On 20th Anniversary of State Tobacco Settlement (the MSA), It’s Time for Bold Action to Finish the Fight Against Tobacco

Statement of Matthew L. Myers, President, Campaign for Tobacco-Free Kids
November 26, 2018

WASHINGTON, D.C. – This month (November 23, 2018) marks the 20th anniversary of the landmark 1998 legal settlement between the states and the tobacco companies (the Master Settlement Agreement or MSA), which required the companies to pay more than $200 billion over time as compensation for tobacco-related health care costs, restricted some forms of tobacco marketing and provided funding for a national public education campaign to prevent youth tobacco use.

As a complement to separate policy actions, including higher tobacco taxes and comprehensive smoke-free laws, the settlement played an important role in driving down smoking rates that are now at record-lows in the United States (in 2017, just 14 percent of adults and 7.6 percent of high school students still smoked).

Our progress shows that the battle against tobacco is entirely winnable if proven strategies are fully implemented. But enormous challenges remain. Tobacco use is still the No. 1 cause of preventable death in the United States, killing more than 480,000 Americans and costing the nation $170 billion in health care bills each year. There are also large disparities in who still smokes and who suffers from tobacco-related diseases in the U.S., with especially high smoking rates among people with lower income and less education and other specific populations. In addition, the youth e-cigarette epidemic, driven by the exploding popularity of Juul, is an urgent challenge that must be addressed to prevent yet another generation from becoming addicted to nicotine.

The 20th anniversary of the tobacco settlement is an opportunity to review our progress and remaining challenges – and for a renewed national commitment to finish the fight against tobacco and eliminate once and for all the death and disease it causes.

Impact of the Tobacco Settlement

The Master Settlement Agreement settled the states’ lawsuits against the tobacco companies to recover health care expenditures related to tobacco use. The MSA, along with earlier settlements with four individual states, required tobacco companies to make annual payments to the states in perpetuity, with payments estimated at $246 billion over the first 25 years.

The settlement contributed in significant ways to reducing smoking in the U.S., but also represents a missed opportunity to achieve even more. The settlement impacted smoking rates in several ways:

Cigarette price increases: The settlement, along with subsequent state and federal cigarette tax increases, resulted in significant increases in the price of cigarettes, which is one of the most effective ways to reduce smoking, especially among kids. The settlement led the major cigarette companies to increase prices by more than $1.10 per pack from 1998 to 2000 (part of these increases was used to pay the states, but about half of the increase simply boosted profits). State and federal cigarette tax increases have further raised cigarette prices, with the average combined federal-state cigarette tax increasing from 63 cents per pack in 1998 to $2.79 today.

Tobacco marketing restrictions: The settlement curtailed some forms of tobacco marketing. It prohibited tobacco transit ads and billboards, the use of cartoon characters to promote tobacco products, most tobacco brand-name merchandise (such as hats and t-shirts) and most tobacco brand-name sponsorship of concerts, sports and other events (these restrictions were strengthened and expanded by the 2009 federal Family Smoking Prevention and Tobacco Control Act, which authorized the Food and Drug Administration to regulate tobacco products). However, these restrictions applied only to cigarettes and smokeless tobacco and not to other products popular with kids today – e-cigarettes and cigars.

Despite these restrictions, tobacco companies subsequently increased their marketing expenditures, especially in retail stores, and continued to spend billions of dollars each year to market their deadly products, often in ways that appeal to kids. In 1998, tobacco companies spent $6.9 billion to market cigarettes and smokeless tobacco in the U.S. From 1999 to 2016, they spent an average of $10.7 billion per year on marketing – that’s more than $29 million every day and about $1.2 million every hour – according to annual reports issued by the Federal Trade Commission. Most of this spending is on price discounting schemes, which undermine tobacco tax increases and make tobacco products more affordable for price-sensitive kids.

Funding for national public education campaigns: The settlement provided about $300 million a year for five years to create a national foundation, initially named the American Legacy Foundation and now Truth Initiative, to conduct national public education campaigns to reduce tobacco use. Funding at that level depended on the market share of the major cigarette manufacturers so that it only lasted five years. The foundation used the funds to create the iconic truth® campaign, which studies have shown to be highly effective in reducing youth tobacco use and tobacco-related health care costs. The campaign continues today at a still robust level, but well below what it would have been had the original funding continued beyond five years.

Funding for state tobacco prevention and cessation programs: At the time of the tobacco settlement, state officials promised to spend a significant portion of their settlement funds on programs to prevent kids from smoking and help smokers quit. While overall funding did increase for such programs, especially in the first few years after the MSA, many states subsequently cut funding and almost every state broke its promise and failed to provide adequate funding.

