CBSA is tracking the development of a policy proposal from legislators that would mandate a fee on opioid manufacturers and distributors, along with manufacturers of other controlled substances including alcohol, marijuana, and tobacco to fund grants to non-profit entities working in the substance use treatment, education, and prevention space. While the concept is well-intentioned, the specific policy creates unintended consequences for patients, goes against prior legislative actions to regulate the cost of medications impacting manufacturers, and will ultimately be an ineffective mechanism in addressing the substance abuse crisis facing the state.

Colorado Proposal

The impact fee from every wholesale drug distributor of $.0100 each opioid morphine milligram equivalency per pill manufactured or distributed in Colorado; and each tablet of other controlled substance manufactured or distributed in or to Colorado.

Opioid and other controlled substance is defined as:

• A drug product in the opioid analgesic drug class prescribed to treat moderate to serve pain or other conditions, whether in immediate release or extended release or long-acting form, that may be combined with other drug substances to from a single drug product or dosage form.
•  A drug product on schedule II through V on the federal controlled substances schedules.
  • Except that “opioid and other controlled substance” does not include a substance prescribed for the treatment of a substance use disorder.

The Issue: Unintended Consequences

The premise of a fee on prescription opioids is unfair to patients who use these prescribed medications appropriately.A fee would not change the price for most customers, insured individuals would not see an increase in out-of-pocket costs due to fixed copays. This would likely result in insurers passing the cost forward to all beneficiaries through higher premiums. 

In recent years, state lawmakers across the country have introduced legislation to propose a tax or fee on prescription opioids to either deter their use or fund programs for the treatment, education, and prevention of substance abuse. New York’s law was subject to significant litigation in federal court, with the court’s ruling that the commerce clause of the constitution permits an excise tax to be passed onto consumers. For example, looking specifically at opioid prescriptions to treat acute pain, the mean out-of-pocket cost for a prescription is about $5.00, depending on insurance, and with a mean fee/tax of $.0100 per morphine milligram equivalent that would be a fee of $2.50 that could be passed on to patients. 

In a Colorado context, this is particularly harmful to patients considering the legislative intent of the Prescription Drug Affordability Board enacted via SB21-175 the last session is to lower the cost of a prescription drug by setting an upper payment limit. The state is also set to receive $400 million in opioid settlement funds which would be used for the same purposes as outlined in the draft legislation. In the draft, the state would also receive a limited amount of revenue from this fee due to TABOR, collecting a maximum of $100 million dollars annually for the first five years of the program. 

Actions Taken in Other States

Delaware, Minnesota, and New York enacted either fees or tax measures in 2019 and were followed by Rhode Island in 2020. Twelve other states have considered similar legislation in recent years. The policy options under consideration have included excise taxes, value based taxes, gross receipt taxes, value based taxes, gross receipt taxes, and license fees.

Delaware:

Impact fee on opioid manufactures

• Prescription Opioid: $.0100 per morphine milligram equivalent
• Generic Opioid: $.0025 per morphine milligram equivalent

Minnesota:

Registration fee on opioid manufactures

• Selling, delivering, or distributing 2 million or more units of an opiate: $250,000

New York:

Excise tax on opioid registrants on first sale in the state

Wholesale acquisition cost of opioid

• Less than $.50 per unit: $.0025 per morphine milligram equivalent
• More than $.50 per unit: $.0150 per morphine milligram equivalent

Rhode Island:

Annual registration fee based on in-state market share

• Estimated $5 million annual revenue to the state, split among opioid licensee’s