Is $1.30 Prescription Charge A Democratic Tax?

It's Going to Hurt the Elderly and Medicaid

Minority Leader Wants Pharmacy Assessment Repealed Representatives Who Voted Last Summer to Remove the Prescription Tax

By Curt Lovelace
January 28, 2003

Is the new $1.30 prescription charge a Democratic tax as Republicans are claiming?

No one can deny that the Republican leader in the House, Fran Marini, warned about this charge last May. He declared at the time:

"This is one of the most ill conceived ideas I have ever heard of. It's going to be a $182 million tax increase. They called it a user fee. You go to the pharmacy for a prescription and they charge you a user fee. That's a tax. You know who's going to pay the tax? Old sick people in nursing homes. Talk about a regressive tax. Let's tax old, sick people. There is no logic in this. It's unfair and inequitable. In the long run, it will push more onto Medicaid and exacerbate the problem. It's regressive and unfair."

The Republican leader had a few Democrats as companions last summer.

Rep. Charles Murphy (D-Burlington) told the House: "This is a tax, despite the title. This user fee imposes a $3,300 fee on residents [of nursing homes]. It also imposes a fee on prescriptions filled for private-pay patients at pharmacies. It's a tax. I don't suggest that the nursing home industry doesn't have issues. It does. But pick a line item -- most got cuts. Just because they are private-paying residents doesn't mean they are rich. Many are middle class and cannot afford this liability. They have done their work to save and are not on Medicaid rolls. They are going to bear the brunt of this tax. This isn't about rich
versus poor. This is about a tax."

The present Republican leader in the House, Brad Jones, tells MassNews that the only way to resolve the mistake is to repeal the tax.

"We voted against it here in the [Republican] caucus, and we'd like to see it repealed," says Jones. "The question becomes, 'How do you replace the money?' There have to be some better ways out there than doing it on prescriptions. What has gotten as much ink is the nursing home bed tax. It seems to me we're taxing exactly what we should be wanting to encourage, which is for people to make provisions for their long term, to be able to pay for themselves as opposed to getting on Medicaid. What do we do? We make it more expensive and more likely that people will have to get on Medicaid sooner. That doesn't seem to be the smartest public policy that we can come up with."

Jones says it is hurting the small pharmacies because the big chains can find a way to pass it on to the consumers.

"It takes a certain amount of naivete to believe they aren't going to pass this along to the consumer. Some pharmacies might not pass this cost along, as a way of getting a certain amount of market share. I think ultimately they'll have to, but some of the companies are big enough to shift that off to another department to get people in the store. So, for them, if it's a loss leader, that's fine. But not many pharmacies, especially the few, small independent ones that are left in the state, have that ability. Prescriptions are a big portion of their repertoire."

Jones says that Republicans tried hard last May to show the unfairness of this tax. "People have been saying, 'Oh, we didn't know this was going to happen at the time. We didn't think this would happen. It wasn't supposed to.' I think there's a certain amount of dissembling after you get caught with your pants down. This was pointed out at the time. We tried to separate these from the budget by amendment. I would also say that I don't think the press did a very good job of amplifying on the situation at the time. I think there are a lot of people sort of wondering where this tax came from. Is it something Romney did? Or Jane Swift did on the way out the door? This was done in May, June and July of last year. So it's been sitting there."

The $1.30 assessment on each prescription was attached to the Fiscal Year 2003 state budget through an outside section. No issue has caught the imagination of the citizens of the Commonwealth like assessing prescriptions for all non-Medicare and non-Medicaid prescription buyers. Legislative offices report that this is the number one issue on which constituents have been calling their legislators.

Since the phone calls have begun to come to their offices, many legislators have worked hard at deflecting the criticism for allowing this tax. Although none have gone on record as saying he or she didn't really know what was in the outside section, that excuse is being said in defense of some who voted in favor of this assessment. It is a hard position to defend.

During debate on May 16, 2002, several amendments were forwarded. One, which was fully debated before being defeated by a margin of 107 to 43, would have eliminated the assessment altogether. In a primarily, but not totally, partisan vote, Democrats maintained the assessment. The list of those who voted in favor of the amendment to eliminate the assessment is short.

Legislators are under pressure from constituents to undo what has been done. It remains to be seen whether this issue will land on the fast track once House Speaker Thomas Finneran makes committee appointments. Until then, there will be no movement on the issue and people will continue to pay an extra $1.30 for each non-Medicare/non-Medicaid prescription.

The Massachusetts Division of Health Care Finance and Policy is trying to console the citizens with this statement on its webpage, "The Pharmacy Assessment was enacted by the Massachusetts Legislature in the FY 2003 State Budget (Section 101 of Chapter 184 of the Acts of 2002). Pharmacies are required to pay an assessment on all non-Medicaid, non-Medicare prescriptions. The statute does not say how the pharmacies are to find the money to pay their assessment. The Division is aware that some pharmacies are requiring their customers who are purchasing prescriptions to pay."