Over the past 19 years, from Fiscal Year 2000 to FY2018 (numbers are still being tallied for FY2019), the states have spent just 2.6 percent of their total tobacco-generated revenue on tobacco prevention and cessation programs. During this time, the states have received $425 billion in tobacco revenue – $148 billion from the tobacco settlement and $277 from tobacco taxes. They have allocated $11.1 billion to tobacco prevention and cessation programs.

Most states have consistently fallen far short of funding these programs at amounts recommended by the U.S. Centers for Disease Control and Prevention. In FY2018, no state funded such programs at the CDC-recommended levels, and the states combined provided just 22 percent of the recommended funding. The states’ failure to adequately fund tobacco prevention and cessation programs represents a missed opportunity for even greater gains in reducing tobacco use.

Great Progress and Big Challenges

In addition to the tobacco settlement, other key factors that have driven down smoking rates include tobacco tax increases, public education campaigns and widespread adoption of state and local smoke-free laws. In 1998, only California had a statewide law that prohibited smoking in restaurants and bars; today, 25 states and Washington, D.C., and hundreds of localities have comprehensive smoke-free laws that apply to all restaurants, bars and other workplaces, protecting nearly 60 percent of the U.S. population.

Other strong measures implemented in recent years include the 2009 law granting the FDA authority over tobacco products, expanded health insurance coverage for smoking cessation treatments, a growing number of state and local laws raising the tobacco sale age to 21, and the strongest and most sustained media campaigns to reduce tobacco use in the nation’s history, including campaigns by the CDC, FDA and Truth Initiative.

The result has been large declines in smoking among both youth and adults. From 2000 to 2017, the smoking rate fell by 73 percent among high school students (from 28 percent to 7.6 percent) and by 40 percent among adults (from 23.2 percent to 14 percent). Data are from government surveys, the 2017 National Health Interview Survey and 2017 National Youth Tobacco Survey.

But enormous challenges remain. The latest data show that 34.3 million U.S. adults still smoke and 47 million – about 1 in 5 adults – still use some form of tobacco. In addition, there are large disparities in who still smokes and who suffers from tobacco-related disease. Smoking rates vary greatly by population groups and regions:

  • Income: 21.4 percent of adults with annual household incomes under $35,000 smoke.
  • Education: Among adults 25 and older, 23.1 percent who do not graduate from high school and 36.8 percent with a General Education Development (GED) certificate smoke, compared to 7.1 percent of those with a college education and 4.1 percent of those with a graduate degree.
  • Region: Smoking rates are highest at 16.9 percent in the Midwest and 15.5 percent in the South, compared to 11.2 percent in the Northeast and 11 percent in the West.
  • Racial and ethnic disparities: American Indians and Alaska Natives have the highest smoking rate of any racial/ethnic group at 24 percent. While African-American and white adults smoke at about the same rate (14.9 and 15.2 percent, respectively), African Americans are less likely to quit smoking, and both incidence and death rates for lung cancer are higher among African-American men. African Americans are much more likely to smoke menthol cigarettes, which the FDA has found leads to increased smoking initiation among youth and young adults, greater addiction and decreased success in quitting smoking. The FDA recently proposed banning menthol cigarettes.
  • Health insurance status: 24.5 percent of Medicaid enrollees and 24.7 percent of uninsured individuals smoke, compared to 10.5 percent with private insurance coverage.
  • Sexual orientation: 20.3 percent of lesbian, gay and bisexual adults smoke, compared to 13.7 percent of heterosexual adults.
  • Mental health: 35.2 percent of adults with serious psychological distress smoke, compared to 13.2 percent of other adults. Other surveys have found smoking is much more common among adults with mental illness than among the general population.

These disparities underscore that reducing tobacco use among all Americans is a critical element of achieving health equity in the United States.

Winning the Fight Against Tobacco

To win the fight against tobacco use, policymakers at all levels must fully implement the proven strategies that have driven our progress and ensure they reach all Americans. These include significant tobacco tax increases, comprehensive smoke-free air laws, well-funded tobacco prevention and cessation programs, hard-hitting mass media campaigns, barrier-free insurance coverage for tobacco cessation treatments, and Tobacco 21 laws.

The FDA has an especially critical role to play and should take several powerful actions that can accelerate progress:

  • Prohibit menthol cigarettes and flavored cigars, as the FDA recently proposed, and strengthen its plan to address the youth e-cigarette epidemic by stopping sales of all flavored e-cigarettes that have not been subject to public health review by the agency. Until the FDA stops the sale of all flavored products, states and localities should continue their growing efforts to do so;
  • Require graphic health warnings covering at least half of cigarette packs, as the 2009 Tobacco Control Act mandated and a federal judge recently ordered the FDA to expedite;
  • Foster development of innovative new products that can help more smokers quit and increase the effective use of existing smoking cessation products.

We have the tools to win the fight against tobacco, but continued progress is not inevitable. With bold action, our nation can finally end this entirely preventable epidemic and make the next generation tobacco-free.