Proposals to tax widely-used painkillers called opioids have failed in other states, leaving Kentucky legislators in uncharted territory as they consider the levy to help shore up the state’s shaky finances.
Kentucky would be the first state to approve such a tax if it succeeds in the current legislative session.
The two-year state budget approved by the House on Thursday includes a tax of 25 cents on each dose of an opioid sold into Kentucky, meaning each pill or liquid dose. The drugs include oxycodone and hydycodone, among others.
The tax, which now faces scrutiny in the Senate, would be on wholesale distributors, not directly on Kentucky pharmacies or patients.
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But one key question is whether the cost of the tax could ultimately be passed on to people picking up prescriptions at the pharmacy.
State Rep. Steven Rudy, who heads the House budget committee, said during testimony Wednesday that the state Attorney General’s Office would have the power to go after wholesalers or pharmacies if they passed on the tax to consumers.
However, the section of the budget bill dealing with the tax — as approved in the House — does not contain language to specifically bar passing on the cost of the tax to patients. It also does not mention giving the attorney general power to pursue any businesses for doing so.
By comparison, a separate bill sponsored by Rep. James Kay, D-Versailles, to tax opioids and use the money for the state’s employee-pension deficit, says the tax “shall not be passed on by a wholesale opioid distributor or a mail-order pharmacy to a subsequent purchaser.”
Rudy, R-Paducah, would not take a question on Friday about the issue of whether the budget bill protects patients .
House Speaker Pro Tempore David Osborne, R-Prospect, said he had heard Rudy refer to the attorney general protecting patients from paying the tax.
“I’m not knowledgeable exactly of that process but I would assume that it would be just like any other price-gouging type of issue,” Osborne said.
Attorney General Andy Beshear, a Democrat, said Friday his office would use any power it has to protect consumers.
“We are supportive of any efforts to reduce the flood of opioids into Kentucky and would use any authority granted to us to do so,” he said.
The Attorney General’s Office has authority to go after businesses for price-gouging — though that generally applies when the governor has declared an emergency — and to enforce the state Consumer Protection Act, intended to guard against scams and predatory practices.
It isn’t clear that passing on the cost of an opioid tax to patients would fall under those provisions.
Mark Glasper, executive director of the Kentucky Pharmacists Association, said the group was not consulted about the proposed opioid tax and as a result has not taken a position.
The association did not have information Friday on whether pharmaceutical distributors could pass on the tax to pharmacies, and whether pharmacies could then pass on the cost to patients.
Kay said be believes that if the legislature approves the opioid tax and it causes patients to pay more, the legislature will fix the problem.
The issue of whether patients might pay more under the tax is important, not just from a consumer standpoint, but because it could underpin arguments against such a measure.
“Notably, if a regressive tax is imposed on any product, particularly a health care product, it will limit the ability for legitimate patients to access the medicines they require for the treatment of chronic pain or palliative care,” said John Parker, spokesman for the Healthcare Distribution Alliance, which represents large drug wholesalers.
Kentucky already exempts drugs and health services from the state’s 6 percent sales tax.
Efforts to tax opioids have increased around the country the last couple of years, with lawmakers proposing to get money from an industry whose products have contributed to rising costs from abuse of the products, including addiction treatment and prison costs.
Kentucky has certainly seen the damage, including a record-high 1,404 overdose deaths in 2016. Legal opioids contributed to that toll, but heroin and fentanyl — which also are opioids — accounted for more deaths.
However, all state proposals to tax opioids have failed so far, according to the National Conference of State Legislatures.
Kentucky is one of more than half a dozen states — both red and blue — where lawmakers have proposed opioid taxes this year, according to NCSL.
Under the proposed tax in Kentucky, wholesale pharmaceutical suppliers and mail-order pharmacies would have to get a state license, file reports on how many doses they distribute, and make a monthly payment.
It would be crime for a company to distribute opioids without a license or fail to make a payment.
Proposed opioid taxes in some states would be designated for substance-abuse treatment. In Kentucky, the money would go into the the General Fund, which pays for most government programs.
Kentucky pharmacies filled prescriptions for 303 million doses of opioids in Kentucky in 2017, according to the the Cabinet for Health and Family Services, which houses the state’s electronic prescription reporting system.
That means that at 25 cent tax would have brought in $75 million had it been in place last year.
The number of opioid doses prescribed in Kentucky has gone down in recent years, from a high of 5.82 million prescriptions — 378 million pills — in 2011 to 4.84 million prescriptions in 2017, according to the the Cabinet for Health and Family Services.
The peak came the year before the legislature approved a measure aimed at driving down the diversion of opioid pills to the black market, including from shady “pill mills” where doctors wrote prescriptions for cash without really examining people.
Still, Kentucky’s rate of opioid prescribing remains among the highest in the nation, according to federal reports.
Kay, who also sponsored an unsuccessful bill in 2017 to tax opioids, said it’s clear some people need the powerful painkillers and lawmakers don’t want to limit legitimate access, but that there has been excessive prescribing of the drugs in Kentucky.
As long as companies continue sending millions of pills to Kentucky, “I think we need to be getting millions of dollars back,” Kay said.