Big Tobacco Makes Annual MSA Payment

April 20, 2007

Earlier this week, the company signatories of the 1998 tobacco Master Settlement Agreement (MSA) made their required annual payments to Maine and the other 45 States. The money collected by Maine will go to finance the Fund for a Healthy Maine. In addition to large amounts paid to the signatory States, the MSA is a public health agreement with strong prohibitions on numerous forms of advertising, promotion, and marketing of cigarettes by the participating companies. Since the Fund for a Healthy Maine was created, youth smoking in Maine has decreased 60% and sales of cigarettes have declined 21% nationwide. “The programs made possible by the Fund for Healthy Maine and the prohibitions on certain advertising have substantially contributed to reducing smoking in Maine. Adults are quitting and fewer children are taking up the habit.” Attorney General Steve Rowe explained.

The major tobacco manufacturers who pay into the fund are Philip Morris, Reynolds America and Lorillard. Of the three only Philip Morris made its full payment. The other two companies paid only about 75% of the amount due and placed the remainder into a “disputed payment account”. They did so based on an alleged entitlement to a downward payment adjustment for a loss in sales to companies that did not participate in the MSA. The total withheld amount equals approximately $704 million dollars.

The agreement provides that any state that diligently enforces the provisions of the MSA during a year is immune from an NPM Adjustment reduction to its MSA payments for that year. Rowe stated, “Maine has diligently enforced all provisions of the MSA. It is my hope that any dispute in this matter will be resolved amicably. However, if this is not the case we are fully prepared to litigate the matter.”

“We would have preferred that all tobacco companies had honored the MSA and made their full annual payment. Nonetheless Maine received $46,336,828.45 to help fund health programs, of that more than $12.5 million is aimed at further reducing smoking.” Rowe added.

Nationwide the signatory States received almost $6 billion in MSA payments, bringing the total paid under the MSA to over $53 billion since the agreement was first executed.

* * * * *

NEWS RELEASE April 20, 2007 DAVID LOUGHRAN, SPECIAL ASSISTANT TO THE ATTORNEY GENERAL (207) 749-9078 OR david.loughran@maine.gov