DTC Advertising

Movement Afoot on Eliminating Ad Tax Deduction, Requiring List Prices in DTC Drug Ads

March 25, 2019 – Several moves that could change the way prescription drug marketing and communications are conducted are being made in Washington, with the House Ways and Means Committee about to begin markup on a tax measure that could include eliminating the deductibility of drug marketing costs, and the Office of Management and Budget (OMB) currently reviewing the Centers for Medicare & Medicaid Services proposed rule to require drug list prices in direct-to-consumer (DTC) television.

According to Coalition for Healthcare Communication sources, the House Ways and Means Committee is considering extensions of several tax cuts from the December 2017 tax bill that would reduce revenue. As an offset, members of the Subcommittee on Select Revenue Measures are looking at eliminating the deductibility of marketing costs as an attractive source of new revenue, putting the deduction for all advertising — and specifically drug marketing costs – at serious risk.

“This is a scenario I warned of [Jan. 16] discussing a bill introduced that week by Sens. Jeanne Shaheen (D-N.H.) and Elizabeth Warren (D. Mass.),” Coalition Executive Director Jon Bigelow wrote in a March 23 CHC Industry Leaders Alert. The “End Taxpayer Subsidies for Drug Ads Act,” which called for amending the tax code to remove deductibility of the cost of any DTC marketing in all media, did not mention promotion to healthcare professionals, but “other iterations of this proposal in past Congresses included professional promotion as well,” Bigelow noted, “providing ‘shovel ready’ models of ways to raise revenue while effectively making pharma marketing more expensive.”

Although the markup in Ways and Means is on different legislation than the Shaheen-Warren bill, “it remains to be seen which marketing activities would be included,” Bigelow said, “but an expansive scope would raise more revenue.”

Coalition members are reaching out to members of Ways and Means to oppose measures to eliminate the deduction for pharma marketing costs. Email jbigelow@cohealthcom.org if you can assist.

In other news, the OMB has received for review the CMS proposed regulation to require that the list price of a drug be included in DTC TV ads. “This suggests that HHS Secretary Alex Azar is determined to push the regulation through despite the practical and legal flaws in the plan and the measures taken by the Pharmaceutical Research and Manufacturers of America and individual pharmaceutical companies to provide more context about drug prices in other ways,” Bigelow told CHC leaders.

On a positive note, it appears CMS is going forward in its consideration of removing journal reprints and medical textbooks distributed to healthcare professionals from the list of transfers of value that are reportable under the Sunshine Act.