how much money was paid for tobacco settlement

by Madie Oberbrunner Published 2 years ago Updated 2 years ago

Under the Master Settlement Agreement, seven tobacco companies agreed to change the way they market tobacco products and to pay the states an estimated $206 billion.

Full Answer

How are state governments using tobacco settlement money?

Fifteen years after tobacco companies agreed to pay billions of dollars in fines in what is still the largest civil litigation settlement in U.S. history, it's unclear how state governments are using much of that money. So far tobacco companies have paid more than $100 billion to state governments as part of the 25-year, $246 billion settlement.

What happened to the tobacco Master Settlement Agreement money?

Up In Smoke: What Happened to the Tobacco Master Settlement Agreement Money? In November 1998, forty-six US states, along with the District of Columbia and five US territories, and the major tobacco companies entered into a contract of an extraordinary nature.

Where did all the cigarette money go?

15 Years Later, Where Did All The Cigarette Money Go? So far, tobacco companies have paid more than $100 billion to state governments as part of a 25-year, $246 billion settlement. Though the money was meant to be spent on prevention and smoking-related programs, it didn't come with a mandate. 15 Years Later, Where Did All The Cigarette Money Go?

What was the first state to sue the tobacco industry?

While the proposed legislation was being discussed in Congress, some individual states began settling their litigation against the tobacco industry. On July 2, 1997, Mississippi became the first. Over the next year, Florida, Texas, and Minnesota followed, with the four states recovering a total of over $35 billion.

Where did all the tobacco settlement money go?

This year (fiscal year 2020), the states will collect $27.2 billion from the 1998 tobacco settlement and tobacco taxes. But they will spend less than 3% – just $739.7 million – on programs to prevent kids from using tobacco and help smokers quit - less than a quarter (22.4%) of the total funding recommended by the CDC.

How much did the tobacco industry settle with the states for in 1998?

In 1998, state governments reached a 25-year, $246 billion deal with the country's largest tobacco companies.

How much was the Master Settlement Agreement?

$365.5 billionThe settlement included a payment by the companies of $365.5 billion, agreement to possible Food and Drug Administration regulation under certain circumstances, and stronger warning labels and restrictions on advertising.

What restrictions were included on tobacco in the 1998 $200 billion settlement agreement?

Restricting tobacco advertising, marketing, and promotions, including: Prohibiting tobacco companies from taking any action to target youth in the advertising, promotion or marketing of tobacco products. Banning the use of cartoons in advertising, promotions, packaging, or labeling of tobacco products.

When did the Big Tobacco lawsuit start?

The first big win for plaintiffs in a tobacco lawsuit occurred in February 2000, when a California jury ordered Philip Morris to pay $51.5 million to a California smoker with inoperable lung cancer. Around this time, more than 40 states sued the tobacco companies under state consumer protection and antitrust laws.

When was the first tobacco lawsuit?

In 1994, Mike Moore, the state attorney general, filed the first state lawsuit against big tobacco. Individual lawsuits by smokers failed because courts held people responsible for their decision to smoke, but Moore argued that Mississippi shouldn't be forced to pay the costs of treating smoking-related diseases.

Why was the tobacco industry sued?

The United States Justice Department has filed a massive civil lawsuit against the country's major tobacco companies, seeking to recover billions of dollars in long term costs related to treating ill smokers covered by the government health programmes.

Can I sue tobacco companies for COPD?

Yes, you can still sue tobacco companies in certain cases. You may be able to bring an action as an individual or, in some cases, as a representative of a class in a class action.

Who fought Big Tobacco?

In 2006, the American Cancer Society and other plaintiffs won a major court case against Big Tobacco. Judge Gladys Kessler found tobacco companies guilty of lying to the American public about the deadly effects of cigarettes and secondhand smoke.

What was the big tobacco lawsuit?

Who brought tobacco North America?

In 1492, Taino Arawak Indians introduced tobacco to Columbus in the Bahama Islands during his first encounter with the Americas (21), and later European explorers to the Americas were quick to adopt tobacco after recognizing its special properties.

When did Big Tobacco go down?

As skepticism from the public crept up, Big Tobacco's power began to erode. The industry was hit with a big blow in 1998 when it agreed to a $206 billion master settlement with 46 states, the largest settlement in U.S. history.

What law did Congress pass in 1984 that affected how cigarettes are labeled?

As a result of this report, Congress enacted the Comprehensive Smoking Education Act of 1984 (Public Law 98–474), which required four specific health warnings on all cigarette packages and advertisements: SURGEON GENERAL'S WARNING: Smoking Causes Lung Cancer, Heart Disease, Emphysema, and May Complicate Pregnancy.

Getting a truer picture

Instead of applying estimates of total costs of smoking from national surveys to individual states as previous studies have done, our research assessed how specific, individual smoking-related illnesses create costs for Mississippi.

An expensive set of illnesses

In total, we estimated that the cost of tobacco-related illness to Mississippi Medicaid was $388 million in 2016 and $396 million in 2017. This made up about 9% of Mississippi’s annual spending on Medicaid. Our estimates were somewhat lower than the national cost estimates of 15%.

What is the tobacco master settlement agreement?

The Tobacco Master Settlement Agreement ( MSA) was entered in November 1998, originally between the four largest United States tobacco companies ( Philip Morris Inc., R. J. Reynolds, Brown & Williamson and Lorillard – the "original participating manufacturers", referred to as the "Majors") and the attorneys general of 46 states. The states settled their Medicaid lawsuits against the tobacco industry for recovery of their tobacco-related health-care costs. In exchange, the companies agreed to curtail or cease certain tobacco marketing practices, as well as to pay, in perpetuity, various annual payments to the states to compensate them for some of the medical costs of caring for persons with smoking-related illnesses. The money also funds a new anti-smoking advocacy group, called the Truth Initiative, that is responsible for such campaigns as Truth and maintains a public archive of documents resulting from the cases.

How many lawsuits were filed against tobacco companies?

By the mid-1950s, individuals in the United States began to sue the companies responsible for manufacturing and marketing cigarettes for damages related to the effects of smoking. In the forty years through 1994, over 800 private claims were brought against tobacco companies in state courts across the country. The individuals asserted claims for negligent manufacture, negligent advertising, fraud, and violation of various state consumer protection statutes. The tobacco companies were successful against these lawsuits. Only two plaintiffs ever prevailed, and both of those decisions were reversed on appeal. As scientific evidence mounted in the 1980s, tobacco companies claimed contributory negligence as they asserted adverse health effects were previously unknown or lacked substantial credibility.

Why did the OPMs and the settling states not join the MSA?

The OPMs worried that the NPMs, both because they would not be bound by the advertising and other restrictions in the MSA and because they would not be required to make payments to the settling states, would be able to charge lower prices for their cigarettes and thus increase their market share.

How long does it take for a SPM to join the Master Settlement Agreement?

As an incentive to join the Master Settlement Agreement, the agreement provides that, if an SPM joined within ninety days following the Master Settlement Agreement's "Execution Date," that SPM is exempt ("exempt SPM") from making annual payments to the settling states unless the SPM increases its share of the national cigarette market beyond its 1998 market share, or beyond 125% of that SPM's 1997 market share. If the exempt SPM's market share in a given year increases beyond those relevant historic limits, the MSA requires that the exempt SPM make annual payments to the settling states, similar to those made by the OPMs, but based only upon the SPM's sales representing the exempt SPM's market share increase.

What was the 1997 National Settlement Proposal?

This proposed congressional remedy (1997 National Settlement Proposal (NSP), a.k.a. the "June 20, 1997 Proposal") for the cigarette tobacco problem resembled the eventual Multistate Settlement Agreement (MSA), but with important differences. For example, although the congressional proposal would have earmarked one-third of all funds to combat teenage smoking, no such restrictions appear in the MSA. In addition, the congressional proposal would have mandated Food and Drug Administration oversight and imposed federal advertising restrictions. It also would have granted immunity from state prosecutions; eliminated punitive damages in individual tort suits; and prohibited the use of class actions, or other joinder or aggregation devices without the defendant's consent, assuring that only individual actions could be brought. The congressional proposal called for payments to the states of $368.5 billion over 25 years. By contrast, assuming that the Majors would maintain their market share, the MSA provides baseline payments of about $200 billion over 25 years. This baseline payment is subject to

How many plaintiffs have ever prevailed in the tobacco case?

Only two plaintiffs ever prevailed, and both of those decisions were reversed on appeal. As scientific evidence mounted in the 1980s, tobacco companies claimed contributory negligence as they asserted adverse health effects were previously unknown or lacked substantial credibility.

When was the Master Settlement Agreement signed?

Adoption of the "Master Settlement Agreement". In November 1998 , the Attorneys General of the remaining 46 states, as well as of the District of Columbia, Puerto Rico, and the Virgin Islands, entered into the Master Settlement Agreement with the four largest manufacturers of cigarettes in the United States.

How much did tobacco companies pay in compensation?

In 1998, an historic landmark legal settlement between 46 states and the major tobacco companies, – along with individual settlements with four other states – required the companies to pay more than $246 billion over time as compensation for tobacco-related health care costs.

How much does tobacco spend on marketing?

According to the most recent data from the Federal Trade Commission (for 2017), the major cigarette and smokeless tobacco companies spend $9.4 billion a year – over $1 million each hour – on marketing.

How much money will the CDC spend on tobacco in 2020?

How many high schoolers use e-cigarettes?

The number of kids who use e-cigarettes has skyrocketed to over 5.3 million, including more than one in four (27.5%) high school students, and recent trends indicate that nearly 5,000 more kids start using e-cigarettes each day.

Which states have banned flavored e-cigarettes?

Massachusetts has prohibited the sale of all flavored tobacco products, including flavored e-cigarettes and menthol cigarettes, while Michigan has banned flavored e-cigarettes.

Why did Trump reverse the ban on vaping?

President Trump in September announced a plan to ban the sale of all flavored e-cigarettes, in response to an increasing number of lung injuries in the U.S. linked to vaping. However, Trump then decided against signing a decision memo on the ban, citing concern over potential job losses.

How much money did tobacco companies pay to the state governments?

So far, tobacco companies have paid more than $100 billion to state governments as part of a 25-year, $246 billion settlement. Though the money was meant to be spent on prevention and smoking-related programs, it didn't come with a mandate.

What was the settlement money put into?

In Mississippi, where the settlement money was put into a trust fund, a lot of it was spent on things other than smoking prevention and health care, Moore says.

Why don't states have money coming in?

Levin says some states don't have any money coming in anymore because they securitized their future payments with an investor in order to receive a lump sum. That lump sum often went into their state's general fund. For its part, the tobacco industry has managed to weather the settlement fairly well.

How much has Mississippi reduced smoking?

Adult smoking has been reduced by about 25 percent, and he says it is that way around much of the U.S. as well.

Why did the Mississippi lawsuit against smokers fail?

Individual lawsuits by smokers failed because courts held people responsible for their decision to smoke, but Moore argued that Mississippi shouldn't be forced to pay the costs of treating smoking-related diseases.

When did Obama sign the cigarette ban?

President Obama signed the law in 2009. "Something that could happen, although I wouldn't put a lot of money on it, is they could ratchet down the allowable levels of nicotine in cigarettes to a level that is essentially nonaddictive," he says. "That would be a total game changer.".

Is smoking down among young people?

While smoking is down among young people and even adults in some areas, it's still unclear where much of that money has gone. Carolyn Kaster/AP. Fifteen years after tobacco companies agreed to pay billions of dollars in fines in what is still the largest civil litigation settlement in U.S. history, it's unclear how state governments are using much ...

How much money did tobacco companies pay to the states?

Nearly twenty years later, the tobacco companies have paid a staggering $119.5 billion to the states and territories participating in the MSA and another $25.4 billion to the four states with their own agreements. What have the states done with this huge amount of money?

What was the master settlement agreement between the tobacco companies and the states?

In November 1998, forty-six US states, along with the District of Columbia and five US territories, and the major tobacco companies entered into a contract of an extraordinary nature. (The other four states, Florida, Minnesota, Mississippi, and Texas, had entered similar agreements on their own beginning the year before.) The agreement, known as the Master Settlement Agreement (MSA), represented the culmination of a decades-long argument between the tobacco companies and state governments. After the dangers of smoking became known, the tobacco industry had engaged in extensive efforts to somehow stay in business, deflect and defeat lawsuits, and minimize negative attention. Public healthcare systems—and most of the healthcare in this country is taxpayer-funded or subsidized—had seen an influx of patients with smoking-related diseases, and state governments began filing lawsuits against the tobacco companies, claiming they wanted money to help cover smoking-related healthcare costs. The tobacco companies had lots of money but were nervous about the states’ potential to sue them out of business. So, they decided to talk. The result was the MSA.

How do politicians take advantage of the tobacco industry?

Besides politicians’ quintessential habit of spending money on things it was not meant for, there is a more insidious way that they have taken advantage of the never-ending stream of money from the tobacco companies. This is called securitization, and it occurs when a cash-strapped state borrows against promised future MSA payments so that it can get the money immediately. The state issues bonds backed up by the promise of future payments. The term “tobacco bonds” is a reference to this irresponsible practice. The buyers of bonds (the most prominent of which are powerful financial institutions) make a handsome long-term profit. State governments and their taxpayers get a raw deal. As the Campaign for Tobacco-Free Kids warned as early as 2002, states that securitize their tobacco funds get much smaller total payments, “usually for about 40 cents on the dollar or less,” than they would if they let the future revenue come in as planned. Borrowing against future payments in exchange for less money today leads to fewer resources for public health and more money for Wall Street. Yet politicians openly turn to the MSA revenue to cover for their irresponsible spending. For example, in November 2017, as Pennsylvania tried to balance its budget shortfall that had been caused by a refusal to eliminate wasteful spending, securitizing tobacco settlement revenue was the preferred course of all parties. Unfortunately, even some otherwise fiscally responsible politicians like to securitize tobacco revenue, as they consider it a better option than raising taxes.

