98-6 STM
CRS Report for Congress
Received through the CRS Web
Tobacco Legislation in the 105th Congress:
Side-by-Side Comparison of S. 1415, S. 1530,
S. 1638, S.1889, H.R. 3474, and H.R. 3868
Updated August 19, 1998
C. Stephen Redhead
Joy Austin-Lane
Science, Technology, and Medicine Division
Congressional Research Service ˜
The Library of Congress
ABSTRACT
This report provides a summary of tobacco legislation in the 105th Congress, including a
side-by-side comparison of two sets of bills introduced to implement the June 20, 1997,
tobacco settlement or otherwise comprehensively limit tobacco use and marketing. Six bills
are included: S. 1415, S. 1530, S. 1638, S. 1889, H.R. 3474 and H.R. 3868. The report also
summarizes the provisions of the settlement and the FDA tobacco regulation. This product
will be updated as additional bills are introduced. A list of CRS products on tobacco issues
may be found in the Tobacco Electronic Briefing Book on the CRS home page. This site
also includes briefing pages on a variety of tobacco issues.
Tobacco Legislation in the 105 Congress: Side-by-Side
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Comparison of S. 1415, S. 1530, S. 1638,
S. 1889, H.R. 3474, and H.R. 3868
Summary
On June 20, 1997, a group of state attorneys general and tobacco industry
lawyers announced a settlement that would grant the tobacco industry immunity from
class-action lawsuits in return for annual industry payments to settle the states’
Medicaid lawsuits, submission to strict federal regulation of its products, and funding
for national tobacco control programs. The proposed settlement raises many
complex issues and will require legislation if it is to take effect. House and Senate
Committees have held numerous tobacco hearings as lawmakers consider
development of legislation to implement settlement’s provisions or otherwise
comprehensively restrict tobacco use and marketing. Several comprehensive tobacco
bills have been introduced, including S. 1415 (McCain), S. 1530 (Hatch), S. 1638
(Conrad), S. 1889 (Harkin), H.R. 3474 (Fazio), and H.R. 3868 (Hansen).
On April 1, the Senate Commerce Committee passed S. 1415 by a vote of 19–1.
A modified version of the bill was subsequently debated and amended by the Senate
before being recommitted to the Commerce Committee on a procedural vote. The
modified bill, as amended, would raise cigarette prices by an estimated $1.10 a pack
over 5 years and fines manufacturers up to $7 billion a year if youth smoking rates
do not decline by 67 in 10 years. The bill grants FDA new legal authority to regulate
tobacco products, gives states the option of settling their lawsuits in return for annual
funding, prohibits addiction-based lawsuits, and caps the industry’s legal liability at
$8 billion a year. As amended, S. 1415 would use tobacco revenues to pay for tax
cuts and boost funding for federal drug interdiction programs.
With the exception of the Hatch bill, which mirrors last year’s settlement and
grants the industry broad immunity from civil liability, the other bills provide the
tobacco companies with little or no legal protection. For example, both the Conrad
and Fazio bills would settle the state lawsuits but do not grant the industry any
protection from class actions or addiction-based claims. Moreover, both bills would
raise cigarette prices by about $1.50 a pack over 3 years and allocate the revenues to
biomedical research and a variety of existing children’s health, nutrition, and welfare
programs. The Harkin bill would increase cigarette prices by about $1.50 in 2 years.
It gives FDA broad authority to regulate tobacco products as devices, fines
manufacturers up to $10 billion a year if youth reduction targets are not met, and caps
the industry’s legal liability at $8 billion a year.
Unlike the proposed settlement, which did not include any provisions on
tobacco farmers, the comprehensive bills all include financial assistance for growers
and tobacco-dependent communities. S. 1415 includes two competing proposals for
assisting tobacco growers. One proposal would largely preserve the federal tobacco
price support program and provide assistance to farm families and communities as
the U.S. share of tobacco markets declines. The other proposal would terminate the
price support program and buy out the farmers. Numerous other tobacco-related
bills, more limited in scope, have been introduced in the 105 Congress.
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Contents
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Legal Immunity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
FDA Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Tobacco Use Reduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Annual Payments vs. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Comprehensive Tobacco Bills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
S. 1415 (McCain) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
S. 1530 (Hatch) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
S. 1889 (Harkin) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
S. 1638 (Conrad) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
H.R. 3474 (Fazio) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
H.R. 3868 (Hansen) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Tobacco Farmers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Other Tobacco Bills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Senate FY1999 Budget Resolution (S.Con.Res. 86) . . . . . . . . . . . . . . . . . 12
Laws Enacted by the 105 Congress
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. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Executive Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
List of Tables
Table 1a.
Comparison of Tobacco Settlement Bills
(S. 1415, S. 1889, and S. 1530) . . . . . . . . . . . . . . . . . . . . 14
Table 1b.
Comparison of Tobacco Settlement Bills
(S. 1638, H.R. 3474, and H. R. 3868) . . . . . . . . . . . . . . . . 25
Table 2.
Summary of June 20, 1997 Tobacco Settlement . . . . . . . . 34
Table 3.
FDA’s Regulation of Cigarettes and Smokeless
Tobacco Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Tobacco Legislation in the 105th Congress: Side-
by-Side Comparison of S. 1415, S. 1530,
S. 1638, S. 1889, H.R. 3474, and H.R. 3868
Overview
Since 1994, 41 states and Puerto Rico have filed lawsuits against the tobacco
industry seeking reimbursement for the medical expenses they have paid to treat
smoking-related illnesses under the Medicaid program. On June 20, 1997, a group
of state attorneys general, together with private attorneys who had brought class-
action lawsuits against tobacco companies, announced that they had reached a
national settlement with the industry. Under the terms of the agreement, the industry
would pay $368.5 billion over the first 25 years, and $15 billion a year thereafter, to
reimburse states for their tobacco-related medical costs, pay for tobacco control
programs to reduce tobacco use among teenagers, and extend health insurance to
uninsured children.
The industry would also submit to regulation of its products by the Food and
Drug Administration (FDA) and agree to substantial restrictions on tobacco product
advertising and promotion. In return, the industry would gain protection from current
and future civil lawsuits. In addition to settling all the state cases, the proposed
settlement would terminate all pending class-action lawsuits and nicotine addiction
claims, and provide the companies with immunity from such lawsuits in the future.
Participating tobacco companies would be required to enter into legally binding and
enforceable contracts with states, in which the companies would agree voluntarily to
waive their First Amendment rights to advertise their products, in exchange for legal
immunity.
The text box on page 2 briefly summarizes the major provisions of the
settlement. Table 2 provides a more detailed outline of the settlement. Note that the
citations that appear in parentheses in Title I of the settlement refer to section 897 of
the FDA’s tobacco regulation, which is summarized in Table 3.
1
The proposed settlement raises many complex issues and will require federal
legislation before taking effect. This report summarizes and provides a side-by-side
comparison of 6 bills introduced to implement the settlement or otherwise
comprehensively limit underage tobacco use and marketing. The report also
summarizes many of the other, more limited tobacco bills that have been introduced
1 Regulations Restricting the Sale and Distribution of Cigarettes and Smokeless
Tobacco to Protect Children and Adolescents.
Federal Register, v. 61, no. 168, Aug. 28,
1996. pp. 44396-45318.
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in the 105 Congress. There are a number of key issues affecting possibl
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legislation.
Summary of Proposed Tobacco Settlement (June 20, 1997)
FDA Regulation. Incorporates the following provisions of the FDA’s August 28, 1996,
tobacco regulation (21 CFR 897): prohibits sale of tobacco products to persons under age 18 and
requires photo ID to verify age; limits advertising to which children are exposed to black-on-white,
text only format; prohibits the sale or distribution of promotional non-tobacco items such as hats
and tee shirts; prohibits brand-name sponsorship of sporting and other events; requires explicit
warning labels. Extends the FDA’s regulation by banning all vending machines and outdoor
advertising, and prohibiting the use of human and cartoon images in advertising and packaging.
Establishes strict regulatory requirements for reducing or eliminating nicotine from tobacco
products including formal rule making with judicial review and demonstrating that the modified
product reduces health risks and does not create a black market for unmodified products.
Retailer Licensing. Sets federal standards for licensing retailers who sell tobacco products.
Retailers caught selling to minors would be fined or risk license revocation.
Industry Documents. Establishes a public depository of industry documents, and a three-
judge arbitration panel to settle disputes over documents that are determined by the industry to be
privileged against disclosure.
Non-Tobacco Ingredients. Requires companies to disclose annually to FDA the amounts
of all non-tobacco ingredients added to each brand, and to demonstrate that each ingredient is not
harmful under the intended conditions of use.
Reduction of Youth Tobacco Use. Sets targets for reducing the number of underage
smokers: 30% reduction in 5 years; 60% reduction in 10 years. Fines industry up to $2 billion a
year if targets are not met.
State Youth Access Laws. Requires states to enforce their minimum-age-of-sale laws for
tobacco products or risk losing settlement funds. The provisions expand on those of the Synar
Amendment.
Environmental Tobacco Smoke. Restricts smoking in public buildings entered by 10 or
more individuals at least once a week to separately ventilated smoking rooms. Exempts restaurants
(except fast food), bars, private clubs, and prisons.
Industry Annual Payments. Requires industry to pay $10 billion up front and annual
payments beginning at $8.5 billion in the first year, increasing to $15 billion in the fifth year, and
remaining at $15 billion a year thereafter. Payments would be adjusted for inflation and would be
tax deductible.
Tobacco Control Programs and Research. Allocates funds to states to reimburse
Medicaid programs and provide health insurance to uninsured children. Provides funds for
tobacco cessation programs, counter advertising, biomedical research, FDA regulation, and
federal, state, and local tobacco control programs.
Civil Liability. Terminates all pending state Medicaid and class-action lawsuits and
prohibits such lawsuits in the future. Preserves the right of individuals to bring personal injury
claims, but prohibits punitive damages in claims arising from past industry conduct. Limits the
total damages paid by the industry in any one year to 33% of the annual payment.
Legal Immunity. In the wake of damaging industry documents that have been
made public in the past few months, lawmakers appear less inclined than previously
to grant the industry protection from civil lawsuits. The industry has stated that the
civil liability protections in the proposed settlement are a necessary precondition for
it to agree voluntarily not to advertise and promote its products in media and venues
to which children have access. In addition to protection from civil liability, the
settlement also caps the amount the industry would have to pay in damages each year
in personal injury lawsuits.
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FDA Regulation. In August 1996, the FDA issued a regulation aimed at
reducing tobacco use among children and adolescents. The agency concluded that
cigarettes and smokeless tobacco products are delivery devices for nicotine, an
addictive drug. Last year, a North Carolina federal judge agreed with FDA’s position
and ruled that cigarettes and smokeless tobacco products are both drugs and drug
delivery devices within the meaning of the Federal Food, Drug, and Cosmetic Act
(FFDCA). However, while the district court upheld all the regulation’s youth access
and labeling provisions, it found that the FDA did not have statutory authority under
the FFDCA to restrict tobacco-product advertising and promotion. The court also
delayed implementation of all but two of the regulation’s provisions, pending further
court action.2
On August 14, 1998, the Fourth U.S. Circuit Court of Appeals overturned the
lower court’s decision, ruling that the FDA lacks authority to regulate tobacco
products. The appeals court ruled that Congress has never delegated such authority
to FDA, and that the agency’s argument for regulating as a medical device a
substance as hazardous as tobacco was “obvious sophistry.” The Clinton
Administration has appealed the ruling to the full appellate court.
The proposed settlement would explicitly recognize the FDA’s authority to
regulate tobacco products and codify that authority into law. The settlement goes
beyond the FDA’s advertising restrictions, for example, by banning all outdoor
tobacco product advertising and all brand-name advertising facing outside from retail
stores. However, public health officials and some lawmakers have criticized the
settlement on the grounds that it places undue restrictions on FDA’s authority to
regulate nicotine and other harmful tobacco-product constituents. They want to see
FDA granted unrestricted authority to regulate tobacco products as combination
drug/device products under the FFDCA.
Tobacco Use Reduction. The settlement sets reduction targets for underage use
of tobacco products. For example, it mandates a 60% reduction over 10 years in the
number of underage cigarette smokers. Manufacturers would be fined up to $2
billion a year if the reduction targets are not met. However, they could petition to
recover 75% of the fine if they pursued all reasonably available measures to reduce
underage tobacco use and did nothing to undermine the provisions of the settlement.
Many lawmakers are pressing for greater reduction targets and larger penalties.
Proposals include requiring manufacturers to pay a noncompliance fee of up to $2.00
per pack of cigarettes, and assessing penalties on a company-specific basis, as well
as on the industry as a whole.
Annual Payments vs. Taxes. The proposed settlement mandates annual
industry payments indefinitely. The industry would pay an up-front sum of $10
billion, and annual payments beginning at $8.5 billion in the first year and increasing
to $15 billion by the fifth year. The payments would be tax-deductible and subject
to a yearly adjustment for inflation and tobacco-product consumption. The industry
2 Two youth access provisions went into effect on February 28, 1997, prior to the
North Carolina decision, which prohibit sales of tobacco products to anyone under age 18
and require retailers to check photo ID for anyone under age 27.
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would have to increase cigarette prices by about 62 cents per pack to raise $15 billion
in additional revenue, based on current cigarette sales. By itself, this price increase
might reduce the number of underage cigarettes by as much as 20%.3
The President, the public health community, and many lawmakers argue that a
much larger price increase, at least $1.50 per pack, is required in order to meet the
youth tobacco use reduction targets in the settlement. Legislation to increase the
federal tobacco excise tax by $1.50 per pack over three years has been introduced in
the House and the Senate. For more information on the impact of the proposed
tobacco settlement on prices, consumption, and income distribution, see CRS Report
97-995,
The Proposed Tobacco Settlement: Effects on Prices, Smoking Behavior, and
Income Distribution, by Jane Gravelle.
Comprehensive Tobacco Bills
Several comprehensive tobacco bills have been introduced, including S. 1415
(McCain); S. 1530 (Hatch); S. 1638 (Conrad); S. 1889 (Harkin), H.R. 3474 (Fazio),
and H.R. 3868 (Hansen). Table 1a provides a section-by-section comparison of the
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provisions of S. 1415, S. 1889, and S. 1530. Table 1b compares the provisions of the
other three bills. The grey shaded areas in the tables indicate that a bill does not
contain any provisions on a particular topic. For ease of comparison, the two tables
are organized and formatted in the same way.
