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Big Pharma's $13.8B DTC ad spend drives drug costs

A CSRxP report reveals Big Pharma spent $13.8B on direct-to-consumer advertising in 2023, prompting renewed calls to eliminate corporate tax deductions worth up to $1.7B annually.

Alivia Kaylor, MSc
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Published: 19 Mar 2025

A new analysis from the Campaign for Sustainable Rx Pricing has reignited debate over direct-to-consumer pharmaceutical advertising, revealing that the 10 largest pharmaceutical companies in the U.S. spent nearly $14 billion on promotional efforts in 2023 alone. The report, released on March 18, highlights how drugmakers leverage tax deductions for these expenses, reducing their federal tax burden while contributing to rising prescription drug costs.

The findings could bolster bipartisan efforts in Washington to increase scrutiny on pharmaceutical marketing practices. According to the Campaign for Sustainable Rx Pricing (CSRxP), eliminating the tax write-off for direct-to-consumer (DTC) advertising could generate between $1.5 billion and $1.7 billion annually in additional federal tax revenue.

"This analysis sheds new light on Big Pharma's staggering spending on advertising directly targeting consumers and the scale of pharmaceutical companies' tax benefits from writing off these marketing strategies that increase prescription drug prices for the American people," CSRxP Executive Director Lauren Aronson said in an email.

DTC advertising and rising drug costs

Since the FDA loosened regulations in 1997, pharmaceutical advertising in the U.S. has increased dramatically. CSRxP's report points to studies showing a direct correlation between higher ad spending and increased drug prices. The Congressional Budget Office (CBO) estimates that a 10% increase in DTC advertising results in a 1–2.3% rise in prescription drug spending, while another analysis found that the same 10% increase in ad spending leads to a 5.4% rise in product revenue.

Some of the most heavily marketed drugs have also seen significant price hikes. Eliquis (Bristol Myers Squibb/Pfizer) has been promoted with over $1 billion in DTC advertising since 2013 while its price has more than doubled. The migraine drugs Nurtec ODT (Biohaven/Pfizer) and Ubrelvy (AbbVie) have been aggressively marketed through celebrity endorsements by Khloe Kardashian, Lady Gaga and Serena Williams, generating billions in sales despite concerns about advertising accuracy.

The report also raises concerns about DTC advertising encouraging the overuse of costly brand-name drugs over lower-cost generics. A 2023 JAMA Network study found that only one-third of DTC-advertised drugs were considered "high therapeutic value."

Tax loopholes and potential policy changes

The report examines how pharmaceutical manufacturers use tax deductions on advertising expenses to reduce their taxable income, effectively shifting costs onto taxpayers. CSRxP analyzed financial data from 10 major pharmaceutical companies, including AbbVie, Amgen, Biogen, Bristol Myers Squibb, Eli Lilly, Gilead Sciences, GlaxoSmithKline, Johnson & Johnson, Merck and Pfizer, to evaluate the tax implications of eliminating advertising deductions. The findings modeled two taxation scenarios:

  • Scenario 1. Applying a 13.8% global tax rate would result in an additional $1.5 billion in annual tax revenue.
  • Scenario 2. Using a 15.7% U.S. industry-specific tax rate would increase tax revenue by $1.7 billion per year.

While an outright ban on DTC advertising could reduce drug spending, it could also lower taxable corporate revenue. A more likely scenario would involve removing tax deductions while still allowing advertising, ensuring manufacturers contribute more in taxes without eliminating promotional efforts entirely.

Industry implications

The potential for stricter tax policies raises strategic and financial concerns for pharmaceutical companies. If tax deductions were eliminated, drugmakers might need to rethink marketing budgets, shift promotional spending to physician engagement or digital health initiatives and reassess pricing strategies to offset higher tax liabilities.

Historically, the industry has defended DTC advertising as a tool for patient education, but scrutiny over ad transparency and its role in rising drug prices continues to grow. A 2021 study by America's Health Insurance Plans found that 7 of the 10 largest pharmaceutical companies spent more on sales and marketing than on research and development, solidifying concerns regarding profit-driven promotional strategies.

This analysis arrives amid growing scrutiny of pharmaceutical pricing practices. The data builds on a recent FTC report highlighting how pharmacy benefit managers also inflate drug costs. Report findings like these underscore the increasing concern surrounding industry practices that contribute to rising prescription drug costs for American consumers.

Alivia Kaylor is a scientist and the senior site editor of Pharma Life Sciences.

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