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Federal appeals court reinstates New York tax on opioid manufacturers
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Federal appeals court reinstates New York tax on opioid manufacturers

The US Court of Appeals for the Second Circuit on Monday reversed a judgment that prevented New York state from collecting over $600 million from drug companies in its attempt to combat the ongoing opioid crisis.

The decision concerns New York’s Opioid Stewardship Act (OSA), which Governor Andrew Cuomo signed into law in 2018. The law requires opioid manufacturers and distributors to make annual payments to fund statewide opioid-related services “to address the substantial costs imposed by the national opioid public health crisis.” OSA imposes an annual fixed $100 million payments for a six-year duration, collectively on all licensed opioid manufacturers and distributors that sell/distribute opioids in the state. Those proceeds support treatments, recovery, prevention and education services.

The law also contained a “pass-through prohibition,” which blocked drug companies from passing off the costs of their opioid stewardship payments to their customers. Three trade associations representing manufacturers and distributors of pharmaceutical products challenged the law in federal court. The US Court for the Southern District of New York invalidated the OSA in its entirety, finding it unconstitutional. In 2019 the New York state legislature enacted a new payment mandate that did not include the pass-through prohibition.

Monday’s decision reinstated the OSA’s opioid stewardship payment as well as the statute’s other remaining provisions. The three-judge panel established the OSA payments are taxes meant for “several general revenue-raising purposes without a regulatory or punitive aim.”

“The health programs that the stewardship payment funds ‘relate directly to the general welfare of the citizens of [New York] and the assessments to fund them are no less general revenue raising levies simply because they are dedicated to a particular aspect of the commonwealth.'”