The MSA – 20 Years Later

Tamara Schlinger, Counsel, NAAG Center for Tobacco and Public Health

Twenty years ago, on November 23, 1998, forty-six states, the District of Columbia, the Commonwealth of Puerto Rico, American Samoa, Guam, the Northern Mariana Islands, and the Virgin Islands (collectively the “Settling States”) and the four largest U.S. cigarette manufacturers entered into the national tobacco settlement known as the Master Settlement Agreement (MSA).¹ Over the past twenty years, the MSA has had far-reaching public health implications and economic effects. This “landmark agreement”² has led the way to significant reductions in cigarette smoking, particularly among youth, and contributed to a dramatic shift in societal perceptions about smoking and the tobacco industry.

The percentage of high school students currently smoking cigarettes (smoked on at least one day during the thirty days before the survey) plummeted from 36.4% in 1997 to 8.8% in 2017.³ In terms of frequent use (smoked twenty or more days during the thirty days before the survey), the percentage dropped from 16.7% in 1997 to 2.6% in 2017.⁴

As evidenced by these numbers, the MSA has been extremely effective in carrying out one of its primary purposes, which is to reduce youth cigarette smoking.⁵ The MSA has not functioned in a vacuum, but rather has worked in conjunction with actions at the federal, state, and local levels to play a vital role in reducing smoking rates. There are four primary ways that the MSA has combatted youth smoking and contributed to these dramatic reductions.

First, it raises the price of cigarettes by requiring the tobacco manufacturers that are parties to the MSA to make annual payments to the Settling States based on their cigarettes sales or shipments in the United States.⁶ Under the MSA, the Settling States released the four largest cigarette manufacturers that originally signed the MSA, known as the Original Participating Manufacturers,⁷ and the tobacco manufacturers that later settled with the states under the MSA, known as Subsequent Participating Manufacturers, from past and future claims for costs incurred by the states as a result of smoking-related illnesses and death and for other equitable relief.⁸ (Original and Subsequent Participating Manufacturers are referred to collectively as Participating Manufacturers.) In exchange, the Participating Manufacturers are required to make annual payments to the Settling States for as long as they have cigarette sales in the United States.⁹ In 2018, for example, the Participating Manufacturers made almost $7.2 billion in payments to the Settling States.¹⁰ From the inception of the MSA through July 2018, the Participating Manufacturers have paid over $126 billion to the Settling States.¹¹

The increase in cigarette prices connected to the MSA is significant because such increases “reduce the initiation, prevalence, and intensity of smoking among youth and young adults.”¹²

Second, Section III of the MSA imposes significant limits on the Participating Manufacturers’ marketing, advertising, and promotional practices.¹³ As a result, the MSA has dramatically changed the way that cigarettes are advertised and marketed in the United States. The MSA specifically prohibits cartoons, such as R.J. Reynolds’ infamous Joe Camel, and ads targeting youth.¹⁴ It limits tobacco brand name sponsorships, a tactic that was used by the tobacco industry to showcase their brands on race cars and at concerts and athletic events.¹⁵ Also, it eliminates transit and outdoor advertising, such as the ubiquitous Marlboro Man billboards and signs in stadiums and arenas, prohibits tobacco brand name merchandise, and limits the distribution of free samples.¹⁶ The MSA also prohibits Participating Manufacturers from causing tobacco brand names to appear in movies, television, theatrical productions, music performances, and video games.¹⁷ Additionally, it prohibits Participating Manufacturers from making any material misrepresentation of fact regarding the health consequences of using tobacco products.¹⁸ This is a particularly important provision given the tobacco industry’s long history of denying and distorting the health consequences of smoking.¹⁹

The Section III restrictions have had a substantial impact on tobacco marketing in the United States, leading to a shift in the way that Participating Manufacturers promote their products to areas that are potentially outside the constraints of the MSA, such as adult-only venues and age-verified websites. Also, technology has drastically changed since the MSA was drafted. In 1998, the Internet was not ingrained in so many aspects of daily life and social media was in its infancy. Social media influencers, Instagram posts, and YouTube videos were non-existent. Today, in contrast, it is difficult to monitor the vast array of promotion platforms and it can be difficult to determine who is behind a promotion. Despite these challenges, the Settling States continue to monitor the Participating Manufacturers’ advertising and marketing and the MSA continues to have a significant impact on cigarette marketing.

