Markets

New Study Alleges Philip Morris Tried to Influence WHO

By David Phillips

Updated on: January 2, 2009 / 10:16 PM EST / MoneyWatch

A new study of previously confidential tobacco industry documents concluded that a Philip Morris scientist, Roger Walk, established close connections with a WHO Collaborating Center in Thailand, called the Chulabhorn Research Institute, and leveraged these relationships to help advance the interests of the cigarette maker in the country and across Asia. Although the purveyor of Marlboro, Parliament, and Virginia Slims showed cigarette volume growth of 15.5 billion units, or 2.4 percent, to 667.0 billion units for the nine-months ended September 30, the company -- albeit Asia, Latin America, and Africa continue to report healthy volume gains -- is concerned that governmental and NGO actions will result in reduced industry volume and consumption in many of its markets, according to its third-quarter 2008 regulatory 10-Q filing:

Significant regulatory developments will take place over the next few years in most of our markets, driven principally by the World Health Organization's FCTC (Framework Convention for Tobacco Control). The FCTC is the first international public health treaty, and its objective is to establish a global agenda for tobacco regulation with the purpose of reducing initiation of tobacco use and encouraging cessation. In addition, the FCTC has led to increased efforts by tobacco control advocates and public health organizations to reduce the palatability and appeal of tobacco products to adult smokers.

Initiatives by the FCTC include the restriction of smoking in public places; imposition of more health warning requirements on packaging; public education campaigns to inform the public about the health consequences of smoking and the benefits of quitting; the restriction and/or elimination all tobacco product advertising, marketing, promotions and sponsorships; and, the implementation of public health-based fiscal policies (tax and price increases).

That Philip Morris has cause for concern is reflected in the European Union market, where cigarette shipment volume decreased 4.1% to 191.6 million units (for the nine months ending September 30), driven lower by the implementation of indoor public smoking restrictions (notably in France, Germany, Portugal, and the United Kingdom) and the negative impact of higher cigarette taxes.

The study is "full of innuendos and unsupported facts," Mathuros Ruchirawat, the institute's vice-president of research, said in an e-mailed response to questions from Bloomberg News.

David Phillips

David Phillips has more than 25 years' experience on Wall Street, first as a financial consultant and then as an equity analyst for several investment banking firms. He sifts through SEC filings for his blog The 10Q Detective, looking for financial statement soft spots, such as depreciation policies, warranty reserves and restructuring charges. He has been widely quoted in outlets such as BusinessWeek, The International Herald Tribune, Investor's Business Daily, Kiplinger's Personal Finance, and The Wall Street Journal.

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