[Congressional Record Volume 144, Number 39 (Tuesday, March 31, 1998)]
[Senate]
[Pages S2854-S2858]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. HARKIN (for himself, Mr. Chafee, and Mr. Graham):
  S. 1889. A bill to reduce tobacco use by children and others through 
an increase in the cost of tobacco products, the imposition of 
advertising and marketing limitations, assuring appropriate tobacco 
industry oversight, expanding the availability of tobacco use cessation 
programs, and implementing a strong public health prevention and 
education strategy that involves the private sector, schools, States, 
and local communities; read the first time.


           the kids deserve freedom from tobacco act of 1998

  Mr. HARKIN. Mr. President, today I am joined by my colleagues 
Senators John Chafee, Bob Graham in introducing the first bipartisan 
comprehensive proposal to cut youth smoking--The Kids Deserve Freedom 
From Tobacco Act, or simply, The KIDS Act. Today marks the turning 
point in the drive for tobacco reform this year.

  Before I go further, I want to thank my partners in this effort, John 
Chafee and Bob Graham. They are real heroes in the fight to save kids 
from tobacco. They've taken significant risks in joining this effort. 
And they have done a terrific job in putting our proposal together. 
This has truly been a bipartisan team effort.
  I also want thank the leaders of the public health community who have 
joined us to support our efforts. They will play a critical role in 
shaping the course of this historic tobacco reform effort in the coming 
months. And their support is vital to the success of The KIDS Act. 
Finally, I want to thank Dr. C. Everett Koop and Dr. David Kessler, for 
their help and counsel to us in crafting our proposal.
  We are introducing this bill because we face a public health crisis 
affecting our children. 3,000 kids start smoking every day and fully 
1,000 of them will die prematurely because of it. That's the equivalent 
of 3 jumbo jets packed with kids crashing every day. 400,000 Americans 
die every year of tobacco related illness at a cost of over $50 
billion. And the tobacco industry has been engaged in a systematic 
campaign of distortion and deceit to hook kids and hide the facts from 
the American people.
  Tobacco reform is the issue of 1998. It is the crown jewel of this 
Congress. And passing a tobacco bill like the KIDS Act is a once and a 
lifetime opportunity. Unfortunately, though, the tobacco debate so far 
has been largely partisan. That's why we've joined arms across party 
lines behind the KIDS Act. We hope and believe that the introduction of 
our bipartisan bill will change the debate and significantly increase 
the odds that reforms will be made.
  The KIDS Act would cut tobacco use by kids in half over the next 
three years through aggressive and comprehensive reforms. That's the 
sharpest and fastest reduction achieved by any bill proposed to date. 
Our goal is to cut it by at least 65 percent shortly after that. The 
Food and Drug Administration has found that reducing the use of tobacco 
by children by 50 percent could prevent well over 60,000 premature 
deaths every year, and will save up to $43 billion annually in reduced 
medical costs and improved productivity.
  Now is not the time for anything but the strongest, most effective 
bill possible.
  Experts agree that a substantial price hike over a very short period 
of time is key to changing teen smoking behavior. If left unchanged, 
the Commerce Committee draft bill, which spreads a $1.10 price increase 
over 5 years will do little to impact teen smoking. In contrast, the 
KIDS Act increases the price by $1.50 in just two years, achieving a 
50% reduction in just three years. That's the bottom line and anything 
less is just smoke and mirrors.
  In addition, our bill gets tough on the individual companies that 
addict the most kids by imposing tough penalties if the company doesn't 
meet teen smoking reduction targets. I'm very concerned that the 
Commerce Committee proposes no company-specific penalty. Without a 
profit-based deterrent, the penalty will just be passed through to 
consumers, giving companies no incentive to cut youth smoking.
  Finally, our bill caps the annual liability of the tobacco industry 
as part of a tough, comprehensive bill that dramatically reduces youth 
smoking. Without a tough public health bill, the annual liability cap 
is not acceptable.
  As Drs. Koop and Kessler say in their letter, our bill is ``tough 
medicine for a tough problem.'' Our proposal sends a simple message to 
the tobacco industry: Keep away from our kids. Our plan will be a very, 
very bitter pill for the industry. And no doubt they will criticize us. 
But in the end, I believe they are going to have to swallow it.
  Creating a more sensible policy toward tobacco has been a goal of 
mine for many years. It was in 1977, over 21

