If Ad Tax Deductions End for Pharma, You Could Be Next

Guest Editorial by the ANA's Bob Liodice

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Bob Liodice
Bob Liodice
The marketing community is facing a major, imminent threat that could raise the cost of advertising, reduce its effectiveness and productivity, threaten consumer health and well-being and further encumber the U.S. economy.

Leading members of the House Ways and Means Committee -- the tax-writing committee -- are considering a proposal that would eliminate the tax deductibility of prescription medications, while a similar proposal is gaining traction in the Senate Finance Committee.

Denying the tax deduction for advertising in one industry is unprecedented and would raise very serious First Amendment concerns. The Supreme Court has made clear that differential taxes on the basis of the content of an ad are unconstitutional.

Currently, all companies are eligible for an ordinary and necessary business tax deduction for their advertising activities. If a product-specific deduction disallowance is imposed on the prescription-drug industry, it will create a dangerous precedent: Only companies that are presently popular with the government will feel confident about retaining their ad deduction, while businesses in "controversial" categories will be highly jeopardized and in constant fear that their ad deductions will be revoked. This could be the beginning of a dangerous slippery slope that would potentially imperil many, if not all, product categories.

Furthermore, in these challenging economic times, it would be incredibly counterproductive to make any form of advertising more expensive by taxing it. Advertising helps generate $6 trillion in economic activity annually and supports more than 21 million jobs.

Beyond these serious constitutional and economic considerations is the fact that consumers benefit enormously from prescription-medication advertising. Legislative actions that increase the cost of this informative communication would ill-serve the public. Here's why: Medication advertising instructs people about life-threatening diseases such as high blood pressure, strokes, diabetes and asthma and encourages them to consult a physician about available treatments.

Several studies and expert authorities underscore the direct and substantial benefits of medical advertising to consumers.

According to the Centers for Disease Control, prescription-drug advertising helps reduce undiagnosed and undertreated medical conditions. For example, 6 million Americans suffer from diabetes but have not been diagnosed, and 18 million are unaware they have high blood pressure, the "silent killer."

A 2004 survey conducted by Prevention magazine found that 65 million patients spoke to a physician as a result of seeing an ad for a prescription medication. Almost half that number consulted a doctor about a specific medical condition for the first time because they saw an ad.

Out of 3,000 patients in a Massachusetts General Hospital study, 35% discussed an ad for a medication during an appointment. Of that population, 25% received a new diagnosis. About 43% of the new diagnoses were for "high-priority" conditions such as hypertension, diabetes, depression and high cholesterol.

Health Affairs reported on the important role of the physician during visits prompted by seeing a prescription-medication ad:

  • 57% of the visits resulted in diagnostic tests;
  • 52% resulted in a recommendation for a lifestyle change;
  • 32% of the patients were referred to a specialist;
  • Prescriptions were written by the physician in 72% of the visits.
  • Imposing restrictions on advertising for medications will limit the ability to educate the public on important health conditions and unleash a host of other negative consequences. In fighting this issue, the marketing community must be firm and united. That's why the ANA is encouraging its 360 members, which collectively spend more than $200 billion on marketing communications and advertising, to take their case directly to members of the House Ways and Means Committee and Senate Finance Committee and express their strong opposition to any restrictions on the deductibility of marketing costs for prescription-drug products.

    As our policymakers seek ways to restore the financial health of our nation, they should embrace and support the benefits of advertising as a vital economic stimulus -- not encumber it with ill-conceived legislation or regulation.

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    Bob Liodice is president-CEO, Association of National Advertisers.

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