PAGENO="0001" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY ~7o~yI~ HEARINGS BEFORE THE SUBCOMMITTEE ON MONOPOLY OF THE SELECT COMMITTEE ON SMALL BUSINESS UNITED STATES SENATE NINETIETH CONGRESS FIRST SESSION ON PRESENT STATUS OF COMPETITION IN THE PHARMACEUTIOAL II~DUSTRY PART 2 JUNE 27, 28, 29, JULY 24, AND AUGUST 8, 10, 19~7 Printed for the use of the Select Committee on Small Business U.S. GOVERNMENT PRINTING OFFICE 81-280 WASHINGTON : 1967 For sale by the Superintendent of Documents, U.S. Government Printing OffIce Washington, D.C. 20402- Price, $1.00 PAGENO="0002" SELECT COMMITTEE ON SMALL BUSINESS [Created pursuant to S. Res. 58, 81st Cong.] (90th Cong., First sess.) GEORGE A. SMATIIERS, Florida, ChaSrmaa JOHN SPARKMAN, Alabama RUSSELL B. LONG, Louisiana WAYNE MORSE, Oregou ALAN BIBLE, Nevada JENNINGS RANDOLPH, West Virginia B. L. BAIITLETT, Alaska HARRISON A. W~[LLIAMS, Ja., New Jersey GAYLORD NELSON, Wisconsin JOSEPH M. MONTOYA, l~ew Mexico FRED H. HARRIS, Oklahoma JACOB K. JAVITS, New York HUGH SCOTT, Pennsy~vania NORRIS COTTON, New Hampshire PETER H. DOMINICK, Co]s~rado HOWARD H. BAKER, JR., Tennessee MARK 0. HATFIELD, Oregoa GAYLORD NELSON, Wisconsin, Chaiirmas~ HUGH SCOTT, Pennsylvania MARK 0. HATFIELD, Oregon JACOB K. JAVITS,* New York BENJAMIN GORDON, Staff Economist STEAN H. HIIWMAN, Research Assistant WILLIAM T. MCINARNAY, Staff Director and General Counsel DANIEL P. COUGIILIN, Minority Counsel MoNoPoLY SUBCOMMITTEE JOHN SPARKMAN, Alabama RUSSELL B. LONG, Louisiana WAYNE MORSE, Oregon GEORGE A. SMATHERS,* Florida *Ex officio member. II PAGENO="0003" CONTENTS Statement of- Burrows, Harold W. H., president, Parke, Davis & Co., Post Office Box 118, Detroit, Mich.; accompanied by Kenneth D. McGregor, vice president and general attorney Cherkasky, Dr. Martin, director, Montefiore Hospital and Medical Center, 111 East 210th Street, New York, N.Y.; and on behalf of The Greater New York Hospital Association; accompanied by Kurt Kleinmann, director of pharmacy services 665 Cluff, Dr. Leighton E., professor and chairman, department of medi- cine, University of Florida College of Medicine, Gainesville, Fla___ 559 Conzen, W. H., president, Schering Corp., 60 Orange Street, Bloom- field, N.J.; accompanied by Dr. Do~iald R. Longman, vice presi- dent; and Irving H. Jurow, vice president and general counsel 621 Fitelson, J., Ph.D., Fitelson Laboratories, Inc., 305 E. 45th Street, New York, N.Y 550 Garb, Dr. Solomon, department of pharmacology, University of Missouri Medical School, 228 Medical Science Building, Columbia, Mo... 519 Goddard, Dr James L., Commissioner, Food and Drug Administra.. tion, U.S. Department of Health, Education, and Welfare, Crystal Plaza No. 6, 2221 Jefferson Davis Highway, Arlington, Va.; ac- companied by William W. Goodrich, General Counsel; Dr. Herbert L. Ley, Director, Bureau of Medicine; Alfred Barnard, Director, Bureau of Regulatory Compliance; and Dr. Daniel Banes, Acting Director, Division of Pharmaceutical Science 737 Kunin, Dr. Calvin M., associate professor of preventive medicine and medicine, University of Vi~ginia School of Medicine, Charlottesville, Va 709 McCarron, Dr. Margaret M., F.A.C.P., associate clinical professor of medicine, University of Southern California School of Medicine; assistant medical director and chairman of therapeutic committee, Los Angeles County General Hospital, 1100 North Mission Road, Los Angeles, Calif 581 Magee, Dr. Donal F., chairman, department of physiology and pharmacology, Creighton University Medical School, 657 North 27th Street, Omaha, Nebr 486 Miller, Lloyd C., Ph.D., director of revision and acting secretary, U.S. Pharmacopeial Convention, Inc., 46 Park Avenue, New York, N. Y_ 499 Williams, Dr. Harry L., professor of pharmacology, Emory University School of Medicine, 1380 South Oxford Road, NE., Atlanta, Ga - 447 HEARING DATES June 27, 1967 Afternoon 486 June 28, 1967 517 Afternoon 550 June 29, 1967 559 July 24, 1967 601 August 8, 1967 665 Afternoon 687 August 10, 1967 Afternoon 769 III PAGENO="0004" PAGENO="0005" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY TUESDAY, JUNE 27, 1967 13.5. SENATE, MONOPOLT SUBCOMMITTEE OF THE SELECT COMMITTEE ON SMALL BusINEss, Washington, D.C. The subcommittee met, pursuant to adjournment, at 10:10 a.m., in room 318, Old Senate Office Building, Senator Gaylord P. Nelson (chairman of the subcommittee) presiding. Present: Senators Nelson, Scott, and Hatfield. Also present: Benjamin Gordon, staff economist; Daniel T. Coughlin, minority counsel; Susan H. Hewman, research assistant; and William B. Cherkasky, legislative director, staff of Senator Nelson. Senator NELSON. We will open the hearings of the Senate Subcom- mittee on Monopoly. I want to read a brief statement prior to hear- ing the first witness. In the interest of proceeding in a fair, judicious and orderly man- ner, I would like to comment at this time on an effort which has been made by Mr. Joseph Stetler, president of the Pharmaceutical Manu- facturers Association, to prejudice the work of this subcommittee in the eyes of the general public. Mr. Stetler has been writing letters to newspaper editors, in my State at least, charging that the hearings on prescription drug prices held so far by this subcommittee have distorted the facts, and that drug manufacturers have been denied an opportunity to testify. This charge is, of course, completely false, as Mr. Stetler himself knows. However, the newspapers to which he has been writing have no way of knowing for certain that his statements are false, and some have published his statements and editorials in my State, critical of me, based upon his false statements. On May 10, 5 days before these hearings began, Mr. Stetler and Attorney Roy Ingoldsby came to my office to discuss the hearings. I assured them that ample opportunity would be given the drug in- dustry to be heard. I suggested that he listen to the testimony for a few days and when he decided on the appropriate time for industry to be heard he should come to see me and we would set a time for their appearance. To this date he has not come to me with any request to appear either in behalf of his association or any company he represents. I wrote this statement last night. Ten minutes before I came down here a letter was written to my office from Mr. Stetler for the first time requesting an opportunity to appear. That letter was based 443 PAGENO="0006" 444 COMPETITIVE PROBLEMS IN THE DRTJG INDUSTRY upon a response to a letter I wrote to him last week, because T thought he ought to have the courtesy of knowing what I was going to say today before I said it. So I outlined the statements that had been made to Mr. Stetler by me in my office, and then he in response to that delivered a letter, and about 10 minutes to 10 it came to my desk. I repeated this invitation, that is the invitation I made in my office to him and Mr. Ingoldsby. I repeated this invitation during hearings on May 16, the second day of the hearings. At those hearings I stated that Mr. Stetler had been invited and that the industry was invited to come and would be heard. I said it again on June 82 the fifth day of the hearings, publicly from the chair. During a discussion with Senator Javits, I stated: We want the companies in here to speak for themselves, and I understand that to be the Senator's position. Senator Javits agreed with that, said it was his position. In fact, if the subcommittee should possibly run into difficulty obtaining testimony from the drug companies, Senator Javits sug- gested that they might be subpenaed. I mention this sim~r to show the determination on the part of the subcommittee to hear drug in- dustry witnesses. There never has been any question about that point from the very start, and Mr. Stetler knows it. Yet Mr. Stetler has tried to make that the issue. Even though he has not accepted my invitation after hearing it in my office, and after it was twice repeated at a public hearing, he has repeatedly charged that we will not let him testify. He made this false charge in a letter released to the press on June 6. He made it again in a letter to newspapers in my State dated June 14. In this letter of June 14, Mr. Stetler stated: We have yet no idea when Senator Nelson will give the American public an opportunity to hear from the industry. This, despite the fact that I had told him twice publicly and once in my office to let me know when they wanted to be heard. It is interesting to note that on the same day that Mr. Stetler was writing Wisconsin newspapers stating that we were refusing to hear drug industry witnesses, he wrote another letter to the drug industry stating the exact opposite. In this second letter, also sent on June 14, Mr. Stetler quoted me as having "encouraged all interested persons to participate," and Mr. Stetler went on and urged the drug industry spokesmen to accept my invitation, so we had two contradictory letters going out on the same day. Meanwhile, as Mr. Stetler was carrying on this dual correspondence, we were actually making arrangements with major drug manufac- turers to testify. On June 12, I personally wrote to the Sehering and Parke-Davis companies and invited them to testify. They agreed to do so, and they will be heard in July. Just yesterday, E. Th Squibb & Sons wrote to me to indicate a desire to testify. A date will be set for their testimony. These are the first requests that I have received from industry to testify. Two industry representatives came~to see me in my office and when asked "When do you want to testify?" told me that they weren't PAGENO="0007" COMPETITIVE PROBLEMS IN THE DRUG [NDIJSTRY 445 interested in testifying. So the first request I got was from E. R Squibb & Sons. For the fourth time, I repeat the invitation of the subcommittee to Mr. Stetler and the drug manufacturers to advise us when they wish to testify. So that there will be no question about the subcommittee's willing- ness to hear him, I will remain at the presiding officer's chair at the close of this set of hearings on June 29, to consider requests to testify from Mr. Stetler or any other representatives of the drug industry. A date will be set to hear them, just as dates will be set to hear the three firms which have already responded to my invitations to them to testify. I hope that, with that question settled, we can get back to the serious questions which form the subject of this inquiry. The subcommittee has an important task to perform, and we will not be dissuaded by attempts to divert us or to inflame public opinion against us. From the very first day of the hearings it has been perfectly clear that the Pharmaceutical Manufacturers Association intended to indict the committee rather than supply us with any information about the important questions that exist. I am sure that that does not represent the position of the many very fine companies that the Pharmaceutical Manufacturers Association represents, and two companies have come to me privately to say so. Senator HATFIELD. Senator Nelson. Senator NELSON. Yes. Senator HATFIELD. Senator Nelson, I wouTd like to make a comment. I appreciate the statement that you have just made for the record. I would like to add to that statement that prior to the beginning of these hearings, I had conversations with both representatives of various pharmaceutical houses as well as the chairman of this subcommittee, and I recall that even during the first one or two hearings, the chairman reiterated what he told me prior to the beginning of this hearing- that all parties would have an opportunity to be heard, and there is nothing that the chairman has done or said that would indicate contrariwise. I assured these representatives of the pharmaceutical houses that they would have this kind of opportunity, and if they did not find it convenient or they did not find it possible to testify at certain times, I would like to be informed and I would certainly take it up with the chairman. I have not been informed to the contrary, so from everything I know from my contacts with the pharmaceutical houses, with my contact with the chairman as a member of this subcommittee, I want to assure the chairman that I can certainly second his comments here as to the procedures that. have been followed and are being followed to give fair and equitable hearing to all parties. Senator NELSON. I want to thank you, Senator Hatfield. The fact of the matter is I have had the opportunity over a period of some 18 years to serve on legislative committees. I never have intentionally conducted an unfair hearing any time in my life, and I do not intend to now. This committee wishes to hear the most informed and the best testimony we can get involving various problems in this field. This PAGENO="0008" 446 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY is not a hearing to indict anybody. Tt is not a hearing for the purpose of a running criticism of anybody. Everybody will concede, privately at least, including representatives of the drug industry, that there are problems in the area. I happen to recognize, as any informed person does, that the drug industry has made a great contribution to medicine. I happen to recognize that the medical profession has made a great contribution, and so has the corner druggist. But that doesn't mean that there aren't problems in existence here that ought to be explored and some sensible solutions to them sought. We have not, and do not intend to invite people to appear before the committee who are not responsible people. If you look at the list of witnesses you will see that we have had some very, very distinguished witnesses from across the United States, and we will hear distinguished witnesses from the drug industry, and they will be afforded the oppor- tunity to present their position on any issue that has been raised before this committee by any witness, and they will be afforded all the time that they want to do so. And Mr. Stetler has understood that from the very first day of the hearings, though he has misrepresented the position of this committee throughout the United States. We will hear our first witness this morning, Dr. Harry L. Williams. Dr. Williams, we appreciate your taking time from your busy sched- ule to appea.r here today. You have filed with the committee bio- graphical data. We are all well aware of your very distinguished background and your professional credentials, but if you would for the purposes of the opening of the hearing, just recite briefly your back- ground, we will file in the record your detailed biographical data, and you may present your statement in any fashion that suits you, either by reading it in full, or dealing with it extemporaneously. If you don't mind, I may interrupt you to ask some questions as they occur to me. If you do mind, we can wait until the end. (The biographical data referred to follows:) OURRICIYLUM VITAE: HARRY L. WILLIAMS Born December 25, 1919, Detroit Michigan. Degrees B.S.-Unlversity of Chicago, 1949. M.D.-Univers;ity of Chicago, 1952. Education 1939-41-Wayne University, Detroit (night school). 1947-52~--University of Chicago. 1952-58-Internship, King County Hospital, Seattle, Washington. Positions 1938-4&-Laboratory technician, Parke, Davis & Company, Detroit, Michigan. 1943-48-Research Assistant in Pharmacology, University of Illinois College of Medicine, Chicago, Illinois. 1951-Research Assistant in Pathology, University of `Chicago. 1953-54-Research Associate In Pharmacology, University of Illinois College of Medicine, Chicago, Illinois. 1954-60--Assistant Professor of Pharmacology, Emory University School of Medicine, Atlanta, Georgia. 1960-64-Associate Professor of Pharmacology, Emory University School of Medicine, Atlanta, Georgia. 1963-Professorial Lecturer in Pharmacology, University of Oklahoma School of Medicine, Oklahoma City, Oklahoma. PAGENO="0009" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 447 1964-Professor of Pharmacology, Emory University School of Medicine, Atlanta, Georgia. 1966-Assistant Professor of Medicine, Emory University School of Medicine, Atlanta, Georgia. ~Slocieties The American Society for Pharmacology and Experimental Therapeutics, Inc. The New York Academy of Sciences. National Society for Medical Research. Alpha Omega Alpha. American Association for the Advancement of Science. American College of Neuropsychopharmacology. Southern Eleetroencephalographic Society. Sigma XI; President, Emory Chapter, 1962-63. American Society of University Professors; President, Emory Chapter, 1963- 64. American Association for Laboratory Animal Science. Awards Harry Ginsburg Memorial Prize for research in Physiology (University of Chicago, 1951). Markle Scholar in Medical EducatIon, 1955-60. Best Basic Science Professor by Emory Senior Medical Class, 1965-66. Outstanding Faculty Award for Medicine by P1 Delta Epsilon and the 196T Emory "Campus". Eniory University activities Chairman of Animal Care Committee and Director of Central Animal Facility. Member of Formulary Committees of Grady Memorial and Emory University Hospitals. Advisory Committee of Division of Basic Health Sciences. Adult Education Committee. Premedical Curriculum Committee. Medical School Curriculum Committee. Committee on Educational Policy. Patent Committee. University Senate; President, 1965-66. Standing Committee on Promotions and Appointments, Division of Basic Health Sciences. Interdivisional Student Affairs Committee. Admissions Committee, School of Medicine, 1954. Therapeutic Trials Committee, School of Medicine. 3Tonuniversity activities Consultant to Southeast Regional `Committee, American `Social Health Asso- ciation. Medical Consultant, Epilepsy Foundation of Atlanta. Board of Directors, Planned Parenthood of Atlanta. Pharmacy and Chemistry Committee, National Institute of Mental Health. Consultant to Georgia State Drug Vendor Program. Consultant in EEG, Atlanta Veterans Administration Hospital, 1954-66. Member Joint COmmittee, FDA-NIMH, on LSD and Drug Abiise. STATEMENT OF DR. HARRY L. WILLIAMS, PROFESSOR OF PHARMA- COLOGY, EMORY UNIVERSITY SCHOOL OP MEDICINE, ATLANTA, GA. Dr. WILLIAMS. I don't mind at all. Senator NELsoN. Go ahead, Dr. Williams. Dr. WILLIAMS. Briefly, just relating to my experience with drugs, beginning in 1937 with a year in a retail drugstore, moved from there to Parke-Davis in 193S, where I worked from 1938 to 1943 as a tech- nician. This was after high school training. PAGENO="0010" 448 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY I went in the Navy and was stationed at the pharmacology research part of the Naval Medical Research Institute in Bethesda for 3 years. Following that, I went to the University of Chicago to get my B.S. and my M.D. I was a little bit older than most of the medical students. I interned at King County Hospital in Seattle, came back to the University of Illinois in Chicago to teach 1 year in pharmacology and then went to Emory University in Atlanta, Ga., in 1954, where I have been since this time. I am now a professor of pharmacology, and an assistant professor of medicine at Emory University. I have had a long interest in the relative usefulness and the relative cost of drugs, so when I had a chance in 1960 to be adviser to Grady Memorial Hospital in Atlanta in their drug purchasing practices, I was, I might say, `happy to take the job. I have advised them since this time, and advised the 5;tate on the drugs to be listed in the State drug vendor program. My' special areas of interest are drugs which act on the nervous system. I belong to the usual societies. I am on two national committees, one a joint committee of the Food and Drug Administration and the National Institutes of Mental Health on LSD, and another a commit- tee of the Psychopharmacolog Service Center at National Institutes of Mental Health. I think that is probably sufficient. Senator N1~soN. Thank you, doctor. Go ahead. Dr. WILLTAMS. As I had indicated, in 1960 Grady Memorial Hospital in Atlanta, Ga., faced with a rapidly increasing expenditure for drugs year by year despite a somewhat limited formulary, decided to appoint a new formulary committee and seek outside help for their drug cost problem. Actually, at this tin~e they hired me as an adviser to a formulary committee. Grady Hospital is a large charity hospital supported largely by the two metropolitan Georgia counties, Fulton and DeKaib, and operated by the Fulton-De'Kalb Hospital Authority. The medical services in the hospital are the responsibility of the Emory University School of Medicine plus a large staff of volunteer physicians from the community. In 1965 the hospital provided for 293~258 days of inpatient care and 486,214 outpatient clinic visits~ In `addition to a resident and intern staff numbering 210 the hospital provides the major training area for the medical students of Emory University. I say this to point out that this is a very lai~ge operation. Most important to our discussion today is the fact `that Grady Hos- pital pharmacy fills over 600,000 inpatient and outpatient prescriptions yearly. In 1965 the yearly total was 600,542. On a 5-day week basis this amounts to 2,300 prescriptions daily, of which about 1,900 are outpatient prescriptions comparable to those filled in a local pharmacy. Senator N~soN. These outpatient prescriptions are filled by your- selves? Dr. Wmi~IAMs. At Grady, they are filled by ourselves. There are only a few operations as large as this in the country, I believe Los Angeles and a couple of others. Prior to 196Q~ as I said, the hospital administration had watched its drug bill rise fairly steadily from $183.901 in 1953 to $470,000 in 1959. This rise could not be accounted for by an increase in prescriptions or patient care. In surveying drug purchase pc~iieies and prescribing habits at the `hospital, the new formulary committee found that, except PAGENO="0011" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 449 for a very few old drugs such as aspirin, drugs were being ordered by trade names rather than generic names; there were confusing duplica- tions of drugs that had the same therapeutic action and that the pharmacy was in chaos attempting to keep multiple trade name equivalents of the same drug in stock. In addition, the hospital was spending as much as $50,000 yearly for drugs which had no proved useful therapeutic action. A few examples, many could be cited. The hospital was paying $167 per 1,000-these are wholesale costs-for a trade name cortisone-type drug when a comparable generic product could be bought for $6 per 1,000. Senator NELSON. May I interrupt a moment here? Dr. WILLIAMS. Yes. Senator NELSON. Then you did change in your formulary to the com- parable $6 per 1,000 generic drug; is that correct? Dr. WILLIAMS. Yes, we did. Senator NELSON. And have the physicians in the hospitals observed any difference in the therapeutic effect of the $6 per 1,000 versus $167 per 1,000 drug? Dr. WILLTAMS. None whatsoever. Senator NELSON. So you are satisfied that the generic name was as good as the trade name you had been using. Dr. WIlLIAMs. As a matter of fact, there were later assays on these drugs published by the Medical Letter, who actually assayed them, and the drug we were using was as good. Senator NELSON. Thank you. Dr. WILLIAMS. They were paying $22.50 per 1,000 for trade name Dexedrine when equivalent generic dextroamphetamine could be pur- chased for 71 cents per 1,000. Senator NELSON. Wasn't Fulton County still purchasing dextro- amphetamine as of the time of the hearings a month ago? Dr. WILLIAMS, That is right. This is sort of a confusing error. The people in New York sent a questionnaire to the Fulton County pur- chasing agent, and they buy just a few drugs for the county jail, and they don't have any major drug usage. If the letter had gone to Grady Hospital, where most of the drugs are purchased, it would have been different. It caused a local stir in our papers, but it was a little unfair, because they were comparing a generic price in New York with a trade name price in Atlanta,. Senator NELSON. But Grady had already switched over to purchasing generic dextroamphetamine. Dr. WILLIAMS. We switched from trade name Dexedrine to generic dextroamphetamine. Senator NELSON. Did you find any difference in the therapeutic va.iue of your generic dextroaphetamine versus Dexedrine? Dr. WILLIAMS. None whatsoever. We were buying expensive anti- biotics such as tetracyclines on a trade name basis. Now there were at the moment no generic tetracyclines available, but I want to make this point, because I would like to show during my testimony that it is possible to get the major drug firms to compete, if one goes about this properly. But at the time we took over, they would just order one trade name tetracycline or another, a~id the prices were always the same, right PAGENO="0012" .450 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY ~at $22.50, which was not too different from the price paid by a lOcal pharmacy.. Those of us who had been vaguely aware that trade named items were more expensive than non-trade-named items were nonetheless ap- palled when trade named items were found, as shown by the examples above, to be in many cases 20 to 30 times as expensive as their generic equivalents. Not 2, 5, or 10 percent. more as might be expected in other areas of commerce, but 2,000 to 3,000 percent more. One of the members of the Fulton-DeKalb Hospital Board that sits on the bid openings for the pharmacy orders, a businessman, was quite shocked. He is used to 1 percent for cash and 2 percent for faster de- livery, and he couldn't believe his eyes when he saw these price differ- entials that came in every month on the drug bids. The formulary committee of Grady Memorial Hospital was in general agreement on the following procedures for the future operation: 1. Drugs would be prescribed and ordered on a generic rather than a trade name basis and purchased on a low bid basis when possible. 2. Needless duplications of drugs having the same therapeutic action w~uld~be deleted from the formulary. 3. Where different trade name drugs had equivalent thera- peutic action we would use the drug which was the least expensive. This No. 3 it turned out to give us as much in the way of savings as the use of the generic name. 4. New drugs which were minor molecular modifications of established drugs with no clear-cut therapeutic advantages would not be considered until they had been on the market at least 1 year, where we would have ample time to see if the extravagant claims made for their superiority were really true. 5. Drugs would not be considered that did not have clearly established therapeutic value or therapeutic action clearly su- perior to older products available under generic names, and which we knew more about in terms of side effects. The result was a trimmed down hospital formuiary of which the committee has copies. Including drugs, nursing items, and diagnostic items, the formulary contains about 800 to 900 items. This compares with as many as 14,000 items in some large pharmacy operations. It was not easy in the beginning. As you might imagine, the medical profession is conservative. This was a radical departure of performance at Grady Hospital. There were complaints that the committee was try- ing to dictate the type of medicine practiced at the hospital, that Grady Hospital patients would be poisoned by cheap inferior drugs, that the change from one color of pill to another would upset the GraUy Hospital patients in an irrernedial manner, that we should buy trade named expensive items to support the research done by the large drug companies, and that the committee was attacking the American free enterprise system. We persisted, with support from a large part of the faculty, and the total support of the administration of the hospital, who were inter- ested in cutting this enormous drug bill. We have been fortunate-estimated savings during the first year ran as high as $150,000 on a budget of $480,000 for drug purchases. PAGENO="0013" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 451 Some of this savings was due to the elimination of drugs with no proved therapeutic action; some of it was due to price breaks on trade named items once the major companies were forced to compete on a trade name basis, and this is very important. And some of it was due to the purchase of generic name drugs. Introduction of new useful ex- pensive drugs changing the therapeutic habits of the house staff and some increase in patient load have combined to produce a continuing increase in overall drug costs at Grady Hospital, despite our efforts to hold them down. Reference to page II of the "Grady Formulary" will show that the yearly drug costs at the hospital have increased more or less steadily from $308,000 in 1958 to $738,000 in 1965. Much of this has been due to the introduction of expensive new antibiotics, in- cluding the ;semisynthetic penicillins, the oral antidiahetic agents, and some of the new anti-inflammatory analgesics such as Indomethacin or Indocin. These agents are clearly patented for the next 17 years and Grady Hospital pays essentially the same amount for them that the corner pharmacist pays. It remains difficult to say exactly how much we save-because of this escalation and change in prescribing habits-by generic prescribing, bid purchasing and the formulary system at the present time, although recently installed computer techniques will give us these figures in future years; we can get an automatic feed-out of just what our sav- ings are. One way of estimating our savings is to compare the cost of drugs in the outpatient prescriptions at Grady Hospital with the average cost of drugs in the prescripitions of private pharmacies across the country. Between April 28 and June 2 of this yearL~_37 days inclu- sive-the Grady outpatient pharmacy filled 43,100 prescriptions. The cost of the drugs used was $48,758 for an average drug cost of $1.14 per prescription. Similar figures for community pharmacies can be calculated from the data in Tile & Till (Vol. 53, No. 2, June 1967). Preliminary figures on community pharmacy practice from the Lilly Digest, a report on 1,234 community pharmacies surveyed in 1966, indicate an average prescription charge of $3.56. If we subtract an avera~e markup of 40 percent, the cost of drugs in the average pre- scription would be $2.14, or nearly double the Grady average out- patient prescription cost of $1.14. it should be noted I think, in fair- ness, at this time that an operation such as the one at Grady Hospital cannot be equaled by local pharmacies, or even by many very small hospital pharmacies. Grady Hospital gets some discounts for quantity purchases, does some manufacturing, very little, and we prepackage our own drugs-and all of these things are important in reducing the average Grady prescription cost to $1.14. However, since the Grady outpatient prescription is generally for a month's supply of drugs, and the usual private pharmacy prescription is for a shorter period, I think that any minor adjustments in the figures for the drug costs in the two types of prescriptions would not significantly change the ratio. I have a suspicion it might change it in our favor. The inescapable conclusion is that Grady Hospital, through its formulary and pharmacy practices, is saving a considerable amount of money. In addition to the savings effected, there was a noticeable increase in the quality of pharmacy services and efficiency made pos- sible by the smaller number of items stocked. Several times the watch- PAGENO="0014" 452 COMPriTITIVE PROBLEMS IN THE DRUG INDUSTRY dog action of the formulary committee has prevented the introduc- tion of items such as Mer-29 and some of the long-acting sulfa drugs which were later proved to be toxic, and were withdrawn from the market. It was some of these things I think that encouraged the hospital staff to support us, the fact that we were doing more than just saving dollars. None of the dire predictions have come to pass. We have poisoned no Grady Hospital patients with "cheap" drugs and have confused neither the patients nor the hospital staff with rare changes in pili color, although we have had one minor instance of poor shelf life and reduced potency in a generic injectable preparation which led us to change suppliers. Senator NELSON. Did you still get a generic supplier ~ Dr. WILLIAMS. No, this happened to be a trade name supplier, but this happened to be in an area where it was an old drug, where trade name costs are not vastly different from generic costs. They may be double, but not 10 or 20 or 30 times. This drug, incidentally, tested out to be all right by USP methods. It lust happens that there are newer, more sophisticated ways of assay which showed it to have reduced potency. So the ordinary USP assay, which would be required on this, showed it to be all right. We have occasional arguments with the house staff about this or that drug, but in general the administration and the staff of the hos- pital feel that the formulary committee operation has resulted in im- proved pharmacy practices, improved patient care and considerable savings in money to the hospital, allowing these funds that might have been spent on more expensive drugs to be diverted to other areas of patient care in the hospital. We have been fortunate, as I have already stated. We were helped a great deal in the early days by the Medical Letter, whose generally expert opinion on the comparative value of the new and old drugs could be used to reinforce our own stand. We were moving into a new area. We were one of the first major hospitals in the country to do this, and we n~eded every bit of help we could get. Senator NELSON. What year ~ Dr. WILLIAMS. In 1960. The information presented to the Kefauver hearings helped us a lot, because it helped in subtle ways to change public opinion and the attitude of some of the medical profession toward the generic versus the trade name controversy, and these added ammunition that we could use all the time. Our experiences over the past 1' years of the formulary committee operation have, however, led me to several conclusions about advertis- ing and pricing policies of the maj or drug companies and the prescrib- ing habits of physicians, which are just as important: 1. Trade named drugs are arbitrarily priced by manufacturers and the prices bear no relationship to the cost of manufacture, distribution, or research directly relatable to a given drug. New drugs for acute disease states tend to be priced in the $200 to $300 per 1,000 range-antibiotics, et cetera-and new drugs for the treatment of chronic disease in the $30 to $70 per 1,000 range-di- uretics, tranquilizers, et cetera. It should he clear all along here that these are wholesale prices to Grady Hospital and that the pharmacy may pay a little bit more, and then the price would be essentially doubled for the patient in the outpatient prescription. PAGENO="0015" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 453 These are arbitrary pricings, with no evidence that the more ex- pensive group of drugs are more expensive to prepare. As a matter of. fact, evidence presented at the Kefauver hearings showed clearly that there was no relationship between cost of preparation and sale price of an individual drug item. 2. Good quality generic brands of unpatentable drugs are avail- able at what seem to be ridiculously small fractions of the price of comparable trade named items. 3. If the tyranny of trade name prescribing and ordering of drugs can be avoided, even the large pharmaceutical manufactur- ers will compete on a price basis. Let me stop here to expand on this, because some of our greatest savings were in the area of getting pharmaceutical manufacturers to compete. I had indicated that we were buying tetracyclines by trade names and paying roughly $22.50 per 100. This is $225 per 1,000. This is in the upper class of expensive drugs. We decided, since there was evidence in the literature and in the Medical Letter, that all of the tetracyclines on the market, even though they varied in chemical constitution slightly, were therapeutically equivalent. It didn't make any difference whether you used oxytetracy- dine or Terramycin by trade name, chloratetracycline, or Aureomycin by trade name or tetracycline. The dose was the same, the effect was the same. So we said we will use the one for the next 6 months which bids in the cheapest, and after a couple of months of nearly identical bids, the Squibb product tetracycline came down to $19, and then there was some jockeying and there were further reductions. Mr. Gom~oN. Excuse me, may I interrupt here? Dr. WILLIAMS. Yes. Mr. GoiwoN. They were sealed bids, were they not? Dr. WILLIAMS. Our bids were sealed. Mr. GORDON. But they were still identical. Dr. WILLIAMS. Yes; not a penny's difference for the most part. No need for it as long as you just order a trade name, because only one company can fill the trade name, so there isn't any point in making a different bid. It is when you agree that even when they are patented products, three companies' products are therapeutically equivalent that savings can be made. In the absence of monopoly and price-fixing practices, this is when you can use the purchaser's power to force these people to come down in their price. There were other examples. Our largest savings have come from in the chlorothiazide diuretic group of drugs. Now at the time we took this job in 1960, there were six chlorothiazide diuretics on the market, all patented, all trade named, of five different chemical compounds. The evidence in the literature indicated that they all had equal side effects, they all were equally therapeutically potent, and that there was no real reason for choosing one or the other. These are not different trade names for the same generic product. These are different drugs that do the same thing. So we said Grady Hospital for the next 6 months will use the chlorothiazide diuretic with the lowest bid. These by trade name purchase on the market ran right around $50 to $60 a 1,000. In our PAGENO="0016" 454 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY first bid we got a break from one company to $40. It successively has broken to $30, $20, $10, and now less than $10. Senator NELsoN. For what you used to pay $56? Dr. WILLIA1~S, For what we used to pay $50 to $60, and as high as $65. This `has saved us, under present-day rates, we calculated this out, `this saves us alone $40,000 a year, just on chlorothiazide diuretics, because we use just over 2 million of these tablets a year. It is easy to calculate out if you come from $50 down to around $5 that you are saving $45 per 1,000, and on 2 million tablets `this is a lot of money. The tetracycline price, of course, has continued `to go down. We got involved with Italian tetracycline, and used it at an enormous saving. If we could have continued to use the Italian tetracycline at the time, we could have saved, our purchasing agent has calculated, over $100,000 yearly. Senator NELSON. Yearly? Dr. WILLIAMS. Yearly, on that one drug. Unfortunately, Pfizer brought threat of suit against Grady Hospital if we used Italian tetracycline, and so our legal department felt we had best play it safe at the time, and wait until the suit that Pfizer insti'tuted against New York City was settled. So it was a little while before we could make that saving. At `the present time, of course, we have good generic tetracycline made in the United States available, and our savings are enormous over what we would `have to pay if we bought the trade named item. Senator NELSON. Have you found any difference in the therapeutic effect? Dr. WILLIAMS. There shouldn't be really, since all of the lots are tested by the Government and approved~ so in th,e area of antibiotics' there shouldn't be any difference therapeutically and we have found no difference. To go on to No.4: 4. Detail men, who are the chief source of information about drugs for many physicians, are salesmen. Informed, charming, witty though they may be, I have never heard one of them say that a competing drug was superior to theirs or that their own drug may be dangerous. I would like to quote the chairman of our department, Dr. Neil Moran, who each year reminds the medical students that they who spend from 5 to 12 years in get- ting a medical education are foolish to let a detail man, who may not even have a college education, tell them what drugs to use for which disease. We tell the students this each year. I think' the effect of the lesson wanes as they progress through the clinical years and get out into practice. 