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Legislative Memo

Brendan O'Bryan
Manager of Government Affairs
T 518.694.4464
www.bcnys.org

BILL:

S.7509 / A.9509 Part CC (Budget)

Support

SUBJECT:

Opioid Epidemic Surcharge

 

DATE:

February 6, 2018

 

The Business Council opposes this legislation which would establish an opioid epidemic surcharge, i.e., tax, in the amount of two cents per morphine milligram equivalent sold, on the first sale of all opioids in the State.

Over the last several years, New York State has enacted a significant number of regulatory and statutory measures in an effort to combat the growing prescription opioid and heroin epidemic.  These include, the creation of I-STOP/PMP - Internet System for Tracking Over-Prescribing - Prescription Monitoring Program; creation of an expedited appeals process for insurance; new crime of fraud and deceit related to controlled substances to crack down on doctor shopping; new crime of criminal sale of a prescription for a controlled substance or of a controlled substance by a practitioner or pharmacist ; granting the Department of Health (DOH)s Bureau of Narcotic Enforcement expanded access to criminal histories to aid its investigations of rogue prescribers and dispensers; increased the penalties for the criminal sale of a controlled substance by a pharmacist or practitioner by making the crime a class C felony; improved accessibility to naloxone anti-overdose kits; expanded public education campaigns; updated Workers’ Compensation Board (NY-WCB) adopted updated Medical Treatment Guidelines for “Non-Acute Pain,” specifically addressing opioid addiction in the workers’ comp system; granting that a defendant’s  treatment for opioid abuse or dependence shall not be deemed to have violated release conditions on the basis of his or her participation in medically prescribed drug treatments; establishing the crime of homicide by sale of an opioid controlled substance; expanding the crime of operating as a major trafficker; facilitating the conviction of drug dealers by allowing someone to be charged with the crime of intent to sell if they possessed 50 or more packages of a Schedule I opium derivative, or possessed $300 or more worth of such drugs;  expand the list of controlled substances in schedules I, II, III, IV, and V to include any controlled substance which is intended for human consumption and is structurally or pharmacologically substantially similar to, or is represented as being similar to heroin, opium, or other opioid-based narcotic; established assisted outpatient treatment for substance use disorders; creation of a prescription pain medication awareness program for medical professionals; creating Drug-Free Zones upon the grounds of drug or alcohol treatment centers within 1,000 feet of a drug or alcohol treatment center and methadone clinic, similar to “drug-free zones” for schools; criminalization of the illegal transport of opiate controlled substances; establishing the option for a youth, suffering from a substance use disorder, to be adjudicated as a Person In Need of Supervision (PINS); and requiring the Department of Health to assign at least one investigator from the Bureau of Narcotics Enforcement to each county within New York City.

While The Business Council has been generally supportive of these provisions, we strongly oppose the imposition of this new tax, whose supposed purpose is to “disincentivize the use of opioids.”

In a misguided attempt to place blame for a national heroin epidemic, the budget singles out for taxation the manufacturers, producers and distributors of opioid medications whose efforts are based on the legal, medically necessary prescriptions being written.  This legislation will not have any effect on the number of opioids being prescribed within New York nor will it disincentivize a single heroin addict from using the drug.

The Executive Budget indicated that the revenue from this tax would be used to fund opioid prevention, treatment or recovery.  However, the actual language of this bill has the $127 million being deposited into the state’s general fund, while the state’s overall spending on alcohol and drug treatment will only increase by $18 million.  It appears that vast majority of the new tax will simply be used to shore up holes in the state budget. 

Further, this provision will have a number of unintended consequences.  Prescription medications are distributed through a complex national supply chain.  Medications may be shipped and stored in New York State, while on its way to another final destination.  With the sheer volume of all medications, opioids and non-opioids, being shipping through New York, it would be nearly impossible for either manufacturers or wholesalers to determine when a unit of product is subject to the proposed tax. Determining which of these products, from each distribution facility, contain an opioid ingredient, and when a sale would represent the “first sale” in to New York, and then calculate a tax rate based on the “morphine milligram equivalent” in each individual product, is a near impossible task and one, which the cost of compliance may be equal or greater to the tax itself.

Further questions arise under the use of mail-order pharmacy.  In many cases of mail order dispensing, the “first sale” in New York would be from pharmacy to patient.  The proposal results in an unclear understanding of what entity would be responsible for the tax due to the complexity of the supply chain.

Additionally, the proposal excludes certain treatment options from being subject to the tax.  These treatment options include sales made to chemical abuse or dependence facilities.  Due to the complexity of pharmaceutical sales, there is no way for a pharmaceutical distributor to know in advance where the product will ultimately be delivered upon the time of the original purchase from the manufacturer.  Furthermore a wholesale distributor is not made aware of how the product will be prescribed or used upon the delivery of the medication.  These reasons make these exemptions to the tax nearly impossible to execute.

There is little doubt that with such uncertainty and need for extensive new accounting mechanisms, the increased costs to the manufacturers, producers and distributors will be enormous and will eventually be borne patients.  Some models indicate that this tax could nearly double the cost of these products to their intended patients. 

Our members agree that we need an effective public response to the growing heroin epidemic.  Imposing a new tax, the bulk of which will not be used to address this rampant societal problem, does almost nothing to help. This new tax will be extremely costly and overly burdensome to both the pharmaceutical industry and the people who rely on medication.  Raising a new tax to combat heroin, in name only, is cynical and absolutely the wrong policy choice. 

For these reasons, The Business Council strongly opposes S.7509 / A.9509 Part CC, to create an Opioid Epidemic Surcharge.