S. 1415 (McCain). The McCain bill, as introduced, mirrored the proposed
settlement and, according to its sponsor, was intended to serve as a basis for
discussion and amendment. To date, it is the only tobacco bill to see legislative
activity. On April 1, the Senate Commerce Committee approved a substitute bill by
a vote of 19–1. On May 14, the committee substitute bill was further amended and
reported out of the Finance Committee by a vote of 13–6. The bill was further
modified when it came to the Senate floor to reflect provisions agreed to in
negotiations between the Commerce Committee and the White House. The Senate
debated S. 1415 for 4 weeks, passing 7 amendments, before the bill was ordered to
be recommitted to the Commerce Committee on June 17 on a procedural vote.
Details of the floor votes may be found in the chronology page in the Tobacco
Electronic Briefing Book on the CRS home page.
3 According to the Tobacco Institute, the average price of a pack of cigarettes,
including generic brands, as of November 1, 1997, was $1.95. A recent study of tobacco
product price elasticity estimates that for every 15% increase in price, the number of
underage smokers decreases by about 10%.
4 The National Tobacco Policy and Youth Smoking Reduction Act (S. 1415) was
introduced by Senator McCain on November 7. The Placing Restraints on Tobacco’s
Endangerment of Children and Teens, or PROTECT Act (S. 1530) was introduced by
Senator Hatch on November 13. The Healthy Kids Act (S. 1638) was introduced by Senator
Conrad on February 12, 1998. The Kids Deserve Freedom from Tobacco Act (S. 1889) was
introduced by Senator Harkin on March 31, 1998. The Healthy Kids Act (H.R. 3474) was
introduced by Representative Fazio on March 17, 1998. The Bipartisan NO Tobacco for
Kids Act (H.R. 3868) was introduced by Representative Hansen on May 14, 1998.
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The modified committee substitute bill that came before the Senate mandates
annual industry payments that would raise cigarette prices over the next 5 years by
about $1.10 per pack and generate net revenues of about $65 billion during that
period. It grants FDA new legal authority to regulate tobacco products and would
fines the industry up to $4 billion a year if youth smoking does not decline by 60%
in 10 years. The bill gives states the option of settling their lawsuits against the
industry, settles the Castano class actions, and prohibits future addiction-based
claims. The industry’s legal liability is capped at $8 billion a year. Finally, the bill
includes two competing titles—one favored by Senators Ford and Robb, the other
favored by Senators Lugar and McConnell—that provide financial assistance to
tobacco farmers and their communities (see discussion below).
The Senate passed 7 amendments to S. 1415, which are summarized in Table
1a in italics, including using tobacco revenues to offset the cost of a tax cut for
middle and lower income families and pay for federal anti-drug programs. Other
amendments would limit attorneys’ fees, disallow the tax deduction for tobacco
advertising, promotion, and marketing, provide funds to pay for veterans’ tobacco-
related health care, and mandate stiff company-specific penalties.
S. 1530 (Hatch). The Hatch bill is closely based on the proposed settlement
and grants the industry broad protection from civil liability. It mandates annual
industry payments totaling $398.3 billion over 25 years, compared to a 25-year total
of $368.5 billion in the settlement. Unlike the settlement, S. 1530 authorizes and
allocates funding for asbestos-related litigation and Native American health
programs. It also establishes a new chapter in the FFDCA for regulating tobacco
products, includes stiffer industry penalties if nationwide underage smoking
reduction targets are not met, mandates greater restrictions on smoking in public
indoor facilities, addresses attorneys’ fees, and includes a limited anti-trust
exemption for the industry.
S. 1889 (Harkin). A bipartisan bill introduced by Senators Harkin, Chafee, and
Graham mandates industry payments of $25 billion a year, which would raise the
price of a pack of cigarettes by about $1.50 over 2 years. S. 1889 grants the FDA
broad authority to regulate tobacco products as restricted devices, and fines the
industry up to $10 billion for failure to meet the youth reduction targets. It also gives
states the option of settling their lawsuits, settles the class-action lawsuits based on
addiction, and caps the industry’s civil liability at $8 billion a year. The bill provides
$13.5 billion for tobacco farmers and their communities.
S. 1638 (Conrad). The other bills provide the tobacco companies with little
or no legal protection. The Conrad bill requires manufacturers to pay a health fee of
$1.50 per pack, phased in over 3 years, and uses the net revenue, estimated to total
$500 billion over 25 years, to fund tobacco control programs, biomedical research,
and other health, welfare, and education programs. S. 1638 gives FDA unrestricted
authority to regulate tobacco products as drugs and devices, and imposes both
industry-wide and company-specific penalties on manufacturers that do not meet the
reduction targets for underage tobacco use. The bill does not grant the industry any
special protection from civil litigation, but it would settle the state and local
government medical-cost reimbursement lawsuits.
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H.R. 3474 (Fazio). The Fazio bill is largely based on the Conrad bill, except
that it mandates annual industry payments over 25 years rather than assessing a per-
pack fee on tobacco products. However, the projected net revenues in H.R. 3474 are
the same as S. 1638. H.R. 3474 also establishes a $20 billion asbestos trust fund to
pay asbestos injury claims of smokers.
H.R. 3868 (Hansen). The Hansen bill also assesses a $1.50 per pack fee on
cigarettes and allocates the revenues for states, federal tobacco control programs, and
reducing the national debt. It grants FDA unrestricted authority to regulate tobacco
products as restricted devices and requires manufacturers to pay up to $2 per pack if
youth smoking does not decline by 80% in 10 years. H.R. 3868 gives states the
option of settling their lawsuits in return for funding.
A bill introduced by Senator Kennedy (S.1492) increases the federal tobacco
excise tax by $1.50 per pack over 3 years and allocates the revenues to biomedical
research, child health and development research, national and state counter-
advertising and smoking cessation programs, and existing children’s health, nutrition,
and welfare programs. The tax increase, which is set out in a short companion bill,
S. 1491, would generate as much as $500 billion over the first 25 years. In addition
to authorizing spending on research and public health and welfare programs, S. 1492
grants FDA unrestricted authority to regulate tobacco products as drugs and drug-
delivery devices. S. 1492 and S. 1491 were introduced in the House as H.R. 3028
and H.R. 3027 (DeLauro), respectively.
Tobacco Farmers
The proposed settlement does not include any provisions concerning tobacco
farmers or the federal tobacco price support program, which was established in the
1930s as a way of limiting production in order to guarantee a higher and more stable
price for the tobacco crop. Tobacco farmers, who are concentrated in six major
tobacco-producing states, are concerned about the financial impact of the settlement
on their farms and communities. There appears to be some agreement among
lawmakers that comprehensive tobacco legislation should include financial assistance
to address these concerns.
Title X of the modified McCain bill incorporates, with modification, the Long-
Term Economic Assistance for Farmers Act, or LEAF Act (S. 1310; Ford), and the
Tobacco Market Transition Act (S. 1582; Robb). It establishes a $28.5 billion fund
to provide financial assistance for tobacco farmers, industry workers, and tobacco-
dependent communities while maintaining the current tobacco price support program
for burley tobacco growers. Flue-cured quotas would be replaced with
nontransferable permits. Title XV of S. 1415 incorporates, with modification, the
Tobacco Transition Act (S. 1313; Lugar), which terminates the federal tobacco price
support program. It establishes an $18 billion fund to buy out quote owners and
compensate tenants.
The Harkin, Conrad, and Fazio bills all set aside funding for tobacco farmers
and their communities and require Congress to enact legislation authorizing the use
of these funds. For more information about the agricultural provisions in the tobacco
settlement bills, see CRS Report 97-1042,
Summary and Comparison of the Major
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Agricultural Provisions of the Tobacco Settlement Policy Proposals, and CRS Report
98-133,
Compensating Tobacco Farmers for the Tobacco Settlement, both authored
by Jasper Womach. Additional information may be found in the Tobacco Electronic
Briefing Book on the CRS home page.
Other Tobacco Bills
In addition to the very broad tobacco settlement bills described above and
summarized in Tables 1a and 1b, numerous other tobacco-related bills, more limited
in scope, have been introduced during the 105 Congress. Many of these bills ar
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summarized by topic below.
Advertising
H.R. 410 (Gordon) prohibits FDA regulation of tobacco sponsorship of professional
motor sports.
H.R. 762 (Hansen) restricts the advertising and promotion of tobacco products.
American Indians
S. 1797 (Campbell) applies much of the tobacco settlement to federally recognized
Indian tribes, allowing regulation enforcement and retailer licensing by qualified
tribes and authorizing public health grants to tribes (subtracted from state grants) and
trust fund payments to the Indian Health Service; subjects tribal tobacco-product
manufacturers to tobacco trust fund payments; exempts Native American religious
and traditional tobacco uses from requirements of the tobacco settlement act; and
forbids state imposition of tobacco settlement act requirements on tribes. Reported
(amended) by Indian Affairs Committee on April 1, 1998.
S. 2300 (Gorton) requires Indian tribes to collect and remit state excise tax from
sales of tobacco products to nontribal members.
Attorneys’ Fees
H.R. 2740 (McInnis) limits attorneys’ fees paid in connection with the settlement
of state litigation against the tobacco industry to $150 per hour plus out-of-pocket
expenses approved by the court.
H.R. 3907 (Bryant) amends the Internal Revenue Code to tax attorneys’ fees at a
marginal rate of 95%.
S. 1570 (Faircloth) limits the plaintiff’s attorneys’ fees paid in connection with the
settlement of state litigation against the tobacco industry to $125 per hour plus out-
of-pocket expenses approved by the court.
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Excise Taxes
H.R. 1263 (Pallone) amends the Internal Revenue Code to increase the federal
tobacco excise tax to cover the cost of extending health care insurance coverage to
children.
H.R. 1364 (Johnson) amends the Internal Revenue Code to increase the federal
tobacco excise tax to fund state grants to provide uninsured children with health care
insurance.
H.R. 2897 (Lewis) amends the Internal Revenue Code to impose an excise tax of
$500 annually on tobacco product vending machines.
S. 1343 (Lautenberg)/H.R. 2764 (Hansen) increases federal tobacco excise tax by
$1.50 per pack over 3 years, and establishes a trust fund for the new revenues;
requires 75% of the trust funds to be allocated to states for tobacco control programs
and existing child and maternal welfare programs; requires the remaining 25% to be
used for federal tobacco control programs, financial assistance for tobacco farmers,
and for NIH and CDC.
Farmers
H.R. 1826 (Furse) increases the deficit-reduction marketing assessments for
participants in the federal tobacco price support program.
H.R. 3264 (Baesler) requires cigarette manufacturers to pay the costs of the USDA’s
tobacco programs. Establishes a voluntary tobacco quota retirement system for quota
holders and provides market transition assistance for tobacco farmers and their
communities.
H.R. 3664 (Lewis, R.) requires tobacco importers and tobacco product
manufacturers to pay the USDA’s tobacco program costs.
H.R. 3867 (Baesler) provides financial assistance for tobacco farmers, industry
workers, and tobacco-dependent communities. Maintains the federal tobacco price
support program for burley tobacco growers and replaces the flue-cured quotas with
nontransferable permits. [A combination of S. 1310 and S. 1582. Similar to Title X
of S. 1415.]
S. 643 (Durbin)/H.R. 1438 (DeGette) prohibits the federal government from
providing insurance or uninsured-crop disaster assistance for tobacco.
S. 1310 (Ford) provides financial assistance to tobacco farmers, displaced industry
workers, and tobacco-dependent communities in response to any adverse impacts
caused by the tobacco settlement; retains the federal tobacco price support program.
[Incorporated in S. 1415 (McCain)].
S. 1313 (Lugar) terminates the federal tobacco price support program and
compensates farmers for the loss in value; provides block grants for agricultural
diversification and rural economic development. [Incorporated in S. 1530 (Hatch)].
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S. 1582 (Robb)/H.R. 3437 (Goode) transfers the administration of the tobacco price
support program from the USDA to a private corporation, and provides market
transition assistance for quota holders, tobacco producers, and tobacco-growing
counties.
Federal Medicaid
S. 1471 (Graham)/H.R. 2938 (Bilirakis) prohibits the federal government from
claiming its share of the Medicaid funds recovered as part of state litigation with the
tobacco companies.
Federal Medicare
H.R. 3172 (Peterson, J.) mandates that all unallocated tobacco settlement revenues
be used for Part A of Medicare.
Industry Documents
H.R. 1881 (Waxman) establishes the Tobacco Accountability Board, to which each
company must submit all documents relating to the health effects of tobacco use,
control of nicotine in tobacco products, and the sale and marketing of tobacco
products to children; requires the Board to make the documents available to the
public.
Industry Tax Deductions
H.R. 1323 (McHale) amends the Internal Revenue Code to disallow deductions for
advertising for tobacco products.
H.R. 3908 (Bryant) amends the Internal Revenue Code to exclude from gross
income the dividends paid by tobacco companies which meet youth smoking
reduction targets.
H.R. 4473 (Kaptur) amends the Internal Revenue Code to disallow deductions for
tobacco-product advertising and expenses incurred influencing federal tobacco
policy.
S. 1411 (Mack)/H.R. 3030 (Gekas) amends the Internal Revenue Code to prohibit
a tax deduction for industry payments pursuant to any tobacco settlement, and
establishes a National Institutes of Health research trust fund for the net increase in
revenues received as a result of the tax code amendment.
S. 1755 (Reed) amends the Internal Revenue Code to disallow deductions for
advertising tobacco products if manufacturers do not comply with certain advertising,
marketing, and promotion restrictions. [These restrictions are identical to those in S.
1638.]
International
CRS-10
H.R. 2135 (Doggett) prohibits U.S. agencies from promoting the marketing and
export of tobacco products; prohibits U.S. agencies from seeking the removal or
reduction by any foreign country of any restrictions on the marketing of tobacco
products; mandates that tobacco product exports be subject to the current labeling
and advertising requirements for tobacco products in the United States.
