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COMMITTEE REPORT
April 5, 2001
H. 3129
S. Printed 4/5/01--H.
Read the first time January 9, 2001.
To whom was referred a Bill (H. 3129) to amend Section 12-36-2120, as amended, Code of Laws of South Carolina, 1976, relating to exemptions from the South Carolina sales tax, 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 general fund sales and use tax revenue by an estimated $3.53 million in FY 2001-02. Of this amount, general fund sales and use tax revenue would be reduced by $2.82 million and EIA funds would be reduced by $710,000.
Explanation
This bill would exempt from sales and use tax prescribed medicines sold for the purpose of treating renal (kidney) disease. According to information provided by the SC Chapter of the National Kidney Foundation and various health professionals, there are between 21,000 and 26, 000 South Carolinians suffering from some form of this disease. Of those individuals, between 14,000 and 19,000 have been diagnosed with "Pre End-Stage Renal Disease." Another 2,000 have undergone kidney transplants and the remaining 5,000 have been diagnosed with "End-Stage Renal Disease" requiring dialysis treatment an average of three times per week. Based on prior growth, the BEA estimates there will be 5,320 patients requiring dialysis treatment during FY 2001-02. It should be noted that individuals with renal disease take between 6 and 10 prescription drugs daily to treat their disease. Current law (SC Code Section 12-36-2120) exempts prescription drugs sold to consumers from sales and use tax liability. However, drugs sold to clinics and hospitals to be administered to dialysis patients during treatment are not exempt from sales and use tax. According to information obtained from dialysis clinic staff and members of the pharmaceutical industry, there are four commonly prescribed drugs administered to dialysis patients during treatment. Epogen, a drug which signals the production of oxygen carrying red blood cells, is administered to approximately 94 percent of individuals receiving dialysis treatments in the state and will cost an estimated $32.5 million in FY 2001-02. Another complication associated with chronic renal failure is Secondary Hyperparathyroidism, which is commonly treated by Vitamin D supplements. An estimated 93 percent of South Carolina's dialysis patients receive one of these two supplements during treatment. Sixty percent will be administered Zemplar at an estimated cost of $14.4 million, while the remaining 40 percent will receive Calcijex at an estimated cost of $8.6 million for FY 2001-02. The fourth prescribed medicine administered to dialysis patients is an iron management drug known as Infed. Roughly 50 percent of dialysis patients in the state receive Infed at an average cost of approximately $15.1 million on FY 2001-02. Added together, these four drugs will cost an estimated $70.6 million in FY 2001-02. Applying a five percent sales and use tax rate to this amount reduces general fund sales and use tax revenue by an estimated $3.53 million in FY 2001-02. Of this amount, general fund sales and use tax revenue would be reduced by $2.82 million and EIA funds would be reduced by $710,000 in FY 2001-02.
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, Section 2-7-76 for a local revenue impact, and Section 6-1-85(B) for an estimate of the shift in local property tax incidence.
TO AMEND SECTION 12-36-2120, AS AMENDED, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO EXEMPTIONS FROM THE SOUTH CAROLINA SALES TAX SO AS TO PROVIDE AN EXEMPTION FOR PRESCRIPTION MEDICINE USED IN THE TREATMENT OF RENAL DISEASE.
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 Act 399 of 2000, is further amended to read:
"(a) medicine and prosthetic devices sold by prescription, prescription medicines used in the treatment of renal disease, prescription medicines and therapeutic radiopharmaceuticals used in the treatment of 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 upon approval by the Governor.
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