A National Opioid Tax for Treatment Programs in the US: Funding Opportunity But Problems Ahead

Two million people have an opioid use disorder (OUD) in the US,¹ putting local and state governments in desperate need of treatment funds. Five states—Delaware, Maine, Minnesota, New York, and Rhode Island—recently enacted opioid excise taxes or fees to generate revenue and curtail excessive opioid prescribing (Table).

A national opioid tax is now on the agenda for the US Congress. Senator Manchin of West Virginia introduced Senate Bill (SB) 1723 to establish a federal excise tax on prescription opioids and to use block-grants to distribute revenue to expand access to treatment.² The bill would tax manufacturers, producers, and importers of prescription opioids at $0.01 per milligram (mg) of active opioid ingredient sold. We note that taxing per mg rather than per morphine mg equivalent (MME) appears to be a drafting error that would distort the tax incentive if left uncorrected. For example, the frequently prescribed drug, tramadol, has a 10:1 ratio of mg to MME (a 50-mg tablet is equivalent to 5 MMEs); however, a 5-mg hydrocodone tablet, with a 1:1 ratio of mg to MME, has the same analgesic strength (5 MMEs) but the tax would be one-tenth of that imposed on the tramadol tablet.

Exempted from the tax are opioids used to treat OUD and prescriptions for patients in hospice, with cancer-related pain, or with conditions for which nonopioid pain medication has been deemed inadequate or inappropriate by the prescriber. In contrast, state opioid tax laws allow few or no exemptions (Table). Because the courts have ruled that the Commerce Clause of the US Constitution permits an excise tax to be passed onto consumers,³ SB 1723 intends that all patients with an opioid prescription pay the tax initially; then, if covered by an exemption, they would receive either a tax rebate or a discount at the time of purchase. The US Department of Health and Human Services is tasked with organizing and administering the rebate-discount program.

Although it is efficient to tax opioid manufacturers rather than retailers or consumers because this lowers the cost of tax enforcement and enhances compliance, the administrative costs of delivering rebates and/or discounts to millions of patients may be much greater than the associated cost savings. Alternatively, tax collection could occur at the retail level, which would depart from federal excise tax protocol, although exceptions have been made for certain goods and services (eg, tractors, indoor tanning). If this approach is taken, we suggest a check-off box be put on all opioid prescriptions for clinicians to indicate whether the prescription should be subject to the tax. This may be an unwelcome addition to the prescription protocol, but the tax criteria could be programmed into the electronic health record and be overridden by prescribers as needed. A point-of-purchase tax would not require reimbursements, and therefore, would be simpler to administer, and the amount of the tax would be based solely on the tax rate and be clear to consumers.

The US Congress should target the tax to those therapies that provide patients with the least benefit and a considerable risk of opioid dependence and misuse. One possibility is to limit the tax to opioids prescribed for acute musculoskeletal pain. Too often, opioid prescriptions are the first-line treatment for acute pain, even though guidelines recommend against it. A broader tax base that includes prescriptions for patients on long-term opioid therapy would generate more revenue; however, many patients on high doses of opioids are being treated for extreme pain; a heavy tax may lead to physical or psychiatric decompensation. Instead, the tax should be aligned closely with a pragmatic public health and clinical objective, such as lessening exposure of new patients to extended opioid use. A tax base focused on acute pain would help internalize the social costs of OUD.

Whether the tax is associated with reduced opioid consumption depends on the amount of the tax and patients’ price sensitivity. If restricted to acute pain, the mean out-of-pocket cost of an opioid prescription is about $5, depending on type of insurance,⁴ and the mean tax of 1 cent per morphine mg equivalent would be about $2.50.⁵ Would an increase in out-of-pocket costs of $2.50 or even $5.00 toward the upper end dissuade patients from filling an opioid prescription? The literature on the price elasticity of demand for prescription opioids is inconsistent^6-8; still, the evidence mostly suggests that patients are not very responsive to moderate increases in out-of-pocket costs for opioid prescriptions.

Excise taxes are generally regressive, meaning they take a larger share of income from people of lower income than those of higher income. Moreover, patients with lower income fill a larger percentage of opioid prescriptions.⁹ However, if the revenues generated by the opioid tax are used to support OUD programs that mostly benefit lower-income groups, the effect may be progressive. We note that revenue from excise taxes sometimes goes toward an unrelated purpose (eg, federal alcoholic beverage tax revenues go into the general fund). The revenue created by SB 1723 would be dedicated to OUD treatment and recovery programs, and thus may not be regressive, but the specifics have yet to be determined.

In states with an existing opioid tax, SB 1723 would create a second layer of taxation to the extent that state and federal tax bases overlap. To limit the tax burden, Congress should place an upper limit on the amount of the federal tax (eg, $0.30 per day multiplied by the number of days per prescription). Congress also should require periodic renewal of the law to consider evolving evidence and conditions.

We support a federal opioid tax in principle. The tax could be 1 element of public finance strategies to address the OUD crisis. However, SB 1723 in its current form is unworkable because its tax rate is based on quantity (per mg), rebates and/or discounts, an overbroad tax base, and unchecked layering of state and federal taxes, and could harm patients who depend on opioid therapy.

Published: January 7, 2022. doi:10.1001/jamahealthforum.2021.4316

Open Access: This is an open access article distributed under the terms of the CC-BY License. © 2022 Harris RA et al. JAMA Health Forum.

Corresponding Author: Rebecca Arden Harris, MD, MSc, Department of Family Medicine and Community Health, Perelman School of Medicine, Andrew Mutch Building, 6th Floor, 51 N 39th St, Philadelphia, PA 19104 (rebecca.harris@pennmedicine.upenn.edu).

Conflict of Interest Disclosures: Dr Gross reported personal fees from the Pfizer Data and Safety Monitoring Board for tofacitinib use in inflammatory bowel disease outside the submitted work. No other disclosures were reported.