Florida - targeting companies that did not particpate in tobacco master settlement agreement...

November 25, 2009 - Facing a daunting deficit, some lawmakers plan to again target the smaller cigarette companies that didn’t participate in Florida’s settlement with the tobacco industry about a decade ago.

Back in 1997, Florida reached a settlement with large tobacco companies that the state contended were costing Florida money by making people sick. The settlement included companies that made most of those cigarettes – but left out a few companies with barely enough market share to be noticed. Those companies, though, particularly Miami-based Dosal, have greatly increased their share of the market since then.

And with Florida facing a deficit of some $2.7 billion, adding Dosal and other small companies to the settlement could bring in $70 million or so new dollars that when matched by Medicaid money from Washington could mean about $200 million for Florida health care programs.

“It’s almost like the state of Florida is appropriating $150 million to $200 million a year to cigarette companies and in this environment it’s unconscionable,” said Senate Finance and Tax Chairman Thad Altman, R-Melbourne. “We’ve got to fix that problem.”

A move in the Senate last year to try to add the non-settling tobacco companies to the settlement, requiring them to pay into state coffers, got bogged down in discussions over a broader tobacco surcharge that was eventually passed.

The proposal also ran into opposition from Dosal, which would be hit hard by being saddled with the same requirement as the bigger companies. Dosal argues that only the courts could add other companies to a legal settlement – not lawmakers – and that it shouldn’t be forced to pay for historical bad behavior by the tobacco giants, anyway.

The reason they were left out of the settlement agreement depends on who you ask. Those who want to add the smaller companies say it was simply because their market share was too small. Dosal says that’s not true at all – it didn’t settle with Florida because, unlike the big tobacco companies, it wasn’t accused of wrongdoing in the original lawsuit.

Regardless, Altman and a few others in the Legislature now want small companies like Dosal – which have dramatically increased their market share in the last decade – to pay into Florida’s health care coffers.

“It’s also a fairness issue for me,” said Altman, who said he will likely file a bill this year to try to force the companies that weren’t in the settlement to begin paying. “It’s fundamentally unfair to have what is now 20 percent of the market having some sort of advantage. And it undermines the entire effort of what was most important under the settlement – to curb smoking.”

Backers of the idea last year included former Attorney General Bob Butterworth – who was in office when the settlement was reached. The move is also being pushed by the companies who did settle with Florida – who now are competing with the smaller non-settling companies.

They’re no longer insignificant competitors, either. “Today, 12 years later, you’re talking about almost 20 percent of the market,” for the non-settling companies said David Sutton, a spokesman for Philip Morris USA’s parent company Altria, which is lobbying for adding its competitors to Florida’s settlement. “If one of the main things was to reimburse the state for health care costs related to smoking, some people are enjoying the opportunity to decide whether they’re going to pay into that stream based on the brand they buy. The fee would just sort of level that paying field – to the state’s benefit.”

That argument infuriates officials of Dosal, which shut down for a day last spring so its employees could trek to Tallahassee to remind lawmakers that the company’s workers are voters in this state and that the company provides jobs in Miami – not unimportant when unemployment hovers above 10 percent.

“Those guys in the settlement agreement, they are paying for past wrongdoing,” said Sarah Bascom, a spokeswoman for Dosal. “It was for a host of acts of wrongdoing, it has nothing to do with the effects of smoking, it had nothing to do with the size of the market…..They’re paying for things like lying to Congress, advertising to minors…. We weren’t a part of that.”

Reference: State Targets Small Cigarette Companies as Source for Cash, The Jacksonville Observer, 11/23/2009.