Not so fast, Hillary. Ad industry will fight with pharma against DTC tax moves

Hillary Clinton

Don't worry, pharma marketers. The ad industry's got your back. Hillary Clinton's plan to take away drugmakers' advertising tax deductions gets a resounding "no" from ad industry trade groups. While the ad executives aren't taking a stance on the rest of Clinton's drug-pricing plan, the advertising proposal gets a thumbs down.

It's not the first time a politician has tried to get rid of the deduction--not just for pharma but for the whole advertising industry. However, widespread political support never amassed, and it seems unlikely this time, too. History stands in its favor as well. The ability for a business to deduct advertising and promotional expenses has been part of the tax code for more than 100 years; it currently allows a 100% deduction.

There's also the matter of First Amendment rights, which Clinton's proposal seems to violate, because it singles out pharma. "It would be completely unconstitutional to take away the advertising tax deduction for prescription drugs on the basis of trying to suppress free speech," Dan Jaffe, head of the government relations office at the Association of National Advertisers, said in an interview. "The Supreme Court has been clear that manipulating the tax code to penalize disfavored speech runs afoul of the First Amendment."

Dan Jaffe

The ad industry is ready to support pharma in fighting against the proposal. "Absolutely we would take this on," Jaffe said. "This would create a very significant precedent not just for the prescription drug industry but for the whole advertising industry. So you would get a deduction only if the Congress decides your industry is acceptable? What happens if there are other products people decide they don't like?"

Clark Rector, executive VP for government affairs at the American Advertising Federation, agreed that singling out pharma would be a free-speech issue. When asked about potential business impacts, he said the cost of pharma advertising would increase, and there would be less advertising because budgets wouldn't inflate to cover the lost tax deduction. That could have a ripple effect on the economy and jobs, Rector added.

"If this comes to the place where it's an active legislative proposal--and there is a long way to go before that--we would certainly oppose it," Rector said. "We have in the past and will again."

• read Jaffe's ANA blog post

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