H.R. 3738 (Doggett) incorporates the provisions in H.R. 2135. In addition,
establishes the American Center on Global Health and Tobacco and provides grants
for international tobacco control. Mandates serial numbers and export labels on
packages and requires manufacturers and distributors to post a bond for all tobacco
exports. [Similar to international tobacco control and anti-smuggling provisions in
Title XI of S. 1415.]
S. 1060 (Lautenberg) prohibits U.S. agencies from promoting the marketing and
export of tobacco products; prohibits U.S. agencies from seeking the removal or
reduction by any foreign country of any nondiscriminatory law that restricts the
marketing of tobacco products; mandates that tobacco product exports be subject to
the labeling and advertising requirements that are applicable to tobacco products in
the United States.
Minorities
H.R. 4189 (Thompson) amends the Public Health Service Act to require the Office
of Minority Health to fund and coordinate federal efforts to address tobacco use
among minorities; provides grants to minority medical schools for tobacco-related
research and provides funding for community, migrant, and homeless health centers
for tobacco-related health care.
Smoking Restrictions
H.R. 552 (Oberstar) bans smoking on all airline flights that touch down in the
United States.
H.R. 1351 (Lewis) prohibits smoking in any federally funded transportation facility.
H.R. 2118 (Traficant) prohibits smoking in any building owned or leased by the
federal government.
S. 826 (Lautenberg)/H.R. 1771 (Waxman) restricts smoking in public facilities,
defined as any building entered by 10 or more individuals at least one day a week, to
enclosed, separately ventilated areas; prohibits smoking on all airline flights within
the United States, and on all international flights into and out of the United States.
[The same definition of a public facility appears in the environmental tobacco smoke
provisions in the proposed settlement and the comprehensive settlement bills.]
S. 938 (Bond) provides medical surveillance, research, and services aimed at the
prevention and cessation of prenatal and postnatal smoking.
S. 2066 (Chafee) establishes a state grant program for education and outreach on the
health impact of environmental tobacco smoke. Bans smoking on any international
CRS-11
flight that touches down in the United States. Restricts smoking in all federal
buildings to separately ventilated smoking rooms.
Veterans
H.R. 3948 (Klink) entitles veterans to disability compensation for tobacco-related
diseases.
H.R. 4070 (Frank) and
H.R. 4220 (Smith, L.) repeal a provision in the
Transportation Equity Act for the 21 Century (TEA-21; P.L. 105-178), whic
st
h
prohibits veterans from claiming tobacco-related disability compensation.
H.R. 4188 (Stearns) establishes a Veterans Tobacco Trust Fund and provides $3
billion for veterans’ tobacco-related health care.
H.R. 4374 Kennedy, P.) entitles veterans to medical care for tobacco-related
illnesses.
Youth Tobacco Use
H.R. 768 (LaHood) prohibits FDA from fining retailers for face-to-face tobacco
sales that are in accordance with state law.
H.R. 2034 (Bishop) amends Section 1926 of the Public Health Service Act (i.e.,
Synar Amendment) to require states to enact a detailed law regarding the sale and
distribution of tobacco products to minors or risk losing federal substance abuse
block grant funds. [This bill incorporates all of S. 1238, plus it requires lockout
devices on vending machines except in adult-only facilities, and a ban on the sale and
distribution of tobacco products to minors via the Internet.]
H.R. 2519 (DeGette) increases the legal age of smoking from 18 to 21.
H.R. 2594 (Fox) restricts youth access to tobacco products by limiting vending
machines to adult-only facilities, prohibiting sales to persons under age 18, requiring
photo ID in face-to-face sales, requiring cigarettes be sold only in packs of 20, and
requiring retailers to display prominently signs indicating the requirements for
purchase of tobacco products.
H.R. 3298 (Rothman) prohibits tobacco product vending machines except in adult-
only facilities.
H.R. 3457 (Luther) prohibits movies in which a tobacco company has paid to have
its product featured.
H.R. 3655 (Green) provides incentives for states to enact laws that penalize minors
for tobacco possession and retailers who sell tobacco products to minors.
H. R. 3889 (Upton) amends the Food, Drug, and Cosmetic Act to require ingredient
labeling and explicit health warnings. Bans vending machines except in adult-only
CRS-12
facilities. Prohibits sales to individuals under age 18. Mandates 80% reduction in
youth smoking over 10 years.
H.R. 4159 (Blunt) waives the Synar Amendment sanctions against states if they
penalize minors caught purchasing or in possession of tobacco products by
suspending their driver’s license.
S. 527 (Lautenberg)/H.R. 1244 (Meehan) mandates explicit warning labels for
packages and advertising, and requires ingredient disclosure and labeling.
S. 828 (Durbin)/H.R. 1772 (Waxman) sets reduction targets for underage tobacco
use (by 90% in 6 years) and fines manufacturers $1 per unit of product sold if the
targets are not met; fines escalate with repeated noncompliance.
S. 1238 (Smith, G.) amends Section 1926 of the Public Health Service Act (i.e.,
Synar Amendment) to require states to enact a detailed law regarding the sale and
distribution of tobacco products to minors or risk losing federal substance abuse
block grant funds. [Sec. 302 of the Hatch bill (S. 1530) is S. 1238, but with stiffer
penalties. This bill, first introduced in 1997, was reintroduced in 1998 as S. 1713.]
Senate FY1999 Budget Resolution (S.Con.Res. 86)
On April 2, the Senate voted 57–41 to approve the FY1999 Budget Resolution,
which reserves all tobacco settlement revenues for the Medicare Trust Fund. An
amendment by Senator Conrad (S.Amdt. 2174) to provide tobacco funds for youth
tobacco control and smoking cessation programs and to assist tobacco farmers was
defeated by a vote of 46–54. Under the approved Budget Resolution, it would
require 60 votes to permit floor consideration of any tobacco legislation that provides
funding for programs other than Medicare. The Senate Budget Resolution also
prohibits the VA from paying disability compensation for smoking-related diseases
(see below).
Laws Enacted by the 105 Congress
th
The President has signed three bills that include provisions relating to smoking
and tobacco products. Section 9302 of the Balanced Budget Act of 1997 (P.L. 105-
33) increases cigarette excise tax by 15 cents per pack. The current federal excise tax
of 24 cents per pack will increase by 10 cents in 2000, and an additional 5 cents in
2002.
Section 618 of the Commerce, Justice, and State appropriations bill for FY1998
(P.L. 105-119) prohibits funds from being used to promote the sale or export of
tobacco or tobacco products, or to seek the removal or reduction by any foreign
country of any nondiscriminatory law that restricts the advertising, manufacture, sale,
labeling or distribution of tobacco products. This provision is associated with the
efforts of Representative Doggett (see H.R. 2135 above), and is referred to as the
Doggett Amendment. As required by the new law, the State Department in April
sent out a directive to all U.S. embassies and commercial offices abroad instructing
them not to promote U.S. tobacco products. In addition, the embassies and offices
CRS-13
are not to oppose policies that restrict the use of tobacco products unless those
policies favor local tobacco products over those made in the United States.
The Transportation Equity Act for the 21 Century (TEA-21; P.L. 105-178
st
)
includes a provision (section 8202) that prohibits veterans from claiming tobacco-
related disability compensation. That will result in an estimated savings of $16.9
billion over 5 years, of which $15.4 billion is to be used to offset the costs of TEA-
21. The remaining $1.5 billion is for specific improvements to various veterans
benefits. Three bills (H.R. 3948, H.R. 4070, and H.R. 4220) have been introduced
to restore the veterans’ entitlement to disability compensation for tobacco-related
diseases. For more information, see CRS Report 98-373,
Veterans’ and Smoking-
Related Illnesses: Congress Considers Limits to Compensation, by Dennis Snook.
Executive Actions
On August 9, 1997, President Clinton signed Executive Order 13058 that
restricts smoking in all federal Executive Branch facilities to enclosed, separately
ventilated areas. The order also prohibits smoking in front of building air intake
ducts and directs agency heads to evaluate the need to limit smoking in doorways and
courtyards. Agencies are also encouraged to offer smoking cessation assistance to
their workforce.
On June 22, 1998, the President announced that the National Household Survey
on Drug Abuse (NHSDA) would be expanded to include information on the cigarette
brands teenagers smoke. The NHSDA is administered by the Substance Abuse and
Mental Health Services Administration and has been conducted annually since 1990
using in-home interviews. In the future it will include 70,000 households and will
utilize computer-assisted technology to improve disclosure of sensitive information.
Households with teenagers under age 18 will be oversampled in order to obtain more
accurate information on smoking prevalence and brand preference.
On July 17, 1998, the President directed the Secretary of Health and Human
Services to report back within 90 days with a plan to make the millions of tobacco
industry documents released during the Minnesota trial more accessible to the public.
CRS-14
Table 1a: Comparison of Tobacco Settlement Bills (S. 1415, S. 1889, and S. 1530)
Topic
S. 1415 (McCain)a
S. 1889 (Harkin/Chafee/Graham)
S.1530 (Hatch)
Regulation of Tobacco Industry, Tobacco Products, and Product Use
Titles I, II, III, VIII, XI & XIV
Titles II & IV
Titles II & IV
Marketing and
Prohibits outdoor tobacco product advertising;
Prohibits outdoor tobacco product advertising;
Prohibits outdoor tobacco product advertising;
Advertising
prohibits use of human or cartoon images in
prohibits the use of human or cartoon images in
prohibits use of human or cartoon images in
Restrictions
advertising; prohibits Internet advertising;
advertising; prohibits Internet advertising; restricts
advertising; prohibits Internet advertising; restricts
restricts point-of-sale advertising. Restricts
point-of-sale advertising. Prohibits use of non-
point-of-sale advertising. [Sec. 212] Restricts use
use of non-tobacco trade or brand names for
tobacco trade or brand names for tobacco products;
of non-tobacco trade or brand names for tobacco
tobacco products; limits advertising to FDA-
limits advertising to FDA-specified media;
products; limits advertising to FDA-specified
specified media; restricts glamorization of
prohibits glamorization of tobacco. Restricts
media; restricts glamorization of tobacco. [Sec.
tobacco. Restricts advertising in non-adult
advertising in non-adult facilities and publications
213] Restricts advertising in non-adult facilities
facilities and publications to black-on-white
to black-on-white format. Requires statement of
and publications to black-on-white format. [Sec.
format. Requires statement of intended use on
intended use on advertisements. Prohibits non-
214] Prohibits non-tobacco merchandise and
advertisements. Prohibits non-tobacco
tobacco merchandise and brand-name sponsorship.
brand-name sponsorship. [Sec. 215]
merchandise and brand-name sponsorship.
[Sec. 201, 411]
[Sec. 1403-1405]
Warnings,
Amends existing federal labeling laws to
Requires new, explicit warning labels in bold type,
Requires new, explicit warning labels in bold type.
Labeling and
require new, explicit warning labels in bold
subject to regular review and updating by DHHS.
Exempts tobacco product exports from labeling
Packaging
type. Authorizes DHHS to revise warning
Preempts labeling by state and local governments.
requirements. [Sec. 401] Repeals existing federal
labels as necessary. Requires labeling of
Repeals existing federal tobacco product labeling
tobacco product labeling laws. [Sec. 402]
tobacco product exports. [Sec. 301-304, 1106]
laws. [Sec. 212]
Youth Access
Prohibits sales to minors; requires photo ID if
Prohibits sales to minors; requires photo ID if
Prohibits sales to minors; requires photo ID if
Restrictions
under age 27; requires face-to-face
under age 27; requires face-to-face transactions;
under age 27; requires face-to-face transactions;
transactions; bans vending machines; bans
bans vending machine and self-service sales except
bans vending machine and self-service sales
self-service sales except in adult-only
in adult-only facilities; allows mail-order sales
except in adult-only facilities; allows mail-order
facilities; allows mail-order sales subject to
subject to FDA review. [Sec. 212]
sales subject to FDA review. [Sec. 401]
FDA review. [Sec. 231, 1162]
Retailer
Requires states to license tobacco retailers.
Establishes minimum federal licensing standards
Mandates state licensing under model state law
Licensing or
Establishes penalties for noncompliance,
for tobacco manufacturers, importers, exporters,
(see section 301-102).
Registration
including license suspension and revocation.
and distributors, and the registration of tobacco
[Sec. 231]
retail outlets. Stipulates penalties for
noncompliance, including license and registration
revocation. [Sec. 221-232]
CRS-15
Table 1a: Comparison of Tobacco Settlement Bills (S. 1415, S. 1889, and S. 1530)
Topic
S. 1415 (McCain)a
S. 1889 (Harkin/Chafee/Graham)
S.1530 (Hatch)
Amendment of
Amends Federal Food, Drug, and Cosmetic
Amends Federal Food, Drug, and Cosmetic Act as
Amends Federal Food, Drug, and Cosmetic Act as
Federal Food,
Act by adding a new chapter (incorporating
follows: Defines nicotine as a drug and tobacco
follows: Defines tobacco products as drugs.
Drug, and
much of the existing device authority) for
products as restricted devices. Authorizes FDA to
Directs DHHS Secretary to issue regulations,
Cosmetic Act:
regulating tobacco products under a public
use a public health standard for regulating tobacco
through notice-and-comment rulemaking and in
Regulation of
health standard. Authorizes FDA to regulate
products. Prohibits FDA from banning the sale of
consultation with experts, for reducing or
Tobacco
the sale, distribution, access to, advertising,
tobacco products to adults. Requires full disclosure
eliminating nicotine and other tobacco product
Product
and promotion of tobacco products.
of amounts of all nontobacco ingredients for each
constituents. Requires Secretary to consider
Development
Establishes regulatory requirements for
brand. Requires testing, reporting, and disclosure
various factors in any such action, including
and
reducing nicotine and other tobacco product
of tobacco smoke constituents. Requires FDA
reducing health risks and the creation of a black
Manufacturing
constituents. Requires congressional review of
approval of all health claims for reduced-risk
market. Requires disclosure of amounts of all
any proposal to eliminate nicotine or ban
tobacco products. Subjects manufacturers to good
non-tobacco ingredients for each brand. Subjects
tobacco products. Requires testing, reporting,
manufacturing practice standards. Requires
manufacturers to good manufacturing practice
and disclosure of tobacco smoke constituents.
companies to disclose to FDA research
standards. Mandates new warning labels and
Requires FDA approval of all health claims for
information, including data on reduced-risk
youth access restrictions (described earlier in
reduced-risk tobacco products. Subjects
products. Requires new labeling (described
table). Provides incentives for development of
manufacturers to good manufacturing practice
earlier in table). [Sec. 201-205, 211-214]
reduced-risk tobacco products. Establishes DHHS
standards. Requires disclosure of amounts of
scientific advisory committee. [Sec. 401]
all non-tobacco ingredients for each brand.
