15 January 2007 External T.I. 2006-0212201E5 - Eligible Medical Expense

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues:

Whether the cost of a particular over-the-counter medication is an eligible medical expense pursuant to paragraph 118.2(2)(n) for purposes of the medical expense tax credit

Position:

No, amounts are eligible only if the particular medication is included in Schedule I of the Drug Schedule Regulations to the relevant provincial legislation and purchased for use by the patient as prescribed by a medical practitioner or dentist and as recorded by a pharmacist.

Reasons:

In interpreting the phrase "as prescribed by a medical practitioner or dentist and as recorded by a pharmacist", the CRA relies on the legislative authorities governing the sale, dispensing or disposal of drugs and devices. This approach is consistent with the decision of the Federal Court of Appeal in Ray [2004] DTC 6028.

2006-021220
XXXXXXXXXX D Tiu
(613) 957-8961
January 15, 2007

Dear XXXXXXXXXX:

Re: Eligible Medical Expense

We are writing in response to your October 24th, 2006 letter on the above subject. You are concerned about the Canada Revenue Agency's ("CRA") interpretation of eligible medical expenses pursuant to paragraph 118.2(2)(n) of the Income Tax Act (the "Act") as it applies to a particular medication that you advise can be obtained without a prescription.

The particular situation in your letter appears to relate to a factual one, involving one specific taxpayer. As explained in Information Circular 70-6R5, it is not this Directorate's practice to comment on proposed transactions involving specific taxpayers other than in the form of an Advance Income Tax Ruling. Should your situation involve a specific taxpayer and a completed transaction, you should submit all relevant facts and documentation to the appropriate Tax Services Office for their views. However, we are prepared to provide the following general comments.

Paragraph 118.2(2)(n) states that for the purposes of subsection 118.2(1), a medical expense of an individual is an amount paid

"for drugs, medicaments or other preparations or substances (other than those described in paragraph (k)) manufactured, sold or represented for use in the diagnosis, treatment or prevention of a disease, disorder, abnormal physical state, or the symptoms thereof or in restoring, correcting or modifying an organic function, purchased for use by the patient as prescribed by a medical practitioner or dentist and as recorded by a pharmacist" In interpreting the phrase "as prescribed by a medical practitioner or dentist and as recorded by a pharmacist", the CRA relies on the legislative authorities governing the sale, dispensing or disposal of drugs and devices. This approach is consistent with the decision of the Federal Court of Appeal in Ray [2004] DTC 6028 which held as follows:

"There are laws throughout Canada that govern the practice of pharmacy. Although the laws are not identical for each province and territory, they have common features. Generally, they prohibit a pharmacist from dispensing certain medications without a medical prescription, and they describe the records that a pharmacist is required to keep for medications dispensed by prescription, including information that identifies the prescribing person and the patient. There is no evidence that pharmacists anywhere in Canada are required to keep such records for the substances at issue in this case."

It is our understanding that the relevant law governing the practice of pharmacy in British Columbia would be the Pharmacists, Pharmacy Operations and Drug Scheduling Act ("PPODSA") of British Columbia. It is also our understanding from reading the PPODSA that only the items listed in Schedule I and IA of the Drug Schedule Regulations to the PPODSA require both a prescription by a medical practitioner and the recording by a pharmacist under the legislation. The cost of a particular medication is an eligible medical expense only if the medication is included in either of the said Schedule I or IA.

These comments represent our opinions of the law as it applies generally, and as indicated in paragraph 21 of Information Circular 70-6R5, are not binding on the Department. Nevertheless, we hope that our comments will be of assistance to you.

Yours truly,

Robin Maley
Section Manager
For Division Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch