Delaware - Oppose Tax Increases on Drug Manufacturers

May 8, 2018

Delaware State Senate
411 Legislative Avenue
Dover, Delaware 19901

Dear Senator,

On Wednesday, May 9, 2018, the Senate Committee on Health, Children, and Social Services is scheduled to hear SB 176, a bill that would create a Prescription Opioid Impact Fund by taxing pharmaceutical companies.  The fee would be assessed quarterly in the amount of $0.01 per morphine milligram equivalent (MME).  This fee would be based on the amount of MME in each dose of the manufacturer’s opioid drug that is dispensed.

While opioid addiction is a severe epidemic that must be addressed, enacting legislation such as SB 176 is poor public policy.  On behalf of the 5,106 members and supporters of the Council for Citizens Against Government Waste (CCAGW) in Delaware, I ask that you oppose this bill.

CCAGW understands and appreciates your concern regarding the best way to grapple with opioid addiction in your state.  However, singling out drug manufacturers for the funds to create the Prescription Opioid Impact Fund is inappropriate, as there are many players and factors involved in this crisis.

According to a December 26, 2017, Council on Foreign Relations backgrounder, “The U.S. Opioid Epidemic,” many health experts attribute the crisis to over-prescribing by physicians.  Some healthcare providers felt pressure to prescribe them, as opposed to using other means such as physical therapy or acupuncture, either from their superiors or their patients.  In some cases, other treatments were more expensive or were not available.  Furthermore, according to the Substance Abuse and Mental Health Services Administration’s September 2017 report, “Key Substance Use and Mental Health Indicators in the United States: Results from the 2016 National Survey on Drug Use and Health,” 53 percent of people aged 12 or older who misused an opioid were given by, bought, or stole the drug from a friend or relative.

While CCAGW believes the entire bill is bad policy, we are especially concerned about a provision that states, “no person may increase the retail price of a prescription opioid sold in this State to recover the cost of this Fee.”  This provision is a de facto price control.  Since pharmaceutical companies are not controlling the price of the drug throughout the supply chain, and many prices are determined across state lines, a manufacturer would unfairly be held accountable for a price increase established by another stakeholder.  Furthermore, who would be responsible for tracking the entity or person who raised the price?  This provision will likely create cumbersome accounting issues and expensive legal challenges.

CCAGW is also concerned over a provision that allows monies in the fund to be used to provide “services for the under-insured and uninsured” because it is overly vague and would be open to misuse.

Additionally, a pharmaceutical company could decide not to sell its opioid product in an effort to avoid the tax and regulatory hurdles.  In this case, the people who would suffer are those patients who need these types of drugs, particularly cancer or hospice patients.

In March 2018, Congress passed an Omnibus spending bill, which includes a $4 billion boost to deal with the opioid crisis, a 215 percent increase from last year’s funding level that is directed to be used for treatment, prevention, and law enforcement.  The largest allotment will be sent to the states and Native American tribes through grants to help fund programs combatting the epidemic.  It would be better for Delaware to utilize this funding than to tax discriminatorily pharmaceutical companies, which would both lessen the amount that could be spent on research and development, and potentially cause a shortage of necessary opioids in the state.

Sincerely,

 

Thomas Schatz
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