August 26, 1997 in Nation/World

Florida Deal May Undercut Effort To Stop Teen Smoking State Settles For $11.3 Billion From Big Tobacco

From Wire Reports
 

By securing his own settlement with U.S. tobacco companies, Florida Gov. Lawton Chiles won billions of dollars for his state. But public health advocates said the deal was limited and might actually set back the effort to secure a tougher, national settlement that would cost cigarette makers more money and force them to do more to cut teenage smoking.

Foes of the tobacco industry fear that if other states follow Florida and Mississippi, which settled with tobacco companies seven weeks ago, then momentum could falter in Congress for a national settlement. And it is only through a national deal, they said, that teenagers - the industry’s future financial base - can be forced to give up smoking.

“The real way to stop smoking is to make cigarettes more expensive, and this just doesn’t do it,” said Joseph A. Califano Jr., who fought smoking in the late 1970s as U.S. secretary of Health, Education and Welfare. Adding $2 per pack could cut teenage smoking by 70 percent, he said, “but this only adds a few cents.”

In addition to $11.3 billion in payments over 25 years, Chiles and Florida officials won an agreement from tobacco companies to pull down all cigarette ads on billboards, in sporting arenas and on mass transit. Cigarettes will no longer be sold in vending machines where children have access.

But tobacco companies have agreed to do all that and far more as part of a proposed national settlement, the result of lawsuits against the industry by 40 states, including Washington. In the national settlement, the industry agreed to cease all cigarette advertising and marketing to underage smokers, including all human and cartoon characters and product placements in movies and on television. Cigarette makers could not sell or give away merchandise with cigarette logos, and warning labels on cigarette packs would have to state that smoking causes cancer.

The deal was announced just seven weeks after Mississippi settled its suit against the industry for $3.3 billion. Both state agreements would be superseded if Congress enacts a $368.5 billion national settlement the industry reached with 39 state attorneys general in June.

The industry, meanwhile, avoided the massive negative publicity generated by a trial that would have opened up 40 years of damaging internal documents to a jury in a case that was set to be televised live while Congress and the White House were considering the national deal.

But with the nationwide agreement under attack in Congress, the separate settlements with Florida and Mississippi ensure that both states will receive hoards of cash and other benefits, even if the 39-state agreement unravels in Washington, D.C.

Only the national settlement can force tobacco companies to pay in a way that forces the companies to pass the cost of the payments to its customers. That is expected to raise the price of a pack of cigarettes between 40 cents and 80 cents.

The penalties would rise if cigarette companies fail to cut teenage smoking by specified percentages. Economists who have studied smokers’ behavior say that each 10 percent rise in cigarette price causes a 4 percent reduction in smoking and a nearly 13 percent reduction among teenagers, who tend to have less money to devote to their nicotine habits.

“You don’t reduce youth smoking if you don’t get the national settlement, a well-funded, sustainable tobacco policy that is federally mandated,” said Kathryn Kahler Vose, a spokeswoman for the Campaign for Tobacco-Free Kids.

The prospects for a national settlement are already in doubt. Some public health advocates have criticized the payments as too meager and the penalties for failure to reduce teenage smoking as too small.

A national settlement would require congressional approval, and Republican leaders in Congress have said lawmakers are not likely to take up the matter this year. On Martha’s Vineyard, where President Clinton is on vacation, White House officials said the president would get recommendations from his advisers on the proposed settlement after he returns to Washington Sept. 7.

Monday’s settlement in Florida drew opposing views on whether it added new momentum to a national settlement or made a national deal less certain. Congress could conclude that states are reaching good settlements on their own and that lawmakers need not act quickly, some said. They noted that Texas has the next tobacco lawsuit scheduled for trial, and reports are already widespread that the state is working on a settlement.

But Bob Butterworth, Florida’s attorney general, said in a phone interview that the state’s agreement would boost the chances for a national settlement by “taking steam out of the argument” that the tobacco industry should reveal more industry secrets. Under the Florida settlement, Butterworth said, tobacco companies will release many documents that would have become public during the trial.

“I’d have a hard time asking a congressperson to vote on this without seeing documents, so this helps” build momentum for a national settlement, he said.

“As states settle, you always run the risk that the tobacco companies will decide to settle one-by-one and forego much of what they agreed to in their national settlement,” said Kahler Vose. “However, there is a great deal of momentum for a national settlement. I think this train is going down the track, and I don’t think the Florida settlement is going to derail it.”

A White House spokesman said the administration had yet to review the Florida settlement but was not concerned about states cutting their own deals. “Based on the information we have received, we don’t think it should have any impact on our review of the proposed national settlement,” Barry Toiv, deputy White House press secretary, said of the Florida agreement.

Florida itself would benefit from a national settlement. Not only would the tougher national advertising rules supersede those in the state agreement, but the state also stands to win as much as $18 billion in payments, far more than in the state settlement.

Moreover, the tobacco companies want a national settlement. They stand to lose a great deal of money in state suits, which generally seek compensation for the money states have paid to treat emphysema and other smoking-related illnesses through Medicaid and other state programs. But only Congress can offer tobacco firms the limited protection from individual and class-action suits that is included in the national settlement.

Only Monday, a lawsuit by individual smokers was certified as a class action by a federal judge in Philadelphia. “Only Congress can legislate that away,” said Allan Kaplan, a tobacco stock analyst with Merrill Lynch in New York.

Califano, who is now president of the National Center on Addiction and Substance Abuse at Columbia University, and others praised Florida’s Chiles for winning concessions from the tobacco industry over protests from many in the state Legislature. State lawmakers last year came within one vote of repealing a law that helped the Florida lawsuit.


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