New York State Given Federal Go-ahead to Collect $200 Million Tax to Combat Opioid Addiction Epidemic

Under the Opioid Stewardship Act, signed by Democratic Governor Andrew Cuomo in 2018, New York State was owed $200 million from back taxes. This was the first time such a law was imposed by any state, and the tax is meant to cover the costs of the epidemic caused by opioid addiction in the state.

Recently the law was struck down by the 2nd U.S. Circuit Court of Appeals. However, the federal appeals court ruled on Monday that the court lacked the authority to strike down the annual requirement imposed on the companies to pay $100 million collectively. Companies will contribute toward the tax according to their share of the market.

According to Reuters, the law was challenged in court by the industry trade group Healthcare Distribution Alliance, the Association for Accessible Medicines, and the drug manufacturer Mallinckrodt Plc. In a statement, the challengers said they were disappointed with the ruling.

Since the adoption of the tax by New York state, Delaware and Minnesota have also imposed opioid taxes. Other states are also considering legislation related to the opioid epidemic.

A provision in the original law barred companies from passing on the costs of making payments to consumers, but this was ruled unconstitutional by a federal judge in 2018. This meant it could not be severed from the rest of the law.

After this ruling, New York enacted the new tax law without the pass-through prohibition, allowing the state to collect the $200 million market shares for2017 and 2018.

Even as AAM declared that it was reviewing the new ruling, drug manufacturers and distributors have been setting funds aside to cover payments. AmerisourceBergen Corp is one of those and is reported to have set aside $22 million.