[[Page S2855]]

years ago, that I first introduced legislation calling for repeal of 
the tax deductibility of tobacco advertising and marketing.
  Unfortunately, victories in the tobacco wars have come few and far 
between. In 1988, we finally changed federal law on smoking in 
airplanes. It was a full ten years later, and after failing one time, 
the Senate took its next step last September by passing the Harkin-
Chafee plan to fully fund enforcement of the FDA youth ID check.
  But I am more hopeful now than ever that we can pass a comprehensive 
plan that would once and for all change how this nation deals with 
tobacco and dramatically cut the number of our kids addicted to this 
deadly product. Mr. President, our goal is to be on the Senate floor 
three years from now announcing that indeed, child smoking has been cut 
in half. We're going to put all our energies into making that happen.
  We urge our colleagues to review our proposal and join us in 
sponsoring it. We look forward to working with all our colleagues on a 
bicameral, bipartisan basis to make good on the historic opportunity we 
have this year.
  Mr. President, I ask unanimous consent that a summary of the KIDS 
Act, letters of endorsement of our bill and copies of several 
editorials in support our the KIDS Act be included in the Record.
  There being no objection, the items were ordered to be printed in the 
Record, as follows:

     Kid Deserve Freedom From Tobacco Act of 1998 ``The KIDS Act''

     Principles
       Congress has an historic opportunity to enact legislation 
     this year which will significantly reduce tobacco use--
     especially among children. Nearly one in five deaths in 
     America today is attributable to tobacco use, making it the 
     single most preventable cause of premature death, disease and 
     disability facing this country. These facts compel us to act 
     now. However, to ensure the most effective result, 
     legislation must embody the following principles:
       It must be bipartisan and comprehensive--not piecemeal--to 
     ensure a fundamental and lasting change in the way tobacco 
     products are marketed and sold in this country.
       It must attack the youth smoking epidemic as rapidly as 
     possible by forcing the price of cigarettes to increase by 
     $1.50 per pack within the first two years, and providing for 
     comparable increases in other tobacco products.
       It must preserve the rights of individuals and groups to 
     sue tobacco manufacturers for the damages they have caused, 
     while at the same time establishing a framework to ensure 
     that funds are available to cover awards and settlements 
     secured by successful claimants.
       It must provide incentives to states, local communities, 
     schools, research institutions, health professionals and 
     other stakeholders to develop innovative strategies to 
     discourage youth smoking, and to assist adult smokers in 
     kicking the habit.
       It must have as its primary purpose the promotion of 
     aggressive anti-tobacco initiatives and public health 
     improvements, including the provision of significant new 
     resources for medical research.
     Summary
       The Kids Deserve Freedom From Tobacco Act of 1998 (``The 
     KIDS Act'') significantly improves upon and strengthens the 
     June 1997 Attorneys General Tobacco Settlement Agreement 
     (``June 1997 Tobacco Agreement''). The legislation would 
     substantially reduce youth tobacco use through a 
     comprehensive set of policy changes. These include increasing 
     the cost of tobacco products, curtailing advertising and 
     marketing to children, assuring appropriate industry 
     oversight, expanding the availability of smoking cessation 
     programs, and implementing a strong public health prevention 
     and education strategy involving the private sector, schools, 
     states and local communities.


                         i. economic incentives

       Price Increase. Public health experts agree that the single 
     most important component of a comprehensive plan to reduce 
     youth tobacco use is to significantly increase the price of 
     tobacco products over a short period of time. A gradual 
     increase, phased in over 5 or more years, will not 
     significantly reduce teen tobacco use. Therefore, our 
     proposal would increase the price of a pack of cigarettes by 
     $1.50 within two years ($1.00 the first year; $0.50 the 
     second year). The price of other tobacco products with 
     significant market shares would be increased by a comparable 
     amount. These increases would be achieved through annual 
     industry payments totaling $20 billion the first year and $25 
     billion per year thereafter (indexed to inflation).
       Annual Youth Reduction Targets. There is clear and abundant 
     evidence that the tobacco industry has tailored its marketing 
     and advertising programs to attract and encourage children to 
     smoke. Largely because of the industry's success in this 
     regard, 3,000 children start smoking every day in America. 
     Accordingly, the KIDS Act would make the tobacco industry 
     accountable for promoting and achieving a significant 
     reduction in tobacco use among children. Our proposal would 
     set an ambitious, but realistic schedule for reducing the 
     rate of youth smoking by 65 percent over the next ten years.
       The schedule would follow the recommendations of the Final 
     Report of the Advisory Committee on Tobacco Policy and Public 
     Health, chaired by Dr. C. Everett Koop and Dr. David Kessler. 
     The following targets would be set:


                                                   Percent of reduction
Year:
    2................................................................15
    3................................................................20
    4................................................................25
    5................................................................30
    6................................................................40
    7................................................................50
    8................................................................55
    9................................................................60
    10...............................................................65
    Beyond...........................................................65

(youth prevalence measured by monthly use)

