Juul settled with North Carolina for $40 million. Now what?

By Anne Blythe

Kelly Kinard knows firsthand how quickly a teenager can become addicted to nicotine after experimenting with e-cigarettes and the flavored pods.

Her son Luka was just 14 when he started vaping in his first year of high school in High Point. That would get him to the front row of the bleachers at football games and give him a sense of belonging when he walked up to a group of students who also were smoking.

Luka recounts his naivety about what was in the Juul pods as he gives speeches to teens and others about the risks of vaping and his addiction to a chemical compound that he says sent him spiraling downward toward a grand mal seizure. Eventually, he had an extended stay in a California substance abuse treatment center.

Kelly Kinard was set to testify in Durham County Superior Court about the ill effects that she contends Juul, the multi-billion dollar e-cigarette company, caused her family.

Then on Monday, Attorney General Josh Stein announced that Juul had agreed to a $40 million settlement with the state of North Carolina in lieu of going forward with a trial. What would have been tested at trial was the argument that the company’s marketing and advertising tactics were designed to attract middle and high school students to the flavored pods and other products.

“I’m glad that Juul settled,” Kinard said. “Hopefully the state will do something good with this money.”

Terms of the settlement

That money will come to North Carolina state coffers over the next six years where the General Assembly will control how it is allocated.

The first $13 million are to come to the state by July 28, according to the consent order accepted by Judge Orlando Hudson on Monday. The next $8 million are to come no later than one year later, according to the order, with $7.5 million the year after that, another $7 million within three years and $2.25 million for each of the final two years.

The order states that settlement funds are to go toward education programs focused on strategies that have demonstrated effectiveness in preventing e-cigarette use among young people. Some of the funds should go to cessation programs designed to help people stop vaping and some are to go toward evidence-based research.

Juul also committed to:

• Stop marketing, social media advertising and influencer campaigns in North Carolina targeting people younger than 21.
• End outdoor advertising near schools in this state and forgo any sponsorships at sporting events and concerts.
• Stop making claims comparing the health effects of using JUUL to the health effects of using combustible cigarettes in its marketing materials.
• No more online sales to anyone not age verified through an independent verification system.
• No retail sales to anyone not age-verified using a barcode scanner.
• Ensure that its products are sold behind counters, limiting shoppers access without the assistance of an employee.
• Maintain a secret shopper program in North Carolina to ensure such measures are followed. Retailers not in compliance should be held accountable.
• No new pod flavors or nicotine content levels without approval from the U.S. Food and Drug Administration.

Too much flavoring

In January, Stein joined other attorneys general from 19 other states, the District of Columbia, the Northern Mariana Islands and Puerto Rico asking the FDA to ban menthol cigarettes.

On Monday, the attorney general sent a letter to acting FDA commissioner Janet Woodcock asking the FDA to prohibit all “non-tobacco flavors,” including menthol, in e-cigarettes. Additionally, he asked the FDA to limit the amount of nicotine in e-cigarette products and to impose marketing restrictions on e-cigarette companies so they cannot try to entice youth toward their products.

“North Carolina will continue to exercise its jurisdiction under state law to do everything possible to keep our kids safe,” Stein said in the letter. “But the FDA has the authority to effect broader systemic change in response to the youth nicotine epidemic. An entire generation of youth is —right now— being introduced to nicotine through e-cigarettes, and we must protect them. Now is the time for the FDA to take decisive action to rein in these harmful practices before more irreversible damage to public health is done.”

Landmark agreement?

North Carolina led the way in taking legal action against Juul in May, 2019. California, Illinois, Massachusetts, and New York followed Stein’s path and sued Juul, raising allegations similar to those in the North Carolina lawsuit.

In February 2020, Attorneys General from Connecticut, Florida, Nevada and Oregon announced that a 39-state coalition had launched a bipartisan investigation into Juul.

Stein also has filed lawsuits against eight other e-cigarette companies using the North Carolina Unfair or Deceptive Trade Practices Act as he did with Juul. The other companies are Beard Vape, Direct eLiquid, Electric Lotus, Electric Tobacconist, Eonsmoke, Juice Man, Tinted Brew, and VapeCo.

The FDA also is in the process of reviewing marketing applications from Juul and other e-cigarette companies that were submitted in September as required by Congress. Though their applications are under review, the companies have been allowed to remain on the market for at least several more months.

The months and years ahead will determine what impact the Juul settlement with North Carolina has on other e-cigarette companies and other states.

“This win will go a long way in keeping JUUL products out of kids’ hands, keeping its chemical vapor out of their lungs, and keeping its nicotine from poisoning and addicting their brains,” Stein said in a statement announcing the consent order. “I’m incredibly proud of my team for their hard work on behalf of North Carolina families. We’re not done – we still have to turn the tide on a teen vaping epidemic that was borne of JUUL’s greed. As your attorney general, I’ll keep fighting to prevent another generation of young people from becoming addicted to nicotine.”

Lawmakers hold the purse strings

In North Carolina, it’s unclear how much power Stein, a Democrat, will have over how a state legislature, whose chambers have Republican majorities, distributes the settlement funds.

“Our expectation is the legislature will comply with the court order,” Stein said in a phone interview on Monday.

But history shows interpretations of settlement agreements can vary depending on who’s doing the allocating.

More than two decades have passed since North Carolina and other states reached a sweeping settlement with the country’s four largest tobacco companies, seeking to recover health -care costs to their Medicaid and public health systems for tobacco-related illness.

As part of the 1998 Master Settlement Agreement, the industry agreed to settle with North Carolina and 45 other states to pay out $206 billion over the next 25 years. North Carolina and 13 other states would receive $5 billion as compensation for potential harm that communities producing might suffer.