5. The pharmaceutical manufacturers exist to make money for their stockholders, not to render service to humanity or the medical profession, though they may do both excellently in the pursuit of money. I don't question as you did not question the value of their contribution to medicine and to our culture, but they still exist not for this purpose but to make money, and they behave as if they existed to make money. 6. Arguments about the amount of research done or the amount of profit made by a drug company are not germane to a discus- sion of generic versus trade name drug prices. You will hear te~t~-' PAGENO="0017" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 455 mony from the drug companies I am sure in the future about the enormous amount of research they do. It should be clear that drug companies do research to find a patentable product which they can sell at an arbitrary price for the 17 years of the patent life or they do it, and they do a great deal of this, for public relations purposes. Were it otherwise their stockholders would not stand for such behavior. To suggest that drug companies do research because they make a lot of money or that they should have a preferential place in the marketplace because they do research violates the canons of economics in a free enterprise society. I should suspect that being able to make a lot of money on old unpatentable products through the ruse of the trade. name game deters rather than stimulates research. Other industries do research also and do not ask for a preferred position in the economy. This preferred position I think has been defined before this com- mittee again and again, and it involves the fact that the doctor who prescribes the drug does not know the price. If he prescribes by trade name, he frequently may not know what the contents of the drug are in terms of chemicals or generic names. The pharmacist who fills a prescription, if the doctor writes a trade name prescription, must use that item, and the patient must pay for it. This has been said before, but I think it needs emphasizing, that this is not a free market practice, because the man who pays has nothing to say about what he gets, and he is unable to even shop around. Senator NELSON. In your State of Georgia, if a doctor prescribes a trade name drug, the pharmacist may not substitute? Dr. WILLIAMS. No, it is one of the States where legally he may not do this. Senator NELSON. But if a generic named drug is prescribed, he may substitute a trade name Dr. WILLIAMS, Yes, if a generic name is prescribed, since a trade name drug has the same generic name, if a generic name is prescribed, he may either use the cheaper generic drug and pass the saving on to the patient, or he may use the more expensive trade name drug, and charge his usual price. However, I still think, and I will repeat this again at the end of my statement, that if the pharmacist has a choice, and if the patient has a choice, which he does have in this case, he can shop around, and in the end I think in our economy this will pull drug prices down and prevent monopoly and price fixing, and allow a choice. Maybe I am too much ivory tower and have too much faith, but I think if you give them a choice they will pull the prices down. Senator HATFIELD. Dr. Williams, I want to ask you a question. Dr. WILLIAMS. Yes. Senator HATFIELD. I am not quite clear on your conclusion here that this preferential position in the marketplace, because they do research, violates the canons of economics in a free enterprise society. Dr. WILLIAMS. I maybe got out of my field and should be caught short on that. Wha~t I meant was that there is no choice at present when a trade name drug is prescribed, there is no choice for the person who buys it, 81-280-pt. 2-67-2 PAGENO="0018" 456 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY Senator HATFIELD. But if I read your language correctly here- Dr. WILLIAMS. Maybe you don't. Senator HATFIELD. Are there no patents that are given for other products that are developed out of the laboratories of research in vari- ous industries in our free enterprise society, and that enjoy certain preferential treatment in the marketplace? Dr. WILLIAMS. Yes, but you have the choice of whether you want to buy them or not. You have a choice of whether you want to buy an Oldsmobile with certain patented products on it, or a Ford, or no car at all. In this particular case- Senator HATFIELD. I think you should delineate though between a research product and the product that comes out of research which may be prescribed by a doctor in the course of a personal relationship be- tween a doctor and a patient. I think you are getting far afield in the field of economics here about making this as an inducement on the drug industry. I think it is a little unfair, because I think you will find that many industries, in fact, most of our products today come out of research laboratories and upon many of these patents are given. As a result of those patents, you could say they enjoy a preferential treatment in the marketplace. I)r. WILLIAMS. Right. Senator HATFIELD. And also I would say that out of this exercise of research and patent acquisition you stimulate further research. To hold the drug industry up here as a special case in point I think is not quite fair. Dr. WILLIAMS. I think later on in my statement I clear this up, and I think, lay the blame at the door where I think the blame should be laid. Senator HATFIELD. Good. Dr. WILLIAMS. And it is always dangerous I suppose for a pharma- cologist to get into the area of economics. 7. The enormous pressure of advertising and detailing creates a mar- ket sometimes where none exists and unfortunately, for good medical practice, this may lead physicians to the use of unnecessary or even unsafe drugs. Mr. GoimoN. Can you give us some examples? Dr. WILLIAMS. Yes. I think that you have had examples presented previously. I think the antibiotic field is one of these, and the use penicillin for the treatment of the common cold, which is demanded from the physician by the patient in this case, the overuse of anti- biotics by physicians, in general, lead to serious and even fatal anti- biotic reactions. I think in the absence of quite so much advertising pressure, there would be less of this. In my own area, the present exploitation of the field of tranquilizers has resulted in a great deal of addiction, and the beginnings of drug abuse in our society, in a group of people who ~previously were not involved in this, and this can be documented again and again. I look on the above seven statements almost as statements of self- evident fact and except for item 7 I am not sure that there is anything that should not be so in the above statements. For if I believe in a free economy-and I do-then I must agree in a company's right to in- vent, patent, and sell its product. Here is where I think, Senator Hat- field, I answer your question as to my stand. PAGENO="0019" COMPETITIVE PROBLEMS IN TEE DRUG INDUSTRY 457 In terms of the cost of the drug to the patient rather than the whole- sale operation at Grady Hospital, I have no information which would indicate that the local pharmacist makes an exorbitant profit on his operation. As a matter of fact, the prescription markup in today's pharmacies is about what I remember from my own time in a retail pharmacy in 1937. Maybe it is a little less-I am talking about the stated average markup. The primary responsibility for the problem of drug prices today must in the end be the physicians and only the physician can change the system; for if the physician prescribes a trade name drug, the pharmacist must fill the prescription with that item and the patient must pay accordingly. There is no caveat emptor, the buyer, the pa- tient, has no choice in the matter nor the pharmacist with a trade name prescription, only the physician. This leads me to some more conclusions: 1. The physician, in general, is unaware of comparative drug prices and is frequently unaware of the price of. the drug he pre- scribes. This is almost a conspiracy of ignorance. From the time he is a freshman medical student to the end of his professional career he is supplied with drugs and even baby foods by the major manufacturers. None of the information that he gets contains prices, as for instance when he uses the Physicians' Desk Refer- ence as a source of information. This book has no prices in it. Unless a patient complains to him, or unless, as sometimes hap- pens, he is caught in the boondocks with no drugs and has to go buy them himself, he has frequently no idea of the cost of drugs. 2. The physician has almost no source of information on the comparative efficacy of drugs of a given class or on their com- parative prices and no source of information on generic prices versus trade name prices except possibly the Medical Letter, which unfortunately is used by few physicians. He has the Physicians' Desk Reference-PDR-which is a trade item paid for by those companies whose products are listed, but the PDR does not list any prices and contains no critical comparative information as to relative efficacy of drugs. A physician faced with the choice of using a trade name tranquilizer chlordiazepoxide or Librium for a patient who is anxious, this sells wholesale for somewhere around $50 a 1,000- Senator NELSON. Librium? Dr. WILLIAMS. Librium, somewhere around $50 a 1,000. Faced with a choice between whether to use that drug or to use phenobarbital, which we use at Grady Hospital, and which in many cases is equal to and in some cases superior to Librium, which costs us 9 cents per 1,000, this is 9 cents versus $50, the average physician has nowhere to go to find out whether the statement made by the drug company that Librium is the successor to the tranquilizers is really true. He has no place to go. Senator NELSON. Did you say that phenobarbital is 9 cents a 1,000 your cost? Dr. WILLIAMS. Our cost at Grady Hospital. Senator NELSON. And $50 a 1,000 for Librium? Dr. WILLIAMS. Somewhere between $40 and $50. Senator NELSON. And that in many instances phenobarbital per- forms the satisfactory function which you seek? PAGENO="0020" 458 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY Dr. WILLIAMS. Yes, and in many instances it is superior. Senator NELSON. To Librium? Pr. WILLIAMS. Yes. Senator NELSON. Dr. Williams, your indictment here of th~ medical profession's educational training program concerns me a bit. If I read your statement after listening carefully here, I gain the im- pression that the inadequacies of the present format of medical education which is being followed is obviously inadequate, and puts the patient in a rather precarious position because of the lack of knowledge of the prescription of drugs. Is this a question that is being studied by your profession? What do I, as a patient, have as a guarantee that I am going to get the proper drug prescribed, if what you say here is true of the average doctor that he has so little understanding? Dr. WILLIAMS. You have no guarantee. Senator NELSON. I am at the mercy of my physician? Dr. WiLLIAMS. Yes, in the end this is, I think, as it should be, be- cause in the end, when properly enforced- Senator HATFIELD. I don't like to be at the mercy of anyone who is ignorant. Dr. WILLIAMS. All right. Senator HATFIELD. What are we doing here in the medical field? As a former educator, I must say I have great concern here and a great interest as a member of this committee. Are our medical educa- tion programs so totally inadequate or so unaware of their inade- quacies that we are not doing something to correct this terrible situa- tion that you portray here? Dr. WILLIAMS. Ninety percent is the figure frequently given, it is certainly close to the exact figure; 90 percent of the drugs that are prescribed today were not even on the market 10 years ago. The average physician got out of medical school some time longer than 15 years ago. Unless he is unusual, and many of them are unusual, his source of information about drugs is the detail man or advertising literature in his own journal. Now, even if he reads the journals carefully, objective comparative information on drugs is not available to him, and I will develop why this is so later. So the physician is in a difficult position. As I will state in a minute, I am unable to keep up with drugs, and this is all I have to do. I don't have to see patients or do anything except be familiar with drugs. Senator HATFIELD. What is the relationship, though, to the present medical student between pharmaceutical information and understand-* ing and his medical curriculum in general? Dr. WILLIAMS. The present medical student gets pharmacology. At Emory University he spends as much time on it as he does in physi- ology and almost as much time as he does in anatomy. He gets this in his sophomore year. In addition, we have a large clinical pharmacology group, who work with the students in the junior and senioryears at Grady HospitaL Then he graduates. Depending on where he goes, if he is an intern at ¶~rady Hospital, he would still be getting information from the clinical pharmacology people. If he is not, this about ends his formal training in drugs. PAGENO="0021" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 459 Senator HATFIELD. That is for general practitioners? Dr. WILLIAMS. This is for a general practitioner. Senator HATFIELD. What about internists? Dr. WILLIAMS. Internists in general do not have formal critical ~training on the use of drugs. As has been said elsewhere, they are trained in the diagnosis of disease, but the use of drugs in the treat- ment of disease frequently is by custom and habit and precept, and actual critical discussions of the comparative value of drugs is fre- ~uently not available to the physician. Senator HATFIELD. Isn't there commensurable time between diag- nosis and therapy or prescription? Dr. WILLIAMS. I hope so; but in terms of choosing which drug out of a large group of drugs, maybe hundreds of forms of drugs, which may be available to him that would be superior in the treat- ment of this particular disease, he not only does not have the informa- tion, as I will show you, I think, he has no source for the information. Senator I-IATFIEth. Then what is the alternative for the physician today whom you criticize for relying on the drug salesman for his information and upon that information making his prescription of drugs to his patients? What is the substitute for that procedure that seems to be, according to your statement, the only course open today to the average practicing physician? Dr. WILLIAMS. I think I will answer this when I make some recom- mendations later. The reason I feel it is the only alternative i.s that, as I have indicated, I think a drug company should have the right to invent, patent, and sell its product. I think they should have a right, if they don't tell lies to the physi- cian, or in their advertising or through their detailing procedures, I think they should have a right to push their drug. I think these rights are important. If this is so, then there has to be some source of critical information not put out by the drug companies available to the physician. Senator HATFIELD. Dr. Williams, it seems to me that this hearing might then be expanded to not include only the drug houses and the manufacturers and the users in terms of your hospitals and other such groups, but perhaps the medical society or the medical profession, and more particularly the deans of medical educational programs, be- cause it seems to me that, without expanding the scope of this hearing, we cannot in this `committee get to the real heart of the matter of pro- tecting the American public. I think we ought to protect them more than just against overpricing of drugs. We should be concerned basi- cally about their health and well-being, and if there is this loose prac- tice that is being carried on today in the prescription of drugs, with as little information on the part of the physician as you indicate, it seems to me that this should be even paramount, to take the priority of this committee's attention over just the matter of economics, be- cause I think health and well-being is far more important than mere economics. Dr. WILLIAMS. I think the committee must have its plans, and I would hate to agree to a red herring, but I would have to agree with you that this is in the end the thing I am most interested in. Senator HATFIELD. Good. PAGENO="0022" 460 COMPETITIVE PROBLEMS IN THE. DRUG INDUSTRY Dr. WILLIAMS. Because in the end if you can't help the physician, and if he does not change his prescribing habits, once you have pre- vented monopoly, and where this may occur, once you have done this, and prevented the drug company from actually lying to the physician, I don't see what other avenue is open to you except to help the physician. Senator NELSON. May I say at this stage to both Dr. Williams and Senator Hatfield that the issue raised by Senator Hatfield is pre- cisely the issue that has been raised by several witnesses before, and I agree with Senator Hatfield that it is a very fundamentaJ question. It is my hope, if this committee accomplished nothing else, we would come up with a solution, some kind of a solution to the very issue you raise here about prescribing. Two previous distinguished witnesses, both of them medical doc- tors and pharmacologists, Dr. Modell and Dr. Burack raised exactly the same question, the continuing education of the physician in just about the same way that you have raised it here and made about the same statement about it, so I as a member of the committee consider it a very important issue. It is one of the problems to which we woujd like to get a solution. Mr. GORDON. Could you say a few words about overmedication, that is, the prescribing of drugs unnecessarily? Are you going into this subject? Dr. WILLIAMS. Yes, I have previously mentioned some of this in terms of the fact that advertising pressure from major drug houses leads the physician partly-directly and partly through pressure from the public into use of drugs which the physician might not other- wise use. Each year I stand up and tell my students that penicillin is not good for the common cold, it is a dangerous drug, and sometimes causes fatal illness. I had a former graduate who is in practice in Alabama come back to me 3 years ago now, and he said, "Dr. Williams, you were all wrong when you said penicillin shouldn't be used for the common cold." And I said, "What do you mean And he said, "I have to use penicillin for the common cold because if I don't my patients go to another doctor." And he had been in practice about 3 years at the time, and I asked him, I said, "How much did you make last year?" He said, "$40,000." And I said, "Well, that is your answer." He didn't have to, but he was doing it. The physician then has no source of comparative information about the relative effectiveness of similar drugs or the relative toxicity fre- quently of similar drugs, and no source of inform~ition about price. The PDR, as I stated, does not list the prices and does not contain any comparative critical information as to relative efficacy of drugs. The PDIR should be considered for what it is, a som~times useful catalog of drugs, their use ~iid side efrects, written resfly as adver~ tising copy and paid for as such. . It might be said that the physician has available to him the scien- tific literature and can make his judgment about the relative value of drugs from the literature. PAGENO="0023" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 461 This is just not so-the physician does not have the time. I am a pharmacologist and my professional role is to keep up with drugs and I am unable to do so. I subclassify myself as a neuro- pharmacologist, which means I only have to keep up with drugs which act on the brain. In terms of original literature, I wonder if I even accomplish keeping up with this narrowed field. Time is not the only problem for a high percentage of the clinical and drug studies reported in the literature are paid by the parent drug house and this should be clear, the major pharmaceutical manufac- turers do not support comparative studies which might show their product to be inferior. In a sense, they would be foolish if they did so, and their stockholders should correct them, since their object is to sell their drugs. Mr. GORDON. have you had any experience along these lines? Dr. WILLIAMS. We have had a funny experience at Emory, which illustrates this point. Wyeth, one of the major drug firms, was in- terested in its drug Serax, a chemical congener of Librium being tested in the Emory Dental School for its action in anxiety in patients who were J~cing serious dental operations, and they agreed to pay for the study, and the people at the dental school came to us for design of a critical experiment, a double blind experiment which would tell them whether Serax was helpful in these patients. In designing it, we designed the experiment to compare pheno- barbital, Serax, and placebo or blank. Wyeth said they were sorry they could not pay for the study with phenobarbital included, but would be happy to pay for the study comparing Serax and a placebo, and if you look at the literature, this is what happens for most drug studies. You have to raise the question at the present time. I have some sug- gestions about this, but you have to raise the question who pays for drug studies? Universities do not. Most drug studies which are in the literature, even the good ones, controlled studies, are paid for by manufacturers, and manufacturers are not interested in comparing their drug with a similar drug, unless they have evidence that their drug is clearly superior to the simlar drug. So most studies do not produce critical comparison. They will show, and many of them are excellent, that the drug A is better than a blank. Senator NELSON. Better than a placebo? Dr. WILLIAMs. Better than a placebo, but they do not show that drug A is better than drug B. They don't want to get involved in this contrQversy. So that since they do not support comparative studies, it is difficult for me and for other people in the area of pharmacology, and must be just as difficult for people in the practice of medicine to even find a study which critically compares, say, phenobarbital with Librium,. It is hard for us to find this information. Senator NELSON. Does the FDA do any studies of this kind? Dr. WJLT~AMs. Not as yet, but I will have some suggestions. I think they should get involved. These studies thus far have been done by the Veterans' Administration, which has done some excellent studies. When the question about the effectiveness of isonicotinic acid hydrazide on multiple sclerosis came out, several good clinics around PAGENO="0024" 462 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY the country reported it to be effective, this is INI-i, and so the Veterans' Administration coded a large double blind study out of Washington, which was excellently designed, and which showed after an appro- priate time when the code was broken, that there was no significant difference between those subjects who had gotten the placebo and those who had gotten INH. This is the sort of study we need. The Army and Navy do these sort of studies. Many of you will re- `member that antihistamines were widely touted as a treatment for the common cold some 15 years ago now. This was not just advertising or anything like that. Several clinics *had reported that the antihistamines were effective against the com- mon cold, but the studies were not critical. Well, the Army did the critical study in large numbers of men, and showed that the course of the common cold was not affected by the administration of antihistamines, and that is the antihistamine couldn't be differentiated from the blank. These types of studies, however, are rare in our literature. They are very rare. What are the solutions available? As I have indicated, beyond preventing price fixing or monopoly practices, beyond making sure that drug companies do not tell lies to physicians through their advertising, it is fruitless to bandy words about profits and research and service to humanity. The one person in the team who can change things is the physician, and he needs help. The physician must have available critical unbiased information on the relative value and cost of drugs, trade name as well as generic. The physician and the pharmacist must have available lists of ap- proved generic products which they can use with confidence and which will allow them to prescribe and fill generic prescriptions where this is desirable. Ideally, this information should come from the two professions of medicine and pharmacy. Actually at one time in the past, the Ameri- can Medical Association assumed this role, but it has abandoned it since the 1930's, `and shows no sign of taking it up again. Senator NELsoN. When the American Medical Association did per- form that function, did they do a good job? Dr. WILLIAMs. They did an excellent job. Some of you may remember their work in eliminating quack drugs and quack medicines which ex- tended from the period after 1900 right up through about the 1930's. They were extremely active. They had an AMA seal of approval, sort of like the Good Housekeeping seal of approval, and before they would accept an advertisement for a drug in the AMA Journal, it would have to have the stamp of approval. They had their own laboratories. They assayed these drugs before they approved them. They were cru- sading and did a tremendous job. However, about 6 years ago, 6 or 7 years ago, the AMA offered me the job of secretary of their council on pharmacy and chemistry, which then handled the problem of drugs. I went up to look at the job because I felt there was a real job that needed doing. This job was offered to me by Dr. Turner at the AMA shortly before his untimely death. PAGENO="0025" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 463 I was upset at the time by drug advertising, but found out, when I got to Chicago, that with the reorganization-the previous person in that job had left-and the hiring of myself, the function of control of advertising was removed from under the purview of the council on pharmacy and chemistry. So I would be employed by an organization which was advertising drugs in a manner that I could not agree with, and I had nothing to say about it. So I didn't take the job. Senator NELSON. Do you know the reason that the AMA ceased to perform this valuable function ~ Dr. WILLIAMS. I think the proliferation of drugs got to be so rapid and the problem became so huge that even attempting to do these analyses would have been a serious financial burden to the AMA. Now, I have heard suggestions that since they accept all these drug ads and make over half of the income necessary to publish their various journals from drug advertisement, that they stopped because of this. I am not sure of that. I think the problem just got out of hand and they could no longer handle it. Senator NELSON. I will let you finish your statement. Go ahead. Dr. WILLIAMS. Anyway, the AMA has abandoned this role, shows no sign of taking it up again. I am frequently asked by retail pharmacists which generic house can be depended upon to supply good quality drugs. I cannot give them an easy answer. I suggested to pharmacists in a talk last year to the Georgia Pharmaceutical Association that if they really want to know what is a good generic drug, and I get asked this question all the time, which one should they buy, that although they can't do these analyses themselves, they certainly can as an association, do the analy- ses and put out a list of drugs which meet the standards they set. I have seen no sign that they are interested as an association in taking out this function either. I think what we are going to have to have is something like a regular FDA newsletter which will go out to all physicians and pharmacists. Let me back up here in the statement. It would seem that the role that was formerly handled by the AMA must be assumed by a Federal agency, such as an information service, possibly a regular FDA newsletter to all pharmacists and physicians,. utilizing information in FDA, NIH, Army, Navy, and Veterans' Ad- ministration files as well as consultation with outside experts. The Medical Letter does a good job with what it does but its sources are inadequate for the job and the circulation is too small at the pres- ent time to seriously affect the prescribing habits of the Nation or of the physicians of the Nation. Since writing this, I have had some thoughts that possibly this should be handled by contract support of the Medical Letter people and let them do the job as an unbiased group intermediate between Government and industry in the way that the Rand Corp. operates. I don't know what the final solution will be. But in the end it must get to the physician and the pharmacists critical, comparative informa- tion about the relative value of drugs and their relative prices. I believe that the average physician is interested in the financial welfare of his patient as well as his patient's health, and I firmly be- lieve that if he had the information available to him, information in PAGENO="0026" 464 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY which he could place some èredence, he would use it to treat the patient more effectively and save the patient money. I go out and talk to physicians and small communities around the State and I believe this. They say, "If you can give us proof that this product is as good, we will use it." At the present time they have faith in the major pharmaceutical manufacturers. They are used to depending on their statements as statements of truth, and you have to bring something equally authorita- tive, if you will, to show them another side of the story. I also believe that the average pharmacist is honest, and will pass the savings on to the patient. In any event, armed with a generic prescription, the patient is back in the marketplace and he can shop around for lower drug prices. Senator NELSON. Did you say earlier in your testimony that 90 per- cent of drugs on the market have been created- Dr. WILLIAMS. In the last 10 to 15 years. Senator NELSON. Ninety percent in terms of numbers? Dr. WILLIAMS. Ninety percent that are prescribed. Senator NELSON. Ninety percent of the prescriptions? Dr. WILLIAMS. Ninety percent of the prescriptions right, are for drugs which are new drugs within the last 10 to 15 years. Senator NELSON. Are you saying 90 percent in terms of numbers or ~0 percent in terms of the money spent in the field? Dr. WILLIAMS. As a matter of fact, I can't remember which it was. Senator NELSON. I don't think there is any doubt but what you raise here a very serious question of great public interest. Now, your hospital, for example, has its own formulary. You have the benefit of your specialists in all the various fields participating as well as pharmacologists and pharmacists. You have an opportunity for clinical and scientific observation with experts in many aspects of clinical medicine. So with considerable safety and a controlled situa- tion, it is possible then for the doctors there to rely upon your formu- lary and prescribe from it, and you have an attentive, intelligent group who are continuously evaluating and revising the formulary. That is the situation, is it not? Dr. WILLIAMS. That is the situation, and many drugs undergo months of discussion before we introduce them into the formulary, and sometimes even here, even for our group, finding the information to make the choice is difficult under our present system. Senator NELSON. And many other formularies around the country, hospitals in New York and elsewhere follow this same procedure and the doctors who work with it are able then to be relying upon a formulary that is established by some reliable, distinguished, knowl- edgea'ble people in the field. The private practicing physician doesn't have that opportunity. Dr. WILLTAMS. Unfortunately, no. Senator ~TvLSON. Even thou ~h you have your formulary committee, you aren't able to do double blind tests, for example., on various drugs that you use yourself, so what you do have is the information and experience of a number of doctors in various fields, and that is what you rely upon. plus whatever studies are made around the United States that come to your attention. Dr. WILLIAMS. That is right. PAGENO="0027" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 465 Senator NELSON. You made a suggestion as to how this question ought to be tackled. Is there any reason why, for example, the FDA might not, through a series of arrangements, contract with your medi- cal school and your hospital to do a certain amount of testing, and contract with half a dozen or whatever it may be, a dozen medical schools with associated teaching hospitals. They could contract in various ways for testing chemically the drugs that are coming out, to see what their potency is, and make double blind studies of various drugs, to see whether they have therapeutic value that is asserted for them? Does that strike you as a problem that is too large for the Government to tackle and successfully meet? Dr. WILLIAMS. I think it is best to state that it is a problem that is so large that only the Government can tackle it. This is what we wind up with. I think, in addition to the pathways you have mentioned, that I would like to emphasize that the Government treats an enormous pool of patients in Veterans' Administration and similar organizations, and I think that these studies frequently can be effectively done within this sort of organization, not experiments with new drugs necessarily, but the critical comparison of older drugs with newer drugs. Senator NELSON. There is at least-I don't know anything about the field-there is at least two things that can be done. One of them is to do a chemical analysis of the various drugs and determine whether they are in the potency range that is established by the pharmacologist. That produces one result. Then there is the other question of doing your clinical studies to find out the therapeutic comparisons between these drugs and a placebo on these drugs and other drugs. Dr. WILLIAMS. The first is easy. This can he done in a Government laboratory. The second is difficult, because it requires the cooperation of the medical profession at large, including as you mentioned, the medical schools and so on. Senator NELSON. You think it would be relatively easy to test the potency of all prescription drugs on the market, and to run a con- tinuous testing of them? Dr. WILLIAMS. I think what will probably happen is that- Senator NELSON. I am talking about the chemical testing. Dr. WILLIAMS. I am talking about the chemical testing. I think what will probably happen is that as the Food and Drug Ad- ministration continues its present area of functioning, that manufac- turers who do not maintain the standards which should guarantee ade- quate potency in the drugs, their license to manufacture will be taken away from them. I mean this is an area where if the Food and Drug Administration were actually able to do the policing job that it already had the powers to do, the fly-by-night bucketshop operator that you hear so much about, producing supposedly spurious drugs, simply could not operate. Senator NELSON. In terms of the size of the pro'blem, I don't know what to compare it to, but every meatpacker in the United States that ships any meat in interstate commerce, which is most of them, have on the job in the plant a Federal meat inspector whose salary is paid for by the packer himself. PAGENO="0028" 466 C0i\~PETITIVE PROBLEMS IN THE DRUG INDUSTRY I don't know that that would be thesolutio~i here, but, it seems to me, if we exercise this amount of care about shipping in interstate com- merce meat, which a casual purchaser frequently can tell whether or not it is good, in terms of a matter as serious as prescription drugs, we ought to be concerned enough to have adequate inspection wherever necessary, either in the manufacturing plant or batch sampling to protect the public in the consumption of drugs, and to advise the physi- cian, of course, about the drug. Dr. WILLIAMS. Actually, an on-the-job inspector is something I had really never considered, and something that I want to start thinking about. I think that possibly this is an excellent way to bring some operations up to standards. Something needs to be done in this area so that the physician and the pharmacist can have confidence if they use a drug from a generic house that this drug, in most respects, will be as stated by the manufacturer. Now, all people can make errors, and Dr. Burack in his book pointed out that major drug firms make errors, too, as do small drug firms. This may be a meaningless point, but in terms of the amount of drugs that people get which are in error, if the implications of Dr. Burack's state- ments are correct, then since the drug trade letter lists that only 5 per- cent of prescriptions in the country are being written generically today, 95 percent for trade