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79–936 2013

IMPACT OF LIMITATIONS ON THE USE OF 

TAX-ADVANTAGED ACCOUNTS FOR THE 

PURCHASE OF OVER-THE-COUNTER MEDICATION 

HEARING 

BEFORE THE

SUBCOMMITTEE ON OVERSIGHT 

OF THE

COMMITTEE ON WAYS AND MEANS 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

SECOND SESSION

APRIL 25, 2012 

Serial No. 112–OS11 

Printed for the use of the Committee on Ways and Means 

( 


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COMMITTEE ON WAYS AND MEANS 

DAVE CAMP, Michigan, Chairman 

WALLY HERGER, California 

SAM JOHNSON, Texas 

KEVIN BRADY, Texas 

PAUL RYAN, Wisconsin 

DEVIN NUNES, California 

PATRICK J. TIBERI, Ohio 

GEOFF DAVIS, Kentucky 

DAVID G. REICHERT, Washington 

CHARLES W. BOUSTANY, JR., Louisiana 

PETER J. ROSKAM, Illinois 

JIM GERLACH, Pennsylvania 

TOM PRICE, Georgia 

VERN BUCHANAN, Florida 

ADRIAN SMITH, Nebraska 

AARON SCHOCK, Illinois 

LYNN JENKINS, Kansas 

ERIK PAULSEN, Minnesota 

KENNY MARCHANT, Texas 

RICK BERG, North Dakota 

DIANE BLACK, Tennessee 

TOM REED, New York 

SANDER M. LEVIN, Michigan 

CHARLES B. RANGEL, New York 

FORTNEY PETE STARK, California 

JIM MCDERMOTT, Washington 

JOHN LEWIS, Georgia 

RICHARD E. NEAL, Massachusetts 

XAVIER BECERRA, California 

LLOYD DOGGETT, Texas 

MIKE THOMPSON, California 

JOHN B. LARSON, Connecticut 

EARL BLUMENAUER, Oregon 

RON KIND, Wisconsin 

BILL PASCRELL, JR., New Jersey 

SHELLEY BERKLEY, Nevada 

JOSEPH CROWLEY, New York 

JENNIFER SAFAVIAN, Staff Director 

JANICE MAYS, Minority Chief Counsel 

SUBCOMMITTEE ON OVERSIGHT 

CHARLES W. BOUSTANY, JR., Louisiana, Chairman 

DIANE BLACK, Tennessee 

AARON SCHOCK, Illinois 

LYNN JENKINS, Kansas 

KENNY MARCHANT, Texas 

TOM REED, New York 

ERIK PAULSEN, Minnesota 

JOHN LEWIS, Georgia 

XAVIER BECERRA, California 

RON KIND, Wisconsin 

JIM MCDERMOTT, Washington 


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C O N T E N T S 

Page 

Advisory of April 25, 2012, announcing the hearing ............................................ 2 

WITNESSES 

Mr. Scott M. Melville, President and Chief Executive Officer, Consumer 

Healthcare Products Association, testimony ...................................................... 5 

Dr. Joel M. Feder, D.O., F.A.C.O.F.P., Captain MC, USN (Ret.), American 

Osteopathic Association, testimony .................................................................... 20 

Mr. Steven Taylor, Chief Executive Officer, Sjogren’s Syndrome Foundation, 

testimony .............................................................................................................. 27 

Ms. Jennifer Hatcher, Senior Vice President, Government & Public Affairs, 

Food Marketing Institute, testimony .................................................................. 34 

Mr. Paul N. Van de Water, Senior Fellow, Center on Budget and Policy 

Priorities, testimony ............................................................................................. 40 

The Hon. Lynn Jenkins ........................................................................................... 51 

The Hon. Erik Paulsen ............................................................................................ 58 

SUBMISSIONS FOR THE RECORD 

The Hon. Wally Herger ........................................................................................... 64 

The Hon. Dave Reichert .......................................................................................... 66 

American Medical Association ................................................................................ 68 

Center for Fiscal Equity .......................................................................................... 72 

Henderson Brothers ................................................................................................. 75 

Infinisource ............................................................................................................... 76 

National Business Group on Health ...................................................................... 81 


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IMPACT OF LIMITATIONS ON THE USE 

OF TAX-ADVANTAGED ACCOUNTS FOR 

THE PURCHASE OF OVER-THE-COUNTER 

MEDICATION 

WEDNESDAY, APRIL 25, 2012 

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON WAYS AND MEANS, 

SUBCOMMITTEE ON OVERSIGHT, 

Washington, DC. 

The subcommittee met, pursuant to call, at 2:30 p.m., in Room 

11002, Longworth House Office Building, the Honorable Charles 

Boustany [chairman of the subcommittee] presiding. 

[The advisory of the hearing follows:] 


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HEARING ADVISORY 

FROM THE COMMITTEE ON WAYS AND MEANS 

Boustany Announces Hearing on the Impact of 

Limitations on the Use of Tax-Advantaged Accounts for the Purchase of Over-the-Counter 

Medication 

Wednesday, April 25, 2012 

Congressman Charles W. Boustany, Jr., MD, (R–LA), Chairman of the Subcommittee on Oversight of the Committee on Ways and Means, today announced the 

Subcommittee will hold a hearing on limitations on the purchase of over-the-counter 

(‘‘OTC’’) medication with tax-advantaged accounts such as health care Flexible 

Spending Arrangements (‘‘FSAs’’), Health Savings Accounts (‘‘HSAs’’) and Health 

Reimbursement Accounts (‘‘HRAs’’). The hearing will take place on Wednesday, 

April 25, 2012, in Room 1100 of the Longworth House Office Building, beginning at 2:30 P.M. 

In view of the limited time available to hear witnesses, oral testimony at this 

hearing will be from invited witnesses only. However, any individual or organization 

not scheduled for an oral appearance may submit a written statement for consideration by the Committee and for inclusion in the printed record of the hearing. A 

list of invited witnesses will follow. 

BACKGROUND: 

Millions of Americans currently use tax-advantaged accounts to save for medical 

expenses defined as ‘‘qualified’’ by the Internal Revenue Code (IRC). Contributions 

to and distributions from these accounts are generally tax-exempt and may be used 

for unreimbursed medical expenses such as deductibles and co-payments. Approximately 33 million Americans are in families with FSAs, which are offered by 29 percent of small businesses and 85 percent of large employers. An additional 11.4 million Americans are enrolled in an HSA. 

Until 2011, these account holders could use their tax-free savings to purchase 

OTC medication without a prescription. Recent changes to the Tax Code modified 

the definition of qualified medical expenses, generally prohibiting Americans from 

using their FSA, HSA or HRA funds for medication not prescribed by a health care 

provider. As a result, Americans must now purchase non-prescribed OTC medications with after-tax dollars, resulting in a tax increase on American families. 

Physician groups have suggested that the OTC medication prescription requirement has imposed an unreasonable administrative burden, resulted in longer waits 

for appointments, and increased health care costs. The Subcommittee’s hearing will 

examine how these changes have specifically affected patients, consumers, physicians, and health care costs and spending. 

In announcing the hearing, Chairman Boustany said, ‘‘Too often in Washington, officials make decisions about health care policy based on abstract 

theories and budgetary scores. This hearing will focus on how one decision 

in particular—the limitation on how consumers may use their own FSA, 

HSA or HRA money—has adversely affected access and affordability for 

families, physicians, and job creators.’’ 

FOCUS OF THE HEARING: 

The hearing will focus on reviewing the rules affecting FSAs, HSAs and HRAs 

and the impact the rules have on consumers, physicians, and employers. 


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DETAILS FOR SUBMISSION OF WRITTEN COMMENTS: 

Please Note: Any person(s) and/or organization(s) wishing to submit for the hearing record must follow the appropriate link on the hearing page of the Committee 

website and complete the informational forms. From the Committee homepage, 

http://waysandmeans.house.gov, select ‘‘Hearings.’’ Select the hearing for which you 

would like to submit, and click on the link entitled, ‘‘Click here to provide a submission for the record.’’ Once you have followed the online instructions, submit all requested information. ATTACH your submission as a Word document, in compliance 

with the formatting requirements listed below, by the close of business on Tuesday, May 9 2012. Finally, please note that due to the change in House mail policy, 

the U.S. Capitol Police will refuse sealed-package deliveries to all House Office 

Buildings. For questions, or if you encounter technical problems, please call (202) 

225–1721 or (202) 225–3625. 

FORMATTING REQUIREMENTS: 

The Committee relies on electronic submissions for printing the official hearing record. As always, submissions will be included in the record according to the discretion of the Committee. 

The Committee will not alter the content of your submission, but we reserve the right to format 

it according to our guidelines. Any submission provided to the Committee by a witness, any supplementary materials submitted for the printed record, and any written comments in response 

to a request for written comments must conform to the guidelines listed below. Any submission 

or supplementary item not in compliance with these guidelines will not be printed, but will be 

maintained in the Committee files for review and use by the Committee. 

1. All submissions and supplementary materials must be provided in Word format and MUST 

NOT exceed a total of 10 pages, including attachments. Witnesses and submitters are advised 

that the Committee relies on electronic submissions for printing the official hearing record. 

2. Copies of whole documents submitted as exhibit material will not be accepted for printing. 

Instead, exhibit material should be referenced and quoted or paraphrased. All exhibit material 

not meeting these specifications will be maintained in the Committee files for review and use 

by the Committee. 

3. All submissions must include a list of all clients, persons and/or organizations on whose 

behalf the witness appears. A supplemental sheet must accompany each submission listing the 

name, company, address, telephone, and fax numbers of each witness. 

The Committee seeks to make its facilities accessible to persons with disabilities. 

If you are in need of special accommodations, please call 202–225–1721 or 202–226– 

3411 TTD/TTY in advance of the event (four business days notice is requested). 

Questions with regard to special accommodation needs in general (including availability of Committee materials in alternative formats) may be directed to the Committee as noted above. 

Note: All Committee advisories and news releases are available on the World 

Wide Web at http://waysandmeans.house.gov/

f 

. 

Chairman BOUSTANY. The subcommittee will come to order. I 

would like to welcome everyone to this afternoon’s hearing on the 

limitations of the Democrats’ health care law that places on consumers use of tax-advantaged plans to purchase over-the-counter 

medication. 

Millions of Americans use tax-advantaged plans to save for medical expense. Plans such as flexible spending arrangements, health 

reimbursement arrangements, health savings accounts allow consumers to set aside funds for out-of-pocket health care expenses 

such as deductibles, co-payments, and until recently over-thecounter products not typically covered by insurance. Contributions 

to and distributions from these plans are generally tax exempt and 

make health care more affordable to well over 40 million families. 

Until 2011, families with tax-advantaged plans could use these 

funds to purchase over-the-counter medications such as allergy 


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medication, cold and flu remedies, first-aid products without a doctor’s prescription. However, to pay for the massive entitlement expansion in the President’s health care law the new law required 

that consumers using tax-advantaged plans must first obtain a doctor’s prescription in order to use tax-preferred account funds to 

purchase over-the-counter medication. This provision alone is a $5 

billion tax increase on the American people. 

As a result, millions of Americans now first have to visit a physician’s office before going to a drugstore to purchase cold medicine 

with their FSAs, for example. This leads to increased wait times 

in doctors’ offices, greater cost both in time and dollars for consumers and potential delay in obtaining treatment. This policy was 

not enacted to cure a problem or to promote better health care 

spending, this was done to raise revenue, pure and simple. 

When the new law was first enacted the American Medical Association wrote that the limitations would, I quote, increase cost to 

the health care system, generate unnecessary physician office visits 

and place a new administrative burden on doctors, end quote. A 

Wall Street Journal article from last year quoted one pediatrician 

as saying, and I quote, I am now doing the IRS’s work and that 

is what I resent most, end quote. 

This afternoon’s hearing is not designed to be a broad debate 

about the 2010 health care law. Instead it is to examine one provision in the new health care law and hear from our witnesses how 

this is affecting consumers, physicians, job creators in the health 

care sector. 

And with that I want to welcome our witnesses here today, and 

I look forward to a fruitful discussion on this very important topic. 

Ranking Member Lewis has been detained. He should be here 

shortly. But I will now yield to my friend Mr. Becerra from California for the purposes of an opening statement. 

Mr. BECERRA. Thank you, Mr. Chairman, for holding this hearing today. Health care is an important topic that touches the lives 

of millions of Americans. The Affordable Care Act will expand comprehensive health insurance coverage to over 30 million Americans 

and has already insured millions of young adults and people with 

preexisting conditions. It contains important insurance reforms 

that will benefit both those who are insured today and those who 

are not insured. 

The Affordable Care Act will reduce the deficit by over $120 billion over 10 years and over $1 trillion over 20. The Act did not add 

to the deficit and was fully paid for by a number of provisions. One 

of those provisions is before us today, a provision that affects the 

tax treatment of reimbursements for over-the-counter medicines 

from certain tax-favored accounts. 

The provision before us today raised about $5 billion. This provision was initially suggested in a 2005 report from the Joint Committee on Taxation as an option to improve tax compliance. The 

new rule states that over-the-counter medications may no longer be 

reimbursed from flex spending accounts, health savings accounts or 

health reimbursement accounts without a prescription from a physician. 

I look forward to hearing from the witnesses today. I would like 

to learn more about how the new rule is affecting taxpayers and 


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the health care system and how any changes to this provision 

would interface with the notion and desire for tax reform. Many 

people, including some on this committee, have said that we should 

eliminate all tax expenditure programs, which are those specialty 

programs that affect only certain populations within the Tax Code, 

and this would fall within the category of one of those tax expenditure programs. And I would be very interested to see what the witnesses have to say about that. 

So, Mr. Chairman, I thank the witnesses in advance for their testimony and their willingness to share their experiences. And with 

that, I yield back the balance of my time. 

Chairman BOUSTANY. I thank the gentleman from California. 

And let me just say that I ask unanimous consent that all members’ written statements be included in the record. Without objection it is so ordered. And when Mr. Lewis gets here I will also 

allow him out of courtesy to give an opening statement since he is 

ranking member of this subcommittee. 

I want to thank our witnesses for being here this afternoon. We 

will hear from Scott Melville, President of the Consumer Health 

Care Products Association. Mr. Melville, welcome. We have Dr. Joel 

Feder, a member of the American Osteopathic Association. Welcome, sir. Steven Taylor of the Sjogren’s Syndrome Foundation. Mr. 

Taylor, welcome. Jennifer Hatcher, who is Senior Vice President of 

the Food Marketing Institute. Ms. Hatcher, welcome. And Peter 

Van de Water, Senior Fellow of the Center on Budget and Policy 

Priorities. Welcome. I want to thank you all for being here today. 

You will each have 5 minutes to give your statements for the 

record, but your full written statements will be included in the 

record of this hearing. 

Mr. Melville, we will begin with you. You have 5 minutes. 

STATEMENT OF SCOTT M. MELVILLE, PRESIDENT AND CHIEF 

EXECUTIVE OFFICER, CONSUMER HEALTHCARE PRODUCTS 

ASSOCIATION, Washington, D.C. 

Mr. MELVILLE. Thank you, Chairman Boustany, Ranking Member Lewis, other Members of the Subcommittee. Thank you for 

holding this hearing and inviting me to testify on behalf of the 

Consumer Health Care Products Association, the national association representing manufacturers and distributors of over-thecounter medicines and dietary supplements. 

OTC medicines are a vital part of our Nation’s health care system and often serve as a first line of treatment for many common 

self-manageable conditions like colds, allergies, heartburn and 

headaches. OTC medicines are like prescription medicine pharmaceuticals regulated by the Food and Drug Administration. However, 

OTCs can be purchased by consumers without a prescription because the FDA has determined that the medicine can be safely 

used by a consumer without the intervention of a doctor or other 

health care professional. 

This broad availability of OTC medicines 24/7 in a wide range of 

retail outlets, including pharmacies, provides tremendous benefit to 

both consumers and our health care system. In fact, a recent study 

by Booz & Company estimated that OTCs provide $102 billion in 

benefits to our Nation’s health care system every year. These beneVerDate Mar 15 2010 02:10 Apr 02, 2013 Jkt 079936 PO 00000 Frm 00009 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\79936.XXX GPO1 PsN: 79936

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fits are realized first through reduced doctor visits accounting for 

approximately $77 billion of those savings; and, two, reduced drug 

costs relative to prescription products accounting for $25 billion. 

Consumers, public and private payers and the economy all benefit. 

The authors concluded that each dollar spent on OTC medicine 

saves the Nation’s health care system $6 to $7. 

Access to OTC medicines empowers consumers and allows them 

to take greater control over their health care and their health care 

spending. So do flexible spending arrangements, or FSAs, which 

were designed to help Americans afford the portions of health care 

costs not covered by insurance. In 2003 the Internal Revenue Service first authorized the use of FSAs for the purchase of OTC medicines, confirming their equal status with prescription pharmaceuticals for purposes of FSA eligibility. In subsequent years millions of consumers budgeted for their health care, set aside pretax 

money and utilized FSA continuance to purchase OTC medicines. 

Retailers made it a seamless transaction by identifying eligible 

products and processing the payment electronically through the 

consumer’s FSA accounts. 

Unfortunately, for consumers and the health care system that efficient process ended on January 1, 2011. That is when a provision 

in the Affordable Care Act took effect that requires consumers to 

seek a prescription for a medicine that doesn’t require one if they 

want to utilize their FSAs to purchase an OTC medicine. There is 

no medical or regulatory justification for this. It is simply a legal 

requirement under the new law if they want to use their tax-advantaged FSA. 

This leaves consumers with three options. One, to seek an unnecessary doctor’s appointment to get a prescription and then submit 

the purchase for reimbursement under their FSA account. Two, to 

purchase the OTC medicine out of their own pocket which will 

raise the cost of the product to the consumer between 10 or 35 percent depending on their individual tax bracket. Or three, go without treatment. None of these options we would suggest are good 

health care policy, none of these options increase health care access, but they do increase cost to consumers and to our health care 

system. 

According to the Employers Council on Flexible Compensation, 

the average FSA participant earned approximately $55,000 per 

year and contributed around $1,400 to their FSA in 2008, the latest 

data that we were able to access. Clearly FSA accounts benefit a 

broad cross-section of America. And a recent Neilsen study found 

that of 19 American households that participated in a FSA program roughly half of them used their FSAs to purchase OTC medicines before the treatment was changed. 

Now, our industry is not alone in advocating for restoration of 

eligibility of OTCs under FSA accounts, and we are pleased there 

is a growing bipartisan support in Congress to do just that. CHPA 

is one of the founding members of the Health Choices Coalition, 

which includes physicians, patient groups and retailers that is 

dedicated to restoring OTCs to tax-preferred status. The coalition 

supports legislation sponsored by Representative Lynn Jenkins and 

Shelley Berkley and also Representative Diane Black, and also supports bills sponsored by Representative Erik Paulsen and co-sponVerDate Mar 15 2010 02:10 Apr 02, 2013 Jkt 079936 PO 00000 Frm 00010 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\79936.XXX GPO1 PsN: 79936

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sored by you, Chairman Boustany, and Representative Aaron 

Schock as well. We thank these members for leading the fight. If 

we are not successful, this unnecessary policy will continue to cost 

Americans time, money and needless suffering. 

Mr. Chairman, thank you again for allowing me the opportunity 

to testify before this subcommittee, and I will be happy to answer 

any questions you may have. 

