A Deadly Business: Big Tobacco Still Sees Big Profits in America's Poor

With friends in the White House, and a pending $49 billion merger, Big Tobacco is back. The US remains the “world’s largest tobacco profit pool” outside of China, with “exciting” prospects for “long term growth”. Mergers and acquisitions have allowed the deadly industry to squeeze huge profits from customers, increasingly the poor, less educated and marginalized, and the supply chain, contract farmers, and workers, including children, who work for poverty wages.
Jessica Glenza
July 13, 2017
Sofia, a 17-year-old tobacco worker, in a tobacco field in North Carolina. Big tobacco relies on poor smokers and poor workers, including children, to drive its profits in the US.
https://www.hrw.org/sites/default/files/styles/1200w1200h/public/multimedia_images_2015/201512_crd_us_tobacco_photo_2.jpg

Wheeling his oxygen tank in behind him, Leslie E Adams shuffled into the lung doctor’s exam room and let out a long string of rattling coughs. He tried to catch his breath, and coughed some more. He is 63, but looks a decade older.

“I got stage three black lung. There ain’t no stage four. I’m on my way out,” said Adams. “Now, I am slowly going down the mountain.”

The American smoking rate has plummeted since the mid-20th century. Yet somehow the US remains a growth market. That is partly because the proportion of smokers has fallen, but the overall population is rising.

Add a nation bedeviled by inequality and those public health gains, while significant, have simply not reached every corner of the country.

With low taxes on cigarettes, intermittent regulations and tobacco-friendly politicians, many US states still mirror conditions around the developing world where tobacco companies see potential.

West Virginia arguably has the highest smoking rate in the nation. In places such as Logan County, where Adams, a retired coal miner, is from, the smoking rate was 37% in 2015. The last time the national average matched that was 1974.

“I smoked Winston, I smoked Viceroy. I don’t know what I was smoking last, I couldn’t tell you,” said Adams, about brands that once belonged to the tobacco giants Reynolds and British American Tobacco (BAT). “I just smoked anything. If it blowed smoke, I smoked it.” Adams is disabled with stage three pneumoconiosis, better known as black lung.

Adams will tell you he quit, but the truth is, after seven days in the hospital on a ventilator, he still tried to smoke three times. “I smoked about a half a one, and it just – I mean your lungs – it just takes all the oxygen out of them.”

Despite smoking bans, hundred-billion-dollar settlements and a smaller proportion of the American public smoking, Reynolds’ longtime ally BAT sees the US as “an exciting opportunity for long-term growth”.

Through the years, as the population rose, the proportion of Americans who smoke shrank, but their raw numbers stayed the same, at around 45 million smokers. Further, since the 1990s, the threat of tobacco litigation diminished and regulations proved less costly than feared, leaving tobacco companies room to increase the price of a pack. In America, where cigarettes are still relatively cheap, BAT only needs to sell two packs of cigarettes to make the same profit as it would selling six in other markets.

America is “highly attractive” and the “world’s largest tobacco profit pool” outside of China, BAT’s chief executive, Nicandro Durante, said, as he described a $49bn deal to buy Reynolds American in January. The deal will make BAT the largest listed tobacco company in the world.

It also means revenue from eight out of 10 cigarettes sold in the US will be pocketed by BAT and a rival group of companies – Altria Group, a US Philip Morris company. Not since Theodore Roosevelt’s presidency has tobacco been so consolidated.

Mergers and acquisitions have allowed tobacco companies to squeeze profits from customers and the supply chain. Companies charge more for cigarettes, while union organizers say “poverty wages” keep families on the ropes. Both are trends seen worldwide.

At the same time, the typical profile of smokers has changed radically. In 50 years, smoking moved from glamorous to commonplace. Wealthy Americans have the lowest smoking rates, and the middle class has increasingly quit; instead, smoking has become a burden of the poor, less educated and marginalized.

The $49bn merger between BAT and Reynolds, expected within weeks, is the most recent act of faith by tobacco companies that selling cigarettes to Americans will remain profitable long into the future, even if the Americans who buy them can’t afford it.

