Grassley Bill May End Tax Break

Apr 12, 2004  •  Post A Comment

The advertising industry reacted last week after Sen. Chuck Grassley, R-Iowa, introduced legislation that threatens the ability of pharmaceutical companies to deduct expenses for advertising, a large portion of which goes to television.
As it stands, advertising expenses for all companies-including drug purveyors-are completely deductible. But under a provision in Sen. Grassley’s bill, pharmaceutical companies that try to restrict the ability of U.S. consumers to legally import their prescription drugs from other countries could lose their advertising deduction altogether.
Dan Jaffe, executive VP of the Association of National Advertisers, said the provision is particularly “worrisome” because it could establish a precedent that U.S. companies had to do something for the U.S. government to warrant the deduction.
“This is a classic Pandora’s box,” Mr. Jaffe said. “Once you open it up, you have no idea how many things will fly out.”
The same pharmaceuticals sold in the United States are anywhere from 30 percent to 300 percent cheaper in Canada and Europe.
It’s currently illegal for U.S. citizens to import prescription medicines. But in his legislation, Sen. Grassley-the influential chairman of the Senate Finance Committee-would ease the prohibitions on prescription-drug importation.
“If the drug companies are not going to allow U.S. consumers to have access to these lower prices in other countries, then they will lose the tax deduction for the cost of those advertisements,” Sen. Grassley said.
Network television has a 37 percent share of the pharmaceutical advertising pie, according to TVB.