Korea South: Cigarette Damage Suit in Question

Source from:  The Korea Times  11/22/2013

Experts have raised questions about what a possible damage suit filed by the National Health Insurance Service (NHIS) against cigarette companies will actually accomplish.

The state-run agency has claimed since August that tobacco manufacturers operating in Korea are responsible for the medical costs that it pays out to patients suffering from smoking-related diseases.

The amount of damages requested in the suit is expected to be up to one trillion won. But experts say the NHIS has a slim chance of winning, given how similar cases have fared around the world. They also say any money lost by the tobacco companies would result in an increase in cigarette costs, putting an additional financial burden on smokers.

According to the NHIS, the medical costs related to smoking were 1.69 trillion won ($1.59 billion) in 2011. That figure accounted for 3.7 percent of the total amount of medical costs that the agency paid during the cited period.

Despite those numbers, market observers say the NHIS will still have difficulty proving cigarette companies are to blame.

"In healthcare cost-recovery cases, governments, insurance companies or healthcare providers seek to recover the costs of providing medical care to people who they claim have become sick because they smoked," the Phillip Morris International (PMI) said in a statement. The U.S-based firm is the world's largest tobacco manufacturer and has a branch office in Seoul.

"Such suits have been brought in Canada, France, Israel, Nigeria, Spain and the Marshall Islands. They've been dismissed in France, Israel, Nigeria, Spain and the Marshall Islands," the statement read.

In terms of individual lawsuit cases, PMI said Brazil is the only country where an adverse decision against its local branch has not yet been reversed by a higher court.

 Another market expert had a similar view, saying, "It's difficult to prove cigarettes caused diseases for which the NHIS claims the tobacco manufactures are responsible."

Ultimately, if the NHIS wins its suit, it will likely prompt the cigarette companies to increase the cost of their products in order to recoup any money they are forced to pay, said industry sources.

"It would be inevitable for the tobacco-sellers to raise prices on their products," a market expert said. "For that reason, smokers are likely to oppose any suit being considered by the NHIS."

Market experts say the NHIS should use the fees it collects from each pack of cigarettes sold exclusively for smokers instead of patients in general. The amount collected was 1.54 trillion won as of 2010. Enditem