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As a young man, Adams worked in mines so tight he lay on his belly to dig. He dug his own hole for urination. When he learned mine owners handed out dust masks that didn’t work, he sued.

Adams lives in the Appalachian mountains, in a valley between two green hills affectionately called a “holler”. He and his wife had two daughters and a son, and those children had eight of their own.

He started smoking at eight, sneaking beside the creek to puff corn silk. He smoked cigarettes for 40 years. Now, after one son died of a drug overdose, unable to chase after his grandkids and still craving cigarettes, Adams questions whether cigarettes should be legal at all.

“They got so many drugs in there you couldn’t quit if you wanted to. I still crave them. If I had one right now, and I’d go to sleep, you’d hold it, I’d smoke it in my sleep,” he said. “That’s how bad you crave them.”

Dr Tom Takubo sees more than 30 patients like Adams each day at his clinic in Charleston. His is the largest pulmonology office in West Virginia. Set in the capital of a rural state in a rural region, Takubo sees patients from as far away as northern Kentucky and southern Ohio.

“Even if smoking dropped off today, I would probably be going for the rest of my career,” said Takubo.

No one is allowed to smoke in his office, but even so, the air smells faintly of cigarettes. Takubo’s patients carry the scent of the smokes they prefer. Former miners, shop owners and factory workers waiting for their appointments named L&Ms (by Altria) or Salems (by Reynolds) as their go-to brands. One woman said she smoked whatever cigarettes were cheapest, and called them “floor sweepings”.

Takubo estimates 80% of his patients see him for smoking-related diseases. “Cancer, acute bronchitis, flare-ups of their asthma,” he said, naming a few.

The national adult smoking rate dropped from 42.4% in 1965 to 16.8% in 2014, according to the Centers for Disease Control. But in West Virginia, the smoking rate in 2014 was still 26%, according to the Robert Wood Johnson Foundation. One researcher with RWJF called the rate “extraordinarily high”.

When he is not seeing patients, Takubo has another role. He is also a Republican state senator in West Virginia, putting him in the unique position of treating the same people whose cigarette taxes he hopes to raise. He is occasionally told by a patient: “Now, doc, don’t raise the price of my cigarettes.”

“It’s really hard for me, because you hear people argue for financial reasons, for freedom of choice,” Takubo said about his fellow legislators, shaking his head. This year, inspired by a patient, Takubo introduced a bill that would have fined adults for smoking in the car with a child.

“I have a patient that’s lost about half of her lung function. She’s never smoked a day in her life,” he said. Instead, her father smoked in the car. “If she complained about it, he would roll the window up to teach her a lesson. She remembers even getting in the floorboard of the car because she couldn’t breath.”

But the bill was not successful. Takubo’s fellow Republicans voted it down.

West Virginia is also the epicenter of America’s drug overdose epidemic, but lung and throat cancer have proven far deadlier than opioids.

Drug overdoses killed 41 people for every 100,000 in West Virginia in 2015. The same year, lung and throat cancer killed tripled that number in south-western counties, such as Calhoun. There, those two diseases alone killed 123 people for every 100,000, according to the state’s health department.

The same year, 46% of adults in Calhoun smoked, RWJF found. The West Virginia department of health estimates that one in five deaths of people over 35 are due to smoking.

West Virginia scores badly on every imaginable indicator of poverty and inequality. Takubo has also argued increased tobacco taxes could bring the state significant financial relief. A $1 tax would have generated $100m in revenue for a state that had a $380m shortfall in 2016, and which spends $277m annually on smoking-related diseases. That too failed, although Takubo did help get a 65-cent tobacco tax passed.

Now, fearing Republicans in Washington will pass a healthcare reform bill that could severely cut Medicaid, a public health program for the poor, Takubo said simply: “That would kill us.”

State of the nation

In Washington DC, things have also changed in the halls of Congress. People who still smoke stand out, and perhaps for a good reason – Congress is mostly well educated and wealthy. Every single US senator has a college degree, and just 5% of the House of Representatives lack one. Most members of Congress are millionaires.

