It had to happen: Big Pharma's tax deduction for DTC ads has entered the health-reform debate. Rep. Charles Rangel, chair of House Ways and Means, says Congress could yank that tax break to help raise $37 billion toward reform costs. We all knew this was up for grabs; even before President Obama took office, his people had raised the idea.
As the press points out today, however, pharma spends around $4.7 billion on advertising annually. So wherefore $37 billion? Does it encompass pharma's entire sales, general and admin budget, as BNet Pharma and Ad Age suggest? Or is it an accumulated-over-time savings figure (eight years times $4 billion and change could equal $37 billion, if you squint)?
That's just one of the big questions surrounding Rangel's proposal; another biggie is this: Why would it be OK for other industries to get tax deductions for advertising expenses, but not pharma? The answer might be that, like cigarettes and alcohol, pharma advertising already is treated differently from your garden variety consumer ads. After all, the U.S. is one of the very few countries worldwide to allow DTC promotions, and here it's only been allowed since 1981.
Still, the drug industry and ad industry have their side of that story; already, some are predicting First Amendment challenges to Rangel's proposal, if passed. BNet suggests that pharma use the tax deduction as a bargaining chip for some aspect of reform in its favor. What do you think?