Let's Make a Deal

As the proposed tobacco settlement heads to Congress, the anti-smoking movement is divided over whether it's a good deal after all. A guide to the players, the alliances they've established, and who hopes to get what.

By historical standards, the historic nationwide settlement approved by the tobacco companies last summer was a stunning capitulation. On June 20, an industry whose motto had always been "never settle" announced that it was ready to cough up a ton of money and swallow a mass of humiliating requirements. Among other things, the tobacco companies agreed to pay what amounts to a huge fine ($368 billion) for the crime of selling cigarettes, conceded FDA authority over tobacco products, accepted sweeping restrictions on advertising and promotion (including an end to outdoor ads and the use of human or cartoon figures), endorsed a federal ban on smoking in most nonresidential buildings, promised to finance a $500-million-a-year national media campaign aimed at discouraging consumption of their products, and committed themselves to utterly unrealistic goals for reducing smoking by teenagers, under the threat of further fines.

Implausible as these concessions would have seemed just a year or two earlier, they immediately established a new baseline for the expectations of anti-smoking activists, who treated the compromises hammered out through months of arduous negotiations as an opening offer. John F. Banzhaf, executive director of Action on Smoking and Health, summed up this attitude at a June 25 meeting of the Advisory Committee on Tobacco Policy and Public Health: "I think, as a basic rule of thumb, that anything they are happy to agree to probably is not going to be the most that we can expect, nor very beneficial for the public health." Dr. Jonathan Fielding, vice chairman of the Partnership for Prevention, tried to inject a note of caution: "There's kind of an underlying, fundamental question of whether one wants to see a settlement or not, under any circumstances. We have to always keep in mind that the more we push and the further we push away, the less likely [a settlement] will be….As we add things on, we increase that risk."

The advisory committee, chaired by former Surgeon General C. Everett Koop and former Food and Drug Commissioner David Kessler, seemed to lean toward Banzhaf's view. Its report, delivered to the White House in early July, was a wish list rather than a serious proposal for legislation that Congress can be expected to enact when it takes up the matter this fall or winter. Along with the numerous anti-smoking measures in the proposed settlement, the committee called for big increases in tobacco taxes, elimination of exposure to secondhand smoke, mandatory health insurance coverage for smoking cessation programs, "zero tolerance" smoking policies in schools (including bans on clothing bearing cigarette brand logos), and lots of additional money for anti-smoking groups and researchers. The committee opposed any limits on liability or the Food and Drug Administration's authority over tobacco--the main advantages, aside from settlement of the current lawsuits, that the deal offered the tobacco companies. In fact, the report urged more litigation, saying, "All elements of Federal, State, and Local tobacco control policies should be enforceable through lawsuits [brought] by individual citizens."

The dynamic at work in the committee can be seen in its handling of the targets for reducing teenage smoking. Under the proposed settlement, daily smoking by high school seniors is supposed to drop by 30 percent after five years, 50 percent after seven years, and 60 percent after 10 years. Since the baseline for these reductions is a 10-year average, and since smoking by teenagers has been rising in recent years, the agreement actually requires sharper reductions from current smoking levels than these percentages imply. For some, they were not sharp enough. "Some time short of year 10, we should come to 100 percent," said Robert Graham, executive vice president of the American Academy of Family Physicians. "This is an illegal activity. We do not believe that anyone underage should smoke or use tobacco products." Banzhaf agreed: "The tobacco industry does have total control over this. They can, through a system of licensing, bring down noncompliance to zero….They can, by raising taxes, decrease the level to anything they want." Fielding bravely demurred: "I just don't think that's realistic, frankly." Visibly nervous about seeming to take the industry's side, he suggested that factors other than company behavior might affect smoking by teenagers. After he received support from several committee members, including Koop, it became clear that the final report would insist only on the unreasonable, not the impossible. Instead of eliminating underage smoking within a decade, it called for "specific and increasingly stringent targets," beginning in the second year.