[The prepared statement of Mr. Melville follows:] 


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Chairman Boustany, Ranking Member lewis, and distinguished Members of the Subcommittee, thank 

you for inviting me to discuss the importance of over-the-counter medicines in healthcare. I am Scott 

Melville, President and CEO of the Consumer Healthcare Products Association (CHPA). CHPA is the 131-

year-old trade association representing U.s. manufacturers and distributors of over-the-counter (OTC) 

medicines and dietary supplements. Every year, millions of Americans rely on OTC medicines as a first 

response to onset symptoms of mild-to-moderate ailments. Eligibility of these medicines under flexible, 

tax-preferred accounts, such as Flexible Savings Arrangements (FSAs) and Health Savings Accounts 

(HSAsj. offers significant value to the American consumer. 

Founded in 1881, CHPA is a member-based association representing more than 75 manufacturers and 

distributors of nonprescription, OTC medicines and dietary supplements. Products produced by the 

member companies of CHPA provide millions of Americans with safe, effective, and convenient 

therapies for the treatment and prevention of many common ailments and diseases. 

CHPA is committed to promoting the increasingly vital role of over-the-counter medicines and dietary 

supplements in America's healthcare system through science, education, and advocacy. The association 

provides leadership and guidance on regulatory and scientific issues to Congress; state legislatures; and 

federal, state, and international government agencies. CHPA shares tools and information with partners 

across the globe to ensure the safe and responsible use of OTC medicines. 

OTe Medicines are a Proven and Vital Part of the Healthcare SYstem 

Part of the reason we're here today is to discuss a provision of the Patient Protection and Affordable 

Care Act (PPACA, P.l. 111-148/P.l. 111-152) that requires holders of tax-preferred healthcare accounts 

(such as Flexible Spending Arrangements and Health Savings Accounts) to seek a physician's prescription 

if they wish to use those accounts to purchase an over-the-counter medicine. We believe this 

requirement is bad policy for both the American consumer and the u.s. healthcare system. 

For millions of Americans, OTC medicines are a trusted and affordable way to get well, stay well, and 

feel well. These medicines have been found safe and effective by the u.s. Food and Drug Administration 

(FDA) when used as directed, and are used to treat many common, self-manageable conditions like 

colds, allergies, heartburn, and headaches. like prescription drugs, OTC medicines are pharmaceutical 

products regulated by the U.S. Food and Drug Administration (FDA). However, OTCs can be purchased 

by consumers directly, without a prescription, because the FDA has determined that these medicines 

can be safely used by consumers without the intervention of a physician or other healthcare 

profeSSional. As a result, OTC medicines provide benefits to American families and the u.s. healthcare 

system in a range of ways, including; 

• Access to conveniently available healthcare options 24 hours a day, every day, for busy families 

and caregivers through a wide range of retail outlets including pharmacles, supermarkets, and 

convenience stores; 

Affordability for both consumers and the healthcare system; 

Empowerment for individuals and families to meet their everyday healthcare needs; and 

Trust in safe and effective medicines. 
9 


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A survey of physicians and consumers CHPA conducted in 20101 found that 88 percent of physicians 

recommend their patients attempt to address minor to moderate ailments themselves through the use 

of OTC medicines before seeking the care of a professional. Additionally, 89 percent of consumers 

believe OTC medicines are an important part of their overall family healthcare and just as safe and 

effective as prescription medicines when taken according to directions. In fact, 81 percent of U.S. adults 

use OTC medicines as a first response to minor ailments and half of parents reported that an OTC 

medicine has helped keep their child from missing school. 

OTCs are a proven means to keep healthcare costs down and unnecessary visits to the doctor, a 

significant cause of rising health care costs, at a minimum. The CHPA study concludes that, on average, 

physicians say approximately 10 percent of office visits result from minor ailments, which could be 

effectively self-managed by patients, including through the use of OTC medicines. This amounts to more 

than 40 million appointments each year that could be avoided with effective and responsible self-care. 

Even eliminating half of these unnecessary appointments could save the healthcare system more than 

20 million visits each year, at a savings of more than $5 billion. 2 As more and more areas of the country 

are struggling with reduced medical service due to a shortage in physicians, reducing needless visits to 

the doctor is vital to the future of healthcare. 

To further quantify the value of OTC medicines, CHPA commissioned Booz & Co. in early 2012 to 

determine the value OTC medicines bring to the healthcare system. To estimate the value of OTC 

medicine, the studl assumed a hypothetical world in which OTC medicines did not exist and all 

consumers had to either use prescription drug alternatives or leave the conditions untreated. This 

analysis was performed for seven categories of the most common self-treatable conditions representing 

the majority of OTC medicine purchases: Allergy, Analgesics, Anti-Fungals (both foot and vaginal), 

Cough/Cold/Flu, lower and Upper Gastrointestinal (GI), and Medicated Skin (first aid and anti-itch). 

These seven categories were selected because they all provide symptomatic treatment and comprise 

the largest OTC categories, other than oral care. Likely consumer behavior in this hypothetical world was 

estimated through a 3,200+ person consumer survey and through five case studies of prescription-tononprescription switch, which represent real-world examples of making prescription-only medicines 

available directly to consumers over the counter and thus significantly expanding their use. 

The results of the study demonstrate the high value of OTC medicines. OVerall, the availability of OTC 

medicine in the seven categories analyzed provides $102 billion in annual savings to the U.S. healthcare 

system relative to alternatives, as well as the unquantifiable benefit of increased access to medicine for 

all consumers. $77 billion of that total results from clinical cost savings, including avoided doctor's office 

visits and diagnostic testing, while the remaining $25 billion is realized in the drug cost savings 

associated with lower-cost OTCs versus higher-priced prescription medicines. What this means is that, 

on average, every dollar spent by consumers on OTC medicines saves $6 to $7 for the U.S. healthcare 

system as a whole. 

1 "Your Health at Hand Survey," Strategy One on behalf of CHPA, June 20, 2011 

2 "Potential Reduction in Unnecessary Visits to Doctors from Safe and Appropriate Use of OTC Medicines,}} Paul 

london and Associates on behalf of CHPA, June 17, 2011 

~ "The Value of OTC Medicine to the United States," Booz & Co. on behalf of CHPA, Jan. 31, 2012 
10 


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In addition to cost savings relative to alternatives, OTe medicines provide value through significantly 

expanded access to treatment for the most frequent and common illnesses. The availability of OTe 

medicines, off-the-shelf, without a prescription, and at all hours of the day, provides symptomatic relief 

for an estimated 240 million people across the nation, 60 million of whom would not seek treatment if 

OTe medicines were not available. If even a small fraction of those ailments were left untreated and 

became worse, the increase in visits to a physician could be catastrophic for the healthcare system. The 

annual retail sales of OTC medicines currently consumed by those 60 million people are approximately 

equal to $4 billion in the study's target therapeutic categories. This figure is the direct value of 

Increased access provided by OTC medicines. 

The study also found OTe medicines contribute to increased economic productivity due to less time out 

of work for physician visits or to care for a sick child due to the symptoms studied. By keeping the 

American workforce healthy and at work, OTe medicines offer $23 billion in potential productivity 

benefits from avoided doctor's office visits and time not having to be away from work for medical 

appointments. 

The Affordable care Act and Tax-Preferred Accounts 

In 2003, the Internal Revenue Service expanded coverage of tax-preferred accounts, such as flexible 

spending arrangements (FSAs) and Health Savings Accounts (HSAs), to include OTe medicines as 

qualified medical expenses, allowing consumers to purchase OTe medicines with pre-tax dollars. In the 

subsequent years, millions of consumers budgeted for their annual healthcare expenses, enrolled in an 

FSA program, set aside pre-tax money, and utilized their FSA accounts to purchase OTC medicines. The 

retail community made this process as seamless as possible by identifying eligible products and 

processing the payments electronically through the consumers' FSA accounts. 

Unfortunately for consumers and the healthcare system, the efficiencies in processing these 

transactions ended on January 1, 2011. That is the date that a provision included in PPACA, which 

requires holders of FSAs, HSAs, and other tax-preferred accounts to first seek a doctor's prescription 

before purchasing or being reimbursed for purchases of OTC medicines, went into effect. There is no 

medical justification for this requirement, and as a nation, we want to encourage Americans to make 

smart, efficient healthcare choices, including through utilizing FSAs for OTC medicine purchases. But 

instead, the law today discourages efficient choices and sends the wrong signal. 

The requirements leave consumers with three options: 

1) Seek an unnecessary appointment with a doctor to obtain a prescription, and then submit the 

purchase for reimbursement under an FSA account; 

2) Purchase the OTC medicine out-of-pocket, increasing the cost to the consumer by 10 percent to 

35 percent, depending on the individual's tax bracket; or 

3) Forego treatment entirely, and suffer from the symptoms of the condition. 

None of these options is good healthcare policy. None of these options increases access to healthcare. 

But all three do increase costs for the consumer and to our healthcare system. 

According to the Employers Council on Flexible Compensation (ECFC), in 2008, which is the most recent 

year for which data is available, 35 million Americans participated in an FSA program, earning an 

average of $55,000 per year and contributing $1,386 to their FSA annually. A separate analysis by 
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Nielsen estimates American households using FSAs for OTC medicines spent approximately $136 on OTC 

medicines in 2010, but spent 12 percent less on OTCs in 2011.4 

An additional surveyS conducted by Nielsen found that of the 9.8 million households who have utilized 

an FSA to purchase an OTC medicine, 46.3 percent-roughly half-would request a prescription for OTC 

medicines from their physician. 21 percent of respondents said that they would discontinue or 

drastically reduce purchasing OTC medicines, meaning they would either seek a higher-cost prescription 

medication or leave their ailments untreated. Either way, the requirement to seek a prescription before 

an FSA or HSA can be used to purchase an OTC means higher costs to the healthcare system and a 

logistical burden on the American consumer. 

In order to address this issue, CHPA was the principal founder of the Health Choices Coalition, a coalition 

of physicians, pharmacies, pharmacists, insurers, pharmacy benefit managers, patient groups, retailers, 

manufacturers, and large employers that is dedicated to restoring OTCs to tax-preferred status. To date, 

representatives of the Health Choices Coalition have met with most members of the House Committee 

on Ways & Means, as well as many other members of the House of Representatives at large. 

Specifically, the Coalition supports the "Restoring Access to Medication Act" (H.R. 2529), which was 

introduced by Representatives lynn Jenkins (R-KS) and Shelley Berkley (D-NV), and the "Patients' 

Freedom to Choose Act" (H.R. 605), introduced by Representative Erik Paulsen (R-MN). We thank the 

sponsors and ccr-sponsors of these two bills, as well as the more than 100 sponsors of these and other 

bills that include a provision aimed at addressing the treatment of OTC medicines in tax-preferred 

accounts. Their leadership on this effort has been invaluable and we look forward to continuing to work 

with them on this important issue. 

In conclusion, I reiterate that OTCs are a vital and valuable part of the healthcare system. CHPA and its 

member companies believe strongly that OTC medicines deserve the same tax treatment as other 

medical costs, such as prescription drugs or medical devices. We encourage each Member of Congress 

to examine H.R. 2529 or H.R. 605 and consider signing on as a cosponsor. I thank Chairman Boustany 

and Ranking Member lewis for inviting me here today and for holding this important hearing. 

~ Nielsen/CHPA Correspondence, AprU2012 

5 "Impact of Flexible Spending Account Rule Changes on OTC Purchasing," Nielsen on behalf of CHPA, January, 

2011 
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Appendix 

1. Your Health at Hand - "Perceptions of Over-the-Counter Medicine in the U.S." Survey Key 

Findings 

2. Your Health at Hand - "The Value of OTC Medicine to the United States" Study Key Findings 

3. Paul London and Associates - "Potential Reduction in Unnecessary Visits to Doctors from Safe 

and Appropriate Use of OTC Medicines" Economic Study Introduction 

4. Nielsen - "Impact of Flexible Spending Account Rule Changes on OTC Purchasing" Survey 

5. Supplement to Nielsen Survey Data 

(These studies can be found in full at http://www.yourhealthathand.org/resources-and-news) 
13 


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yourhealth AT HAN D 

KEY FINDINGS: "Perceptions of OVer-the-Counter Medicine in the U.S. H 

Key Findings: Physicians 

+ aTe medicines are an important part of health care management. 

- 93% of physicians agree that it is important that medicines for minor ailments be 

available over the counter. 

- 87% of physicians believe OTe medicines are an important part of overall healthcare. 

+ aTe medicines help reduce the burden on medical professionals. 

- On average, physicians say about 10% of office visits result from minor aliments which 

could be self-managed by patients, including by the use of OTe medicines. This amounts 

to over 40 million appointments each year that could be avoided with self-care. 

- 89% of physicians agree that responsible use of over-the-counter medicines can help to 

ease the burden on medical professionals. 

- 76% of physicians agree that the availability of over-the-counter medicines help make 

managing patient health easier. 

+ Physicians trust OTC medicines to help consumers safely and effectively care for their minor 

ailments. 

- 92% of physicians believe OTe medicines are effective and 91% believe these medicines 

are safe. 

- 88% of physicians agree that they recommend patients try to address minor ailments 

with self-care interventions, including the use of OTe medicines, before seeking 

professional care. 

- Physicians are more likely to recommend over-the-counter medicines as a first response 

treatment option for adult's minor ailments than options like calling a physician or 

scheduling a doctor's appointment. 

Key Findings: Consumers 

+ 80% of consumers have used an over-the-counter medicine in the last year. 

+ OTC medicines provide consumers with affordable, accessible and convenient healthcare. 

- 86% of u.s. adults believe responSible, over-the-counter medicine use helps lower 

healthcare costs for people like them. 

- 68% of u.s. parents have given their child an OTC medicine late at night to help treat a 

sudden medical symptom. 
14 


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- 46% of U.S. adults who believe OTC medicines are Important believe so because they do 

not need a doctor's visit to use them. 

+ Consumers trust over-the-counter medicines to provide relief for minor ailments. 

- 89% believe over-the-counter medicines are an important part of their overall family 

health care. 

- 81% of U.S. adults use OTC medicines as a first response to minor ailments. 

- U.S. adults believe over-the-counter medicines are just as safe and effective as 

prescription medicines when taken according to directions. 

+ Over-the-counter medicines empower consumers to take charge oftheir own health. 

- 96% of U.S. adults believe over-the-counter medicines make it easy for individuals to 

care for minor medical ailments. 

- 93% of U.S. adults prefer to treat their minor ailments with over-the-counter medicines 

before seeking professional care. 

- 86% of U.S. adults agree that medical visits for minor ailments are unnecessary because 

of the availability of over-the-counter medicine. 

- 85% of U.S. parents prefer to treat their children's minor ailments with an OTC medicine 

before seeking professional care. 

About Your Health at Hand 

+ "The ValUe of OTC Medicine to the United States" is a part of CHPA's Your Health at Hand 

initiative. For millions of Americans, OTC medicines are a trusted and affordable way to get 

well, stay well, and feel well. Families reach for OTC medicines to relieve symptoms associated 

with common, everyday ailments associated with pain, cold, allergies, heartburn, and various 

skin conditions, among others. In today's healthcare environment, it is important that 

consumers-as well as healthcare profeSSionals, policymakers, and researchers-appreciate 

and promote the value and solutions OTC medicines provide. In June 2011, CHPA launched 

Your Health at Hand to highlight the benefits of OTC medicines, including: 

- Access to conveniently available healthcare options 24/7 for busy families and 

caregivers; 

- Affordability for both consumers and the healthcare system; 

- Empowerment for Individuals and families to meet their everyday healthcare needs; and 

- Trust in safe and effective health care options. 

+ For more information on Your Health at Hand, please visit: www.YourYealthAtHand.org. 

The Consumer Healthcare Products Association (CHPA) is the 131-year-old-trade association representing U.S. 

manufacturers and distributors ofover-the-caunter medicines and dietary supplements. ~w.chpa-info.Q[fl . 

• 

OCHPfl~ 
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yourhealth AT HAND 

KEY FINDINGS: ''THE VALUE OF OTC MEDICINE TO THE UNITED STATESn 

Over-the-.counter (OTC) medicines; Providing solutions for America's healthcare challenges 

+ The availability of OTe medicines creates significant value for the U.S. health care system - $102 billion in 

annual savings relative to alternatives. OTe medicines provide two key sources of avoided cost: 

- $77 billion in clinical cost savings (avoided doctor's office visits and diagnostic testing); and 

- $25 billion in drug cost savings (lower-priced OTCs versus higher-priced prescription medicines). 

+ For every dollar spent on OTe medicines, the U.S. healthcare system saves $6 to 7. 

+ The total value afore medicines is captured throughout entire U.s. healthcare system: 

- $52.7 billion in value for employer sponsored health plans 

- $27.5 billion in value for government programs (Medicare and Medicaid) 

- $21.7 billion in value for self-insured and uninsured populations 

+ The availability of OTe medicines - off the shelf, without a prescription - provides symptomatic relief for an 

estimated 60 million people who otherwise would not seek treatment. 

- The annual retail sales of OTC medicines to these 60 million consumers are $4 billion. This figure is the 

direct value of increased access provided by OTC medicines. 

+ Without affordable and accessible OTCs, underserved populations would depend more heavily on the hlghestcost medical care for minor ailments. 

- 1 in 4 Medicaid patients and 1 in 10 uninsured individuals would seek treatment in an Emergency 

Department as their first recourse for treatment. 

- Additional Emergency Department visits, primarily by patients on Medicaid and uninsured individuals, 

will drive up nearly $4 billion In healthcare costs to the system each year. 

+ By keeping the American workforce healthy and at work, OTe medicines offer $23 billion in potential 

productivity benefits from avoided doctor's office visits and time not having to be away from work for medical 

appointments. 

+ ucaregiver momsu miss twice as many days of work annually to care for sick children as they do to care for 

themselves. This number would be higher if parents did not have OTC medicines to help children avoid missing 

school. 

+ Nearly one-third of the $102 billion in annual savings is for consumers treating cough/cold and flu symptoms . 

• 

9CHPA.~~ 
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About the Study 

+ This study examines the value of OTC medicines in seven categories relative to potential alternatives, such as 

consultations with healthcare professionals for self-recognizable symptoms and/or prescription medicines. 

+ The seven categories include the most common acute and chronic, self-treated conditions representing the 

majority of OTC medicine purchases: allergy, analgesics, antl-fungals, cough/cold/flu, lower and upper 

gastrointestinal,and medicated skin. 

+ In addition to consulting published data sets and economic modeling, the study firm surveyed 3,200 consumers 

on how they would treat symptoms if OTC medicines did not exist. 

+ This study was conducted by Booz & Co. and funded by the Consumer Healthcare Products Association (CHPA). 

About Your Health at Hand 

+ "The Value of OTC Medicine to the United States" Is a part of CHPA's Your Health at Hand initiative. For millions 

of Americans, OTC medicines are a trusted and affordable way to get well, stay well, and feel well. Families 

reach for OTC medicines to relieve symptoms associated with common, everyday ailments associated with 

pain, cold, allergies, heartburn, and various skin conditions, among others. In today's healthcare environment, 

it Is Important that consumers-as well as healthcare professionals, policymakers, and researchers-appreciate 

and promote the value and solutions OTC medicines provide. In June 2011, CHPA launched Your Health at Hand 

to highlight the benefits of OTC medicines, including: 

- Access to conveniently available healthcare options 24/7 for busy families and caregivers; 

- Affordability for both consumers and the healthcare system; 

- Empowerment for Individuals and families to meet their everyday healthcare needs; and 

- Trust in safe and effective healthcare options. 

+ For more information on Your Health at Hand, please visit: www.YourYealthAtHand.org. 

The Consumer Healthcare Products Association (CHPAj is the 131-year-old-trade association representing U.S. manufacturers and 

distributors of over-the-counter medicines and dietary supplements. www.chpa-info.orq . 