Today, someone with a high school equivalency diploma is nine times more likely to smoke (34.1%) than someone with a graduate degree (3.6%). A poll found Americans who earn between $6,000 and $11,999 are more than twice as likely to smoke as someone who earns more than $90,000.

Even 10 years ago, the “offensive and very strong” odor of a cigar prompted an aide in the Democratic representative Keith Ellison’s office to call the Capitol police on a congressman. Last year, the Republican House speaker, Paul Ryan, took pains to “detoxify” his predecessor’s office, a suite held by former speaker John Boehner. Boehner is a Camel smoker. He now sits on Reynolds’ board.

Tobacco companies don’t spend as much money lobbying Congress as they once did. They spent $72m trying to persuade lawmakers to see their perspective in 1998, compared to $19m in 2016, according to the Center for Responsive Politics.

But they have not abandoned political spending. They have shifted strategies.

Last year, Altria and RJ Reynolds spent $71.3m in California trying beat back a cigarette tax hike referendum. They failed there, but succeeded elsewhere. In North Dakota, tobacco companies spent more than $5 for every man, woman and child in the state, $4m altogether, and convinced voters to reject the tax. They also succeeded in Colorado, where they spent $7m.

States were awarded billions in damages from tobacco companies in recognition of the public health consequences. Yet they largely fail to spend the money they were awarded to prevent smoking. States collected $26.6bn from tobacco settlements in 2016, but spent only 1.8% on smoking prevention, according to the Campaign for Tobacco-Free Kids. Tobacco companies, by comparison, spend $9.1bn a year on marketing, or $1m an hour, according to an analysis of Federal Trade Commission data.

North Carolina, America’s dominant tobacco-producing state, receives $139m annually from such tobacco settlements. Initially, the state set up three trust funds to spend that money: one to prevent smoking, one to help rural communities hit by a decline in smoking and one to help tobacco farmers.

The fund to prevent smoking was dismantled in 2011; all of that money was sucked into the state’s general fund. However, lawmakers allowed the settlement to continue to fund tobacco growing efforts.

Between 2000 and 2004, another $41m of North Carolina’s tobacco settlement went to retrofit tobacco curing barns, a move that researchers called “arguably counter-productive to tobacco control”, and which some farmers believed was at the behest of tobacco manufacturers.

“From our very first day, there was a constant struggle with the legislature,” said Vandana Shah, the first policy director of the tobacco use prevention fund in North Carolina. She now works for the Campaign for Tobacco-Free Kids. “I’d be doing the rounds of begging and pleading that they don’t take our money away, and explaining the value of the program.”

Winston-Salem, AKA ‘Camel City’

Reynolds American’s hometown of Winston-Salem, North Carolina, has developed a relatively strict tobacco policy. An after-dinner cigarette in “Camel City” must be smoked outside, and finding a hotel room to smoke in is a significant task.

The regulations are reflective of how cities have handled smoking in recent years. Even Reynolds employees who smoke must use smoking lounges away from their colleagues.

Tobacco companies, said Gayle Anderson, the head of the Winston-Salem chamber of commerce, “really didn’t fight these laws at all … There just didn’t seem to be that kind of pushback.” She worked for Reynolds from 1976 to 1987.

Once North Carolina’s largest city, Winston-Salem enjoyed a golden era on Reynolds’ wealth. “The moneyed families that ran the factories and mills shared their wealth with the community, endowing it with high schools, auditoriums, hospitals, stadiums, parks and recreational facilities bearing their names,” the local history From Tobacco to Technology said about the 1930s. “Their executives chaired the charities and the capital campaigns to raise money needed to achieve the community’s objections, be it a new terminal at the airport, an arts council for the city or assistance in relocating a college to the city.”

Reynolds still employs about 5,000 people in Winston-Salem, according to Anderson. For many years the notion was: “If you could get in at Reynolds, you were set for life,” she said.

Reynolds recently donated a 70,000 sq ft, immaculately maintained research facility to the town for redevelopment. Reynolds, Anderson said, “is still probably the single largest philanthropic company”.