Requires submission of all health research
information, and notification of any
modification of existing products or release of
new products. [Sec. 101, 305, 311]
Corporate
Requires each manufacturer to submit annually
Requires industry to comply with all the provisions
Protects industry whistleblowers. [Sec. 902]
Culture and
to DHHS a report reviewing their compliance
of the Act and not lobby against any provisions of
Requires lobbyists to comply with the Act and
Compliance,
with the Act and efforts to reduce youth
the Act. Disbands the Tobacco Institute. (Note:
agree not to support or oppose any federal or state
Lobbyists, and
smoking. Provides for suspending the annual
These and other provisions are embodied in
legislation without consent of manufacturers.
Whistleblowers
cap on legal liability if a manufacturer’s
consent decrees, described below.) Protects
[Sec. 221] Disbands the Tobacco Institute and the
actions or inactions impede progress in
industry whistleblowers. [Sec. 411, 701]
Council for Tobacco Research. [Sec. 222]
reducing youth smoking. Protects industry
whistleblowers. Prohibits any domestic
tobacco concern from contributing, in any way,
to youth sales overseas. [Sec. 801-802, 1102]
CRS-16
Table 1a: Comparison of Tobacco Settlement Bills (S. 1415, S. 1889, and S. 1530)
Topic
S. 1415 (McCain)a
S. 1889 (Harkin/Chafee/Graham)
S.1530 (Hatch)
Reducing Underage Tobacco Use, Lookback Penalties
Title II
Title I
Title III
Underage
S.Amdt. 2438 (Durbin) mandates an annual
Mandates an annual survey to determine the
Mandates an annual survey to determine the
Tobacco-Use
survey to determine the percentage of
percentage of individuals under age 18 who used a
percentage of individuals under age 18 that use
Targets
individuals under age 18 who used a tobacco
tobacco product in the past 30 days, and the
tobacco products daily. Sets reduction targets for
product in the past 30 days, and the
percentage who used each brand in the past 30
underage use of cigarettes (by 30% in 5 years,
percentage who used each brand in the past 30
days. Sets reductions targets for underage use of
50% in 7 years, and 60% in 10 years) and
days. Sets reduction targets for underage use
tobacco products (by 30% in 5 years, 50% in 7
smokeless tobacco products (by 25% in 5 years,
of cigarettes (by 40% in 5 years and 67% in 10
years, and 65% in 10 years). [Sec. 131-133]
35% in 7 years, and 45% in 10 years). [Sec. 4,
years) and smokeless tobacco products (by
312-314]
25% in 5 years and 45% in 10 years). [Sec.
201-204]
Industry
S.Admt. 2438 (Durbin) mandates industry-
Mandates industry-wide and company-specific
Fines manufacturers up to $5 billion per year in
Penalties
wide and manufacturer-specific penalties (not
penalties (not tax-deductible) if youth reduction
the first 5 years after enactment and $10 billion
tax-deductible) if targets are not met.
targets are not met. Company specific penality =
per year thereafter if reduction in underage
Industry-wide penalties capped at $2 billion a
up to 6 cents per unit sold by a manufacturer whose
tobacco use does not meet targets. Allows
year; manufacturer-specific penalties capped
products fail to meet the targets. Similar industry-
manufacturers to recover all of the fine if they
at $5 billion a year. Provides a de-minimus
wide penalties. Caps annual penalties at $10
pursued all reasonably available measures to
exemption for companies with less than 1%
billion (indexed to inflation). Does not provide any
reduce underage tobacco use and did nothing to
market share. [Sec. 205-206]
abatement or rebate relief to companies. [Sec. 134-
undermine any provisions of the Act. Provides
135]
industry with incentives (i.e., reduced annual
payments) to exceed reduction targets. [Sec. 311-
317]
CRS-17
Table 1a: Comparison of Tobacco Settlement Bills (S. 1415, S. 1889, and S. 1530)
Topic
S. 1415 (McCain)a
S. 1889 (Harkin/Chafee/Graham)
S.1530 (Hatch)
Environmental Tobacco Smoke (ETS)
Title V
Title VI
Title VI
Smoking
Restricts smoking in public facilities (i.e.,
Provides $100 million annually to states for
Restricts smoking in public facilities (i.e., those
Restrictions in
those entered by 10 or more individuals at least
education and outreach activities to reduce ETS
entered by 10 or more individuals at least 1 day a
Public Facilities
1 day a week), including federally owned or
exposure. Provides $100 million annually to states
week) to enclosed, separately ventilated,
leased buildings, to enclosed, separately
to establish programs to reduce ETS exposure.
designated smoking areas. Specifies that
ventilated, designated smoking areas.
Requires Congress to comply with no-smoking
employees may not be required to enter smoking
Specifies employees may not be required to
policies in effect in the Executive Branch (i.e.,
areas. Exempts bars, private clubs, hotel guest
enter smoking areas. Exempts restaurants
Executive Order 13058). [Sec. 601-603]
rooms, casinos, bingo parlors, and tobacco outlets.
(other than fast food), bars, private clubs, hotel
No exemption for prisons or restaurants with a
guest rooms, casinos, bingo parlors, tobacco
seating capacity over 50. Restricts smoking and
outlets, and prisons. Establishes penalties for
use of smokeless tobacco products in schools and
violators. States may opt out if they have a
other facilities serving children to enclosed,
similar or more stringent law of their own.
separately ventilated, designated smoking areas.
Allows state and local governments to enact
Allows state and local governments to enact
stricter laws. [Sec. 501-507]
stricter laws. [Sec. 601-605]
Tobacco Trust Fund
Title IV
Title I
Title I
Establishment
Establishes National Tobacco Trust Fund.
Establishes National Tobacco Trust Fund.
Establishes National Tobacco Settlement Trust
of Tobacco
Mandates tax-deductible industry payments
Mandates industry payments (75% of which are
Fund. Mandates industry payments into Trust
Trust Fund and
into Trust Fund: an up-front sum of $10
tax-deductible) into Trust Fund: an up-front sum of
Fund for 25 years: an up-front sum of $10 billion,
Annual
billion, and annual payments beginning at
$10 billion, and annual payments of $20 billion in
and annual payments beginning at $9.8 billion in
Industry
$14.4 billion in the first year, increasing to
the first year, and $25 billion thereafter.
Total
the first year, increasing to $16.5 billion in the
Payments
$23.6 billion in the fifth year, and remaining at
payments over first 25 years = $630 billion.
sixth year, and remaining at approx. $16.5 billion
$23.6 billion a year thereafter.
Estimated total
Annual payments subject to inflation adjustment.
a year thereafter.
Total payments = $398.3
net revenue over first 25 years = $516
Requires companies to raise prices by at least $1
billion. Annual payments subject to inflation
billion. Annual payments subject to inflation
per pack in the first year, and an additional 50 cents
adjustment, and subject to a volume-of-sales
adjustment beginning in the sixth year, and
per pack in the second year to cover cost of
adjustment. [Sec. 101-102] Allows manufacturers
subject to a volume-of-sales adjustment
payments. [Sec. 101-102]
to raise prices to cover cost of payments. [Sec.
beginning in 2002. Requires manufacturers to
904]
raise prices to cover cost of payments. [Sec.
401-406]
CRS-18
Table 1a: Comparison of Tobacco Settlement Bills (S. 1415, S. 1889, and S. 1530)
Topic
S. 1415 (McCain)a
S. 1889 (Harkin/Chafee/Graham)
S.1530 (Hatch)
Authorization
Authorizes expenditures from Trust Fund to
Authorizes expenditures from Trust Fund to
Authorizes and allocates expenditures from Trust
of Trust Fund
reimburse states for smoking-related medical
provide payments to states and to fund national
Fund: $8 billion a year to states and $8 billion a
Expenditures
costs and provide funds for tobacco control
anti-tobacco and public health programs. [Sec. 101] year for federal research and public health
programs, health research, and to assist
programs (see Title V); $200 million a year for
tobacco farmers and their communities. [Sec.
asbestos-related compensation; $200 million a
401]
year for Native Americans (see Title IX); and a
total of $16 billion over 25 years for the
agriculture program (see Title VIII). [Sec. 101]
Distribution/Allocation of Trust Funds or Excise Tax Revenues
Titles II, IV & XI
Titles 1 & III
Title V
State
Allocates 40% of the amount in the Trust Fund
Allocates a total of $8 billion annually to states
Allocates a total of $8 billion annually to states
Reimbursement
to a separate State Litigation Settlement
(allocation percentages detailed in Act) as follows:
based on state-by-state percentages detailed in
(Medicaid)
Account for distribution to states based on an
$4 billion in unrestricted funds, and $4 billion in
Act. Allows each state to use its state matching
allocation formula to be determined by the
the form of a Health, Human Services and
share (according to Medicaid matching percentage
states. Use of funds by states as follows: 50%
Education block grant to be used to meet each
rates) for purposes it deems appropriate. Allows
unrestricted, and 50% restricted, i.e., to be
state’s particular needs in these areas. Provides an
each state to retain its federal matching share
used for existing child health, welfare, and
additional $500 million annually to states that
provided the funds are used for existing programs
education programs. Does not require states to
exceed youth tobacco reduction targets. [Sec. 101,
including child nutrition programs, maternal and
reimburse federal Medicaid expenditures.
111-112]
child health, Head Start, school lunch, Indian
[Sec. 451-452]
S.Amdt. 2689 (Kerry) requires
Health Service, Community and Migrant Health
states to use at least 50% of the restricted
Centers, and social services block grants. [Sec.
funds for child care.
501-502]
CRS-19
Table 1a: Comparison of Tobacco Settlement Bills (S. 1415, S. 1889, and S. 1530)
Topic
S. 1415 (McCain)a
S. 1889 (Harkin/Chafee/Graham)
S.1530 (Hatch)
Federal, State,
Allocates 22% of the amount in the Trust Fund
Allocates $1.5 billion/yr for cessation programs,
Allocates a total of $8 billion annually as follows:
and Local
(plus all net revenue from lookback penalties)
$500 million/yr for counter-advertising, $1.25
$4 billion to fund biomedical research at the
Programs, and
for a separate Public Health Account to fund
billion/yr for community and school-based
National Institutes of Health, and the remaining $4
Research
smoking cessation programs, community-based
prevention programs, $100 million/yr for 10 years
billion to fund national anti-tobacco campaigns
tobacco control programs, counter-advertising,
to sponsor social and cultural events, and $175
(including counter-advertising) and cessation
Indian health, international tobacco control,
million/yr for surveillance and epidemiology.
programs. Note: At least one half of the non-NIH
FDA regulation, and anti-smuggling activities. Allocates $3.225 billion/yr for NIH (tobacco-
funds must be made available to states as block
related) research, $600 million/yr for CDC
grants. [Sec. 521-522]
Allocates 22% of the amount in the Trust Fund
prevention research, and $300 million/yr for FDA
for a separate Health and Health-Related
regulation. Provides $13.5 billion over 15 years in
Research Account to fund NIH, CDC,
financial assistance t obacco farmers and their
AHCPR, and NSF research and to extend
communities. Allocates $4 billion/yr for settling
Medicare coverage of clinical cancer trials.
legal claims against companies (see Title IV), $200
million/yr for ETS (see Title VI), $200 million/yr
Allocates 16% of the amount in the Trust Fund
for Native Americans, $100 million/yr for anti-
over the first 10 years for a separate Farmers
smuggling activities (see Title II), and $100
Assistance Account to provide financial
million/yr for international tobacco control (see
assistance to tobacco farmers. Beginning in
Title III). [Sec. 101, 301-302, 311, 321-322, 335-
year 11, 12% of the funds in this account are
337, 344]
credited to the Medicare Trust Fund.
Authorizes funds from the Trust Fund to
expand the Child Care and Development Block
Grant.
Consent Decrees, National Protocol, Non-Participating Manufacturers, Attorneys’ Fees, and State Enforcement of Youth Access Laws
Titles II & XIV
Titles II & IV
Title II & III
Consent
Requires manufacturers, states, and the federal
Requires manufacturers, states, and the federal
Requires manufacturers and states to enter into
Decrees and
government to enter into voluntary, but legally
government to enter into voluntary, but legally
consent decrees that include many of the
National
binding consent decrees that include many of
binding consent decrees that include many of the
provisions of the Act and a waiver of
Protocol
the provisions of the Act (e.g., FDA regulatory
provisions of the Act (e.g., FDA regulatory
constitutional claims. [Sec. 241-242] Within 90
authority, document disclosure, advertising and
authority, document disclosure, advertising
days of enactment, requires each manufacturer to
point-of-sale restrictions, annual payments).
restrictions, lobbying restrictions). Excludes from
enter into a legally binding and enforceable
Excludes from annual liability cap any
annual liability cap any company that violates the
contract (the National Tobacco Control Protocol)
company that violates the provisions of the
terms of the consent decree. [Sec. 411]
with the U.S. Attorney General and each state.
