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House Considering $37 Billion Drug Tax, Rangel Says (Update3)

June 16 (Bloomberg) -- The House is considering imposing a $37 billion tax on drugmakers by denying deductions for prescription-drug advertising, Ways and Means Committee Chairman Charles Rangel said.

As lawmakers seek ways to pay for a health-care overhaul, “one thing that’s not off the table is you can pick up $37 billion knocking out the deduction for advertising” for prescription drugs, Rangel, a New York Democrat, told reporters today in Washington.

Rangel identified the proposal as one of a series of revenue-raising measures House Democrats may include in health-care bill this month. Members of his tax-writing committee are meeting daily this week to discuss how to pay for the legislation.

Rangel said he and other lawmakers believe it is wrong to let drug companies deduct their advertising costs for prescription drugs. “The whole thing is messy, but you can raise $37 billion,” Rangel said. “Which means you’re taxing somebody $37 billion, and they don’t like that.”

He said his committee plans to release its health-care proposal on June 19.

Also today, an aide to a member of the Senate Finance Committee said the nonpartisan Congressional Budget Office put a $1.6 trillion price tag on a set of health-care options presented by the committee.

Not Final Plan

Finance Committee Chairman Max Baucus told reporters the options didn’t represent a final proposal and that lawmakers are working to reduce the cost of their plan.

Baucus, a Montana Democrat, said he is likely to proceed with a proposal to tax employer-paid health benefits to help pay for the measure he is drafting. Baucus said his legislation probably would impose income taxes on the value of benefits exceeding $15,000 for a family of four.

Baucus also said that while he had hoped to release a draft of his legislation tomorrow, it will likely be delayed until June 18 or 19. “I’m quite confident that we’ll get a bipartisan bill,” he said. “The president wants a bill by Oct. 15. He’ll get it.”

Yesterday, the Congressional Budget Office said a health-care plan proposed by Democratic Senator Edward Kennedy of Massachusetts would cost about $1 trillion over the next decade. The estimate was based on a preliminary analysis that focused only on major provisions, the CBO said.

Tax Increases

Rangel said last week a health-care overhaul being drafted by House Democrats would include $600 billion in tax increases and $400 billion in cuts to Medicare and Medicaid.

President Barack Obama proposed $634 billion in his budget request to Congress as a 10-year down payment for a health-care plan. Obama said in an interview with Bloomberg News today he wouldn’t rule out agreeing to a tax on employer-provided health-insurance benefits as a way to pay for the overhaul.

“I don’t want to predetermine the best way to do this. I’ve already put forward what I think is the best way,” the president said.

Obama said he prefers to pay for his health-care plan by limiting tax deductions for the wealthiest Americans and reining in the rate of growth of medical spending.

Finding Revenue

Baucus said earlier today that senators “do not want to find the revenue measures outside the health-care” industry. “They don’t like the president’s proposals,” he said.

A New York University study published last year cited media-information company CMR as estimating that U.S. pharmaceutical companies spent about $4 billion on direct-to-consumer advertising in 2004.

Rangel said it’s inappropriate for taxpayers to subsidize ads for pharmaceuticals because they encourage viewers to ask for drugs they may not need.

“I do it. I go to the doctor and say, ‘Did you ever think about ordering this for me?’” Rangel said. “If he says no, I don’t like him, because they promised me on TV that I have no problems at all.”

To contact the reporter on this story: Ryan J. Donmoyer in Washington at

To contact the editor responsible for this story: Jim Kirk at

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