[Congressional Record Volume 143, Number 160 (Thursday, November 13, 1997)]
[Senate]
[Pages S12577-S12590]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. HATCH:
  S. 1530. A bill to resolve ongoing tobacco litigation, to reform the 
civil justice system responsible for adjudicating tort claims against 
companies that manufacture tobacco products, and establish a national 
tobacco policy for the United States that will decrease youth tobacco 
use and reduce the marketing of tobacco products to young Americans; 
read the first time.


THE PLACING RESTRAINTS ON TOBACCO'S ENDANGERMENT OF CHILDREN AND TEENS 
                                  ACT

  Mr. HATCH. Mr. President, perhaps the most important legacy this 
Congress can leave for future generations is implementation of a strong 
plan to curb tobacco use, and especially its use by children and teens.
  Quite simply, something needs to be done to get tobacco out of the 
hands of children--or perhaps more accurately, out of the lungs and 
mouths of children.


                         TEENS AND TOBACCO USE

  The numbers of children who smoke cigarettes and use other tobacco 
products such as snuff and chewing tobacco are truly alarming. And 
these numbers are on the rise.
  According to the Centers for Disease Control and Prevention, most 
youths who take up tobacco products begin between the ages of 13 and 
15. It is astounding that up to 70% of children have tried smoking by 
age 16.
  Again according to the CDC, nearly 6,000 kids a day try their first 
cigarette, and 3,000 of them will continue to smoke. One-thousand of 
them will die from smoking.
  At the Judiciary Committee's October 29 hearing, Dr. Frank Chaloupa, 
a renowned researcher who has spent the last decade studying the effect 
of prices and policies on tobacco use, told us that ``there is an 
alarming upward trend in youth cigarette smoking over the past several 
years. Between 1993 and 1996, for example, the number of high school 
seniors who smoke grew by 14%, the number of 10th grade smokers rose by 
23%, and the number of eighth grade smokers increased 26%.''
  During the time between the issuance of the first Surgeon General's 
report in 1964 and 1990, the number of kids smoking was on the decline. 
Unfortunately, at that time, the number of children who try tobacco 
products started to rise.
  Nearly all first use of tobacco occurs before high school graduation, 
which suggests to me that if that first use can be prevented, perhaps 
we can wean future generations off these harmful tobacco products.
  We also know that adolescents with lower levels of school 
achievement, those with friends who use tobacco, and children with 
lower self-images are more likely to use tobacco. Experts have found no 
proven correlation between socio-economic status and smoking.
  An element that is compelling to me as Chairman of the Judiciary 
Committee is the fact that tobacco use is associated with alcohol and 
illicit drug use and is generally the first substance used by young 
people who enter a sequence of drug use.
  Public health experts have found a number of factors associated with 
youth smoking. Among them are: the availability of cigarettes; the 
widespread perception that tobacco use is the norm; peer and sibling 
attitudes; and lack of parental support.
  Unfortunately, what many young people fail to appreciate is that 
cigarette smoking at an early age causes significant health problems 
during childhood and adolescence, and increased risk factors for adult 
health problems as well.
  Smoking reduces the rate of lung growth and maximum lung functioning. 
Young smokers are less likely to be fit. In fact, the more and the 
longer they smoke, the less healthy they are. Adolescent smokers are 
more likely to have overall diminished health, not to mention shortness 
of breath, coughing and wheezing.


                     The Health Effects of Smoking

  We all know that tobacco is unhealthy. Just how unhealthy is hard to 
imagine.
  According to a 1988 Surgeon General's report, the nicotine in tobacco 
is as addictive as heroin or cocaine.
  Cigarette smoking is the leading cause of premature death and disease 
in the United States.

[[Page S12578]]

  Each year, smoking kills more Americans than alcohol, heroin, crack, 
automobile and airplane accidents, homicides, suicides, and AIDS--
combined. Cigarettes also have a huge impact on fire fatalities in the 
United States. In 1992, cigarettes were responsible for almost 23% of 
all residential fires, resulting in over 1,000 deaths and over 3,200 
injuries.
  And, Mr. President, too many Americans smoke.
  According to the CDC, one-quarter of the adult population--almost 50 
million persons--regularly smoke cigarettes.
  In my home state of Utah, there are 30,000 youth smokers, grades 7-
12, and 163,000 adult smokers. The Utah Department of Health has found 
that over 90% of current adult Utah smokers began smoking before age 
18; 60% started before age 16. And I would note that it is note legal 
to smoke in Utah until age 19.
  And, so, it has been established that tobacco products are harmful, 
that children continue to use them despite that fact, and that 
cigarettes can provide the gateway through which our youth pass to even 
more harmful behaviors such as illicit drugs.


                          Curbing Tobacco Use

  How can we reverse these trends? Many in the Congress have heeded the 
public health community's advice that increases in the price of tobacco 
products are the most important way that youth tobacco use can be 
curbed.
  According to testimony that Dr. Chaloupa presented to us, for each 
10% increase in price, there is corresponding overall reduction in 
youth cigarette consumption of about 13%. For adult smoking, Dr. 
Chaloupa has found, a 10% price increase only corresponds to a 4% 
decrease in smoking.
  As Dr. Chaloupa relates, there are several factors which cause 
teenagers to be more responsive to cigarette prices, including: their 
lack of disposable income; the effect of peer pressure; the tendency of 
youth to deny the future; and the addictive nature of tobacco products.
  The important thing about a price increase is not that it keep 
smokers from buying cigarettes, it is that it can help keep people from 
starting to smoke. If we can keep a teen from smoking, we may very well 
be keeping an adult from smoking. The important thing to keep in mind 
is that There is an exponential increase in risk based on when you 
start smoking. The earlier you start, the worse it is for your health.
  Kids who smoke start out smoking less and then build up. After a few 
years, they are pack a day smokers. The national average for smokers is 
19 cigarettes a day, one fewer than a pack.
  Much has been debated about the effect of advertising on teen 
smoking. The plain fact is that kids prefer to smoke the most 
advertised brands. One study indicates that 85% of kids smoke the top 
three advertised brands, whereas only about a third of adults smoke 
those brands.
  We also know that children are three times more affected by 
advertising expenditures than adults (in terms of brand preference). 
Research is unclear on the effect of advertising in terms of getting 
kids to start smoking. Movies, TV and peer pressure seem to be key 
factors, but kids deny that.
  These facts lead me to conclude that it is in the national interest 
for us to undertake a campaign which will discourage the advertising of 
tobacco products to children and youth. In so doing, however, we must 
be mindful of the Constitution's First Amendment freedom of speech 
protections.
  In fact, we also need to take advantage of the power that media hold 
over youth, and undertake counter-advertising on tobacco products. 
Public health experts advise me that there is good evidence that 
counter-advertising has a measurable and positive effect on teen 
smoking. However, the U.S. has never had a national counter-advertising 
campaign.
  Restrictions on youth access are also an important part of the no-
teen-smoking equation. While there is not a solid body of knowledge on 
this issue, it is important to note that Florida has an aggressive 
policy on enforcement of laws against youth smoking, and they now have 
a success rate of 10% for youths who try to buy tobacco products 
illegally vs. a 50% national average.
  An equally important factor is the influence of the family in 
developing an atmosphere in which kids don't want to smoke. That is 
something we will never be able to legislate, any more than we can 
legislate against teen pregnancy. However, we can help families develop 
the skills and have the information they need to create as favorable a 
no-tobacco climate as possible in the home.

  For example, we know that the more directed information kids receive, 
the less likely they are to smoke. We also know that kids are very 
attuned to hypocritical messages. For example, if a school has a no-
smoking policy, but the teachers smoke, that can have a very 
detrimental effect.


                  Work by the State Attorneys General

  Against that backdrop, a very courageous cadre of State Attorneys 
General began filing suits against the tobacco industry. Most of these 
suits, but not all, were based on the fact that the States' Medicaid 
costs were rising dramatically because of the costs of treating 
unhealthy smokers.
  Subsequent to those suits, negotiations began with the tobacco 
industry, the AGs, a representative from the public health community, 
and the litigants from a large class-action tobacco suit, the Castano 
suit.
  As some of my colleagues may be aware, Mrs. Castano is the lead 
plaintiff in the first class action lawsuit filed against the tobacco 
company in March 1994. She has testified before our Committee in favor 
of the proposed settlement and has presented a very compelling story.
  Quite simply, Mrs. Castano related to us that her goal is to raise 
the public awareness about the power of nicotine. She told the 
Committee she believes that if the proposed agreement's health 
provisions were enacted, it would have prevented her husband's death. 
Peter Castano began smoking at 14, attempted to quit numerous times, 
and died of lung cancer at the age of 47 after smoking 33 years.
  Mrs. Castano's legal team organized 64 law firms with individual 
pending cases and combined them into a large class eventually 
representing 60% of smokers, and this large class was had a place at 
the negotiation table.
  Many of us watched the progress of those negotiations as we would 
watch a cliff-hanger sports event. We wanted a victory, but we couldn't 
believe our team could come from behind and win.
  On June 20, those Attorneys General, led by Mississippi General Mike 
Moore, who had brought the first suit, made a dramatic announcement 
that a settlement had been reached. Six days later, the Senate 
Judiciary Committee held the first of the 16 congressional hearings 
that have been held thus far, during which we heard testimony from the 
tobacco industry, the State Attorneys General, and the public health 
community.
  The settlement, which was ratified by the five major tobacco 
companies and which must have many of its provisions approved by 
Congress through implementing legislation, offers our Nation a once-in-
a-generation opportunity to reduce teen smoking and to undertake a 
major anti-tobacco, anti-addiction initiative never before thought 
possible.
  At this point, it would be useful to give a brief summary of the 
proposal which has been submitted to the Congress.
  As proposed by the 40 State Attorneys General on June 20, 1997, this 
global tobacco settlement would require participating tobacco companies 
to pay $368.5 billion (not including attorneys' fees) over a 25-year 
period, the major of which will go to fund a major new national anti-
tobacco initiative. Part of the money would also be used to establish 
an industry fund that would be used to pay damage claims and treatment 
and health costs to smokers.
  During negotiations on the June 20 proposal, parties agreed there 
would be significant new restrictions on tobacco advertising. It would 
be banned outright on billboards, in store promotions and displays, and 
over the Internet. Use of the human images, such as the Marlboro Man, 
and cartoon characters, such as Joe Camel, would be prohibited. The 
tobacco companies would also be banned from sponsoring sports events or 
selling or distributing clothing that bears the corporate logo or 
trademark. The sale of cigarettes from

[[Page S12579]]

vending machines would be banned, and self service displays would be 
restricted. Cigarette and other tobacco packages must carry strong 
warning labels concerning the ill effects of cigarettes (such as, its 
use causes cancer) that cover 25% of the packages. The tobacco 
companies would have to pay for the anti-tobacco advertising campaigns.

  Parties to the agreement would consent to the FDA's jurisdiction over 
nicotine. The FDA would have the authority to reduce nicotine levels 
over time. The FDA, however, could not eliminate nicotine from 
cigarettes before 2009. Furthermore, as part of the settlement, tobacco 
companies would have to demonstrate a 30 percent decline of aggregate 
cigarette and smokeless tobacco use by minors within 5 years, a 50 
percent reduction within 7 years, and a 60 percent reduction within 10 
years. If not successful, penalties may be assessed against the tobacco 
companies up to $2 billion a year.
  In return, future class-action lawsuits involving tobacco company 
liability would be banned. This would settle suits brought by 40 States 
and Puerto Rico seeking to recover Medicaid funds spent treating 
smokers. Also settled would be one State class action against industry 
and 16 others seeking certification. Current class actions, therefore, 
would be settled, unless they are reduced to final judgment prior to 
the enactment of legislation implementing the agreement. Claimants who 
opt out of existing class actions would be permitted to sue for 
compensatory damages individually, but the total annual award would be 
capped at $5 billion. These amounts would be paid from the industry 
fund. In return for a payment (to be used as part of the industry 
fund), punitive damage awards would be banned. Nevertheless, claimants 
could seek punitive damages for conduct taking place after the 
settlement is adopted and implementing legislation is passed.
  That is an overview of the settlement, as explained to the Judiciary 
Committee at our June 26 hearing.
  Even a cursory examination of the settlement presents Congress with a 
clear question: should we seize the opportunity to undertake a serious 
new national war on tobacco by implementing certain liability reforms 
in exchange for enhanced FDA regulation, substantial industry payments, 
and, in short, a new national commitment.