Revenues derived from the tax are supposed to bolster the Health Care Security Trust Fund, and fund MassHealth spending for prescription drugs. According to many legislators, pharmacy industry spokesmen and advocates for seniors, this amounts to taxing people who pay their own bills in order to provide for those who are on Medicaid or Medicare. In other words, those who pay for their own prescriptions, whether through an insurance plan or in cash, are expected to shoulder the burden for those who are on state and federally-funded programs.

Numerous lawmakers have addressed the issue since the assessment came on line on Jan.1 - and their phones started ringing off the hooks. Sen. Joan Menard (D-Somerset) plans to file a bill calling for repeal of the assessment. Several other legislators have received requests from constituents to file like legislation. It's not quite as simple as having an assessment or not, however.

Legislators like Menard are not so worried that this assessment is a tax, as they are about who's paying it. Her first choice, she has told reporters, is that the Attorney General rule that the assessment is legal and proper, but must be absorbed by the pharmacies and not passed on to consumers.

Obviously, this approach does not meet with much agreement in the pharmaceutical community. CVS, the largest pharmacy group in the state, opposed the implementation of the assessment. At a Dec. 30 hearing in the legislature, CVS Vice President of Government Affairs testified that there is simply no way retail pharmacies could simply absorb the $1.30 assessment on every prescription. He said these pharmacies "operate on a very slim profit margin of approximately 2 percent. At CVS the retail price in 2002 for non-Medicaid/non-Medicare prescriptions is slightly under $51 per prescription. At 2 percent net profit, the net profit per prescription is $1.02. Obviously, as a public company with a fiscal responsibility to our shareholders, we cannot afford to absorb a $1.30 prescription tax."

Not only is it unlikely that a for-profit company is going to absorb a loss on every prescription transaction. The philosophical basis for the tax is also in question. Ortiz, also testified that, "It is inherently unfair to require people who need prescription drugs to subsidize the Medicaid program. This is a responsibility that must be borne by all the citizens of the Commonwealth and should be done out of the General Fund."

Sidebar:
Representatives Who Voted Last Summer to Remove the Prescription Tax

Democrats: Harkins, Asselin, Atkins, Binienda, Bradley, Cahill, Carron, Donovan, Falzone, Frsolo, Galvin, Kaufman, Kocot, LeDuc, Merrigan, C.A. Murphy, Provost, T.M. Stanley, Story, Swan, Teahan, Timilty, Tirone, Torrisi.

Republicans: Marini, Jones, Peterson, Rogeness, Brown, Coppola, deMaceda, Frost, Gomes, Hahn, Hargraves, Hill, Hillman, Kelly, Lepper, Loscocco, Poirier, Polito, Pope.

House Speaker Thomas Finneran voted against the amendment.

Sidebar:
Minority Leader Wants Pharmacy Assessment Repealed

Legislature 'Caught With Its Pants Down'

By Curt Lovelace
January 28, 2003

MassNews sat down with House Minority Leader Brad Jones (R-Reading) to get his views on the Pharmacy assessment.

MassNews: How do you see this issue being resolved?

Jones: Ultimately, since we voted against it hear in the [Republican] caucus, we'd like to see it repealed. The question becomes, "how do you replace the money?" There have to be some better ways out there than doing it on prescription. What has gotten as much ink is the nursing home bed tax. It seems to me we're taxing exactly what we should be wanting to encourage, which is for people to make provisions for their long term, to be able to pay for themselves as opposed to getting on Medicaid. What do we do? We make it more expensive and more likely that people will have to get on Medicaid sooner. That doesn't seem to be the smartest public policy that we can come up with.

MassNews: Some lawmakers have blamed the pharmacies for passing along this extra cost. How do you view that?

Jones: It takes a certain amount of naivete to believe in collecting something like this, whether you call it a fee or a tax, that they aren't going to pass it along to the consumer. Now some pharmacies might not pass this cost along, as a way of getting a certain amount of market share. I think ultimately they'll have to but some of the companies are big enough to shift that off to another department to get people in the store. So, for them, if it's a loss leader, that's fine.

But not a lot of pharmacies, especially the smaller independent ones, the few that are left in the state have that ability. Prescriptions are a big portion of their repertoire, and for any legislator to think that this is going to be an assessment that pharmacies will pay and not going to pass on, it seems to me that that legislator doesn't understand how the system has worked in this country for hundreds of years. I don't understand that rationale.

People have been saying "Oh, we didn't know this was going to happen at the time. We didn't think this would happen, it wasn't supposed to. I think that's a certain amount of dissembling after you get caught with your pants down. This was pointed out at the time. We tried to separate these from the budget, by amendment. I would also say that I don't think the press did a very good job of amplifying on the situation at the time. I think there are a lot of people sort of wondering where this tax came from. Is it something Romney did? Or Jane Swift did on the way out the door? This was done in May, and June, and July of last year. So it's been sitting there.