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Pa. would get $11 billion in deal that restricts cigarette marketing
Tuesday, November 17, 1998 By Pat Griffith, Post-Gazette Washington Bureau
WASHINGTON -- Pennsylvania is signing on to a proposed legal settlement between states and the tobacco industry that would ban cigarette advertising that is a familiar part of both the urban landscape and teen-age attire and bring the state as much as $11 billion in payments from tobacco companies by 2025.
The settlement would ban tobacco billboards and brand names at stadiums and arenas as well as tobacco ads on buses and taxis. Gone forever would be cartoon characters promoting tobacco in addition to T-shirts, backpacks and caps bearing the corporate logos of tobacco products.
Actors and producers could no longer be paid to puff a brand name product in television shows, video games and movies. Free samples? Forget them, unless you can prove you're an adult, then you'll have to be in an adult-only facility to find any.
The country's four largest producers of tobacco products -- Philip Morris, R.J. Reynolds, Lorillard, and Brown and Williamson -- have agreed to the settlement negotiated over the past five months by eight state attorneys general, including Mike Fisher of Pennsylvania.
As presented in Washington yesterday, the proposed settlement would require the tobacco companies to pay 46 states and the District of Columbia a total of $206 billion over the next 25 years to end current or potential lawsuits against the industry.
The four states that have already concluded multibillion-dollar lawsuits against the industry -- Florida, Texas, Minnesota and Mississippi -- will be receiving a total of $40 billion under their individual settlements in the same period of time.
Negotiators said the cost of a pack of cigarettes would likely rise by 35 to 40 cents by 2003 because of the settlement, on top of the 20-cent-a-pack increase that has been in effect since June.
"It's time to stop the legal bickering and move the tobacco fight out of the courthouse and into the streets," declared Washington Attorney General Christine Gregoire in announcing what will be, if finalized, the largest corporate financial settlement in history.
"It won't end youth smoking in America," she said, "but it is a refreshing and essential step forward."
The eight attorneys general who negotiated the settlement defended it as a major step to protect children from tobacco, but stressed it was not a substitute for legislation that could make more sweeping changes in the way tobacco products are manufactured and sold in the United States. They urged Congress to pass additional reforms, including giving the Food and Drug Administration full authority to regulate tobacco as an addictive product dangerous to public health.
If it is ultimately adopted, the settlement would halt lawsuits pending in 39 states that are suing the industry to recover Medicare expenses and would commit the industry to fund a $1.5 billion anti-smoking campaign in the next five years. The industry would also pay $250 million for a foundation dedicated to reducing teen smoking.
States would receive an initial payment almost immediately -- in Pennsylvania's case, just under $138 million. Further payments would start in 2000. Pennsylvania would receive $368.47 million that year, and the amount would gradually rise to an estimated annual payment of just under $460 million in the years 2018 to 2025. At that point, according to the settlement, Pennsylvania would have received a total of $11.26 billion, with annual payments to continue indefinitely beyond that.
Health and consumer groups reacted cautiously to the proposed settlement and expressed concern that it did not commit states to devote the money they would receive to educational programs and other efforts to stop young people from smoking and did not address federal regulation of the tobacco industry.
Matthew Myers, executive vice president of the National Center for Tobacco-Free Kids, said the settlement "only contains a fraction of the public health provisions" his group has sought in national legislation.
"It's not a substitute for a comprehensive national tobacco control plan," he said.
At a brief meeting with the attorneys general at the White House, President Clinton called on Congress to try once again to pass comprehensive legislation that would clarify the authority of the Food and Drug Administration to regulate tobacco and also provide financial support to tobacco farmers whose livelihood would be hurt by any reduction in tobacco sales.
He also announced that the administration would take an appeal to the Supreme Court of a lower court ruling that the FDA does not have the authority to restrict tobacco advertising aimed at teenagers.
The Senate killed a far-reaching $516 billion anti-tobacco bill last June after the industry launched a $40 million nationwide advertising campaign that portrayed it as a tax increase on the middle class because of the measure's proposed increase in excise taxes that would have amounted to $1.10 per pack after five years. In that bill, the federal government would have received most of the money from the tobacco companies and directed it into anti-tobacco programs.
One of the unresolved questions rising from the proposed legal settlement is whether the federal government will share in the money that is earmarked for states.
Eleven states, including Pennsylvania, signed the potential settlement yesterday. The others are Washington, New York, Oklahoma, California, North Carolina, Colorado, North Dakota, Arkansas, Arizona and Iowa.
But there won't be a final settlement unless what the settlement calls a "critical mass" of states -- a nonspecific number left to the tobacco industry to determine -- have signed on by noon Friday. If the tobacco companies are satisfied with that response, the attorneys general will wait for final approval from corporate boards over the weekend before the settlement would become legally binding next Monday.
Fisher hailed the potential agreement as "a great first step for the young people of America" which would give Pennsylvania "more than adequate" reimbursement for the Medicaid costs it has incurred because of tobacco-related illnesses and for penalties the industry owes the commonwealth for various violations.
Even more important, he said, will be the health benefits for children and teens.
"No longer are kids going to walk around the city of Philadelphia or the city of Pittsburgh or rural Pennsylvania and see those billboards, or see the materials, the items, the giveaways, advertising one of the various tobacco products," he said. "They'll be gone."
Fisher said he had reached the decision that the most "responsible" thing to do for Pennsylvania was to sign the proposed agreement so that restrictions on marketing cigarettes could start immediately, rather than wait for the outcome of the state's lawsuit against the industry in Common Pleas Court in Philadelphia which could take two or three years or longer to conclude.
He said 100 Pennsylvania youth are among the 3,000 nationally who start smoking for the first time every day. Most become quickly addicted to nicotine, and according to medical studies, at least one-third of the new smokers will die prematurely of a tobacco-related illness.
Although the settlement is designed to foreclose future lawsuits against the industry filed by states and local governments, Fisher said the latter prohibition would not apply in Pennsylvania, because he does not have the legal authority to bar city or county governments from going to court.
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