                   Judiciary Committee consideration

  Our Committee has examined this in great detail, during four 
hearings.
  At our second hearing, in July, we heard testimony from two 
constitutional experts, who advised the Committee on the 
constitutionality of the settlement, including its advertising 
provisions. That testimony was extremely valuable in both reassuring me 
that legislation could be written which would pass constitutional 
muster, and in guiding me on how an appropriate legislative framework 
should be crafted.
  But as important as the legal issues are, we must never lose sight of 
the fact that this proposed settlement must be a public health 
document, a public health statement, a commitment on the part of our 
country.
  At our third hearing, the Committee heard additional testimony from 
public health experts about the proposed settlement.
  I recall with great clarity a very vivid statement made by Dr. Lonnie 
Bristow, the immediate past president of the American Medical 
Association and the only physician to participate in the global 
settlement discussions, who said this settlement has the potential to 
produce greater public health benefits than the polio vaccine.
  In apprising the Committee about the enormous potential of the public 
health provisions contained in the settlement, Dr. Bristow recommended 
that our public health agenda with respect to smoking be guided by 
three ultimate objectives: First, significantly reducing the number of 
children who start smoking, second, reducing the number of existing 
smokers who will die from their addiction; and third, making the 
industry pay for the damage it has done.
  Dr. Bristow also addressed the fundamental question of who will 
benefit from the proposed settlement, relating that the American Cancer 
Society has estimated one million children will be saved from premature 
death if certain key provision of the settlement are implemented. These 
include enforcement of proof-of-age laws, requiring point-of-purchase 
sales, mandatory licensing of retailers, dramatic restrictions on 
advertising, and stronger warning labels.

  And so, it appears to me that the elements are there for development 
of a new national tobacco policy which will make unprecedented gains in 
public health. The question is whether this Congress has the 
wherewithal to make the tough decisions, with all the attendant 
political implications, in order to codify the settlement and move us 
toward a substantial new commitment to improving public health.
  Three years ago, on the 30th anniversary of the first Surgeon 
General's Advisory Committee on Smoking and Health report, I received a 
letter from seven past Surgeon Generals of the United States, 
representing the Administrations spanning Eisenhower through Bush. In 
that letter, the Surgeon Generals said:

       While the scientific evidence is overwhelming and 
     indisputable, significant policy changes in how this product 
     is manufactured, sold, distributed, labeled, advertised and 
     promoted have been slow in coming. There has been little 
     federal leadership for policy changes for the last 30 years. 
     It seems inconceivable to those of us in the public health 
     community that this nation's single most preventable cause of 
     death is also its least regulated.

  They continued:

       As past Surgeons General of the United States we have had 
     great hopes that a day would come before the year 2000 when 
     we will achieve the goal of a smoke-free society. However, it 
     is very clear from the past 30 years that such a goal will 
     not be achieved unless there is federal leadership and a 
     commitment to change that has as its goal the health and 
     welfare of the American public.

  And now the question before this body is whether we are willing to 
accelerate our efforts and rise up to the challenge offered us by the 
Surgeons General.
  If ever there were to be such a time, it is now.
  I believe that the June 20 proposal offers us the solid basis for 
such a national initiative.
  I think it behooves the Congress to seize upon that initiative, to 
improve it where we can without jeopardizing any of its basic 
components, and to pass legislation immediately upon our return in 
January.
  That task will not be easy. Since the settlement has provisions that 
span the jurisdiction of more than half the Senate committees, it will 
be a monumental procedural undertaking.
  Nevertheless, after my considerable study of this issue, I have 
concluded it is in the national interest for us to approve the 
settlement, and I intend to do everything I can to move us toward the 
public health goals it offers.


                    Introduction of the PROTECT Act

  Accordingly, I am today introducing legislation I have drafted as a 
discussion vehicle and which I hope will engender the public debate we 
need on all the fine points of this massive issue so that we are ready 
to move legislation upon our return.
  I expect this bill to be a ``lightening rod,'' a draft work product 
which can be refined over the next 2 months.
  The proposed global tobacco settlement is incredibly complex. 
Drafting this legislation has required 101 decisions, many of them 
interrelated.
  I am willing, indeed eager, to work with all interested parties to 
refine this legislation as it moves forward. What I am not willing to 
do, however, is further delay action on what could be the most 
important opportunity to advance public health in decades.
  I have entitled the legislation I introduce today the ``PROTECT'' 
Act, or ``Placing Restraints on Tobacco's Endangerment of Children and 
Teens Act.''
  I consider this to be a ``settlement plus'' bill. It retains and, 
indeed, strengthens the major provisions of the settlement; but, it 
does so in a carefully balanced way which I believe will not only pass 
constitutional muster but also could be enacted.
  Let me be clear about what this bill is.
  I consider this to be a discussion draft, a vehicle for the dialogue 
we must have about this important issue during the next 2 months when 
Congress is not in session and when we are able to consult with our 
constituents back home.
  At the outset, let me say that I have aimed for a consensus document, 
a

[[Page S12580]]

piece of legislation which bridges the divide over contentious issues 
in a way that is legislatively viable.
  Because it starts with this as a goal, I am painfully aware that this 
bill will totally please no one. Interest groups, by their very 
definition, advocate a particular position. Enactment of a tobacco 
settlement bill will require us to meld many of those positions, to 
develop a consensus around the center.
  As a consensus document put out for discussion purposes, it is my 
intention that the PROTECT Act would be a useful departure point for 
future, productive discussions.
  I am also cognizant of the anti-tobacco groups' interest in seeing a 
piece of legislation that does its utmost to discourage tobacco use.
  I would like to do that as well.
  That is my primary goal.
  I say that not only as a Senator who represents a State which has the 
lowest smoking rates in the country, not only as a member of a Church 
which condemns the use of tobacco, but also as a Senator who has 
devoted the majority of his career to the public health.
  Yet, many anti-tobacco groups may be disappointed because this bill 
is not as stringent as they would like. But I urge those who might 
believe this to keep an open mind. I think they will find that, in many 
cases, my bill is more stringent than the AG's proposal.
  I would also urge them to keep in mind our primary goal of helping 
future generations of children. The only way to do that is to approve 
legislation, which necessitates legislation which is approvable. That 
is my goal--to get a good bill enacted. A bill that is ``perfect'' from 
the point of view of one side or the other cannot be enacted; it must 
be a consensus.
  For that reason, the bill must also contain the legal reform 
provisions put forward by the attorneys' general. Those liability 
provisions were agreed to not only the industry, but also by the 
representatives of 40 states, by the public health community, and some 
members of the plaintiff's bar.
  We should not fool ourselves into believing that such a massive anti-
tobacco policy as is embodied in either the AG's proposal or the 
PROTECT Act can be enacted absent the liability provisions agreed to in 
June.
  Yes, we should keep the pressure on for as anti-tobacco bill as we 
can. But if we are to enact this bill next year, which is my goal, we 
must be realistic. There are very few legislative days left, believe it 
or not.


                   General Description of PROTECT Act

  Accordingly, I have drafted my bill as a global tobacco settlement, 
which mirrors in many ways the key components of the proposal put 
before us on June 20.
  Unlike other bills introduced thus far this session, it is a 
comprehensive bill.
  It contains all of the elements of the June 20 document, embodying 
the critical balance among the punitive, the preventive, and the 
realistic. It combines strong penalties on the tobacco industry with 
strict regulation of tobacco products by the FDA, implementation of a 
major national anti-tobacco, anti-addiction campaign, and defined 
liability protections for the tobacco industry.
  The PROTECT Act requires substantial industry payments to fund state 
and federal public health activities, contains restrictions on tobacco 
advertising aimed at youth, and provides continuing oversight of the 
industry through a strong ``look-back'' provision.
  In addition, the PROTECT Act improves on the state attorneys general 
June 20 settlement, in a number of key areas:
  First, industry payments over 25 years will total $398.3 billion. Of 
those payments, $95 billion will represent the punitive damages for 
the tobacco industry's past reprehensible conduct. These funds will be 
devoted toward a National Institutes of Health Trust Fund for 
biomedical research, similar to the legislation drafted by our 
colleagues Senator Connie Mack and Senator Tom Harkin.

  Second, I have inserted a strong provision to preclude youth access 
to tobacco products, sponsored by our colleague Senator Gordon Smith. 
Since the States have a substantial role in enforcing the laws 
precluding youth smoking, I have also made State receipt of the public 
health funds contained in this bill contingent upon enforcement of 
those youth anti-tobacco provisions.
  Third, to address a concern expressed by members on both sides of the 
aisle, as well as the President, this bill provides transitional 
assistance to farmers modeled after the legislation introduced by 
Agriculture Committee Chairman Dick Lugar, combined with educational 
assistance for retraining taken from the ``LEAF'' Act, drafted by 
Senators McConnell, Ford, Faircloth, and Helms. There is much to 
commend both of these bills, and I look forward to working with 
proponents of each to refine further these provisions as the 
legislation moves forward.
  Fourth, a National Institutes of Health [NIH] Trust Fund is 
established with funds paid by tobacco companies for the settlement of 
punitive damages for their past reprehensible marketing of tobacco. It 
will significantly enhance research related to diseases associated with 
tobacco use, such as cancer, lung, cardiovascular and stroke--similar 
to Mack-Harkin. This fund would provide an additional $95 billion for 
biomedical research, a goal which clearly must rank at the top of our 
national agenda in this day of ever-emerging medical discoveries.
  In earlier versions of this legislation, I had considered making 
these punitive damages not tax-deductible. However, upon further 
reflection about the precedent this would set in tax law, and the fact 
that the June 20 proposal was intended to be tax deductible, the bill I 
am introducing today does not contain that provision at this time.
  Fifth, my legislation contains a substantial new program to enhance 
significantly Indian health care efforts, particularly related to 
tobacco use. This provision will be funded at $200 million per year.
  Sixth, significant new funding is provided to States for anti-
smoking, anti-addiction efforts. States will receive $186 billion 
directly. These funds will be allocated based on the agreement of the 
State attorneys general. States will be able to use whatever portion of 
the funds that would have been attributable to their State Medicaid 
match with no strings whatsoever. The portion that would be 
attributable to the Federal Medicaid match must be used for delineated 
health-related anti-tobacco programs. None of these funds are 
considered to be part of the Medicaid program, however. The Federal 
anti-tobacco program, administered by HHS, will provide an additional 
$92 billion to States, half of which will be administered through a 
block grant program.
  Seventh, in a departure from the AG's agreement and the FDA rule, 
which regulates tobacco as a restricted medical device, the bill treats 
tobacco products as their own class and as unapproved drugs. However, 
the bill provides the FDA with substantial new authority over tobacco 
products, including the authority to control their composition through 
reductions or eliminations of all constituents. Unlike the AG 
agreement, though, which gives FDA the authority to ban tobacco 
products after 12 years, my proposal allows the Secretary to make that 
recommendation in any year, but it cannot be implemented unless 
approved by Congress.
  Eighth, the ``look-back'' surcharge on tobacco manufacturers has been 
significantly strengthened with penalties more than doubled and the cap 
on payments removed. The Secretary may abate all or part of a penalty, 
totally at her discretion.
  Ninth, after funding is provided for a limited program on tobacco-
related asbestos liability, transitional agricultural assistance, and 
the new Indian health program, my bill divides the remaining funding in 
half. Fifty percent will be provided to the Federal Government for our 
new war on tobacco addiction and tobacco use. Fifty percent will be 
provided to the States for anti-tobacco programs.

  These funds will be provided to each state by a formula agreed upon 
by the Attorneys General Allocation Subcommittee on September 16. My 
bill does not treat these payments to the states as Medicaid recoveries 
per se, and indeed, my bill waives the Medicaid subrogation law. 
However, for purposes of use of these State funds, the States will be 
able to retain that portion of the funds which would have

[[Page S12581]]

been attributable to their Medicaid matching rate, and use those funds 
with absolutely no restrictions. The portion of the funds which would 
have represented the Federal share under Medicaid, generally the larger 
share, must be used for certain anti-tobacco public health purposes 
delineated in the bill.
  I want to take the opportunity today to discuss many of these areas 
in more detail.


                 National Tobacco Settlement Trust Fund

  The bill establishes a Trust Fund--termed the ``National Tobacco 
Settlement Trust Fund.'' This is the apparatus that takes the inflow of 
proceeds made by the participating tobacco manufacturers and makes 
payments to the states and various federal health programs.
  Here is how the fund works: The participating manufacturers must 
deposit $398.3 billion in the Trust Fund. Of this amount, $303 billion 
reflects settlement for compensatory damages and $95 billion for the 
settlement of punitive damages for bad acts of the tobacco industry 
prior to the legislative settlement of the claims.
  These amounts are deposited into two accounts: a state account for 
use to pay back the states for Medicaid expenditures and a federal 
account to fund health and tobacco anti-cessation programs. A detailed 
expenditure table is provided in the bill which earmarks where the 
payments are being made.
  These payments represent a licensing fee, of which $10 billion is 
paid ``up front'' to the Trust Fund by the participating tobacco 
manufacturers and the remainder will be paid in annual amounts 
stipulated in the bill. The bill thereafter sets the base amount 
licensing fee that the participating manufacturers must pay to the 
Trust Fund for the 25 year base period.
  The bill also provides for penalties and the possible loss of the 
civil liability protections of the Act if the participating 
manufacturers default on payments.
  The U.S. Attorney General shall administer the Trust and the 
Secretaries of Treasury and Health and Human Services shall be co-
trustees. To ensure that each participant of the tobacco settlement has 
a fair say, an advisory board is created to advise the Trustees in the 
administration of the Trust Fund. Four members are to be appointed by 
the House and Senate majority and minority leadership, and one member 
each representing the state attorneys general, the tobacco industry, 
the health industry, and the Castano plaintiffs' class.


