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AG Kane blasts panel's ruling that may trim funds for anti-smoking efforts

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By Adam Smeltz
Thursday, Nov. 7, 2013, 9:33 a.m.

Three former federal judges erred when they told Big Tobacco companies to cut their annual payments to Pennsylvania public health programs, state Attorney General Kathleen Kane argued on Thursday.

An arbitration panel of William G. Bassler, Abner J. Mikva and Fern M. Smith ruled in September that several companies could reduce by 60 percent the money toward research and smoking-cessation programs. Since an initial settlement agreement with three top cigarette makers in 1998, companies have made annual payments to help pay tobacco users' medical costs and programs to help users quit.

The judges said payments could fall from $300 million to about $120 million.

Settlement participants Philip Morris USA Inc., R.J. Reynolds Tobacco Co. and Lorillard Tobacco Co. challenged whether the state collected money from sales of products made by competitors that didn't join the pact.

The settlement entitles participating companies to cut their payments if they lose market share.

“The arbitration panel's decision penalizes Pennsylvania for factors the panel clearly allowed for other states,” Kane said in a written statement announcing formal objections. “Whether the panel failed to follow a common set of standards or exhibited bias against the commonwealth, it was wrong and we cannot permit this unjust decision to stand.”

Philip Morris and R.J. Reynolds representatives and the judges declined to comment, as did Lorillard spokesman.

Kane's motion filed this week in Philadelphia Court of Common Pleas shows Pennsylvania's collection rate on tobacco products was identical to the rate in Ohio, which the arbitration panel didn't challenge.

Although the panel punished Pennsylvania for not taxing roll-your-own tobacco, it found that Oregon had no obligation to do the same.

If upheld, the funding cuts would start in April but immediately would freeze $25.6 million in refunds to hospitals for uninsured patients' care; $8.5 million in tobacco prevention and cessation programs; and discretionary spending for research grants, the state budget office reported.

The Tobacco Master Settlement Agreement shields participating manufacturers against state lawsuits. Firms challenged 35 states over their 2003 compliance. Nineteen states, districts and territories finished a new, multi-year pact in 2012.

Fifteen states went forward with arbitration. State Rep. Daryl Metcalfe, R-Cranberry, said the appeal by Kane, a Democrat, is a waste of resources.

“I think it's just another indicator that this attorney general is all about politics, all about trying to make headlines for herself with little regard for contracts that were negotiated long before she came on the political scene,” he said.

Adam Smeltz is a Trib Total Media staff writer.

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