CHPA Supports Efforts to Save Taxpayers Money on Medicines

OTC Medicine Tax Fairness Act will benefit seniors, lower-income Americans the most

Washington, D.C. (July 27, 2005)—The Consumer Healthcare Products Association (CHPA) applauds the bipartisan efforts of Senators Jim DeMint (R-S.C.) and Bill Nelson (D-Fla.) in the U.S. Senate and Congresspersons Melissa Hart (R-Penn.) and Mike Ross (D-Ark.) in the U.S. House of Representatives to make over-the-counter (OTC) medicines tax deductible again. Companion legislation introduced in both houses of Congress this week—the OTC Medicine Tax Fairness Act—seeks to amend IRS Internal Revenue Code Section 213 so that OTC medicines will be allowed as deductible medical expenses for taxpayers who itemize their deductions, just as prescription drugs are.

“OTCs are a crucial part of the nation’s healthcare system, relied on by millions of Americans every year,” said CHPA President Linda A. Suydam, D.P.A. “It is high time that these beneficial medicines are recognized in the tax code as deductible expenses again in the same way as prescription drugs, crutches, and contact lenses.” OTCs were tax deductible until 1984.

The IRS already has paved the way, with a September 2003 ruling allowing employees to pay for OTC medicines with pre-tax dollars from their employer-provided flexible spending accounts (FSAs) as well as the health savings accounts (HSAs) created by Congress in the Medicare Modernization Act of December 2003.

In addition to supporting coverage of OTC costs with FSA and HSA monies, CHPA has been a long-time advocate for giving OTCs tax-deductible status. CHPA is joined by a number of patient advocacy organizations in this effort. The Sjögren’s Syndrome Foundation, the Scleroderma Foundation, Vitiligo Support International, and psoriasis groups all have voiced their support for the OTC Medicine Tax Fairness Act.

“OTCs are often the first medicines consumers turn to when treating an illness or symptom. Not only safe and effective, OTCs also are cost-effective for consumers and the healthcare system overall,” added Suydam. For example, research conducted in 2004 shows that OTCs for the treatment of upper respiratory infections alone save the system nearly $5 billion. “This legislation would further help consumers manage their healthcare costs, especially seniors and lower-income families.”

The OTC Medicine Tax Fairness Act would allow taxpayers to deduct the cost of certain OTC medicines provided they itemize deductions and their medical expenses exceed 7.5 percent of their adjusted gross income.

“For the sake of American consumers facing escalating healthcare costs, we hope the U.S. Congress will support this important legislation,” said Suydam. “OTC tax deductibility will have a positive impact on so many American families.”

Contacts: Elizabeth Assey and Virginia Cox, 202.429.9260

CHPA is the 124-year-old trade association representing U.S. manufacturers and distributors of over-the-counter medicines and nutritional supplement products.