Higher Taxes on Pharmaceuticals Will Not Solve the Opioid Crisis

It is common knowledge that addiction to opioids and other controlled substances such as fentanyl is a national epidemic that needs to be addressed.  But, the plans being offered by Minnesota Governor Tim Waltz and the state legislature will drive up pharmaceutical costs, hurt patients, and fail to solve the opioid crisis in Minnesota.

The governor’s two-year budget would boost state spending by 8.8 percent, from $45.5 billion to $49.5 billion.  The budget includes increased annual registration taxes and additional controlled substances taxes on pharmacies, researchers, pharmaceutical companies, drug wholesalers, and practitioners, totaling $7.9 million.  It would also create an annual manufacturer and wholesaler opioid fee, based on total units sold, that in the aggregate of $11 million and $7 million respectively.

The legislature introduced two bills that would raise fees and taxes on pharmaceutical companies and wholesalers.  The House bill, HF 400 would require manufacturers of opioids and wholesalers to pay a tax of $12 million and $8 million respectively.  The Senate bill, SF 751, would raise current annual registration taxes to sell any drug in the state to a minimum of $5,000, an increase of more than 2,000 percent.  Opioid manufacturers would pay much more, a minimum of $55,000 a year, and could pay as much as $250,000, depending on the quantity it sold.  Currently, these two bills are in a legislative conference committee to work out the differences.

There have been endless complaints about pharmaceutical costs rising, but taxing manufacturers and wholesalers is an irrational response as these extra fees will either be passed along to patients and taxpayers or drug manufacturers will choose not to sell their products, which means less competition and higher prices.  Since 90 percent of all prescriptions dispensed are generics, these taxes would be particularly damaging to generic manufacturers, whose products behave more like commodities and have low profit margins.

Policy makers need to understand that while opioid overdose deaths have increased, the nature of the epidemic has changed since 2012.   The opioid addition problem is wide-ranging and goes beyond legal prescription drugs and patients using them correctly.   According to the Center for Disease Control (CDC), the opioid prescribing rate has dropped by 28 percent between 2012 and 2017.  Limiting the dates of prescriptions, drug monitoring programs, and educating doctors on the use of opioids have helped to reduce their use, while allowing access to them by patients who desperately need the medications.

Matrix Global Advisors pointed out where the focus on fighting opioids needs to be.  Approximately 36 percent of people that are misusing painkillers get their drugs from doctors.  The rest, 64 percent, get their drugs from a friend or relative, a drug dealer, or some other way.  A large and increasing number of people are getting their drugs from non-prescription opioids, like heroin and illegally manufactured fentanyl.  The CDC reported that in 2017, more than 28,000 deaths in 2017 were due to synthetic opioids (other than methadone), which is more deaths than from any other opioid.  Minnesota had an 84 percent increase in synthetic opioid deaths between 2016 and 2017, from 99 to 184.

A 2018 Drug Enforcement Administration report stated most of the illicit fentanyl, the most lethal category of opioids, is being brought into the U.S. from China and Mexico.  Fentanyl is also being mixed with other controlled substances and is often being sold as a counterfeit prescription pain reliever.  On January 31, 2019, the Associated Press reported that the largest illegal shipment of fentanyl, nearly 254 pounds, was seized at the Mexican border by U.S. Customs and Border Protection officers.  Other drugs such as heroin, cocaine, and methamphetamine, are coming in as well from Mexico.

Taxing legitimate pharmaceutical companies and wholesalers will not fix what has sadly become a widespread epidemic.