A Conversation with Prof. Teh-wei Hu

Dr. Teh-wei Hu is a Professor Emeritus of Health Economics and served as Associate Dean and Department Chair in the School of Public Health at the University of California, Berkeley. Currently he serves as the Director for International Tobacco Control Policy Research and Evaluation at the Public Health Institute. He has been appointed by the U.S. Government as a member of the Interagency Committee on Smoking and Health. Professor Hu’s areas of expertise are the application of econometrics to health care services research. He is the author of more than 200 publications. He contributed chapters in major WHO and World Bank tobacco control publications. During the past 20 years, he has been conducting research in economics of tobacco control in the US, China, Southeast Asia, and Estonia. He is the editor of Tobacco Control Policy Analysis in China: Economics and Health (2008). He co-authored a report on Tobacco Taxation and Its Potential Impact in China (Hu, Mao, Shi, and Chen, 2008) funded by the Bloomberg Philanthropies and the Gates Foundation. He has served as a consultant to the World Bank, the World Health Organization, and a senior policy advisor to the Ministry of Health, China.


1.     Cigarette Use and Its Consequences in China


Xin: I read your 2011 article in Tobacco Control on smoking and related economic costs in China. It provided an update using data from year 2008 and a comparison with data from 2000. I am wondering if you have any comments on cigarette use and its consequences in China.


Prof. Hu: The article was a collaborated work with Prof. MAO Zheng-Zhong at Sichuan University with several important findings. First, smoking prevalence in China has not been declining in recent years. Moreover, the smoking prevalence among youth and women living in urban areas has gone up. The most important finding in the article is the 300% increase in total economic costs of smoking in China between 2000 and 2008, from 6.2 billion to 28.9 billion U.S. dollars. However, I think this is still an underestimate of the situation, as we only considered three major smoking related diseases, i.e., lung cancer, cardiovascular diseases and chronic obstructive pulmonary diseases. Medical costs related to other smoking related diseases were not included. As a result, these findings imply that if no significant smoking control interventions took place in China in the near future, the economic burden of smoking would escalate even faster than before. There are at least two reasons: (1) the health care cost in China is increasing much faster than the national average consumer price index, and (2) with the rapid economic development in China, the associated indirect costs and the productivity loss could be much higher. That is why we are very concerned about not only the negative health impact, but also the economic impact of smoking on Chinese society.


2.     Tobacco Control in China: Success and Challenges


Xin: In your opinion, what are the successes and challenges regarding tobacco controls in China?


Prof. Hu: On the positive side, our research findings, as part of the evidence based policy interventions, have been communicated to and beyond the Ministry of Health. Other key policy makers in China, including the State Council, the Ministry of Finance, the State Bureau of Taxation, National Development and Reform Commission, and even the Premier’s Office are well aware of two things: (1) the consequences and economic costs of smoking in China and (2) excise tax is an effective way to control cigarette use. So the information has been successfully disseminated to top officials. That being said, we have not seen much of actions so far. The cigarette retail price has remained the same between 2009 and 2011. According to a collaborative survey with the Chinese Center for Diseases Control and Prevention in which retail prices were collected from 6 cities, the cigarette retail price did not change even after the tax adjustment in 2009. The tax adjustment only affected the producer’s price and the wholesale price, but not the retail price. This is because of the monopoly power of the manufactures. These companies are part of the government and they make substantial profits from cigarettes. Consequently, even with tobacco excise tax, they could afford to reallocate between the profit and the tax within the Chinese government after the adjustment to maintain their market share.


Xin: Chinese government announced the indoor smoke-free regulations on May 1st, 2011. Do we have any anecdotal evidence on the effectiveness of the policy?


