Judge Overturns Massachusetts Tax on Rx

Published July 1, 2003

Superior Court Judge Allan van Gestel has overturned a state prescription drug tax and said government officials must return to pharmacies statewide $18 million in revenue collected from the tax, which took effect January 1.

Through the end of the fiscal year, June 30, the tax was set at $1.30 per prescription. The tax would have fallen to 65 cents per prescription on July 1. Expected to raise $36 million a year, the tax affected an estimated 55 million prescriptions. Prescriptions for Medicaid and Medicare beneficiaries were exempt.

Van Gestel ruled the state had improperly implemented the tax and rejected the state’s claim it had obtained federal approval. CVS, Brooks Pharmacy, and dozens of other pharmacy chains filed suit against the state in April to block the tax.

Attorneys for the state said the Division of Medicaid Assistance received a letter approving the tax on December 23 from the federal Centers for Medicare and Medicaid Services (CMS). But van Gestel ruled the letter was “too vague to constitute approval. What the correspondence shows, in plain language, was not federal approval of anything,” he told the Boston Globe.

Conrad F. Meier is managing editor of Health Care News. His email address is [email protected].