       Tough Look-back Penalties. The KIDS Act would impose up to 
     an additional $10 billion per year in non tax-deductible 
     penalties (indexed to inflation) on the tobacco industry for 
     failure to meet these targets. First, and most importantly, 
     company-specific penalties would be imposed to prevent 
     individual manufacturers from achieving any financial reward 
     from addicting children to their products. Second, industry-
     wide penalties would be assessed for failure to meet the 
     above targets. Finally, unlike the June 1997 Tobacco 
     Agreement, the KIDS Act would provide no abatement or rebate 
     relief to tobacco companies.
       Company-specific Penalties: The KIDS Act would impose the 
     strongest possible incentives for individual tobacco 
     companies to stop recruiting and addicting children. It sets 
     up a system of tough and escalating penalties for those 
     companies that miss youth reduction targets. This is crucial 
     because, unlike industry-wide penalties which can be passed 
     on to consumers equally by all companies without affecting 
     market share, company-specific penalties directly tie company 
     profits to reducing teen smoking.
       Under the KIDS Act, for each percentage point a company 
     misses between 0 and 10 percent, a penalty of 1 cent per pack 
     is imposed. The penalty doubles for each percentage point 
     missed between 11 and 20 percent and triples for each 
     percentage point missed over 21 percent. For those companies 
     that miss the targets by 20 percent or more for 3 consecutive 
     years, this portion of the penalty is doubled to 6 cents per 
     pack.
       Industry-wide Penalties: The KIDS Act imposes a similarly 
     tough penalty structure industry-wide if it fails to meet the 
     youth reduction targets. In addition, if the industry fails 
     to meet the targets for 3 consecutive years, the penalties 
     are doubled.
       No Anti-trust Immunity. Anti-trust laws are the most 
     important safeguard we have against anti-competitive actions 
     which hurt consumers and undermine the free market. As such, 
     exceptions to these laws should be made only in rare 
     circumstances, where important policy objectives outweigh the 
     benefit of free market protections. The tobacco industry has 
     not made a persuasive case for the grant of immunity it 
     seeks. Therefore, unlike the June 1997 Tobacco Agreement, the 
     KIDS Act would not extend any anti-trust exemptions to 
     tobacco manufacturers.
       State Performance Bonus Pool. The June 1997 Tobacco 
     Agreement and pending legislative initiatives fail to provide 
     strong economic incentives for states and communities to help 
     decrease tobacco use among children. The KIDS Act would 
     address this shortcoming by establishing a $500 million 
     annual ``Performance Bonus Pool'' for states that meet or 
     exceed the reduction targets within their own borders.
       This would serve as an important incentive for states and 
     localities to develop aggressive and innovative anti-smoking 
     strategies suited to their own individual needs. State-
     specific baselines and targets would be developed using a 
     standardized methodology determined by the Centers for 
     Disease Control and Prevention. Furthermore, the KIDS Act 
     would clarify the authority of states and local governments 
     to encourage the enactment of stronger anti-tobacco policies.


               II. changing how tobacco products are sold

       Marketing and Advertising Reforms. The tobacco industry 
     spends an estimated $5 billion per year on marketing and 
     promotional activities--much of it targeted to children. The 
     KIDS Act would fundamentally alter tobacco marketing and 
     advertising practices to eliminate this reprehensible 
     practice.
       Health Warning Labeling Reforms. Evidence suggests that the 
     current warning label regime for tobacco product packaging 
     fails to adequately convey to children the risks associated 
     with tobacco use. For example, nearly half of the 8th graders 
     in a 1993 study denied any great risk associated with pack-a-
     day smoking, despite the presence of health warnings on 
     cigarette packaging. Moreover, consumer research indicates 
     that alterations in format, composition and warning label 
     content would make them far more effective in reaching 
     children. Thus, the KIDS Act proposes to significantly 
     strengthen warning labels on all tobacco products to improve 
     their impact on the behavior of children. These messages 
     would be regularly reviewed and updated by the Secretary of 
     Health and Human Services to reflect

[[Page S2856]]

     changes in public awareness and attitudes about tobacco use.
       Minors' Access Reforms. Illegal sales to minors and 
     shoplifting are the primary means by which children obtain 
     tobacco products. An estimated 516 million packs of 
     cigarettes per year are consumed by minors, of which at least 
     half are obtained through direct, illegal sales to minors. 
     Shoplifting is another serious concern. In Iowa alone, more 
     than 4 million packs of cigarettes are shoplifted every year.
       The KIDS Act would address these problems by banning self-
     service displays in stores that sell tobacco products, 
     prohibiting vending machine sales in places children 
     frequent, requiring retailers to verify age, and fining those 
     vendors caught selling to children. In addition, the KIDS Act 
     would require states to conduct spot checks of tobacco 
     retailers to ensure compliance with minors' access 
     provisions. If a retailer repeatedly violates the law, it 
     could face suspension or revocation of their registration to 
     sell tobacco products. These reforms would build upon those 
     developed by the U.S. Food and Drug Administration (FDA), and 
     those contained in the June 1997 Tobacco Agreement.
       Importantly, the tobacco companies would be bound by 
     enforceable consent decrees precluding them from challenging 
     such restrictions in the courts, or providing any means of 
     support to third parties for this purpose.
       State Preemption. The KIDS Act would clarify the authority 
     of states and local governments to regulate the sale and use 
     of tobacco products by repealing the preemption clause in 
     existing federal law. However, it would preserve the national 
     requirement for uniform packaging and labeling standards to 
     ensure the free flow of interstate commerce.

          At-A-Glance: Changing How Tobacco Products Are Sold


                              advertising

       B&W text only (except in adult-only facilities and 
     publications).
       No human images or cartoon characters.\1\
---------------------------------------------------------------------------
     \1\ Contained in consent decrees.
---------------------------------------------------------------------------
       No outdoor advertising.\1\
       No advertising on the Internet.\1\
       No self-service displays.


                               marketing

       No ``trinkets & trash'' (caps, jackets, bags, etc.) or 
     proof-of-purchase clubs.
       No sponsorship of sporting events or other forms of 
     entertainment.
       No paid product placement in movies, TV shows, on Internet 
     or video games.\1\
       No free samples.


                                labeling

       Improved and updated warnings.
       Increased size.
       Rotating messages.
       Statements of intended use.
       Regularly reviewed and updated by HHS.


                             minors' access

       No distribution or sales to minors under age 18.
       Photo id required up to age 27.
       Face-to-face sales required.
       No single cigarettes sales.
       No vending machines sales (except in adult-only 
     facilities).
       No self-service sales (except in adult-only facilities).


                     iii. oversight and enforcement

       FDA Authority. Given the addictive, disease-causing nature 
     of tobacco products, full and appropriate regulation is 
     needed. Therefore, in addition to establishing new 
     advertising and marketing restrictions, the KIDS Act would 
     assure that FDA has the authority to effectively monitor and 
     regulate the manufacture and distribution of tobacco 
     products, promote the development of safer alternatives, and 
     to conduct research. For these purposes, the KIDS Act would 
     allocate $300 million over and above those provided in the 
     annual appropriations process. Importantly, FDA would not be 
     required to overcome special burdens or procedural hurdles in 
     its regulatory activities--a major flaw of the June 1997 
     Tobacco Agreement. The KIDS Act would classify ``nicotine'' 
     as a drug, and ``tobacco products'' as drug delivery 
     devices (to include cigars, pipes and loose tobacco). In 
     addition, our legislation would authorize FDA to implement 
     a ``public health'' standard in its review of tobacco 
     products.
       The FDA's authority over tobacco products would be no more 
     and no less than its authority over other drugs and devices. 
     However, because of the addictive nature of tobacco products, 
     and the high prevalence of their use, the KIDS Act would 
     specifically prohibit the FDA from banning the sale of 
     tobacco products to adults. Finally, the KIDS Act would 
     ensure that FDA has adequate financial resources and 
     appropriate access to tobacco industry documents to carry out 
     its responsibilities.
       Ingredient Disclosure. Evidence strongly suggests that 
     tobacco companies design and manufacture their products to 
     satisfy and enhance nicotine dependence. Therefore, increased 
     information about the role and function of tobacco additives 
     is essential to the effective regulation of such products. 
     The KIDS Act would substantially strengthen current 
     ingredient disclosure requirements for tobacco manufacturers. 
     For example, each company would be required, by brand and 
     content, to submit lists of all tobacco additives. Further, 
     if the Secretary of Health and Human Services determines that 
     any of these additives pose a particular risk to smokers or 
     others exposed to tobacco smoke, this information will be 
     fully and promptly disclosed to the public.
       Reduced Risk. Much remains unknown about the feasibility 
     and effectiveness of developing a less hazardous tobacco 
     product. However, it is clear that tobacco manufacturers have 
     the ability and knowledge to modify their products. Indeed, 
     various forms of ``reduced risk'' nicotine delivery devices 
     already have been introduced into the market. The KIDS Act 
     would require tobacco companies to come forward with 
     information in their possession about reduced risk products, 
     and provide increased monitoring of new technologies. It 
     would also stop tobacco companies from making misleading 
     claims about these products.
       Licensing. There are approximately one million tobacco 
     outlets in the United States, and as recently as 1994, nearly 
     three-fourths sold tobacco products to minors. These include 
     supermarkets, newsstands, hotels, gas stations, convenience 
     stores, and other types of vendors. Additionally, each year 
     interstate cigarette smuggling costs states millions of 
     dollars in lost excise tax revenues. To address these 
     problems, the KIDS Act would establish minimum federal 
     licensing standards for tobacco manufacturers, importers, 
     exporters and distributors, and the registration of tobacco 
     retail establishments. States could continue to impose 
     additional licensing requirements, and would work closely 
     with federal officials to enforce licensing and registration 
     policies, just as they do with the distribution and sales of 
     alcoholic beverages. By providing for the permanent 
     revocation of tobacco licenses and registration permits for 
     repeated violations of any provision of our law. The KIDS Act 
     will put the worst offenders out of the business of making or 
     selling tobacco products.


