| Washington State House of Representatives Office of Program Research |
BILL ANALYSIS |
| Finance Committee | |
HB 1891
This analysis was prepared by non-partisan legislative staff for the use of legislative members in
their deliberations. This analysis is not a part of the legislation nor does it constitute a
statement of legislative intent.
Brief Description: Providing a business and occupation tax deduction for the sale of certain prescription drugs.
Sponsors: Representatives Linville, Orcutt, Quall, Cody, Hinkle, Hurst and Dunn.
Brief Summary of Bill |
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Hearing Date: 2/16/07
Staff: Jeff Mitchell (786-7139).
Background:
Washington's major business tax is the business and occupation (B&O) tax. The B&O tax is
imposed on the gross receipts of business activities conducted within the state, without any
deduction for the costs of doing business. The tax is imposed on the gross receipts from all
business activities conducted within the state. Revenues are deposited in the State General Fund.
A business may have more than one B&O tax rate, depending on the types of activities
conducted. The tax rate for most types of businesses that provide services is 1.5 percent.
Public hospitals, nonprofit hospitals, and nonprofit community health centers are allowed a
deduction from B&O tax on amounts received as compensation for health care services covered
under the federal Medicare program, as well as from the Basic Health Plan and other medical
assistance programs funded by the state of Washington. Amounts billed for these programs by
private clinics or physicians are not exempt from tax.
Medicare part B provides coverage for certain physician, outpatient hospital, laboratory, and
other services to beneficiaries who pay monthly premiums. Medicare part B covers a limited set
of injectable and infusible drugs that are not usually self-administered and that are furnished and
administered as part of a physician service. This includes vaccines and anticancer and
chemotherapy drugs.
In 2003, the federal Medicare Modernization Act (MMA) changed the drug reimbursement
process. Prior to the passage of the MMA, drug reimbursement was based on average wholesale
prices, as provided by drug manufacturers. Reimbursement, after the passage of the MMA, is
now calculated using average sales price (ASP). The reimbursement rate for drugs is currently
ASP plus six percent.
Summary of Bill:
A deduction from B&O tax is provided for amounts received by physicians and clinics from sales
of prescription drugs for infusion or injection. To qualify for the deduction, the drugs must not
be sold for an amount that exceeds the rate at which the federal government reimburses under
Medicare part B, and any charges must be separately stated on the billing statement.
Appropriation: None.
Fiscal Note: Available.
Effective Date: The bill takes effect 90 days after adjournment of session in which bill is passed.