they also give rise to untoward consequences including a thriving black market. The multifaceted impact of the prescription model on Australian society will be explored in the following, including how it has inadvertently fostered illicit trade and whether the potential public health benefits outweigh the socio-economic costs.

Australia’s Prescription Model for Vapes: A Public Health Conundrum

In Australia, the debate surrounding vaping regulation has intensified due to its turbulent history with policies surrounding cigarettes. Despite vapes being marketed as a remedial tool for smokers, there are concerns about its potential to normalise smoking behaviours, particularly among youth. Consequently,  Australia has implemented strict regulations governing the sale and use of vaping products.

The prescription-only model for vaping products in Australia is rooted in the country’s stringent tobacco control policies. In 2020, the Therapeutic Goods Administration (TGA) banned the importation of nicotine-containing e-cigarettes without a doctor’s prescription. Given that vaping exposes young adults to the act of smoking, it can be argued that those that engage in vaping may transition to smoking in the future. 

Proponents of the prescription-only model posit that it ensures appropriate oversight and regulation of vaping products, aligning with broader public health objectives aimed at reducing tobacco-related harm and promoting anti-smoking initiatives. Requiring a prescription prompts individuals to consult healthcare professionals, who can provide personalised advice and monitor potential adverse effects.

However, critics contend that the prescription-only model creates unnecessary barriers to entry and may inadvertently drive consumers towards unregulated and potentially unsafe alternatives. Concerns also persist regarding the feasibility of enforcing these restrictions, particularly online sales, which may facilitate bypassing regulations through cash transactions, further complicating enforcement efforts.

The Unintended Consequences of Strict Regulation

The implementation of prescription-only vapes in Australia, while intended to control nicotine use and curb underage vaping, has inadvertently fueled a burgeoning black market. This illicit market thrives primarily due to the intersection of demand dynamics and the lucrative nature of the illegal vape trade. On the demand side, a significant portion of vape users consists of younger adults and individuals from lower socio-economic backgrounds. These groups are particularly sensitive to price increases and are more inclined to seek cheaper, readily available alternatives, thus fuelling the black market. In fact, a 2022 study reveals that 87% source their vapes illegally, rejecting the government’s new regulation. For many young adults, they purchase their vapes easily via the abundance of dealers on social media across Facebook, Snapchat, Instagram and TikTok, signaling their rejection of the government’s new regulation. From the supply perspective, the highly lucrative trade in vapes is characterized by low risk relative to importing illicit drugs like cocaine, which incur severe penalties. Traffickers often source counterfeit or unregulated products at minimal costs from overseas markets, from as low as $2.50, primarily from countries like China. These products are then smuggled into Australia and sold on the black market at a markup as large as ten times that amount, yielding dealers considerable profits. This high reward-to-risk ratio makes the vape black market particularly attractive to organized crime groups and small-time operators alike. 

Moreover, the introduction of flavor restrictions on legally available vapes will likely exacerbate the situation. As legal products become less attractive, the black market will increase in allure to consumers who prefer flavored vaping products. The net effect is an entrenched and seemingly ineradicable black market that not only undermines public health initiatives but also connotes a blatant failure on the government’s part to enforce their regulations.  


The Road Ahead

Australia’s highly restrictive and closely monitored vaping policies have resulted in the emergence of a black market with concerning social ramifications. As with any illicit drugs and substances, people are always going to find a way to import or buy them if there is a demand. Despite the ban on vapes this year, the vape market in Victoria alone is estimated to be upwards of $500 million. The growth in the vape market and vape users have been linked to the increase in taxation on regular tobacco, with the e-cigarette alternative proving to be cheaper and more convenient. Evidence collected from schools and parents have shown the proliferance of vapes to be that of an epidemic, with 80% of 14-17 years old in a study stating that they found it ‘easy to access vapes’. The high demand across all ages and especially in adolescents have propelled this epidemic of vapers. In tandem with an accessible and convenient black market, this has made it harder for effective policy that curbs the health risk associated with vapes. 

The emergence of these black markets has also attracted a violent scene, with organised crime groups surfacing to violently extort those to enforce contracts, collect debts and threaten competitors. These organised crime groups seeking to profit with a relatively low risk are rife throughout Victorian suburbs as a police raid of over 30 stores revealed the seizure of 36,639 e-cigarettes to be worth over $1 million. Syndicates can often be brutal in their approach, extorting tobacco shop owners to sell their products at risk of being firebombed with over 27 fires across Victoria in 2023 stemming from both refusal to sell the illegal products and internal conflicts between other syndicates. The lucrative trade has proven to exhibit vicious and extreme tactics to maintain this black market, risking the livelihoods of those involved. 

In summary, prescription model for vapes in Australia, though well-intentioned in its aim to safeguard public health, has catalysed the growth of a robust black market. This market not only erodes the efficacy of the policy but also introduces new public safety concerns of heightened criminal activity. Going forward, policymakers must reassess current strategies, possibly integrating more flexible regulations or improving policing, to effectively diminish the black market while still achieving the intended health objectives.

The CAINZ Digest is published by CAINZ, a student society affiliated with the Faculty of Business at the University of Melbourne. Opinions published are not necessarily those of the publishers, printers or editors. CAINZ and the University of Melbourne do not accept any responsibility for the accuracy of information contained in the publication.

Meet our authors:

Yolanda Ye
Jenny Wang
Romail Ahsan
Michael Chen