Industry Gives No Ultimatums on Tobacco Deal

Tobacco industry lawyers did not rule out paying higher fines or even giving up tax deductions in return for garnering President Clinton’s support of a $368.5-billion tobacco settlement, administration officials said Tuesday.

Donna Shalala, secretary of health and human services, said the four industry attorneys presented no ultimatums during a 90-minute meeting with her and Bruce Reed, White House domestic policy chief. “They established no line” they would not cross, she said.

Shalala stressed that the meeting was “not a negotiating session.” Rather, she said that the tobacco lawyers came to explain how the agreement had been drawn up and how the elements of the deal--which must be approved by the White House and Congress--fit together.

“We made clear to them that while we see the settlement as a real opportunity, we will insist that it be strengthened in some areas,” Reed said. “We also gave them a clear message to take back to New York, which is that if the settlement is going to work, they have a responsibility to look out for our bottom line, which is reducing smoking, especially by kids.”

Last week, Clinton said that provisions of the deal--which would restrict the ability of the Food and Drug Administration to regulate nicotine content in cigarettes--were unacceptable. He said the agency needs full authority to regulate the industry, a right the FDA won in a North Carolina federal court earlier this year.

As another sign of how seriously the administration takes the issue of FDA power, Justice Department officials said Tuesday that Walter Dellinger, acting solicitor general, will argue the industry’s appeal of the North Carolina decision in August. It is highly unusual for a solicitor general to argue cases other than at the Supreme Court.

Industry officials have privately balked at changing the FDA provisions of the agreement, which would require the agency to navigate strenuous hurdles before reducing nicotine content. Cigarette lawyers have expressed concern that their product might ultimately be banned, despite the fact that FDA officials have repeatedly said that prohibition is not part of their agenda.

On Tuesday, though, industry lawyers, led by J. Phil Carlton of North Carolina and Meyer Koplow of New York, sidestepped questions of whether the industry would back out of the agreement if the terms were toughened.

“We didn’t expect [the settlement] to be rubber-stamped,” Carlton said. “But I remain optimistic that after” White House review is completed, “the conclusion will be that the negotiators did a good job and we don’t need to change anything,” Carlton said.

That appears unlikely.

A bevy of public health advocates, led by former Surgeon General C. Everett Koop and former FDA Commissioner David A. Kessler, have said the settlement must be strengthened considerably in order to pass muster. And a growing number in Congress have raised questions about part of the deal, including the fact that the entire pact is tax-deductible, meaning the industry could write off about $145 billion of it--making the nation’s taxpayers “unwilling partners in this deal,” in the words of Sen. Tom Harkin (D-Iowa).

Shalala declined to hop on that bandwagon Tuesday. “To be fair about tax deductibility,” she said, “it is standard business practice in a settlement to deduct the cost of that settlement from one’s business taxes.”

The settlement was negotiated primarily between industry attorneys and a team of state attorneys general who had filed massive suits against the industry seeking to recover tax money expended treating sick smokers.

On Tuesday, Mississippi, the first state to file such a suit, reaped the initial benefits of its case. The state received a $170-million check from the cigarette companies, the first payment in a separate $3.4-billion, 25-year settlement the state reached with the industry in early July.

That agreement guarantees that Mississippi will receive massive sums of money even if the national deal falls apart in Congress.

Times staff writer Edwin Chen contributed to this report.