Why do politicians want to punish an industry that is developing medications to cure disease? You would think they would applaud those industries for their efforts… Well not anymore….
Each year as part of the rite of passage, the House of Representatives discuss a provision to take away the tax exemption for pharmaceutical marketing in whatever health bill they are working. Now the senate is getting into the act…
Recently Senators Al Franken (D-MN), Sherrod Brown (D-OH), and Sheldon Whitehouse (D-RI), introduced S. 1763 Protecting Americans from Drug Marketing Act which is an attempt to disallow as an ordinary and necessary business expense: the cost of all advertising and marketing for prescription medications.
Key features of the bill include:
In General- No deduction shall be allowed under this chapter for expenses relating to advertising or promoting the sale and use of prescription pharmaceuticals for any taxable year.
(b) Advertising or Promoting- For purposes of this section, the term `advertising or promoting’ includes direct to consumer advertising in any media and any activity designed to promote the use of a prescription pharmaceutical directed to providers or others who may make decisions about the use of prescription pharmaceuticals (including the provision of product samples, free trials, and starter kits).
(b) Conforming Amendment- The table of sections for such part IX of the Internal Revenue Code of 1986 is amended by adding after the item relating to section 280H the following new item:
Sec. 280I. Disallowance of deduction for prescription pharmaceuticals advertising and promotional expenses.
(c) Effective Date- The amendments made by this section shall apply to amounts paid or incurred after the date of the enactment of this Act, in taxable years ending after such date.
According to a report issued by the American Association of Advertising Agencies (AAAA), this bill “would make the advertising 35 percent more expensive (based on the top corporate marginal rate of 35 percent. In opposition to this bill, and the attempt to include such legislation in the overall healthcare reform legislation, AAAA has announced its opposition for the reasons outlined below.
• The proposal would overturn 100 years of tax policy. It would repeal the deduction for one group of products, but where would it stop? Businesses must be able to deduct advertising costs along with all other business expenses such as rent, utilities, salaries and office supplies. This is central to our net income tax system.
• Advertising is critical to the economic recovery of our nation. Advertising provides $6 trillion in sales and 21 million jobs in America. If advertising becomes more expensive, businesses will have to reduce their advertising budgets, and if there is less advertising there will be far fewer sales generated of goods and services.
• It would violate the First Amendment to tax one type of advertising with the intent to discourage commercial speech about the advertised product. The United States Supreme Court has said that even a tax can be unconstitutional if used the way this legislation has proposed – to tax speech about a product in order to make it more difficult and more costly to advertise that product. Because the tax makes this form of speech more expensive, it would violate the First Amendment because the suppression of this speech means consumers will receive less information.
• Advertising is protected because it is important to the daily lives of Americans. A 2004 Prevention magazine survey found 65 million patients talked with a physician as a result of seeing an ad for a prescription medication. Almost 30 million spoke to a physician for the first time about a specific medical condition. Advertising of prescription medications has helped millions of Americans receive medical care for diseases that might otherwise have gone untreated or undiagnosed.
It is interesting to note that advertising and marketing of medical devices are conspicuously left out of the bill, perhaps this has something to do with the sponsor Senator Franken being from Minnesota home to the medical device industry, or perhaps that was just a coincidence.
Penalizing companies for marketing and advertising is ridiculous, no other democracy on the planet singles out an industry for such economic punishment. Some have said this will benefit other parts of industry are wrong, punitive taxes punish everyone. The cost of medication will only go up not down as a result of this tax.
The addition of product samples is also punitive as many of those samples are given to less fortunate patients to measure their tolerations and effectiveness of medications prior to writing a prescription.
Accordingly, public information about drugs, treatments and devices are crucial for keeping Americans informed, safe and healthy.
To tax such information and make it a burden for companies to provide useful data is frightening. Companies must be allowed to carry out such a necessary part of business so that patients can go to their health care providers and talk about the information they can readily see is available.
If your goal is to see cures for diseases developed, disincentives like the proposed tax will only have the opposite effect, in the end we will see fewer cures, less research, higher prescription costs.
Any attempts to hinder patient’s right to access such information should be stopped.
Who will protect us from the politicians! Don’t think for a second if they can tax marketing for pharmaceuticals that taxes on marketing for medical devices, hospitals, and physician practices won’t be next on their agenda.
After that why not tax marketing for food, banks or gasoline….. If they get this passed all marketing will eventually be taxed and the list will never end….