Attorney General Josh Shapiro Announces Settlement With Tobacco Companies Over Disputed Payments Back to 2004

June 21, 2018 | Topic: Consumers

Settlement Will Net $357 Million to the Commonwealth in FY 18/19

HARRISBURG — Attorney General Josh Shapiro today announced that his office has reached a settlement on behalf of the Commonwealth of Pennsylvania with various tobacco companies, resolving 20 years of disputes and future disputes relating to the 1998 Tobacco Master Settlement Agreement.

Under the settlement, Pennsylvania will receive nearly $357 million in tobacco settlement money during fiscal year 2018 – 2019 on top of the $350 million it receives annually from tobacco companies. In addition to these initial amounts, Pennsylvania will receive $279 million more over the following 12 years, which will go to the Commonwealth’s general fund.

“This settlement ends this longstanding litigation and its associated risk to the Commonwealth while providing certainty going forward,” Attorney General Josh Shapiro said. “Instead of being argued over for years, this money will now timely and directly benefit the residents of our Commonwealth.”

The settlement resolves disputes from 2004-2015 and existing and anticipated disputes for 2016-2024. The settlement will result in the release of funds withheld from Pennsylvania over the past 14 years and ends the risk and uncertainty that accompanies litigation. The settlement’s resolution of these issues through 2024 extends the agreement and reduces risks for 2 years longer than agreed with any other state.

Since the inception of the Master Settlement Agreement, Pennsylvania has received $6.85 billion in payments.

In 1998, Pennsylvania and 45 other states and six territories signed the Tobacco Master Settlement Agreement, a landmark public health agreement to settle state lawsuits and recover billions in healthcare costs associated with smoking-related illnesses. Original participating manufacturers included the four major tobacco companies that were initially sued and settled – Philip Morris USA; R. J. Reynolds Tobacco Company; Brown & Williamson Tobacco Corp.; and Lorillard Tobacco Company. More than 40 smaller tobacco companies subsequently joined the settlement.

The central purpose of the Master Settlement Agreement (MSA) was to end the deceptive advertising and unfair marketing of tobacco products that induces healthy people to start smoking and, in particular, targets vulnerable, young people.  By ending these practices, funding public education like the “Truth Campaign”, and increasing prevention and cessation efforts, the MSA sought dramatically to reduce smoking. Nationwide and in Pennsylvania, the volume of cigarettes smoked declined by 44 percent from 1998 to 2016, while the number of individuals smoking nationwide declined by more than 36 percent from 1998 – 2016.

Attorney General Shapiro’s decision to settle this issue was praised by the legislative leaders of both parties.

“This settlement will bring hundreds of millions of dollars to benefit Pennsylvania residents and support critical programs,” said Pennsylvania House Speaker Mike Turzai (R-Allegheny). “Thank you to Attorney General Josh Shapiro and his office for fighting for the settlement.”

“This settlement is a fair agreement for all sides. It will provide a significant influx of money to the general fund, while also saving Pennsylvania taxpayers millions of dollars in legal costs,” said Senate President Pro Tempore Joe Scarnati (R-Clinton). “The Attorney General has provided sound leadership for this legal dispute, and I am pleased that we have reached a positive outcome for our Commonwealth.”

“Ongoing efforts to enforce the state’s laws that prohibit the sale of tobacco products to minors are an important part in protecting our children from these harmful and addictive products,” said Senate Majority Leader Jake Corman (R-Centre). “I applaud Attorney General Shapiro for working to put Pennsylvania in a position to receive more money than anticipated, which directly translates into additional money to use in protecting and educating our neighbors.”

“The Master Settlement Agreement has led to a significant decrease in smoking rates in both adults and youth in our Commonwealth,” said Senate Democratic Leader Jay Costa (D-Allegheny). “I commend Attorney General Josh Shapiro for resolving this settlement after years of stalled efforts.”

“This is great news and a big victory for Pennsylvania. The Attorney General fought hard to ensure Pennsylvania got its fair share of the tobacco monies and surpassed even his own expectations,” said House Majority Leader, Rep. Dave Reed (R-Indiana).

“This news could not come at a better time. I commend Attorney General Shapiro for working out a beneficial outcome for Pennsylvania’s working families. This additional money will help us to meet a variety of needs in the state, thanks to the Attorney General’s leadership,” said House Minority Leader Frank Dermody (D-Allegheny).

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