named items, the indication would be that more people are having trouble with trade named items than with generic items, but this is, as I said, sort of circular reasoning. Senator NELSON. You stated that to do a ~hemical test of drugs for potency and chemical composition would be at least relatively easy. It is when you get to the question of testing the clinical effect- Dr. WILLIAMS. That is correct. Senator NELSON. That it becomes more difficult. Is there any doubt in your mind tha.t it is feasible as a practical matter for the Government, using the resources it has-that is, the thousands and hundreds of thousands of people that are treated by the Army-and they make tests now-plus contracting with di~tin- guished medical sthools and hospitals for purposes of doing double blind tests and paying for them, do you see that as a feasible approach to this problem ~ Dr. WILLIAMS. I think so. I think this is what is going to have to be done, the use of expert opinion plus in some cases where the informa- tion is not available, subsidized research which will give the answers that we need to actually say whether one drug is better than another. The drug houses do not do it. Senator NELSON. What I am seeking to get at here, then, is the end result. In your hospital you do have a formulary committee and your own formulary. Is there any reason why, doing these kinds of chem- ical testing as well as clinical testing using the resources of the Gov- ernment and contracting privately, you can't end up with a formulary which lists all the trade name drugs, lists all the generic name drugs that are the same as the trade name, the same compound, listing the side effects, listing the results of double blind tests, listing all the in- formation, in an indexed book form, so that as a practical matter a practicing physician could rely upon this sort of formulary and keep~ it up to date in an annual or semiannual way? PAGENO="0029" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 467 Is there any reason why that couldn't be done? Dr. WILLIAMS. Such a pharmacologist's bible would be a wonder- ful thing to have, for all of us, for those of us in teaching, too. No; I think this could be done. I think this will have to be done. I might say that in the area of new drugs which will come on the market from now on, the efficacy provisions in the Kefauver drug laws, when they are able to administer them adequately, the Food and Drug Administration can demand of the company that this comparative study be made. For drugs from here on out, the Food and Drug Administration can actually say to the pharmaceutical manufacturer, "Show us that your product Librium is superior to phenobarbital and in which way is it superior." So I think the big problem that we face in the next 15 years will be adequately administering that part of the law, and going back over the wealth of useless drugs which clog our literature and our formu- lary; drugs, many of them which have no therapeutic action at all. Senator NELSON. Has there ever been an adequate test of all the drugs put on the market to find out whether they have any therapeutic v&ue or not? Dr. WILLIAMS. No. You see, as the 1988 food and drug law was writ- ten, it did not require approval for old drugs that had already been on the market, so you take an agent like strychnine,~ which is very toxic, self-evidently poisonous, and which has no therapeutic action that w~ know of is widely sold in this country as an ingredient of some common laxative preparations, to which it adds nothing. An agent like strych- nine which has no therapeutic action and is as poisonous as strychnine is, and which actually results in poisoning of children every year, this agent would not be allowed on the market under the 1938 food and drug law, but agents which were in common use prior to the 1938 food and drug law were never tested for efficacy or toxicity, neither one. Mr. Goi~o~. You mean the 19~2 law, don't you? Dr. WILLIAMS. No; I mean the 1938 food and drug law. Now, this moves up to 1962, but I think under the 1962 law they can go back, when they get the time, and eliminate toxic substances from the market. Senator NELSON. Or any substance that does not have therapeutic value or just toxic substances? Dr. WILLIAMS. I am not too sure about the law. Someone else may know better than I, but I am sure under the 1938 law that this could not be done. Senator HATFIELD. Dr. Williams, I think the quality control factor here in this discussion is very important, but also I want to go back for a moment to the educational part of this problem. It seems to me that in your portrayal of the average American physician today as a sincere overworked dolt, as he relates to the pre- scribing and the understanding of drugs is something that must be the concern of this committee and to the profession. Since you are in a very unique situation as a professor of pharma- cology at a very distinguished college of medicine, I would like to know if there is any possibility that in conjunction with your univer- sity school of medicine, that this committee could have-Senator Nel- son, if it would be appropriate for me to make this request at this time- PAGENO="0030" 468 COMPETITIVE PROBLEMS IN TIlE DRUG INDUSTRY an analysis of the curriculums as it relates to both the general prac- titioner and also to the specialist in internal medicine, an analysis of that curriculum as it relates to the infusion of pharmacology and an understanding, not only in terms of the toxicity, the efficacy, the therapeutic values and all of these other things. Price, I think that is really secondary. I am more concerned about the therapeutic values of the drugs which will be generally in the field of his practice. Again, I emphasize, as I did before, that I think the protection of people's lives is so important, and that if the physician is doing as you say he is doing here, due to ignorance, due to lack of understanding, it seems to me that we must not only attack it from the point of view of those who are already in the practice, providing them with this added service, or source of reliable information, but we should do a very care- ful review of the curriculum and the educational programs in which these medical students today are engaged and the preml3dical students `are moving up into. I don't think we can leave that front unattended and not empha- sized to the proper degree, and I am wondering if you could not be very helpful to us in' this way, because of your dual professional status, training, and background, and now involved in this great institution of learning, as well as in your knowledge of the hospital. I am very interested in the educational aspects of it. Dr. WILLIAMS. So am I. Let me be defensive for a moment. Senator HATFIELD. I didn't mean to put you on the defensive. Dr. WILLIAMS. No, I just meant that your use of the term "dolt" is your interpretation of my remarks and not a statement that I made. Senator HATFIELD. No. Dr. WILLIAMS. Because some of my best friends are physicians and I wouldn't want to get involved in that. Senator HATFIELD. But when you make these observations that the average practicing physician today is really making prescrip- tions with very little knowledge except that which is told him by a salesman of drugs, this is certainly not in terms, I believe, of high professional practice. You indicated, of course, he is sincere and he is overworked. Dr. WILLIAMS. That is right. Senator HATFIELD. But I think it is a matter of prescribing in ignorance as you indicated awhile ago, that in ignorance he does this. So I don't mean to indicate either that all physicians are dolts, but as I read your portrayal in many instances he is ignorant. Dr. WILLIAMS. He just doesn't know, that is correct, and he has no source of information. Senator HATFIELD. But he should know. Dr. WILLIAMS. But he should know for your safety. Senator HATFIELD. All right. So he is ignorant. Dr. WILLIAMs. Right. Senator HATFIELD. Then he is a dolt in that sense? Dr. WILLIAMS. He is uninformed. Let me use the term uninformed. Senator HATFIELD. Uninformed, all right. Dr. WILLIAMS. No; you are completely right, and I think this has crept up on us. Senator HATFIEI4D. I am completely right on the dolt, you mean? PAGENO="0031" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 469 Dr. WIr~I4IAMs. No. You are completely right that we need to really look into the problem of education, in the nature and the use of drugs for the physician today. Look what has happened. In 1900 the most important subject in medicine was anatomy. It occupied an enormous time. Today anatomy is less important, and other things like physiology and pharmacology are more important. But today Grady Hospital patients go out of the hospital with four, five, six, and for certain diseases even seven drugs. Even in the practice of medicine at Grady Hospital, where the medical school the- oretically has control of the quality of medicine, there is frequent use of drugs or sometime use of drugs which should not be used in com- bination, and so on and so on, so that even where they are this close to their original medical training, it is a problem, and as they move out into medicine, the problem becomes greater because primarily there isno objective source of critical comparative information in which the doctor can place any faith yet, except the Medical Letter. Senator HATFIELD. Is there any hope of getting the AMA back onto this job of analyzing and evaluating that they were doing prior to the 1930's? Dr. WILLIAMS. I don't know. I think that this statement should have to come from them. I doubt it. I think at the present time the situ- ation is such that I don't know whether they could handle it. I would hope that the operation that could be set up would be one that would have the support of the American Medical Association. Senator HATFIELD. But, again, Dr. Williams, isn't there a ques- tion here of professional standards? When you say that the average physician in many instances is uninformed, isn't this more than just a matter of excusable ignorance? Isn't this a question of professional standards? He is holding himself out as one who is professionally qualified to assist a person in physical need, and if that person goes to him and is to rely upon his counsel, which includes a prescription of a drug, and you say he is prescribing this drug out of ignorance in many in- stances, and out of being uninformed, isn't that a question then of professional standards, of conduct, that the medical society and AMA should certainly be concerned about, and not just be uninvolved in? Dr. WILLIAMS. I think it should be clear that where the physician is uninformed is whether drug ~X be better than drug Y or not. Now in terms of the drug he uses, the average physician is aware of the side effects. He is aware of the dangers. He will be using out of the thou- sands and thousands of drugs available regularly only a small group of these drugs, and he is informed in general in this area. When it comes to knowing for this particular condition whether phenobarbital might be better than Librium or not, he not only does not know, he does not have the information available to him to tell whether it is better. I would not like the idea to get across that the physician is using drugs in ignorance. The physician is ignorant of the relative value of the drug compared with another drug, and he is ignorant of the price of the drug compared with the price of another drug. Senator HATFIELD. But on page 4, where you said under No. ~, "The enormous pressure of advertising and detailing creates a market some- PAGENO="0032" 470 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY times where none exists and unfortunately for good medical practice this may lead physicians to the use of unnecessary or even unsafe drugs." Dr. WILLIAMS. Yes, sir, that is correct, I would repeat that statement. Senator HATFIELD. When you say "unsafe drugs," then you can't say that physician is acknowledgeable about what he is prescribing. He wouldn't knowingly prescribe unsafe drugs, would he? Dr. WILLIAMS. No; I think the difference here comes in my statement about lack of knowledge of comparative value of drugs. I said the average physician has no knowledge of the comparative efficacy of a group of drugs in the same class. I think unfortunately detailing pressure has resulted in the use of unnecessary and unsafe drugs, but I don't think by the average physician. I think by a smaller group of the medical profession. There is no question about what it happens. This has been documented in the misuse of penicillin, and a widely used agent, nicotinic acid, which is given to a great number of old people in this country for dilating their cerebral blood vessels. The information in the medical literature would indicate that nicotinic acid doesn't dilate cerebral blood vessels, and this information has been there for years. But they have no source of getting this information as opposed to the detailing pressures of the companies that are selling the nicotinic acid. Senator HATFIELD. And under No. 4 on that same page where you say, "And Dr. Neil Moran"- Dr. WILLIAMS. Yes. Senator HATFIELD. Who indicates there that some detail man is telling a physician what drugs to use for which diseases, you are talking there then not about generic drugs but brand name drugs? Dr. WILLIAMS. Either brand name drugs that do not have another maker, or a brand name drug that may be sold by other companies un- cler another brand name. This problem of generics, all trade name drugs also have a generic name. Senator HATFIELD. Yes; so I understand. * Dr. WILLIAMS. So detail men only advertise trade name drugs. Some of these may also have generic equivalents under other trade names; yes, this is true. Senator HATFIELD. But it does seem to me that you have given us at least an impression in certain statements here which would lead one to the conclusion that there are physicians today prescribing drugs, which as you indicate in one place could be unsafe, in another place which have been prescribed on counsel of a salesman. This puts us back to th~ question of whether or not a physician is truly following the highest standards of practice based upon his information, based upon his understanding. It, therefore, should become a concern for the medical practitioner and the medical profession as well as those of us here on this committee who have been besieged by the economics of all this. I think we need to concern ourselves with the economics, but there is this factor to me that is even more preeminent and takes priority over the economics. Dr. WILLIAMS. They are inextricably intertwined. Senator HATFIELD. That is right. PAGENO="0033" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 471 Dr. WILLIAMS. When one uses a drug which is not necessary, the cost to the patient, the unnecessary cost to the patient is the total cost of the drug, whether it be trade name or generic. Senator HATFIELD. Yes; but there could be dollar cost and also health cost. Dr. WILLIAMS. Very serious health costs. Senator HATFIELD. And the health costs can be far more expensive than the dollar costs. Dr. WILLIAMS. Yes; as expensive as fatal. May I add one word here which is not in my statement. There is another problem. Mostly we have been dealing, as you mentioned, about the private contract be- tween the doctor and the patient, and attempting to extend our stud~ ies and our findings at Grady Hospital over into the general area of drug use. But there is a growing amount of money in this country being spent by the Government, tax money, for drugs, drug vendor programs. Grady Hospital is one example, but the State drug vendor program the Federal Government is pouring millions of dollars into, some $4 million into Georgia alone this year. Here another problem exists that is a little bit different from the ordinary private contractual relationship between the patient and the doctor and the pharmacist, if you will, the question of whether or not the patient pays for a useless drug, if it is nondangerous, which the doctor may prescribe, and which may do the patient, give the pa- tient excellent benefit in terms of a placebo reaction is really to me not so much of a moral problem. The question whether the State should pay for a drug which in medical literature has again and again stated is useless in the treat- ment of patients, I think, is a different problem. I think it has a dif- ferent level or morality, and I think this is something that this com- mittee should consider in a sense as two separate problems. There is another area of abuse here, and this is true in our prac- tice at Grady Hospital, when the doctor who I said I believe is con- cerned about the cost of medication to his patient realizes that the Government is going to pay for the medication, he becomes, since he is fallible, much more prone to prescribe a drug with less considera- tion than he might otherwise do. Sometimes this can be good, where he will prescribe a drug which may be good for a disease than he might have withheld for the patient who couldn't pay for it. But sometimes it can lead to a large increase in needless and useless prescribing by the medical profession, and this is something which this country faces in the future as an increasing share of the drug bill is paid for by tax-supported agencies on a local and a Federal basis. Senator NELSON. Thank you very much, doctor. Excuse me. Senator Scott? Senator Scoi'r. I think the questions I had in mind, Senator Nelson, have been well covered, and I have no questions. Senator NELSON. Does committee counsel have any questions? Mr. C0UGHLIN. I have none. Mr. GORDON. You mentioned on page 1 about the cortisone-type drug which cost $167 per 1,000. Dr. WILLIAMS. Right. 81-280--pt. 2-67---3 PAGENO="0034" 472 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY Mr. GORDON. When a comparable generic product would cost $6 a 1,000. Dr. WILLIAMS. Yes. Mr. GORDON. Which drug do you have in mind? Dr. WILLIAMS. I would like to change the word "comparable gen~ eric" to comparably therapeutic product here in this particularly in~ stance, although I could have used another product. Actually the $161 per 1,000 was methylprednisolone. Mr. GORDON. Methylprednisolone? Dr. WILLIAMS., Or Medrol, and we went over to prednisone, which is therapeutically equivalent but is really not the same generic drug. Mr. GORDON. Concerning the hospital formulary, do you have any sustained, release drugs on it? Dr. Wru4IAi~S. We have some sustained release Thorazine or chlor- promazine, because by peculiarities of drug marketing, a sustained release preparation is cheaper to us than the equivalent tablet. This is the only sustained release preparation we have. Mr. GoRnO~. How about drug combinations? Do you have any on your formulary? Dr. WILLIAMS. We have a few drug combinations of the old-fash- ioned type like elixir of phenobarbital and belladonna, which are in general used for their placebo effect, but none of the newer combina- ticeis are available. This is for several reasons. One, using combinations pushes the price up because the combina- tion even of the generic drugs can be peculiar to a certain trade-named item. This is one reason. But the chief reason as we feel, and the medi- cal department feels very strong on this, that the use of drug combina- tions is medically unwise, because for each patient with some very rare exceptions the dose of each drug should be adjusted individually ac- cording to the patient's tolerance for the drug and the patient's need, so that we do not have combination drugs except these minor things that I have mentioned. Mr. GORDON. You referred to new drugs which are minor molecular modifications of established drugs with no clear-cut therapeutic ad- vantages. Will you give us some specific drugs which fall into this category? Dr. WILLIAMS. Oh, some of them are annoying. Schering's patent on chlortrimeton ran out in 10 years instead of 17 years because they had been taken over by the alien property custodian. Chlortrimeton was a big seller. It is an excellent potent antihistamine. Faced with no patentable product, and with the price of generic chlortrimeton down in the range of a couple of dollars a 1,000, they separated the D and L isomers of chlortrimeton in the chlortrimeton fraction-chlortrimeton is a salt that contains two isomers of the drug, two chemically related forms of the drug. Only one of the chemical forms is active, the D form, so they eliminated the L form, cutting the dose from 4 milligrams to 2 milligrams, came out with an advertising statement which said "Schering eliminates the molecular dross," and attempted to charge many, many times the cost of the original product for this product which didn't even result in a molecular modification. Roche has for 17 years sold one of the better sulfa drtigs, Gantrisin Sulfisoxazole, an excellent drug, and they have been able to charge full price on this drug with no serious competition over a 17-year PAGENO="0035" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 473 period. Faced with the loss of the expiration of their patent and a drop in the cost of the generic product to one-fifth or less of the trade name product, they came out with a minor molecular modification of Gantri- sin called Gantinol. Advertising for this drug indicated that it was unique and new. Actually it is an agent which has exactly the same spectrum as the parent compound, maybe slightly longer acting, but it has been shown to have no qualitative unique action different from Gantrisin. We don't use Gantinol at Grady Hospital. And I could go on and on with the list of drugs where, in an attempt to get a saleable item, one drug firm will make a minor modification in a molecule already introduced by another drug firm, or sometimes in one of their own products as the two instances I have mentioned, in order to get back on the trade name basis. Mr. GORDON. Does the Grady Hospital employ any inspection or testing procedures to insure that the drug supplies meet proper standards? Dr. WILLIAMS. No, we do not, and this is why among other things I would be very interested in having this. We purchase from generic houses, we buy the bulk of our purchases, which are by and large es- tablished houses. Our antibiotics come from Primo, and so on. We in the early days of our work arbitrarily set some minimum standards. Actually the then hospital administrator set a minimum Dun & Bradstreet rating which we would accept for a supplier for the drugs. This was a little unfair, but in the absence of other informa- tion gave us at least some standard to go on. In addition, we keep records and watch the recalls noted by the Food and Drug Administration. If we get a drug which we suspect, we turn it over to the local food and drug authorities and have them test it for us, which they do. If a company has drugs recalled for what are seriOus errors, we stop using that company. In addition, we do inspection of the generic suppliers, and when a new generic supplier turns up, either Mr. Dorsey, our chief pharma- cist, or I, will attempt either by telephone to people locally in the area or by a trip to check on this supplier, but we do not do laboratory testing of anything except the things we make ourselves. Mr. GORDON. I understand you manufacture some items. What do you manufacture? Dr. WILLIAMS. Actually minor items, saturated solution of potas- sium iodide and so on. We manufacture all of our own fluids, and we do check tests on these, and this affects our total drug bill, but not the out-patient costs. Mr. GORDON. Now, the figures you gave us in your statement show the savings as a result of adopting a formulary system. Could you give us some specific examples as to money saved by buying generically, that is specific drugs? Dr. WILLIAMS. I have already mentioned some of these in previous testimony. I think one of the most dramatic was in terms of generics, was the savings that we made by switching from methylprednisolone to predmsone, or from trade name prednisone to generic name predni- sone, which would have given us. essentially at that time the same saving. Mr. GORDON. How much money did you save on that? PAGENO="0036" 474 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY Dr. WILLIAMS. It is not used as widely as the antibiotics of some other drugs, it ran right at $20,000 in 1 year. The two big savings, because these drugs are so much used, were in the area of trade-named items where we forced companies to compete, the chiorothiazide din- re1ics, the $40,000 saving, and presently today between generic and trade-name tetracycline, where the savings will run as high as $100,000 a year. Mr. GORDON. In teaching you generally use generic names for drugs. Is that right? Dr. WILLIAMS. I generally use generic names. Mr. GORDON. The textbooks use generic names too, don't they? Dr. WILLIAMS. They do. Mr~ GORDON. Are you acquainted with the Merck Index and the Merck Manual? Dr. WILLIAMS. Yes. Mr. GORDON. Isn't it the case that where the Merck Co. itself pre- pares scientific material it uses generic terms also, does it not? Dr. WILLIAMS. That is correct. You could have 50 trade names for one generic item. Which trade name would you pick to list it under? Mr. GORDON. So it is potentially dangerous to use trade names, es- pecially if the physician may not know what the ingredients are? Dr. WILLIAMS. It is confusing and potentially dangerous. Mr. GORDON. As well as expensive? Dr. WILLIAMS. As well as expensive. Senator NELSON. Dr. Williams, we appreciate very much your testi- mony. It has been an excellent contribution to the hearings. We ap- precia~te your taking the time to come. We will take a 30-minute break so that we don't get too much lunch. We will recess and reconvene at 12:30. In the meantime I will be at the desk for 5 minutes for any of the drug industry representatives who would like to come up and advise me whether or not their companies would like to be heard, and we will make arrangements for a future date. I will stay here for the next 5 minutes. We will resume in 30 minutes. I will put in the record here at this stage an exchange of correspondence at the request of Senator Sparkman, with additional relevant material. (The supplemental information submitted by Senator Nelson follows:) U.S. SENATE, COMMITTEE ON BANKING AND CuRRENCY, Washington, D.C., June 23, 1967. Hon. GAYLORD NELSON, Chairman, Monopoly S~uboommittee of the senate ~5mall Business Committee, Washington, D.C. DEAR Mu. CHAIRMAN: I would appreciate having the enclosed information and exchange of views Included in the record of the hearings on drug prices, which I understand are to resume on June 27. With best wishes, I am, Sincerely, JOHN S1?ARKMAN. Enclosures. PAGENO="0037" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 475 PHARMACEUTICAL MANUFACTURERS ASSOCIATION, Washington, D.C., August 22, 1966. JAMES L. GODDARD, M.D., Commissioner of Food and Drugs, Department of Health, Education, and Wel- fare, Washington, D.C. DEAR COMMISSIONER GODDARD: Considerable publicity was generated by your comments at the recent annual meeting of the Drug and Allied Products Guild that "We have to conclude that one out of every fourteen drug units manufactured is violative just on potency alone." This conclusion was based. according to your talk, on the results of FDA analyses of 4,200 drug samples representing 20 major therapeutic categories. As you know from my letters of June 4 and August 18, requesting background data on your statement that one third of the PMA membership is involved i~ violation of the advertising regulations, we are deeply concerned with reference to statistics of this type without making available to the industry substan- tiating data. The PMA and our member firms should be in a position to know the source of and more details concerning these generalizations to determine what corrective action, if any, is indicated. We respectfully request, therefore, that you forward a copy of the tabulation of the 4,200 samples involved, including name of products and manufacturers and the type and degree of deviation from labeled potencies involved. We, of course, are willing either to reimburse the Food and Drug Administration for any expenses involved or provide personnel to prepare the compilation from your analysis records. In the alternative, we would appreciate a tabulation including only those in- stances involving members of P.M.A. In your letter of June 80, you stated that you deemed it inadvisable to submit names of companies involved in conduct allegedly violative of the Federal Food, Drug and Cosmetic Act in instances where FDA had determined that no action involving publicity should be taken. While we would prefer that you reconsider that decision, our companies' com- pliance efforts would be assisted even if you would transmit `the types and number of violations involving PMA members without divulging the names of companies involved. Sincerely, C. JOSEPH STETLER. PHARMACEUTICAL MANUFACTURERS ASSOCIATION, Washington, D.C., August 25, 1966. Mr. FRED J. DELMORE, Director, Bureau of Education and Voluntary Compliance, Food and Drug Ad- ministration, Department of Health, Education, and Welfare, Washington, D.C. DEAR GENERAL DELMORE: It was certainly a pleasure for Mr. Stetler and me to talk with you the other day on plans of the Bureau of Education and Volun- tary Compliance, and to discuss possible ways in which the pharmaceutical in- dustry could be of assistance to `the Bureau in its future program. During our conversation I mentioned that it would be helpful to have certain information on results of F.D.A. examination of samples of drug products ob- tained in the field. It was concluded that I should send you a letter discussing some of these points. The discussion was prompted, of course, by public comments from Commis- sioner James L. Goddard and others on results of analyses of 4,200 samples recently obtained in an F.D.A. survey. Concerning the specific group of 4,200 sam- ples, Mr. Stetler wrote to Doctor Goddard on August 22, stating in part "We respectfully request, therefore, that you forward a copy of the tabulation of the 4,200 samples involved, including name of products and manufacturers and the type and degree of deviestion from labeled potencies involved". Mr. Stetler then said "In `the alternative, we would appreciate a tabulation including only those instances involving members of P.M.A." . . . "Our companies' compliance efforts would be assisted even if you would traiismit the types and number of violations involving P.M.A. members without divulging the names of companies involved". PAGENO="0038" 476 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY I might add that it would also be helpful to know where the drug product pick-up occurred, because different results could be expected if the product sampled was resting in the shipping room of the original manufacturer, or in a warehouse in another part of the country, or in a retail pharmacy. If it is not possible to disclose the names of companies producing the drug samples tested, it would be helpful to know the names of the drugs, or at least the therapeutic categories of the drugs involved. I am thinking here of non- proprietary drug names such as penicillin, and therapeutic categories such as antihistamine, tranquilizer, etc. To be of maximum usefulness to the industry, any tabulation should also give some idea of the type of manufacturer involved, in the event the nanie of each manufacturer cannot be disclosed. By type of manufacturer I refer to whether the manufacturer is a member of P.M.A. and some idea of whether the company has its own quality control and research facilities. It would be most helpful if studies of this kind could furnish s~ome of these necessary details. To summarize, I would suggest the following information: (a) The name of the drug, or at least the therapeutic category. (b) The name of the manufacturer, or the type of manufacturer as defined above. (c) The nature and extent of the alleged defect found in the drug. (d) The source of the drug sample tested (manufacturer, wholesaler, retailer). Sincerely yours, KARL BAMBAOH. DEPARTMENT OF HEALTH, EDuCATIoN, AND WELFARE, FOOD AND DRUG ADMINISTRATION, Washington, D.C., August 31, 1966. Dr. KARL BAMBACH, Pharmaceutical Manufacturers Association, Washington, D.C. DEAR Dn. BAMBACH: I have your letter of August 25 in connection with your request for data on the results of analyses of 4,200 samples recently collected in an FDA survey. I am forwarding a copy of your letter to the Commissioner's Office since, as you related `to me and also indicated in your letter, Mr. Stetler wrote Dr. God- dard on August 22 concerning this same subject. I am sure that you will be hearing from this office on this subject within the near future. Sincerely yours, Fium J. DELMORE, Director, Bureau of Education and Voluntary Compliance. PHARMACEUTICAL MANUFACTURERS ASSOCIATIONS, Washington, D.C., October27, 1966. JAMES L. GODDARD, M.D., Comiinassioner of Food and Drugs, Department of Health, Education and Welfare, Washington, D.C. `DEAR `COMMISSIONER GoDDARD: As you know from past correspondence, reports from. officials of the Food and Drug Administration on the alleged low quality of drug `products are a matter of increasing concern to the pharmaceutical in- dustry and particularly to the `Pharmaceutical Manufacturers Association. In my letter to you of August 22 I referred to your comments at a meeting of the Drug and Allied Products `Guild that one out of every fourteen drug units is violative with respect to `potency, according to an FDA analysis of 4,20Q drug samples. I asked for details of this study, hoping to receive information on the 4~2O0 samples involved, including the names of products and manufacturers and the types and degree of deviation from' labeled potencies. In the event this could not he furnished, we at least expected to receive a tabulation of instances in- lrolving members of PM'A. This same study was mentioned by Gen. Fred Delm~re at the seminar con- ducted `by the University of Wisconsin at Hershey, Pa., and on August 25 Karl Bam'bach of our staff wrote to General Delmore requesting similar information. On September 1 Deputy Commissioner Winton Rankin acknowledged these letters, stating "We are considering your request and will be in touch with you later." No further reply has been received. PAGENO="0039" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 477 We have recently read in the press and in the Co'n~gressionaI Record about the speech given `by Deputy Commissioner Rankin before the American `College of A'pothecaries on October 15, 1966, in which he states "We collected almost 4,600 samples of drugs last spring representing the output of about 250 manufacturers. We examined these samples for potency . . . 7.8% of the generic-name drugs were not of acceptable potency. 8.8% of the brand-name drugs were not of ac- ceptable potency." Again we would respectfully request information concerning this study, and we would also like to receive clarification of the findings re- ferred to by Commissioner Rankin. If possible, we would like to know the names of the iroducts and manufacturers involved, and the results' o'f the examination. If this is not suitable for transmis~ sion to us, we would think that at least a tabulation of the classes of drugs and the results of examination, by classes of drugs, could be furnished. We alsb have at least one specific question related to Commissioner Rankin's speech. He states that about 2,600 of the drugs were sold by generic name only and about 2,000 by brand name. If the results he summarizes are to have significance, with respect to' the generic and brand name controversy, it would be necessary to know the proportion of substandard lots made by firms which produce so. called generic drugs almost exclusively, and compare this with the performance of the companies which make both brand-aame and generic-name drugs, but which are commonly regarded as brand-name houses. For example, several of the very large pharmaceutical firms offer a complete line of drugs which includes about as many drugs sold by generic tiames as those sold under trademarks. We believe it is most important to obtain meaningful information on the per- formance of drug manufacturers of various kinds, so that mutual efforts can be put forth by the industry arid the 1~ood and Drug Administrution to raise the level of quality of the drug supply as high as possible. We believe that a discussion of the figures already available to the Food and Drug Administration would provide a useful start for this project. Sincerely yours, C. JOSEPH STETLEE. PHARMACEuTICAL MANurAcTuiusn$ AssoCIATIoN, Washington, D.C., December 1, 1966. JAMES L. GODDARD, M.D. Commissioner, Food and Drug Administration, Washington, D.C. DEAR CoMMIssIoNER GODDARD: The purpose of this letter is' to again request in- formation on the drug potency study undertaken several months ago by `the Food an'd Drug Administration which has' been referred to in several FDA speeches. You may recall that I wrote to you on two previous occasions, August 22, and again on October 27 requesting the information. In our meeting in your office on November 1, you indicated that the material would be forthcoming. I am most anxious to submit the data to careful anlysis and at the earliest pos- sible moment because of the seriouS nature of the' conclusions which have been reached by the FDA and the impact which this study is Sure to' have in connec- tion with prospective hearings by the Senate Finance Committee next year. It would be most helpful if you would provide us with a complete list of the drugs that were examined. That is, we are interested in Obtaining a list Of those dru~s which were acceptable as well as' those which were found to be subpotent or otherwise did no't meet labeling requirements. It would also' be helpful if the following information could be provided to assist us in o'ur analysis: 1. Phe nature of the' sampling technioue or design. 2. The source of the samule, i.e., retail pharmacy, hospital pharmacy, whole- saler. manufacturer's distribution point or warehouse, reserve s'amnles, etc. ~. The lot or control numbers of the products found to he subpot,ent. 4. In the case of nonofficial assays, the method of analysis used. .