No Handouts for Drug Advertisements Act
The No Handouts for Drug Advertisements Act would change the Internal Revenue Code to disallow any tax deduction for advertising and promotional expenses related to direct-to-consumer (DTCA) advertising of certain drugs. Specifically, if a sponsor of a prescription drug or an outsourcing facility that compounds drugs incurs DTCA costs (including ads on TV, radio, billboards, direct mail, or online/digital platforms) for covered drugs, those expenses could not be deducted for tax purposes. The bill defines what counts as DTCA, who is a “covered entity,” and what constitutes a “covered drug,” and it generally applies to amounts paid or incurred after the date of enactment for taxable years ending after enactment. The effect would be to raise the after-tax cost of marketing these drugs, potentially reducing DTCA spending and influencing how drugs are marketed to the public.
Key Points
- 1Disallowance of deduction: No deduction is allowed under the tax code for expenses related to direct-to-consumer advertising of covered drugs for any taxable year.
- 2What counts as DTCA: Direct-to-consumer advertising is any ad disseminated by or on behalf of a covered entity that targets the general public and relates to a covered drug, including broadcast and digital media. Ads in journals or periodicals are explicitly excluded from this definition.
- 3Who is a covered entity and what is a covered drug: A covered entity includes sponsors of prescription drug products or outsourcing facilities (503B) that own or operate the drug. A covered drug includes prescription drugs defined by the FDA Act or drugs compounded under 503A/503B compounding rules.
- 4Effective date: The rule applies to amounts paid or incurred after the enactment date, in taxable years ending after enactment.
- 5Scope of advertising: The bill focuses on DTCA intended for the general public; advertising directed solely to healthcare professionals is not described as DTCA under this provision.