- Noreen O'Leary

NEW YORK U.S. Sen. Bill Nelson, D-Fla., a key member of the Senate Finance Committee, has backed off from proposing an amendment to eliminate federal tax deductions for pharmaceutical advertising, sources said.

In a letter to the St. Petersburg Times published on Sept. 11, Nelson, widely considered Florida's most powerful Democrat in Washington, wrote: "I still intend to offer several significant amendments to the [healthcare] legislation, which, among other things, will help pay for the improvements and expansion of healthcare reforms. One of my amendments would require drugmakers to provide rebates to Medicare, just like they do to Medicaid. This would save Medicare a ton of money. Further, by eliminating the tax break drugmakers get for TV advertising, we would see another $37 billion over the next years to pay for healthcare."

In July, Charles Rangel, the New York Democrat who is chairman of the House Ways and Means Committee, backed away from a similar proposal after TV networks, publishers and ad trade organizations argued the tax change violated free speech and unfairly singled out drug manufacturers.

In his letter to the Times, Nelson said he helped prepare the legislation that was released today by Sen. Max Baucus, D-Mont., who is chairman of the Finance Committee.

Representatives from Sen. Nelson's office did not respond to a request for clarification of his position about ending the tax exemption for drug advertising.

"If they do this, it opens a major Pandora's box. An ad deduction is a necessary and ordinary business deduction," said one Washington, D.C., observer. "It's part of the tax code. Now, if you say some companies will get the deduction and some will not, does it come down to: who in the House and Senate do people like? When more money needs to be raised, who will be next? Companies selling alcohol, tobacco, fatty foods, movies with an 'R' or 'X' rating?"

Industry observers have taken issue with the $37 billion Nelson and Rangel have said would be raised by eliminating the advertising tax deduction. The pharmaceutical industry spent $4.3 billion on direct-to-consumer advertising for prescription drugs in 2008, per Nielsen.

While still the second-largest ad spender last year, behind the auto industry, that was 18 percent lower than in 2007 and the first drop in the fast-growing advertising category since the FDA approved DTC drug advertising in broadcast media in 1997.