Karen Tumulty and Michael Scherer wrote a very depressing story about how the pharmaceutical industry got its way in the health care debate. While the public has focused on the insurance industry’s fight against reform, the drugmakers have actually spent more (about $600,000 a day), and gotten more for their money. Their deal with the White House and the Senate Finance Committee will give them extended patent protection on the most expensive drugs (12 years for biologics, rather than 5), while ensuring that past deals not to have the government bargain for lower drug prices or import cheaper drugs from foreign countries remained intact.
A few Democrats have grumbled at this approach, but most of them have been bought off. We know about Byron Dorgan’s bill on reimportations; that will get a vote as an amendment in the Senate, but would need an unlikely 60 votes to pass. There’s another measure which has surfaced in recent days, however, that might have a slightly better chance. S. 1763, sponsored by Sen. Al Franken (D-MN), would “deny the deduction for advertising and promotional expenses for prescription pharmaceuticals.”
Currently, corporations can for the most part deduct advertising and marketing as necessary business expenses, and that holds for the drug industry. However, many studies have shown that drug ads have a deleterious effect on the patients who seek them, as it leads to overtreatment, bad diagnoses, increased medical costs and aggravated patient risk. Only two countries on Earth allow direct-to-consumer advertising for drugs: the US and New Zealand. And American restrictions on those ads have become so lax that the industry has tripled its ad spending from 1997 to 2005. Removing the tax deduction status for advertising would at least provide a financial incentive away from blanketing the airwaves with drug ads, which may lower overall health spending.
The bill was introduced early this month by Franken, with Sherrod Brown and Sheldon Whitehouse as co-sponsors. This week, Tom Udall and Mark Begich, a centrist, signed on. There’s a companion House bill that has languished. But the drug industry is bothered enough by the prospects to plant an article about it in Advertising Age, the Madison Avenue trade mag. In it, there’s a suggestion that this measure could work its way into the final health care bill.
U.S. Senator Al Franken (D-Minn.), along with co-sponsors Sens. Sherrod Brown (D-Ohio) and Sheldon Whitehouse (D-R.I.), have introduced legislation (S. 1763) to disallow the federal tax deduction for all advertising and marketing expenses for prescription drugs. There are rumblings that the senators would like to have the proposal added to the health-care reform legislation, and the possibility exists that they may offer it as an amendment when the proposed bill is considered by the full Senate.
That would seemingly put in jeopardy the handshake deal that pharmaceutical companies struck earlier this year with the Obama administration and Senate Finance Committee leaders, which calls for drug-makers to pick up an estimated $80 billion in health-care costs over 10 years in exchange for no further crackdowns on the industry.
“From our perspective, that would appear to be the case,” said Clark Rector, exec VP-government relations for the American Advertising Federation.
The story includes a host of right-wing and corporate hacks taking their shots at the bill, without anyone defending it. But it at least shows some nervousness around this. I don’t know if we can expect this measure to reach the final bill and blow up that secret Pharma deal or not, but it would be good, in my opinion, if progressives at least made some more noise about the bloody murder that the drugmakers have gotten away with in this bill.
Calls to Franken and Sherrod Brown’s offices have not yet been returned.





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How about eliminating the tax deductions for corporate contributions to PACs, salaries and expenses of lobbyists, and advertising of all kinds, political and product?
Advertising is the true hate speech.
There goes that comedian again.
Who will then sponsor, um, everything on teevee?
Very, very happy with Al Franken so far.
Well worth the wait.
They’ll be a lot more selective in their messaging. Eliminating those deductions would drive up quality and drive down quantity of the barrage.
I did not leave the house on election night although two friends had been elected to the SF Board of Supervisors in hard fought races with public financing over corporate Democrat sleazebags because I was glued to the internet checking on the MN Senate race…
Senator Al Franken…it feels so good just typing it.
I’ve noticed a few auto commericals in between the Cial*s ads.
Sorry, I shouldn’t have mentioned that during the dinner hour.
Teddy P, you make the most important point!
I’ve always felt that a LOT of advertising on teevee has nothing to do will selling product and everything to do with buying coverage (in the journalism sense) or, more so, buying silence.
I’ve noticed a few auto commericals in between the Cial*s ads.
*idly wondering about the possible hilarity of combining those ads…*
even more ironic about big pharma and its myrmidons is the argument that they advance concerning the ineptitude of the usg[i.e., big government is bad, big government will be unable to manage a cost-saving, universal health care system].
yet, pharma is the benficiary of the usg’s patent/trademark/copyright system.
those usg entities seem to work OK for pharma.
here is my recommendation for a tit for tat. if pharma and the health care insurors/industry continue to fight universal health care, let us terminate patent protection for pharmaceuticals.
furthermore, let us terminate the physicians as prescription gate-keepers.
ever travel in latin america? you need a pharmaceutical compound, go to the farmacia. discuss your complaint with the pharmacist. up to a certain level, you will get what you need.
no stinking physician scrip and that physician payment required.
Maybe we will no longer be bombarded with Viagra and Viagra like drug commericals.
You mean like Zero to 100 in 2 seconds? “G”
*g*
“Do not use this product while driving a car with a stick shift”?
“If you find yourself still driving for four hours after taking Cial*s, contact your doctor immediately. Or your mechanic.”
“Always keep at least one eye on the road.”
LMAO
Big Pharma – “This is what your brain is like on drugs!”
Maybe even 4 on the floor.
I wonder what would be prescribed for how sickening this is?
You will never, ever see drug ads on a network news broadcast that carries any story about the drug industry. They will not have their ads carried on programming that they view as critical to their business.
You guys are cracking me up.
Big pink penis cars so turn me off.
Good God demi
You’ve not heard that phrase before?
Sorry.
I’m confused. Advertising and marketing of this nature should be an operating expense, well above the Earnings Before Taxes line, in any accounting system I’m aware of. It isn’t deductible. It’s just not taxed.. no OPEX is. Is Congress proposing to put it below the line for just this one type of firm? or is this just for non-expensible mktg? If they do intend to shove it below the line for big pharma Is that really a good idea? I’m all for punishing these cochons but repealing 400 yrs of corporate financial mgmt theory to do it strikes me as being a bit excessive. A better way to get them by rolling back the numerous deductions they get on below the line stuff like R&D. I’d also support a blanket proposal to make ALL lobbying expenses non-expensible and force them below the tax line.
What is important to remember is that Obama made deals with the insurance, drug, and medical industry. In each case, they made a promise to cut a certain fictional amount of costs over the next 10 years. This is the essence of Obama’s plan to contain costs on the private side. In return Obama gave away the store. And he is using this as a screen to cut “waste” in Medicare. I say a screen because according to Obama most of the cost saving in his plan he aims to get out of Medicare.
I agree there has been such a focus on getting a public option that a lot of this other stuff doesn’t get the attention it deserves. This is true even of the public option because even as people talk endlessly about a “robust” public option, no one has actually put language in a bill that really spells this out. Medicare +5 doesn’t mean a whole lot if it is delayed until 2013 and enrollment is restricted.
ermmm, actually no
Maybe it’s an LA thing. Sorry again. But, you understand I was talking about Over Compensation, right? Did I really insult your senses?
2011 or so is likely to be the earliest practicable date for any such measure… a testament to how far our
country has fallen from the days when such programs could practically
be put in place much faster…. which is why the president’s proposals for interim catastrophic relief and immediate no denial and no recissions are so important. I agree on making sure that there are no enrollment restrictions and other triggers. Premium increases over the next several ears must also be constrained somehow.
As I noted a couple months ago, my wife and I were watching the NBC evening news one night. During the last set of commercial breaks, I counted the commercials. Of these, 7 of 8 were for pharmaceuticals.
And after the break, the NBC “feel good” segment was sponsored by Glaxo SmithKlein.
This is insane. All these “ask your doctor” ads are overtly encouraging people — medically untrained people — to practice medicine-by-advertisement on themselves. And obviously it’s helping to drive drug costs through the stratosphere.
I have a new term for our economic system: Ruthlessly sociopathic capitalism.
It also is driving doctors crazy. They have to deal with patients who are demanding drugs they don’t need or are not compatible with the other drugs they are taking.
With a stiff suspension?
For a commercial lasting longer than 4 hours, please pay your taxes.
“For a commercial vehicle lasting longer than 4 hours, please pay your taxes.”
*G*
Well, before you start thinking he walks on water and all that, he was a compliant puppy on the on Patriot Reauthorization bill.
Blub is right.
I caught wind of Franken’s move last week through a mention in the trade press. I initially thought it was a cool idea and considered doing a diary on it. But after digging for half an hour, it was clear to me that there’s nothing to see here.
This idea has been put forward in the House several times. It falls apart not so much because of industry influence but straightforwardly on the merits. If you remove marketing as an untaxed business expense for the pharmaceutical industry, what’s the legal justification for not doing it across the board, eg, for tobacco, which kills people when used as intended, or alcohol, which kills when used as culturally customary?
I’m not a lawyer, but singling out pharmaceutical companies in this way could even constitute, based on my education c/o Alan Grayson, a bill of attainder.
Alternatively, legislators could move to ban direct-to-consumer pharma advertising. That would feel good and probably be the right thing to do, but it would hurt advertising agencies and media conglomerates far more than Big Pharma itself. Pharma companies would just shift the dollars to marketing for physicians, or save the dollars as profit.
If you’re serious about hurting Big Pharma, there’s one key strategy: lower the bar for speedier introduction of generic substitutes. Start by rescinding the abominable 12-year marketing exclusivity for biologic drugs that the Senate HELP Committee dropped into its health care reform bill. Continue with legislative and regulatory actions, perhaps modifications to the Hatch-Waxman Act of 1984, to reduce hurdles to introducing generics for standard (ie, nonbiologic) brand-name drugs.
The Franken bill is a distraction that collapses on a moment’s inspection. Greasing the skids to generic competition is the sure way to inflict real punishment on Big Pharma.
Marcos, I love it. I have been saying the same things for years now, not understanding how corporations can get tax write-offs for such things as advertising, lobbyist salaries, and the like. Just like with organized crime, sometimes the way to get change is through the tax code. Let’s get cracking with this reform. Franken gets my vote for one of the best to have come into the Senate in the last 20 years.
vedwards: As pertains to corporate personhood, apparently corporations get to write off all manner of cost of business, all while they enjoy the constitutional rights that flesh and blood persons do, while we bags of water are only allowed to write off a token of our cost of living, either through the standard deduction or through those limited expenses which can be itemized, if you qualify to do that.
ralphbon: Congress regulates all manner of advertising as pertains to products, such as alcohol, tobacco and such. Used to be cig and booze ads on television. A bill of attainder would be if Congress mandated that only McKesson lose its tax exemption, not if Congress eliminates the tax deductability of all pharma companies’ advertising.
See Blub’s comment. Advertising is not a deduction; it’s an operating expense. Changing that status for one industry only would never hold up in court. You’re right that there’s plenty else that Congress and/or the FDA can do to regulate or modify the industry’s marketing activities; I mentioned banning DTC drug ads. But changing advertising’s status as a before-tax operating expense won’t hold up. That’s why the House has dropped the idea. And there are better ways to inflict pain on Big Pharma, as I note.