Coalition’s Policy Update: Keep Fiscal Challenges, Privacy Regulation on Radar

Jan. 15, 2013 – If 2012 – with its high number of new drug approvals, senior staff stability within the FDA and the Department of Health & Human Services (HHS) and a definitive decision about the Affordable Care Act (ACA) – is an indicator, then the 2013 Washington outlook for pharmaceutical companies is promising. However, the industry must continue to monitor key issues – especially taxes and privacy – that could send dark clouds over this year, according to speakers at the Jan. 9 Coalition for Healthcare Communication policy update meeting held in New York.

Kate Rawson, contributing editor at Prevision Policy, told meeting attendees that the agency’s record number of new drug approvals – 39 in 2012 – is clearly a plus for pharma. Further, under a new FDA drug approval program, which focuses on novel drugs with more meetings and additional transparency, the prospects for new drug candidates is “as good as it gets,” Rawson said. The FDA Safety and Innovation Act (FDASIA) also provides incentives for antibiotics, a biosimilar pathway, resources for generic drug reviews and a focus on the supply chain.

Further, the U.S. Supreme Court decision on the ACA is generally positive for pharma companies, Rawson indicated, both because it resolves the uncertainty around ACA implementation and, according to Centers for Medicare & Medicaid estimates, should boost drug spending by 2014. However, Rawson added that states may opt out of Medicaid expansion and noted that the impact of the ACA-mandated Independent Payment Advisory Board (IPAB) – a 15-member board that will determine what Medicare will pay for and where cuts should be made – remains unclear. The evolution of the as-yet-unnamed board is an issue that industry “definitely needs to keep an eye on,” Rawson said. [See Rawson's slides for more information.]

And, although a new Congress is in place, it is facing many of the same fiscal challenges as the previous Congress, according to Coalition Executive Director John Kamp. “Policy wonks, Wall Street and Washington all remain focused on debt, the economy, sequester deadlines and tax cuts,” he said. “Tax and spending policy changes define the battles, but mostly it is a question of how quickly lawmakers will reduce the deficit and how deep the cuts will be. There is incredible pressure to avoid cuts in defense, Medicare and

Social Security, so this is a very dangerous time for any tax expenditure, including the deductibility of marketing.” Industry experts fear that significant tax code reform in 2013 is inevitable and could affect the medical marketing tax deduction. “The danger cannot be ignored. No tax idea, good or bad, goes away,” Kamp said. “Every time a Senator or a member of Congress needs several extra billion dollars, our industry will be at risk.”

Pharma companies also need to track any privacy legislation coming out of this Congress, Kamp advised. Many policymakers are pleased with the progress of industry self-regulation of data collection, but others, including Sen. Jay Rockefeller (D-W. Va.), chair of the Senate Commerce Committee, appear committed to legislation that would give the Federal Trade Commission greater power to require consumers to “opt in” before data collection, even for information that does not identify a specific person.

A topic carried forward from 2012 is the impending issuance of the final “Sunshine Act” rules, which will make transparent any payments provided by industry to physicians. In its comment to HHS on the proposed rules, the Coalition stated that HHS must enable industry to provide context and verify the accuracy of payment reports to ensure that the public, the press and policymakers understand the purpose and public health value of industry-physician collaborations, Kamp explained. Another issue to watch in 2013 is how the FDA responds to the U.S. Second Circuit Court of Appeals decision in U.S. v. Caronia, which states that truthful, nonmisleading communication between sales reps and physicians is speech protected by the First Amendment and cannot be used as evidence of misbranding. “The decision in this case undermines the regulatory basis for all FDA marketing enforcement and most HHS IG/state ‘false claim’ settlements,” Kamp told Coalition meeting attendees. [See Kamp's slides for more details.]

With all of these areas to focus on, “2013 will be an interesting year for the pharma industry, and there is no better time to become more actively engaged to preserve the true purpose of medical marketing: getting truthful information about treatments out to physicians and their patients,” Kamp said.

