Requires manufacturers and labelers of prescription drugs dispensed in this state which engage in marketing activities in the state to annually report marketing expenses to the department of health; imposes a $10,000 civil fine for failure to report; eliminates deductibility for certain expenses incurred in the advertising of prescription drugs.
TITLE OF BILL: An act to amend the public health law, in relation to requiring the manufacturer or labeler of each prescription drug to annually report the marketing costs of such drug to the department of health and to amend the tax law, in relation to eliminating deductibility for certain expenses incurred in the advertising of prescription drugs
PURPOSE: To require manufacturers and labelers of prescription drugs dispensed in this state to annually report marketing expenses to the department of health and to eliminate certain tax deductions by pharmaceutical companies for costs incurred for advertising.
SUMMARY OF PROVISIONS:
Section 1 sets forth the legislative intent of the bill.
Section 2 of the bill amends section 206 of the public health law by adding a new subdivision 29.
-Requiring the commissioner to collect marketing data and information from prescription drug manufacturers marketing their products in New York.
-Sets forth definitions of terms used in the bill and sets forth the rules and requirements for reporting and establishes the different marketing activities that must be reported.
-Requires the commissioner to biannually submit a report on prescription drug marketing costs to the Governor, speaker of the Assembly, and Temporary President of the Senate.
-Sets forth the confidentiality of information collected pursuant to this law and sets forth the penalties for failure of compliance with this law.
Sections 3 and 4 of the bill amend the tax law to prohibit tax deductions by manufacturers or distributors of drugs to be distributed to consumers for costs incurred for the advertising of such drugs.
JUSTIFICATION: Over the past few years, Americans have been exposed to skyrocketing prescription drug costs. In no small part, the rise in health care has been driven by the constantly escalating prices of prescription drugs. While prescription drugs do not make up the largest category of health care spending, they do represent the category with the fastest increasing costs. Between 1995 and 2000, the growth inprescription drug costs was two to five times faster than the cost growth in either hospital care or physician services. In 2000 alone, prescription drug spending increased by 17 percent.
In a recent joint public hearing, the Senate Committees on Investigations and Government Operations, and the Senate Committee on Aging, probed the factors behind the rising costs of prescription drugs. Two significant factors contributing to the increase in prescription drug costs are the large annual profits of drug companies and the dramatic increase in promotional spending by pharmaceutical manufacturers. Drug companies, however, argue that prices are high due to the high cost of research and development (R&D). Although estimates place investment in R&D by drug companies at only 2 percent of industry revenue. Promotional advertising by drug manufacturers is a driving factor behind the rising costs of pharmaceutical drugs.
While there is no question that R&D is important, the industry's constantly stellar profitability indicates that prescription drug prices more than cover the costs of research and development and its associated risks. Additionally, R&D costs are partly paid by taxpayers through tax credits and government sponsored research through organizations such as the National Institute of Health (NIH).
In addition to profits, promotional spending by drug manufacturers plays a major role in keeping drug costs high. According to the Raiser Family Foundation, since 1996 promotional spending by drug manufacturers has increased by 60 percent. Promotional spending by drug manufacturers includes paying for television commercials, giving free drug samples to physicians, and taking physicians and their staffs on expensive trips.
It is in the best interest of New York State, in its role as a purchaser of prescription drugs and an administrator of prescription drug programs, to determine the scope of prescription drug marketing costs and their effect on the cost, utilization, and delivery of health care services.
In 1997, the FDA relaxed its guidelines for direct to customer advertisements of pharmaceuticals, since that time, there has been an onslaught of marketing in an attempt to influence a patient's choice of a drug. These efforts have become an essential part of manufacturer's marketing plans, resulting in an increase from $843 million in 1997 to annual costs in the billions for print and broadcast advertising. This change has also resulted in an increase in the number of prescriptions written: fifteen months into the relaxation of the guidelines, one heavily marketed drug saw an increase in sales of more than one hundred times that of prescriptions written prior to advertisement.
This controversial new marketing technique, opposed by the American Medical Association, undermines the patient-physician relationship by encouraging consumers to ask for advertised products by name. As "patient choice" becomes an increasingly popular concept, physicians are being relegated to a passive role where, upon demand, the patient receives a prescription for the advertised drug 73% of the time. The benefits DTC advertising provides to the public are questionable at best, as misconceptions about this type of advertising appear to be extensive. A recent survey reveals that 43% of the individuals polled
believed that only "completely safe" drugs could be advertised directly to consumers, while 21% thought only "extremely effective" drugs could by marketed in this way. An AARP Executive Summary notes that most persons fail to take away key information from the advertising and that consumers age 60 and over appear to obtain less information from the ads than others.
