Supplement Coverage Under HSAs, FSAs Called For In Proposed Legislation

Dietary supplements with approved qualified health claims would be eligible for coverage by health savings accounts and flexible spending accounts under a bill sponsored by Rep. Chris Cannon (R-Utah).

The "Dietary Supplement & Meal Replacement Tax Parity Act" (HR 1545) was introduced April 12. The bill would amend section 213(d) of the Internal Revenue Code "to treat expenses for certain meal replacement and dietary supplement products that qualify for FDA-approved health claims as expenses for medical care."

For the purpose of HSAs and FSAs, "medical expenses" listed under section 213(d) of the tax code are interpreted broadly by the IRS to include expenses for mitigation, treatment or prevention of disease, whether or not the item requires a prescription.

Meal replacement products that make health claims or labeling statements that they are "low fat and are a good source of protein, fiber and multiple essential vitamins" also would be eligible HSA expenses under Cannon's bill.

The Internal Revenue Service announced in September 2003 that OTC drugs may be covered by FSAs (¹ (Also see "IRS Rule On Flex-Spending Accounts A Boon For Chronic-Use OTCs, Switches" - Pink Sheet, 8 Sep, 2003.), p. 3). Talks of providing similar coverage to dietary supplements began soon after OTCs were granted coverage.

Although an equivalent bill has not been introduced in the Senate, Sens. Tom Harkin (D-Iowa) and Orrin Hatch (R-Utah) are interested in pursuing similar legislation. The senators are working to bring other legislators on board, including Sen. Max Baucus (D-Mont.) and other members of the Finance Committee.

Harkin and Hatch both have been interested in tax deductibility for supplements for some time. The two cosponsored a bill on the matter in 2001 (² (Also see "Supplement tax bill" - Pink Sheet, 13 Aug, 2001.), In Brief).

Harkin also is looking into legislation on food stamp coverage for dietary supplements, namely vitamins and minerals, according to Eric Juzenas, a former staffer who recently left Harkin's office. Harkin is not yet ready to introduce HSA/FSA or food stamp legislation, but is looking into potential cosponsors and which types of products could be covered by the bill, Juzenas said.

Juzenas spoke at the National Nutritional Foods Association's Natural Foods Day in Washington, D.C. April 12. The annual event brings NNFA members to the Hill to speak with members of Congress about the dietary supplement industry.

A bill addressing mandatory adverse event reporting for dietary supplements also is on Sen. Harkin's docket, Juzenas reported. Harkin and Hatch came to an agreement with Sen. Richard Durbin (D-Ill.) last year that they would work together on a mandatory AER system (³ (Also see "Senators Durbin, Hatch To Work Together On AER Plan" - Pink Sheet, 28 Jun, 2004.), p. 3).

He added that recent studies indicating a potential negative effect from use of vitamin E have sparked discussion on the Hill of the need for mandatory supplement AERs. An increase in vitamin E intake was linked to a rise in all-cause mortality in a meta-analysis published in November (⁴ (Also see "Vitamin E Dose Increases Linked To Rise In Risk Of Death – Study" - Pink Sheet, 15 Nov, 2004.), p. 13).

Other meeting attendees agreed that news about vitamin E could affect legislators' attitudes toward adverse event reporting. "We actually had a very conservative member of the Energy & Commerce Committee say, 'If there's more studies like vitamin E, you better watch out,'" said Edward Long, PhD, VP-congressional relations, Capitol Associates.

Long noted that if the industry wants to "get HSA [coverage] and you want to get tax treatment, people are going to expect that the product that's being sold is a quality product that's not hurting people. So therefore we in the lobbying world and our champions have been telling the industry, in order to represent you, you have to be responsible too," he said. "So in some ways, back to the AER issue, we aren't given a choice."

Juzenas also pointed out that talks of a mandatory AER system already have surfaced within the animal supplement industry. "We probably don't want to be in a place where we've got serious adverse event reporting for animal supplements but not human supplements," he said.

Development of a mandatory AER system by the HHS Secretary would be required under a bill that Rep. Frank Pallone (D-N.J.) expects to introduce before the Memorial Day recess. The measure also would call for increased FDA funding for full implementation of DSHEA.

The bill would essentially be a re-introduction of the "Dietary Supplement Regulatory Implementation Act of 2004" (HR 4747), which Pallone sponsored in June 2004 (⁵ (Also see "Rep. Pallone Introduces DSHEA Implementation Companion Bill" - Pink Sheet, 5 Jul, 2004.), p. 14).