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COMMITTEE REPORT
April 13, 2005
H. 3297
S. Printed 4/13/05--H.
Read the first time January 12, 2005.
To whom was referred a Bill (H. 3297) to amend Section 12-36-2120, as amended, Code of Laws of South Carolina, 1976, relating to exemptions from sales tax, including prescription medications, so, etc., respectfully
That they have duly and carefully considered the same and recommend that the same do pass:
ROBERT W. HARRELL, JR. for Committee.
REVENUE IMPACT1/
This bill is expected to reduce total sales and use tax revenue by an estimated $1,710,000 in FY2005-06. Of this amount, general fund sales and use tax revenue would be reduced by $1,368,000 and EIA funds would be reduced by $342,000 in FY2005-06.
Explanation
This bill would exempt prescription medicines used to treat Rheumatoid Arthritis (RA) from sales and use tax liability. RA is a chronic autoimmune disease that causes pain, stiffness, swelling, and limitation in the motion and function of multiple joints. An estimated 1 percent of the U.S. adult population has RA, an estimated 75 percent of which are women. Based on national RA prevalence statistics, an estimated 38,000 South Carolinians live with this disease. Because there is currently no cure for RA, numerous prescription drugs have been developed to help RA patients manage their symptoms. While most prescription drugs used to treat RA can be self-administered, one drug, Remicade, must be administered intravenously (IV) by a healthcare professional in a clinical setting. According to Department of Revenue rulings 93-5 and 03-2, prescription medicines sold to clinics, hospitals, and other healthcare facilities are considered retail sales thereby making Remicade subject to sales and use tax liability. Based on pharmaceutical industry data and conversations with area rheumatology professionals, an estimated 10 percent of patients diagnosed with RA are receiving Remicade IV therapy. Multiplying an estimated 38,000 South Carolinians living with RA by 10 percent yields an estimated 3,800 RA patients receiving Remicade IV therapy. Based on average frequency, dose, and price data for Remicade IV therapy, Remicade IV therapy costs an estimated $9,000 per patient annually. Multiplying an estimated cost of $9,000 per patient by an estimated 3,800 patients undergoing Remicade IV therapy generates an estimated $34,200,000 in annual South Carolina Remicade sales. Multiplying $34,200,000 by a five percent sales and use tax rate reduces total sales and use tax revenue by an estimated $1,710,000 in FY2005-06. Of this amount, general fund sales and use tax revenue would be reduced by $1,368,000 and EIA funds would be reduced by $342,000 in FY2005-06.
Approved By:
William C. Gillespie
Board of Economic Advisors
1/ This statement meets the requirement of Section 2-7-71 for a state revenue impact by the BEA, or Section 2-7-76 for a local revenue impact or Section 6-1-85(B) for an estimate of the shift in local property tax incidence by the Office of Economic Research.
TO AMEND SECTION 12-36-2120, AS AMENDED, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO EXEMPTIONS FROM SALES TAX, INCLUDING PRESCRIPTION MEDICATIONS, SO AS TO ALSO INCLUDE IN THIS EXEMPTION, PRESCRIPTIONS FOR THE TREATMENT OF RHEUMATOID ARTHRITIS.
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. Section 12-36-2120(28)(a) of the 1976 Code, as last amended by Section 3.PP of Act 69 of 2003, is further amended to read:
"(a) medicine and prosthetic devices sold by prescription, prescription medicines used to prevent respiratory syncytial virus, prescription medicines and therapeutic radiopharmaceuticals used in the treatment of rheumatoid arthritis, cancer, lymphoma, leukemia, or related diseases, including prescription medicines used to relieve the effects of any such treatment, and free samples of prescription medicine distributed by its manufacturer and any use of these free samples;"
SECTION 2. This act takes effect July 1, 2005.
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