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US Senate Bill Would Limit Tax Breaks for Drug Advertising

Originally published by Reuters Health, May 7, 2002

WASHINGTON (Reuters Health) — Under legislation introduced in the US Senate on Tuesday, drug companies would be able to deduct from their federal taxes no more for advertising and marketing expenses than they do for research and development.

“What we’re saying is the taxpayers of this country ought to set a limit on how much advertising they want to subsidize,” said Sen. Debbie Stabenow, D-Mich., sponsor of the Fair Advertising and Increased Research Act.

Under current law, drugmakers—like other US companies—can deduct as business expenses whatever they spend on marketing and advertising. But sponsors of the bill say that drug advertising has gotten out of hand and is driving increases in drug spending.

“All you have to do is turn on your television,” said Stabenow. “If every ad isn’t for a prescription drug, then every other ad is.” She noted that in 2000, Merck spent more promoting its arthritis drug Vioxx than PepsiCo spent promoting Pepsi.

“We all want the drug companies to succeed and be profitable,” said Sen. Dick Durbin, D-Ill. “But this [amount of advertising] is ridiculous.” And Durbin said the bill would “call the bluff” of drugmakers who maintain that they spend more on R&D than on marketing and promotion.

Backers of the measure say it is only the latest in a series of legislative attempts to rein in drug costs—a critical step, they say, in adding a prescription drug benefit to the Medicare program. If a Medicare drug benefit “is just a blank check and the drug companies can fill in the prices, it won’t be economically or politically sustainable,” said Sen. Paul Wellstone, D-Minn.

Late last month, some of the same Senators introduced a bill that would make it easier for patients, pharmacists, and drug wholesalers to reimport US-made drugs from Canada at that country’s controlled prices. (See Reuters Health report, April 24, 2002.)

A spokesman for the Pharmaceutical Research and Manufacturers of America (PhRMA) told Reuters Health on Tuesday that the group opposes the tax-deduction measure on the grounds that it “would single out one industry and attempt to penalize it for legitimate business activities.” PhRMA has also expressed opposition to the reimportation bill, warning that it could compromise patient safety.