          IV. Stopping Children from Smoking Before They Start

       Prevention in Communities and Schools. In addition to 
     economic incentives, changes in tobacco product advertising 
     and marketing, and improved oversight of enforcement, experts 
     agree that a comprehensive slate of public health activities 
     is needed to stop children from taking up this deadly habit. 
     For example, research-tested school programs have proven to 
     consistently and significantly reduce adolescent smoking. 
     Therefore, the KIDS Act would provide $1.25 billion to states 
     for community and school-based prevention activities. These 
     initiatives would be designed and implemented at the local 
     level to ensure their effectiveness.
       Because minority and low-income populations suffer a 
     disproportionate burden of tobacco-related disease, and are 
     among the greatest users of tobacco products, the KIDS Act 
     would allocate a portion of the funding for community-based 
     prevention activities to address their special needs. Funding 
     also would be provided to assist Native American populations 
     in their efforts to prevent and reduce youth smoking.
       Counter Advertising. Research findings show that well-
     designed counter advertising initiatives do help to reduce 
     teen smoking. Thus, an intensive, sustained media campaign at 
     the state and federal level is needed to ``deglamorize'' 
     tobacco use among young people. Accordingly, the KIDS Act 
     would provide $650 million annually to fund a nationwide 
     campaign with national, state, and local components. 
     Preeminent advertising firms with proven expertise in the 
     formulation of messages aimed at children would be charged 
     with the development and implementation of 
     ``deglamorization'' campaigns.


               V. Helping Current Smokers Kick the Habit

       Smoking Cessation. While the primary emphasis of our 
     proposal is to reduce tobacco use among children, the more 
     than 48 million adult Americans who currently smoke deserve 
     and need help in kicking the habit. The KIDS Act would 
     establish a coordinated federal and state-based initiative to 
     increase access to, and awareness of, effective programs. 
     When fully implemented, the legislation would provide $1.5 
     billion annually for programs designed to enhance existing 
     employer-based initiatives, and those which target uninsured 
     and underserved populations.


                         VI. Expanding Research

       National Fund for Health Research. Tobacco products kill 
     more than 400,000 Americans every year--more death than from 
     AIDS, alcohol and drug abuse, car accidents, murders, 
     suicides, and fires combined. To stop this epidemic, we must 
     strengthen our national commitment to finding preventive 
     measures and cures for diseases--especially those related to 
     tobacco use, including cancer, heart disease, emphysema and 
     stroke. Therefore, the KIDS Act would establish a National 
     Fund for Health Research to allocate resources over and 
     above those provided to the National Institutes of Health 
     (NIH) in the annual appropriations process. The KIDS Act 
     would allot $3.225 billion per year to the Fund.
       Prevention and Cessation Research. While we know a great 
     deal about reducing tobacco use, much remains unknown. 
     Therefore, a significant expansion of prevention and 
     cessation research is critical to the success of any 
     comprehensive effort to reduce tobacco use. In particular, 
     more information is needed on why people use tobacco and on 
     what program interventions are most effective. Efforts must 
     also be undertaken to increase our understanding of the 
     health effects of tobacco use and exposure to second-hand

[[Page S2857]]

     smoke. The KIDS Act would provide $600 million per year for a 
     major new research effort.


