fbpx
780.562.0288 info@vaepworld.com

State governments & the MSA

On November 23, 1998, all but four state governments entered into the Master Settlement Agreement (MSA) with the 4 big tobacco giants.

 

These tobacco companies committed to pay out around $200 billion over twenty years to the state governments. Payment amounts are based on annual cigarette sales.

Money.

Vaping nicotine is proven to help smokers off of cigarettes and keep them off.

If smoking rates drop because of vaping then the states get less money from the MSA. Therefore, successful uptake of vaping threatens to reduce the amount of the MSA payments.

(source)   (source)

In the first section of the MSA, this agreement was made “to avoid the further expense, delay , inconvenience, burden and uncertainty of continued litigation” by the state against the tobacco industry for expenses occurred to Medicaid as a result of smoking.

Unfortunately, the MSA did not make clear provisions for how the MSA money is to be spent and very little of it is being spent on the intended purpose.

(source)

Since the 4 tobacco giants entered an agreement to pay the state though the MSA, other tobacco companies are to be penalized by the state for doing business because the state doesn’t get a cut of their sales. So, since vaping helps smokers get off of cigarettes (which would lower MSA payments) the FDA catigorized vaping as tobacco and the states can ‘dilligently enforce’ laws against them.

It’s important to note that vaping is no more tobacco than vitamin C is an orange.

(source)

Some of the state governments issued bonds based on the projections for future MSA payments. Unfortunately, they underestimated the rate at which smokers would stop smoking which means the payments were lower than they banked on. The actual payments were too insufficient to pay the bonds when due.

(source)

S&P bond ratings sound alarm

The S&P Global Ratings rates publically trading securities such as bonds. Ratings range from AAA to D which indicates the reliablility of the security to pay out when due. They assessed the immerging vaping industry as reducing the amount of smokers and therefore the ability of what is backing the bonds (MSA payments) to cover the pay out. This means the governments that issued the bonds have to find money elsewhere to pay the bonds out when due.

(source)