A federal judge on Wednesday struck down New York’s newly enacted tax on opioid prescriptions, saying it violated instate commerce protections in the U.S. Constitution.
Judge Katherine Polk Failla, of the U.S. District Court in Manhattan, granted an injunction blocking the tax, which Gov. Andrew M. Cuomo and legislators enacted in March as part of the current state budget.
The surcharge was projected to generate hundreds of millions of dollars annually for the state fund and a smaller amount for addiction-treatment programs.
Failla said the underlying goal of the opioid surcharge — addressing addiction — was “commendable,” but its means were clearly illegal.
“New York’s interest in the public health of its residents cannot trump the Commerce Clause,” Failla wrote in a 52-page decision. As applied, she said the two-cents-per-milligram charge “is not a tax but is rather a regulatory penalty on opioid manufacturers and distributors.”
She also called illegal a “pass-through” clause in the tax legislation which sought to ban companies from passing along the cost to customers.
Besides violating federal laws, Failla said a higher price on prescriptions could harm patients who really need opioids.
“Additionally, the perhaps unforeseen consequence that the [tax] could well reduce the availability of opioid medications for those who need them also runs counter to the public interest,” Failla wrote.
Cuomo’s Health Department and state Attorney General Barbara Underwood, who were named in the lawsuit, didn’t say immediately if the state would appeal Failla’s ruling.
“The Department of Health is reviewing this decision and considering all our options,” agency spokeswoman Jill Montag said in an email.
The lawsuit was filed by the Healthcare Distribution Alliance, an umbrella group for drug distributors. Other coalitions and manufacturers later joined the lawsuit. A spokesman for the alliance said it was “grateful” the court recognized the tax, passed as part of the Opioid Stewardship Act, was illegal.
“The act’s unconstitutional surcharge and pass-through prohibition are the wrong way to address the opioid epidemic and would have resulted in significant disruption to patients and the health care system,” John Parker, a vice president for the alliance, said.
Cuomo and legislators created the tax last spring and included it in the state budget. The governor blamed drug companies for fueling the opioid crisis and said they should pick up more of the associated costs.
Treatment advocates, however, were “dismayed” that just 20 percent of the money generated would be earmarked for prevention and addiction programs.