Senator Claire McCaskill recently introduced legislation that would eliminate the ability of drug manufacturers to deduct the cost of advertising their products from taxes. Senate Bill 2478 attempts to amend the IRS code to “deny the deduction for advertising and promotional expense for prescription drugs,” and is co-sponsored by Senator Jeanne Shaheen.
This is not the first time legislators have tried to stop pharmaceutical companies from deducting ad spending as a business expense the same way other companies do with their ad costs. In 2016, a group of four Democratic senators led by former Senator Al Franken introduced “Protecting Americans from Drug Marketing,” a piece of legislation that attempted to end the advertising and marketing tax deduction for pharma companies. The bill was sent to the Committee on Finance, but no other action was taken, so the bill died in committee.
McCaskill said that this legislation stems from the service she has performed with Senator Susan Collins on the Senate Aging Committee, where the two Senators worked together to investigate the rising price of prescription drugs. During the investigation, the Senators found that drug companies spent more on sales and marketing of their drugs than they did on research and development.
Following the introduction of the legislation, McCaskill released a statement. “Drug companies have too much influence in Washington,” McCaskill said. “So it figures we are one of the only nations in the world that allows both advertising of prescription drugs to consumers and allows those ads to be subsidized by taxpayers. I’m determined to fight these high drug prices and a good first step would be to stop subsidizing their ads for drugs that must be prescribed by a doctor. Too many drug companies are spending more on sales and marketing than on research and development. And Missourians are tired of paying for it.”
The bill is expected to receive pushback from the advertising and media industries, in addition to the pharmaceutical industry.
Holly Campbell, deputy vice president of public affairs for the Pharmaceutical Research and Manufacturers of America, which represents leading drug companies, said that McCaskill’s legislation “fails to recognize the value of such ads to patients.” McCaskill said, “I have talked to doctors and they say they now they spend a significant portion of their time talking patients out of drugs they have seen on TV.” In response, Campbell notes that the ads often do the exact opposite — prompting patients to seek diagnosis for such conditions as high cholesterol, hypertension, diabetes and depression, “These common, chronic and costly conditions are often underdiagnosed and undertreated in the general population, which drives up health care spending in the long run.” Campbell also noted that the advertising costs are misleading, as they often include other things such as sales and legal costs.
“We have always strongly opposed efforts to take away the tax deduction for advertising because we believe it would violate the First Amendment first of all, and second, it’s bad policy. A great deal of drug advertising is very valuable to consumers, as many are not aware of health issues they should be concerned about or how to handle health issues they have,” said Dan Jaffe, who heads the Association of National Advertisers’ (ANA) government relations office. “We have to just keep fighting and pointing out to people that this is a simplistic so-called solution that will not solve the problems they’re concerned about and will create new ones,” Jaffe said.