Opinion ID: 2601911
Heading Depth: 1
Heading Rank: 3

Heading: The NPM adjustment

Text: One MSA adjustment applied by the independent auditor that generally reduces a tobacco company's annual payment is the Non-Participating Manufacturer Adjustment (NPM adjustment), which essentially reduces a tobacco company's annual payment amount if that company, as a result of its participation in the MSA, loses its share of the tobacco market to a tobacco company that is not bound by the MS A. Specifically, section IX(d)(1) of the MSA provides that an NPM adjustment shall apply if: (a) the settling tobacco companies collectively lose market share to tobacco companies not subject to the MSA's payment obligations and marketing and other restrictions, and (b) an economic consulting firm determines that the MSA was a significant factor contributing to that loss. Nonetheless, under the MSA, a state can avoid an NPM adjustment by enacting, and diligently enforcing, a qualifying statute imposing certain payment obligations on tobacco companies doing business in that state that are not parties to the MSA. A qualifying statute is a statute that requires all tobacco manufacturers selling cigarettes in a state to either join the MSA or place funds into an escrow account for the benefit of the state's future tobacco-related liabilities. Under the MSA, an NPM adjustment may be made when it is determined that a state fails to diligently enforce its qualifying statute.