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Smoking Can Help Czech Economy, Philip Morris-Little Report Says

Gordon Fairclough / Wall Street Journal 16jul01

Cigarette Smokers' Frequent Early Deaths Offset Federal Medical Costs, Study Finds

[ Complete Philip Morris Study ]

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.

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