The committee's discussion of the penalties for missing the targets followed a similar pattern. Under the settlement proposal, the companies would pay $80 million for each percentage point by which they missed the targets, a figure based on an estimate of the profit generated by additional customers. The task force assigned by the committee to study the issue instead recommended a fine of $240 million for each percentage point, citing the precedent of triple punitive damages. This turned out to be the moderate position. Banzhaf said the main point of the fine should be deterrence, so the higher, the better. Why not 10 or 100 times the estimated profit? "The penalty in the current settlement," he said, would amount to just a nickel a pack, so it "would be a five-cent license to continue to addict and kill children." In the end, the committee declared the $80 million penalty inadequate and called for "predictable financial penalties sufficiently severe to act as a strong deterrent." It also rejected the proposed $2 billion annual cap on penalties and a provision allowing companies to obtain a rebate of up to 75 percent if they could show they had made a good-faith effort to reduce underage smoking. In other words, even if the tobacco companies do everything they're supposed to do, they would still be penalized should teenagers fail to cooperate.

The deliberations of the Koop-Kessler committee reflected splits within the anti-smoking movement caused by the settlement proposal. No one was prepared to say the deal was satisfactory as written. Everyone agreed the FDA should have unqualified, immediate authority to regulate tobacco products--including the power to dictate their content or remove them from the market--rather than the limited, phased-in authority described in the proposal. Nobody liked the liability provisions, which would allow lawsuits by individuals while eliminating punitive damages for past conduct, banning future class actions, and capping yearly outlays. But while some committee members were relatively cautious about attaching new conditions to the settlement, fearing that demands too numerous or too extreme might sink the whole deal, others did not hesitate to insist that the industry make additional sacrifices in return for less protection. Major players in this intramural debate can be roughly divided into three groups: the dealers, who seem committed to making the settlement work, albeit with some modifications ("yes, but…"); the skeptics, who insist on major changes but recognize the need for compromise ("no, but…"); and the militants, who oppose any arrangement to which the industry would conceivably agree ("no way"). The classifications are based on the tone and timing of people's comments as well as the substance of their demands.

Dealers

The Attorneys General. About 40 states have sued the tobacco companies, seeking compensation for the costs of treating smoking-related illnesses under Medicaid. Mississippi Attorney General Mike Moore pioneered this kind of suit in 1994, based on an untested and dubious legal theory, and spearheaded the negotiations. Moore and the other attorneys general can brag that they brought the tobacco companies to the table, gaining money for their state treasuries and concessions that will "improve the public health"--achievements that may help them win higher office. Not all of them are enthusiastic about the deal, however. While Mississippi dropped its lawsuit, which would have gone to trial in July, Minnesota Attorney General Hubert H. Humphrey III (see below) threatened to continue with his case, scheduled for trial in January.

The Private Attorneys. The states farmed out their suits to plaintiffs' lawyers, many of whom are also involved in private tobacco cases. Among these are 17 class actions sponsored by a consortium of 65 prominent law firms and hundreds of lawsuits filed on behalf of individual smokers or their families. Lawyers who played an important role in the negotiations included Florida attorney Hugh Rodham, President Clinton's brother-in-law; Mississippi attorney Richard Scruggs (Senate Majority Leader Trent Lott's brother-in-law), who represented most of the states; and South Carolina attorney Ronald Motley, who had a hand in both the state lawsuits and the class actions. Scruggs and Motley both got rich suing asbestos companies, and they stand to get even richer as a result of the tobacco deal. The attorneys agreed to handle these suits in exchange for a share of any damages: 10 percent to 25 percent in the state lawsuits and 30 percent or so in the private lawsuits. Their percentage of any nationwide settlement will be much lower, lest public outrage threaten the deal, but they are still likely to earn the biggest legal fees in history. Proposals have ranged from $2 billion to $18 billion.