Act. [Sec. 1402-1405]
The Protocol embodies the Act’s advertising,
promotion, and lobbying restrictions. [Sec. 201]
CRS-20
Table 1a: Comparison of Tobacco Settlement Bills (S. 1415, S. 1889, and S. 1530)
Topic
S. 1415 (McCain)a
S. 1889 (Harkin/Chafee/Graham)
S.1530 (Hatch)
Non-
Civil liability provisions of the Act do not
Requires all manufacturers with at least a 0.5%
Denies non-participating manufacturers liability
Participating
apply to nonparticipants. [Sec. 1406]
share of the underage market to make payments.
protection, and imposes user fees, as well as
Manufacturers
Failure to comply results in fines, loss of liability
annual payments into a reserve fund to settle
limitation, and license revocation. [Sec. 102-103,
liability claims. [Sec. 243, 259]
223, 401]
Attorneys’ Fees
Establishes a 3-person arbitration panel to
Establishes a 6-person arbitration panel to
Establishes a 6-person arbitration panel to
determine and award attorneys’ fees and
determine and award attorneys’ fees and expenses.
determine and award attorneys’ fees and expenses,
expenses. Awards to be paid by participating
Awards to be paid by participating manufacturers,
subject to an annual cap equal to 5% of Trust
manufacturers. [Sec. 1413]
S.Amdt. 2705
not by Trust Fund. Mandates public disclosure of
Fund receipts for the applicable year. Awards to
(Gorton) limits plaintiff attorneys’ fees to
attorneys fees. [Sec. 403]
be paid by participating manufacturers, not by
$4,000/hr for lawsuits filed prior to 1995, and
Trust Fund. [Sec. 227]
limits fees in future lawsuits to $500/hr.
State
Requires states to enforce laws prohibiting the
Codifies FDA’s tobacco regulation into law,
Expands on Synar Amendmentb by requiring
Enforcement of
sale or distribution of tobacco products to
including restrictions on youth access that states are
states to enact a law consistent with the provisions
Youth Access
minors, and to conduct monthly unannounced
enforcing. [Sec. 201-242]
of a model state law described in the Act, or risk
Laws
inspections. States must meet compliance
losing Title V funds (see Sec. 501). Model state
targets (80% compliance by year 4 and 90% by
law includes retailer licensing, state inspections
year 7) or risk losing block grant funds
and enforcement, fines for minors and adults
(totaling $200 million a year). Repeals Synar
supplying minors, and no direct access to tobacco
Amendment.b [Sec. 231-233]
products. [Sec. 301-302]
Civil Liability
Title XIV
Title IV
Title IIC
Legal
Allows states to settle their lawsuits in return
Allows states to settle their lawsuits in return for
Terminates all pending class-action lawsuits, civil
Immunity
for funding from the Trust Fund, or opt to
funding from the Trust Fund, or continue with their
actions by state attorneys general, and nicotine
continue with their lawsuits and forgo
lawsuits and forgo the funding. Settles Castano
addiction and dependence claims, and provides
payments from the Trust Fund. Settles
class-actions. Allocates $4 billion/yr from the
manufacturers with immunity from such lawsuits
Castano class-action lawsuits and prohibits
Trust Fund to a National Victims’ Compensation
in the future. Preserves the right of individuals to
addiction claims. Caps total annual liability at
Fund to pay for damages. If damages in any given
bring personal injury claims. Prohibits awarding
$8 billion. Modifies rule of evidence to
year exceed $4 billion, the industry pays the excess
punitive damages in civil actions arising from past
establish a evidentiary presumption that
amount. Caps total annual liability at $8 billion
industry conduct. Requires states to adopt these
nicotine is addictive and certain diseases are
(applies only to claims based on industry’s past
civil liability protections as state law in order to
caused by tobacco use. [Sec. 1406-1412]
conduct). Places any unobligated funds from the
receive Title V funds. Limits the total damages
Compensation Fund into a Contingency Reserve
paid by the industry each year to 33% of the
Account to be used in the event that damages
annual payment to the Trust Fund. [Sec. 255-258,
exceed $8 billion in any given year. [Sec. 400-401]
261]
CRS-21
Table 1a: Comparison of Tobacco Settlement Bills (S. 1415, S. 1889, and S. 1530)
Topic
S. 1415 (McCain)a
S. 1889 (Harkin/Chafee/Graham)
S.1530 (Hatch)
Industry Document Disclosure
Titles IX & XIV
Title IV
Title VII
National
Establishes a public tobacco document
Establishes a public depository to which companies
Establishes a public depository of industry health
Tobacco
depository. Requires manufacturers to submit
must submit all research and marketing documents. research documents. Requires manufacturers to
Document
to FDA all documents specified in the Act.
Requires manufacturers to submit a detailed,
deposit all documents provided to plaintiffs in
Depository
Requires manufacturers to make a separate
itemized log of documents for which they assert
recent specified lawsuits. Allows manufacturers
submission (with accompanying detailed log)
attorney-client privilege or trade secrecy.
to determine and withhold documents protected by
to a 3-judge panel of all documents for which
Establishes a five-member arbitration panel to
attorney-client privilege. Requires manufacturers
they assert attorney-client privilege or trade
settle disputes over making such privileged
to deposit a detailed, itemized log of privileged
secrecy. Requires panel to settle disputes over
documents public. Penalties for noncompliance
documents. Establishes a three-judge federal
making such privileged documents public.
include manufacturer license revocation and a
arbitration panel to settle disputes over making
Establishes financial penalties for companies
waiver of the annual liability cap. [Sec. 404]
privileged documents public. [Sec. 701-703]
that do not comply. [Sec. 901-909, 1403]
Tobacco Farmers and Rural Communities
Titles X (top) & XV (bottom)
Title V
Title VIII
Funding
Authorizes funding over 25 years totaling
Establishes Trust Fund for Tobacco Farming
Establishes Tobacco Transition Account of $16
$28.5 billion. [Sec. 1011-1012]
Families and Communities to receive annual
billion. [Sec. 101, 811, 841-842]
payments from the National Tobacco Trust Fund
over 15 years totaling $13.5 billion. Requires
Establishes a 5-year Tobacco Community
Congress to enact legislation by Jan. 1, 2000,
Revitalization Trust Fund. Estimated funding
authorizing use of funds for assisting tobacco
$18 billion. [Sec. 1511]
farmers and their communities. [Sec. 501]
Farmer
Provides payments to quota owners (up to
Provides quota owner buyout ($8/lb) and tenant
compensation
$8/lb) and tenants (up to $4/lb) for production
compensation ($1.20/lb) (totaling about $14.7
losses from baseline levels (10-year estimated
billion with 100% participation). Mandates end to
cost = $16.5 billion). Maintains burley quotas.
quota program and 3-year phase out of price
Replaces flue-cured quotas with
support loan program. [Sec. 812-814]
nontransferable permits.
Terminates quota program and phases out price
support loan program over 3 years. Buys out
quota owners ($8/lb) and compensates tenants
($4/lb). Estimated 3-year cost = $17 billion.
CRS-22
Table 1a: Comparison of Tobacco Settlement Bills (S. 1415, S. 1889, and S. 1530)
Topic
S. 1415 (McCain)a
S. 1889 (Harkin/Chafee/Graham)
S.1530 (Hatch)
Other USDA
Mandates payments from Trust Fund for
tobacco
extension services, crop insurance, loan
activities
program administration, leaf grading and
inspection, and other activities associated with
tobacco production (cost = about $2.5 billion).
Community &
Provides annual community economic
Provides annual community economic
Worker
development grants of $375-450 million for 25
development grants for 3 years (totaling $300
Economic
years (up to $11.1 billion). Provides assistance
million). [Sec. 821] Provides assistance for
Assistance
for displaced industry workers (up to $625
displaced industry workers (not more than $500
million). Provides higher education grants for
million). [Sec. 816] Provides education grants for
tobacco farm families (up to $1.44 billion).
farm families (about $1.4 billion). [Sec. 817]
Provides community economic development
grants for 5 years (totaling $1 billion)
Immunity
Provides immunity to penalties for agriculture
Provisions
sector for lack of manufacturer compliance
with Act.
Native Americans, State and Local Preemption, International Tobacco Control, Antitrust Exemption, and Smuggling
Titles VI & XI
Titles II, III &VII
Titles I, IV & IX
Native
Provides that the requirements of this Act
Provides that the requirements of this Act relating
Provides that the requirements of this Act relating
Americans
relating to the manufacture, distribution, and
to the manufacture, distribution, and sale of
to the manufacture, distribution, and sale of
sale of tobacco products apply on tribal lands.
tobacco products apply on tribal lands. Allows
tobacco products apply on tribal lands. Considers
Exempts tribal religious and traditional
tribes to compete for grants to fund anti-smoking
tribes as states for the purposes of this Act.
tobacco uses from the requirements of the Act.
activities. Provides IHS with $200 million a year
Provides IHS with $200 million a year from Trust
Requires licensing of tribal tobacco retailers.
from Trust Fund for Indian health programs. [Sec.
Fund for Indian health programs (see Title I).
[Sec. 601-603]
703]
[Sec. 901]
Preemption
Allows state and local governments to adopt
Allows state and local governments to impose any
Allows state and local governments to impose any
and enforce any additional tobacco product
additional tobacco product control measures that
additional tobacco product control measures that
control measures. [Sec. 5]
are not inconsistent with the provisions of this Act.
do not conflict with the regulatory provisions in
[Sec. 704]
this Act. [Sec. 401]
CRS-23
Table 1a: Comparison of Tobacco Settlement Bills (S. 1415, S. 1889, and S. 1530)
Topic
S. 1415 (McCain)a
S. 1889 (Harkin/Chafee/Graham)
S.1530 (Hatch)
International
Provides funding for international tobacco
Prohibits use of federal funds to promote U.S.
Tobacco
control efforts ($350 million/yr over first 5
tobacco exports or to seek removal of
Control
years). Prohibits use of federal funds to
nondiscriminatory restrictions on tobacco by
promote U.S. tobacco exports or to seek
foreign countries. Provides $100 million/yr for
removal of nondiscriminatory restrictions on
global tobacco control efforts. [Sec. 344, 703]
tobacco by foreign countries. [Sec. 1101-1107]
Antitrust
Provides participating manufacturers with limited
Exemption
exemption from federal and state antitrust laws.
[Sec. 903]
Smuggling
Requires all manufacturers, importers,
Licenses tobacco manufacturers, exporters,
exporters and wholesalers of tobacco products
importers, and distributors, and registers tobacco
to be licensed. Mandates serial numbers and
retailers. Allocates $100 million/yr for anti-
export labels on packages. Requires
smuggling program. Establishes new criminal
manufacturers and distributors to submit a
penalties for smuggling. [Sec. 223-232]
report for all tobacco product export
shipments. Strengthens and amends
Contraband Cigarette Trafficking Act to
include all tobacco products. [Sec. 1131-1140]
Veterans, Vending Machines, and Asbestos Workers
Titles XI, XII & XIII
Veterans
S.Amdt. 2446 provides $600 million/yr for 5
years from the Trust Fund for tobacco-related
veterans’ health care. [Sec. 1301]
Vending
Bans tobacco vending machines. Authorizes
Machines
funds to compensate tobacco vending machine
owners/operators. [Sec. 1162]
Asbestos
Authorizes appropriations from Trust Fund if
Allocates $200 million per year to pay asbestos
Worker
Congress establishes a program to pay asbestos
claims of smokers. [Sec. 101]
Compensation
claims. [Sec. 1201]
CRS-24
Table 1a: Comparison of Tobacco Settlement Bills (S. 1415, S. 1889, and S. 1530)
Topic
S. 1415 (McCain)a
S. 1889 (Harkin/Chafee/Graham)
S.1530 (Hatch)
Income Tax Provisions, Anti-Drug Activities, Advertising/Promotion Tax Deduction
Income Tax
S.Amdt. 2686 (Gramm) mandates up to 33% of
Cuts
Trust Funds be used to reduce the marriage
penalty for families with incomes of less than
$50,000/yr and allow self-employed workers a
full deduction for health insurance expenses.
Estimated 5-year cost = $21 billion.
Anti-Drug
S.Amdt. 2451 (Coverdell) authorizes about $3
Programs
billion/yr for 5 years from theTrust Fund to
boost funding for existing federal drug
interdiction efforts. Also authorizes funding to
help communities devise anti-drug strategies.
(Note: includes authorization to fund school
vouchers, and bans federal funding of needle
exchange programs.)
Advertising/
S.Amdt. 2702 (Reed) disallows the tax
Promotion Tax
deduction for advertising, promotion, and
Deduction
marketing expenses unless the manufacturers
comply with the FDA tobacco regulation.
The table summarizes the modified committee substitute bill that was debated on the Senate floor (May 18 - June 17). The amendments that passed are in italics.
a
b The Synar Amendment to the Public Health Service Act (42 U.S.C. 300x-26; 45 C.F.R. 96.130) requires states to enforce their laws prohibiting the sale of tobacco products to
individuals under age 18. States must conduct annual random, unannounced inspections of retail outlets to ensure compliance with the law. States risk losing federal substance abuse
block grant funds for failure to comply.
CRS-25
Table 1b: Comparison of Tobacco Settlement Bills (S. 1638, H.R. 3474, and H.R. 3868)
Topic
S. 1638 (Conrad)
H.R. 3474 (Fazio)
H.R. 3868 (Hansen/Meehan/Waxman)
Regulation of Tobacco Industry, Tobacco Products, and Product Use
Titles II, VII & VIII
Titles II, VII & VIII
Titles II & VII
Marketing and
Prohibits outdoor tobacco product advertising;
Same provisions as S. 1638. [Sec. 726-729]
Prohibits outdoor tobacco product advertising;
Advertising
prohibits use of human or cartoon images in
prohibits use of human or cartoon images in
Restrictions
advertising; prohibits Internet advertising;
advertising; prohibits Internet advertising; restricts
restricts point-of-sale advertising. [Sec. 726]
point-of-sale advertising. Restricts use of non-
Restricts use of non-tobacco trade or brand
tobacco trade or brand names for tobacco
names for tobacco products; limits advertising to
products; limits advertising to FDA-specified
FDA-specified media; restricts glamorization of
media; restricts glamorization of tobacco.
tobacco. [Sec. 727] Restricts advertising in non-
Restricts advertising in non-adult facilities and
adult facilities and publications to black-on-white
publications to black-on-white format. Prohibits
format. [Sec. 728] Prohibits non-tobacco
non-tobacco merchandise and brand-name
merchandise and brand-name sponsorship. [Sec.
sponsorship. [Sec. 204-205]
729]
Warnings,
Requires new, explicit warning labels in bold
Same provisions as S. 1638. [Sec. 205-206]
Requires new, explicit warning labels in bold type.
Labeling and
type. Preempts labeling by state and local
Preempts labeling by state and local governments.
