(Adds analyst comment, background)
SEOUL, April 14 South Korea's state health
insurer is seeking an initial 53.7 billion won ($51.9 million)
from three tobacco companies, including the local units of
Philip Morris International and British American Tobacco
, to offset treatment costs for diseases linked to
The National Health Insurance Service (NHIS) said on Monday
it was suing the two global cigarette makers, as well as local
market leader KT&G Corp, in a South Korean court.
The lawsuit is the first by a state organisation against
tobacco firms among 37 countries and territories in the Western
Pacific, according to the World Health Organization.
Only four tobacco lawsuits have ever been heard in South
Korea, all by individuals or families, so there is no precedent
of a successful action against a tobacco company.
Even if the insurer prevails, Morningstar analyst Philip
Gorham said the damages being sought are so small the companies
should be able to easily cover it through their cash flow.
"The broader issue is, do other governments try to do the
same thing, and I don't see why not. It's a legitimate thing to
go after to solve a legitimate problem," Gorham said.
"We believe the NHIS, as it takes responsibility for the
health of the public and oversees the insurance budget, has a
natural duty to bring this tobacco lawsuit," NHIS lawyer An
Sun-young told reporters.
The damages were calculated based on data on payments by
state insurers for patients with three cancer types associated
with smoking, NHIS added. The insurer has previously said it
spends more than $1.6 billion each year on treating
BAT said it would be inappropriate to comment given that the
case is ongoing. KT&G said it would base its response to the
lawsuit on previous legal processes. Philip Morris did not
respond to requests for comment.
Philip Morris, maker of Marlboro cigarettes, earlier this
month said it would shut a cigarette factory in Australia and
shift production to South Korea.
Philip Morris and BAT combined account for about a third of
South Korea's $9.3 billion tobacco market, which is the 10th
largest in the world, according to Morningstar. KT&G accounts
for the remaining just over 60 percent while Japan Tobacco
International (JTI), an affiliate of Japan Tobacco Inc,
has the smallest market share at 6.4 percent. JTI was not named
in the lawsuit.
The NHIS lawsuit comes after South Korea's Supreme Court
ruled last week in favour of KT&G on a separate case brought by
individuals, which found no causal link between lung cancer and
($1 = 1035.0500 Korean Won)
(Reporting by Joyce Lee; Editing by Miral Fahmy and Jason