Proposed Tobacco Settlement Isn’t Setting Congress on Fire

When state attorneys general settled their lawsuits against the tobacco companies last June, their gargantuan agreement carried a small footnote: Its terms would not take effect unless Congress approved them.

Far from enacting the proposed $368.5-billion settlement into law, Congress has since distanced itself from many of its specific provisions.

All that remains standing are the section headings: tougher Food and Drug Administration regulation of tobacco, limits on tobacco advertising and marketing, higher cigarette prices, antitrust exemptions and limits on future legal liability for the tobacco companies, and money to reimburse the states for tobacco-related health care costs.

But with little agreement on the fine print, even strong proponents of a sweeping deal are starting to float the idea that a scaled-back bill might be a good start. That could mean the multibillion-dollar settlement would likely go by the boards.

Veteran analysts of health care politics say the magnitude of the proposed tobacco deal and the number of different interests it touches put it at risk.

“I find it hard to see them pulling together a giant tobacco deal, getting all 50 states, the tobacco companies and all the consumer groups to sign on to it,” said Tom Scully, president of the Federation of American Health Systems, which represents for-profit hospitals. “No matter how close you get to a deal, somebody is going to have a reason to blow it up.”

Congress, split along regional as well as partisan and philosophical lines, cannot even agree on which of the settlement’s goals--reducing youth smoking, punishing tobacco companies and reimbursing state and federal governments for the costs of treating people made ill by tobacco--should be paramount.

Further complicating matters is that so many members of Congress want a piece of the action. In the Senate alone, at least seven committees claim jurisdiction over a portion of the legislation, and there is no plan in either chamber for how to glue together a bill.

The public health community, which until recently was split over whether to give the tobacco industry legal protections in exchange for massive payments for public health programs, is increasingly opposed to limiting the tobacco companies’ liability in future lawsuits.

That isolates the tobacco companies and their workers, making them and the state attorneys general the major proponents of the proposed settlement.

“I don’t think they [the tobacco companies] have any power in this place at all,” said Rep. Tom DeLay of Texas, who ranks third in the House Republican leadership. “They are big contributors of mine . . . but this is something that would be very difficult for me to support.”

The industry has kept largely silent in recent months, but today executives of the top five tobacco companies are slated to testify before Congress for the first time since 1994. They will push hard to refocus Congress on the deal that the companies worked out to settle lawsuits filed by 40 state attorneys general.

“It will be a chance for the nation to see [that] the top executives of the companies are serious about change and are serious about doing the right thing and have put a serious package on the table,” said Scott Williams, an industry spokesman.

The White House, which is pushing hard for a comprehensive deal, fears that anything less could be too weak to effectively reduce smoking by children and teenagers.

“We shouldn’t content ourselves with half measures that won’t work,” said Elena Kagan, deputy director of the Domestic Policy Council. “What we’re worried about is that there is going to be a small bill and [Congress] will say, ‘We’ve done tobacco legislation, . . .’ and we won’t have.”

Leading members of Congress are not so sure.

“First of all, I’d like to pursue the overall settlement,” said Sen. John McCain (R-Ariz.). “If that’s not possible, then we could focus just on the . . . aspects [affecting smoking by children] and sidestep some of the divisive issues.”

One of the strongest anti-smoking lawmakers, Rep. Henry A. Waxman (D-Los Angeles), said he too would consider more limited legislation. He underscored that the focus of any legislation had to be “ making it harder for [companies] to lure children into smoking. . . . The other issues are harder to resolve.”

Recent events both inside and outside Washington are further compounding the difficulties for Congress.

Congress is uneasy about moving ahead until it sees the outcome of a Justice Department criminal investigation of tobacco companies and a lawsuit by the state of Minnesota against the tobacco firms. Lawmakers fear that any new negative information about the tobacco industry could make their legislation appear inadequate.

“The industry wants us to walk across a minefield blind and hope one doesn’t go off,” said a Senate Republican leadership aide. “Members of Congress want politics to be a low-risk profession.”

Then there is the maelstrom of controversy over President Clinton’s alleged affair with a former White House intern, which has slowed the governmental pace in Washington to a crawl and, more important, may have damaged his ability to piece together a compromise. Analyst Gary Black of the Sanford C. Bernstein & Co. investment research firm, who initially set the odds in favor of enactment of a deal at 4 to 1, dropped them to even money in the wake of Clinton’s troubles.

Most significant of all, many interested parties in the settlement reached last June between the state attorneys general and the tobacco companies find that the deal falls short. Here is where the toughest issues stand:

Immunity from lawsuits: This could hang up the whole deal.

Critics of the proposed settlement challenge the unprecedented grant of immunity to a single industry from future class-action lawsuits and the $5-billion limit on cumulative annual damages the industry would pay in individual lawsuits.

“I cannot see any justification for this industry or any other industry to be given special protection against future wrongdoing,” said Sen. Kent Conrad (D-N.D.).

But the tobacco industry says a deal without legal protections is no deal at all. “It is an unprecedented annual payout for an industry that has not paid a dime in punitive damages,” Williams said. “Therefore it must have the civil liability [protections] it is seeking.”

Clinton aides are being careful not to allow the immunity issue to scuttle an agreement. “Limits on liability are not necessarily a deal-breaker for us,” Kagan said.

Teen smoking: Public health experts criticize the deal for not going far enough to reduce youth smoking. Teenagers will stop smoking, they say, only in the face of an immediate rise in cigarette prices--$1.50 a pack or more--combined with unfettered FDA authority to regulate tobacco as a drug.

The settlement involving the attorneys general anticipated an increase of only 62 cents a pack over five years, according to an analysis by the Federal Trade Commission.

FDA regulation: The extent of FDA authority over tobacco is a highly complex issue that raises the specter that the agency could even go so far as eventually banning tobacco. Although no one has suggested that Republicans are particularly uncomfortable with allowing the FDA to dictate the content of a legal product.

Tobacco tax: Most current scenarios envision a government windfall from the tobacco industry through a penalty payment or a tax. Clinton is counting on raising $65.5 billion over the next five years from the tobacco settlement, and he proposes spending the money on public health, child care and education.

Republicans are divided among themselves about how to spend the money. Possible beneficiaries are biomedical research, anti-smoking programs for young people and the Medicare trust fund.

Lawyers’ fees: Republicans have failed repeatedly in their efforts to weaken the trial lawyers, who are big-time Democratic supporters, by capping damages in civil lawsuits. In the state tobacco lawsuits, the attorneys general hired trial lawyers to run their cases, and lawyers in some states are asking for more than $1 billion in payments.