Nutrition companies’ loan requests rejected, industry urges IRS to make supplements reimbursable

22 Apr 2020 --- The restrictions necessitated by COVID-19 have created difficult financial situations across the nutrition industry, including in the US, where 95 percent of natural products businesses have had their small business loans applications rejected. This is according to a Natural Products Association (NPA) survey of its member companies’ experiences with the US Paycheck Protection Program. Established by the federal government in response to the COVID-19 pandemic, the program is struggling to distribute funds and putting companies under pressure to remain open. Meanwhile, the nutrition industry continues to push for the Internal Revenue Service (IRS) to include dietary supplements as a “medical expense.” It says that this would ultimately encourage a proactive, preventive approach to maintaining health and immunity during these turbulent times.

On average, natural products businesses are requesting loans of US$145,354, with the requests ranging from US$6,000 to US$1.5 million, according to the poll. The total amount of loans requested by respondents amounted to $8,285,186. An additional 88 percent of the respondents said they would reapply for the loan once more resources become available through a new round of small business loans. These issues are in spite of the US Department of Homeland Security (DHS) recently declaring health food stores and supplement manufacturers to be essential during the COVID-19 public health crisis –  although some states have since ordered closures. 

“Our members have stayed open as essential businesses but have clearly not been immune to the shock of this crisis. As the country moves toward reopening in the coming weeks and months, we must ensure that health food stores and supplement manufacturers play a role in the rebuilding process and continue to provide US consumers with products that support their health. We look forward to continuing to work with the Administration, governors, and lawmakers during this crisis and recovery,” says Dr. Daniel Fabricant, President and CEO of NPA. 

With dietary supplements reimbursed as “medical expenses,” consumers would be able to put away pre-tax dollars from their paychecks and purchase beneficial supplements.Terminology makes a difference
As the US nutrition industry struggles to stay afloat amid COVID-19, there is a new push to make dietary supplements more affordable for US consumers, having been identified as a preventive means of sustaining overall health. The Council of Responsible Nutrition (CRN) and other organizations have appealed to IRS Commissioner Charles Rettig to revise the IRS Publication 502 to permit nutritional and dietary supplements to be considered “medical expenses” under the Internal Revenue Code (IRC). US consumers’ Health Savings Accounts (HSA) and Flexible Spending Accounts (FSA) would consequently have to reimburse out-of-pocket expenses for dietary supplements. 

This is not the first time this request has been proposed, but Steve Mister, President and CEO of CRN tells NutritionInsight that the pandemic has created a new urgency. “Ideally, this could be addressed in a couple of months, in time to provide relief for consumers in the wake of the pandemic. Neither the federal tax laws nor the IRS regulations prohibit using an FSA or HSA to purchase supplements – only the agency’s own guidance prohibits it. The IRS simply needs to announce the change and revise its Guidance for Taxpayers.” 

With dietary supplements reimbursed as “medical expenses,” consumers would be able to put away pre-tax dollars from their paychecks and purchase multivitamins, omega 3s, probiotics or a host of other beneficial supplements for better health. “A family with US$180,000 in taxable income falls in the 24 percent tax bracket. If they put US$1,000 in an FSA, it would amount to US$1,240 after taxes. That is an extra US$240 in their wallet for household expenses,” he further explains.

End-consumers are not the sole benefactors from this category shift, adds Mister. “Industry benefits because consumers would likely use more supplements, but the US healthcare system benefits as well. Not only would this fix put hundreds of dollars back into the wallets of every US American who has an FSA or HSA, but it could provide billions of dollars in savings to the healthcare system generally. A 2012 study commissioned by CRN demonstrated that use of selected dietary supplements reduces the risk of various hospital-related illnesses and saves billions for the healthcare system,” Mister explains. 

“Not making the change perpetuates the disparity of reimbursing consumers for sick care, such as copays, prescription drugs, surgery, but not well-care. If we want healthcare to move toward prevention and away from curing ailments once people are sick, then programs like this one help move the country in that direction,” he affirms. Dr. Fabricant also reportedly expressed his support for this move, considering that “giving people more ways to save money to support their health is more important than ever.”

With this debate going on for the past decade, the economic crisis incurred by the global pandemic will continue to drive the CRN to increase its efforts to “help get more money into the hands of consumers,” concludes Mister.

By Anni Schleicher

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