                       National Tobacco Protocol

  The bill establishes a Protocol--in essence a binding contract among 
the federal government, the States, the participating tobacco 
manufacturers, and the Castano private class.
  The primary purpose of the Protocol is to effectuate the consent 
decrees, which terminate the underlying tobacco suits. To receive the 
civil liability protections of the bill, the participating 
manufacturers must sign the Protocol. This works as a powerful 
incentive for the participating members of the tobacco industry to 
abide by the restrictions contained in the protocol.
  Basically, the Protocol establishes restrictions on advertising by 
industry and includes general and specific restrictions, format and 
content requirements for labeling and advertising, and sets a ban on 
nontobacco items and services, contents and games of chance, and 
sponsorship of events.
  Because these restrictions raise serious First Amendment concerns, 
and to avoid years of litigation that would surely tie up the 
implementation of the bill, we have placed these restrictions in the 
Protocol contract provision.
  More specifically, here is how the Protocol works.
  To be eligible for liability protection, each participating tobacco 
manufacturer must sign the Protocol and thus contractually agree to the 
provisions restricting their tobacco advertising.
  The Protocol will also bind the manufacturer's distributors and 
retailers to agree to the restrictions by requiring that in any 
distribution or sales contract between these parties, the restrictions 
will become material terms. If a tobacco manufacturer, or one of his 
distributors or retailers, violates any provision contained in the 
Protocol, liability protection for the manufacturer is no longer 
afforded. The restrictions on advertising include prohibitions on 
outdoor advertising, in the use of human and cartoon figures, on 
advertising in the Internet, on point of sale advertising, and in 
sporting events. Advertising is also subject to brand name, types of 
media, and FDA restrictions
  As I stated, the restrictions were placed in the Protocol because 
current statutory restrictions on tobacco advertising contained in a 
FDA final rule, and in other proposed legislation, raise serious 
constitutional questions.
  It remains unclear whether such statutory restrictions violate the 
First Amendment's guarantee of freedom of speech. And this doubt 
invites years of litigation to determine whether or not the statutory 
restrictions are constitutional.
  Rather than open the door to endless litigation, which could delay 
the implementation of the restrictions for years, I have made the 
restrictions contractual. Because the Protocol is a binding and 
enforceable contractual agreement between the interested parties, a 
challenge to the constitutionality of the restrictions is avoided. 
This, I believe, the wisest and most effective approach in dealing with 
tobacco advertising restrictions.
  As a type of commercial speech, tobacco advertising is entitled to 
some, but not full, First Amendment protection. The law provides that 
commercial speech may be banned if it advertises an illegal product or 
service, and unlike fully protected speech, may be banned if it is 
unfair or deceptive. Even when it advertises a legal product and is not 
unfair or deceptive, the government may regulate commercial speech more 
than it may regulate fully protected speech. This is the case of 
tobacco advertising.
  In May 1996, in 44 Liquormart, Inc. v. Rhode Island, the Supreme 
Court increased the protection that the Supreme Court in its Central 
Hudson test guarantees to commercial speech by making clear that a 
total prohibition on the ``dissemination of truthful, nonmisleading 
commercial messages for reasons unrelated to the preservation of a fair 
bargaining process'' will be subject to a stricter review than a 
regulation designed to ``protect consumers from misleading, deceptive, 
or aggressive sales practices.''
  This case may evidence a trend on the part of the Supreme Court's 
part to increase the First Amendment protection it accords to 
commercial speech. If this trend continues, a court is more likely to 
find that restrictions on tobacco--a legal product--is subject to 
stricter scrutiny than the traditional antifraud type commercial free 
speech cases, particularly when the tobacco advertising is truthful and 
nondeceptive.
  The Protocol also contains a provision establishing an arbitration 
panel to determine the legal fees for the tobacco settlement and caps 
such awards to 5 percent of the amounts annually paid to the Trust 
Fund, any remainder to be paid the next fiscal year. The attorney fees 
are to paid by the manufacturers and are not to be counted against the 
Trust Fund fees and deposits. Finally, the Protocol may be enforced by 
the Attorney General, the State attorneys general, and the private 
signatories in the applicable courts.


                          The Consent Decrees

  The primary purpose of this section is to settle existing claims 
against the participating tobacco manufacturers. Once signed by the 
parties (federal and state governments, the Castano class private 
litigants, and the participating tobacco manufacturers) as 
an enforceable contract, the consent decree becomes effective on the 
date of the bill's enactment and allows for three important things: (1) 
a state receives Settlement Trust funding; (2) a manufacturer receives 
liability protection; and (3) the Castano claims are settled.

  The consent decrees require the parties to agree to various 
restrictions, including restrictions on tobacco advertising, and on 
trade associations and lobbying, the disclosure of tobacco smoke 
constituents and nontobacco ingredients in tobacco products, the 
disclosure of important health documents, the dismissals of the various 
underlying tobacco suits, requirements for warning labels and other 
packaging restrictions, and the obligation to make payments for the 
benefit of the States, the private litigants, and the general public.

[[Page S12582]]

  Pursuant to the consent decrees, the parties waive their right to 
bring constitutional claims. It also provides that the provisions are 
severable. The Attorney General must approve the consent decrees, and a 
state may bring an action to enforce provisions contained in the 
consent decree, if appropriate. Civil Liability Provisions
  In exchange for payments and other concessions, of which I already 
spoke, the tobacco manufacturers will gain certain benefits from the 
bill. It is these benefits which have given the tobacco companies the 
incentive to come forward and participate in the negotiations which 
were necessary to resolve the massive litigation surrounding tobacco 
use. Keep in mind that these benefits only apply to those tobacco 
manufacturers who voluntarily enter into the Protocol and consent 
decrees. There are several aspects to this section of the bill:
  First, all actions which are currently pending against the 
manufacturers will be dismissed. Those actions include actions by 
states or local governments, class actions, or actions based on 
addiction to tobacco or dependency on tobacco. The tobacco companies 
will be immune from such class action claims in the future. I want to 
emphasize that personal injury claims will still be viable. An 
individual will still be able to make claims directly against tobacco 
companies after the enactment of the bill.
  Second, the primary benefit which the tobacco companies will receive 
under this bill is relief from liability for punitive damages. This 
relief only applies to punitive damages for actions which the tobacco 
companies took prior to this bill's enactment. If, at some future date, 
the tobacco companies take some action or commit some wrong that would 
subject them to punitive damages, this bill will not relieve them of 
that future liability.
  Third, this bill makes the participating manufacturers jointly and 
severally liable for damages arising out of claims by individuals. Of 
course, manufacturers who do not voluntarily consent to the terms of 
the protocol and consent decree will be treated separately and lawsuits 
involving both types of tobacco companies will be tried separately.
  Fourth, the bill includes a cap on the amount of damages that can be 
paid out on individual claims each year. The cap is one-third of the 
total annual payments that are due from all the participating tobacco 
manufacturers. The excess over the cap and the excess of any individual 
claim over $1 million will be paid in the following year. Eighty 
percent of those payments to individuals will be credited toward 
payments due to the fund. These provisions were all drawn from the June 
20th proposal and are drafted to be identical to that agreement.
  Finally, as an enforcement mechanism, if a tobacco company which has 
signed the protocol and consent decree is delinquent in payment by more 
than 12 months, the benefits granted under this bill will no longer 
apply. The bill also contains enforcement mechanisms for material 
breaches of the protocol and consent decree. I must point out that 
nonsignatories--such as tobacco companies that refuse to sign the 
protocol and consent decrees--are not eligible to receive the civil 
liability protections in the bill.
  With regard to a state's eligibility to receive funds under this 
bill, it is relatively simple. A state must dismiss any claims it has 
pending against the participating tobacco companies and it must adopt 
provisions in its state code which mirror the benefits granted to 
the participating tobacco companies in this bill. On an annual basis, 
the Attorney General will certify each state which is eligible to 
receive funds.


                 FDA Jurisdiction Over Tobacco Products

  It is may surprise some in this body to learn that the current 
provision in food and drug law that established the efficacy standard 
for drugs was enacted in 1962 through Judiciary Committee leadership 
when Senator Kefauver was chairman.
  As the current chairman of the committee, I has great reservation 
about embarking down a path that appears to turn the world upside down 
and gut the normal safety and efficacy requirements as applied to 
medical devices by creating an exception that swallows the rule.
  Using the restricted device law--a law whose purpose is to regulate a 
class of products that require special controls to help patients--to 
keep an inherently dangerous product on the market troubles me. I am 
not certain what kind of precedent this will be but I fear that it will 
be significant and of questionable necessity and benefit.
  As I understand it, the only product that has been regulated under 
the restricted device provisions of the law are hearing aids. I am not 
sure why some apparently feel a compelling need to equate the treatment 
of cigarettes with hearing aids. I don't share this enthusiasm.
  Judging by some of the public rhetoric since the June 20 announcement 
of the Attorney General's agreement, one of the most hotly contested 
areas of the proposed settlement concerns the provision addressing the 
Federal Government's authority to regulate tobacco products.
  Since June 20 some have adopted the rallying cry of ``unfettered FDA 
authority'' and have suggested that there are major deficiencies in the 
proposed agreement relating to the ability of FDA to regulate tobacco 
products.
  I suggest that the quality and substance of this debate would improve 
if we focus on the real issues.
  As far as I am concerned, the substantive issue is not whether FDA 
should have authority over tobacco products; the real question is 
precisely how much and precisely what kind of authority that FDA should 
be delegated over these dangerous products.
  Frankly, I am of the school that unfettered FDA authority is a bad 
idea. As a conservative, the notion of giving any Federal agency 
unfettered authority is a not a good idea.
  Anyone who argues for the principle of unfettered FDA authority 
apparently has not ever read FDA's organic statute, the Federal, Food, 
Drug, and Cosmetic Act. This important law has its origins in the 1906 
Pure Food and Drugs Act safeguards our Nation's supply of food, drugs, 
cosmetic, medical and radiological devices. My version of this law 
contains 254 pages of ``fetters'' on the FDA. And this does not even 
include the many pages of additional ``fetters'' placed on FDA in the 
Public Health Service Act provisions relating to the regulation of 
biologicals.
  Frankly, I am not sure that many other executive agencies have as 
many fetters placed upon it as FDA. And that is a good thing. FDA 
performs such critical public health missions as approving new drugs 
and medical devices.
  In a democratic society it is only reasonable to expect that the 
American public--which has some much at stake with respect to FDA's 
decisions--will require its elected representatives to watch closely 
what FDA is doing and enact legislation that will improve the 
efficiency of its operations.
  Just this last Sunday, Congress completed its latest exercise in 
fettering the FDA when this Senate passed, and passed by a unanimous 
voice vote I must add, the FDA Modernization Act of 1997. This bill 
takes up fully 22 pages in the Congressional Record.
  So if anyone is under the false impression that ``unfettered FDA 
authority'' is the norm, I would only invite them to read the statute 
and its latest modification.
  The Congress would not, and should not, pass a bill that says 
in essence that FDA has unfettered authority over tobacco any more than 
we would pass laws that said that FDA has plenary, unfettered power 
over drugs and devices.

  As I said earlier, the real question tobacco products is not if but 
what precise authority we give FDA over these products.
  I think that Attorney General Mike Moore got it right as when he told 
several Senate Committees that all he asked from the public health 
community is to be told exactly how tobacco should be regulated.
  There was no intent by the Attorney Generals, the Castano plaintiffs 
group, the public health representatives to act to undermine FDA's 
ability to regulate tobacco. For that matter, we must recognize that, 
even while they were, and are, litigating the issue of FDA authority in 
the Federal courts, the industry negotiators made unprecedented 
concessions in terms of FDA's authority in the June 20 agreement.
  It is possible, as many legal experts believe, that the Fourth 
Circuit Court will rule that FDA does not have the authority to 
regulate tobacco.