National Center for Tobacco-Free Kids. Established in 1996 with $30 million in grants from the Robert Wood Johnson Foundation and the American Cancer Society, the center immediately became the best-funded and most conspicuous anti-smoking organization, arousing resentment from groups with a longer history. The center's vice president, Matthew Myers, was the main anti-smoking activist involved in the negotiations. An attorney with solid anti-tobacco credentials, having worked for the Federal Trade Commission and the Coalition on Smoking or Health, Myers nonetheless has been criticized by other activists for his readiness to compromise. His boss, publicist William Novelli, pleaded for realism with the Koop-Kessler committee: "I hope we're not going to miss this opportunity, but what I heard this morning makes me afraid…that the committee is going to produce a utopian policy blueprint and a separate letter on the settlement proposal that will threaten to drive the industry and its legislative allies away." Novelli's group is well positioned to claim the lion's share of the billions set aside for anti-smoking messages, smoking cessation, and other "tobacco control" efforts.

American Cancer Society. When the settlement proposal was announced, ACS CEO John R. Seffrin said he was "encouraged by the public health concepts" it embodied. A few weeks later, the society issued a statement saying the FDA should have "complete and unfettered authority" to regulate nicotine and other tobacco ingredients, and it recommended stronger penalties for missing the smoking reduction targets. But ACS President Myles Cunningham said the society "still believes at this point that a settlement agreement with tobacco companies has more potential for advancing public health than the uncertain outcome of lengthy continued litigation or piecemeal legislation."

American Medical Association. Lonnie Bristow, then president of the AMA, sat in on the settlement talks. In June he called the deal "a marked advance" but said the organization would not take a formal position until a task force had reviewed the issue. The AMA, which was still taking research money from the tobacco companies in the 1970s and is viewed as a Johnny-come-lately by some longtime anti-smoking activists, has to tread carefully in any area involving compromises with the industry.

American Heart Association. The day the proposed deal was announced, AHA President Jan L. Breslow said, "The American Heart Association is encouraged by the fact that the settlement talks have produced a document for the health community to review. The American Heart Association recognizes our important responsibility to carefully consider such a proposal that could potentially prevent millions of people from dying prematurely." In addition to insisting on full FDA authority, the AHA said "the rights of victims of the tobacco industry should not be abridged in any way."

Skeptics

David Kessler. The former FDA chief claimed jurisdiction over tobacco products in 1994, contrary to the position taken by every one of his predecessors, by the federal courts, and even by tobacco's opponents in Congress. Not surprisingly, he mainly objects to the tobacco deal's limits on FDA authority, which require the agency to show that restrictions on nicotine content would reduce health risks, would be technologically feasible, and would not create a significant black market. The deal would also prevent the FDA from banning nicotine from cigarettes for at least 12 years. Despite his reservations, Kessler has a strong interest in salvaging the industry's concessions, since the same federal judge who upheld the FDA's jurisdiction last April also said the agency could not regulate tobacco advertising and promotion. "I'd like to see a resolution," Kessler said on Meet the Press in June, "and I certainly support some of the elements." He took a harder line in congressional testimony on July 29. "You can do better than the settlement," he said. "You don't need the industry's money….All you need is the nation's collective courage."

C. Everett Koop. Koop, who as surgeon general in 1984 called for "a smoke-free society" by 2000, expressed the same concerns about FDA authority as Kessler. He also urged heavier penalties for failure to meet the smoking reduction goals and criticized the limits on liability. Like Kessler, though, he seemed open to some sort of deal. "I have often been misquoted that I am adamantly opposed to a settlement," he said on Nightline in June. Many anti-smoking activists, he noted, "want to see the culprit, the tobacco industry, flogged in public, and I understand how they feel. I feel that way myself. They are very guilty. But flogging a company in public, if it does not produce something for the health of the American people, is a futile gesture." Like Kessler, he seemed less open to compromise when he testified before a Senate committee in July, urging lawmakers to "face the scourge of tobacco for what it is and legislate a tobacco policy that holds the industry accountable."

