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Tobacco Control Bid by US FDA Gets Top Court Review

Washington, April 26 -- The U.S. Supreme Court agreed to consider letting the Food and Drug Administration regulate tobacco, dashing industry hopes of ending the agency's bid for sweeping power over cigarette design and marketing.

Philip Morris Cos., RJR Nabisco Holdings Corp. and other companies had urged the justices to let stand a lower court conclusion that a 1938 law didn't permit FDA rules designed to reduce tobacco's availability and appeal to children. The justices will hear the Clinton administration's appeal of that ruling and probably issue a decision by June 2000.

If the justices side with the FDA, the agency would have authority to reduce the addictive power of cigarettes and smokeless tobacco. They could even ban the products, although officials so far have ruled out that step. Tobacco company share prices slipped after the high court announcement.

``It's the biggest unknown out there,'' said Ethan Siegal, president of the Washington Exchange, which analyzes policy and politics for institutional investors. ``The industry has the power, if it wants to, to settle smoker lawsuits. The regulatory aspect is something that, once it falls under the power of an agency, is less and less under the industry's control.''

Philip Morris shares fell 3/4 to 34 3/8; RJR Nabisco slipped 7/16 to 25 7/8; Loews Corp. dropped 3 to 74; UST Inc. fell 11/16 to 27 11/16 and British American Tobacco Plc's American depositary receipts fell 7/16 to 16 3/16.

Tobacco company stock options also fell. Options to buy Philip Morris at 37 1/2 before May 22 fell 5/16, or 36 percent, to 9/16. Those securities had risen 40 percent on Friday.

New Restrictions

FDA regulatory authority would buttress restrictions already imposed on tobacco companies by the $206 billion settlement that resolved state claims for the costs of treating sick smokers. Among other things, that accord places a number of advertising and marketing restraints on tobacco companies.

The FDA wants to impose other restrictions, including a ban on sponsorships of sporting events and sharp limits on vending machines and self-service displays.

The rules would ``help stop young people from smoking before they start by eliminating advertising aimed at children and curbing minors' access to tobacco products,'' President Bill Clinton said in a statement.

An FDA court victory also would let it enact new rules later. The agency could require cigarette manufacturers to include an ingredient list on packages, make tobacco less addictive by limiting nicotine and other substances, or require companies to disclose their health-related research. The agency even would have the legal authority to outlaw cigarettes, although the FDA says it has no intention of doing so.

The FDA already has that type of broad authority over prescription drugs and
medical devices.

``Tobacco remains the one product consumed by Americans that isn't regulated by an agency for health and safety purposes,'' said Matt Myers, general counsel for the Campaign for Tobacco- Free Kids.

Intent of Congress

Tobacco companies successfully convinced a lower court that Congress never intended to give such sweeping power to an administrative agency.

``Congress has not given FDA limitless jurisdiction and a roving commission to protect the public health as it sees fit,'' the companies said in a Supreme Court filing.

Cigarette makers today expressed confidence in their case.

``The FDA's attempt to distort the law to allow it to regulate tobacco puts many other industries at risk for similar bureaucratic power grabs,'' BAT's Brown & Williamson Tobacco Corp. said in a statement. ``This is precisely the sort of government overreaching the Supreme Court has struck down in the past.''

The FDA announced its rules in 1996, after then-Commissioner David Kessler convinced Clinton that regulation of tobacco was the single most important way to change how the industry does business. Clinton initially was reluctant to embrace Kessler's approach for fear the tobacco companies could successfully attack him as a big-government activist.

The agency says it has authority over cigarettes under the Federal Food, Drug and Cosmetic Act, which lets the FDA regulate products ``intended to affect the structure and function of the body.'' That law serves as the basis for the agency's power over drugs and medical devices.

Legislators probably weren't thinking about tobacco when they wrote that language, public-health advocates and the FDA acknowledge. Still, the Clinton administration points to new evidence about nicotine's addictive nature and the industry's marketing and manufacturing tactics, saying regulators now know that tobacco meets the statutory standard.

``It is difficult to see how the FDA could have come to a different conclusion based on the evidence before it,'' the government's appeal said. ` `In light of its findings, tobacco products cannot be distinguished meaningfully from other products that FDA regulates, such as stimulants, tranquilizers, appetite suppressants, nicotine replacement products and
narcotics used to treat addiction.''

Split Decision

The 4th Circuit disagreed. Writing for a 2-1 majority, U.S. Circuit Judge H. Emory Widener cited a series of tobacco-specific laws passed by Congress over six decades and concluded that legislators deliberately rejected a role for the FDA.

``Congress developed a regulatory scheme whereby it retained the position of policy-maker for the industry,'' Widener wrote.

That ruling drew a dissent from Circuit Judge Kenneth K. Hall, who said tobacco products ``fit comfortably'' into the 1938 law. The 4th Circuit decision overturned a federal trial judge's ruling that had largely sided with the FDA.

Tobacco companies are likely to face a tough fight at the nation's top court. In the last several years, the justices have reversed lower courts in about two-thirds of the cases they hear. And the decision to take the case means at least four of the nine justices want to take a close look at it.

``Several of the justices likely believe that the lower court got it wrong,'' said Thomas C. Goldstein, a Washington lawyer who monitors the high court's docket. ``The mere fact that the court took the case is a great victory for the federal government. The Supreme Court so easily could have let the case die and be resolved by the Republican Congress.''

Still, several stock analysts were skeptical the high court ultimately would side with the government.

``It would be wrong to assume that a decision to take the case necessarily means it's going to be lost,'' said Salomon Smith Barney analyst Martin Feldman. ``The Supreme Court could as easily take the case simply to come up with a declarative judgment on government agencies trying to usurp the authority of Congress.''

Additional Issues

If they back the FDA, the justices probably would return the case to a lower court to resolve other issues. Tobacco companies argue the U.S. Constitution's free-speech clause bars the marketing restrictions. They also say the FDA can't classify cigarettes as ``drug delivery devices'' -- a status that gives the agency more regulatory options than if cigarettes were simply drugs. Those issues aren't before the high court.

If they follow their normal schedule, the justices will hear oral arguments in November or December and issue a decision before their 1999-2000 term ends in the middle of next year.

The case is Food and Drug Administration v. Brown and Williamson Tobacco Corp.,


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