Pharmacy chain Chemist Warehouse and big tobacco have become unlikely rivals, in a battle to gain market share among Australia’s nicotine-addicted smokers and vapers.

Regulations introduced by the federal government have created a lucrative new market for vapes sold through pharmacies.

The laws shut down scores of small vapes sellers across the country, by restricting the products to pharmacies only, whether they contain nicotine or not, as well as banning single-use vapes and restricting flavours.

It’s no small market at stake — a report last year estimated 3.5 million Australians aged 14 or over either smoke or vape. 

Smokers are still more common, at 8.9 per cent of the population, compared to 7.3 per cent who vape.

But vaping rates have been on the rise among young people, who have fed their addiction with a black market that continues to thrive without proper enforcement.

‘Making criminals and pharma a lot of money’

Despite their regulatory upper hand, pharmacists have been reluctant to sell the products without a prescription, or at all.

In the first month of the new laws, only 3,500 vapes were sold without a prescription, according to data supplied to Senate estimates. 

Andrew Gourley is a vape user and former online vape business owner, who was forced to shut that part of his operations because of the laws.

Mr Gourley is scathing of Australia’s approach to vape laws, which differs from other countries like the UK and Canada, which allow retail sales and tax the products.

“I don’t think they’re going to achieve anything other than making criminals and the pharmaceutical companies a lot of money,” he said.

Mr Gourley has found vapers he knows have struggled to purchase regulated products.

“Some will have them available for you to order, and they’ll get it in a few days.

Vape makers are expecting access through pharmacies to improve though, as concerns about legal liability ease and the Therapeutic Goods Administration (TGA) issues guidance for pharmacists.

Who are the big players?

The TGA lists about 1,000 vaping products on its website that can legally sold at pharmacies.

However, currently no vape companies have completed the process of being evaluated by the TGA for quality, safety, efficacy or performance, and are therefore considered to be unapproved goods, putting vapes in the same category as medicinal cannabis, MDMA and psilocybin. 

Companies are jostling for a slice of the market with millions of potential customers and an expensive product — a monthly supply of medical vapes can cost more than $300, including the device and a daily supply of nicotine liquid pods.  

Big tobacco owns some of the leading vape brands globally, with Philip Morris International (PMI) expecting to generate about half its revenue worldwide from vaping products by 2025.

In Australia, PMI has been targeting smaller banner pharmacies with its VEEV-branded vape, with reports last year it was offering 80 per cent margins in exchange for supply deals.

Australia’s Liber Pharmaceuticals is on track to become a dominant player with its product Nicovape Q.

Promising to never sell into the recreational market, Liber Pharmaceuticals, run by former investment banker and lawyer Richard Lee, has powerful backers.

The company’s shareholders include Chemist Warehouse, a lobby group The Strategic Counsel whose chief executive is former Coalition health minister Michael Wooldridge, and the Pharmacy Guild of Australia’s Victorian branch president (and former national president) George Tambassis.

Liber’s powerful connections have granted the company access to the country’s biggest pharmacy chains and suppliers.

Liber’s website states its Nicovape Q product is the only nicotine vaping product supplied by pharmaceutical wholesalers Symbion, Sigma and API, giving the company access to 5,500 pharmacies across Australia. 

Those wholesalers supply to big chains like Chemist Warehouse, TerryWhite Chemmart, Priceline, Soul Pattison, Amcal, Guardian and PharmaSave.  

Franchise store owners, however, can choose to stock other branded products. A TerryWhite pharmacy visited by the ABC last month was selling Philip Morris International’s VEEV 20mg/ml vapes, which is the legal nicotine limit for over-the-counter sales. 

‘Inhalation company’ Liber distances itself from big tobacco

In a sit-down interview with The Business, chief executive officer Richard Lee, who described Liber as an “inhalation company”, insisted the profitability of his company does not depend on people continuing to use it.

Instead, Mr Lee said he wants to see people “transition to fresh air” and that Liber’s “profitability depends on saving lives.”  

Liber’s marketing pitch is that unlike some of its rivals, it is not backed by big tobacco.

The company’s head of regulatory affairs and shareholder Stuart Prichard did, however, work for Philip Morris International for 11 years from 2002 until 2013.

“He has actually been instrumental in helping us understand and ensure that our business practices didn’t, or were able to be perceived as able to, abuse the supply chain in the way we’ve seen the tobacco industry do so historically,” Mr Lee told The Business, when asked about this.

Global expansion plans are in the works, and a foothold in what has been described as the most regulated vape market in the world is likely to be a good launching pad when convincing overseas governments to let your product in.

“There are a billion smokers in the world, there are 1.6 million smokers in Australia who want to quit,” Mr Lee said, referring to the statistics on adult tobacco users.

“For every smoker that uses my product as a means to stop smoking, they all know five others who would benefit from doing that.

Online bulk-billing services prescribe vapes

Online vape prescription platforms have emerged to fuel the new industry and, with vape companies unable to market directly to consumers, doctor referrals are vital to gaining market share.

An online search produces more than a dozen online platforms that only offer vape prescriptions for eligible patients.

About half of those platforms were advertising ‘free’ and ‘no cost’ prescriptions for therapeutic vapes to use as a smoking cessation tool.

In reality, taxpayers are funding the service, via Medicare bulk-billing.

Liber owns online platform Smoke Free Clinic. 