~. The' limits of potency for non-TJ.SP. or NP. lrugs. I recognize that some of the above information may he ~1ifficult to' supply. however, to the extent possible I would appreciate consideration of as' many' of these' item's as nossible. Your nromnt attention to this request will be very much appreciated. Sincerely yours', 0. ,TosEpH STETLER. PAGENO="0040" 478 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE, FOOD AND DRUG ADMINISTRATION, Washington, D.C., February 1, 1967. Mr. C. JOSEPH STETLER, President, Pharmaceutical Manufacturers Association, Washington, D.C. DEAR MR. STETLER: This replies to your letter of December 1, 1966, requesting information on the drug potency study that we conducted some months ago. The enclosed computer printout release and summary give the results of the survey. It is not possible to retrieve the lot numbers of individual samples from the computer and we have not undertaken the manual task of reviewing each file to obtain the lot numbers. The printout is filed in our Office of Education and Information where it is available for review by any interest parties. Sincerely yours, JAMES L. GODDARD, M.D., Commissioner of Food and Drugs. PHARMACEUTICAL MANUFACTURERS ASSOCIATION, Washington, D.C., February 24, 1967. J~M~s L, GQDThtRD, M.D., Comni~is~ioner of Food an4 Drugs, Department of Health, Education and Wel- fq,rç, Washington, ~lLC. ~i~5AR Dn. GOPPARD': This letter is written in further reference to the drug potency study conducted last year by the Food and Drug Administration and will serve to advise you that, to date, the information we requested in previous correspondence on this' subject has not been receivd. Your letter of February 1, the FDA press release of January 31 and the computer print-out report of the study have been carefully reviewed. This data, however, is not adequate to answer the questions we previously raised. Conse- quently, we are repeatiñ~ our request for more complete information in order that members of this Association cited in the report are afforded the opportunity to adequately study the data and undertake whatever action may be indicated. You will recall that the following information was requested in my letter of December 1, 1966: (1) The nature of the' sampling technique or design. (2) The source of the sample', i.e., retail pharmacy, hospital pharmacy, whole- saler, manufacturers' distribution point or warehouse, reserve samples, etc. (3) The lot or control numbers of the products found to be subpotent. (4) In the case of nomiofficial assays, `the method of anaylsis used. (5) The limits of potency for non-U.S.P. or non-N.F. drugs. The information requested on limits of pote1~ey for non-TLS.P. and no'n-NF. drugs was not supplied but is ascertainable from the speech given by Deputy Commissioner Rankin beforê'tbe American College of Apothecaries on October 15, 1966. It is also' my understanding from our conversation on February 16 that lot and control numbers will be supplied t~ the firms involved upon request. Informa- tion on items 1, 2, and 4 above are prerequisite to a meaningful evaluation of the data thus far provided, however, and I respectively request again, therefore, that it be supplied. More recently questions have arisen as to when the samples in question were obtained by FDA. We would, therefore, also like to have an indica- tion of when the samples identified in the study as violative were acquired by FDA. The effects of the study in question on the industry and the public are sub- stantial. We are particularly concerned by the publicity given to this material because of the admittedly questionable' validity of the study and the improper conclusions drawn from it. We have therefore directed the enclosed letter and questionnaire' to PMA firms whose products were found to be violative by the FDA in the study. The replies we reCeive will be tabulated and analyzed and I shall promptly notif~y you if additional data from the FDA is needed to confirm or deny the conclusions which have thus far been released. PAGENO="0041" COMPETITIVE PROBLEMS IN THII DRUG INDUSTRY 479 The ability of PMA member firms to properly evaluate their performance de- l)endS in a large measure on the availability of complete information In instances in which their products are allegedly found to be in violation of the statute or regulations. It is for this reason that I most earnestly request your prompt attention to this matter. Sincerely yours, C. JOSEPH STETLEE. DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE, FOOD AND DRUG ADMINISTRATION, Washington, D.C. March 15, 1967. Mr. C. JOSEPH STETLER, President, Pharmaceutical Manufacturers Association, Washington, D.C. DEAR MR. STETLER: This will provide additional information concerning the drug potency survey in response to your letter of February 24, 1967. The FDA District offices were requested to obtain one or more samples of each dosage form of the drugs in the categories listed from each primary manu- facturer. Appropriate analytical procedures were used for non-official prepara- tions, and included procedures submitted with New Drug Applications, AOAC procedures and others published in the scientific literature. The survey was ini- tiated in late March 1966, and continued for approximately two months. Yot~ are correct in your understanding that lot or control numbers are being supplied to each manufacturer on request. Information on the method of analysis is included when requested. The criteria used in evaluating the potency findings were arbitrarily set at 90-110% of the declared amount, except where compendia or NDA's were controlling, as announced in our press release. As indicated in the release, our samples were obtained from lots ready for sale. We do not believe we would be justified in expending the time and funds required to obtain and list the specific source of each sample. Sincerely yours, JAMES L. GODDARD, M.D., Cornmi~sioner of Food and Drugs. PHARMACEUTICAL MANUFACTURERS AssocIATIoN, Washington, D.C., May 4, 1967. JAMES L. GODDARD, M.D., Commissioner of Food and Drugs, Department of Health, Education, and Welfare, Washington, D.C. DEAR DOCTOR GODDARD: As you know from past correspondence and conversa- tions, the Pharmaceutical Manufacturers Association and a number of our member firms are attempting to evaluate the methods and tests employed in and the results of the 1966 FDA drug potency study. The results of this survey have been given wide publicity by FDA and others, and some of the conclusions reached have frequently been cited in support of generic prescribing and dispensing legislation. On four occasions the study has been referred to in the Congressional Record by proponents of such legislation. The most recent reference to the report was made by Senator Gaylord Nelson in his address to the Senate on Wednesday, April 26, 1967. At that time he an- nounced that he will initiate investigative hearings, involving the drug industry in the Monopoly Subcommittee of the Senate Small Business Oomnilttee begin- ning on May 15. Included in Senator Nelson's address was a reference to a newly published book "Handbook of Prescription Drugs" by Dr. Richard Burack, which also contains a reference to the survey. The fact that tbi~s ~urvey will no doubt play an important part in the hearings announced by Senator Nelson makes It even more imperative that the information we and individual com- panies have previously requested be made available as soon as poss~ble. Many of the PMA member firms involved have still not been in~ormed of the source or sources from which their alleged violative samples wei~e obtained. I respectfully request again, therefore, that this information be made, available to them at the earliest possible date. We cannot agree with the coneltision you PAGENO="0042" 480 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY previously e~presse~ that the time and funds required to obtain and list th~ specific source of each sample would not be justified. It is our considered opiniou that such information is exceedingly important. Conditions of storage including temperature and humidity can have an important bearing on the potency of many drug products. Information concerning the source of samples can be provided to this office or directly to the firms involved. Pursuant to the comment in your letter of March 15, I shall again advise our member companies involved, which have not already done so, to request the method of analysis for the specific alleged violative samples in question. It will be greatly appreciated if prompt attention can be given to any in- quiries directed to. you or your staff by our member firms with respect to sample sources and methods of analysis. This information will assist us in completing our review of the overall survey which to us is a project of major significance. Sincerely yours, C, Josn~ti STETLER. 1966 FDA druçj potency study comparative analysis P.M.A. Non-. P.M.A I. Total number o~ firms in study 84 162 II. Total number of products examined 1,933 2,640 (a) Generic 531 2,050 (b) Brand 1,402 590 III. Number of violative samples 119 257 IV. Average number of products per firm 23, 0 16. 3 V. Number of firms with generic and brand violations_.. 5 29 Percentage of firms with generic and brand violations 5. 9 17. 9 VI. Number of firms with violations (generic or brand) 49 78 Percentage of firms with violations (generic or brand) 58. 3 48. 1 VII. Number of firms without violations 35 48 Percentage of firms without violations 41. 6 51. 8 VIII. Generic products: (a) Number of firms with generic products in study 53 134 (b) Number of generic products in study 531 2, 050 (c) Average number of products per firm 10 15. 3 (d) Percentage of generic products in total sample 27. 4 77. 6 (e) Number of products sampled among violative firms 241 1, 706 (f) Percentage violative samples among violative firms studied .? 10. 7 10. 6 (g) Numlier of violative samples 25 175 (h) Percentage violative samples of generic products In total sample 4. 9 8. 5 (i) Number of firms with violative Samples 13 66 (j) Percentage of viOlative firms ~- 24. 5 49. 2 (k) Number of firms wlthout violations 40 68 (I) Percentage of firms without violations - 75. 4 50. 7 IX.. Brand name products: (a) Number of firms with brand name products in study 77 106 (b) Number of brand name products in study 1, 402 590 (c) Average number Of products per firm 17. 9 5. 5 (0) Percentage of brand products intotal sarnpLei-~.~ 72. 4 22. 3 (a) Number of products sampled among violative fir5s 1, 120 372 (f~ Percentage violative samples among vlolatiile fftms studied 8. 3 22. 0 (g) Number of violative Samples 94 82 (h) Percentage violative samples of brand products in total sample ~.. 6. 7 13. 8 (i) Number of firms with violative samples 41 42 (j) Percentage of violative firms L 53. 2 39. 6 (k) Number of firms without violations 36 64 (I) Percentage of firms without violations 46. 7 60. 3 PAGENO="0043" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 481 STATBMENT BY FDA OFFICIALS CONCERNING THE POTENCY SURVEY 1. Commissioner James L. Goddard in an address to the Drug and Allied Products Guild, Ettlenville, N.Y., June 8, 1966: "Between March 24 and June 3 of this year, the Food and Drug Administration collected almost 4,200 drug samples in 20 major therapeutic categories-corti- costeroids, anticoagulants, antihypertensives, diuretics, nitrates, and so on, 7.6 percent of them deviated to a material extent from declared potency-they failed to meet DSP or NP limits, or in the case of non-official drugs their potency fell outside the range of 90-110 percent of declared potency. "On the average, then, we have to conclude that one out of every 14 drug units manufactured is violative just on potency alone. ~`* * * These are facts of life-of human life and of economic life. But I must tell you that the Food and Drug Administration is interested first and fore- most in the facts that protect human life. . ." 2. Deputy Commissioner Winton B. Rankin, in an address to the American College of Apothecaries, Boston, Mass., October 15, 1966: "We collected about 4,600 (sic) samples of drugs last spring representing the output of about 250 manufacturers. We examined these samples for potency... The quality of a drug was judged by applying the potency limits of the USP or the NP [United States Pharmacopeia or the Nation~LF-ormuiary] if it was an official drug. Otherwise, it was considered accepiable if it contained 90 to 110 percent of the active ingredient declared on the labeling. 7.8 percent of the generic-named drugs were not of acceptable potency. 8.8 percent of the brand- named drugs were not of acceptable potency.. . Manufacturers who would like to avoid increasing demands for extension of batch-by-batch Government testing of additional drugs would be well advised to clean their own house rather than wait- ing for the Government to do it.. . The main issue is: If a drug manufacturer can- not put out good drug, then he will have to get out of the drug business . . ." 3. FDA news release, for A.M.'s January 31, 1967: "* * * There were 4,537 drug samples collected in the survey. Analysis showed that 376 samples-or 8.2 percent of the total-were above or below acceptable potency levels. The 376 samples came from 127 different finns . . . Follow-up ac- tion on violations of potency standards included the collection and examination of additional samples, re-inspection of manufacturing plants, recall or seizure of products, or citation of the manufacturer. . ." 4. Dr. Goddard, in an address to the Philadelphia Chapter, Defense Supply Association, February 9, 1967: "* * * Altogether there were 4,573 drug samples collected. On just potency levels alone we learned that 8.2 percent of the total survey-that is, 376 drug samples-were above or below acceptable potency levels. As a physician-and, every now and then, as a patient, too-I regard 1 percent as the outside limit." 5. Dr. Goodard, in an interview in the February, 1967 issue of D.O., publica- tion of the American Osteopathic Association: "* * * Well, you can quibble about minor differences; you can talk about whether this sample was statistically significant-it did have more than 4,500 drugs in it-about half of them were trade names, about half of them generic drugs. But you can't argue away the fact that about one out of twelve (sic) drugs didn't measure up on potency . . . In one out of twelve instances the patient isn't getting what the physician intended.. ." STATEMENTS FROM SOURCES OTHER THAN FDA ABOUT THE POTENCY SURVEY Senator Phi?4p A. Hart, Senate Floor ~S'peech, October 21, 1966 Mr. President, last Saturday the Deputy Commissioner of the Food and Drug Administration, Winton B. Rankin, pointed oi~t that if doctors and pharmacists are attempting to supply patients with the best drugs, they might be better advised to use generics over brandname drugs. A quality check by FDA of 4,600 samples of 20 of the most important groups of drugs-generic and brandrlames-Mr. Rankin reported, showed 7.8 percent of the generics not of acceptable potency. But 8.8 percent of the brandname drugs failed to meet standards. The percentages, admittedly, are still too high in both categories and demon- strated, as Mr. Rankin said: PAGENO="0044" 482 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY "That drug manufacturers and the government are going to have to) do a better job." Under `the direction of FDA Commissioner Goddard, I am confident that agency-which has been improving rapidly in recent months-will do the better job required. "The main issue, as the FDA sees it, is: "If a drug manufacturer cannot put out good drugs, then he will have to get out o'f'the drug business." "The agency plans to apply that rule firmly, Mr. Rankin assures us. And he outlines how they will reach that goal `Mr. President, I ask unanimous consent that FDA Deputy Commissioner Rankin s speech of Saturday, October 15, to the American College of Apethe- c.aries at Boston be inserted at this point in the Record." Midlothian, q'e,,~,., Mirror, October 27, 1966 Charges against the effectiveness of generics now should be laid to rest by a recent survey of the Food and Drug Administration. A quality check of 4,600 samples of 20 of the most important groups of drugs-generic and brandisame- showed, in fact, that generics had the edge on potency. Of the brandnames, 8.8 percent failed to meet potency standards, compared to 7.8 percent of generics. Obviously consumers would be well advised to confer with their doctors on the possibility of using generics for their prescriptions. $t. Louis Labor Tribune, February 16, 1967 In a survey of 246 drug manufacturers to determine the potency of their products, more than half of the firms had one or more product samples that did not meet acceptable standards. The results of the survey were released by Food and Drug Administration Commissioner Jameu L. Goddard who said his agency would investigate other drug qualities in a broader survey. Charles Kurait, CB$ l~a4io Network, February 28, 1967 The drug inspectors found that more than half of the manufacturers had at least one product sample that did not meet the standards of potency. Some were more potent than they were supposed to be, a few bad very little potency at all . . . About eight percent of the total were unacceptable, either too potent or not enough. The unacceptable samples came from 127 different firms .. . The FDA, our watchdog over drug quality has made some conclusions from all this. And what does the agency conclude?. . . The Food and Drug Administration was impressed by its survey of drug potency. Impressed with the need for further surveys to watch and safeguard the quality of thousands of drugs we use today. senator Joseph M. Montoya, March 8, 1967, Idress to the Scnate, quoting $cience Newsletter for March 4, 1967 There is rio doubt that research carried otit by wealthy drug houses ha~ led to the discovery of many new drugs. Whether or not a brandname insures a high quality product, however, is a matter of considerable debate. In fact, a recently reported analysis by the Food and Drug Administration revealed that 8.2 percent of 4,573 drug samples did not meet potency standards. Breaking this `down into products marketed under brandnames versus those sold under generic names, 8.8 percent of 1,991 braudname samples were deficient compared to 7.7' percent of 2,582 generics. "Nobody came out of this survey looking good," ai~ FDA `official commented. :Senc2or Russell B. Long, letter to the editor, Medical World News, Aprit 21, 19117 In a survey of drug potency recently completod by the Food and Drug Adminis- 4ration, some 4,600 drug samples were tested for conformance with accepted standards of potency. While the FDA found 7.7% of the established-name drugs falling to meet those standards, it also found 8.8% of trade-name preducts univeceptable. Fourteen of the drug manufacturers who advertised in your February 17 issue produced drugs included in the survey. And nine of the 14 sidvertisers produced unacceptable products! ;$ewator Gaylord Nelson, April 26, 1967, address to the $enate It is correct that problems can arise as to the safety, potency or purity of drugs. But the point is that such problems are not necessarily limited to low* ~prieed drugs sold under generic names . PAGENO="0045" COMPETITIVE HIOBLEMS IN THE DRUG INDUSTRY 483 In 1966, the U.S. Food and Drug Administration sampled 4,600. drugs from 250 manufacturers. About 2,600 were drugs sold by their generic names, and about 2,000 were drugs sold by brand names. The FDA found that, ,`~`.8% of tile generic-named drugs were not of acceptable potency and 8.8% of the bran(~- named drugs were not of acceptable potency. The Washington Post, May 7, 1967 One of the determinants of therapeutic response is potency-that is, whetliet' a drug is of a required strength. A drug that is subpotent is a bad drug, even if it meets all the other requirements and is purer than pure. A year ago the Food and Drug Administration checked the potency of drugs from 250 suppliers. The products fell into 20 key categories but did not include antibibtics, whose.. quality is assured by the FDA's premarketing, batch-by-batch iinlpection. Qf 2,600 samples sold under less expensive generic names 7.8 percent, were found subpotent and therefore unacceptable. Of 2,000 brand-name samples 8.8 percent were below strength. (It should be understood that the difference between these percentages is very little, and under no circumstance should one conclude from the FDA findings that the quality of generics is necessarily higher than that of' brand-name drugs.). "The Handbook of Prescription Drugs," by Richard Burack, M.D. "Not `the least of the reasons forcing us to believe that brand-name drugs are not necessarily better than th'ose sold by generic names is a finding made in the spring of 1966 by the United States Food and Drug Administration. At the di- rection of its new, no-nonsense Commissioner, Dr. James Goddard, the Agency sampled 4,600 drugs from 250 manufacturers. Quoting Mr. Winton B. Rankin, Deputy Commissioner, as he addressed the American College `of Apothecaries on October 15, 1966, in Boston, Massachusetts: `About 2,600 of the drugs were sold by their generic name only and about 2,000 by brand name. They represented 20 of the most important groups of drugs used in medicine-antihypertensives, oral antidiabetics, anti-infectives, digitalis and digitalis-like preparations, for example. Antibiotics were not included because every lot of antibiotics for human used is checked before sale'. Deputy Commissioner Rankin thea went on to re- veal to a hushed audience of pharmacists that `7.8 percent of the generic-named drugs were not of acceptable potency, 8.8 percent of the brand-named drugs were not of acceptable potency.' Later, in reply to a question from the audience, the speaker made it clear that the difference between the 7.8 and 8.8 percent figures is not large enough `to allow one to conclude that genric drugs are necessarily better than those sold by brand name." SUMMARY OF FI)A DISCL,OSURnS, MAY, 19437 Products of 246 manufacturers were involved in the 1906 FDA survey. Of these, 84 are PMA members. Of the 84, 49 were found to have one or more violative products. (PMA has 138 members). FDA reported on tests of 4,573 products. Of these, 1,933 were products of PMA niembers. Of the 1,933, 119 were found by FDA to be violative. Overall, 8.2 percent of the products in the survey were found to be violative. For the PMA-member products, the comparable percentage was 6.1. SUMMARY OF PMA INVESTIGATION (Please see attached questionnaire). Responses to Question #12 are the most significant. Forty-two firms, with 1,467 products in the survey, have undertaken internal reanalyses of their 100 products alleged to `be violative. Results from 40 flrm~ show that only 14 o'f these products were deficient, and that 80 were not. Reports on reanalyses of six products are pending. Two firms have not reported results to date. Seven firms, with 146 products in the' survey, have not reported undertaking reanalyses of their 19 products alleged to be violative. Eight firms so far have reported that their in-house reanalyses were repeated by outside, independent laboratories. Results so far show that of 14 allegedly violative products among these eight firms, five have been found not violative, two were confirmed to be violative, and reports are pending on seven. PAGENO="0046" 484 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY Thus, careful reanalyses of the products of 40 PMA member firms, alleged to be violative, show that only one percent did not meet standard potency limits. Responses to Questions #2 and #3 are also highly significant. Only six firms have reported being notified by FDA of alleged violations Involving their products in the seven months following completion of the survey in June, 1966. Thirteen companies were suddenly notified in January, 1967, just a few days prior to public release by FDA of the more detailed survey results on January 31. Responses to other questions reveal that FDA failed to advise 36 firms of the sources of the samples found to be violative. This is important, because it did not afford the firms an opportunity to check whether, for example, unusual storage conditions may have accounted for the potency violations alleged. Simi- larly, 36 firms were not told when the samples were obtained. * Twenty-three firms state that they have reason to believe there were more samples of their products obtained by FDA during the survey than were ac- counted for by FDA. as either acceptable or violative when the results were finally published. For example, one company received a report on 79 samples (including four alleged violations found baseless on reanalyses), and has bad no information on 36 additional samples obtained from the company by FDA at the same time. FDA suavn~ OF DRUG POTENCY QUESTIONNAIRE 1966 (This is a copy of a questionnaire sent Feb. 10, 1967, by PMA to the presi- dents of 49 of its member firms alleged by FDA to have one or more violative products on the market. Replies for each question, supplemented with later information received from the firms, are shown.) To be answered as completely as possible and returned to P.M.A. no later than Friday, February 24, 1967. Address replies to C. Joseph Stetler, Use addi- tional sheets, if necessary. 1. Did your firm receive any information from the F.D.A. or from an F.D.A. inspector that samples of your products cited in the enclosed list (acceptable or violative) were to be the subject of this study? Yes 8 No 36 2. Did your firm receive any private communication from the F.D.A. or from an F.D.A. inspector concerning the results of their analysis of your products (acceptable or violative)? Acceptable Violation Yes 1 22 No 33 20 3. When was your firm advised of either (1) or (2) above? 1. Date~ April 1966-7 August 1966-1 2. Date* July 1966-1 August 1966-i September 1966-1 October 1966-1 November 1966-1 December 1966-1 January 1967-13 February 1967-1 No date submltted-2 *Vlolatlve only. 4. Does your firm have any reason to believe that a larger sample of your product(s) than is cited in the attached list was obtained by F.D.A. for purposes of the study? If your answer is yes, list the product(s) and number of excess samples (by lot or control number, if possible) on a separate sheet. You may wish to use a composite sheet for answers to questions 4, 5, 6, 7, 8, 9, 10, 11. Yes 23 No 20 PAGENO="0047" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 485 5. Did F.D.A. indicate to your firm the source(s) of its sample(s) of your product(s) (acceptable or violative)? If your answer Is yes, list the product(s) and their source(s) on a separate sheet. Yes 8 No 36 6. Did F.D.A. indicate when the sample(s) of your product(s) were picked up? If your answer is yes, indicate the date(s) on a product-by-product basis on a separate sheet. Yes 8 No 36 7. Is your firm able to identify either the source(s) of the sample(s) of your product (s) or the date(s) of sampling? If your answer is yes, indicate source(s) and date( s) on a product-by-product basis on a separate sheet. Do not include Information on source(s) or date (s) provided by F.D.A. Yes 18 No 24 8. Did F.D.A. specifically identify the lot or control number(s) of your product (s) (acceptable or violative)? If your answer is yes, Indicate the lot or control number (s) on a product-by-product basis on a separate sheet. Yes 39 No 7 9. Is your firm able to identify the lot or control number(s) of your product(s) (acceptable or violative) cited in the attached list? If so, please identify by lot or control number on a product-by-product basis on a separate sheet. 10. Please list your products in the attached list which haive not been identi- fied by lot or control number by either F.D.A. or your Arm. Use separate sheet. 11. Does your firm have any reason to question the validity of F.D.A. methods or the statistical analysis of the results as the latter is related to sampling error or limits of variations? If your answeris yes, please qualify. Yes 36 No 5 12. Has your firm undertaken an analysis of the product(s) (acceptable or violative) cited in the attached list which you have been able to positively identify? If so, indicate results in terms of percent active ingredient as related to potency declaration in labeling or U.S.P. and N.F. standard.~ on a product-by- product basis on a sepai~ate sheet. Yes 42 No 3 13. Does your firm plan to, or will you be willing to, undertake such an analysis of the product(s) which can be positively identified? Yes -~ ~--- 38 No 2 NoTE-These two firms bad done so prior to receipt of the questionnaire. 14. Has F.D.A. initiated any action or follow-up on the violative products of your firm? Yea No Additional samples 20 19 Reinspection of plant 12 24 Recall 2 32 Seizure 1 32 Citation 1 32 Other 4 26 15. Please add any additional comment, suggestion, or explanation which will assist us in the conduct of the project. Company - Signed Please return to Mr. C. Joseph Stetler, Pharmaceutical Manufacturers As- soci'ation, 1155 Fifteenth Street, N.W., Washington, D.C., 20005, by February 24, 1967. PAGENO="0048" 486 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY (Whereupon, at 12 o'clock noon, a recess was taken until 12:30 p.m., the same day.) AFTERNOON SESSION Senator NELSON. We will reopen the hearings now with Dr. Donal Magee, chairman of the Department of Physiology and Pharmacology at Creighton University Medical School in Omaha. Dr. Magee, we appreciate very much your taking the time to come here and testify before the committee. You may proceed to offer your testimony in any way most convenient to you, by reading or ex;tem- porizing, and if you don't mind we may interrupt for questions as they occur. I see your opening statement mentions your professional credentials, so you just go ahead and present it in any way you like. STATEMENT OF DR. DONAL F. MAGEE, CHAIRMAN, DEPARTMENT OP PHYSIOLOGY AND' PHARMACOLOGY, CREIGHT'ON UNIVERSITY MEDICAL SCHOOL, OMAHA, NEBR. Dr. MAGEE. I might add in addition to the opening statement that I teach. I don't practice medicine, and I don't buy drugs except as a patient. I am Donal F. Magee, chairman of the department of physiology and pharmacology at Creighton University Medical School, Omaha. I have a degree in medicine from Oxford University earned in 1948 and a Ph, D. in physiology from the University of Illinois earned in 1951. From then until 1965 I was on the staff of the Department of Pharmacology at the University of Washington, Seattle. In teaching pharmacology to medical students, keeping up to date with new products is a major problem. Every teacher is required to teach branches of the subject in which he has no immediate research interest and must, therefore, have recourse to the published literature and advertising. For new products this is difficult. Every teacher must assess the worth of the product; that is, is it worth mentioning at all, should it be condemned, criticized, or favored. In my opinion, a new product to justify itself must treat an ailment against which no other agent is effective or it must treat an ailment better than any exist- ing therapy. If it meets neither of these criteria it must be less toxic than existing drugs or be easier to administer and, finally, if it is equal in all these respects to ~xisting agents, it must be cheaper. Such com- parative information is almost impossible to obtain even for pharma- co~ogists who have the training and time to search for it. It is not ob- tained from company advertising, despite its improvement over the last few years, and only rarely is it obtained from detail men. In the past, in response to requests to detail men and companies, I have only once received information which could be used in a lecture. One would imagine that it would be in the interest of drug manufac- turers to keep the teaching pharmacologist informed of the therapeutic and pharmacological reasons for the production of a new drug, but this has not been my experience. My judgment of advertising material is that its purpose is to make a name known or to develop in the mind of the reader an enduring relationship between a name and a certain symptom complex or disease. PAGENO="0049" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 487 As an example of this, I cite a piece of literature that I used to get twice every week which mentioned the name of an antibiotic, and told me that this antibiotic was acceptable to children because 0± its good taste, and tills of course for the teacher and for the practitioner is valueless. Advertising literature is not intended as a basis on which the prac- ticing physician can form an assessment of a product. This is so of all advertising, but in my opinion there has to be an essential difierence between the advertising of drugs and the advertising of products like chewing gum, tobacco, and automobiles, because at least with these one has a choice. Most clinicians are not in a position to evaluate the efficacy of new preparations and their patients have no choice but buy what is pre- scribed and submit to treatment which may be more costly and less efficacious than existing medications. An example of this sort of thing is provided by the spate of expen- sive antibiotics touted a few years ago, all of which were said to deal with penicillin-resistant organisms and most of which have now dis- appeared. I ran into this because for many years, up until 1964, I taught the pharmacology of antibiotics. As new ones were advertised I sought literature and information from the companies marketing them, since many were too new to have made an appearance in the usual scientific literature and one had to decide whether they were important or not. One or two of these I examined rather thoroughly, and was alarmed to find out that as the undesirability of these became more and more obvious, the advertising became more strident and reached a cres- cendo before the drugs finally disappeared. One can only suspect that the companies concerned anticipated failure and wished to recoup as much of their loss as possible before it occurred, irrespective of the needs of the patient. The classical example in my opinion of suppression of the critical faculties of the practitioner is in the distribution of multivitamin preparations. The advertising of these needs no description but drug companies employ good scientists who must know that extra vitamins are not needed by the bulk of the population-there is a very small segment, and we should be ashamed it exists which does show defi- ciencies I am told, but it is usually too poor to buy supplements. Physicians apparently do not realize that the bulk of the population are in no need at all of vitamin supplements, or if they do, have had their opinions suppressed by advertising since virtually every pediatri- cian prescribes them. Probably more people in the United States take daily vitamins than have TV sets or cars. I prefer to think the physi- cian is ignorant rather than dishonest. It is impossible to be so lenient with the drug companies. Treatment of imagined and suggested vi- tamin deficiency can only be seen by them as a lucrative source of income. I can give you an example of the persuasiveness of this advertising. Many of my colleagues who know that vitamin deficiencies are un- known or virtually unknown nevertheless have wives who give daily vitamin capsules to their children. They are despite their professional knowledge unable to convince their own wives of the futility of this. 81-280-pt. 2-67-4 PAGENO="0050" 488 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY Senator NELSON. Are there any simple procedures for determining vitamin deficiency? Dr. MAGEE. Most vitamin deficiencies are obvious, a child with a vitamin D deficiency, for example, gets rickets, and the early signs of this show up on X-ray, but in our society this is no longer a problem. It hasn't been a problem for many years, but it has been presented to us as if it were an ever present problem. We are also being told that without added vitamin supplements we become more susceptible to colds and flu, et cetera. There is no shread of evidence at all for this. Senator NELSON. Do we have any statistics on the percentage of the population that does have a vitamin deficiency? Dr. MAGEE. I .don't know of any offhand. I think perhaps these might he found in the annual publications of the World Health Or- ganization table. Our university has a clinic which ministers to Win- nebago Indians, and I am told an occasional Indian child appears with an apparent vitamin deficiency, but it is very, very occasionally. Senator NELSON. Insofar as other children are concerned, it is rare? Dr. MAGEE. Yes, it is not seen. I am told tha1~ occasionally in the children of migrant farm workers, vitamin deficiencies have been seen also, but today in the middle class, the vitamin buying income group, vitamin deficiency is unknown. Senator NELSON. What is the basis for the prescription of vitamins? Or are these self-prescribed? Dr. MAcER. Well, some are self-prescribed. Many are not. As I said, most pediatricians will prescribe them, and to give you the statement of one pediatrician, the man who attended my children. After the children had been attending him for months my wife finally said, "No, we are not giving them their daily vitamins." file said, "Well, I should have known. Your husband is a physiologist and perhaps he wouldn't believe in these or think that they were necessary," and she replied, "Why do you prescribe them?" He said, "Because the mothers expect that I do." Senator NELSON. That is the only reason he gave? Dr. MAcER. This is the only reason he gave, and I think that this is not an uncommon reason. It is expected that pediatricians and ob- stetricians too give vitamins. Senator NELSON. Thank you. I have one more question. You say probably more people take vitamins than have TV sets. Are there any hard statistics on `how many people take vitamins? Do we have any knowledge about that? Dr. MAcRE. NO, I don't believe we have a total, but there are figures, and I have them here, giving the annual production of vitamins in terms of dollars. I think it is about $60.6 million worth per annum, and. the production of penicillin, which is a life saving drug, is $86 million. I tell my students in lecturing on the subject, which I do in the pharmacology course, that we have the most nutritious sewage in the world, because of course excess vitamins for the most part are excreted in urine. A few years ago obstetricians succumbed to the notion that molyb- denum added to ferrous salts rendered them more efficacious in the treatment of iron deficiency anemia. There was no evidence and the PAGENO="0051" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 489 preparation was expensive. I looked into this personally also because my wife was prescribed molybdenum with iron. I did not get it, and I was reprimanded by the obstetrician. Still today iron preparations are touted and prescribed which con- tain an enormous array of ingredients at eno~rmous cost when only the cheap iron salt is needed. Iron preparations are on the market which contain all sorts of metals, copper, manganese, ascorbic acid, intrinsic factor, vitamin B-12, a colossal array of stuff. These are expensive. Iron deficiency anemia can be treated with ferrous