Protecting the Tax Deductibility of DTC Advertising

December 12, 2017

The U.S. Senate Health, Education, Labor and Pensions (HELP) Committee held a hearing today on the cost of prescription drugs, reviewing a report recently released by the National Academy of Sciences entitled “Making Medicines Affordable: A National Imperative.” Among other proposals, the report recommended that Congress “should disallow the tax deductibility of direct-to-consumer advertising of prescription drugs as a business expense.”

This is not a new idea, just a bad one and ANA filed comments with the committee expressing our strong opposition. Such a radical change in the tax code would be misguided, bad public policy and raise very serious First Amendment concerns.   

Several decades ago, ANA was one of the groups that helped convince the Food and Drug Administration (FDA) to reform their marketing rules to make electronic advertising for pharmaceutical products possible.  Just a few years ago we played a key role in helping defeat serious efforts in the Congress to impose very onerous restrictions on DTC advertising. When Congress was considering the Affordable Care Act, we successfully opposed a proposal in the House Ways and Means Committee to restrict the full deductibility of DTC ads.

At the hearing today, several members of the HELP Committee expressed opposition or concern about DTC advertising, so our efforts to protect this category must continue. 

Millions of Americans are unaware that they have high blood pressure, high cholesterol, clinical depression or diabetes. DTC advertising is providing extremely valuable information to these Americans and others about their important health care needs. Denying the tax deduction for DTC marketing costs would be unwise and counterproductive.  

The Academy report seriously undervalued the constitutional protections for DTC advertising. It contained absolutely no analysis of the First Amendment implications of the recommendation to deny the tax deduction for DTC ads. The First Amendment was barely mentioned in a footnote in the report.    

The tax laws should provide the same tax treatment for the advertising costs of every legal product and service in America. Singling out a specific industry for onerous differential tax treatment would punish the speech of companies in that industry, politicize the tax code and create dangerous precedents for any controversial category of advertising.

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