[[Page S12583]]

  One thing that I do know is that whatever happens at the court of 
appeals, the loser will likely appeal its decision.
  This will take time, time in which more and more young children will 
start a lifetime addiction to tobacco products that will lead to 
illness and premature death.
  Regardless of the outcome of this litigation, I am convinced that 
this Congress has a public duty to act, and act now.
  Title IV of my bill describes in detail what I think is the 
appropriate way for FDA to regulate tobacco products.
  First of all, let me start by taking my hat off to FDA and the 
Department of Health and Human Services under the leadership of 
Secretary Shalala for its creativity of using the existing food and 
drug laws in fashioning its final rules on youth tobacco.
  In many ways, these regulations created the environment that made it 
possible for the negotiators to sit at the table and bring us the 
settlement proposal that we are considering today. So I take my hat off 
to the negotiators as well.
  As fully explained in the preamble to the final rule and accompanying 
legal justification, one of the major reasons why FDA regulated tobacco 
products as restricted medical devices was because of the relative 
inflexibility of the drug laws versus the flexibility of the medical 
device laws.
  We all know that this question is before the Fourth Circuit, and we 
expect a decision very soon. But regardless of the outcome of that 
case, many have expressed the concern that FDA has stretched the 
statute beyond the breaking point when it uses a statutory provision 
whose hallmark is the safety and efficacy standard in a fashion to 
reach products that are inherently unsafe and ineffective.
  Call it what it is: A tobacco product is a tobacco product, not a 
medical device.
  My proposal is to create a new regulatory chapter that exclusively 
addresses tobacco products. New chapter IX contains the rules that will 
apply to tobacco products.
  If a tobacco product is not in compliance with this chapter it will 
run afoul of the FDC statute by the two new prohibited acts that S. 
1530 creates in section 301 of the act. It will be against the law to 
introduce into interstate commerce any tobacco product that does not 
comply with these tough new provisions.
  In addition, S. 1530 proposes to alter the definition of drug to 
include tobacco products that do not comply with new chapter IX. That 
means that nonconforming tobacco products will be subject to the rigid 
treatment accorded drugs. Talk about an incentive to comply with the 
new chapter.
  My new proposed chapter IX includes many tough provisions including, 
tobacco product health risk management standards, good manufacturing 
standards, tobacco product labeling, warning, and packaging standards, 
reduced risk tobacco product standards, tobacco product marketing.
  As well, my bill creates a Tobacco Products Scientific Advisory 
Committee that will advise the Secretary and FDA on all of these new 
standards.
  I want to highlight that unlike the proposed settlement that my bill 
would allow the Secretary to recommend that tobacco products be banned 
at any time. The AG agreement had a 12-year bar to any such actions.
  But because this decision is a major public health decisions with 
considerable political, social economic, and even philosophical 
consequences, I require that any such decision to ban products to be 
made personally by the Secretary and require the concurrence of 
Congress.
  So please examine my proposal. I want to hear the comments and 
constructive criticism of all of my colleagues in this body and other 
interested parties and citizens.
  From my experience, I know that FDA legislation is always 
controversial and contentious. There are always a lot of devilish 
details.
  I put out this proposal in the interest of moving the tobacco debate 
forward in the Senate and in public debate.
  I challenge those who have in an interest in FDA prevailing in court 
in the current litigation to put that litigation aside as you read my 
FDA language and consider what law you would write if you were not 
constrained by the current drug and device paradigms.
  I salute those many public health groups and officials who have 
brought the antitobacco use battle so far in the last few years.
  Let us start from a clean blackboard. I believe that my approach is 
preferable than to continue to stretch a perhaps already overstretched 
statute.
  If any in this body believe that my proposal falls short, I hope they 
will tell me how. If some believe it is too lenient here and too rigid 
there, I hope they will respond with fixes, not with shouts.
  I look forward to this aspect to the debate because of my long term 
interest in the FDA and the Federal Food, Drug, and Cosmetic Act. Let 
us take particular care in crafting this language and do so in a way 
that does not distract FDA from its core missions, including its 
central role in getting the latest in medical technology to the 
American public.


                     The Price of Tobacco Products

  Another issue of keen concern to the public health community is the 
price of tobacco products. Earlier this year, I joined with several of 
my colleagues on both sides of the aisle to propose the Child Health 
Insurance and Lower Deficit Act, the CHILD bill. That bill, most of 
which has now been enacted as part of the Balanced Budget Act, made 
huge strides toward providing uninsured children with health care 
services, and it was predicated on a 43 cents increase in the excise 
tax on cigarettes.
  We had a bipartisan coalition under the best of circumstances, and in 
the end, our 43 cents was whittled down to 10 cents phased up to 15 
cents.
  In that climate, I do not think it is reasonable for anyone to expect 
that this Congress will enact a cigarette excise tax of $1 or $1.50.
  I do, believe, however, that there is consensus that it would be an 
important public health goal for the price of cigarettes and other 
tobacco products to be raised significantly to discourage youth 
consumption.
  It is possible to do that without an excise tax, and that is what my 
bill does. Under my proposal, which predicates payments upon a Federal 
licensing fee, I estimate that when fully phased in year six, cigarette 
prices will go up an additional $1.09 per pack at the manufacturer 
level, which will be reflected in a retail level of $1.50 or more.
  Economists have found that markups by cigarette manufacturers are 
always accompanied by increases down the distribution chain, including 
state excise tax increases. Thus, for purposes of this debate, I 
think it is critical that we discuss potential price increases in net 
terms, rather than the manufacturer markup.

  There is an important reason to implement the agreement through a 
licensing payment, as opposed to a tax. Law enforcement officials have 
noted that the closer the price rise is to the source of the 
cigarettes, the less opportunity there is for diversion.
  For example, if this bill were predicated on an excise tax, 
manufacturer sales to distributors would not reflect the higher price, 
and there would be ample opportunity for diversion into the black 
market of the cheaper goods.
  In sum, I believe that my proposal will bring the price of cigarettes 
to a high level and do so in a way that discourages black market 
diversion.
  Another issue of keen concern to the Congress are the tobacco 
farmers, most of whom could be displaced if this legislation is 
successful.


                        Agricultural Provisions

  Mr. President, we cannot forget about our country's tobacco farmers. 
Even though the tobacco farmers have the most to lose from the tobacco 
settlement, they were completely left out of the settlement 
negotiations.
  Tobacco farms in this country are often small family run businesses, 
and in many cases, the entire economic foundation of a community is 
tied up in the production or processing of tobacco.
  As many of my colleagues in the Senate know, I would probably be the 
last person to stand up and defend the tobacco industry or our nation's 
tobacco program. I feel strongly, though, that we should not turn our 
backs on tobacco farmers and their communities at a time when many will 
be harmed as a consequence of the tobacco settlement.

[[Page S12584]]

  Senator Lugar, the Chairman of the Senate Agriculture Committee, has 
introduced a bill that would end the tobacco program while providing 
payments and other assistance to tobacco farmers over a three-year 
transition period. His proposal follows the pattern established by the 
1996 farm bill, by getting the government out the farming business and 
by making temporary assistance available to farmers as they adjust to 
the free market.
  Senator Ford has introduced the LEAF Act, which provides some of the 
same assistance contained in Senator Lugar's bill but adds additional 
grants and assistance for tobacco farmers and workers employed in the 
processing of tobacco. However, Senator Ford's bill maintains the 
tobacco program largely intact.
  Frankly, Mr. President, I believe our tobacco communities have tough 
challenges ahead of them. For that reason, I have combined what I think 
are the best parts of each of these two bills into the PROTECT Act to 
ensure that we care for our nation's tobacco farmers and our tobacco 
dependent communities.
  My bill establishes a Tobacco Transition Account, funded through the 
Trust Fund. The Transition Account will provide buyout payments to 
tobacco quota owners, who will lose their quotas, and assistance 
payments to farmers who lease their quotas from these owners. In 
addition, the PROTECT Act creates Farmer Opportunity Grants. These will 
be available to eligible family members of tobacco farmers to help pay 
for higher education. Eligibility requirements for Farmer Opportunity 
Grants will be similar to those of the Pell Grant program.
  Mr. President, we should also remember the workers in the tobacco 
processing industry who could be displaced as a result of the tobacco 
settlement. The PROTECT Act sets up the Tobacco Worker Transition 
program. Patterned after the NAFTA Trade Adjustment Assistance program, 
the Tobacco Worker Transition program will provide assistance to 
displaced workers and help them receive job retraining.
  Finally, Mr. President, the PROTECT Act will provide a total of $300 
million over three years in block grants to affected states for 
economic assistance. Governors will be able to use these grants to help 
rural areas and tobacco dependent communities make the transition to 
broader based economies and to the free market.


                   Native American Health Provisions

  Let me next turn toward another component of my legislation which 
relates to American Indians and Alaska Natives.
  Tobacco use and abuse are significant health issues in Indian 
country. Native Americans smoke more than any other ethnic group--more 
than twofold for Indian men and more than fourfold for Indian women 
over non-Indians. The Centers for Disease Control estimate that 40 
percent of all adult American Indians and Alaska Natives smoke an 
average of 25 or more cigarettes daily.
  Moreover, according to the Indian Health Service [IHS] lung cancer 
remains the leading cause of cancer mortality. The IHS further reports 
that in some parts of the country 80 percent of Indian high school 
students smoke or chew tobacco. The statistics further show that 
smoking by American Indians is actually increasing while it is on the 
decline among other groups.
  Clearly, in the context of this global tobacco settlement, measures 
must be taken to address the unique problems Indian country faces with 
the use and regulation of tobacco products.
  Accordingly, my bill contains several Indian specific provisions that 
ensure tribal governments will have the regulatory authority to address 
issues of particular concern to tribal health officials while 
maintaining the interest of the tribe in its sovereign authority over 
activities occurring on its reservation.
  These provisions have been developed, in part, on recommendations 
made at an October 6, 1997, oversight hearing on the tobacco settlement 
by the Committee on Indian Affairs on which I serve.
  Let me also add that I welcome additional input from Indian country 
on these important provisions. Overall, my provisions are designed to 
recognize the unique interests of Indian country in the implementation 
of the act as well as provide assistance to improve the health status 
of native Americans.
  Specifically, my bill makes clear that the provisions of the act 
relating to the manufacture, distribution and sale of tobacco products 
will apply on Indian lands as defined in section 1151 of title 18 of 
the U.S. Code.
  The fundamental precept of the Indian provisions is that tribal 
governments will be treated as States in the implementation of the 
provisions of the act.
  The Secretary of HHS, in consultation with the Secretary of the 
Interior, will be required to develop regulations to permit tribes to 
implement the licensing requirements of the act in the same manner by 
which the States are accorded this authority.
  Indian tribes will also be considered as a State for purposes of 
receiving public health payments in order to carry out the provisions 
of the act and in accordance with a plan submitted and approved by the 
Secretary.
  Indian tribes are permitted flexibility to utilize these funds to 
meet the unique health needs of their members as long as their programs 
meet the fundamental health requirements of the act.
  The amount of public health payment funds for tribes will be 
determined by the Secretary based on the proportion of the total number 
of Indians residing on a reservation in a State as compared to the 
total population of the State. Moreover, a State may not impose 
obligations or requirements relating to the application of this act to 
Indian tribes.
  Tobacco use remains a significant health factor for Indians and the 
costs associated for patient care and treatment are extremely high and 
result in a disproportionate allocation of limited IHS dollars for 
tobacco related illnesses.
  Accordingly, my bill establishes a supplemental fund for the IHS to 
augment its program mission of providing health care services to 
Indians. A $5 billion account is established to be allotted to the IHS 
in increments of $200 million annually for 25 years.


                          Antitrust Provision

  Let me also discuss another issue briefly. The proposed settlement is 
predicated upon the tobacco companies receiving immunity from antitrust 
laws in a number of limited areas. For example, in order to determine 
the price increase that will be passed on to consumers due to the 
settlement licensing fee. Another area in which such antitrust 
clarification will be needed is in enforcement of the protocol which 
accompanies the settlement legislation.

  In introducing the bill today, I want to acknowledge that this 
language may need to be refined and tightened up. I do not intend to 
give the tobacco companies blanket antitrust immunity. That would be 
totally unwarranted.
  I intend to work closely with Senators Mike DeWine and Herb Kohl, the 
chairman and ranking member of the Judiciary Subcommittee on Antitrust, 
to further polish this language. They have indicated their willingness 
to work with me on this issue, and I appreciate their expertise and 
assistance.


                                Asbestos

  There exists medical evidence that tobacco use is a contributory 
factor in asbestos-related diseases and injuries. This bill contains a 
program to provide limited compensation for individuals who are exposed 
to asbestos and whose condition proven to have been exacerbated by 
tobacco use. The asbestos program is administered by the Secretary of 
Labor, who will establish standards whereby it can be demonstrated that 
tobacco is a significant factor in the cause of asbestos-related 
diseases. This program would be funded at $200 million per year and 
would complement the existing system for payments related to asbestos.


                                Closing

  As I close, I would like to make one final observation. Three 
thousand kids a day start smoking; countless others start using 
smokeless tobacco products like snuff.
  These children are becoming addicted to powerful tobacco products 
which can only harm them. The scientific evidence is clear.
  I am extremely cognizant of the fact that there is a long history of 
legal use of tobacco products in this country.
  Millions have used them; millions do use them.

