Life Science Compliance Update

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March 16, 2016

Senate Introduces Bill Eliminating the Tax Deduction for DTC Advertising

Four Democrats have introduced a Senate companion bill to the House bill to ban nearly all direct-to-consumer (DTC) advertising. The Senate bill, "Protecting Americans from Drug Marketing Act," would prevent pharmaceutical companies from writing off the money that they spend on advertising and marketing as a tax deduction, as they currently can do.

The bill was introduced by Senators Al Franken, Sheldon Whitehouse, Sherrod Brown, and Tom Udall, and defines DTC as any advertisement "primarily targeted to the general public," specifically: print, radio, television, telephone communication systems, and social media.

Critics of DTC advertising often repeat the same messages, constantly reminding us that the United States and New Zealand are the only two countries that permit pharmaceutical companies to market directly to consumers.

Senator Franken's Viewpoint

Senator Franken, who had previously introduced this bill in 2009, argued that increased spending on advertising contributes to higher drug costs, since many ads feature newer and pricier medicines. Franken issued a statement, saying that drug makers are "trying to encourage Americans to buy the most expensive drugs, even when cheaper, equally effective drugs are on the market...This is just a common sense measure to help cut down health care costs."

In his statement, Senator Franken stated, "doctors and medical professionals are in the best position to provide information to patients, not drug company advertisers aiming to make a profit."

Senator Franken hopes that without the tax benefits provided through advertising, pharmaceutical companies will stop focusing on advertising, and instead turn their focus and resources to developing new drugs.

Senator Franken's argument follows the argument that the American Medical Association made back in November when they called for a ban on DTC advertising and promotion.

Analysis and Reaction

It has been mentioned that the four senators who introduced the bill would like to have it added to the health care reform legislation, possibly even offering it as an amendment when the full Senate considers the proposed bill. Such a move would put a previous "handshake deal" between pharmaceutical companies and the Obama administration and Senate Finance Committee leaders in jeopardy. That deal called for drugmakers to pick up an estimated $80 billion in health care costs in exchange for no further crackdowns on the industry.

John Kamp, executive director at the Coalition for Healthcare Communication, believes that laws "that ban truthful messages are a violation of the First Amendment and an insult to patients seeking information to enrich their discussions with their doctors and empower their medical decisions."

A spokeswoman for the Pharmaceutical Research and Manufacturers of America (PhRMA), stated that criticisms about DTC advertising "are being drive by the false notion that DTC plays a direct role in the cost of new medicines and ignores the positive impact of health care communications." She also enforced the idea that advertisements "provide scientifically accurate information to help patients better understand their health care and treatment options.

The bill was introduced on March 3, 2016, was read through twice, and has been referred to the Committee on Finance.

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If the elimination of the DTC tax deduction will provide a disincentive capable of reducing the early morning television commercial bombardment, I say; "Yay"!

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