Opioid Tax Adds To New York State’s Budgeting Mess

In December 2018, a federal judge ruled that New York’s opioid excise tax was unconstitutional because it expressly said it would pass the cost of the tax from the manufacturer on to the supplier, who would then pass the tax on to those purchasing pain medication.

As part of this year’s state budget, the state Legislature approved the opioid excise tax again. This time, though, the legislation made no mention of who would actually end up paying the tax. Remaining silent on that provision may allow the tax to pass constitutional muster, but it has played a role in the closure of two local independent pharmacies.

The Southside Pharmacy and the Falconer Pharmacy, both owned by Salim Sarvaiya, have closed after Sarvaiya was bought out by CVS. Competition from big chains — several of which have multiple locations in the Jamestown area — was difficult for the local chain to overcome. The buying power of corporate chains and lack of reimbursements on some prescriptions that made the local store lose money filling those prescriptions made it difficult to keep the doors open. Sarvaiya also told The Post-Journal that his pharmacies stood to lose a lot of business due to the state’s opioid excise tax.

The idea behind the opioid tax is to punish pharmaceutical companies for their role in the opioid epidemic while raising money for opioid treatment and overdose prevention programs. Those are worthy goals, but in the end, the opioid excise tax also created a tax and an additional cost for people who legitimately need pain medication — without explicitly saying so, of course — while also exempting providers like Hospice and OASAS providers. Some patients who need medication can get their prescriptions filled for less while others pay more. And, as we have seen, the opioid excise tax had another unintended consequence — as the straw that helped break the camel’s back for a small business that was drowning under the weight of regulations, competition from much larger chains and the dynamics of doing business in a shrinking county.

What’s worse, many of those concerns were glossed over because the legislation was lumped into a budget bill. A 545-page transcript of the vote that enacted the opioid excise tax mentioned opioids a whopping 13 times. It was only questioned twice, by Assemblyman Andrew Raia and Assemblywoman Linda Rosenthal, and enacted with little discussion of its ramifications.

Is there a better argument for approving such legislation outside of the mess that is New York’s budget process? We think not.

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