Summary of IRS Notice 2011-5 Debit Cards and OTC Purchases

12/28/2010

After January 15, 2011, health FSA and HRA debit cards may continue to be used to purchase over-the-counter medicines or drugs at drug stores and pharmacies, at non-health care merchants that have pharmacies and at mail order and web-based merchants that sell prescription drugs. These purchases will not require additional substantiation by Discovery Benefits, if the purchases meet certain requirements.

The merchant must be an IIAS location and the purchase must be made at the pharmacy of that location or through a mail order or web based merchant that sells prescription drugs. For example, the debit card can be used at a Walgreens, CVS, Target or Wal-Mart pharmacy but cannot be used in the general checkout lane at these locations since an Rx number has to be assigned and recorded by the pharmacist.

At the point of purchase, the participant will be required to present a doctor's prescription to the pharmacist for the item being purchased and the pharmacist will assign an Rx number to the OTC medicine or drug and record that Rx number within their system just like they would for a prescription drug. The IIAS system is capable of recording the Rx number so no additional substantiation is needed beyond this.

The debit card will decline the purchase if the OTC medicine or drug does not have an Rx number assigned to it.

A debit card may be used at a 90% pharmacy or drug store, but follow-up substantiation will be required. Substantiation will require either 1) a receipt that identifies the purchaser along with an Rx number; or 2) a receipt showing the item purchased along with a copy of the prescription.

A debit card may be used to purchase OTC medicine and drug at a health-care merchant (hospital or physician) with a health-care MCC and not require follow-up substantiation as long as the Rx number is recorded and maintained by the hospital or physician.

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