Opioid Industry Fights Efforts to Make It Pay for Crisis

Companies and trade groups have argued in three legal challenges filed in recent months that the law, which seeks $600 million over six years, is unconstitutional. They point to a lawsuit New York’s attorney general has already filed against major opioid industry players to recoup money for the state, and say the tax is an improper end-run around resolution of that case.

New York’s health department sent bills last week to 75 companies and their subsidiaries detailing how much they owe under the new Opioid Stewardship Act. The state said the charges are based on the volume and potency of drugs each company sold or distributed in New York. The first charge retroactively covers 2017.

Companies hit with the charge say they recognize the seriousness of the crisis, which has led to widespread addiction and public-health costs. But they say taxing companies for legal drug distribution isn’t the solution.

The state’s health department disclosed the names of affected companies but not the amounts each owe, citing trade secrets. The list includes well-known names like CVS Health, Endo International PLC, Purdue Pharma LP and Teva Pharmaceutical Industries Ltd. alongside dozens of small companies based around the country.

Purdue was assessed $7 million, according to a person familiar with the matter. Drug distributor AmerisourceBergen Corp. estimates it will pay $22 million for its share from 2017 and through September of this year, according to a recent securities filing.

Distributor McKesson Corp. said on an October earnings call it expects opioid-related costs, including the New York surcharge, to exceed $100 million in its current fiscal year, with the majority of that tied to litigation. A Cardinal Health Inc. executive said on a recent earnings call the company took a $29 million charge for the New York opioid tax for prior fiscal years.

Some companies are arguing the amount they owe makes it prohibitively expensive to operate in New York.

Drugmaker Mallinckrodt PLC said in a lawsuit filed Oct. 24 in New York federal court that its costs under the law are higher per pill than the revenue it made on some of its most popular generic drugs. It sold one form of Oxycodone in 2017 for around 4.7 cents per tablet, the company said in the suit, but now must pay 8.2 cents per tablet to New York. The company, which reported $420 million in operating income in 2017, said New York billed it $1.3 million.

“Basic economic reality dictates that if a generic manufacturer is guaranteed to lose money on its sale or distribution of an opioid medication in New York, it will abandon the New York opioid market completely,” Mallinckrodt said in the suit, which it filed under the name of its generic-drug subsidiary, SpecGx LLC.

The law threatens to penalize folks with a legitimate medical need for opioids, said Jeff Francer, general counsel for the Association for Accessible Medicines, a trade organization representing generic-drug manufacturers that filed one of the three lawsuits to block the act.

More than a dozen other states have considered some form of opioid tax in the 2018 legislative session, but only New York’s has become a law, according to the National Conference of State Legislatures. Outside of legislation, some 1,500 cities, counties and states have sued opioid makers and distributors seeking money to combat the opioid crisis.

A spokesman for New York Gov. Andrew Cuomo stood by the law, which was passed in March, and said it “helps hold big pharma responsible for the opioid crisis they helped fuel.”