Debate and Issues Index

draft settlement

Most Favored Nation c/o settlelist


The states that have already settled their lawsuits against the tobacco companies have in their settlements what are called "Most Favored Nation" provisions. These provisions establish that if subsequently settling states reach a better deal with the tobacco companies, the earlier settling states get the same terms.

Under the proposed multistate settlement, if subsequent state settlements reached before October 1, 2000 offer better financial terms than the national settlement, settling states get those terms. States bound to the multistate deal can opt in to non-financial settlement terms of subsequent state settlements, irrespective of the date.

The multistate agreement also give the companies the right to opt into more favorable terms, if nationally settling states subsequently settle with tobacco companies that do not choose to become party to this deal.

Questions and Concerns

The financial MFN provisions only apply until October 1, 2000 ­ less than two years away. Nationally settling states do not benefit from MFN treatment for later settlements with more favorable terms.

The financial MFN provisions only apply to settlements reached before trial, and do not apply to any jury verdicts. If a state reaches a settlement after the jury is seated, then the nationally settling states cannot claim MFN application. The same limitations may apply to non-monetary provisions.

MFN terms constitute a disincentive to settle with other firms ­ a smaller financial settlement with other firms, irrespective of their financial strength and whatever non-monetary concessions they make ­ will trigger decreased payments by the settling firms.

Why shouldn't nationally settling states at least get an MFN clause applying to Minnesota, meaning they would get the same level of per capita (or proportional Medicaid) payment as made to Minnesota?

For more information, contact: Robert Weissman, Essential Action, 202-387-8030.