Historically, with regard to prescription drugs, our courts have created an exception to the traditional duty of manufacturers to warn consumers directly of risks associated with their products because they warned health care providers of those risks. This made sense in an era of "doctor knows best," when pharmaceutical manufacturers directed all of their sales efforts at physicians and never at consumers.
In light of the recent, and expensive, mass marketing of prescription drugs, manufacturers should no longer be relieved of the duty to properly warn their advertising targets about the dangers of their products. Just as the manufacturers can make direct claims about the efficacy of its products, so should that manufacturer warn of its risks. By advertising directly to the patient, manufacturers make the patient an active participant in the decision to use the drug and cannot, therefore, claim the potential adverse effects of using the drug are so complex that they can only be communicated to physicians.
Advertising prescription drugs is effective. If it were not, manufacturers would not continue to pursue their annual multi-billion dollar efforts to peddle their wares. It is shameful enough that pharmaceutical manufacturers continually pass these costs on to customers, one effect of which is an annual increase in the cost of drug benefits of more than 20%.
Therefore, the state-provided incentive allowing tax deductions for this type of advertising by pharmaceutical manufacturers should be prohibited.
FISCAL IMPLICATIONS: Minimal administrative costs associated with data collection, enforcement, and reporting but an unknown increase in revenue is also expected from the elimination of deductibility.
EFFECTIVE DATE: This act shall take effect 180 days after it shall have become law, except for any rules which may be necessary for its implementation.
STATE OF NEW YORK ________________________________________________________________________ 3270 2013-2014 Regular Sessions IN SENATE January 31, 2013 ___________Introduced by Sen. KRUEGER -- read twice and ordered printed, and when printed to be committed to the Committee on Health AN ACT to amend the public health law, in relation to requiring the manufacturer or labeler of each prescription drug to annually report the marketing costs of such drug to the department of health and to amend the tax law, in relation to eliminating deductibility for certain expenses incurred in the advertising of prescription drugs THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: Section 1. Legislative intent. The legislature hereby finds and declares that the price of prescription drugs in this state and across the nation has been increasing at an alarming rate over the past decade. Prescription drug costs are increasing at a faster rate than any other component of health care and are driving the increase in overall health care cost. As is apparent by the ubiquitous nature of the marketing and public information campaigns relating to prescription drugs, pharmaceu- tical manufacturers put a great deal of resources into marketing their products. This has been especially true since the 1997 relaxation of federal laws relating to prescription drug advertising. It is in the interest of assisting this state in its role as a purchaser of prescription drugs and administrator of prescription drug programs, to enable the state to determine the scope of prescription drug marketing costs and their effect on the cost, utilization and delivery of health care services, and thus further the role of this state as guardian of the public interest. S 2. Section 206 of the public health law is amended by adding a new subdivision 29 to read as follows: 29. THE COMMISSIONER IS AUTHORIZED AND DIRECTED TO REQUIRE MANUFACTUR- ERS OR LABELERS OF PRESCRIPTION DRUGS, WHICH DISPENSE SUCH DRUGS IN THIS STATE AND WHICH EMPLOY, DIRECT OR UTILIZE MARKETING REPRESENTATIVES INEXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD01521-01-3 S. 3270 2
