HTML _ IB98022 - The Tobacco Settlement: Issues
16-Oct-1998; Stephen Redhead; 24 p.

Abstract: Since 1994, 41 states and Puerto Rico have sued the tobacco industry to recover the medical costs of treating smokers. On June 20, 1997, a group of state attorneys general and industry lawyers announced that they had reached a settlement that would protect the tobacco companies from civil liability in return for annual industry payments of $365.5 billion over 25 years to reimburse states for their tobacco-related medical costs, and pay for tobacco control programs to reduce tobacco use among teenagers. The proposed settlement would require changes in federal law before taking effect. Tobacco companies would also be required to sign contracts with states, waiving their First Amendment rights to advertise their products in exchange for civil litigation protection. The settlement incorporates the Food and Drug Administration's (FDA) 1996 tobacco regulation and calls for Congress to amend the Federal Food, Drug, and Cosmetic Act (FFDCA) to give FDA specific authority to regulate nicotine-containing tobacco products as restricted devices. Public health officials have criticized the settlement for placing undue restrictions on FDA's ability to regulate nicotine. They are also wary of legislative proposals to establish new legal authority for regulating tobacco under the FFDCA. The settlement would attempt to reduce underage smoking by raising cigarette prices by at least 62 cents per pack, restricting youth access to tobacco products, and restricting tobacco-product advertising and promotion. Funding would also be provided for adult cessation programs, which can be effective and relatively inexpensive. If the industry passed the settlement's costs on to the consumers, the distributional effect would be similar to that of a tobacco tax, which is a very regressive tax. Under the settlement, the states would recover the medical costs of treating smoking-related illnesses. However, a more complete accounting of the health costs of smoking suggests that the federal and state governments have benefitted financially from smoking. The settlement proposed changes to the civil justice system that would provide the tobacco companies with broad protection from future civil litigation. The recent disclosure of industry documents has fueled congressional opposition to granting the industry any such protection. The settlement's advertising restrictions appear likely to be unconstitutional and would therefore require the industry's contractual agreement. Attempts to cap or otherwise restrict the fees of private attorneys retained by states in their lawsuits against the industry may also face a constitutional challenge. Several comprehensive tobacco bills, broadly based on the settlement, were introduced during the 105th Congress. Unlike the settlement, these bills all contained financial assistance for tobacco farmers, who fear a drop in demand for domestic tobacco as consumption declines. The Senate killed the McCain bill (S. 1415) after four weeks of floor debate. The House Republican leadership decided against introducing a more narrowly focused tobacco bill that would have also addressed teenage drug abuse. State attorneys general have resumed negotiations with the tobacco companies to try to reach a more limited settlement, one that would not require federal legislation to take effect. [read report]

Topics: Agriculture

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