Wall Street Journal
Review & Outlook
Monday, May 1, 2006
Thank You for Smoking
Add New York to the list of states hellbent on protecting the market share of Big Tobacco. Attorney General Eliot Spitzer has just filed suit against R.J. Reynolds and Lorillard for withholding part of the payments owed to states under the landmark 1998 Medicaid settlement.
Last month an economic consulting firm found that the major tobacco companies have lost market share to smaller rivals that are not part of the settlement. The cigarette makers say this triggers a provision in the deal that allows them to reduce their payments. Hence, the two companies recently withheld more than $750 million of their combined $2.6 billion annual payout to the states.
The states counter that Big Tobacco must prove that the reduction in cigarette sales was caused by the inadequate enforcement of laws that require tobacco firms outside of the agreement to put money in escrow accounts for future legal claims. And Mr. Spitzer -- along with his counterparts in California, Ohio, Massachusetts, New Jersey and a dozen or so other states -- proudly insists that they've done everything in their power to protect R.J. Reynolds's market share. Doing so, after all, keeps more money flowing to their states for the politicians to spend on things far beyond reducing tobacco use.
The AGs may well prevail in court, which might be one reason industry leader Philip Morris opted to pay up in full rather than join this mini-revolt. And Big Tobacco's real agenda here isn't so much to reduce its payments -- which higher cigarette prices already cover -- as it is to get states to crack down on the competition.
We can't bring ourselves to root for either side. But at least the tobacco companies aren't still pretending that the 1998 settlement was all about recovering health-care costs related to smoking. Which is more than can be said about Mr. Spitzer & Co.
URL for this article:
http://online.wsj.com/article/SB114643733126640000.html
|
