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NY federal judge blocks state opioid tax on manufacturers, distributors

District Judge Katherine Polk Failla ruled the means for extracting payments as unconstitutional

John Moore/Getty Images

A federal judge in New York blocked on Wednesday a unique law aimed at collecting $600 million from drug companies to be used to combat the opioid crisis.

U.S. District Judge Katherine Polk Failla ruled that the law, which would allow the state to extract payments from drug manufacturers and distributors, is a violation of the U.S. Constitution. A specific issue in the legal challenge is a provision that would have prevented opioid manufacturers from passing along the cost of the tax to consumers.

In her decision, Judge Failla ruled that this provision violated the Commerce Clause of the U.S. Constitution. She further ruled that this provision was not severable from the rest of the Act, meaning that the whole act had to be struck down.

The law was challenged by the generic drugmaker's group, Association for Accessible Medicines; Healthcare Distribution Alliance (a drug wholesale distributor group) and opioid generics maker Mallinckrodt PLC's unit SpecGx.

The recently enacted law, known as the Opioid Stewardship Act, established a "stewardship fund" to finance opioid addiction treatment and education programs in New York. The law would put the full expense on the manufacturers and distributors of opioids.

To fund the programs, the state would need to collect a total of $100 million each year from 2019 to 2024. Each company's payment would be based on its annual opioid sales.

The first payments were due on Jan. 1 and were calculated based on 2017 sales. Mallinckrodt's SpecGX said in court papers it owed $1.2 million.

The Association for Accessible Medicines told Reuters in a statement that the "legislative proposals must reflect an understanding of the pharmaceutical ecosystem and adhere to the tenets of the U.S. Constitution."

Several states have considered proposing similar laws, according to the report.

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