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Fallout: The Financial Crisis

‘Big Pharma’ may lose ad tax breaks

Marketplace Staff Jul 10, 2009
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Fallout: The Financial Crisis

‘Big Pharma’ may lose ad tax breaks

Marketplace Staff Jul 10, 2009
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TEXT OF STORY

KAI RYSSDAL: It’s tough to make it through a TV show or read a magazine, without being confronted by what ails you. Or, rather, the fix for what ails you. Drug companies spend $four billion a year advertising everything from Viagra to Lipitor. The IRS lets them deduct those expenses from their taxes. But with the tab for a healthcare overhaul coming in somewhere north of a trillion dollars, that particular privilege might not last.

Sally Herships reports.


Herships: If some lawmakers have their way, drug companies will no longer be able to write off the costs of advertising their remedies. Those additional tax dollars would help the government pay for healthcare reform.

Adonis Hoffman is a lawyer for the American Association of Advertising Agencies. Hoffman says making it more expensive for drug companies to advertise would hit Madison Avenue hard.

Adonis Hoffman: This would probably do away a $4 to $6 billion category of advertising, which supports not only jobs but media.

Drugs ads can be highly profitable, but they are also controversial.

Nancy Chockely is president of the National Institute for Health Care Management. She says ads can help educate consumers, but they may also mislead them.

Nancy Chockely: Is it providing a service and good information to the population? Or is it really going directly to the consumer getting people to come in and ask for brand name drugs for a condition they may or may not have.

And there are other concerns — a plan that targets one industry, could set a bad precedent, says Adonis Hoffman.

Hoffman: If Congress, decides it does not like a particular kind of speech or advertising, today it might be prescription drugs, tomorrow it might be junk food.

Opponents also say the $10 billion generated from taxing drug ads won’t go far against a $1 trillion tab for healthcare reform.

I’m Sally Herships for Marketplace.

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