U.S. Supreme Court dismisses New York opioid business tax challenge

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Opioid-based hydrocodone tablets at a drugstore in Portsmouth, Ohio on June 21, 2017. REUTERS / Bryan Woolston

WASHINGTON, Oct.4 (Reuters) – The United States Supreme Court on Monday cleared the way in New York to levy a $ 200 million surtax on opioid manufacturers and distributors to cover state costs resulting from the deadly epidemic involving the powerful pain relievers.

Judges declined to hear appeal from two trade groups representing drug distributors and generic drug makers and a unit of UK pharmaceutical company Mallinckrodt Plc (MCDG.MU) of a lower court ruling upholding the surcharge.

Challengers to the act included the Association for Accessible Medicines, whose members include drug makers Teva Pharmaceutical Industries Plc (TEVA.TA) and Mallinckrodt, and the Healthcare Distribution Alliance, which represents wholesale distributors.

Alliance members include the three largest drug distributors, McKesson Corp (MCK.N), AmerisourceBergen Corp (ABC.N) and Cardinal Health (CAH.N). They recently offered to pay $ 21 billion to resolve lawsuits accusing them of fueling the epidemic.

Mallinckrodt filed for bankruptcy in 2020 and is seeking to finalize a similar $ 1.7 billion settlement.

The payments to New York were due under the Opioid Stewardship Act, which former Democratic Governor Andrew Cuomo enacted in 2018 to deal with the costs the epidemic imposed on the state.

Opioids resulted in the overdose deaths of nearly 500,000 people from 1999 to 2019 in the United States, according to the United States Centers for Disease Control and Prevention, as part of an ongoing public health crisis.

The law marked the first time that a state sought to impose an epidemic-related tax or fees on opioid manufacturers and distributors. Delaware, Minnesota and Rhode Island have since adopted their own taxes.

New York law envisioned raising $ 100 million per year from manufacturers and distributors of prescription pain relievers based on their market share. A federal judge ruled in 2018 that a provision prohibiting companies from passing the costs of payments on to consumers was unconstitutional and could not be separated from the rest of the law.

The state appealed, but following that ruling, New York enacted a new tax law that did not include the transmission ban, limiting the case to $ 200 million in payments owed based on 2017 and 2018 market shares.

The New York-based 2nd United States Court of Appeals in 2020 awarded the state a victory, ruling that the judge did not have the power to overturn the law. The challengers then appealed to the Supreme Court.

New York Attorney General Letitia James separately announced in July an agreement with three of the nation’s largest drug distributors, which will provide up to $ 1.1 billion to the state to fight the epidemic of opioids.

Reporting by Lawrence Hurley and Nate Raymond; Editing by Will Dunham

Our Standards: The Thomson Reuters Trust Principles.

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