Americans are smoking more during the coronavirus pandemic because they are spending less on travel and entertainment and have more opportunities to light up. They are also switching back to traditional cigarettes from vaping devices in the wake of federal restrictions on e-cigarette flavors.
Those are the observations of executives at Marlboro maker Altria Group Inc., who said Tuesday that the shifts have been significant enough to slow the yearslong decline in U.S. cigarette sales. Altria now expects U.S. cigarette unit sales to fall by 2% to 3.5% this year compared with its previous projection of a 4% to 6% decline.
Pandemic lockdowns have meant fewer social outings and more time to smoke at home, Altria CEO Billy Gifford said. Though unemployment rates are high, stimulus checks and increased unemployment benefits have helped ease the financial hardship for low- and middle-income cigarette smokers, he added. Adult cigarette smokers are making fewer trips to the store, but they are stocking up on packs when they do go.
“Fewer social engagements allow for more tobacco-use occasions,” Mr. Gifford told analysts on an earnings call Tuesday. The company’s Marlboro brand accounts for 43% of all cigarettes sold in the U.S.
People have been switching back to cigarettes from e-cigarettes after the federal government earlier this year barred sales of many flavored vaping products, Altria said. The Food and Drug Administration in February halted the sale of fruit and mint flavors in cartridge-based e-cigarettes in an effort to curb a surge in underage vaping. Public health officials have said that sweet and fruity flavors are popular among young people.
As those restrictions took effect, Altria noted a shift among adult vapers, particularly those older than 50, back to cigarettes. “That consumer was faced with choices,” Mr. Gifford said. “It benefited the entire cigarette category.”
U.S. e-cigarette unit sales in the second quarter were down 14% from a year earlier, Mr. Gifford said, adding that the vaping’s growth may pause over the next two years because the FDA is requiring e-cigarette manufacturers to submit all products for agency review by September or take them off the U.S. market.
In April, Altria also noted that some adult vapers were switching back to cigarettes because of negative news coverage of e-cigarettes. Last year, amid an outbreak of a vaping-related lung illness, U.S. health officials warned against the use of e-cigarettes before they said that the ailment was linked not to e-cigarettes, but to vaping products containing marijuana and Vitamin E oil.
The FDA didn’t immediately respond to a request for comment. Agency officials have said that their first priority is curbing underage use. They also have noted that they allowed menthol-flavored e-cigarettes to remain on the market to provide opportunities for adult cigarette smokers to switch to a less harmful option.
Cigarette smoking is associated with more than 480,000 deaths per year in the U.S., according to the Centers for Disease Control and Prevention.
Altria made a big wager on e-cigarettes in 2018 when it invested $12.8 billion for a 35% stake in Juul Labs Inc. at a time when the startup was logging strong sales of its vaporizers and cartridges. But Altria has had to take $8.6 billion in charges on the investment as Juul’s business slowed. The vaping industry leader has slashed jobs and pulled most of its flavors from the U.S. market.
Altria on Tuesday reported a second-quarter profit of $1.94 billion, compared with $2 billion a year earlier. Net revenue fell almost 4% to $6.37 billion.
The company projected adjusted earnings of $4.21 a share to $4.38 a share for 2020. In April, the company suspended its earnings outlook given uncertainty surrounding the Covid-19 pandemic. At the time, it was expecting adjusted earnings of $4.39 a share to $4.51 a share for the year.
Over about eight years, the American drugstore chain Rite Aid Corp quietly added facial recognition systems to 200 stores across the United States, in one of the largest rollouts of such technology among retailers in the country, a Reuters investigation found.
In the hearts of New York and metro Los Angeles, Rite Aid deployed the technology in largely lower-income, non-white neighborhoods, according to a Reuters analysis. And for more than a year, the retailer used state-of-the-art facial recognition technology from a company with links to China and its authoritarian government.
In telephone and email exchanges with Reuters since February, Rite Aid confirmed the existence and breadth of its facial recognition program. The retailer defended the technology’s use, saying it had nothing to do with race and was intended to deter theft and protect staff and customers from violence. Reuters found no evidence that Rite Aid’s data was sent to China.
Last week, however, after Reuters sent its findings to the retailer, Rite Aid said it had quit using its facial recognition software. It later said all the cameras had been turned off.
“This decision was in part based on a larger industry conversation,” the company told Reuters in a statement, adding that “other large technology companies seem to be scaling back or rethinking their efforts around facial recognition given increasing uncertainty around the technology’s utility.”
Reuters pieced together how the company’s initiative evolved, how the software has been used and how a recent vendor was linked to China, drawing on thousands of pages of internal documents from Rite Aid and its suppliers, as well as direct observations during store visits by Reuters journalists and interviews with more than 40 people familiar with the systems’ deployment. Most current and former employees spoke on condition of anonymity, saying they feared jeopardizing their careers.
