What do the IRS (Internal Revenue Service) and OTC products have in common? Let us fill you in on their new relationship. On October 4, 2023, the IRS published a Request for Information (RFI) in the Federal Register. The IRS was seeking information regarding insurance coverage of OTC preventative items and services without cost sharing and without a prescription.

Key Takeaways for Stakeholders

• Three of the top federal agencies (Department of the Treasury, Department of Labor, and Department of Health and Human Services) are interested in the expansion of health insurance OTC benefits.
• At first glance, the scope of coverage appears to be limited to OTC contraceptives, smoking cessation agents, and diagnostic tests (like COVID-19 tests); however, the proposal uses broad language to allow for expanded coverage of other OTC products that have not yet been identified.
• Stakeholders who need to track the final ruling and prepare for implementation include:
  • OTC manufacturers whose products have potential to be seen as preventive products. This would include manufacturers of vitamins, OTC contraception products (foam, condoms, OTC oral contraceptives), baby aspirin, OTC acid reflux products, and OTC topical antibiotics, as examples.
  • Payers and PBMs who need to prepare for the expectation of covering these OTC products.
  • Pharmacies that may see an increase in OTC product requests.
  • Compendia providers who may receive more OTC listing requests. In order for pharmacies to process the OTC coverage, the products must be listed with the major drug pricing compendia who provide NDC (National Drug Code), UDI (Unique Device Identifiers), and pricing information, which would be required for a pharmacy to bill a payer.

Background

The proposed rule was jointly issued by the IRS (Treasury Department), The Employee Benefits Security Administration (Department of Labor), and the Department of Health and Human Services (HHS). The RFI seeks insights regarding the application of the preventive services requirements under Section 2713 of the Public Health Service Act (PHS Act) for OTC preventive items and services available without a prescription by a health care provider.

Public comments were accepted until December 4, 2023. Approximately 391 comments were received and can be found at regulations.gov. If passed, new regulations will require insurance and health plans to cover certain OTC products ordered with or without a prescription and with limited or no-cost sharing for the patient.

The impact of the proposed rule will affect more than just payers responsible for the new insurance coverage. If approved, the processing of OTC products will impact every player in the current prescription processing model. OTC manufacturers, payers, PBMs, EHRs, pharmacies, and the pricing compendia will all be required to enhance systems to enable the ordering, dispensing, and adjudication of the mandated OTC products.

Included OTCs

Each of the past and current initiatives described in the RFI contains one or more specific preventive OTC products (e.g., folate) or a preventive category (e.g., contraception). All of the following are mentioned in at least one or more initiatives.

• Certain types of tobacco cessation pharmacotherapy, which are currently recommended by the USPSTF (United States Preventive Services Taskforce) with an A-rating for nonpregnant adults who use tobacco.
• Folic acid supplements, which are recommended by the USPSTF with an A-rating to prevent neural tube defects for all persons planning to or who could become pregnant.
• The guidelines for women’s preventive health services adopted and released by the Health Resources and Services Administration (HRSA Guidelines) include recommendations for:
  • OTC preventive products, such as breastfeeding supplies (for example, breast pumps and breast milk storage supplies)
  • Certain contraceptives
  • Coverage of the OTC progestin-only daily oral contraceptive recently approved by the Food and Drug Administration.

Expansion of OTCs

The RFI appears to leave two doors open so expansion of covered products may occur. First is the statement containing the verbiage “….including other OTC preventive products as they might become available on the market.” Second, Section 11-A Solicitation of Comments, uses the term “preventive products” but does not define the term.

“When coverage is offered for OTC preventive products that are prescribed by a health care provider, do cost sharing or other aspects of coverage vary by type of OTC preventive product? For example, are different cost-sharing requirements or medical management techniques imposed for OTC tobacco cessation products than for OTC breast pumps? Do coverage requirements or medical management techniques differ across different types of OTC contraceptives, such as between emergency contraception and condoms, or between medications and devices? What medical management techniques do plans and issuers commonly apply to OTC preventive products when the items are prescribed?”

Scope expansion can easily occur beyond the products specifically mentioned in the RFI. Does aspirin qualify as a preventive medication for heart attacks? Melatonin to prevent sleep deprivation? Topical antibiotics to prevent a topical skin or wound infection? Fish oil for heart health or other vitamin formulations, particularly if a health care practitioner provides a prescription?

Most of the 391 comments requested expansion of these types of OTC products and asked to address the aging population and why this group was not identified as one of the specific populations who have additional or disproportionately burdensome challenges to access OTC preventive products. Commonly mentioned products for this population included vitamins for bone strength, hearing and vision aids, and incontinence products.

Summary

PHSL recommends OTC manufacturers pay close attention as this RFI moves through the regulatory process. Three large federal agencies are involved, which significantly increases the possibility of this initiative becoming a law. OTC products have been in the spotlight lately on a variety of fronts – the FDA has already approved an OTC oral contraceptive. Health plans are expanding their focus to provide healthcare in underserved populations and communities, which is a major component of the proposal. Technical standard organizations are reviewing the current prescription adjudication electronic system for necessary modifications to seamlessly integrate OTC processing.

PHSL is poised to help OTC manufacturers list their products within the leading pricing compendia and will continue to monitor and report as information becomes available. Contact us if you’d like to learn more.