“I can’t imagine how many hundreds of millions of dollars that’s worth,” said Anderson. “They’re benevolent and care a lot about the community, but it’s more like a partnership.” If Reynolds were to ever leave, “it would be a real blow to our ego, for sure”.

We’re down here getting sick, going hungry’

If the company is seen by some as benevolent, that does not necessarily translate to automatic financial security for farmers and their workers. One twentysomething farmer stood by a running tractor as he described the start of each tobacco season in eastern North Carolina. It begins, he said, “with a loan from the bank that you don’t know if you’re gonna pay back”.

He started cutting tobacco in a friend’s field when he was about eight years old, the farmer said. As he smoked a Camel menthol, he acknowledged: “I shouldn’t, as much shit as I spray on it.”

For farmers, the tobacco system has changed considerably since the 1990s. Auctions are obsolete. Now, farmers contract directly with cigarette manufacturers or leaf buyers. This farmer’s entire crop is contracted to Alliance One, one of two major leaf companies.

Labor disputes are common here. Farmers can face cash shortfalls mid-season, making it difficult to pay workers on time. Farm laborers have no collective bargaining rights in the US, and child labor is legal on farms. Children as young as 12 can start working unlimited hours outside of school, and children of any age can work on a family-owned tobacco farm.

With only a handful of companies left to sell to – Philip Morris International, Altria, BAT, Japan Tobacco International and two leaf buyers who serve the same companies – farmers feel at the behest of tobacco companies, those interviewed by the Guardian said. This year, some tobacco buyers didn’t offer farmers formal contracts until spring, when tobacco was already growing in greenhouses.

Nevertheless, after a long fight with the Mount Olive Pickle Company, the Farm Labor Organizing Committee (Floc) secured a collective bargaining agreement with farmers in the North Carolina Growers Association. Several tobacco companies used farmers in the association, thus some tobacco workers were also covered. Last year alone, Floc handled around 500 total labor complaints, often for wage violations. But their influence is small: the union represents just 7% of North Carolina’s 100,000 workers.

The group has asked BAT to recognize a right to organize for all farm workers worldwide, and blames low pay for frequent disputes.

“I think they should pay more,” said Sintia Castillo, a labor organizer for Floc, whose accent reflects her heritage. Some words come out North Carolina country, others with a snap of second-generation Spanish. “You’re rolling in money at the top, and we’re down here getting sick, going hungry.”

Castillo has six brothers and sisters, and started working in the fields with her family at age seven. She moved to tobacco around 13 and into packing houses at 18. Now she’s 24, a woman whose work has acquainted her with the paradox of organizing people without rights.

“There’s been times I fire people up, and then they get fired,” she said.

She tells a story about Brent Jackson, a state senator and tobacco farmer. Jackson was forced to repay several thousand dollars in back wages after he was sued in federal court by migrant workers. The union then alleged he “blacklisted” the seven farmworkers. Jackson pulled out of the growers association.

Last week, he sponsored a bill to make it illegal for farmers to deduct union dues from paychecks, or for growers to end a dispute with farmworkers by signing a union contract. The bill is currently on the governor’s desk. Campaign finance records show Jackson received $9,400 in donations from tobacco companies.

“Child labor exists because of poverty wages. There’s no way that a family can live off of $7.25 per hour,” said Catherine Crowe, an organizer with Floc. Forcing children not to work without increasing wages, the union contends, would only leave struggling families worse off.

Philip Morris International and Alliance One have said they do not buy tobacco from farms that employ children under 18 for most tasks and, in general, tobacco companies have said growers are “not our employees”. Nevertheless, tobacco company audits have identified many instances of child labor in the supply chain.

In the past, Crowe and Castillo said, BAT has shown more willingness to work with the organizing committee, promising to encourage Reynolds to listen to union demands. As for how the unified company will act in the future: “That,” said Crowe, “is the question.”

[Jessica Glenza is the Health reporter at the Guardian US. She tweets at @JessicaGlenza. Click here for Jessica Glenza's public key.]

July 15, 2017