          vii. helping the victims of tobacco-related diseases

       The KIDS Act would fully preserve the rights of individuals 
     and groups to utilize the civil justice system to recover 
     tobacco-related damages. Unlike the June 1997 Tobacco 
     Agreement and some of the legislation currently pending in 
     Congress, the KIDS Act would not ban class action lawsuits or 
     punitive damage awards, as the tobacco industry has sought.
       Simply put, it would provide no immunity to the tobacco 
     industry. Given the industry's behavior, such liability 
     protections cannot be justified or condoned. Furthermore, our 
     legislation would provide no protections from, or limitations 
     on criminal prosecution of the tobacco industry.
       National Victims' Compensation Fund. To ensure that 
     resources are readily available for the victims of tobacco-
     related diseases, the KIDS Act would provide for the 
     establishment of a prefunded National Victims' Compensation 
     Fund (the ``Fund''), from which court awards and settlements 
     would be paid. Furthermore, given the uncertainty of the 
     legal environment surrounding tobacco litigation, an 
     additional Contingency Reserve Account would be established 
     within the Fund. The Fund and the annual cap would be indexed 
     to medical inflation.
       Annual Base Payment: At the beginning of each year, the 
     tobacco industry would make a Base Payment of $4 billion into 
     the Fund; awards and settlements would be paid from this base 
     amount. At the end of every year, any unobligated funds from 
     the Base Payments would be deposited into an interest-bearing 
     Contingency Reserve Account.
       Out-of-Pocket Supplement and Annual Cap: If awards and 
     settlements exceed the Base Payment during any year, the 
     industry would be liable for an additional $4 billion in out-
     of-pocket payments to cover the excess, for a total potential 
     annual liability payment by the tobacco industry of $8 
     billion. This cap would not include payments made to states 
     in settlement of existing Attorneys General suits, and would 
     apply only to civil claims against past wrongdoing by the 
     industry.
       Contingency Reserve Account: As a further protection for 
     claimants, the KIDS Act would establish a Contingency Reserve 
     Account (the ``Account'') within the Victims' Compensation 
     Fund. Any unobligated funds from the $4 billion Base Payment 
     would be placed in the Account. For example, if awards and 
     settlements paid in the first year amounted to $1 billion, 
     the remaining $3 billion would be deposited into the account. 
     Funds in the account would build up substantially in the 
     early years as settlements and awards during this period are 
     expected to be relatively small. For any year in which 
     liability awards and settlements exceed $8 billion, the 
     Account would be drawn down to make the excess payments. In 
     the unlikely event that awards and settlements ever deplete 
     the Account in any year, unpaid claims would be rolled over 
     and paid from the Base Payment at the beginning of the 
     following year.
       If the Account accumulates a balance of $20 billion, the 
     Attorney General, in conjunction with the Secretary of Health 
     and Human Services, would determine whether to continue to 
     deposit excess funds therein, or to redirect those funds to 
     anti-smoking and other public health activities authorized 
     under the legislation.
       Small Claimant Protection: Under the KIDS Act, individuals 
     and smaller classes of individuals would be given priority in 
     disbursements from the Fund to ensure that large awards or 
     settlements, paid to 3rd parties for example, would not deny 
     smaller claimants timely payment of their claims.
       Settlement of State Suits and Castano Class Action: Forty 
     state Attorneys Generals have brought suits against the 
     tobacco industry to recover costs incurred for tobacco-
     related illnesses and other damages. The KIDS Act would 
     provide states the opportunity to settle their suits in 
     exchange for funding from the National Tobacco Trust Fund 
     established under this Act. In addition, the Castano Class 
     Action lawsuits would be settled in return for the 
     establishment of smoking cessation programs.


                 VIII. ENDING TOBACCO INDUSTRY SECRECY

       For decades, to the severe detriment of the public health, 
     the tobacco industry has concealed evidence of the 
     consequences of tobacco use and deliberately misled the 
     public. Moreover, tobacco manufacturers have broadly misused 
     the doctrine of attorney-client privilege to cloak industry 
     documents and research in a veil of secrecy.
       Therefore, the KIDS Act would require tobacco companies to 
     submit key documents relating to the health effects, safety, 
     and marketing of products to children to a Tobacco Document 
     Depository. Trade secret and attorney-client privilege claims 
     would be scrutinized by a professional Tobacco Document 
     Review Board. This reform would assist the victims of 
     tobacco-related diseases in securing judgments against 
     tobacco companies, and out-of-court settlements, without the 
     traditional barriers and costs associated with document 
     discovery. Manufacturers who make claims in bad faith will be 
     subject to fines of up to $5 million per violation. Moreover, 
     failure to comply with this section would result in license 
     revocation and the waiver of the annual liability cap.
       FDA to Obtain Needed Documents. Tobacco companies would be 
     required to turn over to the FDA all documents the agency 
     deemed necessary to carry out its regulatory 
     responsibilities--including assessing the health effects of 
     nicotine and other tobacco ingredients, the design and 
     development of ``less hazardous'' or ``safer'' tobacco 
     products, as well as the advertising, marketing and promotion 
     of such products.


                  ix. transition assistance to farmers

       Changes in national policy regarding tobacco products, and 
     the expected decline in their consumption, will have 
     ramifications for farming families, workers and communities 
     in tobacco growing regions. The KIDS Act would provide $13.5 
     billion for compensation, income support and transitional 
     assistance to tobacco farming families, and for economic 
     development and related assistance in tobacco-dependent 
     communities.