sulphate, which is very cheap. Senator NELSON. Do these other substances have any affect at all? Dr. MAcER. If an animal is copper deficient it gets anemia; but it it very, very difficult indeed to produce copper deficiency. There are parts of the world, in South Australia, for example, where sheep grazing on a copper deficient pasture, get copper defi- ciency, but apart from that, I never have heard of a spontaneous copper deficienc.y in man or animals. Vitamin B-12 treats pernicious anemia, for pernicious anemia the quantities present in these tablets when given by mouth are useless. Mr. GORDON. Are you saying vitamin B-12 cannot be given for anemia? Dr. MAcER. No; but it cannot be given orally because the reason people have pernicious anemia is that they can't absorb vitamin B-19. The vitamin business, in my opinion, is largely fraudulent and based on the gullibility of both the public and the physicians. An added difficulty to me in the assessment of advertising material is the knowledge that in the past this has been shown to be iaaccurate and misleading. Since this has occurred one cannot help but be suspicious and therefore be wary of a recurrence. There are examples of advertising which, as pointed out in the hearings before the Kefauver committee, in which less than a proper account of toxicity, and side effects had been presented to physicians. In every medical school pharmacology department in the country, that I am aware of, only generic drug names are used, in teaching. It is impossible to teach in any other way. The alternative is confusion. We heard this morning that there may be 50 different trade names for one drug, and this, of course, is true. The relationship between one drug and another is hidden, by trade names, as is the fact that some chemi- cals have a physiological function. Who would guess, for example, that Levophed is norepinephrine, which is a physiological substance occurring within the body. I have met practicing dentists and physi- cians who did not know that Levophed was a physiological material. I am sure that there can be very few pharmacologists anywhere who have not been telephoned at one time or another to explain, for example, that the dose and the side effects of Luminal, a trade name, and phenobarbital are exactly the same because they are the same substance. The only difference is the cost. In using generic names in teaching we hope, or at least many of us do, that our students will use them in prescribing. They will know more about the science of therapeutics if they do, and they will save their patients money. This is not denied even by companies selling under trade names. The sick have no sales resistance, and the cost of their treatment should be a prime concern, in my opinion, of the physi- PAGENO="0052" 490 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY cian. But as we have heard this morning, the physician often doesn't know the cost. The patient puts his trust in his physician. The physi- cian does not respect that trust if he prescribes drugs which are much more costly than they need be. In fact, if he is aware of this, in my opinion, he is dishonest. But I think in general he is not aware of it. In all that I have read and heard on the subject, I have seen no proof that generic drugs are inferior to trade name drugs. They are bought by many hospital authorities, and I expect our politicians and Presidents, when they are treated, are treated with generic-name drugs, if they go to Walter Reed Hospital. It is common knowledge that one primary producer often supplies the drug to both the low-cost generic marketer and the high-priced trade name seller. Indeed, in several instances the primary producer is the expensive trade name seller. Some examples of this are prednisone, thiopental, and chloroamphenical, and some of the antihistaminics, tripellenamine, for example. We are asked to believe by the trade name companies, that they pay for the research and development from the high prices charged the individual patient and they sell in bulk at a loss to the low-priced generic purveyor who is underselling them. I can't believe this. I think the drug companies know enough about business to make sure that in selling drugs in bulk, they cover the cost of their research and development. Finally there are high-priced trade name sellers who have not done any research and development work on the product they sell and still they sell at high prices, higher even in some instances than the com- panies which have done the research. An example of this sort of thing are drugs which have been developed in Britain and in France, and are sold here at much higher prices than they are in either Britain or France. Chloropromazine is one of these drugs, and some of the oral antidiabetics, for instance tolbutamide, is another one. The drug market, in my opinion, is fantastic because I know of no other segment of the economy in which the high price seller has a larger share of the market than the company that sells the same prod- uct for less. This happens, in my opinion, because the purchaser is captive, and because the physician lacks the appropriate knowledge or is prejudiced, and because the advertising is effective. Now by prejudice here I mean that one hears from many ~hysicians that they will prescribe only the medications prepared by reliable com- panies, and that they are opposed to "fly-by-night" manufacturers. Generic-name companies in general in many instances have been so designated. The pharmacist in our own medical school uses this designation for many companies which are selling generically. I have constant and frequent arguments with him. I have never been able to convince him just as I have not been able to convince many of my medical colleagues that generic in drugs are in no way inferior. Hoover was once synonymous with vacuum cleaners. Today a trade name Benadryl ® is synonymous with an antihistaminic whi~h is pre- pared by a particular company. Just as with Hoover, so today there are many generally available drugs known to physicians only by trade names. I, for example, `can remember only the trade name of the common antihistaminic drugs. They are easier to remember. To lecture I have PAGENO="0053" COMPETITIVE PROBLEMS IN TTIE DRUG INDUSTRY 491 to go and look up the generic names of these, because, no doubt, I have succumbed to advertising as have most physicians. I do not believe that there is any justification for the high trade name prices charged the patient, except for higher profits and bigger advertising. The arguments for higher production costs, greater pür- ity and research and development are at best unconvincing and at worst false. The testimony before the Kefauver committee brought this out. This country has now, rather belatedly, accepted the principle that good health is a right rather than a luxury, and that all have an equal right to the available treatment. There are many factors mili- tating against this, and one of these is drug cost. Much could be done to reduce drug costs if we had an informed public, informed and altruistic physicians and honest pharmacists. The pharmacist can seemingly set any price he wants for any drug, generic or otherwise. lie can and often does, as the AMA has recently found in Chicago- the AMA conducted a survey of druggists in Chicago purchasing drugs under generic names, and found that these are often more expensive than drugs bought under proprietary names. I think all that this proved was that in Chicago there are pharmacists who are taking advantage of the patient who appears with a generic name prescription. Senator NELSON. I don't know whether this issue was raised or not, I simply saw a news story about it, but isn't one of the problems the fact that there are so many drugs on the market the doctors generally prescribe by trade name? I don't know whether you checked that in this case, but couldn't it have been possible that the pharmacist just didn't have available the generic and that he is allowed under the law to supply the drug under its trade name instead of under its generic name? Dr. MAGEE. That is possible; yes. I got the impression from the article in the AMA News, that generic names were available, but no cheaper. It did not specifically say so as far as I remember, but this was my impression. Of course, this again is another factor in `the cost of drugs. The druggist has to stock such an enormous number of trade name items, oftentimes the same drug, sometimes slightly different, but with the same action. For example, I would .suspe~t there are something of the order of 50 different antihistaminic drugs. This number is quite unnecessary. In lecturing on the subject I treat them as one since virtually all have gen- eral characteristics in common. Senator NELSON. All antihistaminics? Dr. MAGEE. Practically all antihistaminics. They differ slightly in degree. For example, virtually all antihistaminics produce depression. Some of them to a lesser extent than others. Practically all of them have local anesthetic activity, some slightly more than others. There is, therefore, no justification for 50 or even 20 separate and distinct antihistaminic drugs. Senator NELSON. Do you know how many drugs there are on the market? Dr. MAGEE. Antihistaminics? I think there must be over 20. Senator NELSON. I mean in total. PAGENO="0054" 492 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY Dr. MAGEE. In total I don't know. Senator NELSON. Total number of prescription drugs? Dr. MAGEE. I have no idea. It is probably an astronomical figure. Antihistaminics are an example of molecule manipulation. The bulk of them have got similar structures. Antihistaminics, when they ap- peared, did look like a breakthrough. They were disappointing, but even so, most major drug companies have their own antihistaminic under a trade name. Senator NELSON. Is there any substantial therapeutic difference among them? Dr. MAGEE. Not really. Some of them, for example, produce less depression than others. Obviously, if the physician knows this, he will prescribe the one that produces the least depression, because this is one of the undesirable side effects. Senator NELSON. how would he find that out? Dr. MAGEE. Well, the way things are managed at present, this is found out only in the ~course of time. It is found out if one reads medi- cal journals. In the course of time papers are published giving com- parative data. This ultimately gets into the pharmacology textbook. Let's say I am teaching my course next year. A new antihistaminie has appeared on the market and is being prescribed. I would find it well nigh impossible to assess this for the students. Senator NELSON. Supposing it is an antihistamine that has been on the market for 4 or 5 years; where would you look? Dr. MAGEE. If it has been on the market for 4 or 5 years, I can find it probably in the pharmacological journals, and in the clinical litera- ture. Senator NELSON. How difficult a research job is it to find it? Dr. MAGEE. For me it wouldn't be very difficult, because we have in our libraries indexes of medical and scientific literature. I could look this up in the index and find the literature. We have publications like the Medical Letter, and I could perhaps find it in that. But for a man practicing, it might be very difficult indeed. Senator NELSON. There isn't any easy reference place where he could look under antihistamines? Dr. MAGEE. No. Senator NELSON~ And find out which one was the present or- Dr. MAGEE. No; not that I know of. If he treats patients with a drug, he might in the course of time arrive at an evaluation, if pa- tients have had antihistaminics before they would probably tell him that they feel drowsier with this particular preparation than with previous ones, but it would be hard for him, in my opinion, to assess a drug's comparative depressant activity just from the literature that is available from the drug company or from the detail man. Senator NELSON. All right, please proceed. Dr. MAGEE. Recognizing the right of the sick to treatment and the dismal fact that medicine in this country is not up to par, particularly when the patient is poor, we should have the best medicine in the world. I think the time has come for a reappraisal. The present patent laws and the methods by which drugs are merchandised and adver- tised are not in my opinion. in the best interest of the patient. Who, for example, is benefited by the present quinine monopoly? The resultant price increase may be good for business, but it is bad PAGENO="0055" COMPETITIVE PROBLEMS IN TIlE DRUG INDUSTRY 493 for medicine. Who will develop the invaluable but unprofitable drug? By this I mean a drug which is treatment for a disease that very few people get, and therefore hasn't a big market. In defense of drug companies, I have to say that some such have been developed by drug companies, and presumably there is no profit in them. There is a penicillin derivative for example which removes copper from the body. A few people have a disease in which they have excess copper. The needs of private industry, be it the drug industry or the insur- ance industry, are diametrically opposed to those of medicine. Medi- cine wishes to treat disease effectively and as economically as possible. If it is not economical it is often not effective. The companies, on the other hand, wish to make profits and to pay for their research and advertising. And of course it is proper that they should. The patient has no option but to pay when he is sick. Then he can least afford it. It is an unsavory and almost unique fact that medical expenses still reduce people to destitution in the United States, and our large drug companies still make enormous profits. It is proper that drug companies make reasonable profits, and it is true that they do an enormous amount of research. I don't think there can be any dismissal of this fact. I would question myself whether it is proper for them to make ex- cessive profits from the sick, and whether it is proper that the sick be required to foot the bill for all medical research. At the moment, the sick pay twice for the medical research, that is they pay both as taxpayers, they support the U.S. Government's medical research, and they pay as purchasers of medicine. Advertising again is proper, but how much of it and of what sort? It is obviously fraudulent to persuade us that we are on the verge of vitamin deficiency, but free stethoscopes for every sophomore medi- cal student in the country every year sounds wonderful. Is it, however, when it means that some patient is paying three times as much as he need pay for his digitoxin. Every pharmacologist in the country I would suspect, myself included, benefit financially in one way or another from the big drug companies. I don't mean that anyone benefits personally, but the big drug companies give money to departments of pharmacology. They give money to ours, and they give money to most. Senator NELSON. For what purpose do they give the money? Dr. MAGEE. They give money sometimes for people to r:un basic re- search and clinical trials on potential drugs. I myself am in receipt of a sum of money to the department simply because I am a new chairman in the department of pharmacology. This can be used for the purchase of `books or in any way that `I see fit to develop the department. Senator NELsoN. `What money did they contribute? Dr.' MAGEE. They gave me $5,000. Mr. GolmoN. Any strings attached? Dr. MAcEn. No strings at all, and I don't believe for a second that this was gwen m.e in order that I lay emphasis on this company's product when I teach. Senator NEr.soN. There was testimony this morning by Dr. Williams that his departme~it was requested to do research for a particular company. The company only `wanted the research to be done on its PAGENO="0056" 494 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY drug vis-a-vis a placebo. The medical department wanted it to be a re- search of that drug versus the efficacy of another drug versus the placebo, and the company wasn't willing to' fund that. Is that normal practice in asking that research `be' done? Dr. MAGEE. This happens, and judging~ by the literature, it happens quite often. I can remember several years ago when I was teaching pharmacology in antibiotics, in answer to a request I sent to a company which produced a new antibiotic, they sent me a reprint of an experi- ment or a test rather. There were 20 patients with pneumococci pneumonia, and they were treated with the new drug. Eighteen of them got better. Now I of course wanted to know, to evaluate this, how many of them would have gotten better if they had been given penicillin instead of the new drug~ Maybe all 20 of them would have recovered with penicillin. Mr. GormoN. The study did not demonstrate its effectiveness vis-a- vis another drug? Dr. MAGEE. No, this is very rare, very rare indeed, and of course this is what the teacher wants. It is also what the practitioner needs. Mr. GORDON. How do you know if the patients wouldn't have gotten better if they got nothing? Dr. MAGEE. Well, they might of untreated pneumococcal pneu- monia, which is a disease which lasts 7 or 8 days. With antibiotics it can be stopped in 2 or 3 days, which is what they did. Senator NELSON. Doesn't the fact that the comparative studies you were just referring to as to the effectiveness of one drug verus another drug, and that those studies are rare, an indication that there is a sub- stantial gap in the type of research studies that we are doing in this country on drugs? Dr. MAGEE. Yes, it does in4icate that. Senator NELSON. Do you have: any ideas as to how that deficiency ought to be remedied so that the information can be available for the prescribing physician? Dr: MAGEE. As was indicated this morning, I think that some orga- nization, be it the FDA or the Pharmaceutical Manufacturers As- sociation or the pharmacists ought to be interested in comparison of the worth of drugs. As I indicated earlier, I don't believe that there is any justification at all for a new drug on the market which is not as efficacious as drugs which already exist. Senator NELSON. How is that going to be accomplished unless you have some independent organization perform tests? I don't suppose anybody would expect to rely upon any party that had an interest in the outcome. Dr. MAGEE. No. I think it would be most reliably done if it were carried out by an independent organization, but I think it probably also could be done if let's say the drug companies themselves as a body set up some sort of testing agency, these competing companies as a body might conceivably run their own comparative testing program. I doubt very much that this would be done, because of course it would mean that the products of some companies would go by the wayside, but I was thinking of something in the nature of a phar- maceutical better business bureau. The usual better business bureau is paid for and sponsored by the businesses in the community. Its pur- PAGENO="0057" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 495 pose is to keep up standards and to maintain business ethics. But, however it is done, I think there is an absolute need for comparative testing, and the information has to be available to the physician. Senator NELSON. Did you hear Dr. Williams' testimonyl Dr. MAGEE. I did, yes, this morning. Senator NELSON. He discussed that in some detail. Do you agree with his position that it is a very important matter that ought to be settled, that is, that thei~e ought to be testing chemically, clinically, and comparatively, and that the information ought to be available in some easy form for the physician to refer to? Dr. MAGEE. I do. You mentioned meat inspection. I think it is at least as important as meat inspection, because we have a past record of death and disablement from the prescription of drugs which were not properly tested. We have an unfortunate backlog of this sort of thing, and we have been saved from a few others recently almost by chance. Senator NELSON. Even if there weren't any danger to the drug, even if in fact the drug is an efficacious one, isn't it important for the doctor to know which of these drugs are the most efficacious? Dr. MAGEE. It is important for them to know that, because there is danger that drug may be given which is not particularly efficacious for a condition. The patient may in consequence be denied a more ef- ficacious drug. Again with a multiplicity of drugs, with more or less efficacy, as I said earlier, the cost is kept up. Senator NELSON. Do you think it is a feasible project for someone, whether it be the Government, as suggested this morning, someone at least who can clinically test all drugs, and to make arrangements via contracts and various other ways to have clinical tests made so that in one place you can collect all the information that told you what you needed to know about the efficacy of the drug, the side effects, and so forth and so on for generic and trade-name drugs. Do you think it is feasible to do that? Di'. MAGEE. I think it is not only feasible, but essential. I believe now that we have FDA and IJSP chemical testing of new drugs, but we haven't comparative clinical testing of the same order to the best of my knowledge I think that it is absolutely essential. Senator NELSON. I used the word feasible. This raises the question whether it is practicable to do it. How bi~ a job is it? Dr. MAGEE. It would be a very large job. I am certain in the interests of those who are sick. and in view of the fac~ that illness is a national concern, a concern of every American. whether he is ill or not. that this is something that has to be done. As I say here, our medical rec- ord needs imnrovement. Senator NELSON. Of course I am reminded of the very large number of drugs. but I would suppose you would take the relatively small group of drugs that is most frequently prescribed, and settle that issue as to their chemical compositon and a~ to their clinical, comparative clinical therapeutic value. wouldn't you? Dr. MAGEE. Yes, that could be done and I believe is being done now to some extent. There are many older drugs. Those that have proved to be toxic, generally have been dropped in the course of time after illness and death has resulted from their use. PAGENO="0058" 496 COMPETITIVE PROBLEMS IN TIlE DRUG INDUSTRY The drug aminopyrine was once a constituent of headache powders. It is now gone. A number of people suffered in gaining this experience, but amongst the old drugs we haven't separated what is efficacious from those that are not. The toxicity of new drugs, however, is a different matter. Chioramphenicol is an example of a drug that was put on the market before the whole story of its toxicity was known. Senator NELSON. Do we know of the old drugs, is there enough knowl- edge among the pharmacologists to know what of those that are on the market have some efficacy and those that do not, or are there those on the market that we don't even know about? Dr. MAGEE. I think pharamacologists know, but there are drugs that are toxic or useless which are still prescribed. One was mentioned this morning, strychnine. Therapeutically they do nothing. Pharma- cologists know this. The prescription of some of these is justified by physicians in terms of psychosomatic effects. The patient believes he is ill. If he feels something has been done, then he doesn't feel ill. Senator NELSON. Why would one of those drugs make you feel better than just a placebo? Dr. MAcBE. They don't. But these things are time-honored tonics. Patients are told they are going to be given a tonic that will "buck them up." Concerning the financial benefit that the pharmacologist gets from the drug company, most pharmacologists appreciate this, I certainly do, but this has become a way of life, and one doesn't often equate grants and scholarships with prices, or with the money that the patient has to pay. The drug companies, for example, contribute as sponsors to many independent professional scientific societies, and in a way help main- tain these. It is sad and rather frightening in my opinion that organized medi- cine in the shape of the AMA has set itself against the patient in the drug price controversy. I say frightening because if the physicians' organization is neglectful of the patient's interest in this respect may it not be equally neglectful though less obviously in other respects? Senator NELSON. Is this a new position for the AMA vis-a-vis the stand they took 20 or 30 years ago? Dr. MAcBE. This is ne~, yes, new in a sense. Twenty or thirty years ago they were against quabkery, and quackeTy is not exactly within the bounds of medicine, but since quackery involved nostrums and treat- ments outside the profession, they were against it. Until comparatively recently they were concerned with drug standards. They had a council on drugs which gave its approval to new preparations. Senator NELSON. Do you feel that the AMA is not adequately con- cerned with drug standards today? Dr. MAcBE. I get the impression myself that the AMA seems to be more interested in safeguarding business and in safeguarding private enterDrise, in this instanc~ at least, than in the patient. The impression I get is that the AMA sees a greater danger to private enterprise than it does to the patient. Senator NELSON. But why particularly should they be concerned in this instance about say drugs or drug prices, drug standards, versus the welfare of the patient they are sworn to uphold? PAGENO="0059" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 497 Dr. MACER. What they have said is that the ultimate judge of the efficacy of a drug is the physician, and they have given the impression that any action on the part of the Food and Drug Administration to test the efficacy of drugs will detract from the physician. But I have pointed out I hope, and Dr. Williams pointed out earlier, that most physicians are not in a position to get this information for themselves or to judge efficacy of drugs. Mr. GORDON. You mean relative efficacy? Dr. MACER. Yes, relative efficacy. Much of the information that they get is from advertising,~and much of it, very much of it is from detail men. At lunchtime Dr. Williams gave me ~n example of the power of the detail man. Apparently his hospital formulary omitted the Smith Kline & French dextroamphetamine, Dexedrine, because Smith Kline & French couldn't compete with another supplier. Following this, the detail man no longer pushed this drug in the hospital. Dr. Williams has told me that the prescriptions for dextroamphetamine went down 50 percent. Senator NELSON. For Dexedrine or dextroamphetamine? Dr. MAGEE. For dextroamphetamine. Senator NELSON. For the generic went down? Dr. MACED. Yes. Senator NELSON. Or for the drug itself? Dr. MAGEE. For the drug itself. Evidently 50 percent of the supposed need for this drug was due to the detail man. Senator NELSON. The AMA certainly must be aware of the problem that confronts the doctor. It has been discussed by several doctors and pharmacologists before this committee, that is the lack of available information to make a quality judgment between various drugs, and if they are aware of that, why wouldn't they wish, as a professional organization, seek some way to see to it that the doctor is informed? Dr. MACRE. They must be aware of this, but I think there is a matter of professional pride here. I know among doctors, one doctor wouldn't question the intelligence of another one publicly at least. The doctor does occupy a substantial position in society. This might suffer some- what if it became known that the doctor wasn't as informed about drugs and therapy as he is thought to be. But other than this, which may not be the true reason, I don't know why. There have been many actions of the American Medical Association which I don't understand at all. Senator NELSON. Go ahead, or have you finished your statement? Dr. MAcER. Yes, I finished all I had to read. Senator NELSON. Have you any questions, Mr. Coughlin? Mr. COUGHLIN. No, I have not. Mr. GoRDoN. On the first page of your statement you present the criteria which justifies the development and marketing of a new prod- uct. You say: A new product to justify itself must create an ailment against which no other agent is effective or it must treat an ailment better than any existing therapy. If it meets neither of these criteria it must be less toxic than existing drugs or be easier to administer and finally if it is equal in all of these respects to existing drug agents it must be cheaper. Dr. Magee, can you tell us the drugs which have been developed by the drug industry in the last 5 years which treat ailments against which no other agent was effective? Do you know of any offhand? PAGENO="0060" 498 COMPETITIVE PROBLEMS IN THE DRUG iNDUSTRY Dr. MAGEE. I have trouble with 5 years. There have been drugs pro- duced recently which have been a boon to medicine and which in some sense have marked a breakthrough. They may be over more than of a 5-year span. The thiazine antidiuretics I put in this class and the oral antidiabetics I would also put in this class. Mr. GORDON. Developed in Europe? Dr. MAGEE. In Europe, yes. If you would expand this to 10 or 15 years, there have been a host of preparations produced by the drug industry, antibiotics, derivatives of adrenal steroids and so forth, which have represented real breakthroughs. Mr. GORDON. But not in the pastS years for those? Dr. MAGEE. No, these are over a longer period of time, that is true, but it would be improper I think to pretend that we do not owe a tre- mendous lot to drug company research. Many of the sick are now in a better position than they were 20 years ago as a result of drug company research and other research aside from drug companies, but the ques- tion is whether the cost of the drug is out of line with the cost of re- search, and I think the Kefauver committee made it plain that it was. Mr. GORDON. How many drugs can you think of which treat ailments better than any existing therapy? Prostaphlin would be an exampleS would it not? Dr. MAGEE. The synthetic penicillins. They were developed origin- ally in England, and may have been developed a little more than 5 years ago, but this is the case, that they treat a type of infection which was not readily treatable before. Mr. GORDON. You state that a few years ago there was a spate of expensive highly touted antibiotics which turned out to be valueless and subsequently disappeared. Could you give us the names of some of these? Dr. MAGKE. Yes. I had two particularly in mind. One was Carbo- mycin. It became evident in the course of time that Carbomycin was not as effective as an existing antibiotic, Erythromycin. When it be- came evident that there were staphylococci that were resistant to peni- cillin or became resistant, a spate of drugs was developed, each of which was said to be effective against penicillin-resistant staph. In the course of time it became evident that staph resistance developed to these as well. Carbomycin was one which produced a cross-resistance to Ervthromycin such that Erythromvcin. which was a reasonably good drug, was no lon~er effective against a staphylococcus organism which had previously been treated with Carbomycin. Then this drug dis~i npeared. But the advertising did not. Mr. GORDON. That was actually a harmful drugS wasn't it, because it m9de a nerson resistant to the application of a good drug? Dr. MAGEE. Yes, that is true. In that sense it was harmful, because it did displace a better drug. But this better drug in the course of time was shown to have toxicity of its own. It took time to appear also. Another one was a drug which is called Sigmamycin. You may re- member that this one had some notoriety. becwnse the Saturday Review looked into some of the advertising testimonials that were used in its advertisement. Senator NFLSON. Thank you very much. We certainly appreciate your taking the time to come before the committee today. Your testi- mony has been very useful to us. Dr. MAGEE. Thank you. PAGENO="0061" COMPETITIVE PROBLEMS IN TIlE DRUG INDUSTRY 499 Senator NELSON. Our next witness will be Dr. Lloyd C. Miller, direc- tor of the Revision and Acting Secretary of U.S. Pharmacopeial Convention. Dr. Miller, we appreciate very much your taking the time to come over this afternoon. You may present your statement in any fashion that suits you. We may have a question or two, if you don't mind being interrupted. I' think there is going to be a roll call vote in the Senate before very long, and it may require me to absent myself temporarily. STATEiVIENT OF LLOYD C. MILLER, PH. fl., DIRECTOR OF REVISION AND ACTING SECRETARY OP THE U.S. PHARMACOPEIAL CON- VENTION, INC., NEW YORK, N.Y. Dr. MILLER. Thank you very much, Senator Nelson. I appreciate greatly the opportunity to come here. I will preface my remarks by putting into the record a brief comment upon my training and back- ground. My name is Lloyd C. Miller, and I reside in Westchester County, N.Y. My advanced academic training, leading to a Ph. D. in 1933 from the University of Rochester, was in biochemistry and pharma- cology. My experience has included 8 years on the headquarters staff of the Food and Drug Administration and 9 years as a research investi- gator in the pharmaceutical industry. Since 1950 I have served as director of revision of the U.S. Pharmacopeial Convention, an inde- pendent, nonprofit scientific organization devoted to providing stand- ards of strength and purity for drugs. Since 1962, I have served also as acting secretary of the USP Convention. I am a member of several scientific societies. I will mention only the American Society for Pharmacology and Experimental Thera- peutics. It is an organization in which membership is by invitation. In tM present discussion of drug prices and drug quality, there is an acute need for bringing proper perspective to certain aspects of standards of drug quality. In view of the frequent mention of the standards of the U.S. Pharmacopeia in the discussion, we propose to explain briefly how these standards come into being and how they serve to determine the quality of drugs generally. In 1960, we presented a rather comprehensive statement on the pharmacopeia to the Senate Subcommittee on Antitrust and Monopoly which was holding hearings under chairmanship of the late Senator Kefauver. On the assumption that the record of those hearings is readily available, our remarks today are intended mainly to update and amplify the 1960 statement.~ Some recapitulation may be helpful, however. We wish also to correct some rather serious erroneous impres- sions that have been created of late to the effect that the USP stand- ards are too lax, too few, or quite unequal to the task for which they are intended. An erroneous impression seems also to have gained cred- ence that the USP is dominated by the pharmaceutical industry; the falsity of that, too, will be shown. Senator NELSON. Do you know of any witness who has made that statement before our committee? 