Medicine Tax Bad for Biopharma, Patients, State

Issues & Policies

In a close vote, the Finance Committee this week approved a bill (SB 1130) to impose a 6.35% sales tax on manufacturers of certain pain medications (generally those containing opioids).
On top of the mountain of federal and state laws and regulations those manufacturers already face, SB 1130 requires them to register with and submit quarterly gross receipts tax returns to the state.
The tax revenue supposedly would be held in the state’s General Fund to pay for Department of Mental Health and Addiction Services programs for opioid abuse prevention and treatment.
While the idea behind the bill–to reduce and treat opioid abuse–is sound, its mechanics aren’t. The proposal is complex, unprecedented, and conflicts with federal law.
Even the bill’s supporters admitted this but still asked the committee to move the legislation forward so that it could be better understood and its flaws addressed in the process.
This kind of “let’s pass it to find out what’s in it” means of legislating is not the best public policy.
A biopharma-specific tax would be both unprecedented and counterproductive to Connecticut’s investment in and comprehensive policies designed to grow life sciences-related industries in the state.
And because federal law prohibits states from taxing medicines sold under Medicare Part D, SB 1130 would create the need for a complex and unfair system of taxation–a system where some patients’ medicines were tax-free while others’ weren’t.
Though SB 1130 is at face value a tax on manufacturers, it’s difficult to imagine that other parties, especially retail pharmacies that fill patients’ prescriptions, wouldn’t become integral to collecting the tax.
Only retailers have the information identifying which patients are and aren’t covered by Medicare Part D. How that information would be used without violating the privacy and security provisions of HIPAA is left unaddressed.
Fortunately, there’s a nontax alternative to combating opioid abuse and treating opioid addiction.
Connecticut’s bioscience industry has invested billions of R&D dollars to create a breakthrough innovative class of abuse-deterrent opioids.
Abuse-deterrent opioids work in various novel ways to deliver effective pain relief while blocking methods for abuse. Some are physical or chemical barriers; others add compounds to interfere with euphoric effects.
The fundamental feature of the new medicines is that they are effective at preventing opioid abuse and treating patients with opioid addiction.
Studies so far indicate:

  • Abuse-deterrent opioids produce a 41% decrease in opioid abuse among all individuals
  • Healthcare costs are shown to decrease by approximately $10,000 per patient for opioid-abuse related services (as a result of less opioid abuse). Hospitalizations, substance abuse treatment services, emergency department visits and outpatient visits all decrease substantially with the introduction of abuse-deterrent opioids.

The U.S. Food and Drug Administration has specific guidelines for the labeling of abuse-deterrent opioids. Under these guidelines, in order to claim abuse-deterrent qualities in an opioid medicine, the medicine must actually have a measurable impact on abuse in patients.
Since release of that FDA guidance, study data has been submitted for four new abuse-deterrent opioid medicines and, based on the study findings, the medicines have received FDA approval for labels indicating the medicines are expected to “result in a meaningful reduction in abuse.”
Another bill this year, SB 21, would authorize a study of abuse-deterrent opioids. But studies show definitively the value of abuse-deterrent opioids; there’s no need for another study.
Restoring SB 21 to its original language—encouraging abuse-deterrent opioid use by putting these medicines on par with nonabuse-deterrent opioids–would help meet the same policy outcomes as SB 1130.
This would help patients without burdening biopharma companies with an essentially unworkable new taxation mechanism.
For more information, contact CBIA Bioscience Growth Council chair Paul Pescatello at 860.244.1938 | | @CTBio


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