The company’s chief medical officer and shareholder David Busby and its principal toxicologist Autumn Bernal feature on Smoke Free Clinic’s website, which advertises ‘100 per cent bulk-billed phone consultations’ provided by two online scripting services, hubMed and My Quit Clinic.

The ABC was able to book a phone consultation with hubMed and was recommended Liber’s Nicovape Q product and a two-month prescription because “it was not linked to big tobacco” and was available at pharmacy chains.

Mr Lee told The Business Liber does not have any contractual relationships, financial arrangements, or crossover shareholdings with the prescribers, who he said can also recommend other products at bricks and mortar pharmacies. 

“We created Smoke Free Clinic back in 2021 when the framework started, and that was because there wasn’t an independent platform that provided information about how vaping products would fit into the cessation toolkit,” Mr Lee said.

Five of the other online vape-only scripting platforms we looked into do not require a telephone consult to issue a vape prescription. 

Instead, users fill out an online questionnaire, which the sites say is reviewed by a doctor.

Eligible patients, who have tried other methods to give up smoking or vaping, will then receive a prescription for up to 12 months of supply via email. Some direct you to purchase products through their own online pharmacy, and credit your consultation fee to your first purchase.

In investigating this story, we entered Medicare card details into two sites — MyDuke and QuitClinics — which both issued prescriptions after we filled out just an online questionnaire.

MyDuke, which sells international brands, such as Philip Morris International’s VEEV vapes, directed us to its website to complete our purchase. 

QuitClinics prescribed a New Zealand product, ALT vapes, to purchase through its online pharmacy.

Should Australia have a ‘vape tax’?

The profits of vape makers in Australia benefit from the lack of a specific ‘vape tax’ — unlike cigarettes, which are taxed at 80 cents in the retail dollar, regulated vapes sold in pharmacies are only subject to the goods and services tax (GST).

The government also misses out on tax revenue from illicit sales.

In Australia, it’s estimated the cost to the health care system could be upwards of $180 million a year, from just a portion of vapers taking up tobacco smoking.

The research assumes 13 per cent of people who vape but have never smoked before transition to tobacco cigarettes.

Quit, which is optimistic about the federal government’s vape laws, has reported an increase in callers to its counselling service from people struggling to give up vaping from about one-in-10 calls seven years ago to six-in-10.

“Most people that are ringing up about vaping are telling us that they’re finding it extremely difficult to stop,” Quitline counsellor David (who did not want to use his surname for privacy reasons) said.

“They seem to be vaping more often than they smoke. For instance, using a vape, there is no end point, like in a cigarette.

“With a cigarette, it takes like, five minutes, you know, you light it and then you smoke it, and then it’s out. With a vape, you can just grab it and use it.”

For those who only vape and take longer to kick the habit or don’t want to, the long-term health consequences are less known due to the industry’s infancy. However, risks from vaping include lung injury and adverse effects on cardiovascular health.

Other countries have taken a different approach to regulating vapes to Australia, opting to allow retail sales and introducing vape taxes.

It’s an approach that Andrew Gourley says should have been replicated in Australia.

The UK government plans to tax vapes at £2.20 per 10ml of e-cigarette liquid from October 2026.

The tax is designed to make vapes less affordable and accessible particularly to young people, while propping up the health system which will carry increased costs due to their use.

Canada’s vape tax is $CAN1.12 per 2 millilitres (ml) for the first 10 ml of vaping liquid, and $1.12 per 10 ml for each additional 10 ml.

Economist Saul Eslake says he would like to see vapes heavily taxed, but acknowledges doing would also likely fuel illicit sales.

“There are two reasons why governments impose taxes on tobacco and other products that have adverse consequences for people’s health,” Mr Eslake explained.

“One is because governments have to raise revenue in order to spend on the services and other programs that citizens expect governments to provide, and if they don’t tax tobacco, alcohol and other things, then they’d have to raise more by way of income tax, the GST, or some other form of taxation.”

He said if people were to obtain vape prescriptions for recreational use, that would be be a taxpayer-funded problem.

“That’s a loophole that’s being exploited at an increasing cost to revenue, which, of course, has to be made up by higher government borrowing or higher taxes on other taxpayers, and neither of those would be, I think, desirable in the long term.”

Hurdle for vape makers

Collecting any tax on regulated vapes would be difficult if tobacco and illicit vape users aren’t convinced to make the switch, and if pharmacists won’t sell them over the counter.

The Pharmacy Guild’s Victorian-based national councillor Anthony Tassone is one of about 2,000 pharmacy owners to have downloaded the employer organisation’s signage to tell customers they don’t sell vapes without a prescription.

However, Liber’s market share was evident when The Business visited his TerryWhite branded pharmacy, which stocks Nicovape Q for customers with a prescription.

Mr Tassone said chemists he speaks to are anxious about stocking a brand backed by big tobacco, but he is adamant that vapes of any brand should not be sold over the counter until the product gains approval from the TGA.

“The Australian register of therapeutic goods contains therapeutic products that have been assessed for quality, safety and effectiveness, and currently in Australia, there are no nicotine-containing vaping products that are on the Australian register of therapeutic goods,” Mr Tassone said.

“Go through the rigorous process of establishing quality, safety and effectiveness a medicine regulation scheme that served the Australian public very well for decades, in the interest of safety for patients, that’s what we want to see.”