Prof. Hu: Well, it was good that the government have made further clarifications on the Smoke-Free Public Regulation announced earlier in May, 2011. However, it still lacks concrete implementation strategies, such as how to measure the exposures, who is going to monitor and what is the penalty. Remember, it is not a law. They are regulations in many different cities. From the newspapers and monitoring reports I have seen, there may be some partial success in some cities, such as Haerbin, Guangzhou, and Shanghai. Presumably, these cities developed implementation strategies. However, there is still a lack of systematic evaluation of the impact of this indoor smoking regulation. Also, the Ministry of Health is the only government authority who announced the regulation. Unfortunately, no other organizations or government authorities have made strong advocacy for this regulation.


3.     Public Policy and Research Priorities in Tobacco Control


Xin: As a senior policy advisor to the Ministry of Health of China, in your opinion, what are public policy priorities and research priorities on tobacco control in China?


Prof. Hu: From the existing literature and my own professional background, in terms of public policy, I believe the Chinese government should raise tobacco tax, especially the excise tax, the tax based on the quantity of cigarettes purchased. This is an effective policy, allowing the government not only to collect the revenue, but also narrow down the price range of cigarettes.


Prof. Hu: In terms of research priorities, the following areas might have more importance. First, research has only been done at national level so far, such as economic cost studies, and simulation studies evaluating the impact of excise tax on tobacco industry and tobacco farming. I think the next step is to perform studies for a few major tobacco-producing provinces, e.g. Yunnan, Guizhou, or Hunan provinces. These provinces are very much against tobacco control. Regional analyses need to be done to address the concerns among the top local officials. Second, the central government is concerned about the impact of raising taxes on the low-income population. This is another area that needs more research. Is this really the case? If so, how large the impact would be? What would be the impact of switching brands among the low-income population with rising taxes? We really need to help the government understand the answers to these questions. And finally, studies on the options, as well as impacts of separating the national tobacco companies from the government ownership. This may not entirely be an economic research, maybe can be referred as political economy, but this is a major hurdle in tobacco control in China. It suggests that Chinese cigarette companies are not operating in a market economy. It is a very important topic, as this type of structure is not only a barrier to the effectiveness of tax increases, but also an obstacle to the implementation of other provisions in the Framework Convention on Tobacco Control, such as health warning labels, or smoke-free public places.


4.     The Role of Government in Tobacco Control


Xin:  The last research priority you mentioned related to the role of government in tobacco control, is that the case?


Prof. Hu: Right, the separation between national tobacco companies and government definitely relates to the role of government in tobacco control. In fact, we can learn from the international experience, like Turkey, Thailand, South Korean, and even Japan. They all took actions to separate the national ownership from tobacco companies. Also, in national tobacco research conferences or meetings in China, only researchers have been attending and talking to each other. Top government officials have not been involved in these meetings. They did not come even if they were invited. The Chinese government has a top-down system. The system can be very efficient if the government has the will, just like we observed in the severe acute respiratory syndrome epidemic. So I think that top government officials beyond ministers need to be involved in the action. That would be another role of government in tobacco control.


5.     The Impact of China Health Care System Reform on Tobacco Control


Xin: Another topic in China now is the health care system reform. Do you anticipate any impact of China’s health care reform on tobacco control?


Prof. Hu: I would think so. We know that the medical costs in China and the government share in health care expenditures are much greater than before. Back to the first point we talked about, the medical costs associated with smoking have substantially contributed to this increase in medical care costs. If we could not curb the smoking prevalence, it would incur additional medical costs and government investment in health care in the future, particular on the costly chronic, non-communicable diseases. In that sense, the Health Care reform and tobacco control should work together to reduce health care expenditure and to improve health. On the other hand, under the reform, we also talk about more effective health care delivery system and health care balancing. In the Health Care reform, we need to give incentives to providers, say hospitals and physicians, and consumers, the patients. This way both sides would integrate the tobacco control issue into their agenda. It would make the Health Care reform more effective and cost-effective.


By Xin Xu, PhD, University of Illinois at Chicago


Dr. Teh-wei HU

Dr. Teh-wei HU