Third, through the annual payment process, the MSA provides funds to the Settling States that they may choose to use for smoking prevention and cessation efforts. As noted above, more than $126 billion has been paid to the Settling States since the inception of the MSA. Although the MSA does not dictate the use of these funds, state funding for smoking prevention and smoking efforts did occur in the early years of the MSA.²⁰ However, as state legislatures dealt with budget shortfalls and competing demands on state resources, many states subsequently reduced or completely cut funding for these vital programs. For 2018, no state-funded prevention and cessation programs at the levels recommended by the U.S. Centers for Disease Control and Prevention.²¹

Finally, the MSA established and provided funding to the American Legacy Foundation, now known as the Truth Initiative, which launched the truth smoking prevention campaign in 2000. The hugely successful truth campaign now serves as both a “public health initiative to reduce and eventually eliminate tobacco use” and “as a social marketing brand.”²² The campaign, which is focused on eliminating adolescent and young adult smoking, has evolved since its early days and “now employs product promotions” and “has a major social media voice and a renewed focus on the current youth and young adult generation—the ‘Millennials’[.]”²³ The Truth Initiative published research in 2017 finding that, over the course of a single year, the truth campaign prevented more than 300,000 youth and young adults from starting to smoke.²⁴

While the MSA has been dramatically effective in combating youth smoking, the landscape has changed since the execution of the agreement 20 years ago, posing fresh challenges for the states. As noted, new forms of tobacco product marketing have emerged with evolving technology, and there has been a shift in where Participating Manufacturers are spending their marketing dollars. Also, new types of tobacco and nicotine-based products continue to enter the market. Some of these products may come within the scope of the MSA while others do not. In addition, as a result of the passage of the Family Smoking Prevention and Tobacco Control Act in 2009 (the “Tobacco Control Act”), the Food and Drug Administration (FDA) is now heavily involved in regulating the tobacco industry. There are areas of overlap between the Tobacco Control Act and the MSA, such as a prohibition on or restriction of free samples, brand name sponsorship, and brand name merchandise;²⁵ however, the Tobacco Control Act has a preemption provision that leaves considerable space for states and localities to act by legislation or regulation.²⁶ Moreover, the MSA is not subject to preemption since it is a contract. The involvement of FDA in tobacco has provided the states with new opportunities to collaborate with the federal governement on tobacco control matters.

Ultimately, the evolution of the market and regulatory framework has not diminished the relevance of the MSA and its continued importance in further reducing youth smoking. Although we have seen great success in smoking reduction, tobacco use continues to be the “largest preventable cause of death and disease in the United States.”²⁷ Cigarette smoking and exposure to secondhand smoke kill at least 480,000 Americans each year.²⁸ There is still work be done. The MSA is not without flaws; however, it continues to play an important role in tobacco control and has been recognized as a potential model for other public-health-focused litigation and settlements.²⁹ The MSA’s significant and ongoing impact on the public health of this nation, and its ultimate contribution to saving lives, is a testament to the tremendous efforts of the attorneys general in 1998 as well as their ongoing efforts in working collaboratively to implement and enforce this landmark agreement.

