US Supreme Court Upholds Healthcare Law: What It Means for Consumer Health

Analyst Insight by Stephanie Prymas, Consumer Health Analyst at Euromonitor International 

The US Supreme Court ruled on June 28, 2012 to uphold most of the provisions of the Patient Protection and Affordable Care Act (PPACA) passed in 2010. Euromonitor International takes a brief look at how the law relates to consumer health.

OTC reimbursement and the PPACA

One of the most hotly contested elements of the PPACA, which the Supreme Court decision preserves, is the so-called individual mandate, which will require most individuals who can afford to do so to secure basic health insurance coverage by January 1, 2014 or pay a penalty. The very complex law also includes a host of other tenets, including protecting coverage for those with pre-existing conditions, increasing coverage of preventive care, and providing small businesses with tax credits to help them comply with the requirement to offer health insurance to employees. The component most related to consumer health, however, concerns health flexible spending accounts or arrangements (FSAs). Employee benefit plans that include FSAs allow individuals to divert a portion of their salary to pay for qualified medical expenses tax-free. Employees choose how much, if anything, to contribute, but must “use or lose” the funds by the end of each calendar year.  In 2003, the Internal Revenue Service instituted the ability to use FSA funds to pay for OTC drugs and health items, but the PPACA rescinded this policy. Now, OTC drugs require a prescription to be eligible for FSA reimbursement.

The US is the largest OTC market in the world. Consumers appreciate the convenience of self-care, and rising medical costs make OTC self-treatment an attractive alternative. This is particularly true for chronic or recurring conditions, such as allergies, minor aches and pains, and heartburn. 

Source: Euromonitor International

Source: Euromonitor International

Therefore, both medical and consumer groups have spoken out against the new prescription requirement. Indeed, the Consumer Healthcare Products Association (CHPA) testified before Congress on April 25, 2012, saying that the PPACA rule forces consumers to either schedule unnecessary medical appointments to obtain OTC prescriptions, pay higher out of pocket costs for OTCs than they did with their FSA funds, or forego treatment all together.  While the prescription requirement currently still stands, in the wake of the Supreme Court announcement both President Obama and Congressional leaders have pledged to work together to improve the law, and existing legislative proposals such as the  Restoring Access to Medication Act already aim to repeal the OTC provision.

OTC switches and the PPACA

Regardless of whether or not the OTC prescription mandate is lifted, the PPACA could have an indirect influence on the classification of OTC products. The US Food and Drug Administration (FDA) announced in March 2012 the idea of a “new paradigm” for classifying non-prescription medicines that would include a category akin to the behind-the-counter or pharmacist-only designation already used in several other countries. Treatments in this class would be available without a prescription, but would require pharmacist intervention or the use of specialized technology platforms, such as kiosks with standardised algorithms. Emergency products such as asthma inhalers, standard hormonal contraceptives, statins, triptans, and sleep aids have all been cited as possible candidates for re-classification under the new paradigm. While stakeholders are divided in their reactions to the FDA proposal, the PPACA may play a role in making it more attractive to insurance providers. The PPACA expands prescription coverage in several ways, particularly related to preventive care. A behind-the-counter non-prescription class would allow insurance companies to defer the cost of some existing prescription medications to consumers. The Supreme Court’s ruling on the PPACA is undoubtedly a ground-breaking decision that will greatly change healthcare in the US. It remains to be seen if it will significantly impact the OTC consumer health market as well.