Tobacco Lawyer Says No Changes to Deal

Leading tobacco industry attorney J. Philip Carlton told the Senate Agriculture Committee on Thursday that the cigarette companies would not agree to any significant changes in the proposed $368.5-billion tobacco deal--prompting a key senator to tell the North Carolina lawyer that the industry will have to bend if it wants the deal to fly.

“If the message of the industry to Congress today is, ‘You’ve got to take this agreement the way it is, without alteration,’ I don’t think that is going to work,” said Sen. Kent Conrad (D-N.D.).

Conrad, a low-key lawmaker who heads a Democratic task force evaluating the deal, then added pointedly that the cigarette companies can’t tell Congress “it’s got to be way our way or the highway.”

Carlton, who played a key role in the negotiations leading to the June 20 settlement that would compensate states for their smoking-related Medicaid expenses, said the tobacco industry is unwilling to make several key concessions. Those include the acceptance of stronger industry controls by the Food and Drug Administration, the payment of larger penalties if smoking by minors does not dramatically decrease, and an increase in the total amount of money in the settlement.

“In terms of the total amount of money--and I have come to learn in my brief career here that a billion dollars just isn’t what it used to be--we are at the brink,” Carlton noted.

The attorney’s tone was measured and he avoided making any threats when Conrad asked if the industry would “walk away” if Congress toughened the deal. But when pressed further in the hallway by reporters on whether the industry would be willing to pay more, Carlton responded, “I won’t budge.”

He also said it would put the industry “in financial jeopardy” to accept a $1.50-to-$2-a-pack tax hike recommended by Conrad and committee Chairman Richard Lugar (R-Ind.).

But Jeffrey Harris, an economist from the Massachusetts Institute of Technology who has analyzed the deal and cigarette company balance sheets, testified that the industry clearly could afford to pay considerably more and still remain profitable.

Harris said that after reviewing the agreement in detail, he had concluded that its overall price tag ought to be raised both to combat teen smoking as well as to help cover federal smoking-related health-care costs, such as Medicare and other government programs.

Mississippi Atty. Gen. Mike Moore, a key advocate of the settlement, also said Carlton’s approach just won’t work. “The tobacco companies better stop whining and realize that they are just going to have to pay more money,” said Moore, the lead negotiator for 39 states that had sued the industry.

Carlton’s comments came after former FDA Commissioner David A. Kessler and former Surgeon General C. Everett Koop urged senators to make several revisions to the settlement, including enactment of a sharp tax hike to discourage smoking, particularly among teenagers. Both said that if a settlement can achieve the goal of dramatically reducing youth smoking, it ought to be passed.

Otherwise, Kessler said, it ought to be killed.

Longtime anti-smoking advocate Matt Myers also said the industry was not helping the settlement’s prospects with its apparently inflexible stance in public and other recent bungles. In particular, Myers cited the $50-billion tax break the industry slipped into the budget bill in August, only to see it repealed by a 95-3 vote by the Senate on Wednesday.

Myers, executive director of the National Center for Tobacco Free Kids, who played a key role in settlement negotiations, said the tobacco industry “holds the key to beginning to change public distrust” of the deal. He said that if the industry wants to change public attitudes, “they ought to release secret documents and stop the shenanigans like the midnight tax deal.”

Carlton’s hard line came as White House aides attempted to complete their analysis of the deal so they can present their critique to President Clinton as early as today. But administration and congressional sources said there was still internal division at the White House and that the briefing originally planned for today might be pushed back.

Sources said there is a split in the administration about how to approach the issue. They said one administration group contends that the president should give a qualified endorsement to the deal if several key changes are made.

The other camp contends that the flaws in the agreement are so significant that the president should not endorse it in any way. Nonetheless, this group feels that the settlement has created an opportunity for the administration to formulate a national tobacco control strategy and that the president should seize that opportunity.

On Thursday, White House domestic policy chief Bruce Reed and Secretary of Health and Human Services Donna Shalala, who are spearheading administration review of the deal, met with key Democrats in the Senate and the House.

Conrad said in an interview that he and Senate Minority Leader Tom Daschle (D-S.D.) advised Reed and Shalala to tell the president not to “rush to judgment. I told them it’s more important to get this right than to do it right now. My sense is they were responsive.”