By Dallas Woodhouse
Wednesday, July 16
updated 3:00 am

As an insulin-dependent diabetic, I have benefited from many free drug samples over the years. These sample medications have been helpful for my doctor and me to develop a treatment plan to fight heart disease, kidney failure, vision loss and other complications of the disease that killed my father just a few years ago. It could soon be much harder for doctors and patients to develop similar treatment plans due to a bizarre ruling by tax collectors.

North Carolina has seen more than its fair share of questionable taxes over the years. Revenue offices and legislatures are always looking for creative ways to raise extra money without raising too many eyebrows. But the taxation of prescription drug samples that has recently come to light is truly confounding.

The move by Guilford County to demand that Greensboro-based Eagle Physicians and Associates pay taxes on its supply of free drug samples has surprised medical and tax professionals alike. Many of them did not have any idea stocks of free pharmaceutical samples were fair game for the tax collector. Neither, it is safe to say, did the public. But the Guilford tax office pointed to a state decree to make its case.

In 2006 the N.C. Department of Revenue released a directive that said counties should tax doctors’ offices’ supplies of drug samples. The argument was that, because the samples are given away and not sold, they do not constitute inventory - which would be nontaxable. The drugs were instead to be considered office supplies, which can be taxed as part of a company’s overall property tax burden.

If it sounds a bit odd and confusing, you’re not alone. Apparently many doctors’ offices didn’t even know about the directive and so have not been paying taxes on their free drug samples. It doesn’t appear - as the novelty of the Guilford County controversy would suggest - that county tax offices elsewhere have been pressing the issue.

But with the hoopla over the Eagle audit, medical providers across the state are taking note. With malpractice insurance and other costs of doing business continuing to rise, medical professionals are finding themselves in an increasingly uncertain financial position. The last thing they need is a larger tax burden. If doctors are forced to shell out in order to give out drug samples, in the end patients could be the ones to lose out. Doctors might just choose not to provide the medicines altogether.

Free drug samples are useful for several reasons.

The primary one is they allow doctors to tailor treatments to individual patients by allowing them to try out a drug before paying for an entire prescription. It allows doctors to determine the right treatment for a particular patient, without making the patient go through the trouble - and expense - of filling various prescriptions. Also, when time is of the essence and a doctor is not sure a patient will get a regular prescription filled quickly enough, the free samples are an effective way to begin treatment instantly.

Medical clinics serving lower-income patients also use the free samples to provide treatment to patients who otherwise might be unable to afford the proper medicine. It isn’t the best solution to the dilemma of prescription drug access for the poor, but right now it is the best, and the only option many folks have. Let’s not take that away.

Fortunately, help may be on the way. The state Senate’s property tax bill (SB 1878) includes an amendment to exempt free drug samples from taxation. The bill is making its way through the legislature this week. Let’s hope it ends up on the governor’s desk, signed. Many people like me, with chronic conditions like diabetes, are counting on it.
Dallas Woodhouse is director of Americans for Prosperity-North Carolina.