NJ Opioid Tax Details Emerge, But Plan Lacks Legislative Sponsor

Lilo H. Stainton | June 14, 2019 | Health Care
Governor’s proposal would enable the state to charge a fee of up to $5 million on companies that manufacture opiates in New Jersey

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Pills & money
Gov. Phil Murphy is looking to send a strong message to opioid makers: You contributed to the problem, now be part of the solution to addiction. But he has yet to find a legislative partner to deliver the news.

The governor’s attorneys have drafted legislation that would enable the state to impose a fee of up to $5 million on companies that manufacture opiates for sale or distribution in New Jersey. Murphy outlined the plan — expected to raise $21.5 million annually — as part of his budget proposal for the coming year.

“Other states, red and blue alike, are taking similar steps. Let’s join them,” Murphy, a Democrat, said in March when he unveiled the plan; lawmakers, who have opposed several of his revenue-generating proposals, must adopt a budget for fiscal year 2020 by 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,” Murphy said.

However, so far none of Murphy’s Democratic colleagues in the state Assembly (where tax bills must originate) have come forward to sponsor the proposal; Assembly Speaker Craig Coughlin (D-Middlesex) declined to comment Thursday. Sen. President Steve Sweeney (D-Gloucester) has expressed concerns about creating new taxes without spending reforms.

Lawmakers are discussing the measure

But while Democratic leaders have been locked in opposition to Murphy on marijuana legalization and other issues, legislative officials are talking to the governor about the budget. And members of both the Assembly and Senate confirmed Thursday that the opioid tax bill was among the elements now under discussion.

Murphy’s press secretary Alyana Alfaro declined to speak about the status of sponsors for the proposal and said the office “does not comment on specific or pending legislation” — even if the measure was drafted by the governor’s own counsel.

As drafted, the potential bill would assess opioid makers in the Garden State a fee of $250,000, $1 million or $5 million — based on the quantity they made or distributed to doctors, drugstores, animal hospitals and other prescribers. It would also allow officials to charge companies penalties of up to $100,000 if they fail to pay the fee more than once.

The concept has sparked serious concerns for business representatives, who fear it would create one more tax burden for Garden State companies already struggling to remain competitive. “The business community has shouldered a lot for this administration,” said Tony Bawidamann, a vice president for government affairs with the New Jersey Business & Industry Association.

The lack of sponsors so far is not surprising, Bawidamann added. “People are not raising their hands to raise taxes,” he said.

May not be governor’s top priority

The opioid tax measure — which can’t be introduced or advanced through the Legislature without sponsorship from lawmakers in both houses — is not the only orphaned revenue policy Murphy has proposed for the FY2020 budget, and may not be his top priority. The governor is also struggling to find lawmakers to claim ownership of his millionaires tax, which would hike the tax rate on earnings over $1 million and redistribute some $250 million of this money as new property-tax relief.

According to Kaiser Health News, at least 10 states are now considering similar opioid tax measures, despite legal challenges that have delayed the implementation of laws passed in Minnesota and New York; the Empire State hoped to raise $100 million through the measure. Both states have pledged to try again, and leaders in Delaware, Maine, Massachusetts and Vermont are also considering such policies, with funds often directed to addiction prevention and treatment programs.

In New York, the courts objected to a clause that would have prevented the drugmakers from passing on any fee to consumers, according to reports. The draft bill in New Jersey avoids this prohibition — which could leave patients paying more if the fee is implemented.

Credit: NJTV News
Assemblywoman Nancy Munoz (R-Union)
That’s a big concern for Assemblywoman Nancy Munoz (R-Union), a nurse who has spoken out against the measure, in part based on her experience treating patients in a burn unit and others in serious pain. “I find it is a terrible idea,” she said Thursday.

“We’re talking about taxing legal drugs that are used for a legitimate purpose,” Munoz added. “I think it is immoral.”

Assemblywoman faults lack of details

Among her frustrations is the fact that the bill does not specify how money raised through the fee would be spent. While the draft bill’s statement calls for the new revenue to “help fund the State’s response to the opioid crisis,” there are no details, and Munoz noted the money would flow into the general fund, where it could be used by Murphy’s administration for almost any purpose.

If the goal is to force opioid makers to pay for the pain they have caused, Munoz urged the governor to “do what other states have done: sue the company.”

In fact, Murphy’s administration has already done so, more than once. In November, state Attorney General Gurbir S. 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 New Jersey company targeted by the state.

As drafted, Murphy’s opioid tax measure would apply to companies that make opioids within New Jersey’s boundaries as well as drug wholesalers that do business here. It would require these entities, which must already register with the state Department of Health, to provide the DOH details of every pill or dose of any opiate manufactured during the past year and sold, delivered or otherwise distributed to doctors, pharmacies, veterinary hospitals or other prescribers.

Based on these electronic reports, the DOH would assess annual fees on each manufacturer or wholesaler that provides drugs that end up here. For those who create or distribute 1 million or fewer units, the charge would be $250,000; for up to 2 million pills, the company would be taxed $1 million; for more than 2 million doses, it would be assessed $5 million.

The state could also penalize companies up to $5,000 per location for not registering with the state and reporting their opioid totals. Those who fail to pay the assessed fee could be fined as much as $20,000 for an individual, or, as a company, up to $50,000 for the first offense and no more than $100,000 for additional violations.