Q&A: How the Drug Business May Lose the Right to Advertise

With a new president and a Democrat-controlled Congress, lobbyists are already contemplating a scenario in which the drug business either loses or gives up the right to advertise its products to consumers. Such a move would be dramatic, ending a brief, wild decade of animated toenail fungus monsters and warnings of four-hour erections on TV. But companies may have to do it in order to fight larger battles over reimportation, and pill manufacturing in uninspectable foreign factories.

BNET had a conversation with Adonis Hoffman, legal counsel to the American Association of Advertising Agencies. Hoffman attended the board meeting of the AAAA in which President-elect Barack Obama’s new chief of staff, Rahm Emanuel, suggested that Congress should consider whether the pharma business should keep its tax deductibility of R&D and advertising expenses.

I asked him for details of the conversation with Emanuel, and Hoffman volunteered that as Pharma would likely be on the defensive for the next few years the business may consider giving up the right to advertise as a tactical move to preserve its other privileges and protections. (In fact PhRMA is already drawing up new voluntary rules that will further restrict drug companies’ advertising.)

BNET: How did the subject of ending tax deductibility for drug advertising come up with Rahm Emanuel?

Adonis Hoffman: In response to an earlier question he had talked about drug advertising. He said, everything’s on the table for your industry, and that means deductibility

BNET: Have you heard any other Congress member or administration official say anything like that?

Hoffman: Nothing as specific and pointed as that. It was quite sobering for an audience of marketers and advertising people. There’s a been a distinction between the amount spent of R&D and the amount spent on advertising and marketing, people say companies spend more on advertising — it’s not true. But you get this R&D piece and you also get this advertising expenditure. Rahm’s point was, in an era where revenue raising is an objective we would look at that and force companies to make a choice, deductibility of R&D or advertising.

BNET: Do you think Congress will look at this when it gets to healthcare reform?

Hoffman: Whenever you open that box you get to DTC advertising. It may not happen in the first 60 days but down the road when Congress gets organized. Once it’s settled in and they get down to work — and it’s not an election year.

BNET: But now Emanuel is not a legislator. As Obama’s chief of staff this has got to be much further down his agenda, behind the Iraq war and the economy.

Hoffman: I would think it’s much further down. He’s got a lot on his plate

BNET: Are you guys going to fight Obama if he comes after DTC deductibility?

Hoffman: We could challenge that on First Amendment grounds. There’s a line of cases that cut in our favor. It becomes a losing battle on the part of Congress - who wants to fight that battle? Pharmaceutical companies could decide it would be in their best interests not to pursue this DTC battle because they have larger battles to fight, such as reimportation, foreign manufacturing, and intellectual property. They could say, ‘We don’t want to fight that battle, here, we’ll give this up.’ Whether it’s self-regulation or not in essence it will do away with the category.

BNET: That would be very dramatic, if DTC ads just came to an end.

Hoffman: It would probably slip away. I don’t think it would be here today and gone tomorrow. If they don’t want to fight the regulatory battle they may not even bother. Couple that with the approval process and DDMAC and you get a situation which makes it impossible to continue. Rep. Rosa L. DeLauro (D-Conn.) wants additional language in drugs ads on TV, so it becomes a revenue issue as well. You’ve got a small group of big obstacles that make it impossible to go forward. They might want to reinvest those dollars into other forms of marketing.

(This interview was edited for flow.)