While Rite Aid declined to disclose which locations used the technology, Reuters found facial recognition cameras at 33 of the 75 Rite Aid shops in Manhattan and the central Los Angeles metropolitan area during one or more visits from October through July.
The cameras were easily recognizable, hanging from the ceiling on poles near store entrances and in cosmetics aisles. Most were about half a foot long, rectangular and labeled either by their model, “iHD23,” or by a serial number including the vendor’s initials, “DC.” In a few stores, security personnel – known as loss prevention or asset protection agents – showed Reuters how they worked.
The cameras matched facial images of customers entering a store to those of people Rite Aid previously observed engaging in potential criminal activity, causing an alert to be sent to security agents’ smartphones. Agents then reviewed the match for accuracy and could tell the customer to leave.
Rite Aid told Reuters in a February statement that customers had been apprised of the technology through “signage” at the shops, as well as in a written policy posted this year on its website. Reporters found no notice of the surveillance in more than a third of the stores they visited with the facial recognition cameras.
Among the 75 stores Reuters visited, those in areas that were poorer or less white were much more likely to have the equipment, the news agency’s statistical analysis found.
Stores in more impoverished areas were nearly three times as likely as those in richer areas to have facial recognition cameras. Seventeen of 25 stores in poorer areas had the systems. In wealthier areas, it was 10 of 40. (Ten of the stores were in areas whose wealth status was not clear. Six of those stores had the equipment.)
In areas where people of color, including Black or Latino residents, made up the largest racial or ethnic group, Reuters found that stores were more than three times as likely to have the technology.
Reuters’ findings illustrate “the dire need for a national conversation about privacy, consumer education, transparency and the need to safeguard the Constitutional rights of Americans,” said Carolyn Maloney, the Democratic chairwoman of the House oversight committee, which has held hearings on the use of facial recognition technology.
Rite Aid said the rollout was “data-driven,” based on stores’ theft histories, local and national crime data and site infrastructure.
Cathy Langley, Rite Aid’s vice president of asset protection, said earlier this year that facial recognition – which she referred to as “feature matching” – resulted in less violence and organized crime in the company’s stores. Last week, however, Rite Aid said its new leadership team was reviewing practices across the company and “this was one of a number of programs that was terminated.”
“Orwellian surveillance”
Facial recognition technology has become highly controversial in the United States as its use has expanded in both the public and private sectors, including by law enforcement and retailers. Civil liberties advocates warn it can lead to harassment of innocent individuals, arbitrary and discriminatory arrests, infringements of privacy rights and chilled personal expression.
Adding to these concerns, recent research by a US government institute showed that algorithms that underpin the technology erred more often here when subjects had darker skin tones.
Facial recognition systems are largely unregulated in the United States, despite disclosure or consent requirements, or limits on government use, in several states, including California, Washington, Texas and Illinois. Some cities, including San Francisco, ban municipal officials from using them. In general, the technology makes photos and videos more readily searchable, allowing retailers almost instantaneous facial comparisons within and across stores.
Among the systems used by Rite Aid was one from DeepCam LLC, which worked with a firm in China whose largest outside investor is a Chinese government fund. Some security experts said any program with connections to China was troubling because it could open the door to aggressive surveillance in the United States more typical of an autocratic state.
US Senator Marco Rubio, a Florida Republican and acting chair of the US Senate’s intelligence committee, told Reuters in a statement that the Rite Aid system’s potential link to China was “outrageous.” “The Chinese Communist Party’s buildup of its Orwellian surveillance state is alarming and China’s efforts to export its surveillance state to collect data in America would be an unacceptable, serious threat,” he said.
The security specialists expressed concern that information gathered by a China-linked company could ultimately land in that government’s hands, helping Beijing to refine its facial recognition technology globally and monitor people in ways that violate American standards of privacy.
“If it goes back to China, there are no rules,” said James Lewis, the Technology Policy Program director at the Washington-based Center for Strategic and International Studies.
Asked for comment, China’s Ministry of Foreign Affairs said: “These are unfounded smears and rumors.”
“A promising new tool”
Rite Aid, afflicted with financial losses in recent years, is not the only retailer to adopt or explore facial recognition technology.
Two years ago, the Loss Prevention Research Council, a coalition founded by retailers to test anti-crime techniques, called facial recognition “a promising new tool” worthy of evaluation.
“There are a handful of retailers that have made the decision, ‘Look, we need to leverage tech to sell more and lose less,” said council director Read Hayes. Rite Aid’s program was one of the largest, if not the largest, in retail, Hayes said. The Camp Hill, Pennsylvania-based company operates about 2,400 stores around the country.
