DTC Advertising

National Academies Report Calls for End to Ad Tax Deductions, Discourages DTC Ads

Dec. 4, 2017 – A new report from the National Academies of Science, Engineering and Medicine, “Making Medicines Affordable,” recommends promoting the adoption of industry codes of conduct, eliminating the tax deductibility of advertising expenses and discouraging direct-to-consumer (DTC) advertising in order to lower drug prices (http://bit.ly/2zX0jq7).

“In yet another example of drug marketing being caught in the crossfire of the drug pricing debate, the National Academies included suppression of consumer marketing in a wide-ranging set of recommendations on how to lower the cost of prescription drugs for patients, including a call for advertising costs to no longer be tax deductible as a business expense,” Coalition for Healthcare Communication Executive Director John Kamp said in a memo to CHC members Dec. 1.

The marketing-specific recommendations in the report are:

  • Terminate the tax deductibility of DTC advertising expenses
  • Adopt industry codes of conduct that reduce or eliminate DTC advertising of prescription drugs and support efforts to enhance public awareness of disease prevention and management
  • Prohibit patient coupon programs, in which pharmaceutical companies give payments or discounts to consumers who fill prescriptions for the company’s drug, except in cases where no competing drug is available in the market

“The study comes at a critical time in the debates over the Republican tax bill as Congress scrambles for ways to raise money to cover the cost of decreased taxes,” Kamp stated. “The Coalition, the 4As and industry allies in The Advertising Coalition are on high alert and are focused on responding to any fallout from the report.”

According to Kamp, the release of the study “ensures that the issue will stay alive even if the tax bill continues without a marketing tax provision. Bipartisan concern over high drug prices was apparent in the questions to HHS Secretary nominee Alex Azar at his hearing in the Senate HELP Committee Wednesday.”

It is clear from comments at that hearing that several senators, including Sen. Rand Paul (R-Ky.), Sen. Lamar Alexander (R-Tenn.), chair of the HELP Committee, Sen. Al Franken (D-Minn.), a member of the HELP Committee, and Sen. Claire McCaskill (D-Mo.), a member of the Finance Committee, have drug pricing on the front burner. Indeed, McCaskill recently filed but did not offer a bill to eliminate the ad tax deduction in the Finance Committee.

“Our efforts are focused on both parties to ensure that the marketing tax proposal does not garner bi-partisan support,” Kamp noted.