Marketers to Target Consumers who are Losing FSA Drug Purchase Benefit

For several years, a sizeable minority of consumers have grown accustomed to purchasing health services and medications with flexible spending accounts (FSA). By setting aside money in these accounts, consumers have been able to fund health-​care related expenses on a tax-​free basis. Effective this year, changes have been made to FSAs as a result of the new health care legislation. Specifically, consumers can no longer use their FSAs to purchase over the counter (OTC) medications. As a result, these consumers will be making changes to how they purchase these medications and these changes will impact the marketing of these products.

In total, about 15% of consumers have been using FSAs to help pay for health care services and products. And about half of these consumers report using their accounts to cover the cost of OTC medications. A new Nielsen company study reveals consumers will take the following actions to try to cover the higher costs they’ll be paying for these products:

  • Ask physicians to write a prescription for the OTC medication to make it eligible for coverage: 46.3%
  • Purchase store brands, larger size containers or look for coupons to cut costs: 38.8%
  • Ask physicians to write prescription for another type of medication: 36.9%
  • Discontinue or drastically reduce OTC medication purchases: 21.2%
  • Change stores to find better prices: 19.4%

Nielsen analysts point out that FSA consumers have been paying more on average for products in the cough and cold remedy, first aid and antacid categories. In addition, this consumer group had been purchasing these products in traditional drug stores. The new legislation is likely to prompt these consumers to shop at less expensive channels like warehouse clubs and mass merchandisers. Look for new marketing programs to emerge as retailers compete for consumers who are newly price-​sensitive in their purchases of OTC medicines.

[Source: Callahan, Dennis and Yurkevicz, Liz. Paying for OTC Medications – New Rules, Big Impact. Blog​.nielsen​.com. NielsenWire. 27 Jan. 2011. Web. 9 Feb. 2011] 
Kathy Crosett
Kathy is the Vice President of Research for SalesFuel. She holds a Masters in Business Administration from the University of Vermont and oversees a staff of researchers, writers and content providers for SalesFuel. Previously, she was co-​owner of several small businesses in the health care services sector.