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A bitter ad pill to swallow

May 13, 2002  •  Post A Comment

Top television and advertising industry executives confirmed last week that they’ve launched a major behind-the-scenes lobbying campaign to derail a growing legislative threat to the $2.5 billion annual market for prescription drug ads.
Pharmaceutical companies spent $995.7 million for advertising on TV networks in 2001, plus another $68.6 million in the national TV spot market, according to the Television Bureau of Advertising.
Key lawmakers are threatening to put a damper on the rapidly expanding business segment out of concern that the ads are resulting in sharply higher costs to consumers.
But in what appears to be developing into one of the industry’s top legislative battles, industry representatives are insisting that the drug promotions are educational at heart and save lives by encouraging consumers to consult physicians.
“Obviously, direct-to-consumer [prescription drug advertising] is an important business,” said one network TV source, who asked not to be identified. “In a climate of softer ad revenues, it takes on a heightened importance.”
Gary Belis, TVB vice president, communications, said, “It’s obviously a growing pie, and we are pitching for more dollars. It’s a big chunk of dollars, and we’re trying to get as much of it as we can.”
The latest concrete threat to the business segment arose last week in the form of legislation introduced by Sen. Debbie Stabenow, D-Mich.
As it stands, the cost of prescription drug advertising is totally tax-deductible by the manufacturer. Under Sen. Stabenow’s legislation, which has the support of Senate Majority Leader Tom Daschle, D-S.D., pharmaceutical companies would be barred from deducting advertising and marketing costs that exceed their annual outlays for research and development.
“Americans today are being forced to subsidize prescription drug advertising both when they pay their taxes and when they pay at the counter for their prescriptions,” Sen. Stabenow said.
But industry sources attacked her measure as an unconstitutional assault on the First Amendment.
“It would condition the deduction on the content of the speech,” said Jim Davidson, a consultant for a broad-based industry coalition that includes the National Association of Broadcasters, the National Cable & Telecommunications Association and the Newspaper Association of America. That coalition is leading the industry charge against regulation.
“It’s bad policy,” added Penny Farthing, counsel for another industry coalition, whose members include the American Association of Advertising Agencies and the Magazine Publishers of America.
In a statement last week, Sen. Stabenow said lawmakers are concerned because prescription drug bills for seniors increased 116 percent between 1992 and 2000, with spending on advertising escalating 40 percent annually in recent years. “There is strong evidence that dramatic increases in advertising and marketing are a major reason for the continued escalation in prescription drug prices,” she said.
In their counter-campaign, representatives of the TV and advertising industries are arguing that the ads save lives by encouraging consumers to check with their physicians-visits that sometimes uncover conditions the consumers didn’t realize they had.
It is also argued that the legislative initiative, if not stamped out now, could serve as precedent for restricting advertising for other products that some legislators may not like. “Many other companies could be threatened,” said Dan Jafe, executive VP of the Association of National Advertisers.
Chris Molineaux, a spokesman for the Pharmaceutical Research & Manufacturers of America, blamed insurance companies, led by Blue Cross & Blue Shield, for stirring up much of the fuss because the ads spur consumers to visit their physicians.
“They’ve taken the approach that the fewer visits to doctors, the better, because they’ll save money,” Mr. Molineaux said.
But Pam Drellow, a Blue Cross spokeswoman, said the issues are patient safety and whether advertising is stoking consumer demand for branded products despite the availability of less expensive generics. “The real issue is what kind of medically sound consumer demand are we creating vs. selling a product,” she said.
In what is becoming a frequent twist in recent lobbying fights in Washington, each side of the debate has drawn support from non-industry groups that a casual outsider wouldn’t realize had behind-the-scenes connections to the industry.
For instance, the McLean, Va.-based Center for Patient Advocacy, which is arguing against the regulation, turns out to have major financial backing from the pharmaceutical industry-about 40 percent of its budget. At the same time, the board of the National Institute for Health Care Management Research and Educational Foundation, which has conducted studies demonstrating an apparent link between advertising and increased demand for particular drugs, is dominated by CEOs of Blue Cross & Blue Shield.
“We just do the research,” said Steve Findlay, NIHCM director of research.
Said Terre Hall, executive director of the Center for Patient Advocacy, “We’re pretty independent on what we do.”