Philip Morris, RJR Raise Cigarette Prices 7.6%

Philip Morris Cos. and RJR Nabisco Holdings Corp. have boosted wholesale cigarette prices an average of 7.6% as they seek billions of dollars to settle health-related lawsuits.

Retail prices in turn have increased about 7 cents to an average of $1.87 a pack, analysts said they were told by the companies. Loews Corp., BAT Industries’ Brown & Williamson and Brooke Group Ltd.’s Liggett also raised their prices, analysts said.

The increase, the largest since March 1993, will generate about $1.7 billion a year. That’s enough to either make the first settlement payments to the states of Florida and Mississippi--each of which has agreed to settle with the industry for costs incurred to treat ill smokers--or help pay a proposed $368.5-billion national settlement. The national plan, which would supersede the state settlements if it is approved by Congress, includes boosting prices as much as 62 cents a pack in a bid to discourage teenage smoking.

“It’s almost like a tease. It gives Congress a taste of what you could have with 40 states [settling] instead of two,” said Sanford C. Bernstein & Co. analyst Gary Black. This week’s increase will cut consumption by less than 1%, he said.

Philip Morris shares rose $1.63 to close at $45.31. RJR stock rose 63 cents to close at $35.44, and Loews shares gained $3.06 to $105. All trade on the New York Stock Exchange.

RJR and Philip Morris confirmed they raised prices $3.50 to $65.45 per 1,000 cigarettes. In March 1993, the companies announced that they were slashing prices on their best-selling brands by $18.50 to $53.95 per 1,000.

Since the price cuts of 1993, which were designed to stave off competition from discount brands, the companies have been able to make price increases because demand for higher-priced brands--including Philip Morris’ Marlboro and RJR’s Camel--has continued to rise.

Before Tuesday’s increase, RJR generally tracked the industry by raising prices $2.50 per 1,000 in March, $2 in April 1996, $1.50 in May 1995 and $2 in November 1993.

“The increase reflects the additional costs of doing business,” said RJR spokeswoman Maura Ellis.

Spokesmen for Loews and BAT could not be reached and Liggett declined to comment.

It’s the second move Philip Morris has made to generate cash for the settlements. Last week, the company froze its quarterly dividend at 40 cents a share, saving about $776 million a year for payment toward the settlement.