A CFO's Take on Proposed Tax Regulation for Pharma Advertisers

>> Monday, June 29, 2009

Bob Liodice, CEO of the Association of National Advertisers, recently wrote a guest editorial in AdAge about potential new tax laws for advertising prescription drugs. I'm not sure I understand why one industry would be treated any differently than another, but I do know that it has huge potential impact. Our CFO, Michael Day, gives his perspective on the topic.

Hope this finds you well -- Jim.

Take it away, Michael:

Q: When does a Finance Guy write a Wellness blog post?

A: When the Government considers unfair tax regulation on advertising by the prescription drug industry.

Mr. Bob Liodice, President and CEO of the Association of National Advertisers, is spot-on in his guest editorial in AdAge. The approach currently under consideration by the House Ways and Means Committee (HW&MC) has far reaching, extremely negative ramifications for Free Speech, the health of Americans, the stability of some 21 million jobs (as Mr. Liodice points out as supported by the advertising industry) but also for the USA’s place in the world of business.

You can read about it here: http://adage.com/article?article_id=137578

The HW&MC is considering eliminating the ability for advertisers of prescription drugs to claim their advertising expenses as deductions. For this select group of manufacturers, the previously legitimate business expense will no longer be such. But only for them.

If the Tax Code can be manipulated to support or punish industries based on who is or is not popular with the political forces of the day, can any industry be confident they aren’t next? Additionally, toward the broader economic wellness, would any investor or company choose to place their money in a country where such whims would determine if their investment made any return?

The conversation itself seems odd. If advertising by this segment of American business is so problematic, you would expect a large-scale movement in Congress proper to prohibit pharmaceutical marketing. It just happened (again) for the Tobacco industry, but pharmaceuticals were not addressed.

The industry understands the sensitivity and the desire to balance consumer health benefits with the cost of healthcare. Both the ANA and the AAAA, along with PhRMA, are all working with the current Presidential Administration to draft new guidelines to deliver that balance. Wouldn't it be great if the HW&MC joined that process, rather than spend taxpayer time and money to draft a rule that will likely need to survive Supreme Court review (if it can) before it possible goes into effect?

- Michael Day, CFO at Saatchi & Saatchi Healthcare Communications Group


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