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Pharma’s Ad Tax Deduction in Crosshairs Again

Earlier this month, Sen. Claire McCaskill (D-Mo.) introduced a bill to end the advertising cost tax deduction; this is separate from the larger tax cut bill from last December which failed to remove the practice. This latest attempt, Senate Bill 2478 a.k.a. The End Taxpayers Subsidies for Drug Ads Act, is co-sponsored by Sen. Jeanne Shaheen (D-NH).

Much like previous bills similar in nature, industry pushback from both pharma and media companies alike is expected to be significant – largely citing the arguments that removing such an ad deduction for pharma would be discriminatory; it is a threat to the First Amendment; and it would prevent or limit important, valued health information from reaching consumers.

Jim Davidson, Executive Director of The Advertising Coalition, spoke with DTC Perspectives on this matter: “Section 162(a) of the U.S. Tax Code allows any U.S. business to deduct the ‘ordinary and necessary costs’ of conducting their business. Those costs include salaries of employees, office rent, business supplies – and yes, the cost of advertising. Rather than ending a taxpayer subsidy for advertising, S. 2478 would impose a tax on advertising for prescription medicines that does not apply to any other business advertising. Previous efforts to tax DTC advertising have been defeated because they threaten the First Amendment protection for commercial speech. The proposed legislation overlooks the information that this advertising provides to consumers who may be unaware of a treatment for rheumatoid arthritis, Crohn’s disease, depression, or Hepatitis C, among other diseases. Even more important, watching an ad may be the motivating factor that prompts someone with a medical condition to see a doctor for treatment.” (Jim will discuss this, as well as other Threats to Pharmaceutical Advertising, in his presentation at the DTC National Conference in Boston, April 18-20.)

“The Coalition [for Healthcare Communication], the 4A’s and our advertising allies will be taking this bill seriously, but it is unlikely that it will be enacted in this session of Congress,” said Coalition for Healthcare Communication Executive Director John Kamp in a news release in response to the bill. “While the provision is likely to garner some Democratic and even a bit of bipartisan support, the Republican-controlled Senate is not expected to hold hearings or set the provision for a vote.” He added: “The Coalition has long opposed such a change in the tax law. Proposing a ban or tax penalty on prescription drug advertising suggests that consumer ignorance should be preferred to consumer information and involvement in healthcare decision making.”

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