DC Politics/CHC Policy Update January 9, 2013 John Kamp & Jack Angel

1. DC Politics/CHC Policy Update January 9, 2013John Kamp & Jack Angel

2. Coalition for Healthcare CommunicationWho Are We AAAA Advanstar AMM AAFP Alliance Healthcare Information Abelson Taylor Beacon Healthcare CementBloc Crossix Connect Healthcare Draft FCB IMS Elsevier Everyday Health Havas/Euro RSCG Health Haymarket InVentiv IPG McCann KnowledgePoint360 Massachusetts Medical Society Omnicom Pacific Publicis Healthcare Q-forma Slack Thomas Direct US HealthConnect Vox Medica WPP

3. The Coalition Mission To promote and protect, for society and individual patients, the benefit of the free flow of healthcare information

4. Biopharma and device companies have a First Amendment right and a social responsibility to educate healthcare providers and patients about their products Self-regulation is a hallmark of great communication, marketing & education Communication, marketing & education are just as important as R & D, and provide significant value to healthcare system Coalition Passions

5. CHC Focus on Four Big Issues Tax Treatment of Communication/Marketing Costs Transparency, “Sunshine,” Conflict of Interest, Collaboration Privacy proposals to limit communication to professionals & patients FDA/HHS enforcement & emerging policies

6. Election: Four More Years • Obama Administration health leaders expected to stay at least through 2013 • HHS Secretary Kathleen Sebelius moving full speed ahead on Affordable Care Act Rules, Policies, Programs • States given more time to create insurance exchanges • Pent up rule announcements coming quickly • Sunshine Act “final rules” still pending • Expect many “phased in” rules, delays on many details, industry education well before enforcement • Senator Richard Blumenthal (D-Conn) speaking aggressively on many pharma enforcement issues

7. FDA Leadership also stable • Commissioner Margaret Hamburg tells insiders she will stay for now • Some staff shifts; David Dorsey gone • Center for Drug Evaluation and Research senior staff stable • Director Janet Woodcock and New Drugs Director John Jenkins • 2012 Drug approvals (39) best in a decade; the new era of smaller, specialty drugs • Rachel (Behrman) Sherman, Director of Medical Policy, supervises OPDP. (Bob Temple now Deputy Director for Clinical Science) • Recognizes need to modernize label language, increase consumer understanding of uses, dangers, etc. • Tom Abrams remains head of OPDP

8. New Congress; same fiscal challenges • Wonks, Wall Street, Washington still focused on debt, economy, sequester deadline, taxes and cuts • Tax and spending policy choices define the battles, but mostly a question of how fast to reduce deficit • No painless political choices available to either party • Incredible pressure to avoid cuts in defense, Social Security, Medicare • Further tax increases would slow growth, kill tax collections. • Very dangerous time for any “tax expenditure,” including deductibility of marketing • The Advertising Coalition meeting with senior tax staff on House Ways & Means and Senate Finance

9. Ad Tax Sword Still Hangs Above our Heads • Jim Davidson, Chair of The Ad Tax Coalition • “Now, more than any time in our history, the threat to the deductibility of advertising costs is real. …Even in Washington today, 37 billion dollars is a lot of money.” • Dick O’Brien, Head of the DC office of the American Association of Advertising Agencies • “The (Fiscal Cliff) deal was just a Band-Aid…. The more fundamental issue of how to bring the nation's debt under control will still require serious tax code reform. Both parties agree on that--and will probably tackle it squarely this year.” • John Kamp • “The danger cannot be ignored. No tax idea, good or bad, goes away. Every expenditure needs matching federal income. Every time a Senator or Member of Congress needs several extra billion dollars, our industry will be at risk. “

10. Major Tax Legislation Possible in 2013 • Leaders focused on huge tax changes by end of 2013 • Ways & Means and Finance committees gearing up for Spring hearings, preliminary votes starting as soon as April • Considering limits on deductions beyond “the rich,” including charitable contributions, home mortgage deduction, retirement contributions • Senate and House may be ahead of the White House • But only a few Members of Congress are veterans of major tax revisions, last done in 1986. • No House Ways & Means vets of ’86 Act • Only Grassley, Hatch and Baucus in Senate Finance • Many lobbyists very skeptical of aggressive goals • Ad Tax Coalition preparing for the worst

11. How Tax Legislation Matters • Personal v. Corporate Income Tax • Why did Willie Sutton rob banks? Personal tax is where the $$$ is! • Old Game = looking for “pay fors” by tinkering with tax code, mostly personal tax code with corporate flourishes • New Game = reformation of the entire corporate tax code • Same Game = when struggling over popular deductions, tax rates, fairness, Medicare, Social Security, defense, look around for another deduction to chop. • The Advertising Tax Coalition includes you as a member of the Coalition for Healthcare Communication, plus • NAB, NCTA, NBC, CBS, NAA, MPA, 4As, ANA, etc.

12. Your Stake in Medical Marketing Tax Issue Currently, all marketing costs are tax deductible for clients, just like rent, payroll & manufacturing Without deduction, client cost of marketing communication increases by tax rate, as high as 37 % Likely client response: Immediately, cut 37% to make current budget Then, reassess all communication expense based on new ROI where “I” increased by 37% Remember, PhRMA and many pharma clients were neutral on this issue in debates on paying for Affordable Care Act Ad & media grassroots & lobbyists defeated the tax If YOU don’t engage, we cannot win this fight!

13. Privacy Legislation, Regulation • Senator Jay Rockefeller, Chair of Senate Commerce Committee, committed to moving legislation giving FTC greater power to require consumers to “opt-in” before data collection, even for non-personally identified information • But two Senate Democrats supporting industry self-regulation re-elected, Kirsten Gillibrand (D-NY) & Claire McCaskill (D-MO) • House Commerce Committee controlled by Republicans supporting industry self-regulation • White House, Commerce Department & FTC -- all lead by Obama appointees -- interested in “industry/consumer group collaboration”

14. Coalition Comment to HHS on Sunshine HHS must enable industry to provide context and ensure accuracy of payment reports to ensure that public, press and policy-makers understand the purpose and public health value of the physician collaborations HHS’ broad reading of Sunshine provisions is unnecessary and counterproductive; public health demands more narrow and careful implementation Indirect payments should not be reportable Ad supported publications should not be “gifts” Rules must be clear and definitive to ensure compliance, consistency, efficiency and accuracy, and to avoid unnecessary and expensive litigation and arbitrary enforcement Congressman Rob Andrews (D-NJ) writes HHS, supporting Coalition & industry positions

15. U.S. v Caronia • Federal 2nd Circuit Appeals Court reverses criminal conviction of pharma rep for promoting a drug “off label” • Ruling: Truthful, non-misleading communication between rep and physician is speech protected by the First Amendment and cannot be used to jail rep for “misbranding” a drug • Undermines regulatory basis for all FDA marketing enforcement, and most HHS IG/State “false claim” settlements • FDA v. FTC enforcement: Is it on the label or is the audience mislead. What will be the new standard of evidence? • CHC taking a high profile, low key approach • Colucci: IN GOD WE TRUST, ALL OTHERS BRING DATA

16. Issues for Action/Education • Taxes • Sunshine Act Final Rules & Implementation • FDA OPDP enforcement & social media • Privacy in Senate, FTC and Commerce • Focus for CHC advocacy • Comparative Effectiveness Data • “Off-label” clarification/challenge to FDA • Communication just as important R & D

17. For Further Information John Kamp, Executive Director Jack Angel, Coalition Foundation Coalition for Healthcare Communication www.cohealthcom.org 212-850-0708 202-719-7216 jkamp@cohealthcom.org SmartBrief for Healthcare Marketers – get it at web site Nick Colucci, Publicis, Chair of Executive Committee Matt Giegerich, Chair Elect