Details of the Master Settlement Agreement
Ohio became one of 46 states to reach the state master settlement agreement (MSA) with tobacco companies on Nov. 23, 1998, with the agreement becoming effective April 15, 1999. Since then, 46 state attorney generals have signed on the MSA. Illinois reached its agreement back on Nov. 21, 1998, with the other 4 states signing onto MSA in 1999.
The MSA itself provides that 5 major manufacturers, going by the name of the "original participating manufacturers," are required to make annual payments to states in perpetuity. As have other states, Ohio agreed to drop any claims pertaining to past and future tobacco-related healthcare costs, although states can continue pursuing claims for anything that occurred pre-MSA.
In addition , the MSA itself requires that tobacco companies comply with certain marketing restrictions and require that they establish specific limitations on how cigarettes and smokeless tobacco products may both be manufactured and advertised. The restrictions were established to deter youth from initiation and encourage current users to "smoke less." Some of those limitations include:
The MSA also created a National Foundation for Smoke-Free Policies, which is designed to conduct public education campaigns and anti-smoking programs. In addition, the MSA established the Attorneys General Tobacco Trial Fund and the Fund for Tobacco Dependent Reform.
Ohio itself has ever since maintained an allocation for the developers of prescription drugs used to treat smoking cessation, smoking prevention programs, and smoking research.
Public Health Policy Implications of the MSA
Since the Master Settlement Agreement (MSA), Ohio has made great strides in this area. The Ohio Tobacco Use and Prevention Control (OTAPC) program, established with 12.7% of Ohio’s share of MSA funds, has funded smoking cessation programs and provided resources on tobacco related illnesses and consequences. Ohio has established several new statutes and revised old ones to strengthen tobacco regulations and better protect non-smokers and potential smokers.
Tobacco companies are required to submit annual payments according to the MSA formula, the most recent payment being $8.1 billion. These funds are allocated for health care and other tobacco-cessation initiatives, with 25% of the payments designated "to the state’s general fund in the fiscal year of deposit." With these funds, OTAPC has been able to allocate more money towards its tobacco-control efforts. Sarrazin et al. compiled a lengthy list of some examples of OTAPC’s campaign efforts targeting Ohio. These efforts have been very successful, with significant decreases in smoking rates in recent years. For example, according to the CDC, in 2012 Ohio’s smoking rate was 20.3%, down from 23.5% in 2010, and down from 24.3% in 2008.
Ohio has made many policy changes since the MSA was ratified. Ohio has established its own Department of Health, which entitles the Department to determine and develop programs and policies based on the most current medical resources. The Ohio Department of Health’s (ODH) Interagency Workgroup for Tobacco Cessation created the newly established Cigarette Restitution Fund (CRF), whose goal is to use MSA funds to "build a comprehensive, evidence-based tobacco cessation system." In 2010, ODH published the "Comprehensive Tobacco Use Cessation Plan," which outlines its use of MSA funds for education, promotion and distribution of resources and services.
In 2006, Ohio passed House Bill 218 which revised Ohio Revised Code 3791.17, prohibiting smoking in public places and places of employment. ODH, with state funding subject to inspection by the Center for Disease Control and Prevention (CDC), rewarded the 2006 passage of House Bill 218 as "setting the stage for Ohio to make substantial progress in reducing tobacco use." This legislation allowed Ohio to achieve its highest decrease in smoking rates since the implementation of the MSA. Sarrazin et al. notes five key elements that lead to the MSA’s success in Ohio:
To aid in tobacco control initiatives, some states and localities have passed tax increases on tobacco products. For example, Ohio in 2002, passed a $1.25-per-pack increase in the cigarette tax. According to the CDC, every increase also decreases consumption. Other states have used some MSA funds to promote smoking cessation programs. However, in an effort to maximize its MSA funds, Ohio has decided to increase its tobacco-control efforts through its taxation initiatives, such as Ohio’s cigarette tax.
