Can pharmaceutical companies deduct the cost of advertising expenses from their federal taxes?
The Internal Revenue Service treats consumer advertising as a business expense, making it tax-deductible for for-profit pharmaceutical companies.
Democratic senators have introduced legislation to eliminate deductibility for drug makers' ad spending, arguing it drives up drug costs. Tax analysts note that lower rates enacted in 2017 have reduced the value of the deductions, blunting the measure's impact. Others argue for using regulations to address any issues created by excessive spending.
Over the past two decades, ad spending by drug manufacturers has more than quadrupled. Drug advertising represented the third-highest category of advertising expenditures in 2014. Economists estimate that direct-to-consumer-advertising contributed to a 31% growth in drug spending between 1997 and 2010.