Packaging
governments. [Sec. 205] Repeals existing federal
Repeals existing federal tobacco product labeling
tobacco product labeling laws. [Sec. 206]
laws. [Sec. 205, 207]
Youth Access
Prohibits sales to minors; requires photo ID if
Same provisions as S. 1638. [Sec. 202]
Prohibits sales to minors; requires photo ID if
Restrictions
under age 27; requires face-to-face transactions;
under age 27; requires face-to-face transactions;
bans vending machine and self-service sales
bans vending machine and self-service sales
except in adult-only facilities; permits mail-order
except in adult-only facilities; permits mail-order
sales subject to FDA review. [Sec. 202]
sales subject to FDA review. [Sec. 205]
Retailer
Mandates state licensing of tobacco retailers and
Same provisions as S. 1638. Also allows states
Mandates state licensing of tobacco retailers and
Licensing or
stipulates penalties, including license suspension
to provide technologies to aid retailers in
stipulates penalties, including license suspension
Registration
and revocation, for non-compliance. [Sec. 205]
verifying the age of purchasers. [Sec. 205]
and revocation, for non-compliance. [Sec. 205]
CRS-26
Table 1b: Comparison of Tobacco Settlement Bills (S. 1638, H.R. 3474, and H.R. 3868)
Topic
S. 1638 (Conrad)
H.R. 3474 (Fazio)
H.R. 3868 (Hansen/Meehan/Waxman)
Amendment of
Amends Federal Food, Drug, and Cosmetic Act
Same provisions as S. 1638. [Sec. 201-205]
Amends Federal Food, Drug, and Cosmetic Act as
Federal Food,
as follows: Defines nicotine as a drug, and
follows: Defines nicotine as a drug, and tobacco
Drug, and
tobacco products as devices, and gives FDA
products as devices, and gives FDA authority to
Cosmetic Act:
authority to regulate tobacco products as a drug,
regulate tobacco products under a public health
Regulation of
a device, or both. Gives FDA authority to
standard. Considers all the provisions of the FDA
Tobacco
regulate advertising, promotion, and access to
tobacco regulation (21 CFR 897) to be
Product
tobacco products. Exempts tobacco product
promulgated and directs the agency to revise its
Development
regulation from the general safety and efficacy
regulations to incorporate the additional
and
standard if it is achieves the best public health
provisions in the June 20, 1997, settlement (to the
Manufacturing
result. Permits FDA to issue regulations through
extent permitted by the First Amendment). [Sec.
notice-and-comment rulemaking that may include
201-205]
the reduction or elimination of nicotine or other
harmful constituents. Requires testing, reporting,
and disclosure of tobacco smoke constituents.
Requires disclosure of amounts of all non-
tobacco ingredients in each brand. Requires
ingredients to be included on the product label.
Establishes DHHS scientific advisory committee.
[Sec. 201-205]
Corporate
Protects industry whistleblowers. [Sec. 802]
Same provisions as S. 1638. [Sec. 802]
Establishes a Tobacco Accountability Board
Culture and
within DHHS to report to Congress on the tobacco
Compliance,
industry’s future conduct. Grants the Board
Lobbyists, and
responsibility for managing the document
Whistleblowers
depository (see below). Protects industry
whistleblowers. [Sec. 701, 703-707]
CRS-27
Table 1b: Comparison of Tobacco Settlement Bills (S. 1638, H.R. 3474, and H.R. 3868)
Topic
S. 1638 (Conrad)
H.R. 3474 (Fazio)
H.R. 3868 (Hansen/Meehan/Waxman)
Reducing Underage Tobacco Use, Lookback Penalties
Title III
Title III
Title III
Underage
Mandates an annual survey to determine the
Extends the survey requirements in S. 1638 to
Mandates an annual household-based survey to
Tobacco-Use
percentage of individuals under age 18 who used
include the percentage of each ethnic group of
determine the percentage of each ethnic group of
Targets
a tobacco product in the past 30 days, and the
individuals under age 18 who used each brand in
individuals under age 18 that use each tobacco-
percentage who used each brand in the past 30
the past 30 days. [Sec. 302] Sets the same
product brand. Sets reduction targets for
days. [Sec. 302] Sets reduction targets for
reduction targets for underage use of cigarettes
underage use of tobacco products: 50% in 5 years,
underage use of cigarettes (by 40% in 5 years,
and smokeless tobacco products (by 40% in 5
67% in 7 years, and 80% in 10 years. [Sec. 301-
55% in 7 years, and 67% in 10 years) and
years, 55% in 7 years, and 67% in 10 years).
302, 306-307]
smokeless tobacco products (by 25% in 5 years,
[Sec. 303]
35% in 7 years, and 45% in 10 years). [Sec. 303]
Industry
Mandates industry-wide and manufacturer-
Mandates only manufacturer-specific penalties
Mandates manufacturers to increase prices by up
Penalties
specific penalties (not tax-deductible) if targets
(not tax-deductible) if targets are not met. For
to $0.06 a pack if targets are not met (inflation-
are not met. Industry-wide penalty = $0.10 per
each manufacturer whose products fail to meet
adjusted). Requires additional point-of-sale and
unit sold. Manufacturer-specific penalty = up to
the targets, the penalty = $0.02 per percentage
packaging restrictions for repeated
$0.40 per unit sold by a manufacturer whose
point short of the target per unit sold. Penalties
noncompliance. Caps price increase at $2.00 a
products fail to meet the targets. Penalties
increase with repeated non-compliance. [Sec.
pack. Requires manufacturers to pay the U.S.
increase with repeated non-compliance. [Sec.
304] A manufacturer may have its penalty
Treasury an amount equal to the per-pack price
304] A manufacturer may have its penalty
reduced if it can demonstrate that an arbitrary
increase multiplied by the total number of packs.
reduced if it can demonstrate that an arbitrary
and capricious survey overestimated youth
Authorizes these funds to be used for tobacco
and capricious survey overestimated youth
tobacco use. [Sec. 306]
control programs. [Sec. 303-304]
tobacco use. [Sec. 306]
CRS-28
Table 1b: Comparison of Tobacco Settlement Bills (S. 1638, H.R. 3474, and H.R. 3868)
Topic
S. 1638 (Conrad)
H.R. 3474 (Fazio)
H.R. 3868 (Hansen/Meehan/Waxman)
Environmental Tobacco Smoke (ETS)
Title V
Title V
Title IV
Smoking
Amends the Occupational Safety and Health Act
Same provisions as S. 1638 except that there is
Requires the EPA to issue regulations to restrict
Restrictions in
to restrict smoking in public facilities (i.e., those
no exemption for small restaurants. [Sec. 501]
smoking in public facilities (i.e., any building in
Public Facilities
entered by 10 or more persons at least 1 day a
which activities substantially affecting interstate
week) to enclosed, separately ventilated,
commerce occur) to enclosed, separately
designated smoking areas. Specifies that
ventilated, designated smoking areas. Specifies
employees may not be required to enter smoking
that employees may not be required to enter
areas. Exempts small restaurants (other than fast
smoking areas. Includes all federal, state, and
food), bars, private clubs, hotel guest rooms,
local government buildings. Exempts bars, private
casinos, bingo parlors, tobacco outlets, and
clubs, prisons, and tobacco outlets. Establishes
prisons. Prohibits smoking in schools and other
penalties for violators. Allows state and local
facilities serving children, and on public
governments to enact stricter laws. [Sec. 401-
transportation. Allows state and local
406]
governments to enact stricter laws. [Sec. 501]
Tobacco Trust Fund
Title I
Title I
Title I
Establishment
Establishes the Health Enhancement and
Establishes the Health Enhancement and
Mandates initial industry payment of $10 billion
of Tobacco
Lowered Tobacco Hazards for Young Kids
Lowered Tobacco Hazards for Young Kids
(not tax deductible). Mandates annual assessment
Trust Fund and
(HEALTHY Kids) Trust Fund. Mandates initial
(HEALTHY Kids) Trust Fund. Mandates initial
of each manufacturer as follows: $0.50 a pack in
Annual
industry payment of $15 billion (not tax-
industry payment of $16 billion (not tax-
year 1, $1.00 a pack in year 2, and $1.50 a pack in
Industry
deductible). Mandates annual assessments of
deductible). Thereafter, mandates annual, tax-
year 3 and thereafter (adjusted for inflation).
Payments
each manufacturer as follows: $0.50 a pack in
deductible payments into Trust Fund for 25
[Sec. 102]
year 1, $1.00 a pack in year 2, and $1.50 a pack
years, beginning at $24.33 billion and rising to
in year 3 and thereafter. Beginning in fourth
more than $29 billion by year 10. Annual
year, payments subject to inflation adjustments.
payments subject to inflation adjustment.
Five-
Five-year projected total = $82 billion.
year projected net total = $82 billion.a
Companies may not use insurance coverage to
Companies may not use insurance coverage to
make payments. [Sec. 101- 102]
make payments. [Sec. 101- 102]
CRS-29
Table 1b: Comparison of Tobacco Settlement Bills (S. 1638, H.R. 3474, and H.R. 3868)
Topic
S. 1638 (Conrad)
H.R. 3474 (Fazio)
H.R. 3868 (Hansen/Meehan/Waxman)
Authorization
Authorizes annual expenditures from Trust Fund
Authorizes annual expenditures from Trust Fund
Authorizes annual expenditures to reduce the
of Trust Fund
(see below). [Sec. 101]
(see below). [Sec. 101]
public debt, fund tobacco control programs, and
Expenditures
reimburse states (see below). [Sec. 101]
Distribution/Allocation of Trust Funds or Excise Tax Revenues
Title I
Title I
Titles V & VIII
State
Allocates 14.5% annually ($12 billion over first
Allocates 14.5% annually ($12 billion over first
Allocates $8 billion/yr (same as June 20, 1997
Reimbursement
5 years) for reimbursement of state and local
5 years) for reimbursement of state and local
settlement) to states in unrestricted funds.
(Medicaid)
Medicaid programs, based on each state’s share
Medicaid programs, based on each state’s share
Requires states to reimburse local governemnts
of total federal Medicaid payments. [Sec. 111]
of total federal Medicaid payments. [Sec. 111]
that incurred tobacco-related health costs. [Sec.
Allocates 17% annually ($14 billion over first 5
Allocates 20% annually for the first 5 years (for
801-803] Awards grants to states as follows:
years) to states for child care programs. [Sec.
a total of $16.5 billion) and 17% annually
$200 million/yr for child-oriented tobacco control
131] Allocates 6% annually ($5 billion over first
thereafter to states for child care programs. [Sec.
efforts; $400 million/yr for community-based
5 years) to states for elementary school teachers.
131] Allocates 9% annually for the first 5 years
tobacco control programs. [Sec. 811]
[Sec. 132] Allocates 4% annually ($3 billion
(for a total of $7.5 billion) and 6% annually
over first 5 years) to states to expand children’s
thereafter to states for elementary school
health care coverage. [Sec. 133]
teachers. [Sec. 132] Allocates 4% annually ($3
billion over first 5 years) to states to expand
children’s health care coverage. [Sec. 133]
CRS-30
Table 1b: Comparison of Tobacco Settlement Bills (S. 1638, H.R. 3474, and H.R. 3868)
Topic
S. 1638 (Conrad)
H.R. 3474 (Fazio)
H.R. 3868 (Hansen/Meehan/Waxman)
Federal, State,
Allocates 15.5% annually ($13 billion over first
Allocates 15.5% annually ($13 billion over first
Allocates funds for federal programs as follows:
and Local
5 years) for tobacco control activities including:
5 years) for tobacco control activities including:
$300 million/yr for FDA, $200 million/yr for
Programs, and
$300 million/yr for FDA; $200 million/yr for
$300 million/yr for FDA; $200 million/yr for
cessation programs, $500 million/yr for counter-
Research
Indian Health Service; $200 million/yr for
Indian Health Service; $200 million/yr for
advertising, and $1 billion/yr for research,
behavioral research; $100 million/yr for
behavioral research; $100 million/yr for
epidemiology, and surveillance (inflation-
surveillance; $300 million/yr for school- and
surveillance; $300 million/yr for school- and
adjusted). [Sec. 501-506]
community-based programs; $500 million/yr for
community-based programs; $500 million/yr for
counter advertising; $700 million/yr for cessation
counter advertising; $700 million/yr for cessation
programs; and $60 million/yr for smokers’
programs; and $60 million/yr for smokers’
medical costs. (Funding amounts are estimates
medical costs. (Funding amounts are estimates
over first 5 years.) [Sec. 602, 603, 611, 621-626]
over first 5 years.) [Sec. 602, 603, 611, 621-626]
Allocates 21% annually ($17 billion over first 5
Allocates 21% annually ($17 billion over first 5
years) for NIH research. [Sec. 121, 601]
years) for NIH research. Requires that research
Allocates 12% annually ($10 billion over first 5
be conducted at minority institutions. [Sec. 121,
years) to tobacco farmers and communities (see
601] Allocates 12% annually ($10 billion over
Title IV). Allocates 4% annually ($3 billion over
first 5 years) to tobacco farmers and communities
first 5 years) to Medicare, and 6% annually ($5
(see Title IV). Allocates 4% annually ($3 billion
billion over first 5 years) to Social Security;
over first 5 years) to Medicare, and, beginning in
allocations grow to 10% and 12%, respectively,
year 6, 6% annually ($5 billion over first 5
after 10 years. [Sec. 101]
years) to Social Security; allocations grow to
10% and 12%, respectively. [Sec. 101]
Consent Decrees, National Protocol, Non-Participating Manufacturers, Attorneys’ Fees, and State Enforcement of Youth Access Laws
Title VII
Title VII
Title II
Consent
Requires manufacturers and states to enter into
Same provisions as S. 1638. [Sec. 721, 725-729]
Decrees and
consent decrees that include many of the
National
provisions of this Act. [Sec. 711] Within 90 days
Protocol
of enactment, requires each manufacturer to enter
into a legally binding and enforceable contract
(the National Tobacco Control Protocol) with the
U.S. Attorney General and the Attorney General
of each state. The Protocol embodies the
advertising and promotion restrictions in the June
20, 1997, proposed settlement (described earlier
in table). [Sec. 721, 725-729]
CRS-31
Table 1b: Comparison of Tobacco Settlement Bills (S. 1638, H.R. 3474, and H.R. 3868)
Topic
S. 1638 (Conrad)
H.R. 3474 (Fazio)
H.R. 3868 (Hansen/Meehan/Waxman)
Non-
Participating
Manufacturers
Attorneys’ Fees
Establishes a 7-person arbitration panel to
Same provisions as S. 1638. [Sec. 702]
determine and award attorneys’ fees and
expenses, subject to the American Bar
Association’s ethical guidelines. [Sec. 702]
State
Requires states to restrict access of minors to
Same provisions as S. 1638. [Sec. 205]
Requires states to enact a law consistent with the
Enforcement of
tobacco products, through licensing, compliance
provisions of a model state law described in the
Youth Access
checks, and enforcement. States must meet
Act, or risk losing Title VIII funds. Model state
Laws
compliance target of 95% within 3 years.
law must include retailer licensing, and state
Establishes penalties for retailers, their
compliance inspections and enforcement. [Sec.
employees, and minors for sales to minors. [Sec.
