NCPA urges treasury department to help with FSA requirement

September 24, 2009

Community pharmacies and patients suffering the ill effects of a new flexible spending account (FSA) regulation could get some relief under two proposals the National Community Pharmacists Association (NCPA) presented to the U.S. Department of Treasury in a letter Wednesday.

Community pharmacies and patients suffering the ill effects of a new flexible spending account (FSA) regulation could get some relief under two proposals the National Community Pharmacists Association (NCPA) presented to the U.S. Department of Treasury in a letter Wednesday.

Earlier this month NCPA representatives met with Treasury and Internal Revenue Service (IRS) officials in an effort to resolve inequities that have placed independent community pharmacies at a competitive disadvantage in the FSA market.

Since July 1, IRS rules have mandated that, in order to continue processing FSA debit card transactions, pharmacies operate an inventory information approval system (IIAS) that meets certification requirements of the Special Interest Group for IIAS Standards (SIGIS). “Patients and community pharmacies have experienced significant disruption as a result of this regulation,” said NCPA Executive Vice President and CEO Bruce T. Roberts, RPh.

“Every time a transaction can’t be processed, patients are forced to leave their pharmacy of choice to find a vendor recognized by their health plan. With the year’s end approaching, and FSA balances expiring, the problem will only grow worse without intervention.” The rule provided an exemption for pharmacies whose sales are comprised of at least 90 percent prescription drugs and other qualifying medical supplies.

However, many health insurance plan administrators and employers have refused to honor the 90 percent exemption and aren’t processing any FSA debit card transactions from such stores.

In a letter to Treasury, NCPA proposes the government take two steps to help restore a level playing field for FSA purchases:  First, suspend for one year IRS audit requirements of FSA and Health Reimbursement Account (HRA) transactions at community pharmacies registered under the 90 percent exemption. Second, issue a communication from the IRS to plan administrators asking them to honor the 90 percent rule to ensure patients can continue purchasing eligible medical products at the pharmacy of their choice.

“Fear of an IRS audit has emerged as a primary reason health plan sponsors have refused to recognize purchases at community pharmacies under the 90 percent rule. Maintaining the documentation necessary to comply with an audit can pose a significant burden,” Roberts added.

“A one-year moratorium on auditing this one class of FSA transactions would mitigate the disruption for patients and allow additional time for resolving problems. A message from the IRS to plan sponsors reminding them of the purpose of the 90 percent rule and the need to support it would go a long way as well. We’re grateful for the time and attention Treasury officials have dedicated to these problems and we respectfully encourage the IRS to take these modest steps to provide some relief without undermining the purpose of the regulation.”