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New headache for tobacco
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April 29, 1998: 9:06 p.m. ET
Group of state insurers sues to recoup costs; bipartisan bill shelved
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NEW YORK (CNNfn) - In the latest setback to Big Tobacco, a group of more than 30 state health insurers filed federal lawsuits Wednesday to recoup billions of dollars in medical expenses from smoking-relating losses.
The news comes the same day that Republican House leaders said they had shelved another bipartisan tobacco bill to allow time to fine tune the legislation's language.
The suits represent an additional headache for the nation's tobacco industry. It comes on top of separate class-action civil suits in several states, and a divisive showdown with Washington over anti-smoking legislation the cigarette makers consider overly punitive.
On Tuesday, Liggett & Myers, a subsidiary of the Brooke Group holding company, broke ranks with Big Tobacco to cooperate with the U.S. Justice Department in its criminal investigation of the industry.
The Coalition for Tobacco Reponsibility, which represents Blue Cross and Blue Shield plans in at least 35 states, filed lawsuits in New York, Chicago and Seattle.
The suits allege that the tobacco industry engaged in conspiracy, fraud and violated federal racketeering and antitrust laws.
They also accuse the industry of manipulating nicotine content, concealing reserach pointing to the addictive nature of caffeine, and actively recruiting teenagers through aggressive marketing campaigns.
Michael McGarvey, the chief medical officer of Blue Cross and Blue Shield of New Jersey, told a news conference the group acted on emerging "new evidence" of alleged abuses by tobacco firms.
"Millions of participants in our plans - whether or not they smoke - have suffered because the tobacco companies continue to produce and vigorously market an addictive product," McGarvey said.
"These suits are our effort to begin to improve public health by changing the behavior of the tobacco industry," he added.
Health officials say costs stemming from smoking-related illnesses far exceed what customers are typically charged. Tobacco-related illnesses are estimated to cost the U.S. economy about $60 billion a year in direct costs, according to a recent Treasury Department report.
Major cigarette makers were only slightly affected by the announcement in midday trading Wednesday. RJR Nabisco Holdings (RN) was off 1/8 at 27-7/8, Philip Morris Companies (MO) was up 1/8 at 37-5/8, and Brooke Group Ltd. eased 3/16 to 13-11/16.
The decision to shelve the proposed bipartisan tobacco bill was made Tuesday in the Republican party caucus meeting for the current proposal to be "sent back for fine tuning, according to one Republican source.
The bill has been worked on by Commerce Committee Chairman Tom Bliley, R-Va., and Rep. Henry Waxman, D-Calif., who is an ardent tobacco opponent.
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