205]
205]
Civil Liability
Title VII
Title VII
Title VII
Legal
Settles state lawsuits and prohibits state and local
Same provisions as S. 1638. [Sec. 701]
Gives states the option of settling their lawsuits
Immunity
governments from future action against the
against the tobacco industry in exchange for Title
industry based on its past conduct. States that
VIII funds. [Sec. 801]
elect not to receive any funds ever from the Trust
Fund may continue with their lawsuits. Prohibits
federal lawsuits for past actions by the industry.
[Sec. 701]
Industry Document Disclosure
Title II
Title II
Title VII
National
Requires industry to submit to DHHS Secretary
Same provisions as S. 1638. [Sec. 205]
Requires manufacturers to submit to the Tobacco
Tobacco
all health-related documents. Secretary will
Accountability Board all health, sales, and
Document
make them available to the public. Public health
marketing-related documents. Allows Board to
Depository
considerations override privileged documents.
determine whether trade secrets should remain
[Sec. 205]
protected. [Sec. 702]
CRS-32
Table 1b: Comparison of Tobacco Settlement Bills (S. 1638, H.R. 3474, and H.R. 3868)
Topic
S. 1638 (Conrad)
H.R. 3474 (Fazio)
H.R. 3868 (Hansen/Meehan/Waxman)
Agriculture and Rural Community Adjustment
Title IV
Title IV
Funding
Establishes Tobacco Transition Trust Fund to
Establishes Tobacco Transition Trust Fund to
receive payments from HEALTHY Kids Trust
receive payments from HEALTHY Kids Trust
Fund as follows: $10 billion over first 5 years,
Fund as follows: $21 billion over first 10 years,
then gradually phased out over 25 years.
then gradually phased out over 25 years.
Requires Congress to enact legislation by Jan. 1,
Requires Congress to enact legislation by Jan. 1,
2000, authorizing use of funds for assisting
2000, authorizing use of funds for assisting
tobacco farmers and their communities. [Sec.
tobacco farmers and their communities. [Sec.
101, 401]
101, 402] Requires that cigarette manufacturers
purchase a certain amount of tobacco grown in
the United States. [Sec. 401]
Farmer
compensation
Other USDA
tobacco
activities
Community &
Worker
Economic
Assistance
Immunity
Provisions
Native Americans, State and Local Preemption, International Tobacco Control, Antitrust Exemption, and Smuggling
Titles VIII and IX
Titles VIII & IX
Titles II & VI
Native
Applies provisions of the Act to Indian lands
Same provisions as S. 1638. [Sec. 901]
Treats Indian tribes as states for the purposes of
Americans
(exempts religious or ceremonial use of tobacco).
licensing and inspecting retailers operating on
Tribes that manufacture tobacco products are
Indian lands. [Sec. 205]
subject to the same annual assessments as the
tobacco companies. Provides the IHS with $200
million/yr for Indian health programs. [Sec. 901]
CRS-33
Table 1b: Comparison of Tobacco Settlement Bills (S. 1638, H.R. 3474, and H.R. 3868)
Topic
S. 1638 (Conrad)
H.R. 3474 (Fazio)
H.R. 3868 (Hansen/Meehan/Waxman)
Preemption
Allows state and local governments to impose
Same provisions as S. 1638. [Sec. 804]
and enforce additional measures to further the
purposes of this Act. [Sec. 804]
International
Creates a non-profit corporation and provides
Same provisions as S. 1638. [Sec. 624, 801, 803]
Prohibits U.S. tobacco companies and their
Tobacco
funds for international tobacco control programs.
foreign affiliates from marketing to children in
Control
[Sec. 624] Prohibits use of federal funds to
other countries. Prohibits use of federal funds to
promote U.S. tobacco exports or to seek removal
promote U.S. tobacco exports or to seek removal
of nondiscriminatory restrictions on tobacco
of nondiscriminatory restrictions on tobacco
products by foreign countries. [Sec. 801]
products by foreign countries. Imposes a $0.05
Prohibits U.S. employees of tobacco companies
per unit fee on tobacco products manufactured and
from marketing to children overseas. Requires
sold abroad to be paid into an International
tobacco product exports to carry warning
Tobacco Control Trust Fund. Allocates $150
labels.[Sec.803]
million/yr for an American Center on Global
Health and Tobacco. [Sec. 601-607]
Antitrust
Exemption
Smuggling
Veterans, Vending Machines, and Asbestos Workers
Title X
Veterans
Vending
Machines
Asbestos
Establishes the Tobacco Asbestos Trust Fund.
Worker
Transfers up to $3 billion/yr of the annual
Compensation
industry payment to the Trust Fund. Total
amount transferred over 15 years = $20 billion.
Requires funds to be used to pay asbestos claims
of smokers. [Sec. 1001-1005]
a The projected 5-year total is based on Dept. Treasury estimates and excludes money transferred to the asbestos trust fund and money withheld in lieu of taxes. Note that the annual
industry payments are tax-deductible.
CRS-34
Table 2: Summary of June 20, 1997 Tobacco Settlement
Title
Provisions
I.
Tobacco Industry
Reformation
Incorporates the following provisions of the FDA rule: (i) Prohibits use of non-tobacco brand names for tobacco products unless
Marketing and
such names were in existence as of 1/1/95 (897.16(a)); (ii) Restricts tobacco product advertising to FDA-specified media
Advertising
(897.30(a)); (iii) Restricts permissible tobacco product advertising to black text on a white background except for advertising in
adult-only facilities and adult publications (897.32 (a-b)); (iv) Requires advertisements to include FDA-mandated statement,
“Nicotine-Delivery Device for Persons 18 and Older” (897.32(c)); (v) Bans sale and distribution of non-tobacco items, services, and
gifts, and brand-name sponsorship of sporting and other cultural events (897.34(a-c)).
Modifies and extends the FDA rule as follows: (i) Bans
all outdoor tobacco product advertising and
all brand-name advertising
directed outside from a retail store (modifies 897.30(a-b)); (ii) Bans the use of human and cartoon images in tobacco advertising and
packaging; (iii) Prohibits tobacco product advertising on the Internet unless designed to be inaccessible from the United States; (iv)
Prohibits payments to glamorize tobacco use in media appealing to minors; (v) Prohibits payments for tobacco product placement in
movies, TV programs, and video games; (vi) Establishes additional restrictions on point-of-sale advertising (e.g., regulates number
of permissible advertisements).
Warnings, Labeling and
Amends the Federal Cigarette Labeling and Advertising Act (15 U.S.C. 1331
et seq.) and the Comprehensive Smokeless Tobacco
Packaging
Health Education Act (15 U.S.C. 4401
et seq.) to require new warning labels on tobacco product packages and cartons, and on all
tobacco advertisements. For cigarettes, the warnings would be in bold type and occupy 25% of the front of the package. Requires
a
packages to include FDA-mandated statement, “Nicotine-Delivery Device for Persons 18 and Older” (897.25).
Transfers from the Federal Trade Commission (FTC) to FDA the authority to measure and report tar, nicotine, and carbon monoxide
levels in tobacco smoke, and the authority to require disclosure of such information on labels and advertising.
Restrictions on Access to
Incorporates the following provisions of the FDA rule: (i) Sets a minimum age of 18 to purchase tobacco products and requires
Tobacco Products
retailers to check photo ID of anyone under age 27 (897.14(a-b)); (ii) Requires face-to-face transactions for all tobacco sales, bans
sale of individual cigarettes, and requires retailers to remove all displays and advertising that do not comply with this regulation
(897.14(c-e)); (iii) Establishes a minimum package size of 20 cigarettes and bans the sampling of tobacco products (897.16(b)(d));
(iv) Bans self-service displays except in adult-only facilities (897.16(c)).
Modifies and extends the FDA rule as follows: (i) Bans
all vending machine sales; (ii) Permits mail-order sales, subject to proof of
age and FDA review (modifies 897.16(c)); (iii) Mandates that tobacco products be placed out of reach of the customers (i.e., behind
counter or under lock and key), except in adult-only facilities.
Licensing of Retail Sales
Mandates minimum federal standards for licensing tobacco product retailers. Retailers would face fines for selling tobacco without a
license of at least $1,000 per violation. Licensed retailers who sell to minors would face fines starting at $500 and rising to $25,000
for repeated violations. Retailers caught selling to minors 10 times within any two-year period could lose their license. Licensing
fees would cover the administrative costs of issuing state licenses.
CRS-35
Table 2: Summary of June 20, 1997 Tobacco Settlement
Title
Provisions
Tobacco Product
Recognizes explicitly FDA’s authority to regulate tobacco products. Classifies tobacco products as Class II devicesb under the
Development and
Federal Food, Drug, and Cosmetic Act (21 U.S.C. 360c) and permits FDA to require the modification of tobacco products in
Manufacturing
accordance with Performance Standards:
(i) For at least 12 years following enactment of the settlement, FDA would be permitted to adopt Performance Standards to reduce
nicotine yields and eliminate other harmful tobacco product ingredients, provided that the modification significantly reduces health
risks, is technologically feasible, and does not create a black market for unmodified products. FDA must show “substantial
evidence” for any such modification in a formal rulemaking subject to the Administrative Procedure Act, with the right of judicial
review. Any such action would also be subject to congressional review under the Regulatory Reform Act of 1996.
c
d
(ii) After the initial 12-year period, FDA would be permitted to adopt Performance Standards to eliminate nicotine, provided that the
modification meets the same criteria listed in item (i). FDA must base any such modification on a “preponderance of evidence”
pursuant to a Part 12 hearing, or notice and comment rulemaking, with the right of judicial review. Any such action would be
e
phased in after a two-year period to allow for congressional review under the Regulatory Reform Act of 1996.
(iii) Requires FDA approval of all health claims for tobacco products. Permits FDA to mandate the introduction of less hazardous
tobacco products that are technologically feasible. Any such action would require a formal rule- making subject to the
f
Administrative Procedure Act, with the right of judicial review. Requires FDA to establish a scientific advisory committee to study
issues related to the regulation of nicotine and other health and safety issues.
Good Manufacturing
Subjects tobacco companies to good manufacturing practice standards comparable to those applicable to other FDA-regulated
Practice
industries (see 820.1(e)(f)).
Industry Documents
Establishes a public depository of industry documents related to smoking and health, addiction or nicotine dependency, safer or less
hazardous cigarettes, and underage tobacco use and marketing. The depository would not include documents that are determined by
the industry to be “privileged against disclosure,” but would instead include a detailed, descriptive log of such privileged documents.
Establishes a three-judge federal arbitration panel to settle disputes over making privileged documents public.
Non-Tobacco Ingredients
Supersedes the current federal ingredient law by requiring manufacturers to disclose annually to FDA on a “strictly confidential”
basis the amounts of all non-tobacco ingredients added to each brand. Requires manufacturers to disclose ingredients information to
g
the public in a manner comparable to current federal requirements for food products. Manufacturers must submit safety testing
results for each non-tobacco ingredient within five years, and demonstrate that there is a reasonable certainty that the ingredient is
not harmful under the intended conditions of use. FDA would have 90 days to review each safety assessment.
Corporate Culture and
Includes requirements to ensure that the industry complies with both the letter and spirit of the settlement, including the
Compliance
establishment of internal procedures to promote compliance with laws barring tobacco sales to minors. Provides “whistleblowers”
in the tobacco industry with protection. Requires tobacco lobbyists to agree in writing to comply with all the provisions of the
settlement, and not support or oppose any state or federal legislation without the manufacturer’s authorization. Disbands the
Tobacco Institute and the Council for Tobacco Research.h
Grants tobacco companies immunity from federal and state antitrust laws thereby allowing them to confer and act in concert to meet
the requirements of the settlement (e.g., raising prices to cover annual payments).
CRS-36
Table 2: Summary of June 20, 1997 Tobacco Settlement
Title
Provisions
II.
Look-Back Provisions, State
Sets targets for reduction in underage cigarette use. The industry would face fines of up to $2 billion per year if underage cigarette
Enforcement Incentives
use does not decline by 30% in five years, 50% in seven years, and 60% in 10 years, or underage use of smokeless tobacco products
does not decline by 25% in five years, 35% in seven years, and 45% in 10 years. Allows the industry to petition FDA to recover
75% of the fine if it can establish that it pursued all “reasonably available measures” to reduce youth smoking and did nothing to
undermine the settlement goals.
Requires states to undertake significant enforcement steps to reduce the incidence of underage tobacco use, which go beyond the
provisions of the Synar Amendment (42 U.S.C. 300x-26; 45 C.F.R. 96.130). States must maintain a specific level of enforcement
activity or risk losing health care funds (see Title VII).i
III.
Penalties, Consent Decrees,
Requires manufacturers and states to enter into legally enforceable consent decrees that include many of the provisions of the
Non-Participating Tobacco
settlement. Violations of the proposed settlement’s requirements would carry civil and criminal penalties based upon the penalty
Companies
provisions of the Food, Drug and Cosmetic Act and the provisions of the United States criminal code. In addition, the industry
would face civil penalties of up to $10 million for each violation of the requirements to disclose information about non-tobacco
ingredients and the health effects of tobacco products. Non-participating tobacco companies would be subject to all the regulations
outlined in Title I of the settlement, but would receive none of the civil liability protection outlined in Title VIII. Requires non-
participating companies to make annual payments into an escrow fund earmarked for potential liability claims against the
companies.
IV.
