Tax bill may target pharma's DTC deduction, but ad industry's ready to defend it

Direct-to-consumer advertising deductions could once again be on the legislative chopping block. The current version of the still-being-debated tax bill doesn't target drug ads, but pharma isn’t out of the woods yet, experts say.

Sen. Claire McCaskill, D-Mo., crafted an amendment that would have axed the deduction for DTC advertising, but it was not included in the final Senate bill, said Dan Jaffe, head of the Association of National Advertisers' (ANA) government relations office. As lawmakers look to reconcile the House and Senate bills, though? It could well be back on the table.

“We’re hopeful we will not be dragged into this process, but you can’t be certain because various provisions drop out for one reason or another. They may then start to scramble and look for other so-called ‘pay fors,’ and we could be put back in,” Jaffe said.

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It’s not the first political assault on the pharma advertising deduction and DTC ads in general, and it likely won’t be the last, though Jaffe confirms that the ANA will continue to defend it.

“Even if we are able to succeed—and I’m very hopeful that the advertising community in general or prescription drug advertisers specifically will succeed in not being impacted adversely by the tax plan—that’s not the end of the issue,” he said.

Previous efforts have aimed at striking the pharma ad tax—or DTC advertising entirely. Two years ago, for instance, the American Medical Association called for the banishment of DTC ads, with pharmacists following that lead shortly after. More recently, last month the National Academies of Sciences, Engineering, and Medicine, in a paper addressing affordability, discussed barring DTC advertising from the list of tax-deductible business expenses.

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The paper also advised that “manufacturers and suppliers should adopt industry codes of conduct that reduce or eliminate direct-to-consumer advertising of prescription drugs and should increasingly support efforts to enhance public awareness of disease prevention and management.”

Jaffe said the ANA will file testimony in opposition to the academies' proposal, which the association says is unconstitutional under the First Amendment. The Supreme Court has been clear that freedom of speech means that companies cannot be penalized for truthful advertising, he said.