The Home Depot Inc said it had been testing facial recognition to reduce shoplifting in at least one of its stores but stopped the trial this year. A smaller rival, Menards, piloted systems in at least 10 locations as of early 2019, a person familiar with that effort said.
Walmart Inc has also tried out facial recognition in a handful of stores, said two sources with knowledge of the tests. Walmart and Menards had no comment.
Using facial recognition to approach people who previously have committed “dishonest acts” in a store before they do so again is less dangerous for staff, said Rite Aid’s former vice president of asset protection, Bob Oberosler, who made the decision to deploy an early facial recognition system at Rite Aid. That way, “there was significantly less need for law enforcement involvement,” he said.
“Tougher” neighborhoods
In interviews, 10 current and former Rite Aid loss prevention agents told Reuters that the system they initially used in stores was from a company called FaceFirst, which has been backed by US investment firms.
It regularly misidentified people, all 10 of them said.
“It doesn’t pick up Black people well,” one loss prevention staffer said last year while using FaceFirst at a Rite Aid in an African-American neighborhood of Detroit. “If your eyes are the same way, or if you’re wearing your headband like another person is wearing a headband, you’re going to get a hit.”
FaceFirst’s chief executive, Peter Trepp, said facial recognition generally works well irrespective of skin tone, an issue he said the industry addressed years ago. He declined to talk about Rite Aid, saying he would not discuss any possible clients.
Rite Aid originally piloted FaceFirst at its store on West 3rd Street and South Vermont Avenue in Los Angeles, a largely Asian and Latino neighborhood, around 2012.
Of the 65 stores the retailer targeted in its first big rollout, 52 were in areas where the largest group was Black or Latino, according to Reuters’ analysis of a Rite Aid planning document from 2013 that was read aloud to a reporter by someone with access to it. Reuters confirmed that some of these stores later deployed the technology but did not confirm its presence at every location on the list.
Separately, two former Rite Aid managers and a third source familiar with the FaceFirst rollout said the systems were concentrated, respectively, in the “tougher,” “toughest” or “worst” areas.
Reuters reviewed a 2016 spreadsheet from the company’s asset protection unit in which Rite Aid rated 20 higher-earning Manhattan stores as having equal risk of loss – labeled “MedHigh.” Two of 10 stores where whites were the largest racial group had facial recognition technology when Reuters visited this year, whereas eight of the 10 in non-white areas had the systems.
One spot ranked “MedHigh” was a store at 741 Columbus Avenue in New York’s whiter, wealthier Upper West Side. Another was the pharmacy’s West 125th Street store in nearby Harlem, a majority African-American neighborhood. The Harlem store got facial recognition technology; the Upper West Side one did not, as of July 9.
“Looks nothing like me”
Starting in 2013, as Rite Aid deployed FaceFirst’s technology in Philadelphia, Baltimore and beyond, some serious drawbacks emerged, current and former security agents and managers told Reuters.
For instance, the system would “generate 500 hits in an hour all across the United States” when photos in the system were blurry or taken at an odd angle, one of the people familiar with FaceFirst’s operations said.
FaceFirst’s Trepp said the company has high accuracy rates while running “over 12 trillion comparisons per day without any known complaints to date.”
During that earlier period, Tristan Jackson-Stankunas said Rite Aid wrongly fingered him as a shoplifter in a Los Angeles store based on someone else’s photo. While Reuters could not confirm the method Rite Aid used to identify him, the store had FaceFirst technology by that time, according to a Rite Aid security agent and a Foursquare review photo showing the camera.
According to a complaint Jackson-Stankunas filed with the California Department of Consumer Affairs a week after the incident, he was looking for air freshener in September 2016 when a manager ordered him to leave the store. The manager said he had received a security image of Jackson-Stankunas taken at another Rite Aid in 2013 from which he allegedly had stolen goods, according to the complaint.
When Jackson-Stankunas viewed the photo on the manager’s phone, he told Reuters, he saw nothing in common with the person except their race: Both are Black.
“The guy looks nothing like me,” said Jackson-Stankunas, 34, who ultimately was allowed to make his purchase and leave the store. Rite Aid “only identified me because I was a person of color. That’s it.”
The California department told him his complaint fell outside its purview, directing him to another state office, email records show. Instead, he said he decided to write the store a bad review on Yelp.
Rite Aid and the manager who allegedly was involved declined to comment on Jackson-Stankunas’ account.
At one store Reuters visited, a security agent scrolled through FaceFirst “alerts” showing a number of cases in which faces were obviously mismatched, including a Black man mixed up with someone who was Asian. Reuters could not determine whether the incorrect matches resulted in confrontations with customers.
FaceFirst CEO Trepp said that his company takes racial bias seriously and would not work with any business that disregarded civil rights. “We cannot stand for racial injustice of any kind, including in our technology,” he said.
