Tired of seeing drug commercials on television as health care costs continue to rise across the state?
So are some Maryland health care advocates, who are pushing a bill to remove state tax exemptions for pharmaceutical ads, arguing that those funds would be better used to boost health care coverage in Maryland.
“America is one of only two nations – America and New Zealand — that allow direct-to-consumer advertisement by drug corporations,” said Vincent DeMarco, president of Maryland Health Care for All. “There is no reason for Marylanders to subsidize this. We should put care over commercials.”
He was testifying before the Senate Budget and Taxation Committee Wednesday on Senate Bill 987, Sen. Karen Lewis Young’s (D-Frederick) bill that would prohibit pharmaceutical companies from taking direct-to-consumers advertising expenses off their state corporate tax return.
The move would bring in at least $5 million a year in additional revenue, according to a fiscal note with the bill. The state would be required to dedicate the $5 million to the Department of Health to boost Medicaid eligibility operations, which are expected to need more staff and technological upgrades to keep up with new federal restrictions on who qualifies for the federal health care plan.
Remaining funds would go toward state subsidies on Maryland’s Affordable Care Act marketplace. State lawmakers last year created a temporary subsidy to compensate for the loss of federal tax credits that kept ACA plans more affordable. But with a tight budget this year, and more budget deficits expected down the line, those subsidy accounts are at risk of running out of money by next year, unless lawmakers can find a sustainable source of funding.
Right now, companies can write off costs for advertisements as a business expense. That includes pharmaceutical companies that pay to advertise brand names for prescription drugs and drive awareness among consumers.
Meanwhile, consumers are struggling to afford prescription drugs and other health care needs.
PhRMA, a powerful lobbying group representing pharmacy manufacturers, argues that the rising costs of prescription drugs are driven by the the billions drug companies have to spend on research and development of new products.
But advocates argue that some companies spend more on executive salaries, stock buybacks and advertising than they do research and development.
“It’s a question of priorities,” said Paul Schwartz, with the National Active and Retired Federal Employees Association, in testimony to the committee. “What I’m basically asking is that we take a look and maybe reinvest this money from a tax break for the pharmaceutical industry on their advertising and reinvest that money to lower health care costs.”
But Josh White with PHRMA said Wednesday that it’s not just a question of a tax exemption. The bill could pose a challenge to the First Amendment rights of pharmaceutical companies.
“Rather than focusing on affordability issues and access, this creates a punitive tax on a single industry,” White argued in opposition to SB 987. “If enacted, Maryland would become the only state in the country to impose a tax tied to pharmaceutical manufacturers’ communications with patients about FDA-approved medicines … The bill singles out one industry for a unique treatment and poses a tax tied to the content of communications about life-saving treatments.”
The constitutionality question was raised during a hearing last month on the House version of the legislation, House Bill 484. The bill sponsor, Del. Natalie Ziegler (D-Howard and Montgomery) asked the Attorney General’s office to weigh in on the question.
Assistant Attorney General Shaunee L. Harrison last week issued a letter of advice, not an official opinion, which said the legislation “is not clearly unconstitutional and is defensible if challenged under the First Amendment,” so long as Maryland could prove that it has a substantial state interest.
With a month left in the legislative session, there’s still time for the legislation to move out of either committee.
The House version of the bill has not yet been voted out of the Ways and Means Committee. The Senate version was voted out of the Rules Committee, where bills often are left to languish without a vote until the end of session.
Once moved out of Rules, SB 987 was assigned to Budget and Taxation Committee, increasing its chances of passage before the end of the session. But no vote has been scheduled yet on the bill.