AAF Government Report

July 9, 2009


Clark Rector Jr., Executive Vice President – Government Affairs





Prescription Drug Advertising Under Fire

Eliminating the tax deductibility of prescription drug advertising continues to be considered as a source of revenue to fund healthcare reform. The House Ways and Means Committee is scheduled to release its list of revenue raising measures on Friday, July 10. Committee Chairman Charles Rangel, D-N.Y. has been publicly quoted as favoring elimination of prescription drug advertising deductibility. AAF members across the country have sent countless emails and calls to committee members and their representatives in opposition to the proposal.
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FTC Official Targets Behavioral Marketing

The new Director of the Federal Trade Commission’s Consumer Affairs Bureau spoke recently to the American Bar Association. His comments, according to a blog from the law firm Arnold & Porter, were highly critical of industry’s behavioral marketing privacy policies. David Vladeck said that the commonplace policy of allowing consumers to opt out of online targeted advertising is not working because people do not understand the policies. He also said that focusing on consumer harm is inadequate because there are real privacy concerns where harm cannot be quantified.

Vladeck said he will take a “hard look” at behavioral advertising and advertising to vulnerable groups such as children. Vladeck indicated he will emphasize an aggressive pace in investigations and rulemaking. The new Director emphasized that he is an experienced litigator accustomed to bringing test cases. He suggested he is especially on the lookout for cases of economic frauds.
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Supreme Court Action

Last week’s flurry of Supreme Court decisions included two of considerable interest to the advertising community.

In the first, the Court agreed to consider whether cable companies can offer consumers digital video recorder services through a remote storage system without the use of home boxes. Studios and television networks believe that these services will greatly increase the use of DVRs and increase the likelihood that more consumers will choose to delete commercials. This, of course, could undermine the economic viability of much entertainment production.

When the case is argued the networks will argue that the remote DVR service is like video on demand and that the cable operators should pay licensing fees.

In the second case, the Supreme Court refused to hear the arguments of health care information publishers that their data mined for sale to pharmaceutical companies is protected by the First Amendment. The publishers had appealed a New Hampshire law making it a crime to use information gathered about the drugs a doctors prescribes in order to help increase pharmaceutical sales.

Publishers go to doctors to learn what illnesses they have treated and what medicines have been prescribed. This information is then sold to pharmaceutical companies to provide a better picture of the doctor’s practice. No patient names or identifying information is included with any of the information.
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Vermont Limits Doctor Gifts

Vermont has enacted a new law placing strict limitations on gifts and/or payments to doctors and how gifts and/or payments must be disclosed. The law generally bans gifts to doctors from pharmaceutical companies, medical device companies, and biologic products producers. When a gift and/or payment is permitted, the product that the company is marketing must be disclosed as well as the name of the recipient, address, affiliation and the gift and/or payment he or she has received. After review of the information by the Vermont Attorney General, the information will be available for public viewing.

Generally banned are payments, food, entertainment and travel unless it is an “allowable expenditure.” Exceptions include drug samples for free distribution to patients, short terms loan of medical devices for the purpose of evaluation, and journal articles and other items that serve a “genuine educational function.”

Some “fair market payments” such as those for speaking, consulting, and research may still be paid but must be disclosed. On the other hand, royalties, licensing fees, rebates and the like need not be disclosed.

The law takes effect this month in Vermont.

A similar proposal which would require that industry disclose on a federal website many of its gifts and/or payments to doctors has been introduced in the Congress although no action appears imminent. Under this legislation state laws such as Vermont’s would probably be preempted by requirements included in the federal law.
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House Committee Looks at Radio Ratings

The House Government Oversight and Government Reform Committee has begun an inquiry into whether Arbitron’s new electronic devices for counting radio listeners under accounts for minority households. Traditionally, listeners record listening habits on paper forms. With Arbitron’s new system, listeners carry an electronic device that automatically records their listening habits.

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According to Arbitron, the new system gives advertisers a better and more detailed look at a radio station’s audience. However, some stations say the device fails to adequately include minority audiences. In a letter to the Federal Communications Commission, Committee Chairman Edolphus Towns (D-NY) expressed his concern that Arbitron has not adequately trained non English speaking households into how to use the device. He also wondered whether by not recruiting from cell phone only households, Arbitron is under utilizing minority households.

Arbitron maintains that the new system is an accurate gauge of radio listenership. More recently in a letter to the FCC, Arbitron denied that the Commission has jurisdiction over the new electronic meter stating the FCC has “absolutely no authority to impose regulations upon Arbitron’s exciting new technology.”
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