Environmental Tobacco
Restricts smoking in public facilities (i.e., any building entered by 10 or more individuals at least one day a week) to separately
Smoke
ventilated locations. Ensures that no employee may be required involuntarily to enter a smoking area. Exempts restaurants (other
than fast food restaurants) and bars, private clubs, hotel guest rooms, casinos, bingo parlors, tobacco merchants and prisons.j Allows
state and local governments to enact stricter laws.
V.
Scope and Effect
The settlement includes all tobacco products sold in U.S. commerce, and also covers imports and U.S. duty free items. Preserves the
legal authority of state and local governments to regulate further the sale and distribution of tobacco products. Retains the fiscal
authority over tobacco products of the Bureau of Alcohol, Tobacco and Firearms, and the existing authority of the FTC, except for
tar, nicotine and carbon monoxide testing (see Title I, sec. B).
CRS-37
Table 2: Summary of June 20, 1997 Tobacco Settlement
Title
Provisions
VI.
Programs and Funding
Mandates annual industry payments in perpetuity to reimburse states for Medicaid outlays for smoking-related illnesses, pay
k
damages to settle individual lawsuits (see Title VIII), provide funds for public health programs and research, and to cover the costs
of implementing and enforcing the programs and regulations outlined in the settlement (see Title VII).
The industry would pay an up-front sum of $10 billion, and annual payments beginning at $8.5 billion in the first year, increasing to
$15 billion in the fifth year of the settlement. The annual payments would remain at $15 billion per year thereafter. The annual
payments would be subject to adjustment for inflation, and would be deemed an ordinary and necessary business expense and,
therefore, tax deductible. Companies would raise prices on tobacco products to cover the cost of the annual payments. The annual
l
payments would also be subject to a sales-volume adjustment. If adult consumption decreases, annual payments would be reduced
proportionately. It total consumption increases, annual payment would be increased proportionately.
Total estimated payments over the first 25 years = $368.5 billion (in 1998 dollars)m
VII. Distribution of Annual
Recommends distribution of annual payments as follows: (i) Unrestricted funds to states totaling $8 billion/yr by the sixth year
Payments
(allocated according to a formula) to reimburse their Medicaid programs; (ii) Funding for tobacco cessation programs (totaling $1.5
billion/yr by the sixth year); (iii) Funding for a public health trust to pay for biomedical and behavioral tobacco-related research
(payments into trust total $25 billion over the first 8 years); (iv) Funding for tobacco control programs (totaling $1.5 billion/yr by the
fourth year), which include counter advertising ($0.5 billion/yr), FDA regulation, local community programs, research on reducing
tobacco use, and also compensation for sporting and cultural events that lose tobacco industry sponsorship.
Provides up to $4 billion/yr to pay damages in individual lawsuits (see Title VIII). Unused funds would be allocated for other
tobacco-related activities and programs by a presidential commission .
VIII. Civil Liability
Provides the participating companies with protection from civil liability by legislatively settling the state attorneys generals’ and
class-action lawsuits. Prohibits future class-action lawsuits. Preserves the rights of individuals to sue tobacco companies for past or
future conduct. Individual lawsuits arising from past conduct could claim only compensatory damages, whereas individual lawsuits
arising from future conduct could claim both compensatory and punitive damages. Defines permissible parties that can act as
plaintiffs and defendants in such lawsuits. Limits the total damages paid by the industry in any one year to 33% of the annual
industry base payment.n Allows industry to deduct 80% of its liability costs each year from the annual payment.
IX.
Board Approval
The terms of the settlement are subject to approval by the Boards of Directors of the participating tobacco companies.
a The nine warnings on cigarettes packs include: “WARNING: Cigarettes are addictive” and “WARNING: Cigarettes cause cancer.” The four warnings on smokeless tobacco products
include: “WARNING: Smokeless tobacco is addictive” and “WARNING: This product can cause mouth cancer.” The warnings would appear in Canadian format (i.e., alternating black
text on a white background and white text on a black background). They would be introduced concurrently on all tobacco product packages and cartons, and rotated quarterly on all
advertisements. The settlement preserves the preemptive language in both the Federal Cigarette Labeling and Advertising Act and the Comprehensive Smokeless Tobacco Health
Education Act, which prevents state and local governments from requiring additional health warnings on tobacco products.
b Class II medical devices (e.g., syringes, hearing aids, and powered wheelchairs) are those for which FDA requires special controls to assure safety and effectiveness. These controls
may include special labeling requirements, mandatory performance standards, and postmarket surveillance.
CRS-38
c Most regulations are issued informally under the notice-and-comment procedure established by the Administrative Procedure Act (APA; 5 U.S.C. 551
et seq.). The agency publishes
a notice of proposed rulemaking in the Federal Register, permits interested persons to submit comments, and incorporates in the final rule a concise statement of the rule’s basis and
purpose. These regulations are reviewed under the “arbitrary, capricious, abuse of discretion” standard. Under this standard, a reviewing court would uphold an agency’s action if it
is rational, based on a consideration of the relevant factors, and within the scope of the authority designated to the agency by Congress. The settlement, however, would require FDA
to undertake a formal rulemaking subject to the APA. This would involve trial-type hearings at which parties present evidence and conduct cross examinations. Furthermore, the
“substantial evidence” standard required by the settlement may be more stringent than the “arbitrary, capricious, abuse of discretion” standard employed in informal rulemaking.
d This presumably refers to the Small Business Regulatory Fairness Enforcement Act of 1996 (P.L. 104-121), under which Congress has 60 session days to block a regulation by passing
a joint resolution of disapproval. This procedure may be applied to any rule that results in an annual effect on the economy of at least $100 million.
e A Part 12 hearing refers to a formal evidentiary public hearing under FDA regulations (21 C.F.R. 12), involving presentation of evidence, cross examination, and other trial-type
procedures. Requiring that an agency base its action on a “preponderance of evidence” is, according to some analysts, extremely unusual.
The term “less hazardous tobacco products” refers to innovative products such as smokeless cigarettes, as opposed to chemically modified existing products.
f
g Under current law, the industry is required to provide annually to the Secretary of Health and Human Services a list of all the additives used in the manufacture of tobacco products.
The Secretary is granted no authority to regulate additives that are suspected of being hazardous.
h The Tobacco Institute is the industry’s Washington DC-based lobbying organization, and the Council for Tobacco Research provides industry funds for biomedical research.
iThe Synar Amendment to the Public Health Service Act requires states to enforce their laws prohibiting the sale of tobacco products to individuals under age 18. States must conduct
annual random, unannounced inspections of retail outlets to ensure compliance with the law. States risk losing federal substance abuse block grant funds for failure to comply. Under
the settlement, a state would lose up to 20% of its Medicaid reimbursement funds (see Title VI) if after 10 years its enforcement program failed to reach a 90% compliance rate.
jOn March 25, 1994, the Occupational Safety and Health Organization (OSHA) proposed an indoor air quality regulation that would restrict smoking to separately ventilated, designated
smoking rooms. The smoking restriction would apply to all industrial and non-industrial buildings under OSHA’s jurisdiction, including restaurants and bars.
The settlement negotiators intend that funding provided to the states would be sufficient to extend health insurance to uninsured children.
k
lArithmetically, an increase of 62 cents per pack would raise $15 billion in additional revenue, based on (1996) cigarette sales of 24.165 billion packs. However, this estimate does
not take into account any wholesale or retail price mark-up.
m This 25-year total includes $60 billion in lieu of punitive damages for the tobacco industry’s past conduct.
n By the ninth year, the total annual damages paid by the industry is capped at $5 billion per year.
CRS-39
Table 3: FDA’s Regulation of Cigarettes and Smokeless Tobacco Products
Section
Provisions
Status
Labeling (Sec. 801)
Exempts cigarettes and smokeless tobacco from section 502(f)(1) of the Federal Food, Drug, and Cosmetic
Act (FFDCA), which requires drug and device labels to bear adequate directions for use.
a
21 CFR §801.126
Medical Device Reporting (Sec. 803)
Requires manufacturers of cigarettes and smokeless tobacco to submit reports only for serious adverse
Implementation
health events beyond those well-documented by the scientific community, including events related to
delayed c
product contamination, or a change in any ingredient or manufacturing process.
21 CFR §803.19(f)(g)
Medical Device Distributor Reporting
Requires distributors of cigarettes and smokeless tobacco to submit reports only for adverse health events
Implementation
(Sec. 804)
related to contamination.
21 CFR §804.25(c)
delayed c
Registration and Listing of Medical
Requires manufacturers of cigarettes and smokeless tobacco to comply with establishment registration and
Implementation
Devices (Sec. 807)
device listing requirements for medical devices.
21 CFR §807.65(j)
delayed c
Good Manufacturing Practice (GMP)
Requires manufacturers of cigarettes and smokeless tobacco to comply with GMP regulations for medical
Implementation
for Medical Devices (Sec. 820)
devices. Distributors of tobacco products are exempted from this requirement.
21 CFR §820.1(e)(f)
delayed c
Youth Access, Labels, and
Advertising (Sec. 897)
General responsibilities of
Manufacturers, distributors, and retailers are responsible for complying with all applicable requirements of
Implementation
manufacturers, distributors, and retailers
this regulation.
21 CFR §897.10
delayed c
Additional responsibilities of
Manufacturers must remove from each point of sale all self-service displays, advertising, labeling, and other
Implementation
manufacturers
items owned by the manufacturers that do not comply with the requirements of this regulation.
21 CFR
delayed c
§897.12
Prohibition of sale and distribution to
(i) Retailers may not sell cigarettes or smokeless tobacco to persons younger than age 18. (ii) Persons under
Effective
persons younger than age 18
age 27 must verify age by means of photographic identification. 21 CFR §897.14(a)(b)
February 28, 1997
Additional responsibilities of retailers
(i) Retailers must perform sale in a direct, face-to-face exchange without assistance of mechanical or
Implementation
electronic device (e.g., vending machine). (ii) Retailers may not sell or distribute individual cigarettes. (iii)
delayed c
Retailers must remove all self-service displays, advertising, labeling, and other items that do not comply
with this regulation.
21 CFR §897.14(c)(d)(e)
CRS-40
Table 3: FDA’s Regulation of Cigarettes and Smokeless Tobacco Products
Section
Provisions
Status
Conditions of manufacture, sale, and
(i) Prohibits manufacturers from using a trade name or product name of a non-tobacco product for a
Implementation
distribution
cigarette or smokeless tobacco product unless such names were in use prior to 1/1/95. (ii) Prohibits
delayed c
distribution and sale of cigarette packages containing fewer than 20 cigarettes. (iii) Bans vending machines
and self-service displays except in locations where the retailer ensures that no person under age 18 is
permitted at any time. Permits mail-order sales. (iv) Bans distribution of free samples of cigarettes and
smokeless tobacco. (v) Bans sale and distribution of cigarettes and smokeless tobacco with labels, labeling,
or advertising not in compliance with this regulation.
21 CFR §897.16(a)(b)(c)(d)(e)
Package labels
Cigarette and smokeless tobacco packages must bear an appropriate, established name (e.g., “Cigarettes” or
Implementation
“Loose Leaf Chewing Tobacco”) and include the following statement: “Nicotine-Delivery Device for
delayed c
Persons 18 or Older.”
21 CFR §897.24, 21 CFR §897.25
Permissible forms of labeling and
(i) Permits labeling and advertising of cigarettes and smokeless tobacco products in newspapers, magazines,
Implementation
advertising b
periodicals, billboards, posters, placards, in nonpoint-of-sale promotional materials (including direct mail),
delayed c
and in point-of-sale promotional materials (including audio and video formats). FDA must be notified of
any intention to use any other medium not listed. (ii) Bans outdoor advertising of cigarettes and smokeless
tobacco within 1000 feet of a public playground, elementary or secondary school.
21 CFR §897.30(a)(b)
Format and content requirements for
(i) Cigarettes and smokeless tobacco labeling and advertising must use only black text on a white
Implementation
labeling and advertising
background. Publications read by fewer than 2 million persons under age 18, or whose youth readership is
delayed c
15 percent or less of the total readership are exempt from this requirement. Point-of-sale advertising in
adult-only facilities is also exempt, provided that the advertising is not visible from the outside. (ii)
Labeling and advertising in an audio format is limited to words with no music or sound effects. Video
format is limited to static black text on a white background. (iii) Labeling and advertising must include the
product’s established name, followed by the words: “A Nicotine-Delivery Device for Persons 18 or Older.”
21 CFR §897.32(a)(b)(c)
Sale and distribution of non-tobacco
(i) Prohibits marketing, licensing, distribution or sale of all non-tobacco items and services that are
Implementation
items, services, and gifts
identified with a cigarette or smokeless tobacco product brand name or other identifying characteristic (e.g.,
delayed c
promotional tee shirts and caps). (ii) Prohibits gifts of non-tobacco items as well as credits and coupons that
are linked to the purchase of cigarettes and smokeless tobacco.
21 CFR §897.34(a)(b)
Sponsorship of events
Bans brand-name sponsorship of sporting and other cultural and social events. Only corporate-name
Implementation
sponsorship permitted.
21 CFR §897.34(c)
delayed c
Source: Regulations Restricting the Sale and Distribution of Cigarettes and Smokeless Tobacco to Protect Children and Adolescents.
Federal Register, v. 61, no. 168, Aug. 28, 1996.
pp. 44396-45318.
CRS-41
a The regulation does not exempt tobacco products from section 502(f)(2) of the FFDCA, which requires adequate warnings against use by children and others whose medical condition
(e.g., pregnancy) makes use of the product dangerous to health. According to FDA, this requirement is satisfied by the rotating Surgeon General’s warning labels. The regulation also
requires package labeling for
intended use. According to FDA, this requirement is satisfied by sections 897.24 and 897.25 of the regulation.
b The terms “labeling and advertising” are used in sections 897.30 and 897.32 to include all commercial uses of the brand name of a product, logo, symbol, motto, selling message,
or any other indicia of product identification similar or identical to that used for any brand of cigarette or smokeless tobacco product.
c Implementation of these provisions was delayed by a North Carolina federal district court judge. FDA jurisdiction over tobacco products remains unclear pending the Administration’s
appeal of the August, 1998 federal appeals court ruling (see page 3).