North Carolina’s total portion was estimated to be some $40 billion over the next quarter century. This year, the state will receive a $167 million payout from the settlement.

Legislation for how that money would be distributed was adopted in 1999 laying out that:

• 50 percent would go to the Golden LEAF Foundation to spur economic development in communities dependent on tobacco;
• 25 percent what is now known at the Health and Wellness Trust Fund; and 
• 25 percent to a trust fund established by the general assembly for tobacco producers, allotment holders and others engaged in tobacco related businesses.

‘Can’t play whack-a-mole’

Some of that money went to tobacco cessation and prevention programs, such as one that Adam Goldstein, director of Tobacco Intervention Programs (Tobacco Treatment Program and Tobacco Prevention and Evaluation Program) at the UNC School of Medicine, helped build.

On Monday, after the Juul settlement was announced, Goldstein took a brief break from finishing up a report studying the impact that interacting with patients virtually during the pandemic had on efforts to stop smoking.

Goldstein’s heartened that there will be more funding in the pipeline for smoking cessation programs, but he cautioned against focusing only on e-cigarettes.

“We can’t play whack-a-mole with any one product,” Goldstein said.

Studies show that many young people who report using e-cigarettes also are what he calls “dual users,” meaning they might also smoke combustible or more traditional cigarettes and cigars, while quite possibly being drawn to the thinner, flavored cigarillos.

“Flavors play a huge role in encouraging participation in youth,” said Goldstein, whose research focuses on tobacco regulatory science and its relationship to health policy, disparities in tobacco use and patient-centered tobacco cessation.

Over the past year, Goldstein said, UNC opened its cessation program to e-cigarette users, too. Many of the patients that come to the program want to quit but because of the addictive hold the nicotine has over them have been unable to stop using.

Still, as noted by Goldstein and Kinard, the mother in High Point whose son had to go across the country for treatment for his nicotine addiction, North Carolina lags on providing centers that are available to abusers of other substances.

“There are no residential programs in North Carolina,” Goldstein said.

There could be more money, too, for cognitive behavioral therapy that many smokers need and for pharmaceutical support such as nicotine patches, gum and more.

GOP cuts prevention funding

North Carolina was creating what Goldstein described as “a quiet success” through the first decade of the tobacco settlement funds coming to the state, seeing the youth smoking rate hit an all-time low in 2011.

Then in 2013, when the Republicans held newly gained majorities in both General Assembly chambers and the governor’s office, lawmakers slashed funding for tobacco prevention programs.

In 2011, $17.3 million was allotted in the budget for such programs. In 2013, nothing was included in the budget for teen tobacco prevention programs geared toward youth and that hasn’t changed. Since then, North Carolina has received more than 1.2 billion dollars in settlement money. 

That corresponded with the time when North Carolina started seeing a rise in e-cigarette use, a trend that has continued on that trajectory since then.

According to the Campaign for Tobacco Free Kids North Carolina report card, 8.3 percent of high school students smoke.

The organization’s data suggest that nationally the high school smoking rate was at 4.6 percent with 19.6 percent of high school students reporting using e-cigarettes. Years of research have shown that most adult smokers picked up the habit when they were young.

One e-cigarette pod, Goldstein pointed out, contains nearly as much nicotine as an entire pack of cigarettes.

‘Our kids are worth more than zero’

A look back over the 22 years since the tobacco settlement done by The Campaign for Tobacco Free Kids shows that North Carolina spent  $2.2 million on tobacco prevention over the past budget year, or just 2 percent of the $99.3 million that the Centers for Disease Control and Prevention recommends.

James Davis, a physician at Duke who is the medical director for Duke Center for Smoking Cessation, director of the Duke Smoking Cessation Program and co-director of the Duke-UNC Tobacco Treatment Specialist Credentialing Program, said it can be difficult to get funding for smoking- related research. Some 480,000 people die each year from tobacco-related disease, according to the CDC, but competing for grant funding to study the issue can be difficult.

“We’ve known the problems, they’re well documented,” Davis said. “It’s almost like we’ve become numb to it.”

The Juul settlement funds could help fill some of that research void, as well as be put toward the development of youth programs.

The Quitline in North Carolina has been poorly funded for years, Davis said, and that should be considered as the settlement funds are allocated.

Ultimately, Davis would like state lawmakers to realize that reducing tobacco use in the state ultimately could save a lot of health care costs.

The American Cancer Society Cancer Action Network issued a statement on Tuesday calling out Senate lawmakers who passed their recommended spending plan last week with no funding allocated for tobacco prevention programs.

“Our kids are worth more than zero,” Derwin Montgomery, ACS CAN Government Relations Director in North Carolina, said in the statement. “With our state budget in surplus and an estimated $140 million collected from the tobacco industry annually, offering no support to prevent our kids from starting to use tobacco is shocking and downright dangerous. Failing to include such funding will cost our state more financially in the long-term and result in thousands of preventable deaths.”

Montgomery urged the House, which has not yet released its proposed two-year spending plan to approve the End Youth Nicotine Dependence Act, a bill sponsored by Sen. Mike Woodard, a Durham Democrat, that would dedicate $17 million from the nearly $140 million North Carolina receives from the Master Settlement Agreement payments.

Kinard, who was ready to pitch her case in state court for why she wants the e-cigarette providers to stop marketing their products to young people, hopes state lawmakers put settlement funds toward an effort that could go a long way.

“Prevention is key,” Kinard said. “If kids don’t ever start, there won’t be a problem.”