[[Page S12585]]

  I am trying to strike a delicate balance here: That of allowing 
adults to continue to use these products as they choose, but of 
discouraging it whenever we can and helping those who are addicted wean 
themselves from these powerful tobacco products.
  But most importantly, we have to renew our efforts aimed at teen 
tobacco use. The funds provided in the global tobacco settlement will 
allow us to set that course.
  Let me say right now that I fully anticipate criticism of my proposal 
from those who are afraid it is too large, and perhaps too 
bureaucratic.
  To them I would say that the value of this proposal is in its size. 
We need to show that we are serious about stopping kids from smoking. 
We need to penalize the tobacco industry as part of that effort.
  I have tried to rely upon the existing administrative structure 
wherever possible in the implementation of my plan. If others have a 
better way to run the program, I welcome their advice.
  But to those who would advocate a smaller program, let me share my 
serious concerns about lowering the amount the tobacco industry has 
already agreed to pay.
  I would also have serious concerns about raising the amount and using 
the funds for unrelated purposes. This is not the pot of money under 
the rainbow which will allow us to fund 60's-era left-leaning 
initiatives. This is a tobacco settlement which will provide us with 
significant new funding for new war on tobacco. A war to save our 
children.
  My bill differs markedly from the others that have been introduced in 
that it is comprehensive, it includes all the components of the 
settlement in one piece of legislation, and it makes all the hard 
choices necessary to delineate how a settlement will operate. Further, 
it is drafted to be constitutional.
  Many have begun to criticize my bill before they have even read it. 
It happened with the CHILD bill. It will happen again.
  But to those who wish to sling barbs at my bill, I urge you to study 
it carefully. It is not the Kennedy bill. And, by the way, it was never 
intended to be. It is not the Lautenberg bill, nor the McCain bill.

  It is a discussion draft intended to embrace, and improve, the 
proposed global tobacco settlement recommended to the Congress by 40 
states this June. I welcome any suggestions for improvements which may 
be offered to my bill. That is why I am putting it forward today as a 
discussion vehicle.
  I hope that the majority of Congress will agree with me that this 
should become a national priority, and begin to move legislation 
immediately upon our return in January.
  In closing, Mr. President, I want to thank all of my colleagues who 
provide advice and assistance in drafting this legislation. It is clear 
that we must have a collaborative process if this legislation is to 
move forward, and I look forward to being a part of that process in the 
months to come. We can leave no greater legacy to our children.
  I want to say a special thanks to Bill Baird in the Office of 
Legislative Counsel. He worked day and night to get this bill drafted 
for us, and I want to say publicly how much I appreciate this extra 
effort.
  Anyone who wishes to read the entire text of the bill will soon be 
able to access it on the Hatch web page which can be reached at: 
``www.senate.gov/hatch/''. It will take us a day or two, but it will 
be available to the public. Since it is 308 pages, I think this is the 
most efficient way to make it available to the public. And, as I just 
said, I welcome suggestions.
  Finally, for those who just want the digest version, I ask unanimous 
consent to insert a section-by-section summary of the PROTECT Act in 
the Record.
  There being no objection, the section-by-section analysis was ordered 
to be printed in the Record, as follows:

                      Section-by-Section Analysis

       Section 1. SHORT TITLE; TABLE OF CONTENTS. Entitles the 
     bill ``Placing Restraints on Tobacco's Endangerment of 
     Children and Teens'' Act ``PROTECT'') and lists a table of 
     contents.
       Section 2. FINDINGS. Makes a series of congressional 
     findings with respect to tobacco, its harmful health effects 
     on children and adults, and the role of government in 
     regulating tobacco products.
       Section 3. GOALS AND PURPOSES. Sets forth the goals and 
     purposes of the legislation, including decreasing tobacco use 
     by youth and adults, enhancing biomedical research efforts, 
     setting forth Federal standards for smoking in public 
     establishments, establishing the authority of the Food and 
     Drug Administration to regulate tobacco products, providing 
     transitional assistance to farmers, and reforming tobacco 
     litigation practices.
       Section 4. NATIONAL GOALS FOR THE REDUCTION IN UNDERAGE 
     TOBACCO USE. Sets out national goals for reduction in youth 
     tobacco use. For cigarettes, the national goals, measured 
     from the baseline year, will be a 30% reduction in use in 
     2003 and 2004; a 50% decrease in 2005, 2006 and 2007; and a 
     60% reduction thereafter. For smokeless tobacco, the national 
     goals, measured from the baseline year, will be a 25% 
     reduction in use in 2003 and 2004; a 35% reduction in 2005, 
     2006, and 2007; and a 45% reduction thereafter.
       Section 5. DEFINITIONS. Defines pertinent terms used in the 
     bill.


            TITLE I--NATIONAL TOBACCO SETTLEMENT TRUST FUND

       Section 101. ESTABLISHMENT OF TRUST FUND. Creates a 
     National Tobacco Settlement Trust Fund that will receive 
     payments from tobacco manufacturers according to a schedule 
     set out in the bill. Over the next 25 years, deposits will be 
     $398 billion, of which $95 billion are considered punitive 
     damages and will be used to fund a biomedical research trust 
     fund.
       The National Tobacco Settlement Trust Fund will be 
     administered by the Attorney General, the Secretary of Health 
     and Human Services, and the Secretary of Treasury, and will 
     be advised by a board composed of the Trustees and 
     representatives of State attorneys general, public health 
     experts, the Castano plaintiffs, and the tobacco industry. 
     The initial $10 billion down payment from the tobacco 
     industry, the continued annual payments, and any look-back or 
     surcharge payments or penalties will be deposited into the 
     Settlement Trust Fund.
       The Settlement Trust Fund consists of a State Account and a 
     Federal Account. Generally, as specified in section 101(c), 
     the funds are distributed as follows: First, a portion of the 
     total funds are set aside in the Federal Account for a 
     transitional agriculture assistance program, a limited fund 
     for asbestos-related litigation (where it can be proven that 
     tobacco use was a cause of injury), and a new program to 
     enhance Native American health. The remaining funds are 
     divided equally with one-half provided to the States and one-
     half to the Federal government. In addition to the set aside 
     funds for tobacco farmers, tobacco/asbestos plaintiffs, and 
     Native American activities, the remaining funds from the 
     Federal Account will be essentially divided equally between 
     tobacco-related biomedical research and public health 
     activities as provided in sections 521 and 522, respectively.
       Funds from the State Account may be used by the states for 
     both general purposes and for tobacco related programs as 
     specified in sections 501 and 502, respectively. The Trustees 
     are precluded from making an expenditure for programs which 
     are currently being funded at either the Federal or State 
     levels, so that the funds provided in this Act are 
     supplemental to any on-going activities and not a 
     substitution.
       Section 102. PAYMENT SCHEDULE. As a condition of receiving 
     the liability provisions contained in Title II, participating 
     manufacturers must execute a protocol with the Secretary of 
     Health and Human Services, each respective state attorney 
     general, and Castano litigants, sign consent decrees with 
     States and Castano plaintiffs, and deposit an initial $10 
     billion payment into the Trust Fund. In addition, to be 
     eligible for the liability protections, manufacturers must 
     make payments according to a schedule listed in the bill. The 
     Trustees are authorized to adjust those continuing payments 
     in two cases: 1) an annual inflation adjustment; 2) a volume 
     adjustment which could either increase or reduce the base 
     payments. The amount that each participating manufacturer 
     will pay will be determined under the protocol appended to 
     the agreement.
       Section 103. ADMINISTRATIVE PROVISIONS. The Attorney 
     General will hold the Trust Fund and will report annually to 
     the relevant congressional committees on the financial 
     condition of the Trust Fund. The Trustees will invest excess 
     balances of the Fund in interest-bearing obligations of the 
     U.S. and proceeds therefrom will become a part of the 
     account. Members of the Trustees' advisory board shall serve 
     without compensation, although travel expenses will be 
     reimbursed, and overall costs of the advisory board are 
     capped. Receipts and disbursements from the Trust Fund 
     will not be included in the annual budget, and cannot be 
     transferred to the general fund of the Treasury.
       Section 104. ENFORCEMENT. Any participating manufacturer 
     which fails to make payments required by the Act will be 
     subject to daily fines. If the manufacturer has not made the 
     required payment within one year, the manufacturer will be 
     considered non-participating, will lose the liability 
     protections contained in the Act, and will be ineligible from 
     becoming a participating manufacturer in the future.

[[Page S12586]]

          TITLE II--NATIONAL PROTOCOL AND LIABILITY PROVISIONS

           Subchapter A--Protocol Restrictions on Advertising

       Section 201. REQUIREMENT. To be eligible for the liability 
     protections contained in Subtitle C, each tobacco 
     manufacturer shall enter into a binding and enforceable 
     contract (``the Protocol'') in each state, with the Attorney 
     General on behalf of the Chief Executive Officer of the state 
     and representatives of the Castano litigants. As part of the 
     protocol, a participating manufacturer shall agree, in any 
     contract entered into with a distributor and retailer, to 
     require the distributor and retailer to comply with the 
     applicable terms of the protocol.
       Section 211. APPLICATION OF SUBCHAPTER. The following 
     provisions will be considered part of the Protocol.
       Section 212. AGREEMENT TO PROHIBIT ADVERTISING. Parties to 
     the executed Protocol agree that they will not use any form 
     of outdoor product advertising, nor will they advertise in 
     any arena or stadium where athletic, musical, artistic or 
     other social or cultural events or activities occur. Parties 
     also agree not to use human images or cartoon characters in 
     tobacco-related advertising, labeling or promotional 
     materials, and not to advertise tobacco products on the 
     Internet. Parties also agree to limit point of sale 
     advertising of tobacco products both in terms of number of 
     advertisements and format, except in adult-only stores and 
     tobacco outlets.
       Section 213. GENERAL RESTRICTIONS. Parties agreeing to the 
     Protocol will not use a trade or brand name of a non-tobacco 
     product as the trade or brand name for a cigarette or 
     smokeless tobacco product, except for products sold in the 
     United States before January 1, 1995. Parties further agree 
     to limit the media in which tobacco products will be 
     advertised and will not make payments for placement of 
     tobacco products in television programs, motion pictures, 
     videos or video game machines.
       Section 214. AGREEMENT ON FORMAT AND CONTENT REQUIREMENTS 
     FOR LABELING AND ADVERTISING. Those signing the Protocol 
     agree to limit tobacco-related advertising to black text on 
     white background, except in certain cases such as vending 
     areas not visible from the outside and adult publications. 
     Further, parties using audio or video formats agree to 
     certain limits, such as restrictions on music or sound.
       Section 215. AGREEMENT TO BAN NON-TOBACCO ITEMS AND 
     SERVICES, CONTESTS AND GAMES OF CHANCE, AND SPONSORSHIP OF 
     EVENTS. Parties to the Protocol agree to ban all non-tobacco 
     merchandise bearing the brand name, logo or other identifier 
     of tobacco products. They also agree not to offer any gift or 
     item in connection with the purchase of a tobacco product. 
     Parties agree not to sponsor any athletic, musical, artistic 
     or other social/cultural event in which identifiers of 
     tobacco products are used, although the use of a corporate 
     number in use in the United States prior to January 1, 1995 
     would be permissible.


             Subchapter B--Provisions relating to Lobbying

       Section 220. APPLICATION OF SUBCHAPTER. The provisions of 
     this subchapter will be considered part of the Protocol.
       Section 221. AGREEMENT TO PROVISIONS RELATING TO LOBBYING. 
     A manufacturer signing the Protocol must require that any 
     lobbyists it retains will sign an agreement consenting to 
     comply with applicable laws and regulations governing tobacco 
     products, including this Act and the consent decree under 
     this Act, and agreeing not to support or oppose any Federal 
     or State legislation without express consent from the 
     manufacturer.
       Section 222. AGREEMENT TO TERMINATE CERTAIN ENTITIES. 
     Parties to the Protocol agree that, within one year of 
     enactment, the Tobacco Institute and the Council for Tobacco 
     Research, U.S.A. will be terminated, and that any successor 
     organizations will meet strict guidelines with respect to 
     membership and activities and will be subject to oversight by 
     the Department of Justice.


                     Subchapter C--Other Provisions

       Section 225. APPLICATION OF SUBCHAPTER. The provisions of 
     this subchapter will be considered part of the Protocol.
       Section 226. DETERMINATION OF PAYMENT AMOUNT. Manufacturers 
     agreeing to the Protocol will determine the percentages each 
     specific manufacturer must pay.
       Section 227. ATTORNEY'S FEES AND EXPENSES. Within 30 days 
     of enactment, an arbitration panel will be appointed by the 
     Trustees, the participating manufacturers, and State 
     Attorneys General participating in the June 20, 1997 
     memorandum of understanding and the Castano litigants. The 
     arbitration panel will establish procedures for its 
     operation, receive petitions for attorneys' fees and 
     expenses, and make awards based on enumerated criteria 
     subject to an annual cap which is equal to 5% of the 
     amount paid to the Trust Fund for the applicable year. 
     Awards made by the panel will be paid by the participating 
     manufacturers and will not be paid from the Trust Fund.
       Section 228. LIMITATIONS WITH RESPECT TO INDIAN COUNTRY. 
     Participating manufacturers will agree not to conduct any 
     activity within Indian country that is otherwise prohibited 
     under this Act, and agrees to sell or otherwise distribute 
     tobacco products to an Indian tribe or tribal organization 
     under the same terms and conditions as the manufacturer 
     imposes on others.
       Section 231. FEDERAL ENFORCEMENT OF THE PROTOCOL. Sets 
     forth the terms and conditions under which the Attorney 
     General may bring civil actions, including imposition of 
     stiff penalties, to enforce the Protocol. The Attorney 
     General may enter into contracts with state agencies to 
     assist in enforcement. The Attorney General is authorized to 
     utilize funds from the Trust Fund for performance of her 
     duties under this section.
       Section 232. STATE ENFORCEMENT OF THE PROTOCOL. The chief 
     law enforcement officer of a state may bring actions to 
     enforce the protocol if the alleged violation is the subject 
     of a proceeding within that State. However, the State must 
     first give the Attorney General 30 days' notice before 
     commencing such a proceeding, and the State may not bring a 
     proceeding if the Attorney General is diligently prosecuting 
     or has settled a proceeding relating to the alleged 
     violation.
       Section 233. PRIVATE ENFORCEMENT OF PROTOCOL. A 
     participating manufacturer may also seek a declaratory 
     judgment in Federal District Court to enforce its rights and 
     obligations under the Act, and may also bring a civil action 
     against other participating manufacturers to enforce or 
     restrain breaches of the contract. In general, no such 
     actions may be commenced, however, if the Attorney General or 
     applicable State is already pursuing an action on the same 
     alleged breach.
       Section 234. REMOVAL. The Act allows removal to Federal 
     court of state claims which seek to enforce the Protocol.


