Murphy’s Budget Would Impose New Tax on Opioid Manufacturers

New Jersey is among a growing number of states looking to makers and distributors of highly addictive medicines for extra revenue to help fight opioid epidemic

New Jersey has joined a growing number of states seeking to generate additional revenue to fight the opioid epidemic through new taxes on the pharmaceutical companies that manufacture the highly addictive medicines that can lead to drug abuse.

In his new budget proposal, Gov. Phil Murphy has called for a tax on companies that make or distribute opioids, which his administration said could raise some $21.5 million over the coming fiscal year. Details of the plan remain scarce and it would require legislation, which has yet to be introduced.

“Other states, red and blue alike, are taking similar steps. Let’s join them,” Murphy, a Democrat, said in March, when outlining the $38.6 billion plan for fiscal year 2020, which begins in July. “Let’s send a clear message that we should be working together to end our national addiction to opioids, not to continue feeding it.”

According to Kaiser Health News, at least ten other states — including New York and Delaware — have introduced proposals designed to tap drugmakers for the cost of treating addiction. These proposals have faced strong opposition from pharmaceutical companies in both the legislative and judicial branches of state governments, and courts have struck down several plans.

So far, none of the initiatives have survived all the challenges, according to various reports. New York’s initial law, which was slated to raise $100 million, was among those thrown out by the courts. Gov. Andrew Cuomo has pledged to try again with revised legislation, as have leaders in a number of other states.

Can NJ succeed where other states have failed?

These legal battles raised questions for some Garden State lawmakers during a Senate budget hearing last week. Sen. Troy Singleton asked state Treasury officials about how the measure would be different from New York’s failed plan. (In that case, the courts objected to a clause that prohibited the fee from being passed on to consumers, something New Jersey officials pledged to avoid.)

Credit: NJTV News Online
State Sen. Troy Singleton (D-Burlington)
“I was puzzled by that,” said Singleton (D-Burlington). “But I guess the devil is in the details.” (Lawmakers must sign off on the budget by the end of June before Murphy can sign it into law.)

State Treasurer Elizabeth Maher Muoio said the state has been tracking these developments and is looking to Minnesota for a model to emulate.

“While the legislation to effectuate this proposal still needs to be drafted, we have the benefit of hindsight, as well as legislation pending in Minnesota, which is more in line with our intended proposal,” explained Treasury spokeswoman Jennifer Sciortino.

“As we work with the Legislature to develop the required language to implement this fee, we will use the court decision to guide us in avoiding issues that led to the New York law being struck down,” she said.

Following the Minnesota approach

Several versions of this proposal are now under discussion in Minnesota; they all call for creating an opioid stewardship fund, an entity to oversee these resources, and an opiate product registration or licensing fee of some kind. Lawmakers there suggest these plans could raise about $20 million in the first year. According to the Minneapolis Star-Tribune, the proposal is quite different from the “penny a pill” tax that was proposed last year and stalled amid opposition from drugmakers.

New Jersey has already taken various actions to reclaim resources from the companies that manufacture opioids.

In November, state Attorney General Gurbir Grewal filed suit against New Jersey-based Janssen Pharmaceuticals, a subsidiary of Johnson & Johnson, claiming it deceived providers and patients about the dangers of certain drugs it made. Grewal has also joined several multistate lawsuits seeking to recover damages from other drugmakers, but Janssen was the first in-state company targeted by the state.

Heroin and other opioids contributed to nearly 3,000 overdose deaths in New Jersey last year and drove tens of thousands of residents into treatment, at growing cost to the healthcare system and communities statewide. (While the drugs have legitimate use among pain patients, research has shown they have contributed significantly to the overall epidemic.)

Taking a toll on taxpayers

The epidemic has also taken a toll on taxpayers, officials note. According to the Janssen case, which focuses on two medications — Nucynta and Nucynta ER — since 2010 the state has spent $183 million on all opioid-related health and workers’ compensation cases and paid more than $106 million for opioid prescriptions through Medicaid.

In his FY2020 budget, Murphy has pledged to spend $100 million on efforts to address opioid addiction in New Jersey, continuing the level of investment he made in the current year to a wide range of prevention, treatment and support programs. The funding for these initiatives comes from federal and state revenue sources and flows through a number of agencies, including the departments of Health, Human Services and Law and Public Safety, which includes the Attorney General’s Office.

“We are ever-mindful that the opioid epidemic was ravaging our cities long before it made headlines,” Murphy noted in his budget speech. “This budget maintains our commitment, and proposes increasing fees on opioid drug distributors and manufacturers to help support our fight against the opioid epidemic.”

We’re in this together
For a better-informed future. Support our nonprofit newsroom.
Donate to NJ Spotlight