A Tax on Opioids: Who Pays? And Why?

A new bill was introduced last week by US Senator Joe Manchin (D-WV).  The bill calls for a tax on opioids to the tune of 1 cent per milligram.  This tax will fall primarily to the payor community.

Manchin compares this newly proposed tax to current taxes on alcohol and cigarettes.  This analogy is a poor one: the alcohol and cigarette taxes are born by consumers with the express consequence of changing use patterns.  In the case of the opioid tax (as with most economic propositions in a 3rd party payor system), the tax will likely be paid by an entity (the insurer) that is not a party to the originating transaction (the doctor writing a prescription for the patient).  It is therefore doubtful that the proposed tax will have any material impact on utilization.

There are two notable exceptions to this line of logic.  First, cash-based transactions whereby patients pay for the entirety of the opioid prescription will now be more expensive.  At 1 cent per milligram, a standard prescription for Oxycontin 40 mg q12h would lead to a monthly tax of approximately $25. That might not seem like much, but for the patient paying cash, that adds up quickly.  The second possible exception may occur if certain insurers choose to structure plans such that this tax is passed along to the patient in the form of co-pays, deductibles, co-insurance, etc.  This will surely be the case in many health plans and may cause at least certain patients to seek alternative, non-opioid medications from their doctors.

Neither of these potential exceptions will be available to workers' compensation payers.  For work comp payers, the entirety of the tax will be paid by the insurer and neither the doctor nor the patient will have any financial incentive to do anything differently as a result.  A tax, if you will, on all your houses.  

The other interesting consequence of the proposed tax is that it treats a milligram of a brand name drug and a milligram of a generic drug as equivalent for tax purposes despite the fact that the underlying cost of the generic is significantly less than the brand.  This proposed tax will be yet another factor pushing the cost of generics up for payers, a trend that we've already seen unfold over the last 24 months.

If the proposed tax passes, it's expected to raise somewhere in the neighborhood of $1.5 to $2.0 billion.  These dollars will be used to fund outpatient and residential addiction recovery programs, an increase in the number of doctors certified to provide medication-assisted treatment, and other services to support addiction recovery (like housing and employment assistance for those in recovery).

Candidly, lack of access to these programs today is a major barrier to injured worker recovery. If the bill passes, workers compensation payers will bear the brunt of this new tax burden. Perhaps rather than fighting against the tax, we should collectively lobby to ensure that injured workers can easily access any and all of the new programs/centers/providers funded by the new tax?  

Just a thought...

Michael
On Twitter @PRIUM1