Impact of State Cigarette Minimum Price Laws on the Price of Cigarettes

Increasing cigarette prices is an evidence-based strategy to prevent initiation, reduce consumption, and increase quit attempts. Excise taxes are the most effective policy intervention states can use to increase cigarette prices. However, tobacco companies utilize discounts, coupons and other promotions to reduce cigarette prices.

Minimum price laws are a policy intervention with the potential to: 1) Maximize the impact and protect the fidelity of state excise taxes on cigarette prices, and 2) Serve as a secondary method by which states can raise cigarette prices. These laws typically require a percentage markup be added to the wholesale and/or retail price of cigarettes, and may also prohibit tobacco companies from using trade discounts to lower cigarette prices.

Using data published by CDC on the 25 states with minimum price laws and data from Nielsen Scan Track data on cigarette prices, the average price of cigarettes was calculated for states with and without fair trade laws, controlling for state and local excise tax.

States with minimum price laws do not have higher cigarette prices. In 2009, average cigarette prices in convenience stores in fair trade states were $3.33 per pack and in non-fair trade states were $3.44. Similar results were found in grocery and drug stores, and for prices of discount, premium and specific brands of cigarettes. This presentation will discuss: 1) Why cigarette prices are not higher in fair trade states; 2) Enforcement issues related to minimum price laws, and 3) How these laws can be strengthened to increase cigarette prices.