Kids and Lawyers Win Big In Tobacco Settlement
The concept is simple: Public health is supposed to be the big winner in the historic tobacco settlement. But the $368 billion deal has scores of winners and losers:
As much as $500 million per year would be spent on anti-smoking programs to persuade underage smokers not to light up. Smoking among adults is falling, but teenage smoking rates are still high. If underage smoking doesn't fall by 30 percent in five years, the tobacco industry will pay out $80 million for every percentage point difference. In 10 years, teen smoking must decline by 60 percent. The industry has also agreed to fund an insurance pool of up to $40 billion for children without health insurance.
The deal would also extend nonsmoking areas to all public places, workplaces, and fast-food restaurants. Smoking will still be legal in restaurants, bingo parlors, and casinos.
Tobacco payments could give state governments an unexpected windfall - if they get to keep the money. The federal government funds 50 percent of Medicaid, so Uncle Sam might ask for reimbursement. This will be negotiated by Congress. In any event, each state will get a bundle it did not anticipate.
The lawyers come out smiling. Every state suing the tobacco companies hired law firms to work on a "contingency" basis - they don't get paid unless there is a settlement or they win the lawsuit. Most firms agreed to be paid 20 to 25 percent of any payment to their state.
But Richard Danyard, head of the Tobacco Products Liability Project in Boston, says that payment has been reduced to 1 to 3 percent, or $3.6 billion to $11 billion. A panel of retired judges will decide who gets paid. A few law firms could cash in. The Charleston, S.C., firm of Ness, Motley, Loadholt, Richardson & Poole represents nine states. Richard Scruggs, who pursued the case for the state of Mississippi, also signed up five states.
The pharmaceutical industry also could profit. The tobacco industry has agreed to fund $2 billion per year in tobacco-cessation efforts. Last year, Nicoderm and Nicotrol sold $83 million in products, and Nicorette gum had $121 million in sales.
Medical-research firms may also benefit. The tobacco industry has agreed to put $25 billion into a fund for medical research.
Industries from billboards to NASCAR
The outdoor advertising industry estimates more than $1.7 billion is spent on tobacco advertising per year. It estimates that 10 percent of its billboards carry tobacco ads, which will be banned under the agreement.
The industry will also have to discontinue spending on T-shirts, caps, and other promotional items. It will end its brand-name sponsorships. Last year, tobacco companies spent $30 million to $40 million on stock-car racing. It also invested in Indy car racing. Officials at the National Association of Stock Car Racing say it's too early to determine the impact on the races.
* Laura Siegel in New York contributed to this report.