Are Orthovisc, Euflexxa, and Hyalgan injections for knee osteoarthritis exempt from NY sales tax?

Plain-English summary

The petitioner asked whether three products used to treat osteoarthritis of the knee -- Orthovisc, Euflexxa, and Hyalgan -- are exempt from sales tax under Tax Law 1115(a)(3). A healthy knee is cushioned by synovial fluid; an osteoarthritic knee has little or no joint fluid, causing pain. Each product is a form of hyaluronan/hyaluronic acid (a naturally occurring joint lubricant), administered by a physician as a series of injections into the knee for patients who don't get enough relief from exercise, physical therapy, or pain killers. The FDA classifies all three as medical devices and approved them to treat knee osteoarthritis.

The Office of Counsel concluded they are exempt. Tax Law 1115(a)(3) exempts, among other things, "products consumed by humans for the preservation of health." When injected into the knee, Orthovisc, Euflexxa, and Hyalgan all supplement the knee's fluid, improving the operation of the knee and thereby maintaining the patient's mobility. They are therefore products consumed for the preservation of health and are exempt under 1115(a)(3) (20 NYCRR 528.4(b)(3)).

What this means for you

Sellers and distributors of injectable joint treatments

Hyaluronan/HA knee-osteoarthritis injections such as Orthovisc, Euflexxa, and Hyalgan are exempt from New York sales tax as products consumed for the preservation of health -- the exemption turns on the health-preserving function (restoring joint fluid and mobility), not on whether the item is technically a "drug" versus a "medical device." If you sell these, you generally don't charge sales tax.

The broader 1115(a)(3) test

The exemption covers drugs and medicines used to treat illness, certain medical equipment and supplies, and products consumed by humans for the preservation of health. A substance that the body uses to restore normal function -- like supplementing depleted joint fluid -- fits the "preservation of health" branch.

Common questions

Q: Are Orthovisc, Euflexxa, and Hyalgan taxable in New York?
A: No. They're exempt under 1115(a)(3) as products consumed for the preservation of health.

Q: Does it matter that the FDA calls them medical devices, not drugs?
A: No. The exemption applies because they're consumed for the preservation of health (supplementing knee fluid and maintaining mobility), regardless of the device-vs-drug label.

Q: Why are these exempt when many wellness products aren't?
A: They restore the knee's natural fluid and function to treat osteoarthritis -- a genuine preservation-of-health use, not a cosmetic or general-wellness one.

Citations and references

• Tax Law section 1105(a) (tax on retail sales of tangible personal property)
• Tax Law section 1115(a)(3) (exemption for drugs/medicines and products consumed for preservation of health)
• 20 NYCRR section 528.4(b)(3) (products for preservation of health)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2012.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a12_16s.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-12(16)S
Sales Tax
July 5, 2012

Office of Counsel
Advisory Opinion Unit
STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S120511A

The Department of Taxation and Finance received a Petition for Advisory Opinion from
name and address redacted. Petitioner asks whether several products, Orthovisc, Euflexxa, and
Hyalgan, all used to treat osteoarthritis of the knee, are exempt from sales tax pursuant to Tax
Law Section 1115(a)(3).
We conclude that Orthovisc, Euflexxa and Hyalgan are exempt from tax under Tax Law
Section 1115(a)(3) on the grounds that they are all products consumed by humans for the
preservation of health.
Facts
Petitioner submits the following facts: osteoarthritis is the most common form of arthritis
and can damage any joint in a person’s body, including the knee. A healthy knee is surrounded
by synovial fluid, which acts as a shock absorber to cushion and protect the knee. A knee
damaged by osteoarthritis has little or no joint fluid, resulting in pain.
Orthovisc is the only FDA-approved treatment of osteoarthritis of the knee made from
ultra-pure hyaluronan, a naturally occurring lubricant found in healthy knee joints. Euflexxa is a
form of hyaluronic acid (HA) and is a treatment of osteoarthritis of the knee that is similar to the
synovial fluid found in healthy knees. Hyalgan is also a treatment for osteoarthritis of the knee,
the principal component of which is a naturally derived substance called hyaluronan.
Hyaluronan is a chemical found in the body, in particularly high amounts in joint tissues and in
the fluid that fills the joints.
Each of the above products is administered by a physician, as a series of injections into
the knee. These treatments are for those patients who are not getting enough relief from other
methods of treatment such as exercise, physical therapy, or simple pain killers. The U.S. Food
and Drug Administration classify these three substances as medical devices and has approved
them all as treatments for osteoarthritis of the knee.
Analysis
Tax Law Section 1105(a) imposes sales tax on the receipts from every retail sale of
tangible personal property, except as otherwise provided. Tax Law Section 1115(a)(3) exempts
from tax:

-2-

TSB-A-12(16)S
Sales Tax
July 5, 2012

Drugs and medicines intended for use, internally or externally, in the cure,
mitigation, treatment or prevention of illness or disease in human beings, medical
equipment (including component parts thereof) and supplies required for such use or to
correct or alleviate physical incapacity, and products consumed by humans for the
preservation of health but not including cosmetic or toilet articles notwithstanding the
presence of medicinal ingredients therein.

When injected into the knee, Orthovisc, Euflexxa, and Hyalgan all supplement the knee’s fluid,
thus improving the operation of the knee, and thereby maintaining the patient’s mobility.
Accordingly, Orthovisc, Euflexxa, and Hyalgan are all products consumed by humans for the
preservation of health and are exempt under Tax Law section 1115(a)(3) (see 20 NYCRR
Section 528.4[b][3]).

DATED: July 5, 2012

NOTE:

/S/
DEBORAH R. LIEBMAN
Deputy Counsel

An Advisory Opinion is issued at the request of a person or entity. It is limited to the
facts set forth therein and is binding on the Department only with respect to the
person or entity to whom it is issued and only if the person or entity fully and
accurately describes all relevant facts. An Advisory Opinion is based on the law,
regulations, and Department policies in effect as of the date the Opinion is issued or
for the specific time period at issue in the Opinion. The information provided in this
document does not cover every situation and is not intended to replace the law or
change its meaning.