Tobacco Settlement Helping to Ensure Profitability of Industry

A new report finds that the 1998 Master Settlement Agreement (MSA) between tobacco companies and 46 states has encouraged states to ensure the profitability of the tobacco industry, Reuters reported Jan. 13.

Under the settlement, the four major tobacco companies are required to provide states with $206 billion over 25 years, as well as future payouts based on tobacco sales.

Despite the amount of the payout that tobacco companies have to make, report author Dr. Steven A. Schroeder said, “It's still an enormously profitable industry.” Schroeder is a faculty member at the University of California at San Francisco and chair of the American Legacy Foundation.

Although the intent of the settlement was to recover expenses from smoking-related illnesses, the MSA contains few stipulations on how the money should be spent. With most states facing severe budget deficits, many of the anti-tobacco initiatives implemented at the time of the settlement have been eliminated.

In addition, many states are using settlement funds to sell tobacco bonds to address budget shortfalls or are allocating the monies to other programs.

“They are trying to protect the public health, but on other hand, they're starved for money and they have all these tobacco dollars coming in. That keeps them from having to raise taxes and forfeit on their bonds,” said Schroeder. He added that the situation was “kind of scary.”

Public-education and tobacco-control initiatives funded through the American Legacy Foundation, which was established through the MSA, have also expired because the four tobacco companies no longer hold 99.05 percent of the domestic cigarette market.

The report is published in the Jan. 15 issue of The New England Journal of Medicine.

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