New Tax on Prescriptions Takes Effect in Massachusetts; Pharmacists Call Regulations ‘Unclear’

Massachusetts' new tax on prescriptions, which has taken "heavy fire ... from pharmacists," took effect Jan. 1, despite the fact that final regulations will not be effective until February, the Boston Globe reports. An estimated 55 million prescriptions will be subject to the tax; prescriptions for Medicaid and Medicare beneficiaries are exempt. The tax will be $1.30 per prescription for the remainder of the current fiscal year and then will drop to 65 cents per prescription July 1. The tax, which will be used to fund Medicaid, is expected to raise $36 million annually, which would be matched by the federal government.

Problems with the Tax
In a Dec. 30 hearing, pharmacists asked the state to delay the tax, calling it "unfair, unclear and certain to drive up the price of drugs for most Massachusetts residents," the Globe reports. Concerns include:

• Consumers can avoid the tax by using out-of-state pharmacies or mail-order pharmacies.
  
• It is unclear whether pharmacists dispensing advice about over-the-counter drugs should assess the tax.
  
• Pharmacies often have difficulty determining whether a Medicare beneficiary's bill is being paid through traditional Medicare or through a Medicare+Choice plan.
  
• Blue Cross and Blue Shield of Massachusetts has asserted that federal government employees in its plan are exempt from the tax.
  
• Some hospitals contend that their outpatient pharmacies should not be taxed because they are licensed differently than retail pharmacies (Mohl, Boston Globe, 12/31/02).
  
• It is unknown whether the tax goes into effect when the prescription is filled or when it is purchased by the customer.
  
• It is unknown whether refills are subject to the tax (Heldt Powell, Boston Herald, 12/31/02).