No DTC tax break ban … for now
September 17, 2009 – 5:13 pm by Chris
When Adweek posted the news this morning that Senator Bill Nelson, D-Fla., had backed off an amendment to the healthcare reform bill that would have killed the tax deductions for pharmaceutical advertising and promotion, there was some relief from industry advocates. But lobbyists look at legislation-crafting like a game of whack-a-mole, because they know that certain amendments never die, they just pop up elsewhere, and it’s their job to keep the rubber mallet handy.
John Kamp, executive director for the Coalition of Healthcare Communication, fully expects the amendment won’t stay dead. “Somebody else will raise this again before it’s over, you bet,” he says. “Baucus says the reforms will cost $850 billion, the Congressional budget office $750 billion. Three-quarters of a trillion dollars is a lot of real money in Washington. The $37 billion will continue to be in the buffet of options as they try and figure out healthcare.”
The $37 billion Mr. Kamp refers to is what what Rep. Charles Rangel, D-N.Y., originally suggested could be picked up over 10 years denying tax breaks for pharmaceutical advertising (I blogged about the proposal here when it was made in June).
Mr. Rangel had speculated that the $37 billion over 10 years could come from eliminating the tax breaks for DTC advertising, but Mr. Kamp continues to point out that DTC only accounts for $4 billion a year in spending. Mr. Kamp broke down the $37 billion like so: to get that amount, at the average 37% rate pharma companies are taxed at, that’s $10 billion a year of spending to get the $3.7 billion a year in tax revenue. This means the $10 billion a year in spending must include other things.
“To get that $10 billion a year, you’d have to include everything except the salaries for the sales force, and maybe samples, which have an imputed value, not a true value,” Mr. Kamp says.
Even the numbers cited for DTC spending are just an estimate, he points out. “The numbers we use all the time, the Nielsen numbers, reflect the rate value of ads if they were sold at the rate card rate,” Mr. Kamp says. “But damn near nobody pays that rate; there are discounts, swaps, etc. We’re guessing that the actual number is three-quarters of the number there. For this year, $5 billion in DTC advertising is more like $3.5 billion.”
If a similar amendment is passed into law, the industry could mount a constitutional challenge, Mr. Kamp says. “Whether this would be constitutional is a good question, but we wouldn’t know until the Supreme Court told us so, and it would take three years,” he says.
Mr. Kamp says it is unknown why Mr. Nelson backed off the amendment. “We think some education from media lobbyists made a difference, but we’re not certain,” he says. “Everyone’s mum.”
What other terrors for the pharmaceutical and healthcare marketing industries could be added to the healthcare reform bill released by Senator Max Baucus, D-Mont.? Mr. Kamp points out S. 1142, the Informed Healthcare Decision Making Act, which was introduced back in May by Senator Jack Reed, D-R.I. The bill would set standards for clinical comparative effectiveness information in drug labeling and advertisements. (The industry’s objections against this, and other measures floating around in the legislative ether, will be the topic of a future blog post.)
