HARTFORD, CT — A group representing pharmaceutical distributors sent a letter to lawmakers raising constitutional questions about a proposed opioid tax, but the warning was not leading legislative leaders back down.
The tax was originally part of the “Connecticut Option” bill, but has been included in the state budget. It is estimated to bring in $20 million in the second year of the biennium.
Sen. Matt Lesser, D-Middletown, said it will help 26,000 low-income parents get back on Medicaid. New income guidelines set in 2016 to close a budget deficit kicked them off the program.
Lesser said the opioid tax seemed like a good way to pay for it.
“It seemed that the least objectionable way was to ask companies associated with the opioid epidemic to chip in a very modest amount,” Lesser said.
However, Maribel La Luz, Gov. Ned Lamont’s communications director, said because of concerns about implementation and the need for federal approval, “We are also not counting on the revenue within the budget and already made the necessary adjustments.”
Attorneys for the Healthcare Distribution Alliance, a group that represents major pharmaceutical distributors, wrote to lawmakers Thursday and told them the tax “raises serious constitutional concerns.”
“First, there is a dormant commerce clause problem. Out-of-state distributors will bear the Proposed Tax, while in-state distributors will not. This is the paradigmatic example of discrimination against interstate commerce,” attorneys with McDermott Will & Emery said in the letter on behalf of the Healthcare Distribution Alliance. “There may also be economic evidence to show discriminatory effect.”
“Finally, the Proposed Tax may violate the internal consistency test of the dormant commerce clause because if every state had the same tax, an opioid sold through a distribution chain covering multiple states will bear a higher cumulative tax than one sold purely within Connecticut,” the unnamed attorney wrote.
New York was the first state in the nation to tax the sale of opioids. It passed last year as part of that state’s budget, but the tax was struck down by a federal judge before it could be implemented. A judge concluded that the provision barring manufacturers and distributors from passing the tax onto consumers violated the dormant commerce clause.
In April of this year, Gov. Andrew Cuomo approved a budget that would allow the tax to be passed along to consumers.
Rep. William A. Petit Jr., a physician, said an opioid tax makes no sense.
“It’s going to raise the cost of care for people in the worst moment of their lives,” Petit said Saturday.
He said it will increase the cost of medication, and at $20 million will likely increase health insurance premiums for every man, woman, and child across the state by $6 or $7.
“You can’t take $20 million out of the system and expect it not to have an impact,” Petit added.
Sen. Saud Anwar, D-South Windsor, another physician, said there will be a lot of unintended consequences.
“When somebody is getting anesthesia, when someone is having surgery, when somebody is actually going to get care in the hospital or an outpatient procedure, they will be paying a lot more than they have,” Anwar said. “Opioids have a legitimate use and there is a legitimate risk of abuse, but in order to try and reduce that abuse we’re going to have an impact on people with a legitimate use.”
House Speaker Joe Aresimowicz, D-Berlin, said, “The producers of opioids have made a lot of money in a very inappropriate way, so it’s our intention to make sure they’ll be paying it and not the consumers.”
However, the Healthcare Distribution Alliance said the tax wouldn’t impact producers, but distributors of the drug.
“In many, if not most cases, the ‘first sale’ of any medicine into the state of Connecticut is not made by a manufacturer, but rather by a wholesale distributor, a chain pharmacy or possibly by a large hospital system,” John Gray, president and CEO of the Healthcare Distribution Alliance, wrote in a letter to lawmakers. “These are the entities that will pay the tax to the state, but ultimately it will be the Connecticut consumer who will pay the price.”
Gray added: “To impose a tax on prescription drugs which will add costs to the healthcare system makes no sense as a funding mechanism for a program intended to do just the opposite for Connecticut consumers.”
New York was unable to figure out a way to make sure that the tax was not passed along to consumers, but Connecticut’s Democratic legislative leaders remain committed to the tax.