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WASHINGTON -- In March 2002 Philip Morris lobbyist John Scruggs journeyed from his office here to a Kentucky warehouse to meet with tobacco farmers. His mission: Persuade them to back a plan for the Food and Drug Administration (FDA) to regulate the cigarette industry. He knew it would be a hard sell, he told The Wall Street Journal, when he saw several farmers sporting baseball caps reading "Keep FDA off the Farm!" -- hats that Philip Morris had given the farmers a few years ago.
It was a reminder to Scruggs that Philip Morris was on a strange political odyssey. After years of rallying farmers, sympathetic politicians and other friends of the industry to oppose government efforts to regulate cigarettes, Philip Morris had switched sides.
Now, 18 months after Scruggs's tour of tobacco warehouses, Philip Morris's wooing of tobacco farmers may be on the verge of paying off. A bill headed for the Senate floor would put the tobacco industry under the regulatory purview of the FDA. That shift would create new marketing and manufacturing rules, such as more stringent disclosure of harmful ingredients and more visible health warnings in ads and packaging. The FDA could require that nicotine levels be reduced, even to zero, the report said.
In the long, circuitous journey that led to this legislation, a motley collection of interest groups managed to find common ground. Tobacco executives and antismoking advocates, northeastern legislators and tobacco-state politicians, farmers and urban liberals came together in a most unlikely alliance.
It couldn't have happened without the lobbying clout of the tobacco farmers. Philip Morris recruited them by combining the bill with a measure the farmers badly wanted: to ditch an old federal subsidy program and set up a new system that would let them sell their leaf more easily and profitably.
To Philip Morris, a unit of New York-based Altria Group Inc., the FDA plan is the paradoxical key to its future success. Regulations have historically helped the company fend off rivals and hold onto its Marlboro brand's number-one position. Before the cigarette industry's sweeping 1998 settlement of state lawsuits, Philip Morris fought the states' proposed restrictions on advertising.
Today those rules amount to big barriers that keep rival brands from taking away Marlboro's market share. But now Philip Morris faces unprecedented competition from low-priced cigarettes made by a swarm of upstarts with names such as Bronco and Roger.
Philip Morris says FDA regulation is good business and good policy because it would create uniform standards for manufacturing and marketing by all tobacco companies. "The fact is that until FDA oversight is in place, we will not have an accepted and official external process to review our work," Michael Szymanczyk, CEO of Philip Morris USA, said in June.
Philip Morris's about-face on the FDA began taking shape in the late 1990s and was set in motion in 2000, when the U.S. Supreme Court invited Congress to act on whether cigarettes should be regulated by the agency. Tobacco-industry executives had always seen any such move as anathema. But some Philip Morris executives were concerned about the image problems of Big Tobacco, the report said. They began to wonder if regulation might improve the image, prevent more draconian measures down the road and solidify the dominance of the company over its rivals.
Most of all, Philip Morris wanted predictability. Its stock price doesn't respond well to the uncertainties of today's competitive and legal pressures. Steven Parrish, senior vice president for corporate affairs at Altria, recalls that John S. Reed, Altria's most senior director (until he left the board last week to head the New York Stock Exchange), agreed that a moderate stance on FDA regulation might benefit the company in the long run.
That wish appears to be coming to fruition. The FDA's plan is to merge the two bills on the Senate floor. Philip Morris executives as well as leading tobacco critics are working together with Sen. Gregg's staff, although the coalition could still wind up rupturing over the details.
The latest draft of Sen. Gregg's bill would authorize the FDA to reduce or eliminate nicotine. To placate Altria and its Senate allies, it also prevents regulators from making any changes that would "directly or indirectly" ban cigarettes.