• 

OCHPA. ===== 
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Paul A. London and Associates; 

Paul A. London, PhD 

Daniel Shostak, MPHIMPP 

June 17, 2011 

Potential Reduction in Unnecessary Visits to Doctors from Safe and Appropriate Use of OTe 

Medicines Could Save Consumers and Taxpayers Billions AnnuaUy 

The cost of health care in America is staggering. Healthcare expenditures in the United States (U.S.) 

surpassed $2.3 trillion in 2008, more than three times the $714 billion spent in 1990. Greater use of 

safe and effective over-the-counter (OTe) medicines, those available without a prescription, could 

help Americans cut healthcare costs while meeting their everyday healthcare needs. 

The aim of this paper is to estimate savings that could be achieved by reducing unnecessary visits to 

primary care physicians for patients who can address symptoms with appropriate use of OTC 

medicines. For the purpose of this research, we defined primary care physicians as including 

pediatricians, internists, and general practitioners based on defmitions from the Centers for Disease 

Control and Prevention (CDC). The Your Health at Hand survey referenced throughout also included 

pediatricians and internists in its definition of primary care physicians. Our research makes the 

following important points: 

Primary care physicians (including internists and pediatricians) have estimated that 10 

percent or more of visits to their offices were unnecessary and could have been avoided by 

self-management of health care, including the use ofOTC medicines for minor ailments.! 

Patients made 1.5 billion visits to medical offices in 2008, including 992 million visits where 

they saw a doctor.2 

Of the 992 million visits to doctors, approximately 525 million were visits to primary care 

physicians.3 

The average total payment for a visit where the patient saw a doctor was $199, including $28 

in out-of-pocket (OOP) costS.4 

• If one-half of the visits that primary care physicians report as unnecessary could be avoided 

by greater self-management of health care including more use ofOTe medicines, it would 

save consumers and taxpayers $5.2 billion annually. 

• The shortage of primary care physicians in the United States is becoming increasingly 

problematic. Reducing unnecessary visits from 10 percent to 5 percent (by 26.3 million visits 

annually) would save overburdened doctors almost a half hour per day, allowing them to 

focus on more urgent patient needs. 

There are other economic advantages that would come with greater self-management of certain 

health conditions and minor ailments, including through efficient, effective use ofOTC medicines. 

These advantages include time and monetary gains for consumers and employers ifless time was 

spent in doctors' offices, but these are not evaluated in our savings estimates. 
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Introduction 

OTC medicines are an affordable and effective first-line treatment for a variety of common minor 

conditions.5 (See section below on Conditions Amenable to Treatment with OTC Medicines.) A 

survey of primary care physicians and consumers (the "Your Health at Hand survey") conducted by 

StrategyOne in November 20 I 0 for the Consumer Healthcare Products Association (CHP A) confirms 

thls: 92 percent of doctors surveyed agreed that OTC medicines are effective in this first-line 

treatment role.6 

The Your Health at Hand survey also found that doctors believe a significant number of office visits 

- about 10 percent according to the primary care physicians - are unnecessary and could be reduced 

with more self-management of health care by patients with minor conditions, including reliance on 

OTC medicines. Jfunnecessary visits could be reduced from 10 to 5 percent (that is by 

approximately 26.3 million per year) it would save the healthcare system $5.2 billion annually. The 

body of this paper examines these and other costs, and describes how we arrive at the estimates of 

potential savings from reducing unnecessary visits. 

Unnecessary Visits that Could Be Avoided by Greater Self-management of Healthcare and OTC 

Medicines 

A significant number of Americans, despite evidence of the safety and effectiveness of OTC 

medicines, choose to visit a doctor's office or an emergency room (ER) with minor ailments. Primary 

care physicians, including internists and pediatricians, interviewed in the Your Health at Hand survey 

estimated that about 10 percent of visits to their offices could be avoided if more patients managed 

minor ailments through self-management of health care including the use ofOTC medicines.7.s 

Unfortunately, time wasted during unnecessary doctor visits has a significant cost associated with it. 

Thls includes the primary care physicians' time and that of their staffs, unnecessary tests and 

procedures as well as labor and resources used to treat patients during visits to ERs and clinics, all of 

which are far more expensive than the costs of the OTC medicines that in some and perhaps many 

cases could be tried first. Data from the Medical Expenditure Panel Survey (MEPS) - part of the 

Agency for Healthcare Research and Quality (AHRQ) of the U.s. Department of Health and Human 

Services (HHS) - put the mean cost of a non-surgical visitto a doctor's office at $199, of which $28 

represents out-of-pocket (OOP) costs to patients. 
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Slightly over half of the FSA enrollees covered the costs of their OTC 

medications with FSA funds in the past 12 months. 

• This equates to 9.8 million US households. 

Prescriptlon medications • ••••••••• 81.2 

Dental ot vision care ••••••••• 75.1 

C<>iliIymenls ••••••••• 74.7 

Officevisits to. health care profession •••••• 72.3 

OTe medications _ ••• '51.6 

aVes aNo • Don'tkhow Eloct/Ve medical procedures 17.3 

I 

Other }I 5.7 

for which of the following eligible health care expenses have you or other household members used Flexible Spending Account (FSA) funds to cover costs during the past 12 months? Please select all that applv. 
20 

f 

Chairman BOUSTANY. Thank you, Mr. Melville. Dr. Feder, you 

may proceed. 

STATEMENT OF DR. JOEL M. FEDER, D.O., F.A.C.O.F.P., CAPTAIN MC, USN (RET.), AMERICAN OSTEOPATHIC ASSOCIATION, OVERLAND PARK, KS 

Dr. FEDER. Chairman Boustany, Ranking Member Lewis, Representative Jenkins and Members of the Subcommittee, thank you 

for the opportunity to testify before you today. 

As an osteopathic physician board certified in family medicine, I 

have treated patients for 36 years. The osteopathic profession has 

a strong and distinguished history of educating, training and placing physicians in underserved communities. Today over 60 percent 

of all osteopathic positions practice in a primary care specialty. 


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21 

Over the years I have witnessed efforts to enhance access to 

quality health care and promote patient centered care. Today I 

share with you my personal experience of how the new restrictions 

placed on consumers choosing to use their tax-advantaged account 

to purchase over-the-counter medications has affected my practice 

and my patients. 

As a physician my paramount concern is developing and preserving a strong relationship with my patients. I along with my colleagues strive to empower patients to make decisions regarding 

their health while still coordinating their care. In doing so, I aim 

to put practices into place that allow them to stay out of the office 

as a result of good health. 

In my experience with this new requirement the majority of the 

patients that request a prescription for an OTC medication are 

doing so to address a simple cold or allergy. However, this still requires an appointment slot normally allocated for other patient 

needs. As a result my time available to treat patients with more 

serious health care needs has reduced significantly. On average I 

see about 25 patients per day, spending 15 to 20 minutes with each 

patient, 90 percent of whom visit my office for traditional care 

ranging across a wide array of health care needs, plus 10 percent 

who are simply requesting a prescription for OTC medication and 

in some instances numerous medications. 

My practice is a relatively small practice with five providers, including four physicians and one advanced registered nurse practitioner. We have an administrative staff of 10 working in the office 

who are extremely busy processing paperwork to keep the office 

running and filing claims for the patient care my partners and I 

provide. The additional task of processing requests for appointments for OTC prescriptions is an unnecessary burden. This new 

burden is in addition to the further demands on physician practices, including the adoption of electronic health records and electronic prescribing systems, preparation for coding under ICD–10, 

implementation of quality measures and adjusting to other changes 

in the health care delivery system. These additional policies and 

procedures are important; however, each new requirement can be 

quite costly to small physician practices. 

As you know, physicians work hard to establish a trusting relationship with their patients. Generally patients choose to see their 

physician when they truly believe they need care. And my experience is most patients feel inconvenienced and unhappy with a new 

prescription requirement and enter my office with that mindset. As 

a result, I am potentially placed in a difficult and uncomfortable 

situation with a patient by possibly refusing to provide a prescription, charging for that service and/or recommending the patient 

purchase a different higher cost alternative. For instance, I do not 

agree with the practice of using OTC medicines as a source of renewed energy. A patient might then seek to choose another physician who is willing to write their prescription, which further fragments the important physician-patient relationship. 

We must remember that the FDA has already deemed these 

products safe and appropriate for direct over-the-counter sale to 

consumers, yet after writing the prescription physicians may be 

subject to new liability for any potential interactions they might 


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22 

have with other over-the-counter medications my patient has taken 

which the patient may or may not be willing to disclose. 

In closing, restricting consumers who choose to use their tax-advantaged account to purchase OTC medications by requiring them 

to obtain a prescription from their physician is unnecessary and 

disruptive to efficient care delivery. This restriction creates an unnecessary burden upon me as a physician, upon my practice and, 

most importantly, upon my patients. 

I would again like to thank you and Members of the Committee 

for affording me the opportunity to share my experiences and the 

AOA’s perspective regarding this important topic affecting osteopathic physicians and our patients. We appreciate the work that 

you do to promote policies that advance patient centered quality 

care that is cost effective for the health care system. We look forward to working with you in the weeks and months ahead to ensure that congressional action fosters strengthening the physicianpatient relationship. 

Thank you. 

[The prepared statement of Dr. Feder follows:] 


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Statement of Joel M. Feder, DO, FACOFP, Captain MC, USN (Ret) 

American Osteopathic Association 

Presented to the 

House Ways and Means Committee 

Subcommittee on Oversight 

Hearing on the Impact of Limitations on the Use of Tax-Advantaged Accounts for the 

Purchase of Over-the-Counter Medication 

Apri125, 2012 

Chairman Boustany, Ranking Member Lewis, and Members of the Subcommittee, on behalf of the 

American Osteopathic Association (AOA) , thank you for the opportunity to testify today on the 

new restriction placed on consumers that choose to use their Flexible Spending Account (FSA) , 

Health Savings Account (HSA) , or other tax-advantaged account to purchase over-the-counter 

(OTC) medications. My name is Joel Feder, I am a retired u.S. Navy Medical Officer and a Board 

Certified Family Practitioner in Overland Park, KS. I am co-owner and a partner of Overland Park 

Family Health Partners. My practice includes the full gamut of family medicine services from birth 

to geriatrics. We are located in a suburban setting serving a significant number of retired and 

dependent military patients. 

I am the past president of the medical staff at Overland Park Regional Medical Center and I am the 

past president of the Kansas Association of Osteopathic Medicine. I also serve on the adjunct 

teaching faculty of the University of Kansas School of Medicine, Department of Family Practice and 

am a clinical preceptor for the Kansas City University of Medicine and Biosciences. 

I have treated patients for 36 years. Over the years I have maintained active involvement on 

numerous medical boards. Today, I am pleased to share with you my personal experience of how 

the new restriction placed on consumers choosing to use their tax-advantaged account to purchase 

over-the-counter medications by requiring them to obtain a prescription from their physician has 

affected my practice. I will also speak to this new restriction being counterintuitive to the concepts 

of enhancing access to health care and promoting patient-centered care, how it increases costs to the 

health care system, and how it is a new administrative burden on already over-burdened physicians 

and their practices. 

Background on the Osteopathic Profession 

The osteopathic profession has a strong and distinguished history of educating, training, and placing 

physicians in underserved communities. This commitment began in the late 1800's and continues 

today. Our academic and training model, while not unique to the osteopathic profession, places an 

emphasis on preparing osteopathic medical students for careers in general physician specialties such 

as primary care, obstetrics, general surgery, and emergency medicine. Our academic curriculum, 
24 


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along with a community-based training model, is the primary reason that the profession has enjoyed 

great success in the production of primary care physicians and general surgeons. Today, 60.5 percent 

of all osteopathic physicians practice in a primary care specialty. Currendy, one in five medical 

students in the United States is enrolled in a college of osteopathic medicine. We are one of the 

fastest growing fields in the health care sector. 

Currendy, there are 26 colleges of osteopathic medicine operating on 34 campuses. We estimate that 

2 to 3 new colleges will open in the next few years. Many of our colleges are located in geographic 

regions with acute physician shortages, such as western Washington, Arizona, and the full span of 

Appalachia where we have four schools. This commitment to establishing colleges and training 

opportunities in areas of need is key to meeting the health care needs of underserved communities 

and is indicative of the profession's commitment to this cause. The nation's colleges of osteopathic 

medicine currendy graduate more than 3,600 osteopathic physicians. In 2013 that number will grow 

to 4,700 and by 2015 over 5,000 osteopathic physicians will graduate each year. If current trends 

remain consistent, by 2020 there will be over 100,000 osteopathic physicians in the United States. 

The evolving health care delivery system is aimed at keeping patients healthy while providing them 

with access to quality and cost-effective care. The AOA believes that this goal can best be achieved 

through a longitudinal model of coordinated care such as the patient centered medical home 

(PCMH). 

Unfortunately, the new FSA OTC restriction is contrary to ensuring access to quality, affordable, 

and cost-effective care. It requires additional time on a physician's part as well as that of patients 

which perversely affects lower cost quality care. In my experience, this new restriction on the 

purchase of OTe medications has necessitated changes in how I am able to treat my patients on a 

daily basis. I have been forced to make decisions regarding whether or not to charge patients a copay if they wish to obtain a prescription. I have also struggled to best determine how to make the 

time in an already fully scheduled day to fulfill these requests from multiple patients who previously 

did not require a face-to-face visit. 

As a physician, my paramount concern is developing and preserving a strong relationship with my 

patients. I along with my colleagues strive to empower my patients to make decisions regarding 

their health while still coordinating their care and visiting with them when necessary. As I work to 

coordinate the care for my patients and provide them with important consult on their individual 

health care needs, I aim to put practices into place that allow them to stay out of the office as a 

result of good health. Physicians and patients should discuss all medications being used, but a 

written prescription should not always be necessary. This restriction being placed on consumers and 

burden being imposed on physicians; however, drives a patient to my office for a simple symptom, a 

patient who might otherwise be efficient in managing their own health at home needing my 

oversight only when medically necessary. Consequendy, access to care is impacted since patients 

who really need my care are sometimes unable to schedule an appointment since I am now juggling 
25 


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additional patient visits just to write prescriptions for OTC medications. Unfortunately, this new 

administrative burden has unnecessarily disrupted the physician-patient relationship in many 

instances. 

In my experience, the majority of the patients that request a prescription for an OTC medication are 

doing so to address a simple cold or allergy; however, this still requires an appointment slot normally 

allocated for other patient needs. As a result, my time available to address patients with more 

substantive health care needs has reduced significandy. On average, I see about 25 patients per day, 

spending an average 15-20 minutes with each patient 20 patients that visit my office for traditional 

care ranging across a wide array of health care needs plus 3-5 patients who are simply requesting a 

prescription for OTC medication, and in some instances numerous medications. Research has 

found that an OTC medication is an effective, affordable, and a convenient way for people to 

address their own health care needs. According to a study conducted by Booz & Co for the 

Consumer Health Products Association, the use of OTC medication saves the health care system 

$77 billion in avoided doctor's visits and diagnostic testing. 

Pla,cing a Burden on Physician Practices 

My practice is a relatively small practice with five providers including four physicians and one 

advanced registered nurse practitioner. We have 10 administrative staff working in the office who 

are extremely busy processing paperwork to keep the office running and filing claims for the patient 

care my partners and I provide. The additional task of processing requests for appointments for 

over-the-counter prescriptions is an unnecessary burden. Larger practices might be able to handle 

this with less disruption; nonetheless, physician practices are negatively impacted by this 

administrative burden - especially small practices like my own. 

Today, physician practices face new demands as required by statute and regulation including the 

adoption of electronic health records and electronic-prescribing systems, preparation for coding 

under ICD-l0, implementation of quality measures, and adjusting to other changes in the health care 

delivery system. These additional policies and procedures are important and are primarily beneficial 

to efficiency as well as to providing improved patient care. However, each new requirement can be 

quite cosdy to a physician practice operating as a small business. The accumulated cost and 

subsequent time spent implementing new systems or procedures has an impact on revenue. 

Confusion is occurring amongst physicians, administrative staff, and patients alike because not all 

over-the-counter medications require a prescription under this restriction. This level of confusion is 

not helpful in operating a physician practice when a patient calls or arrives to request a prescription. 

The administrative staff who is often times the first point-of-contact must research the request in 

order to preliminarily, but not always defmitively determine whether a prescription is necessary. A 

patient may be subsequendy turned away or may then visit with a physician only to find that a 

prescription for that specific OTC medication is not required under this new policy. Ultimately, 

time and money is lost for the patient, another patient who could have better utilized that time, 

administrative staff, and by the physician practice as a whole. 
26 

f 

Chairman BOUSTANY. Thank you, Dr. Feder. Mr. Taylor, you 

may proceed. 


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In an effon to address this issue, my practice attempted to in dude all medications requiring a 

pres.cription on the same fonTI. UnfortunatelYl this rype of form is not deemed acceptable by raxpreferred accounts to fulfill the regu.irement under this restric6on. \X/e require patients to C0111e .in 

for a face-tn-face visit to discuss OTC .medications. -i\fy practice has determined it is no\\{ necessary 

to begin chnrgjng pmjcnts a co-pay for this service bccau~t' of the tinle it takes away 6:om. an ill 

patient in a given Jay. 

Physicians \vork hard to establi~h ;1 trusting relationship with tlu.:ir palient5. (;-encrally patients 

choose to sec their physiclan "\vhen they truly believe they need carc. Thjs restriction nO\l,r presents 

physician~ with patients who traditionally \voulJ not he seen anJ whu are not accu~tolned to being 

s~en in order to purchase (}\.'·er-the-countcr medicat1ons. Tn my experience, tnost patients feel 

inconvenienced and arc unhappy with this situation and enter n1y ofHce with that luindset_ _As a 

result, I am potmtially placed in a difficult and uncomfortable situation ,,~th a patient by possibly 

refusing to provide a prescription, charging for that sClyice, -and/or rccoffill1ending the patient 

purchase a different higher cost alternauyc. for instance. I do not agree \vith the practice of using 

OTC medications as it source of energy .. \ patient tTtight then choose ro seek another physicitln who 

is \viJljng to \vritc their presc.ription \vhich further fmgments the important physlcian-patient 

relationship. The potenri~ll friction created in 3 once trusting relattonship can subjecf a physician iO 

additional liability that has not exisred historically. 

Although physicians are no\v typic::tlly seeing patients to wfire prescriptions for proJucb that rhe 

Food and Drug Administration (ED,\) has already deemed safe and appropriate for direer over-thecounrer sale r:o consumers, the physician is held liable for any potent'ill in(eractlons they mjght have 

\1jlith oLhet over-the-count.er medications my patient is taking \vhich the patjent. n1ll)' or ina? not be 

\vining to disclose. Phvsicians should make a concerted effort to discuss all rnedications \\·-jth 

p-atients; however, this sharing of infol1natl01l is deJicate and sornetunes one--sided. AdditlonajJy. the 

physician lS liable for knowing and prnv-iding infotrmnlon rcg:~rding the p(Hl'ntial side-effects or 

adverse reactions for countless fuedical.ions lhat :lre readily aV:lilable to any consnmer to purchase ar 

will. 

I!l dosing, the A,()A believes that restricting consmners \vho choose to use their tax-advantaged 

accounr to purchase ovcr~thl'·-·countcr l11cdications by rC(jujring thenl to obtain a prcscdption frotl1 

their physician is unnecessary :llll1 disruptive to efficient care ddi\'Cl). \\7ith that said, the ACt-\' 

condnues to support a. padcnl's ahjJjty to utilize tax-ackanraged aCCollDt'" for the: purchase of their 

o\'et"--dH:>counrer medications without restriction. Physicia:ns \\:ill continue f0 coordinate quality care 

fox th(lf patients in order to keep patients healthy i'ather than simply treating them \v·hcn they arc iH . 