                      SUBTITLE B--CONSENT DECREES

       Section 241. CONSENT DECREES. For a State to receive 
     funding under Title V, for a manufacturer to receive 
     liability protections under subtitle C, and for settlement of 
     the Castano claims, consent decrees must be signed effective 
     on the date of enactment.
       The consent decrees shall include provisions relating to 
     restrictions on tobacco advertising and youth access, 
     restrictions on trade associations and lobbying, disclosure 
     on tobacco smoke constituents, disclosure of nontobacco 
     ingredients in tobacco products, disclosure of all documents 
     relating to health, toxicity, and addiction, the obligation 
     of manufacturers to make payments for the benefit of States, 
     the obligation of manufacturers to deal only with 
     distributors and retailers that comply with all laws 
     regarding tobacco products, requirements for warnings, 
     labeling, and packaging, the dismissal of pending litigation 
     as required under this Act, and any other matters deemed 
     appropriate by the Secretary.
       The consent decrees shall not include information on 
     tobacco product design, performance, or modification, 
     manufacturing standards and good manufacturing practices, 
     testing and regulation with respect to toxicity and 
     ingredients, and the national goals relating to reductions in 
     underage use of tobacco. Constitutional claims shall be 
     waived and the provisions are severable. The decree must be 
     approved by the Attorney General. The decree shall remain in 
     effect regardless of amendments to the Act, except as 
     superseded by said amendments. A state may only seek 
     injunctive enforcement of the consent decree in state court. 
     The Attorney General will regulate to ensure consistency of 
     state court rulings regarding consent decrees which are not 
     exclusively local.
       Section 242. STATE ENFORCEMENT OF CONSENT DECREES. A State 
     may bring an injunctive action to enforce the terms of a 
     consent decree which falls within its jurisdiction. It can 
     only seek criminal or monetary relief for a subsequent 
     violation of an injunction previously granted.
       Section 243. NON-PARTICIPATING MANUFACTURERS. Provides an 
     incentive for manufacturers to participate in the national 
     tobacco control protocol. Non-participating firms will not be 
     protected by the civil liability protections of this bill. A 
     non-participating company will be required to transfer funds 
     to the National Tobacco Settlement Trust Fund in an amount 
     based on the proportion of the market share of the sales of 
     the firm. Each non-participating manufacturer shall place 
     into an escrow reserve fund each year an amount equal to 150% 
     of its share of the annual payment required of participating 
     manufacturers.


                    SUBTITLE C--LIABILITY PROVISIONS

       Section 251. DEFINITIONS. Defines pertinent terms used in 
     Subtitle C.


           CHAPTER 1--IMMUNITY AND LIABILITY FOR PAST CONDUCT

       Section 255. APPLICATION OF CHAPTER. This chapter is the 
     sole enforcement mechanism and exclusive remedy for any 
     claims against any participating manufacturer which have not 
     reached final judgment or settlement by the effective date 
     of this act. Any court judgment entered subsequent to this 
     bill's enactment shall include express language subjecting 
     the judgment to the act. No bond, penalty, or increased 
     interest shall be required in connection with appeal of 
     any judgment arising under this act.
       Section 256. LIMITED IMMUNITY. All pending actions against 
     participating manufacturers whether brought by a State or 
     local government entity, as a class action, or as a civil 
     action based on addition to or dependence, are hereby 
     terminated. All participating manufacturers are hereby immune 
     from any future action brought by a State or local 
     governmental entity, as a class action,

[[Page S12587]]

     or as a civil action based on tobacco addiction or 
     dependence. Individual personal injury claims arising from 
     the use of tobacco are preserved.
       Section 257. CIVIL LIABILITY FOR PAST CONDUCT. This section 
     applies to all actions permitted under section 256 for 
     conduct before enactment. Punitive damages are prohibited.
       All actions must be brought by individuals and may not be 
     consolidated without consent of defendants. The only means to 
     remove an action is if a defendant removes it to Federal 
     court. Participating manufacturers must jointly share in 
     civil liability for damages; they shall not be jointly and 
     severally liable with non-participating manufacturers; and 
     actions involving participating and non-participating 
     manufacturers shall be severed. Permissible plaintiffs are 
     individuals, their heirs, and third-party payers who are 
     bringing individual claims for tobacco-related injuries and 
     third-party payers whose claims are not based on subrogation 
     that were pending on June 9, 1997. Defendants under this 
     section are participating manufacturers, their successors or 
     assigns, any future fraudulent transferees, or any entity for 
     suit designated to survive a defunct signatory. Vicarious 
     liability for agents applies. Subsequent development of 
     reduced risk tobacco is not admissible or discoverable.
       Aggregate annual cap is 1/3 of annual payments required of 
     all signatories for the year involved. Excess amounts shall 
     be paid in the following year. Signatories shall receive 
     credit of 80% of amounts paid under judgments or settlements 
     for the year involved. Any amount awarded over $1,000,000 may 
     be paid in the following year. Each annual payment shall not 
     exceed $1,000,000, unless all judgments in the first year can 
     be paid without exceeding the aggregate annual cap. 
     Defendants shall bear their own attorneys' fees and costs.
       Section 258. CIVIL LIABILITY FOR FUTURE CONDUCT. This 
     section applies to all actions permitted under section 256 
     for conduct after enactment. Sections 257(c ) and (e) through 
     (I) shall apply to actions under this section. Third-party 
     payor claims not based on subrogation shall not be commenced 
     under this section. There is no prohibition for punitive 
     damages under this section.
       Section 259. NON-PARTICIPATING MANUFACTURERS. This title 
     shall not apply to non-signatories to the Protocol and 
     participating manufacturers who are 12 months delinquent in 
     payments due pursuant to the act.
       Section 260. PAYMENT OF JUDGMENTS AND SETTLEMENTS. A 
     participating manufacturer may seek injunctive relief in 
     federal court to stop a state court from enforcing a judgment 
     which is unenforceable under this chapter. The federal court 
     shall issue an injunction if the participating manufacturer 
     demonstrates that the judgment or settlement is unenforceable 
     under this chapter.
       Section 261. STATE ELIGIBILITY. A state shall be eligible 
     to receive funds under this act if (1) (by the effective date 
     of the act) it adopts sections 256 through 259 as unqualified 
     state law and any defendant in a civil action under this act 
     shall have a right to a prompt interlocutory appeal to the 
     highest court of the state to enforce the requirements of 
     state law; and (2) it withdraws and dismisses any claims 
     required to be dismissed under section 256.
       Within 6 months of the effective date of this act (with 
     special provision for states whose legislature do not meet 
     within that time frame), and annually thereafter, the AG 
     shall certify that each state eligible to receive funds has 
     complied with this section--states not certified shall not 
     receive funds. No state claim may be maintained in any court 
     of that state if it does not comply with subsection (a)(1) 
     herein. This chapter governs any action by a state which is 
     not in compliance with subsection (a)(1) herein but is 
     otherwise maintainable in the state.
       Section 262. REMOVAL. This section amends the existing code 
     to enact the removal provisions and give the federal court 
     jurisdiction.
       Section 263. CONFORMING AMENDMENTS. The section conforms 
     existing code sections with this act.


              TITLE III--REDUCTION IN UNDERAGE TOBACCO USE

       Subtitle A--State Laws Regarding the Sale of Tobacco 
     Products to Minors
       Section 301. STATE LAWS REGARDING SALE OF TOBACCO PRODUCTS 
     TO INDIVIDUALS UNDER THE AGE OF 18. Expands upon what is 
     popularly known as the ``Synar amendment'' (relating to the 
     sale or distribution of tobacco products to individuals under 
     the age of 18) P.L 102-321.
       Effective in FY 1999 (or FY 2000 for States with 
     legislatures which do not convene in 1999) and thereafter, a 
     State which wishes to receive funding under Title V of this 
     Act must have in effect a State law consistent with the 
     provisions contained in the model law described in section 
     302. A State must enforce the law systematically and 
     conscientiously and in a manner which can reasonably be 
     expected to reduce the extent to which tobacco products 
     are available to individuals under age 18. A State must 
     also certify that enforcement of the law is a priority, 
     conduct random, unannounced inspections to ensure 
     compliance, and annually transmit to the Trustees a report 
     describing its operation of the program. As a funding 
     source for the program, States may use payments from the 
     Trust Fund, grants under sections 1901 and 1921 of the 
     Public Health Service Act, license fees or penalties 
     collected pursuant to this Act, or any other funding 
     authorized by the State legislature. The Trustees are 
     authorized to reduce payments to States for noncompliance.
       Section 302. MODEL STATE LAW. Describes the provisions of 
     the model state law. Under that model, a series of conditions 
     are placed on the sale of tobacco to restrict use by persons 
     under age 18. It will be unlawful for a person to distribute 
     a tobacco product to an individual under age 18. Persons who 
     violate this section, and employers of employees who violate 
     the section, are liable for civil penalties. Under the model, 
     it is also unlawful for an individual under age 18 to 
     purchase, smoke or consume (or attempt such acts) in a public 
     place. Penalties are imposed for violations of this 
     provision. Law enforcement agencies are required to notify 
     promptly the parent(s) or guardians about such violations. 
     Persons who sell tobacco products at retail must post signs 
     communicating that the sale to individuals under 18 is 
     prohibited. It is also unlawful for product samples or opened 
     packages to be provided to anyone under 18, or for packages 
     to be displayed so that individuals have direct access. Civil 
     penalties for violations of these requirements apply.
       The model law also requires employers who distribute 
     tobacco products at retail to implement a program to ensure 
     that employees are not distributing tobacco products to 
     minors in violation of the preceding requirements. The model 
     also requires appropriate state and local law enforcement 
     officials to enforce the Act in a manner reasonably expected 
     to reduce the extent to which individuals under age 18 have 
     access to tobacco products. Under certain conditions, states 
     are authorized to use individuals under age 18 to test 
     compliance with this act. The Act also sets forth 
     requirements for states to license persons engaged in the 
     distribution of tobacco products, and describes the 
     procedures which will be used for suspension, revocation, 
     denial and non-renewal of licenses. States are required to 
     report annually on compliance with the Act.


