|December 28, 2009|
|Tax Deduction for Rx Ads is Safe -- For Now|
|By Kevin McCauley|
|Prescription drug marketers and Big Media are celebrating these days as neither the Senate nor the House passed healthcare reform measures take away the tax deduction for advertising. |
That means "Ask Your Doctor" ads are safe for the new year as proposals to kill the tax break put forward by the likes of Democratic Senators Al Franken, Sherrod Brown and Sheldon Whitehouse have fallen by the wayside.
It’s unclear however whether the drug industry will beef up the $4.7B that it spent for drug ads in `08, an amount that represents 25 percent of overall promotional expenditures. The Congressional Budget Office issued a report earlier this month that found direct-to-consumer advertising on the decline from its $5.2B peak of `06.
Some may say drug companies have scaled back due to criticism over the constant barrage of erectile dysfunction treatments, which is the No. 1 drug class for DTC outlays. Others say Rx companies flinched because of attacks over advertising remedies for made-up or questionable illnesses.
GlaxoSmithKline, for instance, informs people with the uncontrollable urge to move their legs: "Restless Legs Syndrome" is a real medical condition, like diabetes, depression, or high blood pressure. Many people are unaware that there is a name for their condition: it's called "Restless Legs Syndrome." GSK markets Requip for RLS.
The CBO suspects another reason for the downturn in drug ads: lack of innovation. According to the CBO: "The slowdown is probably related, at least in part, to the decline in the number of new drugs that have received FDA approval since 2000."
Drug companies spend more ad dollars on new drugs or ones that have few or no direct competitors. The CBO found that about 750 of the 2,000 drugs that it tracked received promotional spending. Fewer than 100 of them accounted for the bulk of DTC spending. The average outlay is more than $40M—though some blockbusters garner $200M in ad support.
Drug companies may be cutting back because the jury remains out on whether Rx ads work. The congressional watchdog says studies on the effectiveness of DTC ads are mixed. "The writing and filling of prescription drugs increased for some advertised drugs, but not for others," reported the CBO. It also notes: "Some observers have questioned how carefully DTC advertising—especially TV commercials—balances the presentation of a drug’s potential benefits and risks, as well as whether such advertising plays a useful role in the nation’s healthcare system."
That provides more grist to guys like Franken, Brown and Whitehouse, who are bound to take another whack at DTC ads.
As a humorist, Franken should appreciate DTC ads. They are some of the most entertaining fare on TV.
(Image via northersun)
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