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Please note!
This fact brief was originally published as an experiment to test the concepts behind fact briefs.
Readers should be aware that while there is still a lot of useful information in fact briefs like this one, not all of them reflect Gigafact's current methods and standards for fact briefs. If you come across any that you feel are out of date, don't hesitate to contact us at support@gigafact.org.

Can pharmaceutical companies deduct the cost of advertising expenses from their federal taxes?

By Esther Tsvayg
YES

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.

This fact brief is responsive to conversations such as this one.
ABOUT THE CONTRIBUTOR
Between 2020 and 2022, under close editorial supervision, Gigafact contracted a group of freelance writers and editors to test the concepts for fact briefs and provide inputs to our software development process. We call this effort Gigafact Foundry. Over the course of these two years, Gigafact Foundry writers published over 1500 fact briefs in response to claims they found online. Their important work forms the basis of Gigafact formats and editorial guidelines, and is available to the public on Gigafact.org. Readers should be aware that while there is still a lot of relevant information to be found, not all fact briefs produced by Gigafact Foundry reflect Gigafact's current methods and standards for fact briefs. If you come across any that you feel are out of date and need to be looked at with fresh eyes, don't hesitate to contact us at support@gigafact.org.
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