Nearly 20 years ago, Indiana joined a national collective of the states to recover, through litigation, money from the four major tobacco companies for public health costs incurred by the sale of cigarettes to smokers.
The approaching anniversary offers an opportunity to reflect on the nature and extent of the continuing historic legal battles.
My unique perspective arises from service in the public sector from 2001-2009 as Indiana attorney general and then in 2010 for four years as a private sector attorney asked by the state to continue the fight to protect Indiana. Nationally, other state attorneys general left office and worked for the tobacco industry. I declined to do that and was asked to continue to challenge the tobacco industry due to my expertise and standing and because the financial and public health consequences for Indiana remain high.
How much money is at stake in the continuing legal fight? Income to Indiana from the unprecedented and extremely complex master settlement agreement with the major tobacco companies since 1999 now exceeds $2 billion.
Unfortunately, one provision of the agreement allows the companies, after making initial payments to the states, to litigate or arbitrate a better deal (meaning return of funds to the companies) by challenging state enforcement efforts against other cigarette manufacturers that did not join the agreement. Not surprisingly, the tobacco companies have invoked this provision every year since the initial payment process began 17 years ago — thus creating even more litigation.
The companies can only gain, and the states can only lose, via this challenge. The companies can recoup funds already paid, while Indiana strives to retain past payments already received and already spent in prior state budgets.
Those budgets regularly include millions of dollars for health initiatives related to women’s health, breast cancer, prostate cancer, sickle cell, cancer registry, HIV/AIDS, drug afflicted babies, prenatal substance abuse, epilepsy, mental health, dental, prescription drugs and trauma centers. Along with more than $8 million annually for tobacco prevention and cessation, allocations to the attorney general’s office for enforcement costs incurred in opposing the tobacco companies have been less than 1 percent of the payments received by Indiana.
After eight years of involvement with the tobacco disputes as state attorney general, the state asked me to rejoin the battle in 2010. I agreed conditioned upon a public review of the issue by the Indiana State Ethics Commission. The commission voted without dissent to approve an arrangement allowing me to work on behalf of Indiana against the tobacco companies. In my view, that was the correct policy side for a former state official.
Eventually, the lengthy arbitration was settled, with one settlement in 2003 and another in 2013. Defending a $100 million dollar-plus annual payment from attacks by well-funded tobacco lawyers requires hundreds of thousands or more to be spent each year by Indiana fighting this challenge. For the years I represented Indiana, my payment represents .0008 percent of the $614 million total paid to the state.
I no longer work on the tobacco matter, but the disputes and billion dollar stakes will continue. Payments for 1998 through 2012 are now secure, with $124 million anticipated for the Tobacco Master Settlement Trust Fund this year alone.
According to Dustin McDaniel, Democratic co-chair of the National Association of Attorneys General Tobacco Project, “The settlement we negotiated together secured hundreds of millions of dollars for the state of Indiana alone, which is an excellent return on the investment.”