Minnesota - Oppose tax increases on pharmaceutical products | Council For Citizens Against Government Waste

Minnesota - Oppose tax increases on pharmaceutical products

March 26, 2019

Senate Finance Committee
Room 1200
Minnesota Senate Building
St. Paul, MN 55155

Dear Legislators,

You will soon consider SF 751 and HF 400, two bills that purportedly will address the opioid crisis in Minnesota by raising taxes on pharmaceutical manufacturers and wholesalers.  While the Council for Citizens Against Government Waste (CCAGW) understands your concern over the opioid epidemic, these bills will not solve the problem and would raise the cost of pharmaceuticals in your state.  On behalf of the 35,584 CCAGW members and supporters in the state of Minnesota, I ask that you oppose these bills.

SF 751 would increase taxes on all pharmaceutical wholesalers and manufacturers by increasing their annual application to operate in the state to a minimum of $5,000.  For opioid manufacturers, a new annual tax would be implemented of $55,000 for each manufacturer, but could be as high as $250,000, depending on the quantity the manufacturer sold.  HF 400 would charge pharmaceutical manufacturers and wholesalers a fee in the aggregate of $12 million and $8 million respectively.

In an era when complaints are endless about high drug prices, taxing manufacturers and wholesalers is a nonsensical response as these extra taxes 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 harmful to generic manufacturers, whose products behave more like commodities and have low profit margins.

According to the Center for Disease Control (CDC), the opioid prescribing rate has dropped approximately 28 percent between 2012 and 2017.  Limiting prescription quantities, implementing drug monitoring programs, and educating doctors on the proper use of opioids have helped to reduce their use, while allowing access to them by patients that desperately need the medications.  However, the opioid addition problem is wide-ranging and goes beyond legal prescription drugs and patients using them correctly.

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 85 percent increase in synthetic opioid deaths between 2016 and 2017, from 99 to 184.

According to the DEA, most of the illicit fentanyl being brought into the U.S. is coming from China and Mexico.  Fentanyl is also being mixed with other controlled substances, often being sold as a counterfeit prescription pain reliever.  On January 31, 2019, AP 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.  And it is not just fentanyl, other drugs such as heroin, cocaine, and methamphetamine are coming in as well from Mexico.

Legitimate pharmaceutical companies and wholesalers should not be taxed for the illicit use of opioids and they should not shoulder the entire burden of addressing this crisis. These taxes will ultimately hurt taxpayers and patients with higher pharmaceutical costs and less competition.  I urge you to oppose SF 751 and HF 400.

Sincerely,

Thomas A. Schatz

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