Big Tobacco Forced To Turn New Leaf

But approval of pact is not certain, as critics question effect on public health

No one would have guessed that when native Americans gave tobacco to settlers in Jamestown, Va., 400 years ago, the leaf would eventually land at the center of an American morality play about individual choice, corporate responsibility, and public health.

Now, as the US government prepares to review a landmark tobacco settlement, officials and lawmakers will have to answer a key question: Is this settlement in the public's interest?

Clearly, the agreement worked out late last week by Big Tobacco, public-health groups, and state officials will not mark the demise of what has become one of America's most powerful industries. Nor will it likely dramatically change the numbers of Americans who choose to smoke.

But the agreement, if approved by the White House and Congress, would fundamentally alter how the industry operates and perhaps change the smoking habits of a new generation of Americans.

Companies such as Philip Morris and R.J. Reynolds Tobacco will not be able to market and sell cigarettes the way they have for decades. They will not be able to defend their product as harmless. They will have to start paying as much as $368 billion, in part to keep a restless group of litigants out of the courthouse.

The settlement hands antismoking advocates much of what they've wanted for years: government regulation of cigarettes, sterner warning labels on packs, and restrictions on tobacco advertising, especially that aimed at children.

Still, some tobacco-control activists are skeptical of the settlement. The industry, they note, has faced regulatory setbacks in the past - but has always managed to turn them to an advantage.

"The devil's in the details [of the settlement]," says Cliff Douglas, co-counsel to the State of Mississippi in its lawsuit against the companies. "There are some fundamental things that must be dealt with right."

One of those is regulation by the US Food and Drug Administration. The tobacco industry has agreed to let the FDA regulate nicotine. But in an unusual move, the settlement also requires the FDA to prove that any future nicotine ban would not create a black market in nicotine-laced tobacco.

That requirement and others are likely to be major sticking points in the weeks and months ahead. Already, former Food and Drug Administration chief David Kessler said yesterday the agreement actually diminishes the ability of the FDA to control the amount of nicotine in cigarettes, which had been confirmed by the legal system.

Mr. Kessler was not involved in the deal, but during his tenure at FDA he spearheaded efforts to regulate tobacco. The White House has said it will consult him before deciding whether to support the settlement.

The deal will be taken up first by a Tobacco Advisory Committee, made up of major health groups and antitobacco organizations. Led by C. Everett Koop, the nation's former surgeon general, the members met last Wednesday to begin the review process. The White House, which monitored the negotiations, has agreed to wait until this group makes its report in 30 days before passing judgment on the agreement.

Moreover, a significant part of the pact must be approved by Congress, probably after the August recess. House Speaker Newt Gingrich of Georgia has promised a deliberate look at the deal.

Mississippi's Attorney General Michael Moore, who led 40 state attorneys general suing the firms to recover Medicare costs, says the agreement is the best deal he could get. "We had to punish this industry in such a way that everybody in this country and everybody in this world would know that they had paid a higher price than any other corporation in history." Estimates are that the industry will pay about $368 billion over the next 25 years.

The industry concedes it is swallowing a "bitter pill." But it may also have found a way to end the prospect of future litigation. With all the new warning labels on cigarettes, it will be difficult for people to complain that they did not know the risk.

More important, the agreement will end the industry's uncertainty surrounding future litigation by individuals. The companies' stock prices have risen more than 25 percent since last month, when it appeared likely the negotiations might succeed. "Even if their earnings go down, but some of the uncertainty is gone, you would hope the stock price might rise to benefit shareholders," says Tim Swanson, an analyst with A.G. Edwards & Co. in St. Louis.

The industry will have to change the way it markets tobacco products. Under the agreement, the industry will no longer be able to use cartoon characters, such as Joe Camel, or human figures, such as the Marlboro man. It can no longer use billboards or sponsor events such as automobile races.

But the industry has faced restrictions in the past - and has always found a way to thrive. Some current ads for Marlboro, for example, no longer use the name of the product on billboards. Instead, the ads are dominated by a slogan, colors, and a typeface that are familiar to smokers.

"They will use their packs very creatively," complains Joe Cherner, an activist who heads up Smokefree Educational Services in New York.

The agreement might also give the tobacco companies the opportunity to begin marketing cigarettes that don't have the same harmful effects. Last week, Rep. Henry Waxman (D) of California released documents that showed the Liggett Companies had produced a cigarette that did not cause cancer in mice. But the company's lawyers argued that introducing the product would open the company up to liability claims for its current cigarettes. Under this agreement, those claims no longer will exist.

DETAILS OF THE DEAL

* Friday's proposed tobacco deal included these settlement terms:

Payments: Tobacco firms would pay $368.5 billion over 25 years. Most is in annual installments of $10 billion the first year, rising to $15 billion per year. Funds would be split among 40 states, public-health groups, lawyers, and a fund for damage claims and medical treatment.

Lawsuits: Future class-action suits and all punitive damages would be banned. Awards from all individual suits couldn't exceed $5 billion a year.

Ads: Billboard, Internet, and sporting-event ads would stop. Pack warning labels would be bigger and more dramatic.

Regulation: The FDA could reduce nicotine levels but would have to prove reductions were improving public health. It could not eliminate nicotine before 2009.

Youth smoking: Industry would have to show a 60 percent decline in youth smoking within 10 years - and pay up to $2 billion per year in fines if it didn't.

Just the start: Before any of the above occurs, the deal must be approved by President Clinton, Congress, and the states.