THE STATE, TO REPORT THE MARKETING COSTS OF EACH OF ITS PRESCRIPTION DRUGS DISPENSED IN THIS STATE. (A) DEFINITIONS. AS USED IN THIS SUBDIVISION, UNLESS THE CONTEXT CLEARLY INDICATES OTHERWISE, THE FOLLOWING TERMS SHALL HAVE THE FOLLOW- ING MEANINGS: (I) "LABELER" MEANS ANY PERSON OR ENTITY, HAVING A LABELER CODE FROM THE FEDERAL FOOD AND DRUG ADMINISTRATION, THAT RECEIVES A PRESCRIPTION DRUG FROM THE MANUFACTURER OR A WHOLESALER OF SUCH DRUG, AND REPACKAGES SUCH DRUG TO BE DISPENSED IN THIS STATE. (II) "MANUFACTURER" MEANS A MANUFACTURER OF PRESCRIPTION DRUGS DISPENSED IN THIS STATE, AND SHALL INCLUDE THE SUBSIDIARY OR AFFILIATE OF SUCH MANUFACTURER. (III) "MARKETING" MEANS ADVERTISING AND PROMOTIONAL ACTIVITIES FOR PRESCRIPTION DRUGS DISPENSED IN THIS STATE INCLUDING, BUT NOT LIMITED TO, THOSE ACTIVITIES DESCRIBED IN PARAGRAPH (B) OF THIS SUBDIVISION. (B) MANNER OF REPORTING. ON OR BEFORE JULY FIRST EACH YEAR EVERY MANUFACTURER AND LABELER SHALL FILE A REPORT WITH THE DEPARTMENT ON ITS MARKETING ACTIVITIES CONDUCTED IN THIS STATE. SUCH REPORT SHALL BE SUBMITTED IN SUCH FORM AND MANNER, AND INCLUDE THE PAYMENT OF SUCH A FEE AS SHALL BE DETERMINED BY THE COMMISSIONER. EACH SUCH REPORT SHALL INCLUDE THE VALUE, NATURE, PURPOSE AND RECIPIENT OF MARKETING EXPENSES INCLUDING, BUT NOT LIMITED TO: (I) ALL EXPENSES ASSOCIATED WITH ADVERTISING, MARKETING AND DIRECT PROMOTION OF PRESCRIPTION DRUGS THROUGH RADIO, TELEVISION, MAGAZINES, NEWSPAPERS, DIRECT MAIL AND TELEPHONE COMMUNICATIONS AS THEY PERTAIN TO RESIDENTS OF THIS STATE; (II) WITH REGARD TO ALL PROVIDERS OF HEALTHCARE SERVICES REGULATED BY THE DEPARTMENT UNDER THE PROVISIONS OF ARTICLE TWENTY-EIGHT, THIRTY-SIX OR FORTY-FOUR OF THIS CHAPTER, INCLUDING HEALTH MAINTENANCE ORGANIZA- TIONS ESTABLISHED PURSUANT TO ARTICLE FORTY-THREE OF THE INSURANCE LAW, THE FOLLOWING INFORMATION: (A) ALL EXPENSES ASSOCIATED WITH EDUCATIONAL OR INFORMATIONAL PROGRAMS, MATERIALS AND SEMINARS, AND REMUNERATION FOR PROMOTING OR PARTICIPATING IN EDUCATIONAL OR INFORMATIONAL SESSIONS, REGARDLESS OF WHETHER THE MANUFACTURER OR LABELER PROVIDES THE EDUCATIONAL OR INFORMA- TIONAL SESSIONS OR MATERIALS, (B) ALL EXPENSES ASSOCIATED WITH FOOD, ENTERTAINMENT AND GIFTS VALUED AT MORE THAN SEVENTY-FIVE DOLLARS, AND ANYTHING PROVIDED TO A HEALTH CARE PROFESSIONAL FOR LESS THAN MARKET VALUE, (C) ALL EXPENSES ASSOCIATED WITH TRIPS AND TRAVEL, AND (D) ALL EXPENSES ASSOCIATED WITH PRODUCT SAMPLES, EXCEPT FOR SAMPLES THAT WILL BE DISTRIBUTED FREE OF CHARGE TO PATIENTS; AND (III) THE AGGREGATE COST OF ALL EMPLOYEES AND CONTRACTORS OF THE MANUFACTURER OR LABELER WHO DIRECTLY OR INDIRECTLY ENGAGE IN THE ADVER- TISING OR PROMOTIONAL ACTIVITIES LISTED IN SUBPARAGRAPHS (I) AND (II) OF THIS PARAGRAPH, INCLUDING ALL FORMS OF PAYMENT TO SUCH EMPLOYEES AND CONTRACTORS. THE COST REPORTED PURSUANT TO THIS SUBPARAGRAPH SHALL REFLECT ONLY THAT PORTION OF PAYMENT TO EMPLOYEES AND CONTRACTORS THAT PERTAINS TO ACTIVITIES WITHIN THIS STATE OR TO RECIPIENTS OF THE ADVER- TISING OR PROMOTIONAL ACTIVITIES WHO ARE RESIDENTS OF OR ARE EMPLOYED IN THIS STATE. (C) EXCEPTIONS. THE FOLLOWING MARKETING EXPENSES SHALL NOT BE SUBJECT TO THE REPORTING REQUIREMENTS OF THIS SUBDIVISION: (I) EXPENSES OF SEVENTY-FIVE DOLLARS OR LESS;S. 3270 3
