[W]ith the 2018 legislative session winding down, a proposed tax on prescription opioids is mired in uncertainty.
The Senate Finance Committee is scrutinizing how the levy would work and whether it could drive up Medicaid costs, thus negating a portion of the state’s revenues.
Also, Gov. Phil Scott’s administration is opposing the plan. That’s partly because the governor is against new taxes, but it’s also because officials say an opioid tax may not be an effective tool in the battle against substance abuse.
“The problem we’re trying to solve is how to reduce the usage of opiates,” said Michael Costa, deputy commissioner of the Department of Vermont Health Access. “It’s not clear that a tax is the best way to do that.”
Vermont officials have implemented a variety of initiatives aimed at combating the opioid epidemic.
Those include widespread distribution of the overdose-reversal drug naloxone and investment in the statewide “hub and spoke” program of medication-assisted treatment. The state also has imposed limits on the number of painkillers doctors can prescribe.
A tax on prescription opioids could pump significant, additional funding into the state’s prevention, treatment and recovery programs.
The tax proposal — the brainchild of the Senate Health and Welfare Committee — popped up relatively late in the current legislative session. But senators got around legislative deadlines by inserting opioid tax language into H.386, which already had passed the House as a bill related to home health agency provider taxes.
A recent draft of H.386 creates a “substance use disorder prevention, treatment and recovery fund” to receive revenue from an opioid tax that would be imposed at a rate of one penny per morphine milligram equivalent – a value that measures opioids’ potency relative to morphine.
Opioids used in medication-assisted addiction treatment would be exempt from the tax.
An estimate from the Legislative Joint Fiscal Office says the state could net $940,800 from the tax in fiscal year 2019 and $2.14 million in fiscal 2020. The 2019 number is lower because the tax would not take effect until halfway through the fiscal year, and also because the analysis factored in $300,000 in one-time administrative costs.
The draft of H.386 now in Senate Finance allocates those funds to the state Department for Children and Families; the departments of health and corrections; and the Agency of Human Services.
The money would pay for programs like mentoring and after-school programs for kids; needle exchange and naloxone distribution; expansion of medication-assisted treatment in prisons; and the operating costs of the governor’s Opioid Coordination Council.
But the bill has not yet moved forward as lawmakers, administration officials and trade groups cast doubt on its structure and its effectiveness.
For example, the bill proposes that a drug wholesaler should collect the tax from a manufacturer and then turn it over to the state. But the Virginia-based Healthcare Distribution Alliance, which represents pharmaceutical wholesale distributors, says that role is “inappropriate and outside the scope of authority that a public or private corporation should be granted.”
In testimony filed with the Finance Committee, the alliance also questioned the logistics of assessing the tax and warned that “the proposal would ultimately add significant costs to necessary and legitimately prescribed medications for many citizens of Vermont.”
A trade group representing generic-drug manufacturers raised similar concerns, adding that some companies “may recognize that the market is no longer viable for them.”
The proposed opiate levy also is unpalatable for the governor, who has promised to not impose new taxes and fees.
“Certainly, we worry about the impact of the tax,” Costa told committee members this week. “Any tax that’s levied on business ends up being passed on to the consumers in some way.”
That ties in with a concern raised by Sen. Randy Brock, R-Franklin, who questioned “whether or not a substantial portion of the (opioid) tax would eventually be paid by Medicaid.”
“My concern is, are we taxing ourselves?” Brock asked.
Costa acknowledged that possibility.
“The state pays for drugs through the Medicaid program,” Costa said in a later interview. “There is a concern that if we levy a tax that increases drug prices, that we are essentially making the Medicaid program cost more.”
Costa said it’s not clear whether the state could attempt to exempt Medicaid drug purchases from the tax.
There were other questions raised in the Finance Committee, including the relationship between the proposed tax and the price of a typical opioid prescription. The Healthcare Distribution Alliance suggested that, in some cases, the tax “will significantly exceed the price of the product itself.”
Sen. Ann Cummings, D-Washington and the committee’s chair, said she’s concerned that “a penny may well be too much if you’re putting a $5 tax on a bottle of $7 medication.”