The White House. President Clinton would like to claim he helped save the youth of America from Big Tobacco, and to do that he needs a package of new regulations. The administration's main demand is unlimited FDA authority. It may also insist on heavier penalties, and it has questioned the tax deductibility of the industry's payments. But so far no one at the White House has complained about the liability restrictions. "I don't think any of us…are reviewing it with the view toward either saying we're going to embrace it or kill it, and there's no other option," Clinton said at a press conference in June, sympathizing with members of Congress who "were hoping that if they couldn't completely embrace it, that at least it could be salvaged."

Henry Waxman. The California Democrat, one of the industry's staunchest opponents in the House, welcomed the opportunity to put his imprint on tobacco legislation. "There is no way in the world this proposal gets enacted the way it was announced," Waxman's press secretary, Phil Schiliro, told The New York Times in June. "There will be enormous differences between the proposal and the legislative language….What remains to be seen is how different, and how long it takes and whether it ever gets done at all."

Joseph Califano. As Jimmy Carter's secretary of health, education, and welfare, Califano said smokers were "committing slow-motion suicide" and declared tobacco "Public Health Enemy Number One." Now president of the Center on Addiction and Substance Abuse at Columbia University, he criticized the tobacco deal in a June 23 Washington Post op-ed piece, complaining about the size of the payout, the liability limits, the lack of a tax hike (though the fine imposed on the industry would have the same impact once it was passed on to customers), and the absence of payments for the federal share of smokers' health coverage. "The big question," he wrote, "is whether the president and Congress can build on this work and get all American taxpayers a fair deal from an industry that confesses that for years it has made its profits by lying, pushing an addictive product on American teens and killing more Americans than have died in all our wars and auto accidents combined."

Militants

American Lung Association. The ALA, which used to be allied with the American Cancer Society and the American Heart Association in the Coalition on Smoking or Health, is now noticeably more extreme. It opposed the tobacco talks from the start, and after the proposed deal was announced, ALA Managing Director John R. Garrison said flatly, "Now is not the time to settle."

Ralph Nader. In a June 19 letter to the ACS, the AHA, the AMA, and the National Center for Tobacco-Free Kids, Nader warned against "premature support for a settlement," saying "those involved in the negotiations and their close supporters have become invested in the negotiation process." He also implied that their judgment had been compromised by the lure of anti-smoking money. He held out the hope that "a host of new disclosures, initiatives, regulatory controls and lawsuits not yet contemplated" would force the "tobacco drug addiction companies" to give up more.

Action on Smoking and Health. ASH Executive Director John Banzhaf, who as a young lawyer in 1966 filed a complaint with the Federal Communications Commission that eventually led to the ban on broadcast advertising of cigarettes, used to call himself "the Nader of the cigarette industry." So it's not surprising that he and Nader see eye to eye on the proposed settlement. During the talks, Banzhaf complained that avaricious plaintiffs' lawyers and ambitious attorneys general have their own agendas and "can hardly claim to represent the antismoking or public health community." As a member of the Koop-Kessler committee, he repeatedly rejected the idea of "accepting the industry position [i.e., the proposed settlement] as a starting point."

Hubert H. Humphrey III. "Every time we think we're dancing on this industry's grave," the Minnesota attorney general told the Koop-Kessler panel two days before the settlement proposal was announced, "they have instead found a way to keep dancing on those of our loved ones." If the scheduled trials proceeded, he argued, more damning information would emerge, and the industry would be under greater pressure to compromise. "What's the rush?" he asked. "If we just take just enough time to get it right, America can make the rules, and we won't have to trade away the rights of victims or the powers of the federal government to fashion a real solution." After the details were made public, he said, "I fear that this deal could be a tobacco bailout." In congressional testimony on July 16, he called the agreement a "Trojan Camel."

Stanley Rosenblatt. A pioneer of the tobacco class action, Rosenblatt is handling two big cases: Broin v. Philip Morris, which went to trial in July, represents flight attendants who claim injuries from secondhand smoke, while Engle v. R.J. Reynolds, scheduled for trial this fall, represents Florida smokers. His suits are much further along than the class actions filed by the consortium of big-name lawyers, and he is a more passionate enemy of the tobacco industry, so he is less eager to settle. The trial judge in Broin ruled that the case could continue despite the proposed settlement.

