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<i>The Week in Public Finance</i>: States Intent on Taxing Big Pharma Over the Opioid Crisis

Lawmakers want to raise taxes on pharmaceutical companies to help pay for the cost of the opioid crisis. But success has been elusive.



  • Minnesota's "penny a pill" bill failed in the state legislature after heavy lobbying removed a key provision. The state plans to try again in 2019.
  • An additional 10 states all tried and failed to pass opioid taxes this session. Lawmakers in those states say they will try again nex year.
  • Only New York has successfully passed legislation, but the new law is on hold thanks to a lawsuit. 
States haven't been very successful at taxing drug companies to help pay for the opioid crisis. But that won’t stop them from trying again next year.

Minnesota State Rep. Dave Baker, a Republican who sponsored a failed “penny a pill” bill during this year's session, has said that he plans on a different focus in 2019: pharmaceutical licensing reform. Liquor stores and bars pay thousands of dollars each year for the privilege of selling alcohol, Baker noted this week at a conference on opioids in Minneapolis, but drug companies only pay a few hundred dollars in licensing fees.

Record numbers of people are dying each year from drug overdoses. Last year, more than 70,000 people died of an overdose -- a 13 percent increase over 2016.

Baker's bill would have raised an estimated $20 million in new annual funding for abuse prevention and treatment efforts by charging pharmaceutical companies a fee for every opioid painkiller they sell. But after heavy lobbying by Pharmaceutical Research and Manufacturers of America (PhRMA), the fee was dropped from the House version of the bill and, as a result, stalled in the Senate.

Like many lawmakers leading the charge against big pharma, Baker and co-sponsor Chris Eaton, who was also at the conference, have each lost a child to an opioid overdose. “I’m a pissed off dad," said Baker. "My son isn’t here anymore. The state has spent billions and [the drug companies] have profited billions.”

Minnesota’s effort comes as other states have struggled to hold big pharma financially accountable in response to the opioid crisis. California, Delaware, Iowa, Kentucky, Maine, Massachusetts, Montana, New Jersey, Tennessee and Vermont all tried and failed to pass opioid taxes this year. Lawmakers in those states say they will try again in 2019.

Dozens of cities, counties and states are also suing opioid makers and distributors, arguing that the companies downplayed the dangers of addictive pills and ignored signs they were being abused on a massive scale. The cases could produce billions of dollars in government revenue to fight addiction and overdose, but the lawsuits are expected to take years to resolve.

So far, only New York state has been somewhat successful in financially targeting the industry. It passed a bill in the spring that raises $100 million a year for addiction treatment, prevention and education via a tax on manufacturers and distributors. The bill also prohibits passing the tax on to consumers and other purchasers such as insurance companies, a key criticism of Minnesota's penny-a-pill method. But the New York legislation is on hold thanks to a lawsuit filed this summer by the pharmaceutical industry.

At this week’s event in Minneapolis, PhRMA Deputy Vice President Priscilla VanderVeer said one of her concerns is that prescription medications such as Vicodin or Oxycodone are important treatment for some patients, yet the proposed laws would punitively affect those drugs across the board. “There are people who need access to those medicines,” she said. “We want to make sure we’re not making these people who need it feel like criminals.”


In other public finance news:

Congress Passes Opioid Crisis Package

The U.S. Senate wasn’t totally consumed with Brett Kavanaugh’s nomination to the Supreme Court this week: Lawmakers found time to pass legislation aimed at fighting the opioid crisis. Among other things, the bill includes $50 million to help state education agencies, school districts and tribal governments increase evidence-based trauma support services and mental health care. It also allocates $20 million in annual funding for state and local governments and nonprofits to develop and run residential treatment programs.

The bill further includes regulatory fixes, such as expanding access to treatment for those in Medicaid and blocking shipments of opioids, especially synthetic fentanyl and its copycats.

While the bipartisan effort is generally being applauded, some worry that it doesn’t go nearly as far as Congress has gone in the past to support research and grant funding for epidemics. Notably, the Ryan White Care Act allowed for billions of dollars in treatment and other support for people with H.I.V. and AIDS. First authorized in 1990, the program is still funded at a little more than $2 billion in 2016.


The Gap in Higher Education Funding

Nine out of 10 states are spending less on higher education today than they were a decade ago, adding up to a $7 billion shortfall, a new report from the Center on Budget and Policy Priorities has found.

On average, states spend about 16 percent less per student after inflation is accounted for than they did in 2008. In nine states -- Alabama, Arizona, Louisiana, Mississippi, Missouri, New Mexico, Oklahoma, Pennsylvania and South Carolina -- per-student funding has fallen by more than 30 percent.

Only four states -- California, Hawaii, North Dakota and Wyoming – are spending more than they were in 2008.

The cuts have helped drive up the cost of tuition for students in some states by as much as 60 percent. This trend comes as more and more people of color are attending public colleges and universities. For blacks and Hispanics, in particular, the cost of tuition as a share of household income is much greater than it is for whites. Thus, the report warns, the current funding trend has a disproportionately harmful impact on students of color.


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Liz Farmer is a former GOVERNING fiscal policy writer.
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