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Master Settlement Agreement

In settlement of litigation initiated by the State to recover health care costs resulting from the use of tobacco products by its residents, Arizona entered into the Master Settlement Agreement (“MSA”) on November 23, 1998.  This landmark settlement agreement also resolved similar actions filed by 51 other jurisdictions against the major tobacco manufacturers.  The MSA requires the tobacco manufacturers that joined the agreement (“participating manufacturers” or “PMs”) to make significant annual payments to the settling states in perpetuity.

Since 1998, Arizona has received more than $1 billion in settlement payments.  Pursuant to Proposition 204, which passed during the 2000 general election, Arizona’s MSA payments are dedicated entirely to the Arizona Health Care Cost Containment System (“AHCCCS”).

Arizona enacted A.R.S. § 44-7101 (“Escrow Statute”), which is the model statute described in exhibit T to the Master Settlement Agreement (“MSA”) entered into on November 23, 1998 between Arizona and certain United States Tobacco Product Manufacturers.  Among other requirements in the Escrow Statute, any Tobacco Product Manufacturer that is not a Participating Manufacturer under the MSA and that sells cigarettes (includes roll-your-own tobacco) in Arizona (whether directly or through a distributor, retailer or otherwise) must either place into a Qualified Escrow Fund by April 15 of the year following the year in question, the amount prescribed by the Escrow Statute, or  become a Participating Manufacturer and generally perform its financial obligations under the MSA.  Tobacco Product Manufacturers must be compliant with the Escrow Statute, as well as A.R.S. § 44-7111, which was enacted to aid the enforcement of the Escrow Statute.

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