The Multinational Monitor



Puffing All the Way to the Bank

For Philip Morris, 1995 has been the best of times and the worst of times.

In the United States, the company has been reeling, from a variety of legal, regulatory and legislative attacks:

* Representative Henry Waxman, D-California, has obtained and read on the floor of the House of Representatives documents from Philip Morris which show company scientists monitored tens of thousands of children, beginning with third graders, in an effort to study the link between childhood hyperactivity and later teenage smoking. The documents also reveal that the company conducted extensive research on the effect of nicotine on humans.

* With evidence growing that the tobacco companies have manipulated the nicotine component in cigarettes, U.S. Food and Drug Administration Commissioner David Kessler has recommended to President Bill Clinton that tobacco be regulated as a drug.

Fearful of the political fallout of even moderate action (such as limiting the amount of nicotine in cigarettes to non-addictive levels, or requiring plain packaging on cigarette packs), the Clinton administration has hinted it is most interested in adopting measures to restrict sales of cigarettes to minors. It remains unclear how tough those restrictions will be, and whether they will be governmentally imposed or voluntarily implemented by the tobacco industry. Among the possible measures are: a prohibition on tobacco advertising that appeals to children, a ban on distribution of free cigarette samples, requiring cigarettes to be stored behind store counters so children cannot steal them and a ban on cigarette vending machines.

Philip Morris and the other tobacco giants clearly prefer a moderate regime of restrictions on sales to children to far-reaching regulations that recognize the lethal nature of cigarettes.

Philip Morris introduced a new "Action Against Access" initiative in June which, in addition to being an advertising campaign, promises to put warning labels saying ´┐Żunderage sale prohibited´┐Ż on all packs and cartons, to cease all cigarette giveaways through the mail and other means and to prevent the use of its logo on items marketed to minors. The initiative was widely viewed as an effort to preempt more serious federal regulation.

* The Department of Justice has convened a grand jury to investigate whether tobacco company executives, including former Philip Morris Chief Executive Officer William Campbell, lied to Congress in 1994 when they testified under oath that they did not think nicotine is addictive, that cigarettes cause disease or that the companies had manipulated nicotine levels in cigarettes.

* A federal judge in Louisiana has allowed a massive class action suit against the major U.S. tobacco companies to proceed. The suit, which will be the largest class action in history, seeks to represent the current 40 million smokers and 50 million ex-smokers in the United States, and contends that the companies concealed knowledge that nicotine is addictive and that they manipulated nicotine levels to keep smokers hooked. The certification of the class action is now on appeal.

* In February, the state of Florida filed a suit against the big tobacco companies, seeking reimbursement for $1.4 billion in Medicaid costs stemming from smoking. The Florida suit was the fourth such state action.

Given this torrent of damaging developments, why is 1995 also the best of times for Philip Morris? One word: profits.

Philip Morris' second quarter earnings rose more than 14 percent in from 1994, to a gigantic $1.41 billion.

The primary explanation for the profit gain is booming international sales. Company international revenues leaped 25 percent from 1994 to 1995.

Industry analysts rhapsodize about Philip Morris' international operations, but public health experts view them as creating a public health disaster of staggering proportions. If current trends continue, annual deaths from smoking-related causes will skyrocket from 3 million to 10 million by 2025, according to Oxford epidemiologist Richard Peto and his associates.

An increasing proportion of those deaths will be in the Third World. The World Bank predicts per capita tobacco consumption will fall 17 percent this decade in industrialized nations, but leap 12 percent in the developing world and Eastern Europe.

That projected lethal increase in Third World smoking is tied directly to the large Western tobacco companies' deceptive and manipulative promotional and marketing efforts in countries where awareness of the health effects of smoking are low. And Philip Morris has taken the lead in expanding overseas.

In Asia, Latin America and Eastern Europe, Marlboro logos and ads are now ubiquitous. In the eyes of young people around the planet, the Marlboro Man conflates attractive U.S. images of freedom, ruggedness and hipness with Marlboro cigarette.

Philip Morris has made particular headway in its effort to gain a dominant position in the huge Chinese market. It has signed an agreement with the government-operated China National Tobacco Corporation to make Philip Morris cigarettes in China. And it has employed the full panoply of marketing tricks, including underwriting the Marlboro Soccer League.

Many of the world's great problems are complex, with solutions not immediately evident. But the coming upsurge in the annual tobacco slaughter is not among them. It is anticipatable, its causes are easily identified and it could be prevented.

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