Some fear opioid tax will backfire
Big pharma trade group study: Industry will punish consumers by passing cost on to them
With the passage of the state budget last week, New York will once again attempt to become the first state in the nation to tax the sale of opioids.
But lawmakers and addiction treatment advocates say the new tax on prescription painkillers is expected to make it harder for patients to afford their medications and is unlikely to result in any new funds for addiction treatment or pre
vention services — as proponents of the tax originally suggested.
“The whole idea that it was meant to help anyone is a PR fiction,” said Assemblywoman Linda Rosenthal, chair of her chamber’s Committee on Alcoholism and Drug Abuse. “It won’t help anyone but New York state.”
New York first tried its hand at an opioid tax last year, and passed it as part of the budget process in an attempt to hold drugmakers and distributors responsible for their role in an escalating overdose epidemic fueled by opioid addiction.
But the tax was struck down before it could be implemented by a federal judge who said a provision barring manufacturers and distributors from passing the extra cost onto consumers violated the Dormant Commerce Clause. That clause says that states cannot pass legislation favoring their own citizens and businesses at the expense of citizens and businesses from out of state.
Manufacturers and distributors had successfully argued in court that the New York opioid tax would force them to raise costs along their supply chain out of state.
To get around this, Gov. Andrew Cuomo’s budget amendments this year included an opioid tax that would allow drugmakers and distributors to pass the cost onto New York consumers.
“If you go back to last year, at least that tax was specifically crafted to hold pharmaceutical companies responsible for a crisis they helped to create,” Rosenthal said. “We knew the revenue would likely supplant existing treatment funds, but at least they were paying something. Now it’s the patients who will pay.”
An economic analysis of the proposed tax commissioned by a trade group representing the pharmaceutical industry concluded that consumers likely would pay the lion’s share of the proposed tax, and theorized it would lead to higher insurance premiums, higher out-of-pocket drug costs, and higher taxes for New York residents.
It also ominously warned that a tax could increase overdose deaths in New York. By increasing the cost of prescription opioids, it theorized, the tax would encourage residents suffering from opioid dependence to switch to cheaper and more dangerous opioids, such as heroin or illicitly manufactured fentanyl.
The proposed tax quickly drew condemnation from patients, physicians, pharmacists, disability rights groups and the American Cancer Society, who rallied at the state Capitol late last month to urge lawmakers to oppose it.
“The Assembly fought hard against it,” Rosenthal said of the budget negotiation process. “But once it was in the budget it was hard to pull it out.”
Facing a $2.6 billion revenue shortfall this year, Cuomo rekindled the opioid tax but rejiggered it to avoid potential legal issues. It is estimated the tax will generate $100 million in new revenue.
Asked whether the revenues had been earmarked for anything in particular, Freeman Klopott, a spokesman for the state budget division, said they would go into the state’s general fund.
While legislators supporting the tax are hopeful the extra revenue will result in increased funding for addiction treatment and prevention services, state budget language contains no guarantee that it will.
The budget includes language that it is “the intent of the legislature” that no less than $100 million of revenue a year should go to support programs operated, approved or certified by the state Office of Alcoholism and Substance Abuse Services (OASAS). But it is not specific to the opioid tax revenues, Klopott said.
That is also around the amount OASAS already receives in the state budget, Rosenthal said, suggesting that the $100 million budget pledge to OASAS was a “contrivance of wording” to get people on board with the tax.
At least 16 states have considered legislation in recent years that would create an opioid tax, according to the National Conference of State Legislatures. New York is the only state to have gone through with it.
The Healthcare Distribution Alliance, a group that represents major pharmaceutical distributors, said the tax sets a ”dangerous precedent.”
“For the second year in a row, Governor Cuomo and his administration have prioritized political posturing and funding state coffers at the expense of New York’s most vulnerable patients,” HDA president and CEO John Gray said.
New York is also suing the makers and distributors of opioids, and the family behind Oxycontin manufacturer Purdue Pharma, in an attempt to recoup costs incurred by the ongoing opioid epidemic. The 258-page complaint, filed last week, is the nation’s most extensive opioid lawsuit yet.
An economic analysis of the proposed tax commissioned by a trade group representing the pharmaceutical industry concluded that consumers likely would pay the lion’s share of the proposed tax, and theorized it would lead to higher insurance premiums, higher out-of-pocket drug costs, and higher taxes for New York residents.