Evading the drug tax

A California bill to steer more resources toward opioid treatment by taxing drug manufacturers and wholesalers is officially dead.

Supporters say its defeat is a lost opportunity, while opponents say it would have had unintended consequences, particularly for low-income patients recovering from surgery or enduring painful genetic diseases or terminal illnesses.

Co-authored by Sacramento Assemblyman Kevin McCarty, Assembly Bill 1468, the Opioid Prevention and Rehabilitation Act, would have raised $50 million in extra revenue by taxing sectors of the pharmaceutical industry. The money would have then bolstered opioid-related prevention and rehabilitation programs. McCarty and his co-author, Republican Assemblyman James Gallagher of Yuba City, said in their official argument for AB 1468 that California's public health system “desperately needs assistance” for dealing with the deadly opioid epidemic.

But many pharmacy owners worried that the law would have hurt more patients than it helped. Last year, New York state passed a similar tax to net $100 million from pharmaceutical giants. Investigations by at least four New York newspapers have since found that the tax spiked prices for patients with legitimate prescriptions, while some pharmacies couldn't obtain opioids from distributors and other pharmacies closed their doors for good.

New York legislators originally crafted their tax in such a way that the cost couldn't be passed directly to consumers, but Big Pharma sued in federal court—and won. Legislators released an amended version that didn't expressly prohibit the costs from being passed down in various ways, which is what ended up happening.

Amid concerns that Big Pharma would again pass on its tax to wholesalers, AB 1468 died on its third reading on the Assembly floor last week.

Clint Hopkins is co-owner of Pucci's Pharmacy in Midtown Sacramento, which, at 90 years old, is the longest-operating pharmacy in county. Hopkins said AB 1468 would have brought the problems of New York to California.

“A tax anywhere in the supply chain of health care, regardless of how they write it into the bill … leads to the supplier raising the cost of the drug,” Hopkins told SN&R. “Even when it's not a direct cost increase, it leads to an increase in the cost of the patients' insurance premiums and co-pays.”

Pucci's co-owner, Joel Hockman, agrees. Hockman says their pharmacy works with Harm Reduction Services to provide clean needles to people struggling with addiction, and saw AB 1468 as adding to a slippery slope of addiction.

“A shortage on these drugs will potentially take some of these patients out of the controlled system of a valid prescription,” he said, “causing [them] to resort to things like heroin, which will be cheaper and more accessible.”