Former Attorney General Bob Butterworth Exposes Myths on Tobacco Loophole

Dosal Tobacco already pays fee in Mississippi, belying company’s claim that a Florida fee on non-settling manufacturers would make it uncompetitive.

Tallahassee, Fla. – The Dosal Tobacco Company is selling cigarettes in the state of Mississippi, which requires non-settling manufacturers to pay an equity fee to compensate the state for the health costs that smoking imposes on taxpayers. The Magnolia State’s 25-cent per pack fee on non-settling manufacturers, implemented under Mississippi Governor Haley Barbour, calls into question Dosal’s claim that a similar fee proposed in Florida would make the company unable to compete.

“If Dosal can afford to pay their fair share for the health costs of tobacco users in Mississippi, why shouldn’t they pay in Florida?” said former Florida Attorney General Bob Butterworth in an April 6 letter to Senate President Jeff Atwater urging an up-or-down vote on proposed Florida legislation to impose a fee on non-settling manufacturers. “Non-participating manufacturers such as Dosal should be making payments to defray the health costs their products impose on Florida taxpayers.”

In the letter to President Atwater, Butterworth rebutted claims made by Dosal concerning its size, as well as the nature of Florida’s landmark tobacco settlement victory.

“Contrary to claims by the company, Dosal Tobacco is not a ‘small, family-owned South-Florida company,’ but is in fact the 3rd largest cigarette manufacturer in the state,” Butterworth said. “Dosal has clearly become ‘Big Tobacco.’”

In fact, aided by the loophole in Florida’s tobacco policy that leaves non-settling manufacturers exempt from making health care payments to reimburse taxpayers for health costs, Dosal Tobacco sells its cigarettes for as little as $3.50 a pack, compared to more than $6 for other cigarette manufacturers. This loophole has provided Dosal with a huge competitive advantage.

In 1994, the State of Florida sued under the state’s Medicaid Third-Party Liability Act to recoup billions of dollars in health care costs imposed on state taxpayers by Big Tobacco. In its 1997 settlement victory, Florida forced tobacco manufacturers to make payments of about 45 cents a pack to reimburse taxpayers for the Medicaid costs caused by tobacco.

This settlement has produced billions of dollars that have helped reduce the tax burden on Floridians for paying tobacco-related health care costs. Over the past 13 years, however, cigarette companies that were left out of the tobacco settlement because of their small size have grown and now sell 22 percent of Florida’s cigarettes. As a result, payments to Florida’s tobacco settlement fund last year were $58.5 million lower than expected.

Butterworth said Dosal Tobacco was let go from the lawsuit not because of any finding of fact regarding the company’s business practices but simply because of its insignificant market share at the time.

“When we were ready to execute a settlement with 98 percent of Florida’s cigarette market, Gov. Lawton Chiles and I seized that opportunity, as we did not want companies with insignificant market share to delay a final agreement,” Butterworth said, noting that the case against Dosal Tobacco was dismissed without prejudice, meaning that Florida could bring a new lawsuit against the company in the future if it chose.

The proposed fee on non-settling manufacturers, however, would offer a quicker and better solution than litigation, Butterworth said. Moreover, the proposed legislation, Senate Bill 2344 could raise up to $200 million in new revenues if funds raised by an equity assessment were applied to health services that draw down federal matching funds.

Tobacco-related illnesses are responsible for an estimated 28,607 Florida deaths each year, according to the American Lung Association, and the economic cost due to smoking in Florida is more than $12.5 billion.

“Dosal Tobacco sells nearly 20 percent of Florida’s cigarettes, and these cigarettes have the same negative impact on health as those manufactured by companies now making settlement payments,” Butterworth said. “It is time for the Florida Legislature to take action to deliver justice for Florida taxpayers and treat cigarettes produced by non-settling manufacturers the same way we treat all other cigarettes.”

Read Former Attorney General Butterworth’s Letter Here: butterworth letter to atwater 04 06 10

CONTACT: Ryan Banfill
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