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New York's Opioid Tax

Written by Luke Burgess
Posted November 19, 2018 at 4:34PM

The State of New York has a new plan to fight the nation's opioid crisis. And it's a real doozy.

The state has gathered together the brightest and most intelligent team in order to create a radical and revolutionary new strategy that's probably guaranteed to stop opioid abuse dead in its tracks...

It's raising taxes.

Surprised?

Of course you're not. Government's solution to every problem is to raise taxes.

As of July 1, 2018, the State of New York is requiring prescription opioid manufacturers, distributors, and importers to report all transactions on any opioids sold or distributed in the state to the Department of Health's Bureau of Narcotic Enforcement.

Based on transaction reports, the Department will calculate an annual tax relative to reported data of opioid abuse statistics.

Basically, the more junkies there are, the higher the taxes will be for drug companies. And those companies with the highest sales will be taxed most. That could be very costly for major manufacturers.

The State believes it will raise $600 million over six years with the new levy. Drug companies are already taking the state to court over the new taxes, claiming the act “imposes an unconstitutional $600 million punitive surcharge on pharmaceutical distributors and manufacturers.”

So will this new tax work to decrease opioid abuse?

Not. A. Chance.

In fact, I don't see anyone benefiting from this in any way other than a politician in the future taking credit for fighting the good fight, win or lose.

First of all, this kind of tax isn't even fair. I don't know about “unconstitutional.” But it disproportionately targets drug manufacturers as the primary culprit to blame for the nation's opioid epidemic.

Yeah, I'm going to stick up for the drug makers for a second...

There's no denying that manufacturers, distributors, and importers play a critical role in the opioid supply chain.

But here's the fact everyone overlooks: The industry itself has no role in clinical decisions. Drug makers aren't prescribing the drugs. Doctors prescribe opioids. Not manufacturers.

Now, yes, it has been well documented that in the 1990s, opioid salesmen (particularly of OxyContin) were influencing sales through what boiled down to bribery. But that was 30 years ago, and even though it still happens, bribery is much less common.

More important, however, is the fact that it takes both sides to agree: If the drug industry is guilty of bribery (which it is), doctors are also guilty of accepting the bribes.

Point is, manufacturers, distributors, and importers are certainly not blameless for America's opioid crisis. But they're certainly not alone. I wouldn't even say they're mostly responsible.

What's a bit more frightening about the new law, though, is that personal information on consumers might also be logged by the state's Bureau of Narcotic Enforcement.

So what will be the main result of New York's new tax?

Well, certainly higher drug costs for residents.

Drug companies will most certainly pass these new taxes down to the consumer. And that could lead to any number of unforeseen consequences.

On the extreme side, higher prices for opioid pills could even drive up demand for even more dangerous drugs such as street heroin.

At the end of the day, I don't see any winners for the New York opioid tax. I'm sure it has a lot of public support. But who benefits? No one as far as I see.

The only thing this tax seems to be is a punishment, as the drug industry is claiming. And it's a disproportionate punishment at that.

Until next time,

Luke Burgess Signature

Luke Burgess

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As an editor at Energy and Capital, Luke’s analysis and market research reach hundreds of thousands of investors every day. Luke is also a contributing editor of Angel Publishing’s Bubble and Bust Report newsletter. There, he helps investors in leveraging the future supply-demand imbalance that he believes could be key to a cyclical upswing in the hard asset markets. For more on Luke, go to his editor’s page.

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