[Intl-tobacco] WSJ: PM to Czech: Smoking helps economy

[Robert Weissman]

July 16, 2001
Smoking Can Help Czech Economy,
Philip Morris-Little Report Says
Cigarette Smokers' Frequent Early Deaths
Offset Federal Medical Costs, Study Finds
Gordon FairClough
The Wall Street Journal

Philip Morris Cos. officials in the Czech Republic have been distributing
an economic analysis concluding that cigarette consumption isn't a drag on
the country's budget, in part because smokers' early deaths help offset
medical expenses.

The report, commissioned by the cigarette maker and produced by consulting
firm Arthur D. Little International, totes up smoking's "positive effects"
on national finances, including revenue from excise and other taxes on
cigarettes and "health-care cost savings due to early mortality."

The premature demise of smokers saved the Czech government between 943
million koruna and 1.19 billion koruna (between $23.8 million and $30.1
million or between 20.3 million euros and 25.7 million euros) on health
care, pensions and housing for the elderly in 1999, according to the
report.

The report also calculates the costs of smoking, such as the expense of
caring for sick smokers and people made ill by second-hand smoke as well
as income taxes lost when smokers die. Weighing the costs and benefits,
the report concludes that in 1999 the government had a net gain of 5.82
billion koruna ($147.1 million) from smoking.

Philip Morris said it received the Little report late last year and handed
it out recently after complaints from Czech officials that the tobacco
industry was saddling the country with huge health-care expenses. "This is
an economic-impact study, no more, no less," said Robert Kaplan, a
spokesman for Philip Morris's international tobacco unit in Rye Brook,
N.Y. "We're not trying to suggest that there would be a benefit to society
from the diseases related to smoking."

Philip Morris manufactures about 80% of the cigarettes smoked in the Czech
Republic. The New York company, which owns a 77.5% stake in a formerly
state-owned Czech tobacco enterprise, sells its flagship Marlboro smokes
as well as local brands.

Measuring the net costs of smoking to societies and governments long has
been controversial and difficult. Studies measuring the lifetime
health-care costs of smokers, who die sooner but have higher annual
medical expenses, have reached conflicting conclusions. Some find that,
over their lives, smokers have similar costs to nonsmokers. Others have
found that smokers' health-care costs are higher.

Gauging the real level of such costs is very difficult, and
hard-to-quantify expenses aren't captured in many estimates. Smokers, for
example, recover more slowly and are more likely to have complications
after surgery for unrelated problems, increasing the cost of caring for
them.

Tobacco-control experts attacked the Czech report. "Is there any other
company that would boast about making money for the public treasury by
killing its customers? I can't think of one," said Kenneth Warner, an
economist at the University of Michigan's school of public health. Dr.
Warner said the study appeared to be seriously flawed because, among other
things, it fails to consider what the economic impact would be if smokers
stopped buying cigarettes and spent their money on other goods instead.

Eva Kralikova, a physician and epidemiologist at Charles University in
Prague, said the report also "very much underestimated" the costs of
medical care for people suffering from smoking-related diseases. Dr.
Kralikova said lung cancer and other illnesses caused by tobacco use
account for about 20% of all deaths in the Czech Republic, killing about
23,000 people a year. And she said the number of illnesses and deaths is
expected to mount, as is the expense of medical treatment, as smokers age.