Opioid Tax Sets Bad Precedent

A proposal to tax prescription opioid medicines has its heart in the right place but is ineffective policy that would set an unfortunate precedent.
SB 5 creates a complex tax collection regulatory scheme and undermines Connecticut’s economic development efforts.
The proposal levies a tax on manufacturers and wholesalers of opioid medicines sold to a variety of parties, including pharmacies, pharmacists, medical doctors, dentists, veterinarians, and certain hospital, laboratory, college and scientific personnel.
It provides a tax refund mechanism for medicines purchased through Medicare and other federal programs that bar state taxation.
Seems simple enough, but the distribution pathway from manufacturers through wholesalers often involves multiple states.
When the distribution process begins, manufacturers often do not and cannot know to  which state a medicine will be delivered.
Manufacturers also cannot know from whom a patient will receive an opioid medicine (e.g., primary care doctor or hospital) or if the patient is a Medicare beneficiary.

‘Regrettable’ Precedent

Tracking opioid medicines through this distribution labyrinth means determining the state in which they were prescribed and the status of the patient–exempt or non-exempt from taxation–is nearly impossible and certainly costly.
SB 5’s surcharge of 6.35% creates a regrettable precedent, singling out one product and one industry for special taxation.

Connecticut businesses are rightly concerned whether other products and industries would be selected for additional and special state taxation.
Connecticut faces serious fiscal problems and economic development challenges. Laudably, we are working to find ways to put our fiscal house into long-term order without increasing taxes or adding layers of taxation.
But we need to become known as a state of less regulatory complexity–not as SB 5 would do, of more regulatory complexity.
Businesses, consumers, and patients consistently cry out that what Connecticut needs are lower, not higher, taxes and fewer, not more, taxes.
When new taxes are proposed for specific reasons we’re often told “lock boxes” will be devised to protect the new revenue stream.
Skepticism abounds, however, that a new tax as contained in SB 5 would reliably and consistently be fully directed toward addiction treatment and not be redirected to, say, balancing the state budget.

Deterring Abuse

Addiction is a complex set of problems, sometimes involving prescription opioids and often involving illegal opiates (e.g., heroin). But it’s unclear if there are effective addiction treatment programs unable to treat patients owing to a lack of funding.
SB 5 targets opioid manufacturers and patients for taxation but fails to look for revenue from those who illegally entice and sell opioids and opiates.
Law enforcement drug seizure proceeds could be a more just source of revenue to direct toward treatment programs.
SB 5 also disregards how diligently the biopharma industry has worked to combat addiction. The industry has invested billions of dollars in R&D and developed a new class of opiates that are highly effective in deterring abuse.
It would be far better policy to encourage healthcare providers to prescribe these “abuse deterrent opioids” than establishing a new tax.
Connecticut state lawmakers should reject SB 5 to avoid adding confusion, complexity, and cost to the distribution channels of this important Connecticut industry.
They should not ask patients already burdened with increasing healthcare costs, directly or indirectly, to shoulder yet another Connecticut tax.

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For more information, contact CBIA Bioscience Growth Council executive director Paul Pescatello (860.244.1938) | @CTBio