(II) REASONABLE COMPENSATION AND REIMBURSEMENT FOR EXPENSES IN CONNECTION WITH A BONA FIDE CLINICAL TRIAL OF A NEW VACCINE, THERAPY OR TREATMENT; AND (III) SCHOLARSHIPS AND REIMBURSEMENT OF EXPENSES FOR ATTENDING A SIGNIFICANT EDUCATIONAL, SCIENTIFIC OR POLICY-MAKING CONFERENCE OR SEMI- NAR OF A NATIONAL, REGIONAL OR SPECIALTY MEDICAL OR OTHER PROFESSIONAL ASSOCIATION IF THE RECIPIENT OF THE SCHOLARSHIP IS CHOSEN BY THE ASSOCI- ATION SPONSORING THE CONFERENCE OR SEMINAR. (D) DEPARTMENT REPORTS. ANNUALLY ON OR BEFORE NOVEMBER THIRTIETH, THE DEPARTMENT SHALL SUBMIT A REPORT, PROVIDING INFORMATION IN AGGREGATE FORM, ON PRESCRIPTION DRUG MARKETING EXPENSES TO THE GOVERNOR, TEMPORARY PRESIDENT OF THE SENATE AND SPEAKER OF THE ASSEMBLY. ON OR BEFORE JANU- ARY FIRST, TWO THOUSAND FOURTEEN AND EVERY TWO YEARS THEREAFTER, THE DEPARTMENT SHALL PROVIDE A REPORT TO THE GOVERNOR, TEMPORARY PRESIDENT OF THE SENATE AND SPEAKER OF THE ASSEMBLY, PROVIDING INFORMATION IN AGGREGATE FORM, CONTAINING AN ANALYSIS OF THE DATA SUBMITTED TO THE DEPARTMENT, INCLUDING THE SCOPE OF PRESCRIPTION DRUG MARKETING ACTIV- ITIES AND EXPENSES AND THEIR EFFECT ON THE COST, UTILIZATION AND DELIV- ERY OF HEALTH CARE SERVICES AND ANY RECOMMENDATIONS WITH REGARD TO MARKETING ACTIVITIES OF PRESCRIPTION DRUG MANUFACTURERS AND LABELERS. (E) CONFIDENTIALITY; PUBLIC INFORMATION. NOTWITHSTANDING ANY PROVISION OF LAW TO THE CONTRARY, ALL INFORMATION SUBMITTED TO THE DEPARTMENT PURSUANT TO THIS SUBDIVISION SHALL BE CONFIDENTIAL AND NOT A PUBLIC RECORD AS DEFINED IN SECTION EIGHTY-SIX OF THE PUBLIC OFFICERS LAW. DATA COMPILED IN AGGREGATE FORM BY THE DEPARTMENT FOR THE PURPOSES OF REPORT- ING REQUIRED BY THIS SUBDIVISION SHALL BE A PUBLIC RECORD AS DEFINED IN SECTION EIGHTY-SIX OF THE PUBLIC OFFICERS LAW, AS LONG AS IT DOES NOT REVEAL TRADE INFORMATION THAT IS PROTECTED BY STATE OR FEDERAL LAW. (F) VIOLATIONS. ANY PERSON WHO VIOLATES ANY PROVISION OF THIS SUBDIVI- SION SHALL BE LIABLE TO THE PEOPLE OF THE STATE FOR A CIVIL PENALTY OF TEN THOUSAND DOLLARS, PLUS COURT COSTS AND ATTORNEYS' FEES, WHICH SHALL BE ENFORCED PURSUANT TO TITLE TWO OF THIS ARTICLE. (G) RULES. ANY AND ALL RULES AND REGULATIONS NECESSARY TO IMPLEMENT THE PROVISIONS OF THIS SUBDIVISION SHALL BE PROMULGATED BY THE COMMIS- SIONER. S 3. Paragraph (b) of subdivision 9 of section 208 of the tax law is amended by adding a new subparagraph 21 to read as follows: (21) EXPENSES INCURRED BY A MANUFACTURER OR DISTRIBUTOR OF A DRUG, THE DISPENSING OF WHICH TO A CONSUMER WITHOUT A PRESCRIPTION IS PROHIBITED BY EITHER FEDERAL OR STATE LAW, FOR THE ADVERTISING OF SUCH DRUG TO CONSUMERS. S 4. Subsection (b) of section 612 of the tax law is amended by adding a new paragraph 40 to read as follows: (40) EXPENSES INCURRED BY A MANUFACTURER OR DISTRIBUTOR OF A DRUG, THE DISPENSING OF WHICH TO A CONSUMER WITHOUT A PRESCRIPTION IS PROHIBITED BY EITHER FEDERAL OR STATE LAW, FOR THE ADVERTISING OF SUCH DRUG TO CONSUMERS. S 5. This act shall take effect on the one hundred eightieth day after it shall have become a law; provided that effective immediately, any rules and regulations necessary to implement the provisions of this act on its effective date are authorized to be made on or before such effec- tive date and provided further that the provisions of sections three and four of this act shall take effect immediately and shall apply to taxa- ble years beginning on or after January first of the year in which it shall have become a law.