.:\11 important deme-nt of that coordination is empo\vcring patients to ll1ake informed choices 

benefitting their health wirhout unduly burdening them or their physiciiln. 

1 would like to thank you and members of the committee for affording me the opportunity today to 

shMe my experiences and the ':\O:\'s perspective regarding this important topic nffecting 

osteopathic physicians and our patic11ls. The AOA appreciates the work that you do to promote 

policies that advance patient~ccntered quality care thar is cost-effecti\'c for the healtl1 care sysTem. 

\VTc look fOT\vard to working \vith you in the "\veeb and months ahead to ensure tha[ congressional 

action fosters strengthening rather than impedes upon the physician-patjcnt rclatLonship. 
27 

STATEMENT OF STEVEN TAYLOR, CHIEF EXECUTIVE OFFICER, 

SJOGREN’S SYNDROME FOUNDATION, BETHESDA, MD 

Dr. TAYLOR. Good afternoon. Thank you, Chairman Boustany 

and committee members. I am Steve Taylor, and I am the Chief 

Executive Officer of the Sjogren’s Syndrome Foundation, and I 

thank you for allowing us to testify. 

Sjogren’s is one of the country’s most prevalent autoimmune diseases striking as many as 4 million Americans, 90 percent of whom 

are women. Patients largely depend on the use of over-the-counter 

products to treat their disease and prevent devastating complications. The cost is untenable for patients and their families and with 

so many products needed for treatment having to go to a physician 

for a prescription each and every time can present an undue burden on the patient but also on the health care system, the physician and the office staff. 

As with most autoimmune diseases, the immune system turns 

against one’s own body. In Sjogren’s the moisture producing glands 

are the primary target, this causing many complications, including 

internal organ involvement of the lungs, kidneys and pancreas, as 

well as body systems are affected, such as the musculoskeletal, gastrointestinal, vascular, nervous and reproductive systems. 

But today I wanted to elaborate on our hallmark symptoms, dry 

eye and dry mouth, since these lead to a majority of our patients’ 

over-the-counter purchases. Dry eye can cause pain and lead to frequent eye infections and blurred vision. When left untreated dry 

eye can lead to corneal ulcers and abrasions as well as potential 

blindness. The few treatments available, moisture drops and ointments, are expensive. 

Dry mouth can lead to rampant cavities, chipped and cracked 

teeth and ultimately loss of teeth. A lack of saliva to protect the 

lining of the mouth, throat, tongue and digestive tract leads to 

chronic burning and pain. In addition, dry mouth can cause difficult swallowing and problems with digestion. Over-the-counter 

medications, reflux medications, are taking constantly by our patients and treatments for dry mouth such as saliva substitutes, including gels, sprays and liquids, again are all very expensive. 

Today only three FDA approved prescription treatments are 

available for Sjogren’s patients. Two help to increase saliva and one 

to help increase tear production. Not everyone can take these medications, and even for those who can they still need to use over-thecounter products frequently to avoid pain, infection and other complications. Because there are so many products available on the 

market used by Sjogren’s patients we actually publish a directory 

of products, over-the-counter products, that are available for our 

patients to use so they can identify ones that might be helpful to 

treat their disease. 

What is astounding is the cost our patients have to bear when 

buying over-the-counter products. A 2007 patient survey found that 

the average Sjogren’s patient spends $1,300 a year on over-thecounter products to treat their Sjogren’s. For many that dollar figure is actually much higher. We solicited patient stories last week 

for this hearing and those who responded stated that they spend 

anywhere from $2,000 to $4,700 a year on medically necessary 

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Chris Albright of Minnesota wrote, my son and I both suffer from 

severe dry eye, which has impacted our lives immensely. Since 

2008 we have paid over $41,000 out-of-pocket solely for lubricating 

eye drops for the two of us. 

Rachel Hagan of California wrote, I cannot tell you how many 

times I have foregone food for myself because I had to pay for overthe-counter treatments for the various life altering horrible side effects of having Sjogren’s. 

Betty Moss of Georgia wrote, I spend more than $3,000 a year 

on over-the-counter medications. All of these purchases are necessities to just keep my life bearable and that cost represents 10 percent of my income. 

And Kelly Nichols, an optometrist from Texas, wrote, as a practitioner and clinician scientist in the dry eye area, I never truly appreciated the impact of Sjogren’s on the quality of life until attending and speaking at the Sjogren’s Syndrome Foundation’s national 

meeting. Dr. Nichols encourages Congress to recognize that 

Sjogren’s patients have many expenses, including over-the-counter 

costs, to help alleviate the symptoms of their horrible disease. 

The stories are the reason I am here today. While our foundation 

is working hard to increase awareness and education, we still have 

a long way to go. Many physicians still do not recognize or understand all of the over-the-counter medications that are available and 

needed to maintain one’s health. And requiring a prescription only 

puts undue burden on the office and their office staff but also on 

the patient who already has enough to do to fight their chronic illness. 

In closing, the Sjogren’s Syndrome Foundation is glad that patients with diabetes are able to include medically necessary OTC 

products for their disease in their health savings plans without 

having to obtain a prescription. But why one single disease? What 

about the other diseases for which there is a clear medical need? 

What about the million of Americans who suffer from Sjogren’s? 

We need your help and recognition that Sjogren’s patients, too, depend on OTC products to treat their disease and that these expenses create a major burden in their lives. 

We appreciate your time this afternoon for this very important 

hearing, and I will be hear for questions if you have any. Thank 

you very much. 

[The prepared statement of Mr. Taylor follows:] 


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\Vritten Testimony from Steven Taylor, Sjogren's Syndrome Foundation CEO 

House Ways and Means Oversight Subcommittee Hearing: 

"The Impact of Limitations on the Use of Tax-Advantaged Accounts for the Purchase of 

Over-the-Counter Medication" 

April 25, 2012 

The Sjc;gren's Syndrome Foundalion (SSF) is deeply grateful to the SLLbcommittce Chainnan, 

the Honorable Charles Boustany, and the subcommittee members for holding this hearing and 

listening to the needs of the 4 million Americans \ve represent who suffer from the autoimmune 

disease, Sjogren's syndrome. Oral testimony is being provided by Steven Taylor, CEO of the 

Sjogren's Syndrome Foundation, the non-profit 501(c)3 organization serving Sjogren's patients, 

their families and professional healthcare givers. 

Introduction: 

Sjogren's syndrome (pronounced SHOW-grens) is one o[lhis country's most prevalent 

autoimmune diseases, striking as many as 4 million Americans, ninety percent of whom are 

\\.'omen. This chronic disease lasts a lifetime, and it can affect any body organ or system as well 

as cause dryness throughout the body. 

Sjogren's patients largely depend on the usc of Over-the-Counter drugs and products to treat 

their disease and prevent devastating complications. The cost is untenable for patients and thcir 

families, as OTe treatments are not covered by insurance, are not tax deductible, and are no 

longer even covered under Health Savings Plans \vithout obtaining a prescnption. With so many 

OTe products needed for treatment, having to go to a physician or dentist for a prescription for 

each and every one presents an undue burden. 

What is Sjiigren's Syndrome? 

In Sjflgren's, the immune system turns against one's own body. Moisture-producing glands are 

primary targets, resulting in hallmark symptoms of dry eyes and dry mouth. These symptoms 

alone can be devastating. l[not treated, dry eyes can lead to corneal ulcers and abrasions and 

potential blindness. Even with treatment, dry eyes cause pain and lead to fj'equent eye inlections 

and blurred vision. The few treatments available moisture drops and ointments-· are expensive. 

Untreated dry mouth can lead to rampant cavities. chipped and cracked teeth, and ultimately the 

loss of one's teeth. Dentures do not \vork in a dry mouth, so once teeth are lost, patients have to 

turn to dental implants that involve expensive surgical procedures. The lack of saliva to protect 

Sjogren's Syndrome Foundation April 25, 2012 
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the lining or the mouth, throat~ tongue, and digestive tract leads to chronk burning, pain, and 

susceptibility to yeast infections that are very hard to treat. Those with dry mouth suffer from 

difficulty swallowing and talking and constant problems with digestion and renux. aTe renux 

medications are taken constantly by our patients to prevent the pain of reflux and damage to the 

esophagus. And treatments for dry mouth - such as saliva substitutes, including gels, sprays, 

liquids, and lozenges, and remineralizing solutions - again are expensive. 

Because moisture-producing glands exist throughout the body, the impact of dryness extends to 

the lining of the lungs and gastrointestinal and urinary tracts, the cars, nose, sinuses, throal, 

vagina, and skin. Intlatnmatiol1, dysfunction and ultimately atTophy and destruction of tissue 

occurs. 

We also want to mention the systemic nature of this disease, because multiple organ involvement 

and other complications can add to the expense of this disease, including the cost of healthcare, 

loss of jobs and quality of life. The liver, kidneys, heart, pancreas and thyroid can be affected as 

\vell as the musculoskeletal, gastrointestinal, vase-ular, nervous, and urinary and reproductive 

systems in the body. An autoantibody occurring in 70% of those with Sjogren's causes a reaction 

to the sun and can lead to fetal hcartblock in babies born to mothers with Sjogren's. Sjogren's 

also can result in lymphoprolifcrative disorders, leading to development of non-Hodgkin's 

lymphoma at a rate iliat is 44 times higher ilian in the general population. 

Treatment: 

Only three FDA-approved prescription treatments are available for Sjogren's patients - two arc 

oral medications that help increase saliva and one is an eye drop for dry eye that helps increase 

tear production. Not everyone can take these medications because of side efIeets, and for those 

who can, they still need to use OTe products fj:equently to avoid pain, infection and 

complications. 

Because there are so many aTe products used by Sjogren's patients, we publish a directory on 

available products so they can identify ones that might be most hclpful for their symptoms. Just 

to name a fc\\!, these include; 

• Non-preservative moisture drops, gels and ointments for dry eye 

Moisture-chamber g1asses to maintain ocular moisture 

Saliva substitutes and stimulants for dry mouth 

Oral cleaning products 

Lip balms for dry lips 

Saline solutions, gels and irrigators for dry nose and sinuses 

Moisturizers for dry, tlaking skin 

aTe medications for rdlux 

OTe medications to break up excess mucous, especially in the lungs 

aTe medications to help GI problems, such as constipation and motility issues 

Products to help increase moisture, such as humidifiers and neti pots 

Items to protect patients against the sun, including sunscreen and sun protective clothing 

Special socks to help with neuropathic pain 

Joint and other assistive devices 

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Costs: 

A 2007 SSF national survey found that the average Sjogren's patient spends $1,300.00 a year on 

OTC products to treat their disease. For many people, that dollar figure is mueh higher. We 

solicited patient stories last week lor this hearing, and those who responded stated that they 

spend anywhere from 52.000 to 54,700 a year on medically-necessary OTC items to treat their 

disease. The response from patients was amazing - Within 4 hours after our email request \:vcnt 

out, we received more than 40 stories. And, within 48 hours, \ve received 141 stories from 26 

states. This shows the tremendous need of Sjogren's patients and how passionate our patients are 

about getting something done to help find ways to help with the high cost of their disease' 

Just a few excerpts from the many stories our Foundation received follow: 

Marilyn Winnie of lIlinois: 

"I worry about choosing between medical things I can afford and what I cannot. What 

medication to take, what to skip. Even now, the cost of all out of pocket expenses has been 

devastating to my tinancial situation. I-low willI choose? This isn't about taking advantage of a 

system. This is about surviving in some degree of comfOli.l~ 

Chris Albright of Minnesota: 

"T was diagnosed with Sjogren's in 2005. The following year, my 20-year-old son developed 

symptoms of the disease. We both suffer from severe dry eye which has impacted our lives 

greatly. Since January 2008, we have paid over $41,600 out of pocket solely lor lubricating eye 

drops for the two of us. My son and I will require these treatments for the rest of our lives, as our 

condition is chronic and will not improve. The cost will continue to go up . .It is difficult enough 

for us to deal vv1th the disease \\'ithout continually having to struggle to get the services covered." 

Anne Economou of Colorado: 

"The costs are staggering and the overall burden to our family is very difficult to put into ·words. 

Living with Sjogren's is hard enough. The protocol T follow with dozens orOTC products at 

least helps me cope with this terrible disease." 

Shanti Chandrasekhar of Maryland: 

"As iffacing the challenges of having to deal with this autoimmune disorder is not enough, the 

added expenses to manage it causes morc worry about saving for the future ... making the 

symptoms worse. It's a vicious cycle that we, as patients, cannot break without outside help." 

Yvonne Waller of Georgia: 

'"'OTe drugs to treat my Sjogren's arc very expensive. I have to usc moisturizing drops~ which 

work great, but the cost is S 15.00 per box. r go through a box a week 1f1 am conservative, and 

that one product alone adds up to $780.00 per year. I could not keep my job without the aid of 

the various moisturizers Sjogrens patients MUST have because the pain would jllst be too 

intense. So where does the money come trom to purchase these? I have good insurance, but that 

docs no good, and [ have to find other ways to cover them or do without and suller the 

consequences, because these items are literally necessary for survival." 

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Rachel Hagan of Cal ifomi a: 

"I was diagnosed with Sjogren's syndrome almost 12 years ago. 1 cannotte!l you how many 

timcs 1 have forgonc food for myselfbecausc 1 had to pay lor OTC treatment for the various, 

life-altering, horrible side effects ofllaving Sjogren's. The effects that ripple through my family 

due to the cost of just trying to Jive with this disease are terrible. Sjogren's patients have a 

medical necessity for OTe products." 

Anne Kassner of Colorado: 

"I have had Sjogren's since I was 32 years old. I am now 45, and it has been a great burden to 

pay for ovcr the counler tears that J have to put in my eyes 7-12 times a day as well as ointments 

at night. For my mouth, l have to use mouth sprays and rinses to keep it moistened or 1 cough all 

night long. I spend on average $200.00-5300.00 a month on all these products. This is a huge 

burden to me and my family ... Many times the cost dips into our family's food budget, and it 

means serving a poor meal in order to have eye drops so r can pry my eye lids open. Yes, all the 

over the counter meds that I have to have to use hugely affects me and our "vhole family." 

Stephanie Cantrell from Tennessee: 

'"1 was diagnosed t\vo years ago at the age of35. There are so many costs that go into 

maintaining a somc\vha1 norrnallife while living with Sjogren's. 1 usc a humidifier in every 

room, constantly usc eye drops during the day and ointment at night to kcep my eyes moist. I 

have frequent eye exams in order to monitor any damage to my eyes and frequent dental visits to 

monitor and treat dental decay. I use mouth lozenges, gel, gum, mouth spray and dry mouth 

patches (lhose at $12.00 tor a box of 16 lhat only lasts a few days). It gets expensivc! I havc 

mouth sores and cracking. My skin stays so dry that 1 always have to use lots of lotion. I cannot 

be in the sun without sunhlock. 

My mouth and throat feel as if I have eaten sand and my skin feels like sand paper. The 

neuropathy? Well, it feels like I am being electrocuted. Constant jolts. Hearthurn daily. I 

constantly have an upset stomach. Nosebleeds, which are helped somewhat by using a Neti-Pot. 

The cost can become outrageous just trying to maintain life with Sjogren's. I would have never 

realized ho\v debilitating and expensive Sjogren's can be had I not had it." 

Bctty Moss of Georgia: 

1 spend 1110re than $3,000 a ycar on OTC mcdications. All ofthc,e purchases arc necessities just 

to keep my life bearable. The cost represents more than 10% of my monthly income. It is truly a 

struggle cvery month to pay my bills." 

Gai! Azcrrad, RIm, of California: 

"Consider, pleasc, that those of you on this Congressional panel arc reading this or looking at 

someone reading this through eyes that, hopefully, are not impacted by Sjogren's. That likely 

means that your eyes are not bothered by the unrelenting glare ti'om the overhead lights in this 

room. And, none of you probably stmggle with the size and color of the font in today's Hearing 

Agenda, even if you wear eyeglasses. You will be able to read your lunch menu and the street 

signs w'hen you go home to listen to the TV nevvs since reading newspapers is oul of the 

question. Good thing you don't feel like there is sand in your eyes or that you \\,'ant to rub your 

eycs as if it's an Olympic sp0l1. If all that is the case, then none of you have the tell-tale scarred 

Sjogren's Syndrome Foundation April 25, 2012 
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corneas, dry, burning, hlurry eyes ofSjogrcn's syndrome, a progressive, incurable. anti-immune 

disease. Consider yourself lucky ... 

It's a pretty sad state of life that the only 'help' for Sjogren's impacted eyes are over-the-counter 

lubricants or drops. Welcome to a maddening, limited, frustrating, expensive market of such eye 

products. The myth that anything 0-T-C is cheap, easily affordable and totally optional to use, is 

just that, a myth." 

Melinda Ware of Virginia: 

"Most over-the-counter (OTC) drugs and products I depend on to treat Sjogren's symptoms are 

necessary and not covered by Insurance, Healthcare Flexible Spending Accounts and Healthcare 

flex allmvances plans, Medicaid or -Medicare. I spend on average of approximately $3500 a year 

on OTC products alone to assure a decent quality onile ... Sjogren's has changcd my life as I 

once kncv· .... it. 1 Volas once an active nurse and outgoing woman who liked the outdoors and 

volunteering in my community. I have had to lower my expectations for my quality oflife, my 

income. my ability to contribute to my family and community." 

Molly Clennan of Florida:: 

"Due to the cost of all the over the counter medications and my limited budget, 1 have to pick 

and choose what I can afford and what I can't. [can never buy all of the products needed to help 

treat my symptoms and give me some reprieve due to the cosL" 

Rebecca Hunt, Washington, D.C.: 

"While the cost of eye-drops or ibuprofen may not seem like a lot, when used daily. several 

times a day, or every hour, as is the case \vith many patients living \vith Sjogren's Syndrome, 

these costs -- on top of other medical costs associated with living with a chronic disease -- add 

up. While restoring the "tax-free" purchasing orOTC medical expenditures is not free to 

taxpayers, everyone wins when individuals living \vith chronic diseases have easy access to 

100ver-cost medical care." 

Kelly K. Nichols, OD, MPH, PhD, of Texas: 

"As a practitioner and clinician-scientist in the area of dry eye, I never truly appreciated the 

impact of Sjogren's on quality of life until attending and speaking at a SSF national meeting. The 

collective voice of Sjogren's patients, providing support for one another through this difficult 

disease, and the appreciation of patients when iinal1y diagnoscd with the syndromc was 

oven:vhelming. This is a multi-faceted condition that does not have a simple solution, requiring 

many OTC and prescription treatments. I encourage Congress to recognize that Sjogren's patients 

have many expenses including OTC costs to help alleviate the symptoms that are such a burden 

in the disease." 

Sjogren's Syndrome Foundation April 25, 2012 
34 

f 

Chairman BOUSTANY. Thank you, Mr. Taylor. Ms. Hatcher, you 

may proceed. 

STATEMENT OF JENNIFER HATCHER, SENIOR VICE PRESIDENT, GOVERNMENT AND PUBLIC AFFAIRS, FOOD MARKETING INSTITUTE, ARLINGTON, VA 

Ms. HATCHER. Thank you, Mr. Chairman and Members of the 

Subcommittee. I appreciate the opportunity to testify today on behalf of supermarket retailers and wholesalers represented by FMI. 

