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Monday, March 25, 2013

Cigarette companies settle dispute over payments to 17 states

Philip Morris USA said Tuesday that it and other tobacco companies have reached an agreement with 17 states to settle a long-running dispute over how much money the companies must pay under the 1998 national tobacco settlement.
Under the agreement announced late Tuesday, the states, including Virginia, each will receive their share of about $4 billion that was paid into a disputed payments account. In return, Philip Morris USA, R.J. Reynolds Tobacco Co. and Lorillard Inc. will receive credits against future payments to the states.
In 1998, Henrico County-based Philip Morris USA, the maker of Marlboro cigarettes, and other major cigarette companies agreed to pay $206 billion to 46 states, including Virginia, over 25 years to cover smoking-related health care costs. Virginia’s share was estimated at about $4 billion.
So far, the states have received about $85 billion, but a dispute arose over how much the payments should be adjusted as a result of the major cigarette companies losing market share to competitors that did not join the settlement. The dispute has been in arbitration.
Philip Morris USA, a subsidiary of Henrico-based Altria Group Inc., said it will authorize the release of about $190 million of the $458 million that it has paid into the disputed payments account to the states that are part of the deal announced Tuesday.
The company said it is prepared to continue arbitration with other states that were not part of the new agreement. The company said it would receive an estimated reduction in its settlement payment obligations of about $450 million, but that amount could change depending on a variety of factors.
The states participating in the settlement are Alabama, Arizona, Arkansas, California, Georgia, Kansas, Louisiana, Michigan, Nebraska, Nevada, New Hampshire, New Jersey, North Carolina, Tennessee, Virginia, West Virginia and Wyoming. In addition, the settlement includes Puerto Rico and the District of Columbia.

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