Struggle Ensues for a Deal on Tobacco Curbs

As the 104th Congress returns this week to wind up a session that produced landmark legislation on issues ranging from health care to welfare, another pressing--and until recently unforeseen--social question will be percolating on Capitol Hill: Can a deal be struck on tobacco?

With the November elections looming and Congress set to adjourn in early October, the delicate balance of power that exists on the issue in Washington could soon be altered, changing the political landscape--and also the chances that a compromise can be reached.

“What we are trying to do is to take advantage of this session of Congress,” said Richard Scruggs, a Mississippi lawyer who is the chief architect of a sweeping legislative proposal that would cure the tobacco industry’s legal problems and at the same time enable it to escape control by the Food and Drug Administration.

The issues are complex. President Clinton has ordered the FDA to begin regulating cigarettes in order to protect the health of teenagers. The tobacco industry has filed suit to overturn the order. The industry is being sued by several states seeking reimbursement for costs of medical treatment of illnesses allegedly caused by smoking. Other damage suits, including class-action cases, also have been filed against the industry.

If a settlement could be reached, it would provide a dramatic--and surprising--ending to one of the most pressing public health debates of this century. The $50-billion tobacco business is one of the nation’s most powerful industries, and it has increasingly come under fire as anti-smoking sentiment in the United States has risen.

That sentiment hit new heights last week, on the heels of Clinton’s order to the FDA. While Vice President Al Gore brought the Democratic convention to tears with an account of his sister’s death from lung cancer caused by smoking, Target, the giant discount retailer, announced that it was pulling cigarettes off its shelves.

“The landscape has changed totally,” said Dick Daynard, a Northeastern University law professor and expert on tobacco litigation. Daynard said the shift in public perception makes an eventual settlement likely: “At this point I think [the manufacturers] understand privately, no matter what they say publicly . . . that it is going to be in everybody’s interest to work out a settlement.”

10-Day Window

But whether a compromise can be reached soon, in time for Congress to pass a law, remains uncertain.

The plan Scruggs drafted is being revised by a committee of seven of the 14 attorneys general suing the tobacco companies. While Scruggs has until now remained silent on his proposal, in telephone interviews Friday, both he and Mississippi Atty. Gen. Mike Moore said they will be working furiously to reach a consensus by the time the congressional session ends in October.

Scruggs estimated that the attorneys general have only 10 more days to get their plan in shape if a law is to be passed by this Congress. “We have a window of opportunity here that we may never see again to resolve this thing for the whole nation,” he said.

If Republicans gain control of the White House or Democrats strengthen their footing in Congress, Scruggs added, that window could be lost. “It’s sort of like the Palestinian peace negotiations. If the extremes take over, you can’t do it.”

But the prospect of legislation seems distant at this point. So many state and federal officials--not to mention recalcitrant tobacco executives--would have to sign off on any compromise that some think reaching agreement, and doing so soon, is impossible.

“For this to go, the AGs have to be behind it, obviously the president has to be behind it, the FDA and leaders of the House and Senate,” said Florida Atty. Gen. Bob Butterworth. “If all that can be done in 45 days, and if it meets everybody’s criteria, then it’s fine. But as it stands right now, I have not seen anything that I feel comfortable signing off on.”

Talk of Compromise

As for the tobacco companies, they say--publicly at least--that they are adamantly opposed to settling the 14 state lawsuits which seek reimbursement for Medicaid payments made to indigent victims of smoking-related diseases.

“This industry has no history of settling litigation,” said Peggy Carter, a spokeswoman for R.J. Reynolds Tobacco Co., the nation’s second-largest cigarette manufacturer. “We are certainly not going to start with litigation that has no basis in fact or law.”

But privately, Moore said, the companies are singing a different tune. The Mississippi attorney general said intermediaries--including John Sears, a Republican political strategist who has been serving as a liaison officer between the industry and the attorneys general--have reported that the companies are willing to deal.

“We are getting information from the other side as to what they would be willing to do and what they wouldn’t be willing to do,” Moore said. “Our process is to come up with something that we think would be in the best interest of the American public.”