Advertising Tax Deduction “at Risk,” Davidson Says

Dec. 12, 2012 – An ongoing push to eliminate the tax deduction for prescription drug advertising may actually move forward for a number of reasons, according to Jim Davidson, Executive Director, The Advertising Coalition, who spoke at a recent Medivo BTP

“Leadership Series” meeting held at The New York Times.

“Jim Davidson’s update on Capitol Hill’s approach to medical marketing policy helps underscore the importance of vigilance and good representation in Washington,” said Coalition for Healthcare Communication John Kamp. “If the medical marketing tax issue raises its ugly head again, Coalition members will be called upon to do their part in educating Members of Congress about the importance of medical marketing to patients and the U.S. economy,” he said.

The full Beyond the Pill article covering Davidson’s presentation is listed below:

Tax Reform Efforts Put DTC Advertising ‘Deduction’ at Risk

By Mark Tosh · December 11, 2012

It seems like an old story, or now one that comes up about every year at budget time: some legislators on Capitol Hill want to eliminate the tax deduction permitted for prescription drug advertising.

This time around, direct-to-consumer (DTC) advertising finds itself as a chip in the ongoing discussions about tax reform.

This was one of the messages that Washington policy expert Jim Davidson delivered during his presentation at a recent Medivo BTP “Leadership Series” breakfast at The New York Times. Marketing and policy executives from several NYC-area companies attended the breakfast, along with executives of The New York Times and advertising agencies with New York-area offices.

“For the first time, advertising is really seriously at risk in the tax code because people see a huge pot of gold,” Davidson said. “Why is it at risk? Because you can easily alter the deduction as a business expense and make a lot of money. And it is not a rate increase, which meets the Republican objective.”

In addition, in the current negotiations on tax reform, Davidson said the discussion about eliminating the cost of advertising as a business expense has been extended to include “all advertising” and not just ads for prescription drugs.

The idea of taking away the tax deduction allowed to companies for advertising expense, specifically as it relates to DTC, has been around for several years. Indeed, there are some estimates that this move would raise about $37 billion over a 10-year period for the federal government.

“Even in Washington today, that’s a lot of money,” Davidson noted. “So it’s a very serious risk and it’s one that will continue to dog us.” He noted that the concept of wiping out the tax deduction for pharmaceutical advertising — and this would include both consumer and professional ads — has come up in every two-year session of Congress for the past decade. Nonetheless, he noted that advocates for pharmaceutical marketing are taking the threat “seriously.”

Elimination of Marketing Expense Tax Deduction Still Possible, Senator Says

By John Kamp, Executive Director, Coalition for Healthcare Communication

May 18, 2012 — Sen. Claire McCaskill (D-Mo.) told a group of senior advertising executives this morning at the AAAA’s New York offices that elimination of the deduction for marketing expenses remains possible, especially during the “lame duck” session of Congress following the November election.

“I wish I could tell you that you don’t need to worry, but the Congress needs to identify $4-5 trillion in combined spending cuts and new revenues,” McCaskill said. “With the deduction for popular items such as the home mortgage deduction on the list, you can bet relatively obscure items with be there, too,” she remarked.

McCaskill reminded the heads of the ANA, the AAAA, the Internet Advertising Bureau, the Coalition for Healthcare Communication and others that after the failure of the SuperCommittee to come up with the needed cuts, several “automatic triggers” will take effect on Jan. 1, 2013, that reduce funding for defense, Medicare, and other programs, as well as eliminate the Bush tax cuts.

The senator opened her discussion focusing on the multiple privacy proposals she said would “blow a hole in the profitability of Internet advertising business in this country.” She further opined that “neither the White House, the FTC, nor many senators understand how dangerous these proposals are and could easily vote for them.” She also noted that several private companies, including

Mozilla Firefox, are working on browsers that effectively “visualize” data gathering on a browser and how to avoid it.

For more information on this session, please contact John Kamp at: jkamp@wileyrein.com