American Trial Lawyers Association. The tobacco deal is good for some trial lawyers but not for trial lawyers as a whole, since it limits the potential for future income. In July ATLA said it would oppose any settlement that "restricts trial by jury or otherwise compromises access to justice, preempts state laws or limits compensatory or exemplary [punitive] damages."

Stanton Glantz. Writing in the Los Angeles Times on June 23, the co-founder of Californians (now Americans) for Nonsmokers' Rights noted that tobacco stocks had gone up during the settlement talks. "The business community clearly thinks this deal is good for tobacco," he said. "And what is good for tobacco is bad for public health." If litigation is allowed to continue, Glantz predicted, "the tobacco industry will lose enough of these cases to be brought to its knees. At that point, the same stock market that has been bidding up tobacco stocks will force R.J. Reynolds, Philip Morris and the others out of the tobacco business." With the stocks plummeting, he said, the government should take over the tobacco business, shut down foreign operations, and "make plain cigarettes available…for smokers who can't quit." Glantz compared the tobacco companies--unfavorably--to Timothy McVeigh, convicted of murdering 168 people in Oklahoma City. "The tobacco industry has killed 10 million Americans since 1964," he said. "No attorney general or politician ever considered letting McVeigh cop a plea; the same should be true for the tobacco industry."

With their fantasies of dictating terms to a vanquished enemy, hard-liners like Glantz refuse to acknowledge that the policy changes they want will require the industry's cooperation. Given recent Supreme Court rulings in commercial speech cases, for example, it's unlikely that limits on advertising and promotion like those in the proposed settlement would pass constitutional muster if the tobacco companies did not consent to them. In any case, the FDA does not have the statutory authority to impose such restrictions. As Novelli told the Koop-Kessler committee, "the tobacco industry is not on the canvas." It can continue to fight in the courts and legislatures for decades to come.

Even the moderates may insist on terms the industry won't accept. "We recognize that this is going to go through the legislative process," a Philip Morris lawyer told the Senate Judiciary Committee in late June. "Obviously, there are parts of this that the industry might find unacceptable to lose, and there are provisions that the industry would find acceptable to see modified." The tobacco companies may be willing to give up the limits on FDA authority, but it's hard to imagine why they would agree to a package that offered no protection against future lawsuits--the main threat that brought them to the table in the first place. And there's got to be an upper limit to the amount of money they're prepared to shell out.

When push comes to shove, of course, some of the deal's critics may be prepared to give up what they now present as nonnegotiable demands. Since the key parties have a strong interest in putting together a package, it seems likely that some sort of legislation will emerge that gives the industry a measure of security and predictability in exchange for anti-smoking policies and programs that tobacco's opponents could not otherwise hope to see anytime soon. But the tobacco companies will have to get something other than an end to lawsuits in which the plaintiffs are willing to settle. After all, they could get that without any help from Congress.

For anyone who believes that smoking is a matter of personal choice in which the government has no business meddling, the arguments about the details of this package will be frustrating. The news media have long portrayed the tobacco controversy as a struggle between greedy merchants of death and selfless defenders of the public health, and the industry's dramatic concessions left the ground for debate narrower than ever. It seemed the only issue left to resolve was whether the deal went far enough.

But whatever Congress ultimately decides, the crusade for a smoke-free society will continue, because it is aimed at the behavior of individuals, not the behavior of corporations. Even if tobacco's opponents could achieve the chimerical goal of eliminating smoking by minors, they would not be satisfied. "The goal is not just to reduce childhood addiction to nicotine and to tobacco products," Mark Pertschuk of Americans for Nonsmokers' Rights reminded the Koop-Kessler committee. "It's also to reduce adult addiction to levels which are feasible." Michele Bloch of the American Medical Women's Association made the same point: "I would ask that in our own recommendations, in addition to putting youth as our top priority, we not tie our hands from working on reducing adult smoking through penalties, etc., when the time comes." Smokers should stock up while they can.