Talk of a possible compromise comes as the cigarette manufacturers face unprecedented attacks. In addition to the state cases, hundreds of individual smokers have filed suit against the industry, and several class-action claims are pending.

Meanwhile, Clinton’s broad plan for the FDA to regulate nicotine as a drug has generated yet another lawsuit, with the tobacco companies suing the government to block it.

Clinton’s order, which he unveiled in a Rose Garden ceremony shortly before heading to Chicago for last week’s Democratic convention, sets a series of strict rules designed to curb underage smoking. They include a partial ban on vending machine sales and tough restrictions on advertising that would reduce most tobacco ads to simple black-and-white text.

The legislative solution being floated by the attorneys general seeks to resolve all these issues at once. The effort began with Scruggs, a private lawyer who is representing Mississippi in its Medicaid-reimbursement suit. He has close ties to one of the most powerful men in Washington: His brother-in-law is Senate Majority Leader Trent Lott (R-Miss.).

Rolling the Ball

Scruggs said he first broached the topic of a settlement with Moore last spring, telling him that Lott would be willing to shepherd the accompanying legislation through Congress if a compromise could be reached. Susan Irby, Lott’s spokeswoman, said that is correct, although she added that the senator has “no plans to get entangled in discussions” about a settlement unless the parties reach a consensus.

That got the ball rolling. Soon after, Scruggs and Moore said, they initiated meetings with several other attorneys general and began soliciting advice from public health lawyers and--at least unofficially--leaders in government, including people in the White House and the FDA.

Out of those talks grew a proposal, drafted largely by Scruggs. The draft has been in the works for six months. Talks were proceeding quietly until the Wall Street Journal recently broke a story about them. Since then, details of the plan have leaked out in bits and pieces. In Friday’s interview, Scruggs provided new details.

The settlement, Scruggs said, calls for the tobacco companies to pay more than $100 billion over the next 15 years to fund anti-smoking programs, compensate sick smokers and reimburse the states for their Medicaid costs. In the first year, the companies would pay $6 billion; that amount would increase over the following three years to slightly more than $10 billion a year.

Lawsuits Allowed

The companies would make the payments into a fund and would contribute according to their market share. From the fund, at least $500 million per year would be paid to the Department of Health and Human Services, which would use the money for anti-smoking campaigns.

The rest of the money would be disbursed to the states, which would use it to beef up their own anti-tobacco campaigns and pay Medicaid bills for treating victims of smoking-related diseases. Part of the money would go into pools to compensate sick smokers.

Pending lawsuits would be permitted to go forward under the plan, but damages would be limited. In suits with five or fewer plaintiffs, the cap would be $1 million per plaintiff. Plaintiffs in class-action suits would not be permitted to receive more money than other sick smokers in their states were receiving under other provisions in the proposed settlement.

Scruggs’ proposal would also require the industry to follow Clinton’s order aimed at curbing teenage smoking--and would in some cases be stricter than the Clinton plan. For instance, while the president’s order allows vending machines in adults-only establishments, Scruggs’ proposal would ban all vending machines. And while Clinton is allowing mail-order sales of tobacco, Scruggs’ proposal would not. Also under Scruggs’ plan, the states would be permitted to enact more stringent anti-smoking rules than the federal government.

In exchange for following those rules, the settlement would prohibit the FDA from regulating cigarettes. But Scruggs said the Health and Human Services department--which is the FDA’s parent agency--would retain oversight authority over the industry. That power, he said, could be used to require manufacturers to disclose the ingredients of cigarettes, for instance.

Asked if he really expects the industry to go along with such a proposal, Scruggs said: “If they want peace, that’s what they’ll have to do.”

But tobacco companies suggested that Scruggs and Moore have ulterior motives for pressing the settlement plan.

On Wednesday, the Mississippi Supreme Court is set to hear a motion by that state’s governor, Kirk Fordice, who is seeking to throw out Moore’s lawsuit against the industry. And on Friday, the Florida Supreme Court will hear a motion by the tobacco industry to dismiss that state’s Medicaid suit.

“This is a desperate act on the part of people who are really concerned that they could be out of court on their two main cases,” said a lawyer for one of the tobacco companies, “and what better way to do it than to float a bogus settlement?”