                      x. assuring clean indoor air

       Our knowledge is growing daily on the deleterious effects 
     of exposure to Environmental Tobacco Smoke (ETS) in the home, 
     the workplace and other public facilities. Annually, 3,000 
     Americans die of lung cancer caused by second-hand smoke, and 
     15,000 children under 18 months of age are hospitalized with 
     respiratory infections related to ETS exposure.
       While the ETS components of the KIDS Act are still a work 
     in progress, our bill would place significant emphasis on 
     reducing ETS exposure in the home--including such measures as 
     pediatric outreach, public service announcements, and 
     comprehensive media campaigns; $100 million from the counter 
     advertising funds would be directed towards this purpose. The 
     bill would also provide $100 million to help reduce exposure 
     to ETS in workplaces and public facilities.
       The KIDS Act would also require Congress to comply with the 
     ``no smoking'' policies already in place throughout the 
     Executive Branch. Furthermore, legislation would not preempt 
     states and local governments from establishing even more 
     stringent policies to protect individuals from ETS.


          xi. stopping smuggling and showing world leadership

       In some countries, significant increases in cigarette 
     prices have resulted in large-scale smuggling operations. 
     Contraband cigarette trafficking can occur both at national 
     borders and between states with wide disparities in tobacco 
     excise taxes. Since 1992, this criminal activity has 
     increased by more than 500% in the United States. Each year, 
     interstate cigarette smuggling costs some states more than 
     $100 million in lost excise tax revenue. As the price of 
     cigarettes increases as a result of tobacco settlement 
     legislation, actions must be taken to prevent the wide 
     availability of contraband cigarettes.
       Tough Anti-Smuggling Initiative. In addition to licensing 
     all tobacco product sellers in the stream of commerce, the 
     KIDS Act would allocate $100 million per year to implement 
     an aggressive, well-coordinated anti-smuggling program 
     aimed at stopping contraband tobacco products from 
     entering or being sold in the United States. The bill 
     would facilitate substantial coordination of 
     international, federal and state law enforcement 
     activities, as well as providing new resources to expedite 
     the deployment of innovative anti-smuggling technologies.
       Harsh New Penalties to Stop Smuggling. To further deter 
     contraband trafficking in tobacco products, the KIDS Act 
     would also establish harsh new criminal and monetary 
     penalties for individuals convicted of such offenses. 
     Violations by manufacturers, importers, exporters, or 
     distributor or retailers could result in permanent revocation 
     of their license or registration.
       World Leadership. The World Health Organization (WHO) 
     currently estimates that tobacco use causes three million 
     deaths per year worldwide--a number which is expected to 
     increase exponentially as the U.S.-based tobacco industry 
     intensifies its global marketing and promotional activities. 
     By the year 2023, WHO projects tobacco-related mortalities 
     will jump to ten million, with nearly 70 percent occurring in 
     developing countries. This troubling trend is expected to 
     accelerate with the enactment of strong anti-tobacco policies 
     in the United States.
       Unlike the June 1997 Tobacco Agreement, our bill would 
     provide clear leadership on international efforts to curb 
     tobacco use. The KIDS Act would terminate all support for 
     tobacco promotion overseas by the United States Government, 
     provide $100 million per year to fund global education 
     efforts, and encourage America's participation with other 
     nations in efforts to harmonize tobacco policies worldwide.


                     xii. industry consent decrees

       Voluntary, but legally-binding consent decrees--signed by 
     the federal government, state governments and tobacco 
     manufacturers--are critical to the success of any 
     comprehensive tobacco legislation aimed at significantly 
     reducing tobacco use by children. Without these decrees, key 
     provisions of such a law could be delayed by lengthy legal 
     challenges. To help avoid this problem, the KIDS Act would 
     require tobacco companies to sign legally-binding consent 
     decrees in order to receive the benefits of the annual 
     liability cap established under the legislation. Violation of 
     any of the terms of the consent decrees would result in 
     exclusion of that company from the annual liability cap. 
     Among other things, the consent decrees--which would be 
     enforceable by the U.S. Attorney General or State Attorneys 
     General through federal and state courts--would

[[Page S2858]]

     commit the companies to abide by the following agreements:
       Not to directly or indirectly bring or support legal 
     challenges to the implementation of any aspect of the KIDS 
     Act, including existing or future FDA regulatory authority, 
     document disclosure, youth look-back survey methodology and 
     penalties, and advertising and marketing restrictions;
       To pay and fully pass through the cost of annual industry 
     payments and industry-wide look-back penalties, assuring that 
     the price of cigarettes would increase by at least $1.50 per 
     pack over 2 years, with comparable increases for other 
     tobacco products;
       All reforms related to the labeling, sale, advertising and 
     promotion of tobacco products intended by this Act;
       Not to directly, or through contractors, lobby federal, 
     state or local governments against any provision of this Act;
       To only do business with those retailers and distributors 
     in full compliance with all provisions of this Act;
       To dissolve the Tobacco Institute and other existing trade 
     associations;
       Not to advertise over the Internet; and,
       To comply also with all of the marketing and advertising 
     restrictions in both the FDA regulation and the proposed June 
     1997 Tobacco Agreement.


