Tax break for tobacco, not pharma? Here’s some irony …

June 23, 2009 – 12:22 pm by Chris

In case you’ve been under a rock lately, Rep. Charles Rangel, D-N.Y., chairman of the House Ways and Means Committee, proposed last week eliminating the tax deduction for prescription drug advertising. Mr. Rangel believes that this could bring in $37 billion that could go towards the costs of healthcare reform.

Last Friday, at the Healthcare Communication and Marketing Association meeting in Jersey City John Kamp, the executive director of the Coalition for Healthcare Communication, pointed out that the proposed $37 billion that would be raised by eliminating the tax benefit must come from all drug promotion, and couldn’t possibly come from DTC alone. His view was also espoused by Jim Edwards at Bnet, who says the drug companies spend about $4 billion a year on DTC.

As expected, the Advertising Coalition and the Association for Medical Media are crying out against the proposed elimination of the tax benefit. Here’s a letter to Sen. Max Baucus, chairman of the Senate Committee on Finance, that is being circulated by the Advertising Coalition (the idea is that you can sign your own name and send it to Mr. Baucus).

Here’s a passage from the letter: “Because advertising is critical to the economic health of our country, particularly during this period in which we are experiencing a severe recession, we strongly urge you to reject such a penny-wise and pound-foolish means to raise modest revenues. Moreover, we believe the proposal would represent an unconstitutional restriction on commercial speech that is protected under the First Amendment.”

The Association for Medical Media is requesting that anyone who can get the ear of Sen. Robert Menendez, D-N.J., and Sen. Charles Schumer, D-N.Y., to talk with them about the points raised by this letter. Both senators are on the finance committee.

According to Mr. Kamp, “We’re not out of the woods yet. I’m asking my people that they continue to follow the instructions of the Advertising Coalition and keep writing and calling the senators.”

From what he has heard from people who have contacted Mr. Schumer and Mr. Menendez, Mr. Kamp says both understand the importance of the advertising industry to their home states.

“But they’re just two of the members of the Senate finance committee,” Mr. Kamp says. “A lot of this is Baucus working with the White House and the administration to work out the revenue options.”

There is some hope that the pharmaceutical industry’s pledge of $80 billion to subsidize drugs for Medicare seniors entering the donut hole of coverage will reflect well enough on the industry so that the amendment may be taken off the table, Mr. Kamp says.

“Essentially, the pharmaceutical industry stepped up and made a very savvy move,” he says. “Everyone thought Waxman would get his pound of flesh out of the pharma industry one way or another, but the pharma industry stepped up and doing a preemptive strike, might even take the pressure off this.”

In the talking points document provided by the Advertising Coalition, one item in particular caught my eye:

“The United States Senate three times has rejected amendments that would have
denied the deduction for the cost of tobacco advertising – they rejected the
amendments because they were taxes on speech. Today, tobacco advertising remains
fully deductible as a business expense. It would be ironic to now repeal the deduction
for the cost of advertising prescription medications.”

The Advertising Coalition raises a very good point. It would be highly ironic if tobacco companies could continue to deduct the costs of their advertising for their cancer-causing products, yet pharma gets penalized for advertising life-saving and life-enhancing products. Other categories where it would be ironic for their advertising to be tax-deductible as a business expense include fast food, junk food aimed at kids, and all those commercials on late-night TV for all those weight loss and “male enhancement” products.

So, if Congress is serious about raising money for healthcare reform, they should go after all those whose products actually endanger the public health or are pure snake oil. Singling out pharma in this case is just ridiculous.

Of course, the Advertising Coalition wouldn’t be particularly pleased if the business expense deductible for all advertising gets eliminated, because there would go a hell of a lot of jobs (including many in media and publishing, because with fewer ads comes less money; sad but true).

Tags: Congress, DTC, healthcare reform, Rangel