Fireworks follow SMOKE
a settlement in Florida has pressed panic buttons for the tobacco industry worldover. Setting a precedent, the government of Florida signed a us $11.3 billion settlement with us cigarette manufacturers to recover costs of medical treatment for curing ailments caused due to smoking. The cigarette companies, apart from promising to pay the first instalment of us $1 billion by September 1998, have agreed to pull down billboards which are within 305 m of schools; fund anti-smoking programmes aimed at kids; and remove vending machines where children have access to them.
All this has happened just when a larger settlement of us $368.5 billion is under the consideration of the Clinton administration. This settlement is bound to influence the shaping of a national accord on the issue.
Under the proposed national settlement, tobacco companies in the us could be footing the cost of the free medicare offered by the state to those suffering with cancer due to smoking. Cigarette barons might be required to pay us $368.5 billion over a period of 25 years. Coughing up such a hefty sum would provide them relief from the uncertainty posed by hundreds of lawsuits pending against them. Many people suffering from diseases caused by smoking, such as cancer, are seeking compensation for their medical bills.
Hard days ahead As per the conditions of the proposed national settlement in the us , the tobac co industry would have to succumb to a ban on billboards, vending machines, sports promotion and advertisements featuring cartoon characters and people. Warning labels such as 'smoking can kill you' would need to be printed, and facts about the health effects of smoking publicised more openly. Smokers could be, for the first time, in the know about just how much tar and nicotine they inhale. The additives that go into the making of cigarettes could be made public.
Although the settlement is yet to get the green signal from president Bill Clinton and the us Congress, if it does materialise, it would signify an unprecedented victory for the anti-smoking lobby, which has time and again raised concern over the number of deaths caused due to cigarette smoking which stands at approximately 425,000 per year in the us .
The agreement is to be signed by tobacco companies, state attorneys general and public health represen-tatives. Clinton wants the cigarette industry to make some additional concessions. He wants the settlement to be revised so that fines, penalties and punitive damages that will have to be paid by the companies can be taxed. The health panel comprising representatives of health groups that prepared the report highlighting various aspects of the settlement for the White House and the Congress, has supported the move by the president.
With the health care of its citizens assuming importance and becoming the prime responsibility of governments in developed countries, medical reimbursement bills are running into astronomical proportions, especially when costly treatments such as that for cancer are offered free of cost. There is a growing feeling that the state - which is finding it difficult to sustain the drain on the exchequer - should make these companies pay for what is believed to be their doing.
The 'crusade' to make tobacco com-panies pay for the health damages due to cigarettes has spilled across the Atlantic. The new battleground for the tobacco companies and the anti-smoking lobby is the uk , where 47 people suffering from lung cancer have approached the British High Court to demand compensation from Imperial Tobacco plc and Gallaher Group plc.
Shaken to their roots in developed countries, especially the us , the tobacco companies would try to compensate for any dent in their profits by stepping up cigarettes sales in the emerging markets of developing countries. There is little that the us Government can do to stop this at this juncture in the absence of any law prevailing there that could stop companies from selling their products overseas. The chances of restrictions in foreign countries are slim as the laws regarding cigarettes and smoking are not as stringent as those in the us .
The settlement will have far reaching effects. While the companies are eager to focus on business outside the ambit of the settlement, for example in the developing countries that do not have stringent regulations regarding cigarettes, governments in countries such as China are planning to impose restrictions on cigarette advertisements. If other Asian countries that are some of the largest emerging markets for cigarettes, such as India, Malaysia, Indonesia, and Taiwan, tighten up their laws regarding smoking, the tobacco companies would face unprecedented hardships.
Three tobacco giants in the us - - Philip Morris, rjr Nabisco, and bat Industries - have large and fast growing operations in other countries too. It would not be difficult for such com-panies to jack up foreign trade and to offset the losses in the us due to medical and legal bills. us tobacco companies are known to do very well when faced with competition abroad. Through joint ventures with superior companies they enter the market with a superior pro-duct, backed by lots of capital and thereby grab a lion's share of the market.
While the number of smokers is either stagnant or declining in the us , it is increasing in developing countries. This has coincided with a number of us companies expanding business abroad. At Phillip Morris, one of the leading cigarette manufacturers in the world, international sales account for 49 per cent of the total tobacco profits, while the same at rjr Nabisco's international tobacco is 44 per cent.
Developing countries are unlikely to impose any kind of ban on cigarettes as they cannot forgo the dividends from the hugely profitable tobacco industry. At the same time, they are finding it difficult to keep up the balancing act between the revenue earned through cigarettes and controlling the health problems caused by smoking.
China, the world leader in cigarette production and sales, for instance, is contemplating steps to curb promotion of cigarettes. With a 25 per cent share in the world's smoking population, deaths due to smoking-related diseases in China were 440,000 in 1995. Despite the fact that the tobacco industry, the single largest contributor to the state coffers, pays about 10 per cent of the total revenue, the Chinese government has decided to drive out tobacco advertising from its cities. The uproar in the us is being reflected across the world in a growing concern to discourage smoking and make the tobacco companies pay the medical bills.
The worst fear of the anti-smoking lobby in the us is that the companies going in for foreign sales could be targetting children. Expressing these fears, Edward Kennedy, a Democrat senator from Massachusetts, says: "We don't want this tobacco settlement to be financed by 12-year-olds in Manila, by the Third World." Similar sentiments were echoed by Ron Wyden, senator from Orgeon and a leading Congressional opponent of the tobacco industry. "I am going to fight very hard to make sure that these multinational tobacco companies do not target kids in Bangladesh and Bangkok to pay medicaid bills in Bend, Oregon, Bangor, and Maine," he says.
The beginning of the end
The idea of cigarette manufacturers reimbursing the money spent by the state on treatment of smoking-related diseases originated in the state of Mississippi. Currently, over 29 states in the us are seeking tens of billions of dollars as compensation for expenses borne by them.
The dangers of smoking and its link with lung cancer became amply clear through medical research in the '60s. But the powerful tobacco lobby hired lawyers who managed to successfully argue that those suffering from smoking-related ailments could not prove that these were caused by smoking alone. Such arguments are, however, losing ground. In fact, even passive smokers have joined the fray and are demanding compensation from the cigarette industry (see box: Passive smoke, active sufferers ).
There are others who argue that a clear settlement between cigarette manufacturers and those suing them would be difficult to negotiate as smoking is not illegal in the us . If the habit can cause harm, so can emissions from motor vehicles.
The landmark settlement in the us has, quite obviously, led to apprehen sions among the shareholders of to- bacco companies. bat Industries had to assure its shareholders that the settlement would have no effect on its sales in other countries. A shareholder of the itc Limited, India's largest tobacco company, even suggested that the Rs 5,960 crore-giant should move away from its tobacco business.
The panic among shareholders in companies outside the us is indeed seen as a potential threat to the industry. In the event of investors shying away and the high price of medical compensation acting as a deterrent for any expansion programme, the tobacco industry might be up for bleak times.