Congress Considers Taxing Prescription Drug Advertising

By: Amy Lotman, CIS Senior Compliance Manager
amylotman@cis-partners.com

The advertising, broadcast and medical publishing sectors were thrown into a tizzy on June 16, when reports from Capitol Hill said that removing the tax deductibility of drug promotional expenses remains a live issue in the funding discussions around health care reform.

There have been reverberations for over a year that pharma’s critics on Capitol Hill might try to raise some money for health care reform by tapping into the drug industry’s marketing budgets. White House Chief of Staff Rahm Emanuel has previously talked about giving manufacturers a choice between deducting R&D expenses or promotional expenses.

Rep. Charles Rangel (D-NY), the very powerful Chairman of the House Ways & Means Committee, recently made some public comments about abolishing the deduction. Chairman Rangel told reporters that House tax writers are considering a $37 billion proposal that would prohibit companies from taking deductions on advertising for prescription drugs, saying that the tendency to "mumble" about side effects is "wrong."

The $37 billion price tag that Rangel casually attached to the possible change quantified the challenge and gave it a magnitude that made it more threatening.

While Rep. Rangel admitted that the pharmaceutical advertising provision would only pay for a tiny piece of a bill that is expected to cost $1.2 trillion over 10 years, he emphasized that a number of new tax provisions may be needed to ensure the bill’s effectiveness.

Advertising, media and marketing groups are intensifying grassroots efforts to defeat such a proposal.

Sources:
http://rangel.house.gov/
http://www.bloomberg.com/apps/news?pid=20601103&sid=aeEJZicjYE60