Tax Deduction for Self-Care Expenses Scott Melville President & CEO Consumer Healthcare Products Association

We are c ommitted to promoting the role of OTC and Dietary Supplement products through science, education, and advocacy. Serving the self-medication industry since

Self-Treatment Saves Time and Money

4 Health Insurance Coverage in the U.S., 2010 SOURCE: KCMU/Urban Institute analysis of 2011 ASEC Supplement to the CPS.

5 Avg. Annual Health Insurance Premiums and Worker Contributions for Family Coverage, Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits,

6 National Health Expenditure and % of GDP, % 17.6% 16% 5.2% Source: Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group

7 HSA vs. FSA HSA Health Savings Accounts FSA Flexible Spending Arrangements Overview A bank account to save and pay for medical expenses tax-free. Pays for out-of-pocket expenses not covered by medical plan tax- free. Eligibility Must accompany a high- deductible health insurance plan. Eligibility is set by your employer. Rollover/Portable? YesNo Annual Contribution Single coverage limit: $3100 Family coverage limit: $6250 No current limit In 2013, limit will be $2500.

8 Examples of Eligible Medical Expenses Bandages Contact lenses Insurance co-payments Dentures Diabetic monitors Eyeglasses Hearing aids Insulin Medical equipment Orthotics Orthodontia Prescription medicines X-rays Source:

9 FSA Participation By the Numbers Source: According to the Employers Council on Flexible Compensation (ECFC), 2008 # of Participating Americans 35 Million Annual Salary $55,000 Annual FSA Contribution $1386

10 Rev. Rul : Reimbursements of OTCs Are Excludable from Gross Income Effective Sept. 22, 2003 ‘‘Self-insured medical reimbursement plans: This ruling holds that employer reimbursements of amounts paid by an employee to purchase nonprescription medicines and drugs are excludable from gross income under section 105(b) of the Code.’’

11 SEC Distributions For Medicine Qualified Only for Prescribed Drug or Insulin Effective Jan. 1, 2011 ‘‘Reimbursement for expenses incurred for a medicine or a drug shall be treated as a reimbursement for medical expenses only if such medicine or drug is a prescribed drug (determined without regard to whether such drug is available without a prescription) or is insulin.’’

Healthcare Reform Law Intent vs. Reality Intent of Law Decrease Costs Expand Access Reality of OTC Provision Increase Costs Reduce Access

13 Industry Imperative

14 The Value of OTC Medicine to the United States

15 7 Most Common Self-Treatable Conditions AllergyAnalgesicsAnti-fungalCough/Cold Medicated Skin Lower GIUpper GI

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21 OTC Industry Value to Consumers AccessTrustEmpowermentAffordability

22 “This study shows how important over- the-counter medicines are for millions of American families” Source: Nobile Photo

23 Health Choices Coalition Members  Aetna  America’s Health Insurance Plans  American Academy of Dermatology Association  American College of Physicians  American Medical Association  American Osteopathic Association  American Society for Association Executives  Bayer HealthCare Consumer Care  Blue Cross Blue Shield Association  Consumer Healthcare Products Association  CVS Caremark  Food Marketing Institute  National Association of Chain Drug Stores  National Association of Manufacturers  National Community Pharmacists Association  National Federation of Independent Business  National Grocers Association  Prime Therapeutics  Retail Industry Leaders Association  Sjögren’s Syndrome Foundation  U.S. Chamber of Commerce  Wellpoint

24 House Ways and Means Committee FSA Hearing, April 25, 2012 Source: Nobile Photo

25 Gaining Momentum

26 Thank You Contact Information: