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Jim DeMint, Bill Nelson Propose Bill to Reduce Drug Costs

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Location: Washington, DC


Jim DeMint, Bill Nelson Propose Bill to Reduce Drug Costs
Legislation Would Make Over-the-Counter Medicines Tax Deductible

July 27th, 2005 - Washington, D.C. - Today, U.S. Senators Jim DeMint (R-S.C.) and Bill Nelson (D-Fla.) introduced the "OTC Medicine Tax Fairness Act," bipartisan legislation that will make over-the-counter (OTC) medicines tax deductible. Under current law, the cost of prescription drugs, insulin, and most out-of-pocket healthcare costs may be included as a deductible medical expense, while OTC medicines cannot. A companion bill was introduced in the U.S. House by Reps. Melissa Hart (R-Penn.) and Mike Ross (D-Ark.)

"Americans, who already pay outrageous drug prices, shouldn't be punished when medicines transition from prescription to over-the-counter status," said Senator DeMint. "Under current law, the minute a medicine switches from prescription to OTC, it is no longer a tax deductible medical expense. We have a chance to fix this problem and help millions of American consumers, particularly those with lower incomes, afford critical medicines."

According to recent economic data, more than five percent of taxpayers claimed the medical expense deduction in 2000. Of those taxpayers, 56 percent earned less than $20,000 per year. Studies have indicated that every dollar spent on OTC medicines yields $2.47 in health care savings (Kline & Company, 1997).

"It makes no sense that if a doctor prescribes a smoking cessation program the cost is tax deductible, but if a smoker seeks treatment of his or her own with an over-the-counter medicine, that cost is not," said Senator DeMint. "Nor does it make sense that a drug like Claritin was tax deductible when it was available by prescription, but ceased to be tax deductible the moment it became available an OTC. Congress should encourage preventative and cost effective care, not penalize consumers for choosing less expensive options."

In 2003, the Internal Revenue Service (IRS) acknowledged the value of OTC drugs in a ruling which allowed for the cost of these products to qualify for reimbursement from a Flexible Spending Account (FSA) or Health Savings Account (HSA). This legislation acknowledges the IRS ruling, providing the tax savings to millions more Americans by allowing OTC medicines to be included as a deductible medical expense.

http://demint.senate.gov/index.cfm?FuseAction=PressReleases.Detail&PressRelease_id=265&Month=7&Year=2005&Type=PressRelease

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