Tobacco payments hit $6 billion neighborhood

Apr. 15, 2014 @ 10:16 PM

RICHMOND, Va. — The nation's top cigarette makers said Tuesday they have made about $6 billion in annual payments as part of a longstanding settlement in which some companies are paying states for smoking-related health care costs.

Under the 1998 Master Settlement Agreement, participating tobacco companies agreed to make billions in payments to 46 states, Puerto Rico, the U.S. Virgin Islands, American Samoa, Guam, the U.S. commonwealth of the Northern Mariana Islands and the District of Columbia over more than two decades. States first received full payments under the settlement in 1999. It was estimated that the companies would pay up to $246 billion over 25 years. Future annual payments also will continue in perpetuity.

The billions in annual payments come amid criticism from public health officials that states are using only a small amount of the money to fund tobacco-prevention programs, making it harder to reduce death and disease caused by tobacco use. The settlement did not mandate that the money was to be used for anti-tobacco and stop-smoking programs.

While states on average have never spent as much the U.S. Centers for Disease Control and Prevention would like, the total has declined dramatically in recent years as states have grappled with budget deficits. Many also have raised tobacco taxes in order to increase revenue and supplement funds provided by the tobacco industry.

Philip Morris USA, the nation's largest cigarette maker owned by Altria Group Inc., said Tuesday that it made its payment of about $3.3 billion as part of the settlement.

The Richmond-based maker of Marlboro, Virginia Slims and Parliament cigarettes said the payment includes an undisclosed amount that it says it doesn't owe that was deposited into a separate account. The company will try to get it back through negotiations or arbitration, as allowed under the settlement.

No. 2 R.J. Reynolds Tobacco Co., owned by Reynolds American Inc., based in Winston-Salem, N.C., paid $1.77 billion this year. The maker of Camel, Pall Mall, Kool and other brands deposited a portion it disputes— $421 million — into a separate account.

No. 3 Lorillard Inc., Greensboro, N.C.-based maker of Newport, True and Maverick brand cigarettes, paid $1.1 billion this year, including $93 million it disputes.

Philip Morris USA said it has paid more than $66 billion under the settlement and previous agreements since 1997. RJR has paid more than $33 billion under the agreements, and Lorillard has paid more than $16 billion.