The supermarket industry is committed to providing our customers with a wide range of products, including both food and medVerDate Mar 15 2010 02:10 Apr 02, 2013 Jkt 079936 PO 00000 Frm 00038 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\79936.XXX GPO1 PsN: 79936

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35 

ical products. The restrictions placed on the purchases of over-thecounter medical products with an FSA debit card beginning January 1, 2011 are a real burden for consumers and the retail community and they make no sense. 

I will give you a brief history of the issue from our perspective 

and our members’ investments. In July 2006, the IRS published 

new guidance that required retailers to develop and implement an 

information inventory approval system, IIAS, if they wished to continue to be able to accept FSA debit cards for purchases. Under the 

new IRS requirements a merchant’s point of sale system must be 

able to verify in realtime electronically that the merchandise being 

purchased with an FSA card is an eligible medical expense. A massive database of all eligible items had to be designed and built. 

Each merchant point of sale system had to be engineered to identify and flag all eligible products and decline all ineligible products 

electronically. The system also had to be able to maintain the data 

electronically to be produced in the event of an IRS audit. Anyone 

who has ever had the responsibility for an IT project can understand the complexity of this assignment. 

In 2007, FMI joined with a group of stakeholders to develop a 

nonprofit membership organization to build the database part of 

this project to ensure consistency across all participants. We did 

not want customer confusion where an item was determined to be 

eligible at one store and ineligible at another store down the street. 

At the time of the founding this group, known as the special interest group for IIAS standards, included about a dozen stakeholders 

and now its membership includes more than 11,000 companies. 

The guidance we had from the IRS regarding the eligibility of 

certain items was extremely limited. I believe it was only about one 

page in length. We consulted numerous attorneys and the IRS as 

often as they were willing and had dozens of conference calls to ensure the database was accurate and comprehensive. The hard work 

to develop the database of products has been successful, and each 

month an electronic list by UPC code is updated to identify eligible 

and ineligible products and a link is emailed to each participating 

company. The April electronic list included 32,182 eligible items. 

In addition to the creation of the eligible product database, FMI 

members were required to also have the merchant side of the system implemented by January 1, 2008 to ensure that the items 

could be downloaded and flagged and an unflagged item could not 

be purchased with an FSA card, which was the IRS’s ultimate concern. This was a tremendous amount of work to accomplish in this 

timeframe. Customers, merchants and the IRS seemed to be happy 

with the new system. It was consistent, efficient, accurate and was 

created without a single taxpayer dollar. 

On March 23, 2010, this all changed. In an attempt to raise revenue for the health care law this provision was modified to say that 

the expenses associated with OTC drugs or medicines will only be 

considered to be eligible for reimbursement if they are accompanied 

by a prescription. OTC medical supplies and equipment can continue to be purchased under the existing IIAS system. This practical effect of this change is to require a $130 office visit for a prescription to purchase an $18 package of Claritin. All of the eligible 

item lists for all merchant locations had to be updated at the busiVerDate Mar 15 2010 02:10 Apr 02, 2013 Jkt 079936 PO 00000 Frm 00039 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\79936.XXX GPO1 PsN: 79936

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est time of the year. In total, 16,000 OTC medicines had to be removed from the electronic eligible items list. 

Beginning January 1, 2011, the tremendous effort and expense 

that more than 11,000 companies undertook to comply with the 

original IRS requirement was negated. The associates in our member companies who invested so much of their time and resources 

into developing this system were obviously frustrated. Each of our 

members who responded reported to me more than $100,000 in expenses for the development and implementation of this IIAS system. In government dollars that may not seem like a lot, but with 

a 1 percent industry profit margin in grocery that equates to more 

than $10 million in grocery sales just to break even on that expense. 

Regardless of how you feel about PPACA, this change is unfair 

to customers and to retailers and just does not make sense. Bandages and contact solution remain eligible. Claritin and Advil require a prescription. 

FMI believes Congress should preserve affordable consumer access to OTC medicines through FSA accounts. We strongly support 

legislation that many of you have sponsored and cosponsored to 

make this change. 

I will be pleased to answer any questions you have. 

[The prepared statement of Ms. Hatcher follows:] 


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Testimony of Jennifer Hatcher 

Senior Vice President, Government and Public Affairs 

Food Marketing Institute 

Before the House Ways and Means Committee, Subcommittee on 

Oversight 

Hearing on the Impact of Limitations on the Use of Tax-Advantaged 

Accounts for the Purchase of Over-the-Counter Medication 

Wednesday, April 25, 2012 
38 


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Mr. Chairman and Members of the House Ways and Means Subcommittee on Oversight, my name is 

Jennifer Hatcher, and I am Senior Vice President, Government and Public Affairs, with the Food 

Marketing Institute (FMI). Thank you for the opportunity to testify before the Committee on 

Ways and Means Subcommittee on Oversight on the impact of limitations on the use of taxadvantaged accounts for the purchase of over-the-counter (OTC) medicines. 

The Food Marketing Institute' represents supermarket retailers and wholesalers. The 

supermarket industry sells a wide variety of grocery items and other consumer products, 

including over-the-counter (OTC) medications. More than 68% of supermarkets have 

pharmacies and both pharmacy and OTC products represent an important component of our 

overall health and wellness offerings. 

Our members use a variety of payment types to purchase OTC products. Until January 1, 2011, 

when purchases for FSA OTC medicines were cut off for customers using an FSA debit card 

without a prescription, FMI members were seeing growth in the use of debit cards to make 

purchases with a Flexible Spending Account. Below is a history of the issue and our members' 

investments in point-of-sale (PaS) equipment. 

In July 2006, the IRS published updated health benefit card guidance for FSAs {Flexible Spending 

Account} and HRAs {Health Reimbursement Account}. This IRS guidance required members of 

FMI and other retailers to develop and implement an Information Inventory Approval System 

(liAS) if they wished to be able to continue to accept FSA debit cards for purchases. 

Our members are in the business of selling food and other retail products. As you can imagine, 

developing a system as complex as an liAS was an enormous task. Under the new IRS 

requirements, a merchant's point-of-sale system must have the ability to verify in real-time that 

the merchandise being purchased with an FSA/HRA card is an eligible medical expense. A 

massive database of all eligible items had to be designed and built. Each merchant pas system 

had to be engineered to identify and flag all eligible products and decline all ineligible products 

electronically. An associate had to be assigned to monitor and update this system on a monthly 

basis. The system also had to be able to maintain the data electronically to be produced in the 

event of an IRS audit. Anyone who has ever had the responsibility for an IT project can envision 

the complexity of this assignment. 

In 2007, FMI joined with a group of merchants, acquirer processors, issue processors, thirdparty benefit plan administrators and payment card networks to develop a non-profit, 

membership corporation to develop the database part of this project to ensure consistency 

across all participants. We did not want customer confusion where an item was determined to 

be eligible at one store and ineligible at a store down the street. FMI and the other founding 

members provided the seed money and staff support to start this project. At the time of its 
39 


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founding, this group, the Special Interest Group for liAS Standards (SIGIS), included about a 

dozen stakeholders and now its membership includes more than 11,000 companies. 

The guidance we had from the IRS regarding the eligibility of certain items was extremely 

limited. I believe it was only about one page in length. We consulted numerous attorneys and 

the IRS as often as they were willing and had dozens of conference calls to ensure the database 

was accurate and comprehensive. The hard work to develop this database of products has 

been successful and each month an electronic list by UPC code is updated to identify eligible 

and ineligible products and a link is em ailed to each company. 

In addition to the creation of the eligible product database, FMI members were required to also 

have the merchant side of this system implemented by January 1, 2008 in order to continue to 

accept the FSA/HRA debit cards. Much work had to be done to ensure that the items could be 

downloaded and flagged and that an unflagged item could not be purchased with an FSA/HRA 

debit card, which was the IRS's ultimate concern. This was a tremendous amount of work to 

accomplish in this timeframe, but many of our members met this deadline, and many others 

were able to bring their systems online just a few weeks after the January 1, 2008 date. 

The FSA business increased as customers, merchants and the IRS seemed to be happy with this 

new system. It was consistent, efficient and accurate and was created without a single 

taxpayer dollar. 

On March 23, 2010 this all changed. In an attempt to raise revenue for the health care law 

"PPACA" (P.L. 111-148), this provision was modified to say that the expenses associated with 

OTC drugs or medicines will only be considered to be eligible for reimbursement under an FSA 

or HRA account if they are accompanied by a prescription. OTC medical supplies and 

equipment can continue to be purchased under the existing liAS system. The practical effect of 

this change is to require a $130 doctor's office visit for a prescription to purchase an $18 

package of Claritin. Bandages and contact solution remain eligible without a prescription. 

On December 20 and 23, 2010 the IRS finally released guidance on how the change must be 

implemented and the change had to take place by January 1, 2011. All of the eligible item lists 

for all merchant locations had to be updated at the busiest time of the year, which for grocery 

stores is between Thanksgiving and New Year's. In total, 16,000 OTC medicines had to be 

removed from the SIGIS electronic eligible items list. Beginning January 1, 2011, the extreme 

effort and expense that more than 11,000 companies undertook to comply with the original IRS 

requirement by January 1,2008 for an liAS was negated. The associates in our member 

companies who invested so much of their time and resources into developing this system were 

frustrated. 
40 

f 

Chairman BOUSTANY. Thank you, Ms. Hatcher. Mr. Van de 

Water, you may proceed. 

STATEMENT OF PAUL N. VAN DE WATER, SENIOR FELLOW, 

CENTER ON BUDGET AND POLICY PRIORITIES, WASHINGTON, D.C. 

Mr. VAN DE WATER. Mr. Chairman, Ranking Member Lewis, 

Members of the Subcommittee, I appreciate the invitation to appear before you this afternoon. 

The Affordable Care Act includes a number of spending reductions and tax increases designed to assure that expanding health 


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41 

coverage does not drive up the Federal budget deficit. Some of 

these provisions limit the use of tax-advantaged accounts to pay for 

health related expenses. These limitations make sense both as tax 

policy and as health policy, and repealing any of them would in my 

view be unwise. 

Only a minority of workers benefit from these tax-advantaged accounts. In 2010 only 39 percent of all workers had any access to 

Federal spending accounts and only 37 percent of the employees offered an FSA chose to participate. Thus, as a result only about one 

worker in seven has an FSA, and an even smaller number of workers, rather smaller fraction of workers is enrolled in other tax favored accounts. 

Furthermore, people with high incomes benefit disproportionately from these tax-advantaged accounts because they are in higher tax brackets, tend to consume more health care, and can afford 

to deposit larger amounts in their accounts. Middle and low-income 

people benefit much less, if at all. For example, someone in the 15 

percent income tax bracket who contributed the average of $1,420 

to an FSA would save $322 in Federal income and payroll taxes. 

The typical middle income family, however, probably contributes 

much less than that and therefore receives even smaller tax savings. Low and moderate income households are unlikely to receive 

any tax savings because they pay little or no income tax. 

These modest tax benefits entail relatively large administrative 

and compliance costs. Employers must manage the accounts themselves or hire a vendor to do so typically at a cost of about $60 annually per participant. In addition, account holders must spend 

hours complying with onerous recordkeeping requirements to assure that they are using their accounts only for approved items. 

FSAs and other tax-advantaged accounts also encourage the over 

consumption of health care, which runs directly counter to bipartisan efforts to slow the growth of systemwide health care costs in 

both public programs and the private sector. 

The accounts make people less price sensitive and reduce the effectiveness of cost sharing requirements and controlling health care 

utilization. Moreover, prior to the restriction on over-the-counter 

items funds in tax-advantaged accounts could be used to purchase 

nearly any health care item or service regardless of whether it was 

medically necessary, cost effective or of meaningful health value. 

The staff of the Joint Committee on Taxation included changing 

the definition of medical expenses for tax-advantaged accounts in 

a 2005 report, identifying options for improving tax compliance and 

reforming tax expenditures. The Joint Committee offered several 

reasons for using the same definition of medical care both for tax 

favored accounts and also for itemized deductions. 

First, having different definitions for different provisions caused 

similarly situated individuals to receive disparate tax treatment. 

Second, purchases of over-the-counter medicines and other items 

such as pain relievers, cold remedies, and sunscreen constitute routine personal expenses which are generally considered not deserving of a tax subsidy. 

Third, the Joint Committee wrote, providing a subsidy for overthe-counter medicines may also result in less compliance as it may 


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42 

be more difficult to distinguish products that are medical from 

those that are not. 

These reasons still apply today. I think it is important for us to 

remember, as was noted in Mr. Melville’s prepared testimony, that 

flexible spending accounts and other such accounts were generally 

not available to be used at all for over-the-counter products prior 

to 2003. Thus, this provision that we are talking about is relatively 

new and as far as I can tell the world, the medical system, the tax 

system, were operating quite well before 2003 and the notion that 

the situation is deteriorating substantially as a result of this provision I think is implausible. 

Moreover, Mr. Melville’s testimony notes that the average household spends only—using an FSA spent only $136 on OTC medicines 

in 2010. The drop-off he says was 12 percent. Converted into dollars that is $15. And even if all of that drop-off were attributable 

to the provision that we are talking about today, it is truly a de 

minimis amount for most people. And for people for whom over-thecounter expenses represent a large amount then I believe the exception for medical prescription is justified. 

Thank you very much, sir. 

[The prepared statement of Mr. Van de Water follows:] 


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ccoleman on DSK8P6SHH1PROD with HEARINGInsert offset folio 32 here 79936.032

Center on 

Budget 

illld PolleY 

Prioritid, 

TESTIMONY OF PAUL N. VAN DE WATER 

Senior Fellow, Center on Budget and Policy Priorities 

Before the 

Subcommittee on Oversight 

Committee on Ways and Means 

US. House of Representatives 

Umitations on Tax-Advantaged Accounts 

Sir. Chairman, Ranking ,1\,1emb~r Lc"\vls, members of the subcommittee, 1 appreciate rhe in'dtation 

to appear before yon today. 

The .'\ffordable Care .\et (,\Co'\) includes a Humber of spending reducrions and tax increases 

designed to assure that expanding health docs not drive up the deficit. Some proyisions 

limit the llse of raX-ad\Tantaged accounts to par health-related These limitations make 

sense both as tax policy and as health policy, and repealing be umd"c. 

One section of rhe ACA raises an estimated $13 billion over the 2010-2019 period by limiting 

contributions to health flexible spending accounts (FS.'\s) to $2,500 a year. Anotber raises $5 billion 

by making the definition of medical for FS.\s, Health .\ccounts (HSAs), and other 

tax-advantaged accounts conform to dctinition used for the income tax deduction for 

medical exp~nses. _'1.S a result, [he cost of over-the-coumer (OTe) medications and other OTC 

items may flO longer be reimbursed from an account \vithout a prescription or a letter of medical 

necessity from a physician. Reimbursements from tax-advantaged accounts arc "Iso counted in 

applying the ...:\C:\'s excise tiL,\: on high-cost health plans. 

Only a minority of workers benefits from d1CSC tax-advantaged accounts. 1n 2010, 39 percent of 

all workers and 5(j percent of workers in large firms had access to flexible spending accounts, Only 

37 percent of employees offered an FS..c\ in 201U chose to participare, and t:he annual 

contribution LO an PSA ,vas $1,420, well belmv the ne\v 52,500 limir. 1 Thus, onlv one \vorker 

in SC\'cn has an l-<'S..-\. l\ stnaner fraction of ,vorkcrs i:-; enrollcd in other tax-favo;'cd accounts.2 

1pmdiIJ/!. /icrouJlts, Congressional Research Service R.eport RL32656, JannafT 11, 

? Kaiser I<;lmily P()unchtion ana Health Rcw:\l'{:h and Educ:l.t1on Trust, Fimplf)Jlr Hmith Be/l~-/it\~ 2011 
44 

f 

Chairman BOUSTANY. Thank you, Mr. Van de Water. Before 

we proceed with questioning of the witnesses I would like to extend 

courtesy to the ranking member of this subcommittee, Mr. Lewis, 

for a statement. 

Mr. LEWIS. Thank you very much, Mr. Chairman. And Mr. 

Chairman, I want to apologize to you and to other Members of the 

Committee and to my friend and colleague Mr. Becerra for my getting here. I was held up downtown, but I am here. 

Mr. Chairman, thank you for holding this hearing today. I agree 

that this is an important topic for millions of Americans. I understand that Mr. Becerra gave an opening statement for the Democrats, and I thank you, sir. And I thank you for extending me an 

opportunity, Mr. Chairman, to speak. I also would like to thank the 


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45 

witnesses for their testimony I will read, and I am probably going 

to have some questions, and I yield back. 

Thank you. 

Chairman BOUSTANY. I thank the ranking member. And I 

should say we are glad you are here. 

Mr. LEWIS. Thank you, sir. 

Chairman BOUSTANY. We will now proceed with questions for 

the witnesses. 

Mr. Taylor, I am glad you are here today because you brought 

a different perspective to all of this. When we talk about over-thecounter items, medications, we are typically thinking of aspirin and 

cold medicine, but you bring to the table representation for a group 

of people who have very serious chronic conditions, an autoimmune 

condition, with very specific needs in the over-the-counter space 

which is critical to their health. So I want to thank you for bringing that perspective. 

Are there other conditions out there perhaps in the autoimmune 

world or in other areas that are similar to the patients with 

Sjogren’s with similar needs? Could you comment on that? 

Dr. TAYLOR. Absolutely. Surely in the autoimmune disease field 

there are over 80 autoimmune diseases and some of them do have 

similar conditions and symptoms as Sjogren’s, as well as need overthe-counter products for their disease because there isn’t pharmacological methods available for them as well. In addition, diseases 

such as head and neck radiation patients who had head or neck 

cancer also use a lot of over-the-counter medicines for their dry 

mouth, which is a serious side effect from having head or neck cancer, in having the treatments as well. So it does extend into other 

areas besides autoimmune diseases and really does hurt the pocketbook of those patients and their families for sure. 

Chairman BOUSTANY. And oftentimes these are specialists who 

treat these patients, and getting in to see a specialist like a 

rheumatologist for instance is not always one of those things you 

can do on the spur of the moment or even within a week or two, 

it can be difficult to get in to get an appointment, is that true? 

Dr. TAYLOR. That is correct. On average it takes between 3 and 

6 months to get an appointment with a rheumatologist unless you 

go through the emergency room or you have a medical emergency 

that somehow can get an appointment in to see them. And 

rheumatologists treat all the dry mouth symptoms for Sjogren’s. 

And most of the dry eye products are suggested by an optometrist 

or an ophthalmologist, but typically an ophthalmologist is who is 

following them, and they have a very heavy workload as well because they are doing surgery and other things as well. So it is very 

difficult for them to get into their physician’s appointments and 

then also to be able to get a prescription every time they need to 

buy an over-the-counter product. 

Chairman BOUSTANY. I thank you for bringing that perspective. 

Mr. Melville, in 2009 President Obama promised not to support 

any tax increases on families earning under $250,000 a year. And 

yet looking back at all of this it seems that that is exactly what 

has happened now. The ban on over-the-counter purchases without 

a prescription is estimated to raise taxes on American families to 


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the tune of about $5 billion. I think we heard that figure mentioned 

earlier. Can any of the witnesses, starting with you, Mr. Melville, 

comment on whether families using FSAs, HRAs, HSAs make less 

or more than $250,000, and let’s talk about the impact of this tax 

increase on those families. 

Mr. MELVILLE. Sure. Thank you for the question. And as I 

mentioned in my testimony, the average income for an FSA holder 

is $55,000. And on average they set aside about $1,400 of their income to pay for their medical costs that weren’t covered by reimbursement. And from that perspective we think that FSAs and 

HSAs provide the right kind of message to consumers that they are 

responsible for taking care and having skin in the game on their 

own health care and that they will spend that money responsibly, 

and particularly because it is their money, they are setting it aside. 

And as a result of the change in policy someone who had been 

doing all of the right things, budgeting for their own health care, 

seeking an OTC treatment first before perhaps going to see a physician and taking care of it and saving the health care system 

money, they are doing all the right things, and the effect of this 

policy is to penalize them by saying you can no longer use your taxadvantaged card, and if you want to use your FSA you have to go 

to a doctor and get a prescription for a product that doesn’t require 

a prescription. 

Chairman BOUSTANY. So is this going to add cost overall, this 

requirement, to go in and get a prescription each time you need to 

get over-the-counter type medications? 

Mr. MELVILLE. It does not increase the price of the product, it 

increases the cost to the consumer, because before they were able 

to use tax-advantaged dollars to purchase these products, now they 

are using after tax dollars, and you are treating OTC medicines differently than other medicines, prescription medicines. And it really 

doesn’t make a lot of health policy sense because many of these 

medicines that are now available OTC were previously available by 

prescription. It is simply that the product and the experience with 

the product was such that the FDA and the sponsor and manufacturer of the product were able to show that a consumer could use 

this product safely without the intervention of physicians. So something that was previously available only by prescription and you 

could use your FSA, if it gets switched to OTC, that same product, 

you can no longer use your FSA. 

Chairman BOUSTANY. I think we have seen that with peptic 

ulcer disease. Some of the earlier treatments required prescriptions 

and now they are over-the-counter as things have evolved. And the 

ability to get these things over-the-counter probably saves time for 

the consumer. They don’t have to miss work to go to see a doctor 

and those kinds of things. 

Mr. Van de Water, did you want to make a comment. 

Mr. VAN DE WATER. Yes, Mr. Chairman. Again, based on the 

figure in Mr. Melville’s testimony the average family with an FSA 

is spending about $136 a year on OTC medications. That means 

that the tax advantage to that family is on the order of $30 to $35 

a year on it if they could use the FSA to purchase these over-thecounter items. With numbers like that there are going to be very 

few families for whom it would be advantageous to actually spend 


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the money to go to the doctor, even with a modest copayment, to 

look for a prescription to purchase aspirin or a cold medicine. And 

for the people with very high over-the-counter spending, such as 

those whom Mr. Taylor has been talking about, Mr. Taylor’s own 

organization on their website recommends that their members talk 

to their physician about all of the over-the-counter medications 

they are taking anyway and if these are chronic concerns the prescription could be obtained in the course of a regular visit. 

Chairman BOUSTANY. Dr. Feder, do you want to give a physician’s perspective on all that? 

Dr. FEDER. This restriction on patients requiring prescriptions 

for over-the-counter drugs, it places a tremendous burden on the 

family doc. I can tell you that from my practice. And my colleagues 

will tell you the same thing. You know, right now patients can 

come in with a list of 15 or 20 over-the-counter medicines, and if 

we see that some of them aren’t appropriate to be taken together 

the patient reacts unfavorably to that. It puts the provider in a 

very uncomfortable position. Also, the patient will, in my practice, 

and I think in most practices, will have to pay for an office visit 

in terms of the copay. 

Chairman BOUSTANY. Thank you. I will now yield to Ranking 

Member Lewis for questions. 

Mr. LEWIS. Mr. Van de Water, in your written statement you 

stated that 39 percent of all workers have access to flexible spending accounts. About how many workers is that? 

Mr. VAN DE WATER. Well, we currently have about 142 million 

workers, so applying that percentage you get about 55 million with 

access to flexible spending accounts. 

Mr. LEWIS. Well, that is access, but not use, right? 

Mr. VAN DE WATER. Correct. 

Mr. LEWIS. So does the number of people who have access in 

total to include workers and their family members? 

Mr. VAN DE WATER. Well, we don’t have good data on that. Of 

course some of the work—in some cases some of those 55 million 

workers could be in the same household as another worker covered 

by an FSA, in other cases other members of the household might 

not have access to an FSA through their own employment. So we 

can’t be sure. But one would guess that it could be on the order 

of one and a half to two times the 55 million number of workers 

covered. 

Mr. LEWIS. Thank you. Dr. Feder, you testified a few moments 

ago in responding to the chairman’s questions that when people 

come in asking for over-the-counter prescriptions they place a burden on you and other physicians. What can be done to lessen that 

burden? 

Dr. FEDER. The patients, the ones that I have talked to about 

this, they are upset that they have to come in in the first place and 

ask for a prescription for an over-the-counter drug because of the 

cost of their copay or the cost of the visit. And so right away their 

mindset is somewhat uncooperative with my mindset. And so in 

order to try to smooth that rift over, you know, I will give them 

the prescription generally speaking unless I think it is a problem 

for their health. But the burden on the physician is I could be seeing, you know, some very ill patients, elderly patients that I see 


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that take me lots of time to see, and instead I am spending my 

time on these patients writing prescriptions for over-the-counter 

drugs. 

Mr. LEWIS. Now, most of the people that come in, are they sick 

of some symptoms or are they just—maybe they saw a TV ad or 

heard something on the radio and said this is good for me and I 

just need it, I want it, Doctor, please write this prescription? 

Dr. FEDER. I think there is two parts to that question, sir. The 

first part, most of the prescriptions OTC that I give out are for 

colds, they would be for allergies. For example, the patient in the 

spring involves having bad allergy symptoms so they need a prescription for Claritin or Allegra or Zyrtec, something like that. And 

then there are those patients who come in from direct consumer 

advertising on television and radio that hear about something. Let 

me just use the example of testosterone because low T has become 

the big key word today. But that is a prescription item, so that is 

treated differently. But the over-the-counter drugs—oh, and other 

conditions would be pain. They might come in to ask for a prescription for ibuprofen or Aleve or something like that. 

Mr. LEWIS. Thank you very much. Thank you. Mr. Chairman, 

I yield back. 

Chairman BOUSTANY. Mrs. Black, you are recognized. 

Mrs. BLACK. Thank you, Mr. Chairman. And as a health care 

professional I certainly can see a number of reasons here why this 

is not a very good idea. First of all, we have got limited dollars that 

can be spent in health care, to begin with. We already know that 

it is an area where there is a rising cost to both the patient, the 

consumer and then also to the physicians in liability. And so as I 

am sitting here listening to the testimony I was just writing down 

some of the areas where I see this as really being a negative rather 

than a positive as we look at trying to get a lower cost of care and 

also making sure that it is patient centered care. And so I wrote 

these things down, and I would like any one of the panelists to add 

to this or correct me in what I am seeing here as being the real 

problems with this change. 

First is the cost of the visit. We all know that with the limited 

dollars, especially in those families that only have a limited number of dollars to spend on their health care, that the cost of just 

going to see a physician to get that prescription is going to be an 

added cost to their already difficulty in paying for the cost of health 

care. 

Number two is something that I don’t know that was really mentioned here, in part of my having to slip it in now, but I am not 

sure that we really mentioned about the time away from the workplace that someone is going to take. I know having been a mother 

and also a working professional, and if I had to go to the doctors 

every time I needed something for my children’s cough or sniffles 

or whatever, it is going to be time away from the workplace and 

we will see that impacting the families in particular. 

Number three, there is already a physician shortage. 50 percent 

of my district is rural. We are having a hard enough time attracting physicians. And if they are using their time to write prescriptions rather than seeing patients that really need to be seen, this 

is really a problem. 


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Number four is the liability. And Dr. Feder, I don’t know that I 

really thought about that a whole lot until you mentioned it because now you really can’t just say, oh, I will just write that prescription because you have a runny nose or you have an allergy to 

a spring fever or whatever, you are really going to have to do a full 

exam. Because if you just write a prescription and somebody has 

an adverse effect it is going to come back on you. Liability is already high enough and what we are doing is we are adding on top 

of that where it is going to take your time again and also result 

in a possible liability issue. 

And then the one that I don’t know that we have mentioned here 

as well is patient choice, having enough confidence that people can 

understand how to take care of some of their own health care needs 

without running to a health care professional. And I think that 

that is a sad thing that we say that these are drugs that have been 

approved by FDA to be over-the-counter when we should be giving 

our patients enough credibility to say that they can read a box, 

they can understand an over-the-counter medication that has been 

approved by FDA. 

So I have chronicled five things here that I think are going to 

drive up the cost of care, as well not move us in the position of having more patient centered care and allowing people to be more involved in their own care. So any one of you all, can you add to that 

or do you want to correct something that I said? Mr. Melville, let 

me start with you. 

Mr. MELVILLE. Well, I think you really laid out the issue at 

hand here, which is this creates behavior that reduces access and 

increases cost. I think everyone in this room on the committee and 

here in the audience is committed to looking for solutions that reduce health care costs and that increase access to health care. It 

is something our country is struggling with. And quite frankly, this 

policy takes us in the wrong direction. Because as Dr. Feder mentioned, the consumer has to pay a copay, but his insurer is paying 

the balance of that doctor’s visit. The copay may be $10 or $20 or 

$30, the system is paying the $100 or whatever the balance is. 

And in addition to that, as you mentioned, the time out of the 

office as well. Caregiver moms miss twice as many days for taking 

care of their children than they do for their own health care. And 

the access 24/7 to an OTC medicine allows parents to treat their 

children and often allow their children to go to school, allow the 

parent to go to work. And the cost associated with absence because 

of these illnesses is tremendous. And it was never really quantified 

and I am sure was not quantified when the CBO looked at the savings as a result of this change in law. 

Mrs. BLACK. I think I am going to run out of time here. I see 

it clicking. I have got less than 10 seconds left. So if anyone does 

have additional remarks or comments pertaining to what I said I 

would ask that you would give it to us in writing. 

Thank you very much. 

Chairman BOUSTANY. Mr. Becerra, you are recognized. 

Mr. BECERRA. Thank you, Mr. Chairman. And thank you all for 

your testimony. I just want to make sure I understand what we are 

talking about. We are talking about over-the-counter medicines. So 

to be clear, over-the-counter medicines are medicines that you or 


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I or anyone in America, any consumer, could purchase right now 

by just walking into the pharmacy and plucking it from the 

counter. This is not a medication that requires a doctor’s prescription. So we are talking about your run of the mill flu medication, 

it could be aspirin or something for a migraine, it could be the alcohol or peroxide, hydrogen peroxide you might use to help heal a 

wound, things that you can get without having to go to the doctor 

to get a prescription. Now, because of the law the way it is if you 

don’t have a prescription, you buy that medicine, you can’t get a 

tax write-off for it. If you buy that cold medication with a prescription and buy it off the counter, not going to a pharmacist but right 

off of the counter, you can write it off from your taxes. And so what 

we are talking about is the fact that there are Americans who want 

to take advantage of the fact that by purchasing medicines that 

any American can purchase that they can get a tax write-off, they 

can reduce their taxes. And so it is an incentive to call Dr. Feder 

or any other doctor and say, Dr. Feder, I have got a cold, it is really 

bad, could you give me a prescription so I can go buy that cold 

medication. And the inconvenience and so forth that you have explained I think arises from all of that. 

This is the concern I have. I can understand why most Americans want to reduce their cost of health care because health care 

is extremely expensive. But have any of you figured out how we 

would cover the $7 billion cost of eliminating that provision? Because by giving that select group of Americans who has FSAs or 

HRAs or HSAs, these flexible spending accounts, these different 

type of accounts, we are giving a select group of Americans a 

chance to deduct the cost of that flu medicine from their taxes 

where the majority of Americans buy the same medicine, buy the 

same pills but don’t get to deduct those costs from their taxes. And 

so the cost to taxpayers who don’t have FSAs or HRAs or HSAs are 

passed on to the majority of Americans—yeah, the cost of those deductions are passed on to those who don’t have these flexible savings accounts. And so if we want to return to the days when a certain segment, the minority of Americans could deduct the cost of 

that flu medicine from their taxes we have to come up with $7 billion in offsets, because that is what the cost will be over 10 years. 

Someone pays for that. Other taxpayers have to pay for that, either 

paying more taxes elsewhere or we deficit spend and borrow the 

money from China. 

So have any of you thought of the solution, because we talked 

about solutions, what the solution is? How do we pay for the $7 billion cost of reinstituting a program that allowed a minority of 

Americans to deduct the cost of their over-the-counter medicines 

from their taxes, which the majority of Americans cannot do? 

If you have it paid for, I would love to hear it. Otherwise that 

is the dilemma we have. I would love to do what you want to do, 

because I would love to help those Americans, the minority of 

Americans who can deduct the cost of their over-the-counter medicines from their taxes, but I have to pay for it, I have to find a way 

to pay for it. And right now we are being told that we have to cut 

Medicare, we are being told we have to cut Meals on Wheels for 

seniors, we have to cut funding for our schools because we are in 

deficit. And on health care we are told, and Dr. Feder probably 


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knows this very well, we have got to do something about this sustainable growth rate reimbursement for physicians and other providers which is not keeping pace with the cost of inflation for doctors to be able to provide health care. And that is going to cost a 

ton of money. 

Dr. Feder, I don’t know if you would rather we cover this but not 

take care of the SGR doc fix. And so it is easier said than done, 

and given that these provisions that you would like to see in place 

are a convenience and help a minority of Americans, and by some 

estimates the FSAs impact about one in seven workers which 

means they touch the lives of about 30 million Americans, that is 

1/10th, 10 percent of Americans participate in FSAs or are touched 

by FSAs, that means 90 percent of Americans go to the same pharmacies, purchase those same medicines and they can’t deduct them 

from their taxes. And so it would be helpful if when you come here 

to tell us to really rethink and restore that program if you help us 

figure out how we come up with the $7 billion it will cost to reinstitute the program. 

Thank you. 

Chairman BOUSTANY. I would remind my friend that he just 

made a good case for the fact that we still have a massive health 

care problem in the country and it has not been adequately addressed by the passage of a health care law and so we have much 

more work to do. And I think any of those things that could empower individuals and families to take more control of their health 

care destiny is probably a good thing in the long run. 

Mr. BECERRA. But Mr. Chairman, on that point, a few years 

ago some years back there was no such thing as deducting the cost 

of your over-the-counter medicine. It came into play as a result of 

the creation of the FSAs and so forth. And I think it encourages 

folks to make sure that they take the medicines they need. But this 

is the time of austerity and I think, Mr. Chairman, we have to figure out what are the most important things. Is having a consumer 

go to Dr. Feder and say, Dr. Feder, I need to see you because I 

need you to give me a prescription so I can buy that cold medicine 

that I can buy over the counter on my own without a prescription—— 

Chairman BOUSTANY. We will continue this debate. 

Mr. BECERRA. That is the question, that is the question. 

Chairman BOUSTANY. Ms. Jenkins, you are now recognized. 

Ms. JENKINS. Well, I want to thank the chairman again for 

holding this hearing and for all of you for testifying today. We have 

got great bipartisan support in the House and even on this Ways 

and Means Committee to repeal this provision. And I hope that 

hearing some of the facts today will encourage even more of our 

colleagues to support removing this burden on consumers. 

Mr. Chairman, I would ask unanimous consent to enter a letter 

of support into the record. It is from the Health Choices Coalition 

and it is simply supporting the repeal of this prescription requirement from the health care law. 

Chairman BOUSTANY. Without objection. 

[The letter follows: The Honorable Lynn Jenkins] 


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April 25,2012 

The Honorable Charles BOllstany, M.D. 

U.S. House of Representatives 

Washington, DC 20515 

The Honorable John Lewis 

U.S. House of Representatives 

Washington, DC 20515 

Dear Chairman Boustany and Ranking Member Le\vls: 

On behalf of the undersigned groups of the Health Choices Coalition representing 

physicians, consumers, retailers, manufacturers, pharmacies, phannacists, pharmacy 

benefit managers, patients, insurers, small businesses and employers, we \vrite to thank 

you tor holding this hearing today to examine tax-prefened accounts for purchasing overthe-counter products. The coalition is concemed about the impact of the provision in the 

Patient Protection and Affordable Care Act ("PPACA") that requires holders of taxpreferred healthcare accounts to obtain a physician's prescription in order to use funds 

from those accounts to purchase an over-the-counter item. 

The goal ofPPACA was to expand access to affordable care for all healthcare 

consumers. UlrfoI1unately, the provision that limits coverage ofOTe medicines instead 

increases costs to the health care system and places a new, administTative burden on 

already over-burdened physician offices. 

Consumers depend on OTe medicines as a first tine of defense for their ramilies' 

healthcare needs. OTe medicines provide Americans with an effective, affordable, 

convenient and accessible means to address their healthcare needs. These medicines save 

consumers billions of dollars annually through reducing unnecessary doctors' visits, 

increased productivity at work, and the cost advantages of using OTC medicines as a 

frontline treatment. 

A recent studyl found that OTC medicines contribute a total 0[S102 billion each 

year in savings and cost avoidance in the hcalthcarc system. In other words, for every $1 

spent on OTC medicines, the healthcare system reaps 56-S7 in savings. The availability 

ofOTe medicines off .. the-shelfand without a prescription provides medicines for an 

estimated 60 million people who would otherwise not seek treatment. OTC medicines 

are an essential part of the healthcare system and deserve equal tax treatment \\"ith 

prescription drugs and medical devices. 

FUlihermore, millions of American families rely on flexib1c spending arrangements 

("FSAs"), Health Savings Accounts ("HSAs"), and other tax-preferred accounts to 

purchase these cost-effective medications. This issue is of critical importance to the 

estimated 19 million working Americans \vho rely on voluntary contributions of pre-tax 

dollars to FSAs to help meet their basic health care needs, including the purchase of safe, 

affordable OTC medicines. Prohibiting the use of FSA funds to purchase these 

medicines, or requiring documentation from a doctor that OTCs are being used to treat a 

medical condition, is already limiting access and greatly reducing the cost-efficiencies 

associated with these medicines. 

1 "The Value of OTe Medicine to the United States," Bom & Co. 2012, on behalf of CHPA 
53 

f 

Ms. JENKINS. One of my constituents back home, Donna, in 

Fort Scott, Kansas, wrote me at the beginning of this Congress, 

and this is what she said: My husband and I try to stay very 

healthy and really enjoy the flexibility of the health savings account as it once was. It was very convenient to be able to buy overthe-counter products to manage our own health care. Americans 

should choose a healthier lifestyle which could cut down on costs 

tremendously. I do not know why anybody wants the government 

to be so involved in the management of the money we have worked 

so hard to earn. Please work hard to get this part of the health 

care act repealed. 


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54 

And I struggled to provide a rational response to this constituent 

as to why this prescription requirement was even included in the 

President’s health care law in the first place. It doesn’t provide better health care for consumers and I can’t figure out how it would 

lead to creating the 4 million jobs that then Speaker Pelosi promised the bill would create. To me the only logical response was that 

it was a simple line item that provided revenue to help pay for the 

massive overhaul, which is why we have introduced legislation to 

repeal this provision. 

Ms. Hatcher, you mentioned in your testimony all the work your 

organization did to comply with the original 2008 IRS guidelines. 

Then we passed the health care law and you all get new guidance 

just weeks before you must comply with these new prescription requirements. You mention a company spent about $100,000 to comply with this new provision from the health care law. 

Do you know what the average salary is for a full-time employee 

in your member companies? 

Ms. HATCHER. It would depend upon the position. There would 

be a wide variation between the various positions in the store, but 

it would be well below that expenditure. 

Ms. JENKINS. So you think you could hire at least a couple fulltime employees for the cost of just getting the system set up? 

Ms. HATCHER. Certainly. 

Ms. JENKINS. What concerns me most about this investment 

you all had to make was that it may have come at the expense of 

your members creating new jobs at a time when that was what we 

need the most. Could you estimate for me or have you received any 

anecdotal feedback on how this new requirement is hindering job 

growth for your members? 

Ms. HATCHER. Well, certainly, as you mentioned, the expenditures that were put into the system, and there are ongoing expenditures that it didn’t really factor in. Just to add to Congresswoman 

Black’s list, one additional expenditure is the most expensive position and the hardest to fill in the supermarket environment is the 

pharmacist position, and now we have to have a pharmacist involved in the sale of every OTC product that has a prescription, 

and it has taken him away from really counseling sick patients, so 

certainly I would add that to the list of those expenses. 

Ms. JENKINS. Okay, thank you. Mr. Melville, you mention a 

study in your testimony, specifically the fact that every dollar spent 

by consumers on OTC meds saves six to seven dollars for the U.S. 

health care system as a whole. Can you elaborate a little more on 

some of the findings of that study? 

Mr. MELVILLE. Sure, thank you. The study looked at a hypothetical world that said if OTC medicines were not available, what 

would consumers do, and so they polled 3,500 consumers and got 

a direction from them that many of them would go to see a doctor, 

many of them would go to an emergency room, many of them 

would seek a more expensive prescription medicine, all behaviors 

that add costs to the health care system, not reduce costs, and by 

looking at that and extrapolating, it came up to about $102 billion 

in current value today because of OTCs. OTCs keep consumers or 

patients out of a medical office when they don’t need to be there. 

It allows them to purchase a product on their own without the inVerDate Mar 15 2010 02:10 Apr 02, 2013 Jkt 079936 PO 00000 Frm 00058 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\79936.XXX GPO1 PsN: 79936

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volvement of a pharmacist per se, no dispensing fee. It is cost-effective health care. It is not appropriate in every situation, absolutely 

not, but where it is appropriate, it is cost-effective and it should be 

encouraged, and this study shows the benefits of OTC medicines. 

It makes it difficult to understand how this provision could be 

scored at saving money for the health care system when it is causing people to go see doctors. 

Ms. JENKINS. Thank you. Mr. Chairman, I yield back. 

Chairman BOUSTANY. Mr. Marchant, you are recognized. 

Mr. MARCHANT. Thank you, Mr. Chairman. In 2009 the President told the Nation that he was not going to be in favor of raising 

taxes on any family that made under $250,000, yet looking at the 

rules of Obamacare, it seems that exactly the opposite will take 

place. The ban on over-the-counter purchases without a prescription is estimated to raise taxes on families of about $5 billion a 

year. 

Can any of the witnesses each comment on the families that you 

have experience with that you see are affected by this law? Do they 

fall in the under $250,000 category or do they fall above the 

$250,000 category? 

Mr. Melville. 

Mr. MELVILLE. Well, as I cited earlier, the most recent data we 

were able to obtain showed that the average FSA participant 

earned $55,000 a year. As a result of this provision, if they had an 

FSA account before the provision took effect, their cost for OTC 

medicines went up 10 to 35 percent after the provision took effect. 

Mr. MARCHANT. So that would be a tax increase? 

Mr. MELVILLE. It is certainly a cost increase to the consumer. 

Mr. MARCHANT. Mr. Feder, Dr. Feder. 

Dr. FEDER. I can tell you that, you know, my patients, I practice 

in the great State of Kansas, and I practice in a fairly affluent 

county, but I guarantee you these patients make far less than 

$250,000 a year, and we see indigent patients, we see patients that 

don’t have insurance, we give out samples to patients, and we still 

cannot keep up with the complaints about they can’t afford this 

and they can’t afford that, and this is just one more area that I 

think we can empower and help our patients in that they don’t 

have to come to the office and spend money to see me to write them 

a prescription that they can get over the counter. 

Mr. MARCHANT. Thank you. Mr. Taylor. 

Mr. TAYLOR. Thank you. Well, Sjogren’s affects 1 percent of the 

U.S. population, so surely the majority is going to be earners under 

$250,000, affects mostly women, but it surely does affect people 

that don’t make $250,000, and the patient choice is so important 

for our patients, but to understand Sjogren’s, our patients use between 10 and 17 products daily for their disease from dry skin lotions all the way up through dry eye options to dry mouth options, 

et cetera. And so surely with the prescription issue, it would fill the 

doctors’ offices with having them write prescriptions, and it is causing problems for our rheumatologists, our ophthalmologists to write 

those prescriptions for our patients. 

Mr. MARCHANT. Ms. Hatcher. 

Ms. HATCHER. I don’t have any specific data, but where we 

have seen the use of FSA cards, it is throughout all income levels 


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in a community, it is not limited to upper income levels, it is 

throughout all income levels. 

Mr. MARCHANT. Yes, sir? 

Mr. VAN DE WATER. Mr. Marchant, it is important to look at 

not just the tax effect of this particular provision, but of the entire 

legislation of which it was a part. As Ms. Jenkins correctly noted, 

the purpose of this provision is not just to raise revenues for the 

sake of raising revenues but to help finance the major expansion 

of health coverage that was provided by the Affordable Care Act. 

Indeed, using the figures and the testimony we heard earlier, there 

are people, you know, the average person benefiting from an FSA 

will lose perhaps 30 to 40 dollars a year on account of this limitation on over-the-counter spending. However, the Affordable Care 

Act is also extending health coverage to 33 million Americans who 

haven’t had it and providing tax credits to low—which are focused 

on low- and moderate-income Americans. So it seems to me, and 

I can say that as a person who has this year for the first time a 

flexible spending account and who earns less than $250,000 a year, 

I for one am quite happy to pay an extra $30 a year to help provide 

health coverage to the less fortunate of our citizens who otherwise 

wouldn’t have it. 

Mr. MARCHANT. So in your view it is—it was basically a cost 

shifting from one group of people to another group of people? 

Mr. VAN DE WATER. It is not a cost shift. It is a way to raise 

revenue to pay for a very important program. 

Mr. MARCHANT. That would be what we define as a cost shift. 

Thank you very much. 

Mr. TAYLOR. Mr. Marchant, may I please add, we have all these 

new people going to be going on the health care rolls, and we won’t 

have time to see them in the physicians’ offices if people that do 

have FSAs are taking up time to get prescriptions, and that is the 

biggest challenge that we have in the health care system. There is 

only 39 percent on FSAs, but they will be taking up time, important time for other people that could get in, need to get in to see 

their doctors, which is very important to remember as well. 

Mr. MARCHANT. Thank you, Mr. Taylor. 

Chairman BOUSTANY. Mr. Reed, you are recognized. 

Mr. REED. Thank you so much, Mr. Chairman. Mr. Van de 

Water, I do appreciate your generosity in giving your money to a 

segment of the economy, of the population for paying for their 

health care when they need it, but would you agree that some people may not want to be that generous or that some people feel that 

the money in their FSA accounts is the money that they earned 

and it is their money, and they should have the choice whether or 

not to pay for someone else’s health care in America? 

Mr. VAN DE WATER. Whether or not to have an FSA is itself 

a choice. As I said, up to this year I had not exercised an FSA. 

Mr. REED. I think, sir, what you said is you appreciated the fact 

that you had an opportunity because of what you make under your 

FSA to pay for those people that may be in a situation that can’t 

get health insurance, and I appreciate your generosity. But what 

my concern is is why in Washington, D.C. do we have an attitude 

that—you may feel that way, but there is millions of people I am 

sure that are out there that don’t feel like you, and we are directVerDate Mar 15 2010 02:10 Apr 02, 2013 Jkt 079936 PO 00000 Frm 00060 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\79936.XXX GPO1 PsN: 79936

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ing them from Washington, D.C. under this provision to say, well, 

so sorry, so sad, we are going to tell you we are going to take your 

money. 

Would you agree your money in your FSA is your money or is 

it the government’s money? Whose money is it in the FSA? Your 

FSA in your account, whose money is it? Is it the government’s 

money or is it your money? Did you earn that money? 

Mr. VAN DE WATER. The tax benefit is—— 

Mr. REED. No, no, the money in the FSA, you earned it, right? 

Mr. VAN DE WATER. We are not talking, sir, about the money 

in the FSA per se. My money is my money. 

Mr. REED. No, I am talking about the money—— 

Mr. VAN DE WATER. We are talking about whether I should get 

a tax benefit for buying a cold remedy. 

Mr. REED. But that is your money that you earned in your FSA. 

Does anybody else have an FSA on the panel? Okay. Do you feel 

that is the government’s money or is your money? 

Mr. TAYLOR. It is my money that went in there. 

Mr. REED. Yeah. So do you have any problem with us coming 

in and using that FSA money for something else? Do you appreciate the fact that I, here in Washington, D.C., under the Affordable Care Act am directing that I am going to take that money and 

put it somewhere else? I mean, that is what I am hearing from the 

testimony from the panel today. Am I missing something? 

Mr. VAN DE WATER. Yes, that is a mischaracterization of my 

remarks, sir. I can use my money to buy over-the-counter drugs at 

any time. At issue is the amount of the tax subsidy that I should 

get, and the tax subsidy, which is what we are talking about, is not 

my money. Mr. REED. That $30 is not your money? 

Mr. VAN DE WATER. I have no right, God-given right to a tax 

subsidy for buying cold medicine. Mr. REED. Am I missing something? Isn’t that $30 part of the 

FSA money that you are—you essentially earned, you are just paying the $30 as a tax on the money you earned even though you— 

because you are getting the tax benefit from the transaction, you 

are paying the $30 at the end of the day. 

I guess my point, I am just trying to stress the point that there 

is an attitude here in Washington as a new member that I see that 

is clearly on display here in that the FSA tax benefit is looked at 

as if that is Washington’s money, not the individual who earned its 

money, and I have a fundamental disagreement, and I believe you 

can tell where I come down on that side of the equation. 

If I could, I just want to get into a little bit—Mr. Melville, can 

you give me any medical justification as to why this policy was enacted? 

Mr. MELVILLE. There is no medical justification that I am 

aware of. These are often referred to not only as over-the-counter 

drugs but nonprescription drugs. By their very nature, they don’t 

require a prescription, so the tax policy is inconsistent with the 

medical treatment of that product. 

Mr. REED. Would anybody disagree with that assessment on the 

issue? 

[Witnesses nodding.] 


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Mr. REED. Now before this provision was put in the Affordable 

Care Act, was there any consumer advocates or any professional 

doctors or hospital organizations that were advocating or suggesting using FSAs and HSAs to purchase OTC medication that 

was harming patients or represented bad health policy? Was there 

anybody during that debate raising those concerns? Anybody? Yes, 

no? 

Mr. MELVILLE. No. 

Mr. REED. Well, with that, I yield back, Mr. Chairman. I clearly 

see what the policy was for. It clearly was a revenue—I do appreciate your candor on the statement you made, Mr. Van de Water, 

for the record, that it was clearly a revenue source to pay for the 

Affordable Care Act, and I do appreciate that candor. 

With that, Mr. Chairman, I yield back. Thank you. 

Chairman BOUSTANY. I thank the gentleman. Mr. Paulsen, you 

are recognized. 

Mr. PAULSEN. Thank you, Mr. Chairman. Let me just thank 

you also for holding this important hearing today. It is something 

I have certainly taken an interest in personally as well as Congresswoman Jenkins. In fact, her and I today have an opinion piece 

that has been published in the local Roll Call subscription newspaper, so without—I ask unanimous consent to submit that for the 

record if we could, Mr. Chairman. 

Chairman BOUSTANY. Without objection. 

[The article follows: The Honorable Erik Paulsen] 


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f 

Mr. PAULSEN. Thank you. Several members on the committee 

actually have introduced specific legislation to target fixing this onerous provision for over-the-counter medication. So in addition to 

Ms. Jenkins’ bill, I have got the legislation that was mentioned in 

the testimony, there is 128 cosponsors, Mr. Reichert has a legislation, there is bipartisan support for this. You know, it is really no 

wonder when you come up with these types of provisions why the 

President’s new health care law still remains so unpopular. I mean, 

I know it was targeted mostly towards access, but it doesn’t address the cost side of the equation at all, and certainly health care 

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the-counter medications that have grown more popular because 

they have gone through FDA clearance, they become more readily 

available, it only makes sense they are going to be more widely 

used as an opportunity to reduce costs in the healthcare system. 

We have actually made this new health care law more and more 

expensive ironically. So it has gone from like $900 billion to like 

$1.7 trillion, so it has, like, doubled in cost, and so it is no wonder 

that the law itself is so unpopular. 

But what I think is really interesting, though, is that you have 

got 33 million Americans that are in families that use these flexible 

spending accounts. They are offered by 29 percent of small businesses and they are offered by 85 percent of large employers as 

well. So you have got employers that are really pushing out to their 

employees, hey, take advantage of these accounts because it allows 

you to use your own health care dollars for your own health care 

needs, and at the same time Congress comes in and pulls the rug 

out from under them. I get these calls from these suburban mothers who are really just flabbergasted and ticked off that all of a 

sudden they can’t go get allergy medication for their children unless they go to a doctor for that prescription. So you not only have 

to have the copay, but then you do have the insurance cost that 

gets paid, that gets spread out among everybody, so then you are 

increasing health care costs for everybody. It is going in the opposite direction of the intended effort of health care reform. So the 

consumers don’t like it, the doctors don’t like it, and the employers 

don’t like it. 

Let me just ask this question because this has not come up in 

discussion today, but another restriction that is actually in the new 

health care law is also a restriction on the cap of the amount of 

money that can be put into these accounts each and every year. As 

we know, some health care procedures are fairly expensive. I will 

give you one example in particular, but you have got a $2,500 cap 

essentially now that has been placed on these accounts, and that 

starts in January 1st of this next year, so we are going to hear a 

lot more from consumers that are going to be impacted by this new 

cap, and I am concerned we are going to see similar problems, so 

you have got millions of consumers that use these funds, their own 

health care dollars with more restrictions. How will this—as an example, I will give you an example of how this might restrict dental 

care. So if you have got a consumer that is now going to be able 

to—say if they want to use an oral health decision for dental care, 

and they have got no money really to cover their out-of-pocket expenses, so they go to, say, a surgical dental implant for like a jaw 

bone implant in Dayton, Minnesota. According to 

fairhealthconsumer.org, this procedure might cost like $1,221, so a 

significant amount of money. That is a cost that the consumer is 

going to directly have to pay after their insurance coverage. Then 

you add a ceramic retainer, you know, for your child, of course, you 

are at $900, so you have almost used up the whole cap right there. 

Let me just ask this, Mr. Melville or any others that might want 

to comment, after you have had several of these procedures, you 

can use up and burn through your whole account right there. You 

know, in general, I mean, what is going to be the impact on the 


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consumer with that type of a provision as well? Is that moving us 

in the wrong direction, Mr. Melville? 

Mr. MELVILLE. Well, sir, I have a 14-year-old daughter who is 

getting braces next year, so I will be able to personally experience 

that cap in my situation, but, you know, I can’t speak broadly towards how FSAs are utilized broadly for health care. I can say that 

the OTC spend is usually a very small part of the overall amount 

that a consumer will spend out of their FSA, but it is a significant 

amount, and I think I have heard today some comments saying it 

is not much. It is a lot for certain people who perhaps aren’t making a lot of money and may have a disproportionate need. Maybe 

they do take an allergy medicine 12 months a year along with their 

children, and you add all of that up, 10 to 35 percent of that allergy 

medicine over the course of the year is real money, and I think it 

is not fair to characterize it as modest or insignificant. It is really 

significant to a lot of people. 

Mr. PAULSEN. Mr. Taylor—or, Mr. Feder, from a physician’s 

perspective on the cap, I mean, another provision that we are going 

to hear about from consumers down the road here. 

Dr. FEDER. Yeah, I think so. I have patients that I do a physical 

exam on, they need a colonoscopy, a stress test, they need some 

other procedures, it can run up into the thousands of dollars, and 

sometimes they will bundle all these to do in one year because they 

have got the money to do it, and I see that, you know, that is not 

unusual to see that. They may be looking at an elective surgery, 

cataracts, although that is covered, but still there is going to be 

out-of-pocket expense. Maybe they want lasik surgery, there is just 

a host of elective procedures that are very expensive, and a cap obviously will affect that. 

Mr. TAYLOR. And Sjogren’s patients on average spend over $1,500 a year on dental work for their dental issues that they have, 

so it is very expensive as well. 

Mr. PAULSEN. Thank you, Mr. Chairman. 

Chairman BOUSTANY. I thank the gentleman. Yes? 

Mr. LEWIS. Could I just ask one last question, Mr. Chairman? 

Chairman BOUSTANY. Yes. 

Mr. LEWIS. Can I do somewhat of a poll? How many of you favor 

or see health care reform as good in itself, that it is affordable, accessible when we have more than 50 million of our citizens without 

any health insurance, they cannot afford to see a doctor, many 

never see a doctor because they cannot afford it. I would just like 

to get—I know you are very smart, you have been working in this 

area, some of you, for quite a while. Dr. Feder? 

Dr. FEDER. I can address that, if I might. Yes, sir, I represent 

the American Osteopathic Association, and we are on record as 

supporting the Affordable Care Act. However, we do feel with any 

law there is room for improvement and revision, and I support that 

position. 

Mr. LEWIS. Others? 

Mr. TAYLOR. Well, the Sjogren’s Syndrome Foundation is on the 

record as well of supporting the Affordable Care Act. I think the 

challenge is in any disease—I have worked in nonprofit health care 

my entire career, American Heart Association and now Sjogren’s 

Syndrome Foundation—is access to health care and we need to do 


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something about it, and this will definitely change that. The challenge with what we are talking about today is we will be filling 

those doctors’ waiting rooms with people just needing prescriptions 

for their FSAs instead of getting those new people that finally have 

insurance into their doctors. And there is even statistics on 

colonoscopies. People that have higher incomes tend to go for more 

colonoscopies and fill colonoscopy rooms, when people that actually 

have symptoms that need the colonoscopies can’t get in. The same 

thing will happen with rheumatologists and opthalmologists, if 

Sjogren’s patients start filling, and they have been, filling waiting 

rooms trying to get prescriptions, taking away from people that 

really need those appointments because they have a real medical 

need for them just to get a prescription for eye drops or saliva substitutes or et cetera. Access to care is wonderful, but we need to 

make room for those people to get into the doctors’ offices as well. 

Mr. LEWIS. Thank you. Ms. Hatcher, do you have a point of 

view here? 

Ms. HATCHER. Sure. I mean, just in general in terms of affordable care, obviously there is some work that needs to be done. This 

particular provision we have been against all along. We did a lot 

of work to put an advance system in place, and we just felt like 

the rug was taken out from underneath us. When the IRS asks you 

to do something, you usually jump and try to do it, and we did, and 

then we feel like, you know, all of our work was kind of useless, 

and so I think that is the frustration from our member standpoint 

is more of the investment they put into this to try to make this 

work and make the system work and then have it taken away. 

Mr. VAN DE WATER. Mr. Lewis, I think that the Affordable 

Care Act represents a wonderful achievement on the road to reducing the number of people in this country without coverage. As I 

said before, another one of the Act’s remarkable achievements is 

that it does include provisions to pay for the health care expansion. 

Unlike, for example, the expansion of, you know, the provision of 

Medicare drug coverage back in, you know, the previous decade, 

which was not fully paid for, the Affordable Care Act by CBO’s estimation will actually modestly reduce the deficit because it does include other spending reductions and tax changes to pay for it. This 

provision is clearly one of the less popular provisions, but I do 

think that it has a strong policy justification, as I have explained 

earlier. 

Mr. LEWIS. Thank you. 

Mr. MELVILLE. Mr. Lewis, my association did not take a position for or against the Affordable Care Act. We certainly support 

the goals of increasing access and reducing cost. We would agree 

with Dr. Feder that the law itself can be tweaked and improved, 

and this is an area that we think can be improved because with 

the expansion of coverage, it will put more pressure on physicians, 

and the last thing physicians need would be people coming in asking for prescriptions for medicines that don’t require one. 

Mr. LEWIS. Thank you. Thank you, Mr. Chairman. 

Chairman BOUSTANY. I thank the ranking member. I would 

just conclude by saying that this hearing was focused on this particular provision, first of all, a provision that is going to add cost 


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to the health care system, and it certainly has a hassle factor associated with it, as we have heard from many of you. 

On the broader picture of the health care law that passed, we 

know obviously, yes, there was increased coverage, but does coverage really mean real high quality access when you consider that 

a significant amount of that expanded coverage is in the form of 

Medicaid where we have doctor shortages and physicians who currently are not seeing Medicaid patients or trying to markedly curtail their Medicaid exposure because of the very poor reimbursement that doesn’t meet costs. We are going to be simply pushing 

all of these individuals into the emergency room, and so while you 

can talk about expanded coverage, does it mean high quality access? And at the same time we do know that costs are going up 

and accelerating at a rate, according to the CBO, even faster than 

if we had done nothing. 

So there are significant problems remaining, and while I think 

this was a very valuable hearing to focus on this one provision 

which is causing a lot of consternation on the part of families 

across this country and adding to cost, we have clearly much more 

work to do in health care, and so with that I want to thank the 

witnesses for being here today and for your testimony. I want to 

remind you that members may have some additional questions 

they may submit in writing to you, and those questions and your 

answers would be made part of the official record. So, again, thank 

you for being here today, and that concludes our hearing. 

[Whereupon, at 4:00 p.m., the subcommittee was adjourned.] 


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[Submissions for the Record follow:] 

The Honorable Wally Herger 


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The Honorable Dave Reichert 


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WRITTEN STATEMENT FOR THE RECORD FROM 

CONGRESSMAN DAVE REICHERT (WA-08) 

BEFORE THE 

U.S. HOUSE OF REPRESENTATIVES 

WAYS AND MEANS OVERSIGHT SUBCOMMITTEE 

HEARING ON THE IMP ACT OF LIMIT A nONS ON THE USE 

OF TAX-ADVANTAGED ACCOUNTS FOR THE PURCHASE OF 

OVER-THE-COUNTER MEDICA nON 

APRIL 25, 2012 
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American Medical Association 


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Statement 

of the 

American Medical Association 

to the 

Committee on Ways and Means 

Subcommittee on Oversight 

U. S. House of Representatives 

Re: Impact of Limitations on the Use of TaxAdvantaged Accounts for the Purchase of 

Over-the-Counter Medication 

April 25, 2012 

25 Massachusetts Avenue, NW, Suite 600 

Washington, DC 20001 

Division of Legislative Counsel 

202-789-7423 
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STATEME"iT 

ofthe 

American Medical Association 

to the 

Subcommittee on Oversight 

of the 

Committee on Ways and Means 

United States House of Representatives 

Re: Impact of Limitations on the Use of Tax-Advantaged Accounts 

for the Purchase of Over-the-Counter Medication 

April 25, 2012 

On behalf of our physician and medical student members, the American Medical 

Association (AMA) appreciates the opportunity to submit a slatement regarding today's 

hearing on the Impact of Limitations on the Use of Tax-Advantaged Accounts for the 

Purchase of Over-the-Counter Medication. We commend Chailman Boustany lor 

holding this hearing to consider the consequences of a provision in the Patient Protection 

and Affordable Care Act (ACA) that reslricts the use ofra"{-advantaged accounts, such as 

flexible savings accolmts (FSAs) and health savings accounts (HSAs), for the purchase of 

over-the-counter (OTC) drugs. 

Millions of Americans currently rely on tax-advantaged accounts, such as FSAs and 

HSAs, to save for "qualified" medical expenses as defined by thc Intemal Revenue Code. 

Approximately 33 million Americans are in families with FSAs, which are offered by 29 

percent of small businesses and 85 percent of large employers. An additional 11.4 

million Americans are enrolled in an HSA. Contributions to and distributions from these 

account1j arc generally tax-exempt and may be used for unrcimburscd medical expenses, 

such as dcductibles, co-payments, and co-insurance. 

In 2003, as several popular drugs moved to OTC status, the Internal Revenue Service 

changed the regulations on these accounts to allow them to be used for the purchase of 

nonprescriplion medications and other health care prodllcts. Consumers depend on OTe 

medicines as a first line of defense for their families' health care needs. OTC medicines, 

such as aspirin, acid rcnux medications, allergy medications, vitamins, and eye drops, 
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provide Americans \vith eiTective, affordable, convenient. and accessible means to 

address their hcalth care needs. These medicines save consumers billions of dollars 

annually by reducing unnecessary physician visits, minimizing time lost from work due 

to illness, and allowing patients to benefit from the cost advantage orOTe medicines, 

which tend to be less expensive than prescription medications. A survey conducted by 

the Consumer I-Iealtheare Products Association in 2010 found that more than 90 percent 

of Americans prefer to seek treatment with OTCs before seeing a health care provider. 

At the same time, nearly 90 percent of the physicians surveyed recommend patients try to 

address minor ailments with self-care interventions, including the use of OTC medicines, 

before seeking professional care. 

As a Vliay to offset costs associated with the ACA, Congress revisited the guidelines 

governing the usc of tax-advantaged accounts to purchase OTe medications. However, 

as an alternative to returning to the pre-2003 limits, Section 9003 of the ACA allo\Ved 

consumers, beginning in 2011, to continue purchasing OTC medications \vith pre-tax 

dollars, but only with a prescription. We believe this change has resulted in sc\eral 

unintended consequences. Under U.S. food and Drug Administration mles governing 

drug sa!~ty and efficacy, OTC medications do not need a prescription; yet, now, because 

of Section 9003, patients have to get a prescription solely to use their tax-advantaged 

accOlmts. This requirement makes no sense from a drug safely or patient safety 

perspective since OTC drugs, by definition, do not require prescriptions in order to be 

purchased. 

This new OTe requirement has placed new administrative burdens on already 

overburdened olTicc-based physicians, particularly small primary care practices. We 

believe it \vil1 result in increased office visits, increased physician and starr time talking 

to patients over the phone (usually not reimbursed), and increased costs and 

inconvenience to patients. 

Physicians face many new challcngcs as they begin to implement the numerous rcfonns 

included in the ACA and incorporate health infornlation technology into their practices. 

Rather than improving access and saving money, hmvever, this particular AC A provision 

may instead increase overall health care spending by forcing patients to schedule ofl-ice 

visits \vith thejr physicians solely to obtain prescriptions for OTe medications. While 

some practices may have the resources to handle prescription requests over the phone, 

others may not. Many physicians require patients to schedule an appointment before 

prescribing any medication, so that they can examine the patient, determine ",·hether a 

medication is appropriate, and counsel the patient about possible side-effects and drug 

interactions. This increased demand on their time means less time and attention to other 

patients with more urgent treatment needs, and results in increased cOsts to patients, who 

arc charged for an otTtcc visit. 

To maintain office productivity, other physicians may decide not to issue prescriptions 

thaI simply are not needed for the purchase orOTe medications, and could llnd 

themselves \'vith unhappy patients who may decide to leave the practice, thus disrupting 

long-standing patient-physician relationships. Furthermore, since a prescription for an 

2 
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Center for Fiscal Equity 


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Henderson Brothers 

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Infinisource 


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April 20, 2012 

Committee on Ways and Means 

Subcommittee on Oversight 

ATTN: The Honorably Charles Boustany (R-LA), Subcommittee Chairman 

1102 Longworth House Office Building, Room 1100 

Washington D,C, 20515 

Re: Comments for April 25, 2012, Hearing on the Impact of Limitations on the Use of 

Tax-Advantaged Accounts for the Purchase of Over-the-Counter (OTC) Medication 

To Whom It May Concern: 

Thank you for the opportunity to provide comments to the Subcommittee. 

Based in Coldwater, Michigan, Infinisource, Inc. is a payroll and benefit administrator that 

provides administrative services related to payroll, tax-advantaged accounts (including 

Health FSAs, Health Reimbursement Arrangements [HRAs] and Health Savings Accounts 

[HSAsJ), COBRA and HIPAA. Our client base numbers more than 18,000 employers 

nationwide. All told, we have more than 800 Health FSA clients, over 250 HRA clients and 

some 30 HSA clients. 

As you are well aware, Section 9003 of the Affordable Care Act (ACA) has had a 

significantly negative effect on tax-advantaged accounts since January 1, 2011. In assisting 

employers, patients and consumers with these benefits every day, we have seen first-hand 

the burdens and inefficiencies of this provision. 

We see at least six reasons why Congress should consider repealing Section 9003: 

The OTC restriction forces people to pay for OTC medication with after-tax dollars. 

The OTC restriction provides an exception to the rule that adds cost to the health 

care system. 

Participants around the country have already commented on the hardships that 

result from Section 9003. 

The OTC restriction essentially amounts to a tax on the working class of America. 

Tax-advantaged accounts serve a vital purpose for a significant segment of society, 

and limiting their application frustrates that purpose. 

Physicians are already overburdened by the amount of time they spend on nonreimbursable activities, and Section 9003 simply adds to that burden. 

1. The OTe restriction forces people to pay for OTe medication with after-tax dollars. 

In late 2003, the IRS issued Revenue Ruling 2003-102, which permitted tax-advantaged 

accounts like Health FSAs to reimburse OTC items. For years, this ruling empowered 
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Comments for April 25, 2012, Hearing on the Impact of Limitations on the Use of TaxAdvantaged Accounts for the Purchase of Over-the-Counter (OTC) Medication 

April 20, 2012 

Page 2 

consumers to use pre-tax dollars to purchase OTC medication. This is significant because 

an increasing number of drugs are now available over-the-counter and because prescription 

drugs (even generics) are an expensive health plan cost. Section 9003 simply eliminates 

this right, requiring consumers to obtain a prescription for non-prescription medication. Most 

consumers will not do this because it requires involvement with a doctor, which will likely 

entail an office visit. As a result, many consumers simply purchase the medication with aftertax dollars. 

Good public policy should encourage and facilitate the use of OTC medication whenever 

possible. The Consumer Healthcare Products Association recently issued a study, "The 

Value of OTe Medicine to the United States." A major finding was that the U.S. health care 

system saves $6 to $7 every time an OTC drug is purchased, providing over $100 billion '" 

value each year. Section 9003 significantly restrains the ability of OTC drugs to provide 

maximum benefit to the U.S. health care system. 

"When you consider that every dollar spent on an OTe medicine saves our system 6 to 7 

dollars in avoided cost, it is paramount that our policymakers do all they can to encourage 

consumer access to OTe medicines for self-treatable conditions," CHPA President and CEO 

Scott M. Melville said. 

2. The OTe restriction provides an exception to the rule that adds cost to the health 

care system. 

One exception to the aTe restriction is that prescribed aTe medications are reimbursable 

under a Health FSA, HRA or HSA on a pre-tax basis. However, this entails involvement from 

the physician. This adds time and cost for the consumer. Typically, instead of selfmedicating a health condition (e.g., cold, flu, allergies), the consumer now must pay an 

office visit co-payment, and the health plan must pay for the balance of that office visit, 

which in some geographic areas can exceed several hundred dollars. The consumer has to 

wait for an appointment and take time away from work. Before Section 9003, the consumer 

had the freedom to obtain the OTe medication at any time of day or night, use an electronic 

payment card at the point of sale, and have the expense auto-adjudicated immediately. 

Another option is for the consumer to try to obtain a prescription over the phone without an 

appointment This is very difficult and time-consuming to do because physicians are very 

busy. Many physicians will refuse to accommodate these requests for reasons explained 

below. 

In addition, if a consumer does obtain a prescription from the physician and makes an OTe 

purchase, that transaction is not auto-adjudicated. The consumer must provide written 

documentation to the claims administrator to receive reimbursement, which typically occurs 

several weeks later. 

3. Participants around the country have already commented on the hardships that 

result from Section 9003. 

A website, called www.savemyflexplan.org, has documented several testimonials about the 

hardships of Section 9003. The following are samples: 
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Comments for April 25, 2012, Hearing on the Impact of Limitations on the Use of TaxAdvantaged Accounts for the Purchase of Over-the-Counter (OTC) Medication 

April 20, 2012 

Page 3 

Audrey - Kentucky: The new requirement means I can no longer use flex spending 

money for OTC medications without a doctor's visit. Going to the doctor for these 

things costs me money--both in the co-pay as well as time away from work, This 

reduces productivity in the workforce and wastes my doctor's time slotting an 

appointment to write me a prescription for Tylenol instead of attending to patients 

who have more serious medical needs. Moreover, it is an unnecessary doctor's visit, 

which will artificially inflate health care expenses, Please work to repeal this rule and 

allow OTC medications back in flex spending as they used to be--without a 

prescription! After all, isn't that the definition of OTC?I 

Laura - Utah: It is horrible to not be able to purchase OTC medications on my flex 

card, specifically because I have a child who has Febrial Sezures [sp] if she gets a 

high fever, This is something that is very easily treatable with Tylenol or IB, Before 

when I knew she was getting Sick, I would run to the store, and be able to by the 

medicine. Now, not only do I have to obtain a prescription for it, I also have to pay for 

it out of pocket and wait for a reimbursement. In these times, I just don't have the 

extra money to put away, and wait for someone to pay me back later, since it is 

already taken out of my paycheck. When these charges come up, I shouldn't need a 

prescription, and I should be able to use my flex card like I did in the past. 

Lisa - Nebraska: My spouse uses OTC allergy medicine which is just as effective for 

him as an allergy medication obtained with a prescription. Prior to 2011, we were 

able to use our FSA debit card to obtain this OTC medication. With the new 

regulation, we had to pay for a doctor visit just to be able to submit this for 

reimbursement. In doing so, we are still not able to use our FSA debit card, but must 

pay cash, submit a paper claim form along with the prescription, and wait for a check 

to be issued to us. Not only is this inconvenient for us, it is costing us more money to 

visit the doctor, is wasting the doctor's time, is costing our health plan more for an 

'unnecessary' visit to the doctor, and is costing the FSA plan administrator more to 

process the paper claim. We would appreciate being able to go back to getting OTC 

meds as we have in the past saving all of us much needed time and money. 

4. The OTC restriction essentially amounts to a tax on the working class of America. 

Surveys have shown that the average Health FSA participant earns about $55,000 per year 

and that Health FSAs benefit about 35 million Americans. HRA and HSA participants 

number in the several millions as well. Most of these health care consumers are working 

class Americans, struggling to make ends meet, especially with escalating health care costs. 

The pre-tax advantage of tax-advantaged accounts is very important. The fact that OTC 

medication is now presumptively post-tax amounts to a tax on many who cannot afford it. 

Paying for benefits on a post-tax basis means that you use after-tax dollars, which 

employees receive after federal and state income tax and FICA withholding. This essentially 

eliminates at least a 25 percent discount on OTe medications that was previously available 

to consumers. 
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Comments for April 25, 2012, Hearing on the Impact of Limitations on the Use of TaxAdvantaged Accounts for the Purchase of Over-the-Counter (OTC) Medication 

April 20, 2012 

Page 4 

5. Tax-advantaged accounts serve a vital purpose for a significant segment of 

society, and limiting their application frustrates that purpose. 

Tax-advantaged accounts play an important in controlling health care costs. They empower 

consumers to pay for out-of-pocket expenses (e.g., co-payments, co-insurance, 

prescriptions and deductible expenses) with pre-tax dollars. Families also use taxadvantaged accounts to defray the cost of dental treatments and vision expenses. Taxadvantaged accounts pay for chronic conditions (e.g., high blood pressure and asthma). 

When these benefits undergo a serious restriction, this causes health care costs to rise. 

Tax-advantaged accounts are not misused. Current law requires that every Health FSA and 

HRA expense must be verified by an independent third party as medically necessary before 

it is reimbursed on a pre-tax basis. Most consumers run out of money before the end of the 

year. Those who don't often purchase needed OTC medications toward the end of the year. 

This option is no longer available because of Section 9003. 

6. Physicians are already overburdened by the amount of time they spend on nonreimbursable activities, and Section 9003 simply adds to that burden. 

When Section 9003 took effect, it caught many physicians and pharmacies by surprise. One 

news report told the story of a Roseville family practice physician who said that her office 

received calls from three or four patients per week, sometimes wanting 5-10 prescriptions at 

a time for OTC medications. 

Another health care professional has pointed out that physicians already spend a good 

amount of time on activities that are not reimbursed by patients or insurance. Examples from 

one physician who tracked such activity on a daily basis were as follows: 

Over 20 phone calls 

Over 16 e-mails 

Over 19 lab reports reviewed 

Over 12 prescription refills 

None of these were reimbursable. To compound the problem, a physician undertakes 

liability every time he or she writes a prescription, even if it is for OTC medication. 

Physicians are reluctant to do this without examining the patient in an office visit. After all, 

OTC medications can have side effects as well. 

We want to thank the Subcommittee for this opportunity to comment on the impact of 

limitations on the use of tax-advantaged accounts for the purchase of OTC medication. If 

you have any questions or concerns, please feel free to contact me or Connie Gilchrest, our 

Research and Compliance Specialist. who assisted with these comments, at 800-300-3838 

or via e-mail at rg.l~?_~_@J}l~jni~Q!-JrG~.com or C;g-'jcJlr~~t_@lr!fiD_tsqUJc~_-S~P!1J. 
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National Business Group on Health 


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National 

Business 

Group o I'! 

Health 

May2.2012 

The Honorable Charles W. Boustany. Jr.. M.D. 

Chairman 

Ways and Means Subcommittee on Oversight 

1102 Longworth HOB 

Washington, DC 20515 

Dear Chairman Boustany: 

W 1'1'\'\ • bus im:ssgrouphca !th.org 

C!,('(Jtiv(' Health B"IWt7ts SO/II,ionsjor Toda.\'_ Strung j'v/ity ti>r TomorroH' 

The National Business Group on Health applauds the Subcommittee's efforts to review 

the Patient Protection and Afrordablc Care Act's (ACA) ban on using Flexible Spending 

Accounts (FSAs), health reimbursement anangernents (l-IRAs), and health savings 

accounts (HSAs) (0 pay for over-the-counter (OTC) medications, except for insulin, 

unless people have a prescription. 

The National Business Group on Health represents approximately 342, primarily large, 

employers (including 67 of the Fortune 100) \vho voluntarily proyide health benefits and 

other health programs to over 55 million American employees, retirees, and their 

families. 

As you bow, the National Business Group on Health supports H.R. 605, the Patient's 

Right to Choose Act, a bill that you co-sponsored with Representative Erik Paulsen (Rl'vfN) that would remove both the ACA's ban on using health accounts for OTC 

medications without a prescription and the 52,500 annual maximum employee 

contribution limit for FSAs. 

The ACA made OTe nonprescription drugs more expensive and taxable. Ironically, this 

change has likely added to health care costs by creating incentives to use more expensive 

prescription drugs even \vhen OTC dmgs would work just as effectively in many cases. It 

has also likely raised health care costs and waste by encouraging additional visits to 

doctors solely to obtain prescriptions for OTe medications. Unnecessary visits "vill make 

it even more difficult to schedule appointments with providers when the ACA expands 

coverage to an additional 28 million people in 2014\ in the face ofa 45,000 primary care 

physician shortage.2 

Estimates ofthe Insurance Covewge Provisions in the Affordable 
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