What is the Tobacco Master Settlement Agreement?

The Tobacco Master Settlement Agreement simultaneously represents one of the most egregious examples of a government shakedown of private industry and offers a case study of the problems that stem from big government and big business scratching each other’s backs. It has turned the largest tobacco companies into an indispensable cash cow for politicians and bureaucrats, enabled irresponsible state spending, and, amazingly, has resulted in less money for public health and tobacco control while propping up a declining industry. As is the case with discriminatory tobacco taxes, the incentives of the MSA are perverse: the more people smoke, the more money the government gets to spend on whatever it wants. The biggest losers are those with tobacco-related diseases and smokers trying to quit.

How does the amount paid by tobacco companies affect the number of cigarettes sold?

The amount paid by the tobacco companies would directly correlate to the number of cigarettes sold—the more cigarettes sold, the more money the states would get. In exchange for their money, the tobacco companies would not be sued by state and local governments seeking recovery of costs associated with tobacco use.

What is tobacco bonds?

The state issues bonds backed up by the promise of future payments. The term “tobacco bonds” is a reference to this irresponsible practice. The buyers of bonds (the most prominent of which are powerful financial institutions) make a handsome long-term profit. State governments and their taxpayers get a raw deal.

What is the tobacco settlement?

StateAG.org’s The Tobacco Settlement commemorates the historic fight against big tobacco and the men and women who led these efforts on behalf of the states.

What was the purpose of the settlement of the tobacco addiction lawsuit?

The settlement created a trust fund to pay for medical costs resulting from tobacco addiction and ended the suits by several states and individuals for payment of such medical costs. The settlement also prohibited class action law suits against tobacco companies in the future.

Which state is the fifth to join the tobacco litigation?

Massachusetts became the fifth state to join the litigation. In December 1998, the National Association of Attorneys General awarded Tom the NAAG President's Distinguished Service Award for his work nationally on the state tobacco litigation and settlements.

When was the James Tierney interview conducted?

This interview was conducted by James Tierney on Dec. 6, 2016.

Overview

Summary of terms

The Original Participating Manufacturers (OPMs) agreed to several broad categories of conditions:
• to restrict their advertising, sponsorship, lobbying, and litigation activities, particularly as those activities were seen as targeting youth;
• to disband three specific "Tobacco-Related Organizations," and to restrict their creation and participation in trade associations;

History of adoption

In September 1950, an article was published in the British Medical Journal linking smoking to lung cancer and heart disease. In 1954 the British Doctors Study confirmed the suggestion, based on which the government issued advice that smoking and lung cancer rates were related. In 1964 the United States Surgeon General's Report on Smoking and Health likewise began suggesting the relatio…

Contraband statutes

By the middle of 2000, domestic NPMs and importers had begun to obtain greater market share. The NAAG noted that reductions in settlement payments which result from an overall reduction in cigarette consumption benefit the states because health care costs imposed by each cigarette exceed the settlement payments. On the other hand, when reductions in settlement payments occur because NPM sales displace PM sales, the states receive no benefits if the NPMs do not …

Criticism

Some anti-smoking advocates, such as William Godshall, have criticized the MSA as being too lenient on the major tobacco companies. In a speech at the National Tobacco Control Conference, Godshall stated that "[w]ith unprecedented future legal protection granted by the state A.G.s in exchange for money, it appears that the tobacco industry has emerged from the state lawsuits even more powerful".

Securitization

In the ten years following the settlement, many state and local governments have opted to sell so-called Tobacco Bonds. They are a form of securitization. In many cases the bonds permit state and local governments to transfer the risk of declines in future master settlement agreement payments to bondholders. In some cases, however, the bonds are backed by secondary pledges of state or local revenues, which creates what some see as a perverse incentive to support the to…

Individual state settlements

There is technically a distinct MSA signed separately with each state. While these MSAs are identical, the states have had to enact enabling legislation which differs from state to state. Furthermore, each state's court system is entitled to create its own jurisdictional interpretations of the MSA text. As a result, legal understanding of the MSA differ from state to state.
Documents relating to the initial lawsuits filed by each individual state are available at the UCSF