Taxing drugmakers, distributors for opioid treatment programs upheld by U.S. appeals court

The U.S. Appeals Court for the Southern District of New York on Sept. 14 upheld a New York law taxing drugmakers and distributors to help address the opioid epidemic.

The Opioid Stewardship Act,  enacted in 2018, requires all manufacturers and wholesalers that sell or distribute opioids in the state to pay a collective $100 million a year over six years to  fund  prevention, treatment and recovery programs related to the opioid epidemic. It was the first law that sought to fight the opioid epidemic by taxing these companies; Minnesota and Delaware have since enacted similar policies.

But the same year the law was enacted, a federal judge declared it unconstitutional after pharma trade groups sued the state. The groups alleged the law did not allow companies to pass the surcharge costs  to consumers, violating the dormant commerce clause of the Constitution.

The Sept. 14 appeals court decision upheld the surcharge and ruled that it should be considered a tax. 

“Faced with rising costs associated with mounting statewide opioid addiction and opioid-related deaths, the state legislature crafted the opioid stewardship payment to raise $600 million to respond to the state’s public health crisis,” the decision reads. “New York’s allocation of revenues from the payment thus strongly suggests that the stewardship payment requirement serves general revenue-raising purposes without a regulatory or punitive aim.”

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