               xiii. annual tobacco payments and spending

       Industry Payments: The KIDS Act would require a non-
     deductible industry payment of $10 billion immediately upon 
     enactment. That payment would be used by states and local 
     communities, as well as the federal government, to begin 
     implementation of the strong anti-tobacco measures authorized 
     under the Act.
       One year after enactment the industry would make a payment 
     of $20 billion to the National Tobacco Trust Fund. Each year 
     thereafter the industry payment would be $25 billion, indexed 
     to inflation. These payments would be assessed based upon 
     each company's share of the overall tobacco market. Twenty-
     five percent of the payments would be deemed punitive, and 
     therefore non-deductible.
       Payments to States: As under the June 1997 Tobacco 
     Agreement, $193.5 billion over the 25 year period would be 
     reserved for state use. Of those funds, fifty percent would 
     be distributed to the states to use at their discretion. The 
     remaining fifty percent would be allocated to the states in 
     the form of a Health, Human Services and Education block 
     grant to be used to meet each State's particular needs in 
     these areas.
       Additionally, $500 million annually would be made available 
     to states meeting or exceeding youth tobacco reduction 
     targets.
       Payments for National Programs: Under the KIDS Act, $4 
     billion of the industry's yearly payment would be directed to 
     the National Victim's Compensation Fund as the Annual Base 
     Payment. Remaining industry payments would be used 
     exclusively for national anti-tobacco and public health 
     purposes. These include funding for smoking cessation, 
     counteradvertising, and community and school-based prevention 
     programs, international education, health research, and other 
     activities outlined in this summary.
                                                                    ____

                                                    March 11, 1998
     Hon. Tom Harkin,
     Hon. John Chafee,
     Hon. Bob Graham,
     U.S. Senate,
     Washington, DC.
       Dear Senators Harkin, Chafee and Graham: We are sorry we 
     are not able to be with you in person as you introduce your 
     bill, but we wanted to offer our congratulations to you for 
     crafting a very strong, comprehensive package of tobacco 
     reforms.
       We have carefully reviewed a detailed summary of your plan 
     and strongly support its major features, with the exception 
     of the concept of liability caps. While we await actual 
     legislative language, it appears to us that if enacted, we 
     believe your proposal includes many measures that would 
     significantly reduce tobacco use and fundamentally alter the 
     way America deals with tobacco. It is tough medicine for a 
     tough problem. It would set national tobacco policy on to a 
     course that would bring down nicotine addiction and the 
     terrible health consequences of using tobacco.
       You are to be especially commended for forging a bipartisan 
     consensus on this difficult and complex issue. For a proposal 
     to be successful in Congress, it must have bipartisan 
     support. Yours is the first to meet that crucial test.
       Your plan correctly deals with this public health crisis in 
     a comprehensive manner, seeking to come as close as possible 
     at this time to the ideals expressed last July in the report 
     of the Advisory Committee on Tobacco Policy and Public 
     Health. A piecemeal approach clearly won't work. We are 
     especially pleased that you specify an increase in the cost 
     of tobacco products within two years. This is vitally 
     important for reducing tobacco use by young people. 
     Protecting the FDA's authority, protecting a State's ability 
     to develop and enforce stronger public health measures, and 
     other such provisions make this proposal very attractive. We 
     understand that you will address environmental tobacco smoke 
     and we will be pleased to work with you on that. You are also 
     to be commended for recognizing that the United States must 
     play an enhanced role in promoting enlightened policies 
     toward tobacco in other countries. We have a moral imperative 
     to lead in this area as well as protecting the public health 
     within the United States.
       We look forward to continuing to work with you as you 
     finalize this very promising proposal. There is much to be 
     done this year, but the announcement of your bipartisan 
     effort is a major step forward in our long battle for a 
     tobacco policy.
           Sincerely,
     C. Everett Koop, M.D., Sc.D.
     David A. Kessler, M.D.
                                                                    ____


              The KIDS Act Allocation of Industry Payments

       The following amounts represent the annual maximum spending 
     for each of the activities, assuming a 25% excise tax offset.

                        [In billions of dollars]

States--no strings...............................................$3.000
States--Human Services Block Grant................................3.000
States--bonus pool................................................0.500
                                                             __________