            Subtitle B--Required Reduction in Underage Usage

       Section 311. PURPOSE. Encourages achievement of dramatic 
     and immediate reductions in the number of underage consumers 
     of tobacco through substantial financial surcharges on 
     manufacturers if targets are not met.
       Section 312. DETERMINATION OF UNDERAGE USE BASE 
     PERCENTAGES. Sets forth a methodology for the Secretary of 
     HHS to set base percentages for the calculation by age group 
     of children who use tobacco products.
       Section 313. ANNUAL DAILY INCIDENCE OF UNDERAGE USE OF 
     TOBACCO PRODUCTS. Five years after enactment, and annually 
     thereafter, the Secretary shall make a determination 
     according to the methodology set out in this section of the 
     average annual incidence of daily tobacco use by individuals 
     under age 18.
       Section 314. REQUIRED REDUCTION IN UNDERAGE TOBACCO USE. 
     Requires the Secretary to determine if the annual incidence 
     of the daily use of tobacco products exceeds the national 
     goals set forth in section 4.
       Section 315. APPLICATION OF SURCHARGES. If the Secretary 
     determines that the national goals have not been met in any 
     year following year five, she will make a report to Congress 
     outlining changes to the national program established in this 
     act that she believes must be undertaken to move the country 
     toward achievement of the national goals. The Secretary is 
     authorized to impose a surcharge on cigarette manufacturers 
     of $100 million per percentage point for each of the first 
     five percentage points by which the goal is not met; the 
     surcharge will be $200 million for each of the next five 
     percentage points by which the goal is not met, and $300 
     million per percentage point for the amount that the goal is 
     not met by eleven or more percentage points. In the case of 
     smokeless tobacco products, which represent one-seventh of 
     youth use of tobacco products, the potential lookback 
     penalties will be $15 million per applicable percentage point 
     for each of the first five points by which the goal is not 
     met. The potential surcharge that could apply would be $30 
     million and $45 million for the next two five percentage 
     point increments, respectively.
       Five years after the surcharge provisions are applicable 
     (the eleventh year after passage), the surcharge payments 
     will be increased. For cigarettes, the surcharge payment will 
     be $250 million for each of the first five percentage points 
     that the goal is not met and $500 million for each additional 
     percentage point by which the goal is not met. (E.g., If 
     cigarette usage failed to meet the applicable target by 6 
     percentage points, in year 6 the surcharge assessment is $700 
     million, and in year 11 is $1.75 billion.) For smokeless 
     tobacco products, the corresponding surcharge amounts will be 
     $30 million and $60 million, respectively. This section 
     provides an annual cap on surcharge payments for cigarettes 
     of $5 billion for the first five years in which the 
     surcharges apply under the Act (the sixth year after passage) 
     and $10 billion thereafter. For smokeless tobacco products, 
     the analogous caps are, $500 million and $1 billion, 
     respectively.
       Any surcharge imposed under this section is the joint and 
     several obligation of all participating manufacturers 
     (subject to the abatement provisions contained in section 

[[Page S12588]]

     316) as allocated by the market share of each 
     manufacturer. Any funds generated under this section will 
     be available to the Trust Fund.
       Section 316. ABATEMENT PROCEDURES. A manufacturer who 
     becomes subject to any surcharge that might be imposed under 
     section 315 must first pay the surcharge, and then may 
     petition the Secretary for abatement of the surcharge. The 
     Secretary is required to hold a hearing on the abatement 
     petition, during which the burden will be on the 
     participating manufacturer to prove by a preponderance of the 
     evidence that the manufacturer should be granted the 
     abatement. The Secretary will make her decision based on 
     criteria described in this section. She may abate all or part 
     of the surcharge, but this is totally at her discretion. 
     Judicial review of the Secretary's decision may be sought.
       Section 317. INCENTIVES FOR EXCEEDING THE NATIONAL TOBACCO 
     PRODUCTS USE REDUCTION GOALS. In any year, including the 
     first five program years, that the ultimate national tobacco 
     product use reduction goals are exceeded (a 60% reduction for 
     cigarettes and a 45% reduction for smokeless tobacco 
     products, tobacco manufacturers will be assessed reduced 
     payments. This section provides that for payments related to 
     cigarettes, for each percentage point by which the 60% 
     reduction goal has been exceeded payments will be reduced by 
     a factor of \1/80\ per percentage point. (E.g., if cigarette 
     use dropped by 80% from the base year in a given year, the 
     payment would be reduced by 20/80th's, or 25%). The 
     corresponding factor for smokeless tobacco products is 1/110 
     per percentage point that the 45% goal is exceeded.


       TITLE IV--HEALTH AND SAFETY REGULATION OF TOBACCO PRODUCTS

                     Subtitle A--General Authority

       Section 401. Amendments to Definitions Contained in the 
     Federal Food, Drug, and Cosmetic Act. This title grants clear 
     jurisdiction over tobacco products and establishes the 
     framework for the Secretary of Health and Human Service, 
     acting through the Food and Drug Administration, to oversee a 
     new comprehensive regulatory system for tobacco products. 
     ``Tobacco product'' and other relevant terms are defined for 
     the first time in the FDA's basic regulatory statute, the 
     Federal Food, Drug, and Cosmetic Act. This section adds two 
     important new prohibited acts to the FD&C statute that make 
     it illegal to manufacture and market tobacco products that do 
     not comply with the new Tobacco Products chapter, Chapter IX. 
     The bill amends the definition of ``drug'' to give FDA 
     authority to regulate tobacco products as unapproved drugs if 
     they do not comply with new Chapter IX. No change is made in 
     the definition of ``medical device'' and this bill does not 
     contemplate that tobacco products shall be regulated as 
     restricted medical devices.
       Adds a new Chapter IX to the Federal Food, Drug and 
     Cosmetic Act, which will be entitled ``Health and Safety 
     Regulatory Requirements Relating to Tobacco Products. It will 
     contain the following new sections.
       Section 900. Definitions. Definitions of the term 
     ``cigarette,'' ``cigarette tobacco,'' ``nicotine,'' 
     ``smokeless tobacco,'' ``tar,'' ``tobacco additive,'' and 
     ``tobacco product'' will be added to the FD&C Act.
       Sec. 901. Statement of General Duties. The Secretary of HHS 
     is directed to undertake a number of regulatory activities, 
     detailed in section 902 through section 908, in furtherance 
     of the comprehensive health promotion and disease prevention 
     program that the PROTECT Act establishes for tobacco 
     products.
       Sec. 902. Tobacco Product Health Risk Management Standards. 
     This section directs the Secretary to issue regulations, 
     through routine notice and comment rulemaking procedures and 
     in consultation with public health experts, that establish 
     rigorous controls over the composition of tobacco products. 
     These regulations will include provisions relating both to 
     the protection of confidential commercial information and for 
     the public disclosure of the ingredients of tobacco products.
       Such regulations will grant the Secretary the authority to 
     issue regulations to assess and manage the risks presented by 
     nicotine and reduce or eliminate constituents of tobacco 
     products, or to ban tobacco products after the Secretary 
     considers relevant factors. These factors include: reduction 
     of public health risks; capacity of the health care system to 
     provide effective and accessible treatments to current 
     consumers of tobacco products; the potential creation of a 
     significant market for contraband tobacco products; and, the 
     technological feasibility of manufacturers to modify existing 
     products. Secretarial actions to ban tobacco products will 
     require a joint resolution of approval from both chambers of 
     the United States Congress.
       Sec. 903. Good Manufacturing Practice Standards for Tobacco 
     Products. The Secretary shall issue regulations that specify 
     the good manufacturing practices (GMP) for tobacco products. 
     Such regulations will prescribe the methods used in, and the 
     facilities and management controls used for, the 
     manufacturing of tobacco products. The GMP regulations will 
     contain requirements for registration and inspection of the 
     tobacco product manufacturing establishments.
       The GMP regulations promulgated by the Secretary shall 
     contain provisions relating to pesticide residue levels and 
     will provide for an advisory committee to recommend to the 
     Secretary whether to approve, consistent with the 
     public health, petitions for variances to the established 
     residue level standards. The GMP requirements established 
     by the Secretary shall include record keeping and 
     reporting standards for tobacco products.
       Sec. 904. Tobacco Product Labeling, Warning, and Packaging 
     Standards. Section 904 stipulates new warning statements for 
     both cigarettes and smokeless tobacco products. Section 904 
     provides format and type-size requirements and stipulates 
     rotation schedules for tobacco product labels. Section 904 
     grants the Secretary the authority to issue regulations to 
     revise tobacco product labeling statements and exempts 
     tobacco product exports from these labeling requirements.
       Sec. 905. Reduced Risk Tobacco Products. This section 
     requires the Secretary to issue regulations that create 
     incentives for the development and commercial distribution of 
     reduced risks tobacco products. Under section 905 
     manufacturers of new technologies that reduce the negative 
     health effects of using tobacco products notify, in 
     confidence, the Secretary of such technology. Upon a 
     determination that an innovation reduces the health risks of 
     tobacco products and is technologically feasible, the 
     Secretary may require that such risk reduction innovations be 
     incorporated, through a licensing program, into other tobacco 
     products.
       Section 906. Tobacco Product Marketing Restrictions. 
     Section 906 prohibits the sale of tobacco products to persons 
     under 18 years of age and generally requires retailers to 
     conduct sales in a face-to-face manner and to verify the age 
     of tobacco purchasers. Under this section, cigarettes must be 
     sold in packages with no fewer than twenty cigarettes; no 
     free samples may be distributed; the vending machine sales 
     must be eliminated except in certain limited adult 
     facilities; and mail order sales must be accompanied by age 
     verification procedures.
       Section 907. Tobacco Products Scientific Advisory 
     Committee. This requires the Secretary to establish a Tobacco 
     Products Scientific Review Committee to assist in the 
     development and in an on-going assessment of the 
     effectiveness of the tobacco product health risk management 
     standards required by section 902, the tobacco product good 
     manufacturing standards required by section 903, the tobacco 
     product labeling, warning, and packaging standards required 
     by section 904, the reduced risk tobacco product provisions 
     of section 905, and the tobacco product marketing 
     restrictions required by section 906. This committee will 
     primarily consist of experts in science, medicine, and public 
     health but will also include experts in law and ethics and 
     include representatives of both pro-, and anti- tobacco use 
     groups.
       Section 908. Report to Congress. Section 908 requires the 
     Secretary to report to Congress biennially on the 
     effectiveness of new Chapter IX and the other relevant 
     provisions of the PROTECT Act, and other relevant laws and 
     policies that relate to the nation's effort to reduce use of, 
     and the health risks associated with, tobacco products. Such 
     report will contain information on current use patterns and 
     health effects of tobacco products with a particular emphasis 
     on use of these products by those under 18 years of age. The 
     Secretary shall also report to the Congress on recommended 
     changes in legislation that will increase the effectiveness.
       Section 909. Judicial Review Standards. This new section 
     makes clear that in any judicial proceeding involving the 
     regulations issued under Chapter IX, the courts will use 
     procedures, apply standards of review, and grant the degree 
     of deference that it normally accords the Secretary under the 
     Federal Food, Drug, and Cosmetic Act.
       Section 910. Preemption. This section permits state and 
     local governments to enact requirements with respect to 
     tobacco products so long as the state or local requirement 
     does not conflict with a requirement of section 902, 903, 
     904, or 905.
       Section 402. Repeals. This section repeals the Federal 
     Cigarette Labeling and Advertising Act and the Comprehensive 
     Smokeless Tobacco Health Education Act.


         TITLE V--PAYMENTS TO STATES AND PUBLIC HEALTH PROGRAMS

                     Subtitle A--Payments to States

       Section 501. Reimbursement for State Expenditures. The 
     Trustees will make available to the states one-half of the 
     Trust Fund amounts each year (after payments have been 
     allocated for tobacco farmers, Native Americans, and certain 
     combined asbestos/tobacco plaintiffs), apportioned state-by-
     state according to a table listed in the Act which is based 
     on the State Attorney Generals' agreement. The funds will be 
     utilized by the States under two sets of conditions. 
     Utilizing the Medicaid matching percentage rates, the portion 
     of the funds which would have been attributable to the state 
     matching share shall be used by the State for any purpose it 
     deems appropriate. Federal subrogation is waived, and the 
     amount that otherwise would have been returned to the Federal 
     government will be retained by the State, but may only be 
     used for certain specified anti-tobacco-related purposes as 
     outlined in section 502.
       Section 502. Requirements for States' Use of Certain Funds. 
     As a condition of receiving funds which otherwise would have 
     been returned to the Federal government, a state must submit 
     to the Trustees a plan that describes the anti-tobacco 
     programs for which the funds will be used, the measurable 
     objectives that will be used to evaluate the program outcome, 
     the procedures which will be

[[Page S12589]]

     used for outreach, and efforts which are made to 
     coordinate the new programs with existing Federal and 
     State programs. The state must also collect necessary data 
     and maintain records to allow the Trustees to evaluate the 
     plan and its effectiveness. State plans and amendments 
     thereto are deemed to be approved unless disapproved by 
     the Trustee within 90 days of submission. Each year, the 
     State must provide the Trustees with an assessment of the 
     plan, including the effectiveness of the plan in reducing 
     the number of children and adults who use tobacco 
     products. In addition, the Trustees will provide an annual 
     report on operations of the plan.
       In order to retain the otherwise-Federal share, States must 
     use the funds for anti-tobacco programs in coordination with 
     existing Federal public health and social services programs, 
     including child nutrition programs, maternal and child 
     health, the State Children's Health Insurance Program, Head 
     Start, school lunch, Indian Health Service, Community Health 
     Centers, Ryan White, and social services block grant. States 
     may also use these funds for smoking cessation programs that 
     reimburse for medications or other therapeutic techniques, 
     and anti-tobacco products public education programs, 
     including counter-advertising campaigns.


