July 15, 2002

Legislative Activity

Date: July 15, 2002

To: >Council of Governors, Club Presidents, Legislative Chairs and Executive Directors

From: Jeff Perlman, EVP-Government Affairs
Clark Rector, SVP-State Government Affairs
Jennifer Akridge, Coordinator-Government Affairs

Re: URGENT - Action Requested

Sen. Debbie Stabenow (D-MI) has indicated that she plans to offer an Amendment to the Medicare Bill limiting the tax deductibility of DTC advertising to an amount not to exceed what the company spends on research. The Senate will begin debating the Medicare Bill as early as today. The Stabenow Amendment could come up at any time this week. This Amendment is obviously bad for DTC advertising. But, the Amendment sets a precedent by which the deductibility of advertising could be limited by the failure of any company to meet a random, unrelated, standard.

Contrary to Senator Stabenow's rhetoric, the business tax deduction for advertising is not a government subsidy. Advertising is an ordinary and legitimate business expense. If the government subsidizes advertising, then it also subsidizes rent, salaries, research and development and all other deductible expenses. Our tax code taxes a company's profits, the revenues remaining after legitimate expenses are deducted — including advertising. Senator Stabenow's reasoning is flawed.

Senator Stabenow's Amendment would create a horrible precedent for other products. Should the government use a similar strategy for automobiles to reduce pollution or increase gas mileage? How about to discourage the sale or creation of so-called "junk" foods? Or encourage the development of more "educational" toys? The list of potential targeted products is endless.

Senator Stabenow is operating under the misguided premise that DTC advertising is a negative phenomenon. In fact, DTC advertising provides great benefits to consumers. FDA surveys have confirmed that millions of Americans have visited their doctors to talk about a medical condition for the first time as a result of having seen a DTC advertisement. Such a result can only result in tremendous benefits to public health.

Contrary to the fears of Stabenow and other critics, DTC advertising does not result in patients' receiving unneeded medications. Such an argument totally disregards the role of the doctor in prescribing the medications. Again according to the FDA, half of the patients who request a particular pharmaceutical do not receive that drug. Most doctors do not complain that they are pressured to prescribe unneeded medications.

Finally, Senator Stabenow's Amendment violates American principles of free speech. The U.S. Supreme Court has confirmed that truthful advertising about legal products and services is protected by the First Amendment to the Constitution.

We urge you to immediately contact your senators and urge their opposition to this Amendment. Please pass this important message on to your entire club membership. Time is of the essence, because the debate will begin today and we do not know when the Stabenow Amendment will be debated.

A one or two paragraph e-mail is adequate. You may use the explanation we have written above although, please put it in your own words. Alternatively, click herefor talking points, which industry uses to express its opposition. Please feel free to draft your e-mail based on these talking points. When you send your e-mail, please send a copy to us at governmentrelations@aaf.org.

Also attached, are e-mail addresses for most senators. If your senator's addressed is unlisted go to www.senate.govwhere you can link to your senators Web page which will provide an opportunity to send an e-mail.