Who will pay Gov. Andrew Cuomo’s opioid tax?

| City and State New York

Just a few months after getting shot down by the courts, Gov. Andrew Cuomo is trying again to institute an opioid tax.

The pharmaceutical industry, predictably, remains opposed – but health care experts and advocates are also raising concerns about the governor’s proposal, which has a good chance of advancing as part of the state budget.

U.S. District Court Judge Katherine Polk Failla struck down a previous version of the legislation in December, siding with pharmaceutical interests. She specifically took issue with a clause that prohibited the tax to be passed down to the consumer, which the plaintiffs argued would inevitably happen.

In her ruling, Failla wrote that the legislation was “not a tax but is rather a regulatory penalty on opioid manufacturers and distributors. And as currently structured, it improperly burdens interstate commerce.”

The idea behind an opioid tax is to punish pharmaceutical companies for their role in the opioid epidemic. It’s also seen as a way to raise money for opioid treatment and overdose prevention programs. Last year’s Opioid Stewardship Act was expected to raise $600 million. Pharmaceutical companies were slated to be taxed on the amount of “morphine milligram equivalents,” which accounts for the varying strengths of different opioids, distributed in New York.

Opioid taxes are an issue that’s been percolating in statehouses across the country for several years, with little success, and New York was the first state to pass a tax. Lawmakers in New Jersey and Massachusetts introduced similar proposals this year, and other bills have been debated in more than a dozen states since 2017. The Healthcare Distribution Alliance, which represents pharmaceutical distributors, brought the litigation against New York and said it is gearing up to battle the tax in several states this year.

“This is an emotional issue, but what I think gets lost in the emotion is that these are legit patients in need of legitimate drugs,” said a Healthcare Distribution Alliance spokesperson. “We are not in the position of providing medical care, we are simply filling orders. We do not drive the demand.”

“We tax cigarettes to get fewer people to buy them. But with opioids, do we want people to stop taking pain medication?” – Richard Auxier, Urban Institute research associate

This time around, Morris Peters, a state Division of the Budget spokesman, wrote in an emailed statement that the measure is “simply an alternative method for collecting opioid resources anticipated in last year’s and the current budget to support investments that respond to the opioid crisis.” The new legislation specifically allows for the tax to get passed on to consumers, a move made to strengthen their legal argument if the tax bill ends up back in court.

Experts have mixed opinions on opioid taxes, with some arguing that taxing a medication is a lot less straightforward than taxing an unhealthy commercial product.

“We tax cigarettes not just to punish the companies, but to get fewer people to buy them. But with opioids, do we want people to stop taking pain medication?” asked Richard Auxier, research associate at the Urban Institute in Washington, D.C. “With cigarettes it’s easy to say, cigarettes cause cancer, so you shouldn’t use them. Opioids are more complicated.”

Auxier added that health-related taxes work best when there’s a strong connection to the behavior you’re trying to disincentivize. “If you smoke, you will likely get cancer. The tax being used to break that cycle is a good thing,” he said. “But the link here isn’t as strong, and there’s a lot of confusion. These industries did horrible things, but is a tax the best tool in the toolkit?”

John Coppola, executive director of the Alcoholism and Substance Abuse Providers of New York State, said he supports the idea of an opioid tax and he doesn’t take as much of an issue on the possible pass-through cost to consumers, saying that’s not the worst outcome. However, he wants confirmation from lawmakers that they’ll create a fund to help those struggling with addiction.

“It wouldn’t shock me if we used it for the deficit, or the MTA,” he said. “The Legislature should insist that the dollars support recovery and treatment efforts.”

Another way to increase money for treatment and prevention would be for the Cuomo administration to boost the budget for the state Office of Alcoholism and Substance Abuse Services, which only grew 1 percent between 2012 and 2018.

“Now that consumers are paying for the tax, it’s not punishing the pharmaceutical companies,” said Bill Hammond, director of health policy with the Empire Center for Public Policy. “The alleged wrongdoings has become a pretext for raising money and grabbing cash. I’m not saying we’re not spending any money, but if you looked at the budget you wouldn’t know we were at crisis levels.”

Experts agreed the opioid tax would likely pass again, but it’s unclear if it would hold up in court. Despite the mixed research and previous court decision, count on the Cuomo administration’s determination to push the policy as far as it can go.

“When the governor makes up his mind on something,” Coppola said, “most of the time he moves the needle – no pun intended.”

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