Drugmaker Pfizer Inc said on Tuesday no country in the developed world will get a lower price for its experimental COVID-19 vaccine than the United States if those countries make similar volume commitments.
The U.S. government said last week it will pay nearly $2 billion (1.55 billion pounds) to buy enough of the COVID-19 vaccine being developed by Pfizer Inc and German biotech BioNTech SE to inoculate 50 million people if it proves to be safe and effective. That amounts to a $39 price tag.
President Donald Trump on Tuesday slammed the pharmaceutical industry for what he said were false advertisements alleging his drug price plan would raise the cost of prescriptions for U.S. senior citizens.
“Big Pharma is taking television ads trying to make the case that I am raising prescription drug prices on seniors. The ad is a lie!,” he said on Twitter. “What I have done will lead to a 50% REDUCTION in prices, at least, & Big Pharma is not happy about it.”
Trump did not say to which ads or untruths he was referring.
On Friday, Trump signed off on four executive orders aimed at lowering the prices Americans pay for prescription drugs, some of which he had discussed in previous years but never signed amid questions about their practicality and effectiveness.
Friday’s move set off tensions with the Pharmaceutical Research and Manufacturers of America which described it as “a reckless distraction that impedes our ability to respond to the current pandemic – and those we could face in the future.”
Trump on Friday said he would meet with the drug industry to discuss voluntary moves it could make in return for the administration dropping one of the orders aimed at setting prices for medicines in the United States, but the meeting was cancelled.
Fujifilm Holdings Corp’s Avigan, once hyped as a potential COVID-19 treatment by Japan’s prime minister, is facing uncertain prospects in the country, dampened by disappointing clinical studies and slow progress in regulatory review.
Shares of Fujifilm hit record highs in early April, fueled by optimism for the drug, but have since lost a quarter of their value, highlighting the risks of betting on experimental COVID-19 vaccines and treatments that are often politically promoted early in their development process.
Prime Minister Shinzo Abe previously touted Avigan’s potential as Japan’s contribution to a global race for coronavirus treatments, aiming for domestic approval in May and offering to give it away to other countries. He mentioned the drug in at least 10 official speeches from February.
But Abe has lately gone mum on the drug and regulatory deadlines have lapsed, while researchers at Fujita Health University said earlier this month that their Avigan study was inconclusive.
“I think that does not look good for any early approval,” said one clinical trial expert, referring to the Fujita study, and asking not to be identified due to professional connections in Japan.
Interest in Avigan, developed more than 20 years ago, soared in March after a Chinese official said it appeared to help patients recover from COVID-19. It is now the subject of at least 28 clinical trials around the world.
Fujifilm has not yet submitted the drug for approval to Japanese authorities as a treatment for COVID-19, and has said it will take that step as soon as possible. Health ministry official Yasuyuki Sahara said the government stands ready to review Avigan once Fujifilm submits it for approval.
The former chief of Japan’s main drug regulator, however, warned against a hasty approval of Avigan before its efficacy can be proven.
“When it comes to regulatory bodies, trust is critically important,” said Tatsuya Kondo who ran the Pharmaceuticals and Medical Devices Agency for 11 years until 2019. “If they make an incomplete judgment, it could raise doubts about the whole process.”
As the coronavirus pandemic rages on worldwide, though, some are still hopeful of positive outcomes of the Avigan trials.
Tetsuya Nakamura, the lead researcher at Gunma University, which is running one of the two remaining trials on Avigan in Japan, told Reuters the university is “calmly advancing our research without pressure on the results,” as their study doesn’t rely on public funds.
Fujifilm Toyama Chemical, the Avigan-manufacturing unit of Fujifilm whose own trial is still listed as recruiting patients, is working to complete phase III clinical trials as soon as possible, Fujifilm spokesman Shunsuke Saito said.
The company is continuing with plans to boost Avigan production to 300,000 doses a month in line with a request from the government, he said.
Stanford University is soon to start a phase II trial of 120 patients with mild symptoms and could move to a phase III around September, said Stanford professor Yvonne Maldonado.
“We’re moving as fast as we can,” she said. If the drug can be shown to reduce symptoms and the viral load among patients, “that would be a big deal”.
Although Avigan, generically known as favipiravir, has gone off patent in many markets, the brand and Fujifilm’s know-how in making it still have value. Earlier this month, Fujifilm sold off most overseas rights on Avigan to India’s Dr Reddy’s Laboratories.
That deal involves a research partnership, and Japanese media reported that Dr Reddy’s will carry out a clinical trial of Avigan in Kuwait on behalf of Fujifilm.
That data could possibly help Fujifilm build its regulatory case in Japan, said Credit Suisse analyst Fumiyoshi Sakai.
“Probably it is too early to count out Avigan,” Sakai said.