Economic Impact on the State of Ohio
As a part of the Master Settlement Agreement, states, including Ohio, received a large sum of money. On November 23, 1998, Ohio received its first payment in the amount of $235 million. Since then, total payments have exceeded $10 billion. Pursuant to Ohio House Bill 272, 62.5% of the funds received by the State of Ohio are to be deposited in the Tobacco Master Settlement Agreement Fund. Of that, 15% goes to the Tobacco Use Prevention and Cessation Trust Fund to be used for the prevention of tobacco use by youth and for cessation assistance to persons desiring to stop tobacco use. Another 15% of the receipts goes into the Ohio Tobacco Research Fund to enable Ohio institutions to compete for tobacco research grants. The statute calls for 10% of the funds to be deposited into the General Revenue Fund and 10% to the Health and Human Services Fund. The remaining 50% of the funds are to be kept in an interest-bearing account for the purpose of financing an income tax reduction plan proposed in Ohio House Bill 66.
Litigation and Compliance Issues in Ohio
Initially after the MSA was entered into, Ohio created a Tobacco Master Settlement Agreement Fund for the collection and distribution of MSA payments. The fund was established in the State Treasury with the intention of providing money for health care purposes, such as health care coverage for uninsured children and antismoking prevention programs. Proceeds from the fund were also made available to the State Legislature for annual appropriation. After the passage of S.B. 6 (also known to many as the "cigarette tax increase bill"), Ohio now has different special revenue funds that receive the MSA money collected by the State.
To ensure that tobacco companies duly comply with the agreement’s terms and conditions, the Ohio Attorney General’s Office, along with the Senior Assistant Attorney General in charge of the Consumer Protection Section , monitors MSA compliance in accordance with S.B. 6. Ohio reports MSA violations to the National Association of Attorneys General ("NAAG") for coordination of enforcement activity through the Program Compliance Committee and MSA Enforcement Committee. The Attorney General and his designee are responsible for determining whether there has been a breach or violation of the MSA by any participating tobacco company and for acting on behalf of the State to protect its rights to MSA payments and to enforce any breaches by the tobacco companies. Additionally, the Attorney General is authorized to receive complaints and inquiries from tobacco companies obligated to make payments under the agreement and to correspond with the NAAG and tobacco companies of this nature.
Future Implications of the MSA in Ohio
The Master Settlement Agreement (MSA) has left an indelible mark on the tobacco landscape of Ohio, as on the rest of the United States and territories that participated in this landmark accord. Initially designed as a way to address the public health epidemic caused by cigarette smoking, the MSA has had a multipronged influence on tobacco litigation, cessation efforts, and public health policy, both in Ohio and nationwide. In Ohio specifically, the MSA has accomplished certain of its original aims, such as the establishment and bolstering of state funds for healthcare purposes, though the anticipated substantial declines in the prevalence of smoking and, correspondingly, huge reductions in healthcare costs have yet to materialize. Meanwhile, the MSA has done little to stem the tide of litigation against manufacturers in the years following its adoption. And numerous loopholes and issues, ranging from market share calculation complications to the proliferation of electronic cigarette litigation, continue to persist. For Ohio, and for the state and local entities that have received MSA payments, the past 20 years has provided important lessons and forewarnings regarding the future impact of the MSA . Settlement distributions and funds earmarked for various purposes – whether healthcare or smoking cessation – have been debated and litigated, while manufacturers’ obligations have been challenged in myriad ways. At the same time, e-cigarette litigation has become the next frontier in tobacco litigation, as plaintiffs grapple with cost recovery from potentially at-fault manufacturers and against the backdrop of continuing controversy regarding the efficacy of smoking cessation and public health efforts. This legal, political, and scientific landscape all suggests that the impact of the MSA on future tobacco litigation, public health, and health care costs is unlikely to be anywhere close to its purported initial goals. Future MSA-related claims may prove more difficult to pursue, while healthcare costs may continue to rise and traditional cigarette smoking implementation declines may begin to plateau. The effects of the MSA on Ohio are certain to continue to evolve, as litigation, legislation, and health policy attempts to address the ongoing challenges of tobacco use.