Endnnotes

1. Four states, Florida, Minnesota, Mississippi, and Texas, reached separate settlements with tobacco manufacturers. As a result, these states are not parties to the MSA.
2. Lorillard Tobacco Co. v. Reilly, 533 U.S. 525, 533 (2001).
3. Centers for Disease Control and Prevention, Trends in the Prevalence of Tobacco Use National YRBS: 1991—2017, https://www.cdc.gov/healthyyouth/data/yrbs/pdf/trends/2017_tobacco_trend_yrbs.pdf (last visited Dec. 6, 2018).
4. Id.
5. The fourth “WHEREAS” clause of the MSA provides that the parties to the agreement “are committed to reducing underage tobacco use by discouraging such use and by preventing Youth access to Tobacco Products.” Nat’l Ass’n of Attorneys Gen., Master Settlement Agreement (MSA), https://www.naag.org/assets/redesign/files/msa-tobacco/MSA.pdf (last visited Dec. 6, 2018). These reductions in Youth smoking rates will ultimately accelerate the reduction of smoking prevalence in the overall population.
6. “Cigarette” is defined under the MSA to include roll-your-own tobacco. See MSA § II(m).
7. The Original Participating Manufacturers are Philip Morris Incorporated (now known as Philip Morris USA Inc.) (“Philip Morris”), R.J. Reynolds Tobacco Company (“R.J. Reynolds”), Brown & Williamson Tobacco Corporation (“Brown & Williamson”), and Lorillard Tobacco Company (“Lorillard”). As a result of mergers and acquisitions, R.J. Reynolds is the successor in interest to Brown & Williamson and Lorillard, leaving two remaining Original Participating Manufacturers.
8. See MSA §§ II(nn), (oo), (pp); § XII.
9. See MSA § IX.
10. See Nat’l Ass’n of Attorneys Gen., Payments to Date (as of July 19, 2018), (Jul. 25, 2018), https://www.naag.org/assets/redesign/files/Tabacco/2018-07-25__Payments_to_States_Inception_through_July_19_2018.pdf.
11. See id. This number does not include money that the Participating Manufacturers continue to withhold or have paid into escrow pending resolution of certain payment disputes between the Participating Manufacturers and Settling States.
12. U.S. Dept. of Health and Human Services, Public Health Service, Office of the Surgeon General, Preventing Tobacco Use Among Youth and Young Adults: A Report of the Surgeon General (2012), https://www.surgeongeneral.gov/library/reports/preventing-youth-tobacco-use/full-report.pdf.
13. See MSA § III. The Section III restrictions are broader than other provisions in the MSA in that they apply not only to a Participating Manufacturer’s cigarettes but also to its smokeless tobacco products.
14. MSA § III(a), (b).
15. MSA § III(c).
16. MSA § III(d), (f), (g).
17. MSA § III(e).
18. MSA § III(r).
19. As Judge Kessler stated in her 1600-plus page decision in the RICO case brought by the United States against major tobacco manufacturers, the defendant tobacco manufacturers “have publicly denied, distorted, and minimized the hazards of smoking for decades. The scientific and medical community’s knowledge of the relationship of smoking and disease evolved through the 1950s and achieved consensus in 1964. However, even after 1964, Defendants continued to deny both the existence of such consensus and the overwhelming evidence on which it was based.” United States v. Philip Morris USA, Inc., et al., 449 F. Supp. 2d 1, 146 (D.D.C. 2006).
20.  Statement of Matthew L. Myers, President, Campaign for Tobacco-Free Kids, On the 20th Anniversary of State Tobacco Settlement (the MSA), It’s Time for Bold Action to Finish the Fight Against Tobacco, Campaign for Tobacco-Free Kids, (Nov. 26, 2018), https://www.tobaccofreekids.org/press-releases/2018_11_26_msa20.
21. Id.
22. W. Douglas Evans et al., Effects of the truth FinishIt Brand on Tobacco Outcomes, 9 Prev. Med. Rep. 6 (2018).
23. Id. at 7.
24. Donna Vallone et al., The Effect of Branding to Promote Health Behavior: Reducing Tobacco Use Among Youth and Young Adults, 14 Int. J. Environ. Res. Public Health 1517 (2017).
25. 21 U.S.C. § 387a-1, 21 C.F.R. §§ 1140.16(d), 1140.34(a), (c).
26. 21 U.S.C. § 387(p).
27. Centers for Disease Control and Prevention, Current Cigarette Smoking Among U.S. Adults Aged 18 Years and Older, https://www.cdc.gov/tobacco/campaign/tips/resources/data/cigarette-smoking-in-united-states.html (last updated Apr. 23, 2018).
28. U.S. Dept. of Health and Human Services, Public Health Service, Office of the Surgeon General, The Health Consequences of Smoking – 50 Years of Progress (2014), https://www.surgeongeneral.gov/library/reports/50-years-of-progress/full-report.pdf.
29. See Cheryl Healton, The Tobacco Master Settlement Agreement—Strategic Lessons for Addressing Public Health Problems, 379 New Eng. J. Pub. Health 997 (2018).