1 See p. 1161, pt. 21, hearings before the Subcommittee on Antitrust and ~tonopo1y of the Committee on the Judiciary, U.S. Senate, 86th Congress. PAGENO="0062" 500 CO1\&PETITIVE PR0BJ~EMS IN THE DRUG INDUSTRY; Dr. MILLER. I have had access to Dr. Modell's statement, and from the way it was worded it might have been so interpreted; in fact, some of those who were in the hearing room at the time gained that impression on their own, and they suggested that I take this oppor- tunity to dispel any misapprehensions that may have been given by Dr. Modell, I know he did not intend to give that impression, but the wording of his reference to the .TJSP might have possibly been misinterpreted to mean that USP is supported by the industry. I will deal at some length with that. Senator NELSON. I see. I didn't have that impression. Dr. MILLER. Good, I am glad you didn't. Senator NELSON. My interpretation of the references made by the various witnesses was that the IJSP was an independent, highly reli- able source of information, and so I was curious where your impres- sion came from. Dr. MILLER. Thank you. It was a matter of precaution rather than apprehension on my part. By the simplest definition, a pharmacopeia is a book that lists medicinal substances but the term is now generally restricted to drug lists that include standards of strength and purity, which in addition are produced under recognized authority. Thus the current U.S. Pharmacopeia is a book of some 1,200 pages. I have a copy here, that describes about 900 articles of therapeutic significance and pro- vides for them appropriate tests and standards. This latest edition, USP XVII, was compiled, as were preceding editions, by a revision committee composed of 60 elected but unpaid medical and pharinaceu- tical experts who serve on the revision committee. These experts;, and many others, take part in USP work not. only because they are public- spirited but also because the. .Pharmacopeia is recognized as a legal compendium. That is, the TJSP standards are designated in the Fed- eral Food, Drug, and Cosmetic Act for use~ by the Food and Drug Admmistration. As. a result of this recognition by the Congi'ess, the U.S.' Pharmacopeia is regarded as an authoritative, quasi-legal corn- pendium and no effort is spared to make it scientifically sound and ac- curate. The revision program, incidentally, is supported not by tax funds, grants or contributions but .rather by the sale of the Pharmacopeia and from fees charged for tSP Reference Standards that are used in the laboratory in conducting the~ tSP tests;. The Pharmacopeia and the Reference Standards are used in all parts of the world. About two- thirds of the Pharmacopeias are bought by pharmacists, while nearly all of the Reference Standards are used in testing laboratories of the. Government and the pharmaceutical industry. I mention that fact to show the source of our support. The organization responsible for this program is a nonprofit cor- poration that is constituted anew every 10 years by delegates from all of the colleges of medicine and pharmacy in America, from State and national medical and pharmaceutical associations, from several units of the Government, and from a limited number of professional and trade associations. Without doubt, theY tSP stands on a foundation of deeper roots and broader representation in medicine and pharmacy than anything else of its kind. The revision program is entirely the concern of the tSP Revision Committee, which is made up of 20 medical specialists and 40 special- PAGENO="0063" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 501 ists in pharmacy, chemistry and biology. A nine-member board Of trustees handles all business affairs of the IJSP Convention. At the time our statement was made in 1960, the 16th revision of the Pharmacopeia had just appeared; now, in 1967, the 17th revision has been out 2 years and work is well `along on the next edition. These editions are not mere reprints; they are almost totally rewritten from cover to cover. The fact that the USP comes out at regular, 5-year intervals, with supplements intervening, and one just recently came out for the edition `that is in force, amply supports the first point we wish to stress; namely that USP standards are kept current and are responsive to everyday needs. Senator NELSON. May I interrupt? Dr. MILLER. Surely. Senator NELSON. FLOW often does the supplement come out? Dr. MILLER. Supplements come out as needed. This latest one came out after the main volume had been in effect for 18 months, so that generally we come out with two or three supplements during the 5- year period. There is no regular schedule for supplements. It is just th'at as we accumulate some 40 pages of material, we make the effort to pi~blish it. The supplements incidentally are sent free to all holders of the Pharmacopeia who return a postcard in the back of the book that lets us know where they are, so that there is no excuse `for anyone's not having a current supplement. An outline of how the standards are revised may be helpful. To start with, the USP headquarters office in New York stands ready at all times to receive inquiries and suggestions, compile data, and develop sources of aid for the revision committee. If laboratory testing is needed, it may be carried out by a revision committee member himself or by the drug standards laboratory, a `fully-equipped laboratory fa- cility maintained'here in Washington by three-way financial support from the U.S. Pharmacopeia, the American Medical Association, and the American Pharmaceutical Association Foundation. The prestige of the USP is such that the revision committee has free access to the Nation's most competent experts on any relevant matter. There is no hesitancy in seeking expert opinion outside the revision committee; advisory panels are set up, often jointly with the National Formulary where the problem is common to both compendia. Possibly the fact that industry scientists are often consulted on drug assay problems had led to the notion that the revision committee is industry- dominated. In refuting the suggestion, we need only mention that we also consult FDA scientists often and receive invaluable aid from them. Revision committee members are drawn from industry and aca- demic laboratories alike, but it is `clearly understood that all members serve as individual experts and not at all as representatives of their col- leges or companies. Of the 60 members, only 13 are now in the employ of pharmaceutical firms. And one of them is retiring at the end of this month. Senator NELSON. The drug standards laboratory is maintained and' staffed by the scientists by that laboratory? Dr. MILLER. Yes; the funds come entirely from the TJSP, the AMA, and the American Pharmaceutical Association. Senator NELSON. But the testing is `done by the employees of the drug standards laboratory, and not `by employees of the pharmaceutical industries? PAGENO="0064" 502 COMPETITIVE PROBLEMS~ IN THE DRUG INDUSTRY Dr. MILLER. Yes; this laboratory is wholly independent and it re- sponds to the needs of the three sponsors. It is concerned with the products that are put out by the pharmaceutical industry, but the test- ing it does is at the request of the sponsors. It has a small staff, and a small budget, but up to now it has met its needs rather adequately. Proposals for revision are submitted to a two-layer screen of ap- proval within the revision committee. A revision can be processed in a matter of weeks where a clear course is apparent, or may require years of study. We take seriously the responsibility of keeping the studies in motion and in seeing that the results are translated into tests and standards as promptly as possible. In the 29 years since the passage of the Food, Drug, and Cosmetic Act in 1938, six entirely revised editions of the Pharmacopeia have appeared and numerous supplements have been published. Admittedly, the mechanics and apparatus of the IJSP revision pro- gram are very simple; our headquarters staff is small. Although we must depend greatly upon voluntary efforts, our resources are substan- tial. We submit that the system has worked, is working, and will con- tinue to work in providing the standards for drugs that are not ex- ceeded anywhere in the world. WHAT ASSURES DRUG QUALITY? Great stress has been placed on drug quality in these hearings to date. The importance of quality in drugs is beyond debate, for in scarcely anything else in everyday use is the attribute of quality so vital and so difficult to measure, even for experts. The elements that determine quality are several, but identifiable. This holds true for drug products made by large and small manu- facturers or those compounded locally ~ the community pharmacy or hospital. The first requirement is the will to make a good product and the unswerving adherence to a creed that ranks high quality above all other considerations. Second is flawless procedure, usually called good manufacturing practice in the drug factory or good technique in the pharmacy. Then, in order of u iilization and certainly in importance, come high standards of purity ~nd potency; these are necessary to in- sure that only the best materials are used and that the final product comes up to expectation. It goes almost without saying that high stand- ards are valueless unless they a3:e put to use in a vigilant and rigorous testing program. Finally, once a product of high quality has been ob- tained, it must be protected by proper packaging, handling, and storage. These, in broad outline, are the minimum elements needed to assure a quality drug product. The neglect of any one will almost certainly result in an inferior drug product. Of all these elements, the most objective and most amenable to pre- cise specification are the standards of purity and the conditions of proper packaging and storage. To provide these is the function of the U.S. Pharmacopeia and its sister compendium, the National Formu- lary. As a result, these books are recognized as "official compendia" in the Food, Drug, and Cosmetic Act. PAGENO="0065" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 503 We find it helpful to explain this situation by saying that the lISP and the NF provide the yardsticks against which the FDA measures the quality of drug moving in interstate commerce. This recognition is in keeping with the three-way separation of powers in our Govern- ment, since it results in having the standards set up by an agency other than the one charged with applying them. Mr. Walter G. Campbell, who served as the first head of the Food and Drug Administration and was its head for a longer period than anyone else, often e~p~essed the view that the existence of the official compendia and their creation by an independent agency relieved the FDA of playing the dual role of sitting as a council that promulgates ordinances that it must, acting later as police, proceed to enforce. Regrettably, this concept was disregarded when batch certification of the antibiotics was decreed in the 1962 amendments to the Food, Drug, and Cosmetic Act, and we are aware of more recent suggestions that the Congress should authorize further extension of batch certification. If this course is followed to any significant degree, it will sound the death knell of the Pharmacopeia and the National Formulary as non-Government sources of drug standards. Senator NELSON. I don't exactly follow that. Are you saying that the `Government should not batch-test antibiotics, or that nobody should batch-test antibiotics ~ Dr. MILLER. That is a two-way question. If I answered the second part first I would probably be answering `the first part. We don't think batch certification of antibiotics is especially necessary, because we don't think antibiotics, as a class of drugs, are particularly different from other classes of drugs. There are many reasons why `they came to be regarded as special and different, but penicillin is just about as stable as sugar, and it was on the basis of a lack of stability that the certification program was set up in 1944 as an e~dgency measure, a wartime measure, then it got written into law later, and was extended in 1962. We do not think that as a class the antibiotics are particularly different from any other drugs that we use. Now that view is in conflict with that of the Food and Drug Administration, but there are obvious reasons why they should have an interest in retaining an authority that they have been granted, and of course don't want to give up. Mr. GORDON. Dr. Miller, in the FDA. drug recall list that we have, it seems as though penicillin contamination is one of the most frequent causes for recalls. Dr. MILLER. But that is not an antibiotic certification problem whatsoever. Mr. GORDON. Is it not? Dr. MILLER. No, of course not. If you were to ~look for it, you would probably find other drugs contaminating other drug products just as much as you can find penicillin in other drugs. But it happens that penicillin contamination of other drugs is an important public health problem, because many people are sensitive to penicillin, and they `should not be.subjected to penicillin willy-nilly. It is just good manu- factuinng practice not to mix drugs, and penicillin was a particularly bad one to have mixed in with any other drugs. 81-280-pt. 2-67-5 PAGENO="0066" 504 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY Mr. GORDON. Are yOU saying that all drugs should be batch tested or no drugs should be batch tested? I am not sure I understand exactly what you mean. Dr. MILLER. The TJSP position is that no drugs need to be batch tested. It is a very expensive way. At one time I calculated, as close as we can get the figures, that it costs about 30 times as much to adminis- ter the control testing of the antibiotics as it does for the other drugs~ many of which are just as important to public health as the antibiotics. Mr. GomoN. Does the USP have any means of knowing that its standards are being adhered to? How can we insure that all products conform to the TJSP standards except through batch testing or some other way? Dr. MILLER. Well, you certainly have the reports of the Food and Drug Administration, of their results of applying the lISP tests to~ drugs in interstate commerce. It is their job to see that they do measure up to the lISP standards. Mr. GORDON. How do they do that? Dr. MILLER. They do it by spot testing. Mr. GORDON. By spot testing? Dr. MILLER. Yes, spot testing is the process of collecting samples on the `open market and testing them for compliance with label claims. They do it to a very large extent by factory inspection. They have the option of going in to any factory in the country, and asking to see the results of the tests that have been applied. Now, that can be done with- out requiring that once having completed those tests in the factory,. any place in the country, a sample be sent to Washington, the testing' be done all over again, at the manufacturer's expense, which means in turn at the public's expense, because certainly the manufacturer is' going to have to get that money back in the price of the drug. In other' words, it is retesting to' an extent that we feel is considerably unneces- sary. I am just as much in favor as anybody could be of ensuring that every drug on every pharmacist's shelf in this country shall be just exactly as potent as it is supposed to be, but there are ways to do it that do not include batch certification. Senator NELSON. I am not informed as to how much testing of drugs is done. Are all drugs. that go on the market at some period or another inspected by some independent agency `or the Government? In other words, some company is in the business of manufacturing a particular' drug, and the FDA has the authority to' spot check. Now, If this com- pound is being manufactured by a company that is on the marketyear after year, how do we know that it complies with the lISP standards, for example ~ Dr. MILLER. Well, in the first place the manufacturer has the re- sponthbility in introducing a drug in lnteirstate commerce, assuming' he is going to do that, to see that he meets the published' standards, if such there be. He doesn't need to test to do that. He can risk his renut~tion, risk being thrown into jail literally, If he is willing to take the chance, in not carrying out tests before he ships the drug, or at any time. Very few m~ufacturers are willing to take that risk~ T know of none. Senator NELSON. Are you sayin~ that each batch of' `drugs by any' manufacturing firm is batch tested? PAGENO="0067" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 505 Dr. MILi~ER. Oh, yes. Senator NELSON. By the firm? Dr. MILLER. Absolutely, tested all along the line. The raw materials are tested when they come to the door of the plant before they are used, and the components as they are manufactured are tested at various stages, and then if the product is USP the TJSP tests are gen- erally applied in the finished form, and all of that testing is done in the course of manufacturing. Now, it may not be. If a man is willing to cut corners for various reasons, he can get along without testing to a remarkable degree, but he will be risking putting out an inferior product. Senator NELSON. The law does not require, then, that the manu- facturer test each batch of drug? Dr. MilLER. No. Senator NELSON. But the law does require that it meet the TJSP standards? Dr. MILLER. Yes. Senator NELSON. If it is in the Pharmacopeia? Dr. MII4I4EE. Yes. Senator NELSON. Is that correct? Dr. MiLu~R. Yes. Senator NELSON. Then how do we :know that they do reach the standards, if there is not inspection of each batch by the manufacturer or by somebody else? How can the public be sure that a drug of improper potency is not being put on the market? Dr. MILLER. By seeing that the Food and Drug Administration has the facilities for testing as often as it feels it is necessary and where it feels it is necessary, where the risk is greatest of the products that are offered for sale. Now, the expansion of the FDA testing that will be possible by the setting up of this new central testing laboratory in St. Louis will go a long way towards achieving this purpose. They will be increasing, if I have the figures correct, the amount of testing by about 10 times that which has been done in the past, and that will accomplish much in giving the public a chance to be perfectly con- fident that the drugs that are offered are right up to standard. Senator NELSON. I don't know how important this really was, but in any event, you. recall the publicity a few weeks or months back of the test of some 4,600 drugs by FDA? Dr. MILLER. Yes.. Senator NELSON. And on that what they said was that 1-plus-percent of the generics were subpotent or maybe excessively potent and 8-plus- percent of the trade name drugs, so they were pretty close together. Are those significant percentages, and how do they get onto the market if they were subpotent or too potent, if the controls by the generic manufacturers and trade name manufacturers were adequate? Dr. MILLER. Well, I would suggest that you get Commissioner God- dard here to discuss that, but the facts are coming out with respect to these 4,600 or 4,800 analyses, and there have been some reports which this committee may want to look into, that the work was done by summer help-but it couldn't have been summer help because the work was done from March 1 until about June 1 last year-to give the Com- missioner an idea of just what the market situation was. PAGENO="0068" 506 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY It was a crash program. We have seen data made available by some of the manufacturers involved which contradict, refute completely, the data on these very same lots that are supposed to have been found iii violation. So the least we can say is that the subject is quite controversial at the present time, but I think it will be safe to predict that there will not be much difference between the two general groups of the manufacturers that you just mentioned, those that sell under brand names and those that sell under nonproprietary names. But I think all the facts are not in yet as to the result of this comparison. But there is a lot of difference between a substantive violation, that is one in which the potency was down far enough to be a worrisome thing, and a violation just beyond the line. Now, that too will have to be looked at. Where the USP lower limit was 95 percent and a product ~vas found to be ~ percent that technically would become a statistic on the violation side. Surely it is something that no one wantS. But a product that is 941/4 percent is certainly not in as much violation as one that is 75 percent, and how many were down in that 7-percent range has not yet been revealed. In fact, the data themselves have not been reported with very satisfactory completeness. Mr. GORDON. Dr. Miller, the Food and Drug Administration has sup- plied us with information to the effect that there are about 1,300 drug recalls in the past couple of years. Dr. MILLER. Yes. Mr. GORDON. Some of which caused death and serious injury. How can we insure that that does not happen? Dr. MILLER. I wish I knew, because I am just as deeply concerned over an injury or a death by a subpotent drug as anyone can be. Mr. GoRDoN. Don't you think batch testing could help? Dr. MILLER. No. You will find that there have been just about as many recalls among batch-tested drugs in proportion to the number that are on the market as there were of those that were not batch tested. No, batch testing is not the whole answer. Mr. GORDON. Is it a partial answer? Dr. MILLER. It is a partiaJ answer. Mr. GORDON. A partial answer. Dr. MILLER. If the American public is willing to pay the price that will have to be charged for testing every drug twice, every batch of drugs twice, then that is the way we perhaps should go about it. We don't think it is necessary. Mr. GORDON. One more point. As I understand it, in this batch testing it is the FDA who sets the standards, is that correct? Dr. MmLER. Yes, that is the thing of course that annoys the IJSP, because it took the authority away from us. It is just a matter of professional pride, but we think with almost 150 years of experience, we have a background of setting up standards that should not have been disregarded. Mr. GORDON. Are the FDA standards lower, higher, or just about the same as the TJSP standards? Dr. MILnr~. Actually I think they were lower in many cases. The FDA was willing to settle for 85-percent penicillin, and our committee men never wanted to see less than 90, and yet the 8~-percent figure prevailed. Senator NELSON. You still list the antibiotics? PAGENO="0069" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 507 Dr. MILLER. Yes, but we do not provide any standards. Senator NELSON. You don't provide any standards? Dr. MILLER. We don't provi~le the stan~dards. We simply say, "Lool~ to the Food and Drug Administration for the standards, because our standards would have no force." Senator NELSON. Thank you. Dr. MILLER. I was about to talk about standards of clinical per- formance or equivalency. Senator NELSON. Yes. Dr. MILLER. While standards of chemical purity or potency are now highly developed, a need is recognized in the case of a limited number of drugs for some measure of clinical performance. This reflects a desire for a demonstration that a given lot of a drug product, or preferably every lot of each brand of that product, is capable of per- forming as effectively as any other lot or brand of it. To satisfy this desire fully might require going so far as to use human beings who were ill with the disease for which the product was intended. Needless to say, this is scarcely practical and something short of that is being sought. The scientific principle involved here is physiological availability, and standards for clinical equivalency rest in large measure upon clearer elucidation of the factors that affect it. Physiological availa- bility is a characteristic of a drug product that determines the extent to which the active ingredient of the product may be absorbed by the body in a useful form. It is thus a measure of the utility of a drug product to the sick patient when and where needed. USP STANDARDS AND PHYSIOLOGIC AVAILABILITY It is perhaps not surprising that scientists and laymen alike gen- erally pay more attention to the spectacular natural phenomena, such as an eclipse of the sun or the appearance on schedule of a comet, than they do to other less breathtaking and more frequent events. Some of the latter may actually have enormously greater effects on man and his environment, as for example a prolonged drought or deluge. Similarly, in pharmacy, the failure of some drug products, mostly tablets, to yield the expected effects has stimulated pharmaceutical scientists to undertake studies that have generally explained the fail- ures in a fairly satisfactory way. A whole new sub-branch of pharmacy thus sprung up for which the term "biopharmaceutics" has been coined. Without doubt, the world is much better off as a result of these biopharmaceutic studies, for the drugs concerned are important and physicians now can use them more intelligently and effectively. However, an aura of mystique arose that has tended to blur our perspective at times. In consequence, there has been a tendency to extrapolate the findings unduly; indeed, there are some among us who would cast doubt on every drug offered for the physician's use. Regardless of the complexity of the pharmaceutical aspects, a very simple physiologic fact is concerned here. That is, some patients get less benefit from certain oral medicinal products because, contrary to expectation, the helpful part of the medicine stays in the ga~tro- intestinal tract and fails to get into the blood. Obviously, this applies PAGENO="0070" ~O8 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY oniy to drugs that are given as capsules, tablets or pills and exert their effects following absorption, a process that is seldom 100-percent efficient. It may be an individual matter involving only a few patients or may hold true for all patients who get the same batch of tablets. Regardless of whether the failure of absorption is an individual or a general characteristic, the end result is that one or more patients fail to get well. The physician has reason to be perplexed, and at the very least, his therapeutic plan has gone awry. Generally less frustrating to the physician are the situations in which the effect exceeds expectation as the result of better-than- expected absorption. This has been reported for at least three drugs. In each case, physicians were accustomed to using a specific dose that suddenly proved to be too much. Immediate checks showed that the right amount of drug was present and that other relevant TJSP stand- ards were met. In due time, allowance was made for the more com- plete absorption by reducing the dosage and thus restoring the desired level of effect. The only possible explanation was that greater effici- ency had been achieved as the result of some subtle change. Subse- quently, it was confirmed that the manufacturer had changed his process of making the tablets and accidentally has discovered how to make a smaller amount of drug do what had required a larger amount previously. Greater physiological availability had been achieved, which simply means that the absorption of the tablets was more nearly 100-percent complete. The important point, however, is that not more than a dozen drugs have presented problems with respect to physiological availability. Thus, to damn the entire Pharmacopeia of some 2,000 drugs for the failure of a mere handful is unscientific in the extreme. It would be just as illogical to strip a regiment of its honors each time one of *its privates went AWOL~. Yet this is what is suggested by those who would destroy our faith in all TJSP standards because pharmaceutical and medical science ha$ not yet advanced to the point of providing the required test methods for the few demonstrated cases that require extra precaution. In short, let us not throw out the baby with the bath water. Now I would like to turn to something that has been mentioned in these hearings and concerns a special area of the pharmaceutical world. and deal at some length with that, because I have had rather close experience with it for some years. It is drug nomenclature. DRUG NOMENCLATURE Drug nomenclature is an area in the pharmaceutical world that is distinguished by a maldistribution of too little information among too many self-styled experts. Suggestions are being made for more laws on the subject; but it will be a pity if more legislation is added before we learn to cope with the unfortunate enactments of 1962. Senator NEI~soN. Why were they unfortunate? Dr. MILLER. They were unfortunate because they put the emphasis in the wrong place. I am confining my remarks here to drug nomen- clature. Some two pages of the Kefauver-ilarris Act are devoted to drug names. Senator NELsoN. What is that? Dr. MILLER. Drug names, how to correct difficulties with drug names. PAGENO="0071" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 509 Senator NELSON. And you are referring in this comment of yours about the 1962 act only to that aspect of the act? Dr. MILLER. That is right, a page and a half of those two pages were concerned with official names; half a page was concerned with what I believe is the real problem, getting improper names assigned to new drugs. That is where the real problem is. Senator NELSON. I thought you were referring to the whole act. Dr. MILLER. No, I am not at all talking about the whole act. There were some other unfortunate parts about that, too, one of them being the extension of certification that we just talked about a few moments ago; but this subject of nomenclature was an area in which the Congress was not very well informed. There was very little discussion actually on that part of the act, and no one came up with quite the right formula by the time it went to the floor. As a means of improving communication of information of all sorts on drugs, no one can quarrel with the one-drug, one-name concept. However, this best of all possible world's is clearly unattainable. First of all, most drug substances are chemical entities `and as such are known by names that are generally lengthy and comprehensible only to those highly trained in chemistry. The fact that few of those who deal with drug products are so trained makes it imperative to coin other, much simpler names. Disagreement seems on exist on whether these other names are nearly simple enough. I would like to insert here a comment with respect to this element o'f simplicity. One factor that works against very short names is the prin- ciple that the names should show `any important interrelationships that exist between the drugs. Thus within the group of the sulfon- amides, the wonder drugs of the 1930's which gave man the first means of combating pneumonia and other serious infections, all non- proprietary names of the sulfonamides start with the prefix sulfa. There are sulfanilamide, the original member of the series, and those that have now replaced it, sulfadiazine, sulfamerazine, sulfathiazole. If we were to undertake to shorten the name `of this large group of drugs by chopping off the prefix sulfa, we would at once lose an im- portant common bond o'f identity. Many other examples of this sort of thing could be cited, but the essential p'o'int is that brevity in drug names could come `only at the expense of the informative capacity of the name. Bits of information are conveyed by syllables, and syllables are useful only if they are recognized and can be fixed in memory rather readily. But those of us who have undertaken to coin drug names learned quickly that the way to `any really `simple nomenclature is strewn `with roadblocks of all sorts. Chief among these blocks is the existence of so many names that are in use or have `once been used; ~trademarks may not be infringed and old names may not be applied to new drugs because of the confusion, that would result. In short, just as old ski~ns are not safe for new wine, `old names are useless for new drugs. A second point is that critics `seem never to take into' account the fact that `catchy, two-syllable, `contrived names like Kodak or An's'co come to mean cameras `only as the result of costly and ceaseless advertising. Hundreds of two-syllable trademarks are in use for drugs but they have mnemonic value oniy because they are heavily promoted. No' non- proprietary name, short or lengthy `can compete for public acceptance PAGENO="0072" 510 cOMPETITIVE PROBLEMS IN THE DRUG INDUSTRY without equally heavy promotion and no one has come forward with suggestions for financing the gigantic promotion effort that would be required to make them familiar. The USP is engaged in a promotion campaign of sorts for the non- proprietary names known as the United States Adopted Names. In cooperation with the American Medical Association and the American Pharmaceutical Associatio~ia, we sponsor a program that is aimed at selecting and publicizing a nonproprietary name for every new drug substance. The Food and Drug Achnthistration has recently joined the three original sponsors but does not contribute financial support. The program is now in its 6th year and, to date, some 600 names hai~e been selected and made public. The Fifth Cumulative List of U.S. Adopted Names has just appeared in booklet form. I would like to make this copy available for the committee's use.2 The cost of this entire program, including publication and distri- bution of the just-mentioned list, is probably less than the cost of the preparation and postage of a single direct mailing on any drug with a sales volume of upwards of $1 million annually. The three organiza- tions that are concerned with publicizing the nonproprietary or ge- neric names simply do not have the resources to compete with the promotion efforts of the pharmaceutical industry in this regard in any way. The alternative has been suggested that some limitation be placed on the free choice of clapping a brand name on any drug product. Such a limit might be of the sort that the 1~'rench have used; namely, only the firm that introduces a drug product may use a trademark name, and all who follow must market the same product under a com- mon, nonproprietary name. Others seem to advocate the elimination of all trademarks for drugs. The latter course would force greater use of institutional advertising such as one sees for aspirin. This nonproprietary name was once a U.S. trademark, and while it still has exclusive status in many coun- tries, it is in the public domain here in the United States. Thus we see many "brands" of aspirin, each clearly labeled to show the maker, so that we have Bayer aspirin, St. Joseph's aspirin, and Squibb's aspirin, to name but three of the many sources. A casual check will reveal that the use of the common name has not served to prevent substantial price differences between the makers of aspirin tablets. Such revolutionary changes in our trademark laws as we have men- tioned would apply not just to drugs alone, I should suppose, but to all products, and would surely require long and careful study. All these considerations lead us to believe that tinkering with drug nomen- clature is scarcely a promising way to reduce drug prices. In summary, our position is that the USP and NF standards for drugs are not only unsurpassed but they are reliable measures of drug quality. The standards should not be cast out because of the rare findings that a drug product which meets them fails to produce the ex- pected clinical effect. Finally, the way to lower drug prices, if such there is, will not be found in the thicket of drug nomenclature. Thank you. 2Retained in ceinmittee files. PAGENO="0073" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 511 Senator NELSON. I am not sure I really understand that last state- ment. "Finally, the way to low drug prices if such there is will not be found in the drug nomenclature." According to the Medical Letter, if I were a physician and wrote a prescription for Paracort, the price to the pharmacist is $17.88 for 100 tablets, but if I used the generic name prednisone, it is being sold to the druggist for as low as 59 cents. So that is a case where the name makes all the difference in the world. Dr. MILLER. No, the name has nothing to do with it. There is nothing in the world to prevent the firm that sells at the lowest price from putting a trademark on its product and selling it under the trade- mark. As far as the laws are concerned, and the economics of the situa- tion go, there is nothing that says a trademark product need cost a cent more than one sold under the nonproprietary name, or vice versa. There are other factors that determine what the prices are. It is not nomenclature. Senator NELSON. I suppose there is no price attached to nomeiicia- ture, but the fact of the matter is that Paracort costs the pharmacist $17.88 and Meticorten $17.90, and prednisone by a number of com- panies listed in the Medical Letter study is selling for 75 cents a 100. Dr. MILLER. I have seen that list. Senator NELSON. It appears to me the name you use may very well make all the difference in the world as to what you are paying for that drug. Dr. MILLER. The name you use may make a difference in what the patient has to pay, but the fact that a name differs does not mean that the price would have been different. What I am trying to say is this. That had one of these firms that happens to charge more decided to sell its prednisone, and this is the position that Dr. Modell took here a couple of weeks ago, as predni- sone, TJpj ohn or prednisone, Smith or prednisone, Jones Pharmaceu- tical Co., they would have thereby been able to identify the product with their firm, and whatever price they chose to charge would be the price charged the patient, simply because the ~oetor wanted the Smith product, the Jones product, or whatever firm was concerned. What I think you are observing here is that to establish a trade- mark in the marketplace, and in the mind of the physician, is an expensive operation. It takes a lot of promotion, a lot of reminder, maybe a lot of stethosoopes, as was mentioned here this morning. That costs something, but there are other things that go juto the price of a drug, too. But the question is how one might establish the prac- tice of a physician of prescribing a particular drug without promo- tion. Senator NELSON. What can't be done without promotion? Dr. MILLER. Establishing a desire on the part of the physician to prescribe a specific brand of a drug. Jt isn't the name. It is promQtiou~ and promotion is made easier by the use of a trademark, but it is not necessary. A firm could establish jts name so well that a physician would buy that firm's drug under a nonproprietary name, if he were rompletely convinced that he wanted that particular firm's produots, awl he would get them if he put the firm name on the prescription. PAGENO="0074" 512 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY Senator NELSON. If a good drug is patented, is exclusively held for 17 years, and is a widely used drug, then even at the end of 17 years when the patent no longer protects him from competition, the only name known to practicing physicians is the trade name. There are innumerable examples of major companies, all highly respected, coming into the market with their own brand name and with the generic nameat a fraction of the price. Yet the other one still remains on the market. Dr. MILLER. Yes. Senator NELSON. The other one still sells because that is the only name the doctor knows. So knowing what the drug is and knowing the generics, the generic name, and knowing the Various prices is certainly a very important factor to the physician and to the patient, I would think, wouldn't you? Dr. MILLER. I don't know whether I can answer your question intelligently, but let me make this comment. The reason the price is different, the reason the latecomers into the market lower their price, is that that is the easiest way for them to get into the market. Senator NELSON. But they aren't selling at a loss, are they? Dr. MILLER. That I wouldn't be able to tell. I would assume not, or else they wouldn't go into business. Senator NELSON. The opening sentence in the Medical Letter is that "Tests made for the Medical Letter on prednisone tablets USP pur- chased from 22 different pharmaceutical companies showed that all of them conformed fully to the requirements of the U.S. Ph armacopeia." Dr. MILLER. Yes. Senator NELSON. When you look at the 22 drugs, you find that they vary in price, all meeting the standards of the U.S. Pharmacopeia, from 59 cents per 100 to $17.90 for a 100. The Medical Letter is saying that they all meet the USP standards. Dr. MILLER. Yes. Senator NELSON. One is as good as the other. Therefore, isn't it important that the doctor who is prescribing for his patient to know which is which in the price variation, and why should the patient be paying $17.90, or rather a price based upon $17.90 per 100 to the pharmacist when there is an equivalent drug available at 59 cents a 100 to the pharmacist? Dr. MILLER. I can't answer that in any satisfactory way. I myself wouldn't want to pay $17.90 for a drug that I was just as sure I could get for 59 cents. Mr. GORDON. Dr. Miller, I would like to give you another example where the name is important. When the city of New York buys Benadryl from Parke-Davis Co., it pays $15.63 for 50 milligram, 1,000 tablets. When it is bought generically from the' same company, the city pays $3. Now, how can we say that nomenclature is irrele- vant to price? Dr. MILLER. My position is that actually nomenclature has nothing to do with it as far as the buying of the drug is concerned. It is what you order. If you ordered Benadryl, you would be insisting that the trademark product be provided-what is the USP name? Mr. GORDON. Diphenhydramine. PAGENO="0075" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY Dr. MILLER. If you ordered diphenhydramine hydrochloride, you might no get Benadryl but if you bought it from Parke-Davis the chances are pretty good you would get exactly the same product that they sell under tl1e trademark Benadryl. To clarify my statement here, what I am trying to say is that abolishing trademarks and trying to make names simpler so doctors will remember them and things like that actually may be desirable for some reasons, but it should not be approached from the standpoint of trying to make drugs cheaper, because I don't think that will necessarily follow. We have too many examples, like the