                   Subtitle B--Public Health Programs

       Section 521. National Institutes of Health Trust Fund for 
     Health Research. A National Institutes of Health Trust Fund 
     for Health Research is established which reflects the 
     settlement of punitive damages for past reprehensible 
     behavior of the tobacco industry. This punitive damages fund 
     will be funded from the National Settlement Trust Fund, and 
     overall funding will amount to $95 billion over the first 25 
     years. In year 5 and thereafter, a total of $4 billion 
     annually will be available under this section, subject to any 
     required adjustments due to inflation, sales volume 
     adjustments, and look-back penalties.
       Section 521(e) requires the Director of the National 
     Institutes of Health, in consultation with leading experts, 
     to devise a National Tobacco and Other Abused Sustances 
     Research Agenda. Funds provided under this section are 
     expended as follows: NIH Director's Discretionary Fund, 2%; 
     Research Facilities, 2%; health information communications, 
     1%; national cancer research and demonstration centers under 
     section 414 of the Public Health Service Act, 10%; and, the 
     remaining 85% shall be allocated to the established 
     Institutes, Centers, and Divisions of NIH in the same 
     proportion as the annual appropriations bill for NIH. 
     Eligible research are stipulated in section 521(d)(2) and 
     include diseases associated with tobacco use including 
     cancer, cardiovascular diseases, and stroke.
       Section 522. National Anti-Tobacco Product Consumption and 
     Tobacco Product Cessation Public Health Program. Under this 
     section, with the funds specified in section 101(c)(3)(C) of 
     Title I of this Act, the Secretary shall establish and 
     implement a national anti-tobacco product consumption and 
     tobacco product cessation program. This program will be 
     coordinated by the Office of Smoking and Health of the 
     Centers for Disease Control and Prevention. In year 6 and 
     thereafter, a total of $4 billion annually will be available 
     under this section, subject to any required adjustments due 
     to inflation, sales volume adjustments, and look-back 
     penalties.
       The Secretary may use funds under this section to offset 
     HHS' administrative costs in carrying out the public health 
     components of the PROTECT Act, including the additional costs 
     attributable to the new regulatory responsibilities placed on 
     the Food and Drug Administration under this Act. In carrying 
     out this section, the Secretary may act under the general 
     authorities provided under section 301 of the Public Health 
     Service Act. In carrying out this program the Secretary must 
     act in concert with state and local public health officials 
     and non-governmental organizations and will consider, as 
     appropriate, the public health recommendations made by the 
     Castano class action plaintiffs.
       This section requires the Secretary to undertake a 
     substantial public education program, including the 
     development and dissemination of materials that alert, in the 
     most appropriate and effective fashion, the public to the 
     risks of tobacco use, with a special emphasis on materials 
     and techniques that are targeted to young Americans. The 
     Secretary is also directed to make a special effort to inform 
     current adult users of tobacco products of the health 
     benefits of ceasing use of these products. Among the public 
     education and information techniques authorized by this 
     section is a publicly financed nationally directed counter-
     advertising campaign. The Secretary is also directed to 
     develop and make available a model state anti-tobacco use and 
     tobacco cessation program.
       Section 522 directs the Secretary to make available at 
     least one half the funds available under this section through 
     section 101(c)(3)(C) to states in the form of vountary anti-
     tobacco use and tobacco cessation program block grants. 
     Eligible activities for this block grant will be the same as 
     those specified under 502(e). To the extent possible, the 
     Secretary will harmonize the program management requirements 
     under sections 502 and 522. The formula for the block grant 
     will be devised by the Secretary but shall include such 
     relevant factors as the number of children residing in each 
     participating state.


  TITLE VI - STANDARDS TO REDUCE INVOLUNTARY EXPOSURE TO TOBACCO SMOKE

       Section 601. DEFINITIONS. Defines pertinent terms used in 
     this section.
       Section 602. SMOKE-FREE ENVIRONMENT POLICY. Requires a 
     public facility to implement a smoke-free environment policy, 
     which prohibits tobacco use within the facility and on 
     facility property within the immediate vicinity of the 
     facility's entrance. Requires the policy to be posted in a 
     clear and prominent manner. Exceptions are granted to 
     facilities which meets the requirements of a Specially 
     Designated Smoking Area. No exception would be granted for 
     restaurants, prisons, and congressional office buildings 
     and the Capitol Building. There are special rules for 
     schools and other facilities serving children.
       Section 603. PREEMPTION. Precludes preemption of any other 
     Federal, State, or local law in this area.
       Section 604. REGULATIONS. Sets a 6-month period to 
     promulgate the title's regulations.
       Section 605. EFFECTIVE DATE. Sets an effective date of 6 
     months after the date the rules are promulgated, or 1 year 
     after date of Act's enactment, whichever is later.


            TITLE VII--PUBLIC DISCLOSURE OF HEALTH RESEARCH

       Section 701. PURPOSE. Sets the purpose of this title to 
     disclose previously nonpublic or confidential documents by 
     tobacco product manufacturers.
       Section 702. NATIONAL TOBACCO DOCUMENT DEPOSITORY. 
     Establishes a National Tobacco Document Depository which will 
     be used as a resource for litigants, public health groups, 
     and other interested parties and which will contain documents 
     described in the statute. The section also creates a Tobacco 
     Documents Dispute Resolution Panel, to be composed of 3 
     Federal Judges appointed by the Congress, and outlines the 
     Panel's structure, including its basis for determining a 
     dispute, its final decision rule, and its assessment of fees 
     policy. Provides for the Panel to establish a procedure for 
     accelerated review and for a Special Masters.
       Section 703. ENFORCEMENT. Allows the Attorney General to 
     bring a proceeding before the Tobacco Documents Dispute 
     Resolution Panel with appropriate notice requirements and 
     civil penalty levels.


             TITLE VIII--AGRICULTURAL TRANSITION PROVISIONS

       Section 801. SHORT TITLE: ``Tobacco Transition Act.''
       Section 802. PURPOSES. Terminates the federal tobacco 
     program while making compensation to quota owners and tobacco 
     farmers. Provides economic assistance to affected counties 
     through block grants to affected states.
       Section 803. DEFINITIONS. Defines pertinent terms used in 
     Title VIII.


               Subtitle A--Tobacco Production Transition

                CHAPTER 1--TOBACCO TRANSITION CONTRACTS

       Section 811. TOBACCO TRANSITION ACCOUNT. Establishes the 
     Tobacco Transition Account within the Trust Fund. Through 
     this account, compensation will be made to quota owners and 
     tobacco farmers. Economic assistance block grants to affected 
     states will also be provided through the Transition Account.
       Section 812. OFFER AND TERMS OF TOBACCO TRANSITION 
     CONTRACTS. The Secretary of Agriculture shall offer to buy 
     tobacco quotas from owners through a three-year payment 
     period. All restrictions on the production and marketing of 
     tobacco will be lifted in 1998, ending the tobacco quota 
     program.
       Section 813. ELEMENTS OF CONTRACTS. Within 90 days of 
     enactment of this legislation, the Secretary to offer 
     contracts to quota owners until June 31, 1999. Buyout 
     payments and transition payments shall start at the beginning 
     of the 1999 marketing year and end at the end of the 2001 
     marketing year.
       Section 814. BUYOUT PAYMENTS TO OWNERS. During the three-
     year phaseout period, buyout payments will be made to quota 
     owners as a compensation for the lost value they experience 
     associated with the ending of the quota program. The payments 
     will be determined by multiplying $8.00 by the average annual 
     quantity of quota owned during the 1995-1997 crop years.
       Section 815. TRANSITION PAYMENTS TO PRODUCERS. Provides 
     assistance to farmers who do not own quotas but who leased 
     from quota owners during three of the last four years. 
     Transition payments only apply to the leased portion of the 
     recipient's crop and will constitute a compensation to the 
     producer for lost revenue caused by this act. The payments 
     shall be determined by multiplying 40 cents by the average 
     quantity of tobacco produced during the three years of the 
     transition period.
       Section 816. TOBACCO WORKER TRANSITION PROGRAM. Establishes 
     a retraining program for displaced tobacco workers involved 
     in the manufacture, processing or warehousing of tobacco or 
     tobacco products. Patterned after the NAFTA Trade Adjustment 
     Assistance program, the Governor and then the Secretary of 
     Labor shall determine a group's eligibility for the program. 
     The total amount of payments for the Tobacco Worker 
     Transition Program is capped at $50,000,000 for any fiscal 
     year, and after ten years the program will be terminated. Any 
     individual receiving tobacco quota buyout payments are 
     ineligible for this program.

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       Section 817. FARMER OPPORTUNITY GRANTS. Amends the Higher 
     Education Act of 1965 to establish a grant payment for 
     tobacco farmers and their families to pay for higher 
     education. Grants will be made in the amount of $1,700 per 
     year, rising to $2,900 annually by 2019. Academic eligibility 
     requirements will mirror the standards regulating Pell 
     Grants. Receipt of a Farmer Opportunity Grant will not affect 
     a student's eligibility to receive other income-based 
     assistance.


           CHAPTER 2--RURAL ECONOMIC ASSISTANCE BLOCK GRANTS

       Section 821. Rural Economic Assistance Block Grants. For 
     each of the three years of the transition period, 1999 
     through 2001, the Secretary shall provide block grants to 
     tobacco growing states to assist areas that are largely 
     dependent on tobacco production. The grants will total $100 
     million for each of the three years, with a total cost of 
     $300 million. The amount of each state's block grant will be 
     based on (1) the number of counties within the state 
     dependent on tobacco production and (2) the extent to which 
     the counties are dependent on tobacco production. The 
     Governor shall use a similar formula to apportion the state's 
     grant to the counties. Use of the grants by the counties 
     shall be approved by the Governor.


  Subtitle B--Tobacco Price Support and Production Adjustment Programs

                CHAPTER 1--TOBACCO PRICE SUPPORT PROGRAM

       Section 831. INTERIM REFORM OF TOBACCO PRICE SUPPORT 
     PROGRAM. Amends Section 106 of the Agricultural Act of 1949 
     to phase out the tobacco price support program over the four 
     years following the enactment of this act. In 1999, the price 
     supports will decline by 25% and then by 10% in 2000 and in 
     2001, after which the price support program will be 
     terminated.
       Section 832. TERMINATION OF TOBACCO PRICE SUPPORT PROGRAM. 
     Amends Section 101 of the Agricultural Act of 1949 to repeal 
     the tobacco price support program after 2001.


           CHAPTER 2--TOBACCO PRODUCTION ADJUSTMENT PROGRAMS

       Section 835. TERMINATION OF TOBACCO PRODUCTION ADJUSTMENT 
     PROGRAMS. Amends the Agricultural Adjustment Act of 1938 to 
     exclude tobacco from the provisions of the Act, effectively 
     ending the Tobacco Production Adjustment Program.


                          Subtitle C--Funding

       Section 841. TRUST FUND. Provides for the transfer of funds 
     from Tobacco Transition Account (in the Trust Fund) to the 
     Commodity Credit Corporation (CCC).
       Section 842. COMMODITY CREDIT CORPORATION. Allows the 
     Secretary to use the CCC in carrying out the provisions of 
     this title.


                   TITLE IX--MISCELLANEOUS PROVISIONS

       Section 901. PROVISIONS RELATING TO NATIVE AMERICANS. 
     Provides that the requirements of this Act relating to the 
     manufacturer, distribution and sale of tobacco products will 
     apply on Indian lands as defined in section 1151 of title 18 
     of the U.S. Code. Any federal tax or fee imposed on the 
     manufacture, distribution or sale of tobacco products will be 
     paid by any Indian tribe engaged in such activities, or by 
     persons engaged in such activities on such Indian lands, to 
     the same extent such tax applies to other entities.
       The Secretary, in consultation with the Secretary of the 
     Interior, is authorized to treat Indian tribes as a state for 
     purposes of this Act. The Secretary is authorized to provide 
     any such tribe grant assistance to carry out the licensing 
     and enforcement functions in accordance with a plan submitted 
     and approved by the Secretary as in compliance with the Act.
       A participating tobacco manufacturer shall not engage in 
     any activity within Indian country that is prohibited under 
     the Protocol. A state may not impose obligations or 
     requirements relating to the application of this Act to 
     Indian tribes and organizations.
       Recognizing that tobacco use remains a significant risk 
     factor for Indians and that cigarette smoking is more than 
     twofold for Indian men and more than fourfold for Indian 
     women over non-Indians, a supplemental fund is established 
     for the Indian Health Service to raise the health status of 
     Indians. The fund is established at $5 billion to be allotted 
     to IHS at increments of $200 million annually for 25 years.
       Section 902. WHISTLEBLOWER PROTECTIONS. A tobacco 
     manufacturer or distributor may not retaliate against an 
     employee for disclosing a substantial violation of law 
     related to this Act to the Secretary, the Department of 
     Justice, or any State or local authority. Said employee may 
     file a civil action in federal court if he believes such 
     retaliation has occurred (within two years of the 
     retaliation). The court may order reinstatement of the 
     employee, order compensatory damages, or other appropriate 
     remedies. Employees who deliberately participate in the 
     violation or knowingly provide false information are excluded 
     from this section.
       Section 903. LIMITED ANTITRUST EXEMPTION. Federal and state 
     antitrust laws shall not apply to certain actions by 
     manufacturers, which are taken pursuant to this Act, 
     including entering into the Protocol or consent decree, 
     refusing to deal with non-complying distributors, or other 
     actions meant to comply with plans or programs to reduce the 
     use of tobacco by children. In order for the exemption to 
     apply, such plans or programs must be approved by the 
     Attorney General pursuant to a process set forth in this 
     section.
       Section 904. EFFECTIVE DATE. The effective date will be the 
     date of enactment.
                                 ______