The agreement also puts into place revised and streamlined NPM adjustments for future years.
The NPM adjustment disputes arose out of the MSA, which PM USA and the other leading cigarette manufacturers entered into with 46 states to resolve the states' health care cost recovery litigation against the manufacturers. The MSA imposed significant restrictions on how cigarettes are advertised, marketed and sold in the United States and required participating manufacturers to make annual payments to the states in perpetuity. So far, states participating in the MSA have received more than $85 billion.
The NPM adjustment disputes relate to the state escrow statutes, under which non-participating cigarette manufacturers are required to make escrow payments for volume sold in each MSA state. The MSA allows participating manufacturers to receive downward adjustments in MSA payments if the MSA is a significant factor in market share loss for the participating manufacturers. States that demonstrate that they diligently enforced state escrow statutes during a disputed year can avoid the downward payment adjustment for that year.
PM USA is prepared to continue the current arbitration with states that did not join the agreement.A more detailed description of the agreement is included in Altria Group, Inc.’s 8-K filed today with the Securities and Exchange Commission.