Drug-Advertising Tax Deduction Safe -- for Now

Democratic Draft Bill Opts for Surtax on Wealthy Instead

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NEW YORK (AdAge.com) -- In a memo sent yesterday to American Advertising Federation members, Clark Rector, exec VP-government affairs, celebrated some "good news" for pharmaceutical advertising: The draft for health-care reform outlined by the U.S. House Ways and Means Committee upholds the federal tax deduction for prescription-drug advertising. Despite the win in this battle, though, the war is far from over.

In lieu of eliminating the deduction to raise funds, the committee proposed a surtax on high-income Americans -- individuals earning at least $280,000 in adjusted gross income and couples earning more than $350,000.

"This is a significant accomplishment, achieved in large part because of the outstanding grass-roots response of the advertising industry," Mr. Rector wrote in the memo.

In the past few months, the industry has organized a concerted lobbying effort on Capitol Hill. Mr. Rector did not share numbers in a call with Ad Age but said he is pleased, albeit cautious, about the preliminary results. "For the moment, at least, the advertising deductibility is off the table," he said. "But certainly moving forward on this, to find various funding methods, everything will be in the mix in the future."

House Ways and Means Committee Chairman Charles B. Rangel is one of three Democratic leaders drafting new health-care legislation for the House; House Education and Labor Committee Chairman George Miller and House Energy and Commerce Committee Chairman Henry Waxman are the other two. Later this afternoon, all three House Democrats are expected to join Nancy Pelosi in unveiling a full draft House bill.

"We're by no means taking for granted that [advertising deductibility] is assuredly gone forever. It's still out there, and there are still folks who would like to go in that direction," Mr. Rector said, noting that in the Senate, and even on the House side, the draft bill faces opposition. He also pointed out that Congressmen Pete Stark, D-Calif., and Jerrold Nadler, D-New York, have each introduced bills unrelated to health-care reform that threaten the DTC deduction.

So what can the advertising industry do? Mr. Rector urged members to thank members of Congress who supported keeping the deduction and to continue to push the educational nature of pharmaceutical advertising. "We think DTC advertising in and of itself provides a great benefit to patients and consumers," he said.

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