And this tax change will almost certainly cost the health care system billions more dollars in unnecessary spending both to the government and private insurance plans. The Joint Committee on Taxation estimates that the tax hike will bring in $5 billion in revenues over ten years – itself a drop in the bucket when compared to the bill’s new trillion-dollar entitlement – but that estimate doesn’t take into account behavioral changes as a direct result of this provision.
OTC drugs are much cheaper those available for prescription, but they could now be more expensive to individual consumers given that prescription drugs would still be eligible for favored treatment in the tax plans, and that insurance companies would be mandated to cover many of them. Consequently, any time a consumer has the slightest headache, the financial incentive would often be to see a doctor and get a prescription rather than go to the store and get medicine off the shelf.
This could mean that billions will be wasted on the additional costs for prescription drugs in instances when OTC medicines could be just as safe and effective at treating the illness. A 2005 study in the American Journal of Managed Care found that the Food and Drug Administration’s clearing of antihistamines such as loratadine (Claritin) for over-the-counter sale saves about $4 billion a year in health care costs. Ironically, the liberals and Democrats who normally rail against big pharmaceutical companies are now creating a huge windfall the firms that make expensive prescription drugs by penalizing users of OTC medicines.