aspirin situation, where they are sold under the same name, and price differences do exist. Here you have price differ- ences in that Medical Letter list, where they are sold under prednisone as such but they are all prednisone tablets. If you took away the ones where they are sold exclusively under trademarks! and just looked at the ones that are sold under the nonproprietary name prednisone, you will find price differences there, and that is the point I am trying to make, that price differentials will exist, because of the differences in manufacture, differences in costs of other sorts, differences in dis- tribution, differences in service. Some of the firms that sell for the least do not have a distribution system. You can buy them in only a half-dozen places in the country, and to make it available in 36,000 places in the country is expensive, a very expensive thing. Mr. GORDON. Who has been complaining, as you previously stated, that the TJSP standards are too lax, too few, and cannot do their job? Who made that statement? Dr. MILLER. One of our friends up in Buffalo, Dr. Gerhard Levy, is one of those who says that the TJSP standards do not guarantee clinical equivalency, and yet many times I have asked him for help in improving the TJSP standards, and his answer always is "Well, that be- comes a research project," and he has never been very helpful in pro- viding us better standards. We are working hard on it within our com- mittee. We have one of the country's experts. Mr. GORDON. You disagree with Dr. Levy; don't you? Dr. MILLER. I don't disagree with him completely. I think he is overemphasizing these few shortcomings. Mr. GoiwoN. Yet you say here on page 4 that "The USP standards for drugs are not exceeded anywhere in the world." Dr. MILLER. That is true. Nobody else has any of these standards that he complains we should have. We have standards that no other pharmacopeia in the world has, and yet he thinks we should still be better. We agree with him on that. We wish we were better. But he among others has not been able to provide us with objective methods that FDA could go into court with, to improve, to make certain, dou- bly sure that these products were clinically equivalent and absolutely physiologically available. Senator NELSON. Is the question of clinical equivalency considered i~i establishing the tSP standard? Dr. MILLER. Oh, yes. Senator NELSON. Then, do you do clinical tests yourself? Dr. MILLER. We do not. Senator NELSON. Or do you rely upon the literature? Dr. MULER. We rely upon the literature, we rely upon experts on our committee, and we do have tests that have been shown in the past PAGENO="0076" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY to be important. One example is the drug Griseofulvin which is an anti- biotic. It is available in two forms, tablets made of what are called large crystals, and tablets made of microcrystals. The tablets of large crystals require a dose of twice as much as of the small crystals. In other words, the small crystals are more completely absorbed than the large crystals. In view of that, the lISP recognizes only the small crystal Griseo- fulvin, whereas FDA continues to certify both the large crystal and the small crystal product. We think that, and it couldn't have been done within the law so that FDA is not lax in that respect, it is a pity that the large crystals continued on the market once it was discovered that the small crystals did the job better. We have been asked recently why the lISP can't recognize the large crystal. Our experts think that that would be a medical mistake. There is no reason to give 500 milli- grams when only 250 milligrams will do the job. Senator NELSON. Have you found in your experience that if the drugs meet the potency standards, meet the standards established by the lISP, that these drugs are also clinically equivalent? Dr. MILLER. By and large, as I say, there are not more than a dozen examples where the difficulty has been discovered, and it is not gen- erally true even for all of them. I don't know whether you want to get into examples. There are experts you can call upon to do that. It is a technical matter. But we feel that for the most part the problem has been met by the dissemination of information, the scientific informa- tion that has been developed on these examples, and no one is making those mistakes now. Senator NELSON. Are there drugs that go into the Pharmacopela for which you set standards, on which you do not have clinical tests? Dr. MILLER. No, I do not think-by the time our physicians will vote its admission to the lISP, a drug has to be pretty well established, and so I think that there are very few instances of lISP drugs in which any question exists on clinical equivalency. Mr. GORDON. Although these tablets vary within the bottle? Dr. MILLER. Excuse me; well, all right. Senator NELSON. They vary within the bottle, they still meet the lISP standards. They are not identical, but as I understand it, they are therapeutically effective, isn't that correct? Dr. MILLER. I didn't mean to give the impression that this was an intra-bottle variation. Senator NELSON. Or intra-batch. Dr. MILLER. We have a very good test that rules out the differences from tablets within a given bottle. No, the problem generally is a vari- ation that exists between all the bottles of one batch and as contrasted with all the bottles of tablets in another batch. Senator NELSON. I am talking about prednisone. Now, here you have tablet variation within a bottle. They all meet USP standards. Now, obviously they are not identical. According to you as I understand it, they are therapeutically effective, is that correct? Dr. MILLER. Well, there are two things that happen to prednisolone. Mr. GORDON. I am talking about prednisone. Dr. MILLER. I will try to cover both of them, so that the record will show- PAGENO="0077" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 515 Mr. GORDON. One other question, Dr. Miller. If a drug meets TJSP standards, can we rely on the drug to do the job it was intended to do? Dr. MILLER. We think so, by and large with very few exceptions. I have to qualify to that extent. Now, prednisolone is one of the cases. Mr. GORDON. I am talking about prednisone. Dr. MILLER. All right, prednisone. Yes, it was prednisone. Predni- sone is a drug that is effective in very small amounts. One milligram is enough to do the job. A firm, a very highly respected firm, was putting out 1-milligram tablets of prednisone. The Food and Drug Adminis- tration discovered that within a given bottle some of those tablets had only a half a milligram of prednisone. Others had a milligram and a half. On the average, there was a milligram per tablet. But we con- sidered that poor practice, and we now have a test that rules that out. We have a test in the DSP which applies to prednisone tablets that prevents that happening again. Mr. GORDON. What do you mean by exceeding DSP standards? Dr. MILLER. If I used the word exceeding DSP standards I apolo- gize because we don't recognizc~- - Mr. GORDON. You didn't use it. Dr. MILLER. Oh, we don't think that there is such a thing as exceeding DSP standards, because the DSP standards are so written that any- thing-we say "not less than" a given percentage, and in the case of aspirin, for example, aspirin shall be not less than 99.5 percent pure. Now, that other half percent does not allow very much leeway for being better than DSP standard. Senator NELSON. I have seen some industry literature critical of IJSP in the sense that they say their drug exceeds DSP standards. Are you saying that any further purification and any further this or that has no clinical or chemical meaning so far as the drug and its use is con- cerned? Is that what you meant? Dr. MILLER. Yes, that is partly the view, but the main point is that anything between the minimum that w~ state and 100 percent is still DSP, and when I have time, whenever I see one `of these ads, I gen- erally call the attention of the firm to our position, and as a rule, the ad- vertising changes. Senator NELSON. Thank you very much, Dr. Miller, for coming over here today. Your testimony has been very helpful. Dr. MILLER. We appreciate the chance to come. Thank you. Senator NELSON. We will adjourn until 10 o'clock tomorrow morn- ing. (Whereupon, at 3:50 p.m. the subcommittee was recessed, to recon- vene at 10 a.m., Wednesday, June 28, 1967.) PAGENO="0078" PAGENO="0079" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY WEDNESDAY, ~TUNE 28, 1967 U.S. SENATE, MoNoPoLY SUBCOMMITTEE OP THE SELECT COMMIrPEE ON SMALL BUSINESS, Washington, DXI. The subcommittee met, pursuant to adjournment, at 10:10 a.m., in room 318, Old Senate Office Building, Senator Gaylord P. Nelson (chairman of the subcommittee) presiding. Present: Senators Nelson and Hatfield. Also present: Benjamin Gordon, staff economist; Daniel T. Cough- un, minority counsel; Susan H. Hewman, research assistant; and Wil- ham B. Oherkasky, legislative director, staff of Senator Nelson. Senator NELSON. The subcommittee will resume hearings. Our first listed witness is Dr. Solomon Garb. Dr. Garb, the committee is pleased to have you appear here this morning. Dr. Garb is professor of pharmacology and associate pro- fessor of community health, IJniversiity of Missouri Medical School, clinical pharmacologist at the University of Missouri, Columbia, Mo. We have your biographical data here. Would you like to state briefly your biographical background for the record? You may proceed to present your statement in any fashion you wish. I have read itt and I think it is the clearest explanation we have had for the question of generic brand, chemical names, and 50 forth, and a very good one. You t~-iay proceed to read it or extemporize from it. If you have no objec- tion, as questions occur to Senator Hatfield or myself we may interrupt you to ask them unless you would prefer to present your whole state- ment without interruption. (The biographical data referred to follows:) Da. SOLoMoN GARB-CURRICULUM VITAE Present address: 101 Gipson Street, Columbia, Missouri 65201 Phone number: 314-442-3701 l3irthdate: October 18, 1920 Place: New York, New York Citizenship: U.S.A. Sex: Male Married: 3 children Present position: Professor of Pharmacology and Associate Professor of Commu- nity Health-University of Missouri Medical School; Clinical Pharma- cologist-University of Missouri Medical Center Education: Cornell U. College of Arts & Science, Ithaca, N.Y., A.B.-1940 Cornell U. Medical College, New York, N.Y., M.D.-1943 Cornell U. Medical College, Special Student in Pharmacology, 1947 517 PAGENO="0080" 518 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY Academic appointments: Research Fellow in Pharmacology, Cornell U. Medical College, 1949-1950 Instructor in Pharmacology, Cornell U. Medical College, 1950-1958 Assistant Professor of Clinical Pharmacology, Cornell U. Med. School, 1953- 1956 Assistant Professor of Pharmacology, Cornell U. Medical College, 1956-1957 Associkte Prdfessor of Pharmacology, Albany `M~dical Coll~ge, 1957-~0G1 Associate Professor of Pharmacology, University of Missouri, 1961-1966 Professor of Pharmacology and Associate Professor of Community Health, University of Missouri, 1966-on Basic clinical medical training ana experience: Internship-Beth Israel Hospital, Boston (Harvard Medical Center), 1944 Residency in Medicine-Montefiore Hospital, N.Y., 1948 Clinical Pharmacology Experience: Clinical Assistant in Cardiology, Research Unit, Hospital for Joint Diseases, N.Y. (1~art-timè), 1949-1951 ~ssistant, Cardiovascular Research Unit, Beth Israel Hospital, N.Y. (Part- time), 1949-1951 Assistalit Profe~sor Of Clinical pharmacology, Cornell U. Medical College (Full-time), 19511-1956 Clinical Pharmacologist, University of Missouri Medical Center, 1964-on Military Experience: Active duty, A.U.S. in World War II. Commissioned 1st Lt. Medical Corps, October 6, 1944. Promoted to Captain, Feb~uar~y 28, 1946. Dl~eharged, De- cember 26, 1946. Service in u.s., Philippines and Japan. Awarded Combat Medical Badge, May 27, 1945, by 126th Infantry, 32nd Division. Research prizes and research fellowships: 1943-William M. Polk Prize for Research, Cornell University Medical College 1949-Henry M. Moses PFize for Research, Montefiore Hospital 1949-1~51-New York Heart Association Research Fellowship (1J~S.P.H.S. Post-Doctoral Fellowship awarded and declined) 1952~4956-Anierican Heart Association Research Fellowship 1957-1961-United States Public Health Service Senior Research Fellowship 1962-1967--United States Public Health Service Career Research Develop- ment Award Medical licensure: New York, Missouri, California Membership in scientific societies: Society for ~tperimental Biology alid Medicine Society for Pharmacology aild Ei~perimenta1 Tl1E~rapeut1cs American Federation for Clinical Research-Senior Member Sigma Xi Fellowships in medical and scientific organizations: Fellow-Americafi College of Physicians Fellow-American College of Clinical PharmacO1o~ Membership in medical societies: Boone County Medical Society Missouri Medical A~sociation American Medical Association ConsultancieS and related ~~tlvities-PharmacoloSy and clinical pharmacology- Government and medical groups: Consultant to Senate Committee on Antitrust and Mono~~oly (Kefauver) 1060, 1961 Member of Ad Hoc A.A.M.C. Committee on Relations with Phar~iiaceutical Industry 1961 Consultant to A.M.A. COuncil on Drugs 1965, 1966 Consultant ill Clinical Pharmaeoi&g3~ to Cancer Research Center, Oolumbia 1966, 1967 Faculty committee assignmentS-4~-Ufitver5ity of Ml~soiitri: MEND Oommittee (Secretary)-1961 to date Civil Defense ComhLitteé (Campiis-w1de)-4i~62 tO date Research Development Coinmitt~e-1961-l965 Student Research Stibcomlnittee (C1mirmfin)-~-~1064-1965 safety C~mmittee-1967 human Experiment Committee-1965 to date PAGENO="0081" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 519 STATEMENT OP DR. SOLOMON GARB, DEPARTMENT OP PRARMACOL- OGY, UNIVERSITY OP MISSOURI MEDICAL SCHOOL, COLUMBIA,. MO. Dr. GARB. No, that would be fine, sir. Senator NELSON. If you will speak into the microphone so we can hear you, go ahead and proceed. Dr. GARB. Do you want my biographical sketch, sir ~ Senator NELSON. We have a detailed biographical sketch, but we should be pleased if you would give us a brief résume of your pro- fessional background. Dr. GARB. All right, sir. I received my M.D. degree from Cornell University Medical School approximately 24 years ago. I have had an internship, residency, military experience as a battalion surgeon,. and a certain degree of clinical experience testing drugs in various medical centers. I have been a full-time teacher and researcher in pharmacology and clinical pharmacology since approximately 1950. I taught on the staff of Cornell Medical School, then Albany Medical School, and I am currently professor of pharmacology and associate professor of community health at the University of Missouri Medical Center. I am also clinical pharmacologist for the University of Mis- souri Medical Center and I am a consultant to the AMA Council on Drugs. Senator NELSON. Thank you, Doctor. Dr. GAIu~. It is an honor to be invited to testify before this sub- committee, and I hope that the information which I :~1fl able to present will help you in your deliberations. The key point which I would like to emphasize is that the ~iames of drugs are unnecessarily confusing. They are confusing not only to the layman, but to the physician as well. Furthermore, I believ~ that the existing confusion plays a maj or role in preventing the operation of the usual Americati marketplace checks and balances. As a result, many drug prices are excessively high. The point that I want to make here is that I don't feel that drug prices are excessively high simply because somebody is out to make a killing with them. I think that the economic structure of the industry tends toward high drug prices, and this is a point which I think will become clear as w~ go along. There are several kinds of drug names for us to consider. They in- clude: chemical, official, generic, USAN, brand, and private product names. And each drug can have one or more o~ each of these kinds of names. The chemical name is a long, complex affair ~hich identifies the specific chemical structure of the drug molecule. Fortuna~tely, it is used only by chemists, and we need not consider it further. The words official and generic are often used interchangeably in relation to drug names. The word "generic," is a poor one in this con- test, and hopefully, the term "official" will take its place. As commonly used, the term "~fflcial" ~nd "generic" refer to names o~f drugs which can be used by any m~nttfacturer, and which ser~ie to identify the drug and distinguish it from others. ~the~re are, however, sortie differences in the meanings of generic and official. At one time the word "official" referred to a name approved by the U.S. Pharmacopeia. Today, it 81-280-pt. 2-67---6 PAGENO="0082" 520 COMPETITIV~i PROBLEMS IN THE DRuG INDUSTRY refers to a name approved by the FDA. Since most people still use the term "generic" I will do so ~n the remainder of this testimony. Our older drugs have simple, clear, and useful generic names. These include: Morphine, codeine, insulin, barbital, reserpine, and atropine. Senator NELSON. May I interrupt a moment? Dr. GARB. Yes, sir. Senator NELSON. Why did the older drugs have simple, clear, and useful generic names and new drugs do not? Dr. GARB. I will come to this subsequently, but to give a brief an- swer, I would say that there probably were a combination of two cir- cumstances involved. At one point in the past, the AMA set up certain recommendations about drug names. They were only recommendations, they had no real force, and they involved some rather complicated thoughts about generic names being somewhat similar to chemical names or derivatives of chemical names. The drug manufacturers, following this, developed some very complicated generic names. It turned out that the development of complicated names, which you can't pronounce and can't remember, tends to push doctors to the use of what I call private product names instead of generic names, and I think that when it was discovered that it worked this way, it was just too advantageous to the manufacturers for them to let it go. Senator NELSON. What does the word morphine or codeine or in- sulin or barbital or reserpine tell a physician that another more com- plicated generic name does not, or what does a more complicated one tell the physician? Dr. GARB. Morphine tells the doctor enough to identify the specific drug. Morphine is morphine. Morphine is morphine in Washington, in San Francisco, in London, and Australia. It is the same identical material. Morphine was the same thing in 1900 as in 1967. If we made the name morphine longer or made a longer name for the chemical which we call morphine, it would tell us nothing further. It would tell us nothing that is more useful. It would simply confuse the issue. Senator NELSON. But the question I am getting at is~ supposing you have a chemist who never heard of morphine. You gave him the chemical name and then you gave him the name "morphine," would he recognize what the chemical name was from reading the word morphine? Does morphine tell you anything as a chemist, or is this simply- Dr. GAIUi. No, morphine does not tell a chemist what the chemical structure of morphine is. On the other hand, these long generic names also do not tell the chemist the chemical structure of the molecule. Senator NELSON. What does any of these generic names tell a chemist or a physician that a trade or brand name doesn't tell him? Dr. GAmi. Are you speaking now of morphine, a simple one like morphine? Senator NELSON. Any one of them. What does reserpine teJl you that Sernasil does not? One is the generic name and one is the brand name. Dr. GAmi. Well, the private product name tells you less, unless you happen to know the code. In effect the private product name that you have just mentioned, Serpasil, can be thought of as a code, which in- cludes the identity of the manufacturer and the official or generic name. But if you happen not to know the code and most people do not know the code, it tells you just about nothing. PAGENO="0083" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 521 Senator NELSON. Let me put the question the other way. Supposing somebody had decided that the generic name ought to be Serpasil, and some company decided that their brand name ought to be reser- pine. Would it make any difference? Dr. GARB. No. A name is a name. The whole point is that you can- not rely upon names to give you chemical structures or anything else unless they are the long chemical names. The name of a drug is exactly as useful as the name of a person. You can call a person John, or you can call a person Dick. The names tell you nothing more than the identity of the individual. Senator NELSON. So then in devising an official name or a generic name, the idea ought to be to devise a simple, pronouncable name; is that correct? Dr. GARB. Yes, sir. It should be sithple, it should be pronOunc~able, and above all, it should be so designed that it cannot be confused with another drug. This is a key point. We do have a case where there are two drugs with similar generic names. This is bad. One is digi- toxin and one is digoxin. They are both cardiac glycosides. The names are so close together that confusion exists at times and doctors might make a mistake or pharmacists might make a mistake, and this is not good. So the names should be distinct enough so that they cannot be confused with any other drug by any person. Senator NELSON. Does there have to be approval by FDA or any other official agency of the trade name or product name that a private manufacturer attaches to a generic drug? Dr. GARB. To the best of my knowledge, no, but this is not an area I am familiar with. I am not familiar with the law in this respect. Senator NELSON. The two names you gave, digitoxin, and what was the other? Dr. GARB. And digoxin are generic names. Senator NELSON. Are generic names? Dr. GARB. Are generic names. They go back into history, and it is unfortunate that we have two generic names which are so close that they can be confused. Senator NELSON. Who created those names? Dr. GARB. I don't know. Senator NELSON. They are old? Dr. GARB. They are old. Senator NELSON. Go ahead. Senator HATFIELD. Excuse me, doctor. Dr. GARB. Yes, sir. Senator HATFIELD. Are there any generic names, or rather brand names that through long usage have become generic names? Dr. GARB. The only one that I can think of offhand is aspirin. Senator NELSON. Go ahead. Dr. GARB. Most of our existing drugs, however, have long, com- plicated, almost unpronounceable names such as sulfamethoxypyri- dazine, zoxazolamine, bendroflumethiazide, benztropine methanesul- fonate, oxyphencyolimine hydrochloride, methylbenzethonium chlo- ride, chlorzoxazone, iodochlorhydroxyquin, triacetyloleandomycin, and so forth. Senator NELSON. What do these generic names accomplish? PAGENO="0084" 522 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY Dr. GARB. Well, theoretically they should identify the drug just as the name morphine jdentifies the dr~ig morphine. They give you no more information about the constitution of the drug chemically or otherwise than do names like morphine, insulin, atropine. What they accomplish~- Senator NELSON. Or Dexedrine, which is a trade name. Dr. GARB. Yes, sir; Dexedrine is a trade name. Senator NELSON. I know. Does it give you any more information than that? Dr. GARB. Well, yes. Again, it is the matter of a coding system in effect, Senator NELSON. Does Dexedrine tell you any more than dextro- amphetamine does? Dr. GARB. It probably tells you less, unless you happen to know what the code means. / Senator NELSON. What do you mean by code? Dr. GARB. The private product name such as Dexedrine, if you know all about it, tells you that it is a dextroamphetamine which is made by Smith, Kline & French, but you have to memorize these things, you see. Senator NELSON. But this is what I am getting at. Couldn't Pharma- copeia or FDA have suggested the. official name or the adopted name and have said Dexedrine should be the generic name and then the company Smith, Kline & French could come along and say we will call it dextroamphetamine. Dr. GARB. That is right. Senator NELSON. And neither one tells you more than the other. Dr. GARB. Neither one tells you more than the other, that is correct.. Senator NELSON. Each one has to be memorized. Dr. GARB. That is right. That is exactly correct, yes, sir. Senator NELSON. Now where did these complicated names that you just listed come from? Dr. GARB. These particular names were made up by the manufac- turers. In the days before the Kefauver-Harris law, the responsibility for making up the generic name was left to the manufacturer, who first produced the drug, and in those days there were even drugs which had more than one generic name. I n~iean if two manufacturers developed the drug at about the same time, they could each give it a different generic name and they could even change generic names. This has been changed now in the law, and today the FDA has to ap- prove the new generic names. Senator NELSON. Who proposes the generic name that the FDA approves? Dr.. GARB. The company proposes it, Ibelieve, but there are certain guidelines now that didn't~ exist before. Names today are getting a little less complicated than they used to be. They are still a little more complicated than I would like. Senator NELsoN. Don't they continue to be more complicated than the trade name? Dr. GARB. Oh, yes. Senator NELsoN. Well, what is the explanation for that? Dr. GARB. I think you would have to ask the FDA that. I couldn't tell you the explanation. I know that the FDA now has the power to PAGENO="0085" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 523 insist on simple, direct, easily-remembered names. Now there are cer- tam problems that they have to face, because as you get more and more drugs, it becomes more and more difficult to devise simple names that don't conflict with other names, and that cannot be confused with them. But I would like to see generic names made as simple as pos- :smble. I see no reason for making them multisyllable or having lots of X's, Y's and Z's. I am always amused by the fact that X, Y and Z are rather rare letters in most languages, but when you come to generic names of drugs, I would say about 75 percent of all of them have either an X, Y or Z in them and some of them have all three. Zoxazolamine has two Z's and an X. Senator NELSON. This is your field. Is there a possibility for a phar- macologist to be familiar with all of the generic names? Dr. GARB, it is possible for a pharmacologist to be familiar with the generic names. I don't know if it is possible to pronounce them. Senator NELSON. So if we had to write it down on a prescription without looking up the spelling we couldn't do it in many cases; is that correct? I don't want to test anybody here. Dr. GARB. I think I would have some trouble. I think, however, that a physician who has a particular type of practice and who is only using say 40 or 50 drugs altogether would become familiar enough with them so that even with these spellings he could handle them. Senator NELSON. Go ahead. Dr. GARB. These names are difficult because of two considerations. First, most of them were invented by the drug manufacturers, who found it financially rewarding to make generic names hard to remem- ber, pronounce or write, so that physicians would be more likely to prescribe by private product name. Until 1962, the FDA did not have authority to specify simple, meaningful generic names. It now has that authority. The second reason is that the FDA has been slow about using its authority to simplify generic names, Senator NELSON. Are you referring to- Dr. GA1m~, The old names, Senator NELSON. The old names? Do they have the authority to go back now and establish simpler generic names than those that have already been adopted? Dr. GARB. I believe they have. I am not a legal expert. My under- standing of the law is that they do have that authority. If they don't, they should have. Senator NELSON. But they do have the authority to approve it- Dr. GARB. The new ones. Senator NELSON. The new ones. Does that sole authority rest with the FDA? Dr. GARB. Yes. They have a mandate now. Senator NELSON. Do they work in cooperation with any profes- sional groups? Dr. GARB. I believe they work in cooperation with the AMA and other groups because frequently they will take the USAN name and make it a generic name. I am sure there is a great deal of cooperation. Senator NELSON. I guess that is a question for the FDA when they come up here. PAGENO="0086" 524 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY Dr. GARB. Yes, sir. Senator NELSON. Thank you. Dr. GARB. The USAN nanie is a temporary drug name adopted by the AMA Council on Drugs, the Pharmacopeia Committee and the American Pharmaceutical Association. USAN means United States Adopted Name. It is used for new drugs before a generic or official name is selected. Often, the USAN later becomes the generic or official name. The term "brand name" apparently means different things to differ- ent people. In the classical sense, a brand is a name or device which identifies the manufacturer or other agency responsible for placing the product on the market. In most areas of commerce, the brand name is used as an adjective to modify the common name of the product. Some examples are: Florsheim-shoes, Eversharp-pens, Eveready- batteries, Heinz-ketchup, Heinz-vegetarian beans, Heinz-kidney beans, Heinz-vegetable soup, Campbell's-beans, Campbell's-vege- table soup, Campbell's-tomato soup, Libby-beans, Ann Page-- beans, and so forth. Note that the brand names above are the names of the manufac- turers. Other manufacturers chose to use devices rather than their own names as a brand. Examples are: Arm & Hammer-bicarbonate of soda, Bumble Bee-tuna fish. Sometimes, the product is natural, rather than manufactured, such as: Sunkist-oranges. This use of a brand name stems from old English common law and is specifically protected by congressional act. I want to make it clear that I am 100 percent in favor of this brand- name usage. I consider it to be helpful to the consumer and a major factor in encouraging manufacturer reliability. Let us take note of some of the features of this system, even though they may seem obvious. First, and most important, the brand name is almost always used with the common or official name. A person would be unlikely to ask a grocer for a "can of Heinz"-he would ask for Heinz vegetarian beans, or Heinz vegetable soup, and so forth. Therefore, the use of this kind of brand name does not in any way obscure, hide, or confuse the true nature of the product Second, this use of the brand name permits the consumer to compare prices in a rational manner. He or ~he realizes that there are differ- ences between Heinz beans, Campbell's beans, Ann Page beans, Libby beans, and others. However, the consumer also realizes that the prod- ucts are, nevertheless, basically similar. If the price difference is 1 cent per can, the consumer might decide and often does, that the flavor of one brand is worth the extra 1 cent, and purchases it. On the other hand, if one brand of beans sold for 19 cents per can, while another sold for 69 cents, few consumers would be willing to pay over three times as much. even if the more expensive bean tasted a little better. Mr. GORDON. May I interrupt here? Dr. GARB. Yes, sir. Mr. GolmoN. Now this wouldn't apply to drugs, would it? That is consumers can't flit from one- Senator NELSON. You cover that in your statement, I believe? PAGENO="0087" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 525 Dr. GARB. Yes, sir, as we go along. Thus the proper use of a brand name is fully consistent with the operations of;a free competitive market. Third, the proper use of the brand name helps the consumer choose new products. Let us imagine a consumer who has never eaten clam chowder, but who has eaten and enjoyed Campbell's tomato soup, vegetable soup, and other soups. That consumer, seeing a can of Campbell's clam chowder in a display would be more likely to buy it than to buy an unknown brand, because of previous satisfaction with Campbell's other soups. Fourth, by a similar mechanism, the proper use of a brand name is a stimulus to a manufacturer to keep his customers satisfied, and to keep all his products up to the highest standards. Fifth, this use of the brand name can be applied to mixtures as well as single products. Thus, vegetable soup is a mixture, and Campbell's vegetable soup and Heinz vegetable soup differ slightly in the kinds and proportions of vegetables included. Nevertheless, they are similar products and the similarity is evident to the consumer. Finally, the proper use of a brand name does not make it necessary for the consumer to memorize a large new vocabulary. Beans are called beans, not sneabs, nabes, anebs, ebans, hi-pros, or lo-cals. This is a point which is quite obvious in relation to foods, but not in relation to drugs. I will return to this point later. In the drug field, the proper use of the brand name involves exactly the same arrangement as the proper use in other areas-that is, the name of the manufacturer, plus the official or common name of the drug. Some examples are: Lilly-secobarbital, Armour-thyroid, Wyeth-meprobamate, Lederle-tetracycline. It is also permissible to reverse the names, as follows: secobarbital- Lilly, thyroid-Armour, and so forth. Let me reiterate that I am completely in favor of this sort of brand- name use for all products-drugs, beans, vegetable soup, tires, anything you want to name. Now we come to the private product name, which many people also call "brand name." I am using the term "private product" to distin- guish it from the classical brand name discussed before. The private product name is a noun which is substituted for the official, generic or common name, and which is the private property of the manufacturer who registers and uses it. Private product names are used primarily in the drug, detergent, and breakfast cereal indus- tries, although a few other industries also use them occasionally. Their use for detergents and breakfast cereals is not particularly objection- able. After all, it hardly makes much difference if a housewife knows the names of the active ingredients in Duz, Rinso, Cheer, Fab, Bold, All, Dash, and so forth, nor is it necessary that she know the name of the manufacturer. However, in the drug field, the use of private product names produces serious effects which work against the patient's best interests. Let us look at some private product names for drugs. Heie are some which are or have been in fairly common use: Achromycin, Seconal, Kynex, Miltown, Madribon, Equinal, Midicel. Obviously, these names do not indicate the identity of the manu- facturer or the nature of the active ingredient, unless you happen PAGENO="0088" 526 COMPETITIVE PROBLEMS I~ THE DRTJG INDUSTRY to have memorized what I consider to be a form of a code. Further- more, the relationships between the drugs is often obscured and confused-not deliberately, but by the operation of the system. For example, looking at this, how many people not knowing the system would realize that Kynex is the same thing as Midicel in terms of chemical nature? Well, if a patient has been taking Kynex and develops a drug reaction from it, he will probably develop the same reaction if he gets Midicel, since the activities of each are absolutely identicaL The patient may know that in the past, after taking Kynex, he became ill. And therefore, if he sees a prescription for Kynex he might say to the doctor: "This made me sick last time." However, if be goes to another physician and receives a prescription for Midi- cel, is he likely to realize that the two drugs are the same? The chances are not. Will the doctor? Sometimes, perhaps, but not always. And I should add that there is evidence in the record that this is the case. Senator NELSON. Just for clarification of the record, the list of seven drugs that you list on page 6 of your statement are not all the same generic drug. Dr. GARB. No, no, I have several groups there. Incidentally if I had a list of seven different kinds of beans you would know that they are all beans you see. Senator NELSON. I can see they weren't, but it doesn't appear clear from the statement. Dr. GA1u~. Kyne~ is the same as Midicel; Miltown is the same as Equanil; Madribon is related to Kynex and Midicel, but is not the same thing. If a doctor prescribes Achromycin for a patient with an infection and it doesn't help, might he switch to Tetracyn? Both are really tetracyline hydrochloride, and there are other private product names for the same medication. The use of these private product names prevents the operation of a free competitive market in drugs. Few if any physicians can keep up with all these names, let alone the prices of each product. Let us suppose that Equanil sold for 50 percent less than Miltown. A doctor accustomed to prescribing Miltown would be unlikely to change, if he did not know that Equanil was essentially the same thing, producing exactly the same result, but cheaper. I doubt if there are many physicians who know the composition of all the private product named drugs. In fact, I rather doubt if there are any physicians who know the composition of all those drugs. The confusion which results from the multiplicity of private product names has been mentioned by many, and is thoroughly documented in the record of the hearings of the Kefauvercommittee. Should this com- mittee wish, I will submit page citations. However, the evidence in the Kefauver hearings referred to happenings before 1961. The question PAGENO="0089" COMPETITIVE PRO]~LEMS IN THE DRUG INDUSTRY 527 before us now is whether there is still significant confusion about private product drug names. I believe that the answer is definitely af~ firmative, and to support my statement, I wish to offer a copy of an article by Doctors Aza~noff, Hunningliake, and Wortman entitled "Prescription Writing by Generic Name and Drug Cost," which ap- peared in the Journal of Chronic Disease, volume 19, pages 1253- 1256, 1966. Senator NELSON. The article will be received and will be printed in the record. Dr. GAIIB. Here is the article. (The article referred to follows:) PRESCRIPTION WRITING BY GENERIC NAME AND DRUG COST (Daniel L. Azarnoff,* Donald B. Hunninghaket and Jack Wortman, Depart- ments of Medicine and Pharmacology, University of Kansas Medical Center,. Kansas flty, Kansas, and St. Francis Hospital, Wichita, Kansas) When a problem reaches such stature that it becomes a subject for the cartoon- ist (Fig. 1), we can be assured that it is either a significant social or political issue or an absurdity. Many, many words have been written concerning whether drugs shold be prescribed by generic or brand name. A ~iariety of reasons can be offered for both. One factor frequently listed as a reason for prescribing by generic name is the lower cost of these preparations. There is little doubt that the wholesale cost of many drugs sold by generic name to pharmacists is lessL than the same drug sold under a trade name [1]. The real question, however, concerns the cost of the drug to the consumer and whether or not the decreased cost of a generic drug is passed on to him. In a recent popular book by Morton Mintz [2], it is categorically stated that the price of drugs when prescribed by generic name is cheaper than the same drugs by brand n!ame. This! investigation will show that for at least one drug the statement is true in a large midwestern city. METHOD A bona fide prescription for fifty tablets (400 mg) of Miltown® (meprobamate) was filled and purchased at 23 pharmacies. At least a week later, a prescription for a similar quantity of meprobamate was taken to the same stores by a different individual. If the source of the medication was not discernible by markIngs on the tablet, the pharmacist was asked for the name of the manufacturing pharma- ceutical company. In all instances, this information was made available. RESULTS The mean cost of Miltown at the 23 pharmacies was $4.94 while meprobatnate purchased by generic name was $3.88, a saving of 21 per cent (Table 1). The mean cost at pharmacies of two chain drug storeS was $4.49 and $4.40 when pre- scribed as Milto'wn and $2.93 and $3.22 when prescribed as meprobamate~ This represents a saving of 35 and 27 per cent respectively. At pharmacies composed only of prescription shops and other indiViduhily operated drug stores, the cost for each prescription was higher, although the saving on generic name prescrip- tions averaged 17 per cent. At 18 of the 23 pharmacies, a generic name product was dispensed when ordered in this manner. Of these, only one charged the higher price of a brand name product while be dispensed a generic name product. Of the remaining pharmacies, the brand name product~ were dispensed at their regular price in three and at a higher prk~e in two. *Burroughs Weilcome Scholar In Clinical Pharmacology. tUSPHS Fellow in Clinical Pharmacology. PAGENO="0090" 528 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY TABLE 1 Miltown Meprobamate Retail stores Price Source Price Chainstores A: 1 2 3 $5.75 3.83 4. 