TOBACCO BILL CLEARS SENATE PANEL

$516 Billion Measure Hikes Fees, Restricts Ads, Limits Liability

The Senate Commerce Committee voted overwhelmingly yesterday to establish
the nation's first comprehensive tobacco policy, a tough measure that aims
to reduce youth smoking through steep cigarette price increases and harsh
restrictions sales and marketing.

The 19 to 1 vote represented a major step forward in the long, slow march
to resolve an onslaught of lawsuits against the embattled industry and
tackle the nation's leading cause of preventable death. It was the first
action by Congress since the opposing factions in America's fight over
tobacco signed an unprecedented agreement last June.

"This is the crossing of the threshold," said David A. Kessler, the former
commissioner of the Food and Drug Administration who first proposed
regulating cigarettes like a drug. Committee Chairman John McCain (R-Ariz.)
and his colleagues have broken the hold the industry has had over the
Congress."

Still, the real fight has yet to begin.

Although the legislation grants some of the legal protections the industry
sought, company executives are threatening to fight the plan in court if it
is not amended to their liking.

Saying the bill "contains a number of illegal, punitive and fundamentally
unsound provisions," tobacco lobbyist J. Phil Carlton predicted McCain's
bill could revitalize the black market or even bankrupt some companies.
Tobacco company stock prices dropped at the end of the day yesterday.

Tobacco industry opponents complain the bill does not go far enough in
penalizing the industry or improving public health. They hope to abolish
all civil liability protections and raise the price tag of the legislation.

Indeed, no one spoke well of the document, not even its primary author.

"It is by no means perfect," said McCain who spent the past several weeks
horse-trading with his colleagues, White House officials and anti-smoking
advocates. "However, our task was to craft a bill that reflects the best
possible consensus."

In broad terms, the 400-page bill would impose a fee of $1.10 on every pack
of cigarettes over the next five years, restrict tobacco advertising and
marketing, limit the industry's civil liability to $6.5 billion a year and
exact additional payments from the companies if teenage smoking does not
decline by 60 percent in 10 years. The committee estimates that it will
cost the industry about $516 billion over the next 25 years.

Committee members acknowledged that several of the most contentious issues
would probably have to be revisited, such as precisely how much legal
relief to give the industry, whether the proposed advertising restrictions
are constitutional and how much to pay lawyers who filed lawsuits against
the industry.

For instance, White House officials say they plan to fight on the Senate
floor for stronger penalties against companies that fail to significantly
reduce teenage smoking.

In yesterday's day-long session, McCain beat back virtually every
noteworthy amendment, convincing committee members it was better to send a
flawed version to the full Senate than no version. Known for his
independent streak, McCain showed no favoritism in his no-amendments
strategy.

Sen. John F. Kerry, (D-Mass.) failed to raise the price increase to $1.50
per pack, while Sen. Wendell H. Ford (D-Ky.) lost his bid to reduce the
annual payments by tobacco companies. An amendment eliminating the $6.5
billion liability cap failed as did several attempts to grant similar
protections to other industries, such as biomedical companies.

And still to be settled is a dispute over whether to impose fees, require
cigarette warning labels and take other measures to reduce youth smoking
overseas.

The fiercest debate in a cordial day of haggling came over the question of
whether Congress needs to bargain with cigarette makers to extract
advertising concessions and back penalties if teenage smoking is not
brought down to acceptable levels.

"I have no sympathy for the people that sell these products," said Sen.
John Breaux (D-La.), who said his mother and father-in-law died of lung
cancer.

However, Breaux said he believes the ad restrictions are unconstitutional
and can only be gotten through deal-making with the industry. "We should
not push them so far we lose these very important portions of the bill."

But experts on health issues such as Kessler and Matthew Myers, head of the
National Campaign for Tobacco Free Kids, argue the restrictions can be
written narrowly enough to withstand legal challenges.

Ford, a tobacco ally who filed 47 amendments, warned that even though the
bill contains $28.5 billion to help ease the impact on tobacco farmers, he
was not satisfied. "If my farmers are not taken care of, this carpet is
going to turn red," he said.

Sen. John D. Ashcroft (R-Mo.), the lone dissenter, said he objected to the
legal protections the bill would grant cigarette companies.

If the day did not resolve many of the thornier policy questions, it did
provide a likely road map for the coming battle.

Elena Kagan, the White House deputy domestic policy adviser, said the
committee included a "spectrum" of opinions similar to the entire Senate.
"The fight in the larger Senate may echo this."

Not surprisingly, the real battles will come over money -- how much to pay
lawyers, how much to charge companies and most importantly, how to divvy
the tobacco dividend.

McCain intentionally left open the question of how to spend the billions
that could come pouring in from higher cigarette prices and company
penalties.

"I fear that if we get into a food fight over distribution of funds" it
might derail the measure and should instead be left for President Clinton
and a handful of congressional leaders to work out.

But that did not stop the lawmakers from devoting much time and energy to
giving speeches on what they want to do with the money.

Some wanted money set aside for veterans; others worried about protecting
miners afflicted with black lung disease. Senate Budget Committee Chairman
Pete V. Domenici has said he wants the money given to Medicare.

"I guess the chairman wouldn't go for a flood control project?," joked Breaux.

In the end, the committee approved a nonbinding amendment that listed its
favorite recipients, including child-care programs, smoking cessation
efforts and cancer research.

McCain's bill now goes to the full Senate, although it is possible
congressional leaders will continue to negotiate in private and offer a
revised version in coming weeks. The House, meanwhile, has been unable to
write tobacco legislation and may simply wait for the Senate bill.

"Chances are better today than they were yesterday because of legislation
coming out of the Commerce Committee," said Florida Sen. Connie Mack, a
member of the GOP leadership. "Given how intricate this legislation is and
how politically difficult it is, we still have a major task ahead of us."