OTC Medications Can Provide Financial, as well as Health, Benefits

Medicines available without a prescription are eligible in flexible spending accounts

Washington, D.C. (November 8, 2004)—Employees participating in flexible spending accounts (FSAs) may gain an extra benefit from many of their nonprescription medicines: additional savings. The Internal Revenue Service issued a revenue ruling last year, making many nonprescription, or over-the-counter (OTC), medicines eligible expenses in FSA accounts.

FSAs are voluntary programs many employers use to allow their employees to set aside pre-tax dollars every year to pay for certain medical expenses not covered by health insurance. These expenses now include OTC medicines, including, but not limited to, such medications as pain, allergy, and heartburn relievers; cold and flu medicines; antifungals; first aid topicals; stomach remedies; and nicotine replacement therapies.

“Using an FSA for OTC purchases can mean a savings of up to 38 percent on these important products,” explains CHPA President Linda A. Suydam, D.P.A. However, since an individual company plan might not include all expenses considered eligible by the IRS, Suydam advises consumers: “Check with your employer first to verify which expenses are eligible.”

To make the most of their FSAs, CHPA also recommends that employees:

  • Budget wisely during open enrollment season.
  • Pay careful attention throughout the year to how much money is in their account. Money not used in an FSA by the end of the account year is lost.
  • Ask their FSA administrator what will be needed to meet their plan’s specific substantiation requirements for these purchases. (Often, this can be as simple as a dated receipt listing the product purchased.)

Visit CHPA’s web site at www.chpa-info.org to learn more about OTC eligibility in FSAs. CHPA also has material available for employers and pharmacists to help guide employees and consumers with questions about OTC eligibility in FSAs. Materials include break room posters, brochures, tip sheets, and an FSA calculator in development.

CHPA Contacts: Elizabeth Assey and Mimi Pappas, 202.429.9260


CHPA is the 123-year-old trade association representing U.S. manufacturers and distributors of over-the-counter medicines and nutritional supplement products.