Tobacco companies, including Philip Morris USA and Reynolds American Inc., won an arbiter’s ruling that may allow them to reduce $1.2 billion in payments to states under a 1998 health care settlement.
The Brattle Group, a consulting firm hired by the states and cigarette makers, ruled advertising restrictions imposed by the accord have been a “significant factor” in reducing manufacturers’ market share, according to a statement today from the National Association of Attorneys General in Washington.
Cigarette makers may use the decision to withhold part of the $6.5 billion they owe states under a provision that allows them to adjust payments based on market share. States have become dependent on the money and have used it for health-care programs, antismoking campaigns and to balance their budgets.
“Ultimately, we suspect that some sort of negotiated agreement will be the outcome — sort of a settlement of the settlement,” Prudential Equity Group LLC Robert Campagnino in New York wrote today. “Given what we see as the level of dependency the states have on tobacco settlement funds, today’s ruling will likely trigger a wave of litigation.” Read the Bloomberg report here.