55 Davis-Edwards Wyeth Laboratories (Equanil) Davis-Edwards $2.55 3.83 2. 77 4 3.82 do 2.55 Chainstores B: 1 4.50 American Pharmaceuticals 2.90 2 4.25 do 2.90 3 4 4. 25 4.50 Wyeth Laboratories (Equanil) American Pharmaceuticals 4. 50 2.90 5 4.50 do 2.90 Individual pharmacies: 1 6.10 West-ward 4.90 2 5.50 do 3.65 3 4 5 6 4,40 4.35 4.20 4.00 Wyeth Laboratories (Equanil) $chein Riverton McKesson Laboratories 4.40 4.35 2.38 4.00 7 5. 75 West-ward 4. 25 8 9 5. 50 6. 50 Wyeth Laboratories (Equanil) McKesson Laboratories 5. 50 5. 25 10 6.00 do 4.35 11 6.35 Roder 6.35 12 13 14 6. 50 3.95 4. 50 McKesson Laboratories WolinsPharmacal Wallace Laboratories (Miltown) 4. 25 2.40 5. 50 Mean 4.94 Mean 3.88 DISCUSSION Since `meprobamate purchased by generic name is cheaper than the brand name product, the crux of the problem is whether the two are identical in therapeutic efficacy. Several examples have been reported [3-5] for other drugs which dem- onstrated that neither the United States Pharmacopei'a (USP), National Formu- lary standards, nor Food and Drug Administration regulations assure the thera- peutic equivalence of generically identical pharmaceutical products. The thera- peutic effect of `a drug preparation depends upon the compatibility, purity, solubility, particle size, vehicle, percentage of active ingredient, melting point, pH, allergic effeots, disintegration time, quality control, and effect of storage to name only a few of the factors involved. Although we did not analyze the tablets we purchased for meprobamate content, a survey reported in Medical Letter [1] showed that meprobaniate tablets from all ten companies checked `by them met USP standards for content. There can be little question of differences in the quality of the meprobamate powder itself in generic and brand name products since it is all prepared by a few manufacturers according to specifications of Oarter Wallace, the parent company of Wallace Laboratories. Although our study demonstrated that meprobamate could be purchased more cheaply by generic equivalent, this is admittedly a small survey and involves only one drug. In an editorial in the Rhode Island Medical Journal [6], a survey of the Division of Public Assistance ef that State is quoted as indicating that the saving from prescribing by generic name, where possible, in 10,000 prescrip- tions would be only 5 per cent. However, in a recent report to Congress, the U.S. Comptroller General indicated that if drugs for the welfare recipients of the State of Pennsylvania were prescribed by generic equivalent, the State could have saved $722,000 to $1,500,000 in fiscal year 1964. One factor against prescribing by generic name has been the complexity of `this name supposedly making even the organic chemist cringe. To some extent this has been true in the past. However, the nonproprietary nomenclature has been simplified and standardized by a committee composed of representatives of the lISP, National Formulary, and American Medical Association. The names adopted by this committee are designated as United States Adopted Names (USAN) [7]. The guiding principles of this committee are that the names should be distinctive in sound and spelling, `conveniently short, should indicate general pharmacological or therapeutic class, and the general chemical nature of the PAGENO="0091" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 529 compound. The implementation of these rules by the Kefauver-Harris bill of 1962 has done much to correct this difficulty for the prescribing physician. On too numerous occasions, we have seen patients simultaneously receiving a similar drug in two preparations of different brand name. Meprobamate, for example, can be prescribed by at least 33 different brand names either alone or in combination with a variety of other drugs.' Many of these names give no indi- cation of the active ingredients. It is most often when a combination of drugs is prescribed by a single brand name that the physician may lose sight of the various components and prescribe one of the ingredients again in a separate preparation. In addition, the increasing knowledge of the effects of drug inter- ~tctions makes it imperative for the physician to be acutely aware of all drugs the patient is receiving. We have noticed a similar difficulty particularly when antibiotics have been prescribed by brand name. Following an inadequate thera- peutic effect, the patient may be given another brand name antibiotic without the physician realizing the same antibiotic is being given. Although *~uch errors are not frequent, prescribing `by generic name would do much to stop these in- stances of poor `therapy. Therefore, we strongly recommend that all drugs be prescribed by generic name. In those instances where the physician feels a spe- cific company's product is best `for his patient, `the generic name of the drug should be followed by `the name of the company whose product he wishes. This appears to us to be a logical solution. After all, if a physician has determined that a specific manufacturer's product is best for his patient, he should at least know the name of the company. RETEnENOEs 1. Med. Lett. 7, 35, 1965. 2. MINTZ,: Therapeutic Nightmare. Houghton -Muffin, Boston, 1965. ~3. LEvY, G. and NELsoN, E.: United States Pharmacopela and National Formu- lary Standards, Food and Drug Administration Regulations, and the quality of drugs, N.Y. St. J. Med. 61, 400), 1961. 4. LEVY, U. and NELSON, E.: Pharmaceutical formulation and therapeutic effi- cacy, J. Am. Med. Ass. 177, 689, 1961. 5. WEnus, W. W. GROSSMAN, M. `THOM, J. V. SAX, J. CHAN, J. J. and DuFFY, M. P.: Drug contamination with diethyistilbestrol. New Engi, J. Med. 268, 411, 1963. 6. EDITORIAL: Chemical and generic vs. trade `names, Rhode' 1sT. Med. J. 44, 27, 1961. 7. JEROME, J. B.: Current status `of nonproprietary nomenclature for drugs, J. Am. Med. Ass. 185, 294; 1963. Dr. GARB. There is much of importance and interest in this article and I will return to it again. At this time, there are two statements that I wish to quote. (They use the term "brand name" to refer to what I have called "private product name." They are using it in the usual fashion.) These doctors say: On too numerous occasions, we have seen patients simultaneously receiving a similar drug in `two preparations of different brand name. They go on: We have noticed a similar difficulty particularly when antibiotics have been prescribed by brand name. Following an inadequate therapeutic effect, the patient may be given another brand name atitibiotic without the physician realizing the same antibiotic is being given. Although such errors are not frequent, prescribing by generic name would do much to stop' these instances' of poor therapy. Much of the public discussion of brand versus generic prescribing have assumed that there are only two basic ways to prescribe drugs. `Instead, there are three. Let us assume that a physician wishes to pre- `scribe a particular medication. One way would be to write: meprobamate. 1 Apascil, Atraxin, Biobamat, Calmiren, Cirpon, Cyrpon, Ecuanil, Equanli, Equanil LA, Harmonin, Mepantin, Mepavion, Meproleaf. Meprosin, Meprospan, Meprotabs, Miltown, ~ervonus, Neuramate, Oasil, Pamaco, Panediol, Perequll, Perquietil, Pertranquil, Placidon, Probamyl, Quanil, Quilate. Sedabamate, Sedasil, IJrbll, Viobamate. PAGENO="0092" 530 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY This is called generic, or official prescribing, and means that the pharmacist may dispense any manufacturer's make of meprobamate.. A second way would be to write: Eqiianil. This is called brand, or private product name prescribing and means that the pharmacist must dispense the product distributed by Wyeth. The third way, which I consider the best way would be to write: meproba.mate (Wyeth). The pharmacist would then dispense the Wyeth product. For at least 25 years, medical school facilities have been teaching and urging that prescriptions be written in this third way. Unfor- tunately, our recommendations have not been widely followed, and I believe that this lies at the root of most of the difficulties with drug prescriptions. On May 11 of this year, I participated in a dialog on drug marketing at the University of Missouri, sponsored by the American Marketing Association. It was a most valuable experience. One of the representatives of the pharmaceutical industry asked about the difference between prescribing Seconal or secobarbital (Lilly). Would the patient not receive the identical medication either way? My answer was "Certainly." Senator NELSON. Who makes Seconal? Dr. GARB. Lilly. Seconal is Lilly's brand of secobarbital, and my point was that if the physician wishes to have the patient receive Lilly secobarbital he should write Lilly secobarbital. So this gentleman commented, "Well, if the patient would receive the same medicine, no matter which of these two ways the prescription is written, why quibble over the way the prescription is written ?" And apparently many people think this point we have raised is a quibble, or some sort of ivory tower perfectionism that professors like to indulge in. It is neither-it is an issue of major importance, and I believe that we medical educators have been remiss in not explaining why. There- fore, I'd like to point out the importance of the proper prescribing method. To a large extent it is a matter of numbers. First, let us consider the number of drug names. Let's assume that there are 100 drug manufacturers, each making the same 50 drugs. If prescriptions are written in the meprobamate (Wyeth) fashion, the physician needs to know only 100 plus 50, or 150 names in order to prescribe any combination of any drug made by any company, and of course a physician can easily handle 150 names. However, if pre- scriptions are written by private prod~xct name, f~r example Equanil- the physician must know 100 times 50, or 5,000 names in order to pre- scribe any drug made by any company. Senator NELSON. Any drug made by any one of these 100. Dr. GARB. Right, any drug made by any of these 100: yes, sir. There are actually more than 100 manufacturers using private product names and more than 50 drugs. It was my understanding that the total num- ber of different names for prescribed drugs is today somewhat over 7,000. I heard a disturbing report that I may have underestimated this, but 7,000 is I think a serious enough problem. Senator NELSON. Are you saying there are 7,000 different drugs or 7,000 different brand names? PAGENO="0093" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 531 Dr. GAJm. There are more than 7,000 different private product names on the market today. Senator NELSON. How many different drugs are on the market today? Dr. GARB. This will depend on how you define a different drug really. In other words, do you want to consider sodium penicillin to be differ- ent than potassium pencillin? Depending on how you define your terms, I would say around 900, something in that range. Senator NELSON. We are talking about prescription drugs. Dr. GARB. Yes, sir. The average physician probably uses not more than 50 different dhemical entities. As I say, there are probably more than 7,000 different private product names on the market today, and there are somewhere between 500 and 600 changes per year. These changes may be additions, subtractions, or alterations. A manufacturer can change the name of a mixture that he has already on the market, or he may keep the name and change the mixture if he chooses to, or of course, he may develop a new drug or he may drop an old drug. Let's consider what's involved in trying to learn that many names, and their meaning. Since the words themselves are newly coined, they are the equivalent of a foreign language vocabulary. I consulted some of my colleagues in the language departments of the University of Missouri and asked how many new words a bright student was expected to learn per year. I was told that for French, Spanish, Rus- sian, and German, the range was 1,000 to 1,200 new words in terms of recognition, but less, in terms of full understanding. Thus, I estimate that, conservatively, the time, energy, and study needed by a doctor to learn 7,000 private product names would be equivalent to that needed for a student to obtain an "A" grade in more than 5 years of college French, Spanish, German, or Russian. If a doctor did take the time to do this, he would then find at the end of the 5 years, that 2,500 to 3,000 of the drug names had been changed. The fact is that doctors cannot possibly keep up with the flood of private product names, and this situation leads to poor medical prac- tice. It is not that the doctors are ignorant, it is not that the doctors don't want to know what is going on. The situation is simply that doctors are human beings, not computers and they have certain lim- itations, and they can't possibly learn this. Therefore they must com- promise. They learn a few names and they work with those few. Unfortunately, the names that they learn and work with are not always necessarily the best ones for the particular patient that they are treating, and the doctor just has no way of encompassing the total `amount of information needed in order to handle this. It is difficult enough to practice medicine with `all its complexities, without having the names of drugs `made so confusing that you can't keep up with "the field. I was here for part of `the testimony yesterday when Dr. Williams from `Emory University said that he had difficulty keeping up with all the names, and I will say that I have at least as much difficulty. I can't keep up with these names, although this is my job. It is just not feasible. Mr. GORDON. At present there are thousands of drug names. You mentioned 7,000.1 have heard a figure of 14,000. Dr. GARB. Which is much worse. PAGENO="0094" 532 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY Mr. GORDON. If we had a system of generic names, how many would the average practicing physician need to know to practice good medicine? Dr. GARB. Not more than 50. Mr. GORDON. Not more than 50? Dr. GAIn~. Not more than 50. Senator NELSON. I take it it would vary. Dr. GARD. It depends on his specialty. Senator NELSON. On the specialty of the physician? Dr. GARB. Yes, sir, it would depend on the specialty. Some physi- cians would get by with not more than 10 or 12, but somebody with a very busy practice might have to thoroughly understand about 50 generic names. There is a big difference between 50 and 7,000 or 14,000. Mr. GORDON. What do you mean by poor medical practice when the doctors cannot keep up with private product names? Dr. GARB. Well, I have mentioned two examples of these. One is prescribing two private product name drugs for the patient, not real- izirig that both of them contain the same active ingredient, or similar active ingredients, which will cause toxicity. Another one is starting a patient on a drug, finding that the drug is either toxic or ineffective, and then switching him to another drug,. not realizing it is the same thing. A third example is giving a patient a drug which is not the best possible one for that patient, because the doctor simply has to focus on something, and he may learn to use one particular antibiotic, and not realize that for one patient's infection, another antibiotic would' be better. Just keeping up with the private product names of all the antibi- otics on the market is too much, and therefore, the doctor uses what he knows, although it may not be the best one for a particular patient.~ I do not feel that this is the fault in any way of the doctor or the medi- cal profession. Doctors are having a very difficult time with the enormously complex problem of helping sick people, and this name situation is just making it harder. Senator NELSON. With respect to your statement that you don't think it is in any way the fault of the practicing physician or the medi- cal profession, I certainly don't see how the private practitioner could' solve the problem~ but doesn't the profession itself have more of ~t responsibility to do something about this than it has thus far as- sumed? Or has it assumed all the responsibility you think it should, in terms of clarifying this problem? Now we have had several witnesses of great distinction in addition to yourself who have made exactly the same point, that there is no way for physicians to learn all these names; that as a consequence of this, there is bad medical practice occurring that shouldn't occur; that there is overmedication; that there is duplication of the same drug, unknowingly to the doctor; that the doctor prescribes a drug and there is an adverse reaction and then he prescribes another one, because he doesn't know it is the same composition, and you get a bad result. Doesn't the medical profession have some responsibility to be vigorw ously pursuing the solution, and if it is, have you heard anything about~ it? I certainly have not. PAGENO="0095" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 533 Dr. GARB. Well, sir, I would have to answer you in this way. Those of us who are coming here to testify about this are largely members of the medical profession who have looked into this, and we feel that we are discharging our responsibility by doing so. Furthermore, I will say that many of us have been working in this field, studying it and trying to be heard for long years before the Congress took interest in it. So I don't think it would be fair to try to place the burden for the situation on the medical profession. In fact, in the record which I submitted for the Kefauver hear- ings, was a statement made in 1902 by Sir William Osler, in which he said virtually what we have been saying here in this testimony. My feeling is that a large part of the responsibility for this does not lie with the medical profession because we are fundamentally powerless. Senator NELSON. Pardon? Dr. GARB. I say the medical profession is fundamentally powerless to handle the problem as it stands today. Senator NELSON. When you say the medical profession, are you talk- ing about the profession as a whole or individual members of the profession? Are you saying the AMA, for example, is powerless to do anything about this? Dr. GARB. Well, in terms of the AMA perhaps the word powerless is too strong, but I would say it has very little power in this area, if any. Senator NELSON. In terms of education of the physician, for ex- ample? Dr. GARB. Yes, in terms of the education of the physician too it has very little power. It is I think, doing a good job as it can with the facilities and funds available to it, but you see, in my view, this is not primarily a matter of the education of the physician. There are prob- lems in terms of the medical school and the continuing postgraduate education of the physician, but this is not what I am directing my testimony toward, at this moment. I believe that the fundamental problem which exists is a matter for Congress and the courts, because this misuse, as I call it, of the brand name privilege is a situation which came about because of a series of judicial decisions which extended the meaning of laws. This goes back to the Upton case in 1869, and to the best of my knowledge, Congress has never given a monopoly in law to any company to use a coined name, a noun, as a private product name. Congress has given a monopoly in the use of a copyright name which identifies the manufacturer, but starting back in 1869, the courts have extended by interpretation the monopoly that is vested in a private product name, and I think this is the problem, and I don't think the medical profession has any power to handle this other than to come before Senate and House committees, as we are doing, and asking that this situation be remedied. Senator NELSON. Yesterday, Dr. Williams of Emory TJniversity, testified along similar lines to what you have been saying. He pointed out that the American Medical Association did what he thought was a splendid job in this field of identifying drugs, informing the phy- sician about their effect some 15 years ago, and that it was his judg- ment that it was beyond its capacity now, because of the great multi- PAGENO="0096" 534 CoMPETITIVE PROBLEMS IN THE DRUG INDUSTRY plicity of drugs that have come onto the market. Is that what you are saying about the lack of the power of the AMA? Dr. GARB. No, sir. Senator NELSON. I think I am quoting him roughly correctly. Dr. GARB. Yes, I heard that part of his testimony, Senator. I would say that I agree with him in part. I think that the AMA could prob- ably do more than it is doing, but I think we could say this about any- body or any group. However, I don't think that `the AMA has the power or ever had the power to recitify the present situation in relation to these brand names. Senator NELSON. I wasn't really referring to that. I was referring to the fact of furnishing information to doctors. Dr. GARB. The AMA is doing a good job on that. They have been improving considerably over the last few years. They now have a fea- ture which I find most helpful, a short one or two page summary of new drugs as they come out, I think they are' probably doing as much as they can do in this particular area. Senator NELSON. You were here yesterday during Dr. Dr. GARB. During most of Dr. Williams' testimony. Senator NELSON. He spoke also about the tremendous dimensions of the problem, and again his testimony speaks for itself so I hope my paraphrasing doesn't distort it. But to summarize what I understood him to say, he thought that the Government, through various ways, should test drugs, to do it by contracting, but in any event, it could test the drugs chemically. It could contract for clinical tests in addi- tion to the chemical evaluation of the drugs. That it could out of all of this prepare what in effect would be a national compendium I sup- pose, which listed all the drugs generic and trade name, and listed the side effects and composition and the use of the drug, and as I un- derstood him to say, he thought that was an absolutely necessary thing to do, that it would cost a considerable amount but it was necessary to do for the good practice of good medicine, and that it ought to be done, and that he thought the Government was the only one that could do it. Now I think I have roughly summarized it. Dr. GARB. This was my impression of his testimony also. Senator NELSON. Do you agree with that? Dr. GARB. 100 percent, absolutely. Senator NELSON. Thank you. Senator HATFIELD. I would like to pursue with you this thought for a moment. If I understand you correctly, you do agree with Dr. Wil- liams and others who have testified that there has been on the part of some physicians misprescribing and ill effects that have come out of that. It could be classified as lack of understanding on the part of the physician, ignorance and other such matters relating to certain drugs. You also testified I believe today that you are a counsel, you are a consultant to the AMA. Dr. GARB. Consultant. Senator HATFIELD. I understand also from your testimony today that you feel that this is a problem that is far too large and complex f or the profession alone to handle. Dr. GARB. It is not simply that it is large or complex, Senator. I don't think that a private organization of, citizens has the power to PAGENO="0097" COMPETITIVE P~tOBLEMS rN~ `rilE DRUG INDUSTRY 535 change laws. That is the point. I think that the problem here lies in the way the law has been interpreted by the courts, and I think that this has tobe corrected first. Senator HATFIELD. But don't you a~gree that there are professional responsibilities Dr. GAIIIi. Yes, sir. Senator HATFIELD. In helping to find a satisfactory change in that law. Dr. GARB. Yes, sir. Senator HATFIELD. If this be so then, why has not the American Medical Association indicated some interest by appearing before this committee or indicating involvement of their profession in seeking the proper solution to this? Dr. GAIU3. Well, I don't think I ought to try to interpret motivations of other people, Senator. I don't know why the AMA does a lot of the things that it does. I am a member of the AMA, but I am just one member, and I don't form their policy. I think this is a question which they ought to answer directly. I wouldn't want to guess as to why they do or do not do certain things. Senator HATFIELD. What is your particular area of counsel in the area of pharmacology? Dr. GARB. Sulfonamide drugs. Senator HATFIELD. Have you counseled the AMA along this line, in your role as a consultant? Dr. GARB. Yes. What they do is this. They prepare a book which comes out every year on new drugs, and this is a very useful book for the physician, telling him about the characteristics of new drugs, and so forth. In preparing it, they take the information which is submitted by the manufacturer and they mail it to various consultants in the country, and they ask us to read it over and make comments. Do w~ think the information is clear? Do we think that the information holds together? Is it consistent with what we know about the group of drugs as a whole, and so on? For example, I got a stack of literature about that thick on some new sulfonamide drugs and I sent back a list of comments that I be- lieved that the manufacturer's claim was not substantiated for various reasons, and so on. But the area-and there are many consultants for the AMA council on drugs-the area in which we are consultants is the technical one, not policymaking. Nobody has ever asked me about policies, and I have never discussed policy with any official of the AMA. I have no way of knowing why they make the decisions that they do. Senator HATFIELD. Do you think it would be helpful to this com- mittee to have the counsel of the AMA on this problem? Dr. GARB. I certainly do, sir, and I think- Senator HATFIELD. Do you think it would be in keeping with the standard, or rather, the objective of improving standards of practice that the AMA has as part of its responsibility that it should be here and represented here in these hearings? Dr. GARB. I had assumed that they were going to be here. Senator NELSON. They will be. The AMA representatives will be here. We have been discussing it with them. 81-280-pt. 2-67-7 PAGENO="0098" 536 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY Dr. GARB. I think probably he will be able to answer your questions much better than I could possibly guess at the answers. Senator HATFIELD. The point that I would like to make very clear though .in m.y own thinking this morning with you, Doctor, is that you have stated these matters to us and other doctors have likewise as in- dividuals, as individual practicing physicians or teaching physicians. I am concerned that, from the professional viewpoint or from the viewpoint of the' profession itself, we get the fullest and complete counsel. I think it is very important to have your views as individ- uals-you have been most helpful-~-but I should believe and hope that the profession would assume more responsibility than you indicated that you think the profession has thus far assumed in this problem.. I cannot agree with you that the profession, eveil though technically it may not be empowered as a private association to act upon the problem, I believe that from a professional viewpoint, the profession should be intimately involved in all this, because it does involve the profession and its practice and its relationship to its patients and all the other things that go with professional life, and I would feel that the profession should be the first in line to initiate action, to counsel action, especially where it does not feel it is empowered to act, rather than standing off and asking to be invited. Dr. GARB. Well, sir, I can understand your point of view, but I am afrtud I can't quite agree with it, knowing how busy doctors are, how they practice, how they relate to their various associations, `and so on. Sen.ator HATFIELD. But they were much in evidence in the hails of Congress during the medicare program and debate. They weren't reticent then to not appear here in these hails, so I am told. I wasn't here at the time. Dr. GARB. Well, this is something which I think they had better ex- plain themselves. In this area, in the drug area, there are so many complexities that I rather doubt whether the average practicing physi- cian can keep up with them. It is becoming almost `a full-time job just to keep up witl~i the names, and realistically, I don't see how a democratically elected professional association can do very much~ as an association, in an area of this sort. It seems to me it has to rest on individuals coming and testifying as individuals. I just can't see any other way of doing it. Senator HATFIELD. I couldn't disagree with you more, and for this reason. Let me say it as a former professional person, as one in a pro- fession. I think that when a profession recognizes a specific problem relating to its practice and its profession, and recognizes its own inad- equacies or constrictions on its actions, it should take the initiative to move some way to solve that problem and to take the action to incorporate into the format those agencies that can be helpful t.o it. You see the situation as it appears today to much of the public is that a committee of the U.S. Congress has intervened or has invaded or has injected itself into a professional matter. I think that this is unfortunate, because many times Government will tend to do this without any encouragement. On the other hand, there are many times when Government must do this because of the inaction of either the profession it~e1f or that part of our society which should have taken action or should at least have raised the issue and asked for the cooperation and the partnership action of Government. In this in- PAGENO="0099" COMEETITIVE PROBLEMS IN TEE DRUG INDUSTRY 537 stance, you as physicians have come before us and you have told us that there have been inadequacies in your profession, you 1~ave told us there have been dangers to the people, to the patients because of these inadequacies, and because of this ignprance in the prqfession, and yet the profession has not dc~ne anything to my kn~w1~dge to try to correct this on' a major base nOr has it invited Government to help. We have initiat~d the action, and then in some ins,tanees~some of these professional people come in~ here and criticize our chairman or other members of this committee or Government in general for having injected itself into a professional problem. You see it creates the confusion and the difficulty that does not give, real aid to solving the problem with the professional counsel and the professional partnership role that I would like to see. Dr. GARB. I see your point, Senator. First of all; I do not think any- body could conceivably be justified in considering these hearings or any of the congressional activities relating to drugs as, invasions of a professional prerogative. To me this is an absolutely necessary thing which the Government, must do to protect the health of the people. I think perhaps the area in which we may be seeming to disagree is not really disagreement. You have used the term profession when I suspect you probably mean professional association. To me the medical profession consists of the doctors of medicine, whereas I think, you are using the term to refer to the official professional association of those doctors, and I distinguish between the two. You are speaking, I think, of the AMA, are you not ~ Senator HATFIELD. Well, I would not restrict my comments merely to the AMA, but I believe that where you have a professional society or a professional organization which has a large staff or at least has a' staff to research problems and expresses the thinking of the individual doctors through composite action, that this can be used interchange~ ably, because I know that many physicians do expect their views to be expressed through their professional association. Dr. GARB. Well, in this area it would be difficult, not impossible, but very difficult to determine what a consensus of opinion of the prac- ticing physicians in the country would be. I don't think, for example, that I would have any right to say that I am speaking for anyone other than myself, and people whom I know agree with me. I doubt very much if the average practicing physician has had the time or the opportunity to look into this problem to the extent that those of us who are professors have had, and in a democratically elected: organization you have to go by what the majority are concerned with~ So I don't feel that I have any right even to make guesses as to why the association or any other group of physicians do or do not do ce'r-~ tam things. I think that they ought to explain that for themse1ves..~ Senator HATFIELD. I don't want to press the point too far, but let me just say as a former Governor I recall many times when we had problems that confronted us at a State level that involved the medical profession, and we had every reason to expect and we did. receive counsel from the medical profession acting through its own societies, and we gained their cooperation. We had their active role participating in solving these problems, and I came to expect this because they performed, always performed~ PAGENO="0100" 538 COMPETITIVE rROBLEMS IN THE DRUG INDUSTRY in a most notable and credible way, and I am just concerned that we work with them. I am not here criticizing the doctors. I have great faith in them. I only want to see an active role on the part of the profession, acting through any channel or mode that it wishes to act through, both as individuals as you have appeared here, but also as a profession, because we need their counsel and we must have it, and I think they should be just as concerned about this problem as we who are political officials are concerned. In fact, they should be the first to be concerned, because they are most intimately involved and most technically qualified to counsel on this problem. That is my point. Dr. GARB. Well, I hope it turns out that way. Senator HATFIELD. You sound Very, very encouraging this morning. Dr. `G~uu~. But again I would just have to wait and see what they say. Senator H~r1~'IELn. All right. Thank you. Senator NELsoN. I would like to interject for just a moment. We have had here, as you well know, in addition to yourself, a number of very distinguished authorities in the field of pharmacology and clinical medicine. They have all, without any exception that I recall, generally stated that there is great confusion in this field, that something ought to be done about it, and that it is a very serious matter. I would like to say first that I am inclined to agree with Dr. Wil- liams' testimony yesterday, and your endorsement of it, that it is a problem that needs to be dealt with at some central level. I don't think, for example, that it is a problem you can blame the drug industry for. I am told there are a thousand or two who manufacture, at least several hundreds competing with each other, and under the law they have got to add some name to their drug. That is their responsibility, so there isn't any way for an individual company, and it is unrealistic to expect, the group to get together and settle this problem. In fact, they don't have the legal power to settle it. Fifty of them might agree on what the answer ought to be `and then you would have 50 competi- tors who wouldn't agree and the confusion continues. So I think that is the nature of the problem, and that is the reason for these hearings. It needs a careful evaluation. We need the best testimony of all the people who are involved, the medical profession individually and as an organization, the drug companies, the phar- macists, the retail druggists, independent professors and teachers in the field and that is what this hearing aims to do: to get the best information we can from all of `these people. I think I should clarif y one point. The AMA. as such or any profes- sional group related to the AMA, has not asked to testify. Whether it would be appropriate at this stage or not I am not prepared to say, but none of them has asked to testify. I may have interjected a con- fusing note when I said we were discussing it. What has happened is that Dr. