Leadership Roundtable Finds Health Care Reform Rule Likely to Drive Billions

in New Costs; Concerns About Restricted Access to Non-Prescription Drugs,

Says FoundationHSC

A panel of experts concludes the reform rule making OTC drugs ineligible for reimbursement from
flexible health spending accounts without "prescription" will trigger retail system challenges
impossible to overcome in the timeframe required and could increase health costs.

Washington, DC, October 12, 2010 --(PR.com)-- According to experts, retailers are already taking steps
to warn shoppers of new restrictions regarding purchases of over-the-counter (OTC) medicines with
funds from health care accounts. Employers and health plans are communicating a similar message as
they begin open enrollment for 2011 benefit plans.

As of January 1, 2011, consumers will no longer be able to pay for most OTC medicines with funds from
their flexible spending accounts and other health accounts (including HSAs and HRAs) unless the OTCs
are “prescribed.” This little-known rule change, enacted as part of the Patient Protection and Affordable
Care Act, is intended to help fund increases in health care spending in other parts of the Bill. However, a
panel of health care thought leaders has concluded that the rule change triggers retail system challenges
which are operationally impossible to overcome in the timeframe required by the Bill and has the
potential to increase annual health care costs by billions of dollars.

The Foundation for HealthSMART Consumers convened a Leadership Roundtable in Washington, DC to

discuss this topic. Jon Comola, executive director of The Foundation said, “We see this as a threat to
consumer access and choice at a time when we need our citizens to be more engaged in managing their
health and the cost of care.”

He noted that the new rule only allows OTC medicines obtained with a prescription to be reimbursed or
purchased tax-free with health account funds. “Therefore,” he adds, “some consumers are likely to seek
prescriptions for OTCs or alternative Rx drugs in order to comply with the new tax requirement.”

According to Foundation researchers, the resulting costs could reach $2.5 billion annually if office visits
and lab tests are incurred by even 10 percent of the insured population; potential new pharmacy costs
could reach $3 billion annually. At the Roundtable meeting, employer groups expressed concern about
additional indirect costs associated with more presenteeism and absenteeism in the workplace.

John Hickman, partner, Alston & Bird, LLC, said this new policy will drive significant technology costs
for retailers because they must re-engineer point-of-sale systems to track the purchases according to the
new rules. “Based on IRS guidance, just over 15,000 items are impacted and will need to be removed
from the system,” says Hickman. He adds, “This work cannot be achieved before the January deadline
and retailers are scrambling to find ways to communicate this to shoppers.”

“We are concerned about the negative impact on people who are using OTCs to address health issues like
smoking cessation, weight control, arthritis and allergies because of the increased tax on higher cost

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products,” according to Jim Parker, Fellow for The Foundation. “This may result in increased physician
visits and potentially the prescribing of more expensive prescription drugs.”

According to Roy Ramthun, President, HSA Consulting, “More than 50 million of the 195 million
commercially insured consumers have health care accounts and will be directly affected by this new rule.
However,” he adds, “when retailers have warnings at the shelf, the issue may be a point of confusion for
many consumers.”

Joseph McGovern, Fellow for The Foundation for HealthSMART Consumers, expressed concern about
how this policy may thwart future Rx-to-OTC switches. “We have a robust pipeline of branded
prescription medicines that will be losing patent exclusivity over the next five years, and which may
represent opportunities for increased consumer access and cost savings through OTC availability,”
according to McGovern. “Any destabilization of consumer confidence in OTC use may dissuade
companies from going through the process with FDA to make these medicines available without a
prescription, particularly if there are generic prescription alternatives,” he adds.

The panel included representatives from America's Health Insurance Plans (AHIP); Americans for Tax
Reform; the U.S. Chamber of Commerce, the Consumer Health Care Products Association (CHPA); the
Employers Council on Flexible Spending (ECFS); the Food Marketing Institute (FMI); the National
Association of Chain Drug Stores (NACDS); The Special Interest Group for IIAS Standards (SIGIS);
Visa; and WageWorks.

About The Foundation: The Foundation for HealthSMART Consumers, founded in 2008, is a
notforprofit organization dedicated to increasing individual and collective knowledge about health and
building consumer confidence in making care decisions. The Foundation is committed to engaging and
activating healthcare consumers through education and experience. Its mission is to enable a strong and
high performing U.S. healthcare system through a healthy, knowledgeable and contributing citizenry.

For media kit, go to: http://www.healthsmartconsumers.org

###

Media Resources at www.healthsmartconsumers.org

· Spokespeople
· Fact Sheet: Unintended Consequences of Health Care Reform on Ineligibility of OTC Drugs in Health
Care Account Funds
· Foundation for HealthSMART Consumers position paper on “Ineligibility of OTCs for Purchase with
Health Care Account Funds”

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Contact Information:
The Foundation for HealthSmartConsumers
Mary Alice Lawless
908-953-9198
Mlawless@healthsmartconsumers.org
http://www.healthsmartconsumers.org

Online Version of Press Release:

You can read the online version of this press release at: http://www.pr.com/press-release/268826

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