The pharmaceutical industry has enriched the tapestry of American TV characters with amorous bees, jaunty bowels, and a family of mucasoid “Honeymooners,” all of them cheerily pushing prescription drugs.
But amid growing concern over the cost of medicines and a scramble to reform the US tax code, consultants are warning the industry that lawmakers from both parties could turn their swords on Gut Guy.
A drug advertising conference this week in Boston was packed with self-congratulatory sessions celebrating inspiring campaigns. But there was an undercurrent of unease about the prospect of a federal crackdown on pharma commercials.
The US and New Zealand are the only two developed countries to allow TV ads for prescription drugs. The US is unlikely to ban ads outright. But the economics for pharma could well change: Democrats in Congress are proposing to strip drug companies of their right to write off advertising expenses, and there’s a newfound worry that Republicans might join the cause as part of an ambitious tax overhaul.
“Anything that moves in tax reform — and I do believe there will be a substantial effort to move it — always means that the deduction for pharmaceutical advertising is at risk,” said Jim Davidson, an attorney at the national corporate law firm Polsinelli.
The drug industry spends about $5 billion a year on direct-to-consumer advertising, or DTC. And forcing pharma to pay taxes on that expense could raise $50 billion in federal revenue over 10 years, Davidson said. That could be tempting for Republicans who are scrambling for ways to pay for a large corporate tax cut.
It could also score a political victory against an industry finding little quarter in Washington of late. Pharma has been derided as “getting away with murder” by President Trump and dubbed “the biggest bunch of crooks in this country” by Senator Bernie Sanders.
Last week, nearly two dozen lawmakers — all of them Democrats except for Sanders, an independent — introduced identical bills in the House and Senate aimed at curbing drug prices. Among the provisions: Killing the tax deduction.
The idea has been pushed “almost exclusively by liberal Democrats who want to punish pharma for being profitable,” said John Kamp, who heads the Coalition for Healthcare Communication, a group of ad agencies and medical publishers. But when they failed to repeal Obamacare, Republicans gave up billions in savings that they had planned on using to offset the budgetary impact of big tax cuts. So they need new sources of revenue.
There’s a risk, Kamp said, that both parties might come together around across-the-board changes to tax breaks for marketing costs, affecting more than just pharma.
The fight over DTC drug ads is hardly a new one. For years, pharma was all but kept off of TV by a wary Food and Drug Administration, which required any ad to list all of a drug’s risks alongside its benefits, making a 30-second clip virtually impossible.
But in 1997, the FDA softened its stance, allowing commercials to summarize side effects and then refer viewers to a website or long-form print ad. And thus opened the door for the likes of Viagra, Vioxx, and Lipitor to blanket the big games and the nightly news on the way to becoming household names.
In the years since, pharma’s DTC efforts have blossomed well beyond TV. The industry now pushes drugs through games, celebrity Instagram accounts, and apps. Synergy Pharmaceuticals, maker of a treatment for constipation, just unveiled a fleet of scatalogical emojis with names like Runny Ron and Plugged-Up Paulie, promising to change forever how patients communicate about bowel movements.
Opposition to DTC has risen as TV advertising has become ever more aggressive. The American Medical Association has long criticized the practice and in 2015 called for an outright ban. Democrats in Congress have tried and failed to get pharma off TV numerous times over the past two decades. The most recent effort, from Representative Rosa DeLauro, sought to to force companies to wait three years after getting approval to sell a new drug before marketing it to patients.
Critics say putting drugs on TV contributes to escalating health care costs, stuffing patients’ heads with questionable ideas and leading to diagnoses of diseases that in some cases don’t really exist.
But pharma says its rush to the airwaves has benefited society.
“We’ve always said proposals to prohibit the tax deductibility of advertising expenses ignores the value of informing patients of new, innovative therapies,” said a spokesperson for PhRMA, the drug industry trade group.
Before the dawn of DTC, conditions like depression, incontinence, and erectile dysfunction were taboo topics, the industry argues. Putting them on TV helped reduce the shame factor, empowering patients who might otherwise have gone untreated, the industry says.
And there’s some truth to that, according Dr. David Kessler, who fought to keep drug ads away from television in his time as FDA commissioner. But it doesn’t absolve pharma of its other sins, he said at the conference.
“The problem is you’re not just changing social norms; you’re also selling more drugs, and we have drug price issues,” Kessler said. “…That’s why the promotional budgets are sitting there as a target, and they’re going to continue to be a target until we get drug pricing under control.”
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I’m having trouble with the math. $5B in ad expenses and subsequently deducted from profits, does not equal $5B of annual tax savings. The tax rate is not 100%. So how does that add up to $50B of tax revenue over 10 years by denying the deduction?
Aside from the math question, I wholeheartedly support the elimination of TV advertising for prescription drugs. The choice of which drugs to prescribe should be made by medical professionals and they should prescribe based on cost/benefit for the patient just as if it was money coming directly out of the patients pocket and not some magic self-refilling sack of gold. Drug companies love to tweak medications nearing the end of their patent life, to create marginally better drugs at dramatically higher cost to consumers. Management of the pharmaceutical companies is obligated primarily to providing ever-increasing sales and profits to their stockholders. As a society we need to regulate their activities far for severely than we do companies that provide products that are completely optional purchase where the free market is much more likely to function as it should. When consumers are choosing medical products that are paid for with “other people’s money”, they are not making their usual cost benefit decisions. The free market constraints don’t apply in the usual way.
Couldn’t drug companies raise the drug prices to offset the lost tax write-off and pass that increased cost on to consumers? Alternatively, could drug companies still spend $5 billion, reduce the amount of advertising to cover the tax expense, and keep the cost to consumers the same? In the first scenario, the US would receive more tax revenue, but consumers would pay more for drugs. In the second case, the US would receive less revenue and consumers would continue to pay the same. New drugs are effectively monopolistic because they uniquely treat an illness, or they have shown they treat an illness better than existing treatment.
Personally, I am scared of taking any of these meds.
It is long since time for pharmaceutical advertising to be banned from US public media as a health hazard. Such advertising is largely responsible for the massive over-prescription of anti-depressants which we now know mostly don’t work for mild to moderate depression. It also plays a role in the over-diagnosis and over-medication of ADHD, with significant negative long term side effects in obesity and retarded sexual maturation among kids and young adults.
A major barrier to this needed public health measure is that Big Pharma has bought and paid for the loyalty and advocacy of most of “our” Representatives and Senators in Congress, with bribes falsely characterized as “campaign contributions.” Anyone concerned with the outright frauds which Big Pharma has worked and is now working in television advertising may wish to read “Psychiatry Under the Influence — Institutional Corruption, Social Harms and Prescriptions for Change”, available on Amazon.
Mr Lahern
I couldn’t agree more. Many Ads even fail to identify what condition or disease the drug will “help”. Do followers call their physicians to ask for the drug anyway for whatever condition they have? Evening news venues are bombarded with drug Ads perhaps because viewers are members of the older generation who tend to watch. In this political environment, abash with deregulation, what used to be a comforting role by the FDA is fast waning. While we do need medications to help those afflicted, we need more support toward prevention. Microbes, particularly viral induced cancers and other infections are responsible for many if not most of the world’s suffering. Big Pharma needs to step up with the production of more vaccines. It took 40 yrs for HPV even though its role in nead and neck cancers has been known since the 1970s. Time for a vaccine against the Herpes Group.