Extras on Excise: Proposed Opioid Tax Could Be a Tough Pill to Swallow

The burgeoning opioid addiction crisis that hits close to home for many individuals and communities nationwide is spurring some states to take action. In Pennsylvania, Gov. Tom Wolf (D) held a joint legislative session on Sept. 28 to urge lawmakers to consider legislative proposals to combat the epidemic. One proposal includes imposing a tax on opioid-containing pharmaceuticals.  

Pennsylvania’s struggle with opioid-containing prescription painkillers like Vicodin, Percocet and fentanyl has led to more than 3,500 deaths from overdoses in 2015, up from 2,500 in 2014, as reported by Bloomberg BNA reporter Leslie A. Pappas in the Weekly State Tax Report.

Sen. Jay Costa (D) introduced S.B. 1213 on Sept. 16, which would levy a 10 percent assessment on the first sale of opioid-containing painkillers, paid by drug manufacturers or distributors. Drugs manufactured in the state for distribution outside Pennsylvania would not be assessed. Additionally, consumers may not be required to pay the assessment, either directly or indirectly. 

The 10 percent assessment could raise $60 million a year for anti-opioid addiction initiatives, according to a May memo written by Costa. S.B. 1213 would establish the Opioid Addiction Prevention and Treatment Fund, and assessment funds would provide for the purchase of the anti-overdose drug, naloxone, for use by first responders, opioid treatment programs in communities and jails, and drug and alcohol counseling and awareness programs, among other activity geared at mitigating opioid abuse.

S.B. 1213 also proposes that opioid drug manufacturers must file a report with the Pennsylvania Department of Revenue on or before the 20th day of each month, which shows the amounts sold for the preceding calendar month, and pay the assessment due. Manufacturers are also required to keep proper records for at least a four-year period under this legislation.

Currently, Pennsylvania does not impose an excise tax on pharmaceuticals. If passed, this legislation would be the first of its kind in the state. However, the legislature might not vote on the bill until after the November election—the bill is currently in the Finance committee.

Earlier this year, Connecticut legislators introduced S.B. 5 to levy a 6.35 percent surcharge on opioid medicine manufacturers and wholesalers to fund opioid prevention and treatment programs. The senate has yet to vote on this bill.

Pending legislation at the federal level, H.R. 5845 and S. 2977, would impose a $0.01 per milligram excise tax on the sale of opioid pain relievers by manufacturers. And like at the state level, these bills would establish opioid treatment programs from the revenue generated by the tax.

Regardless of when lawmakers vote, it will be very interesting to see what alternative measures pharmaceutical companies propose to reduce this epidemic.

Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn: Do you think that opioid pharmaceutical manufacturers should cover opioid abuse-deterrent initiatives? 

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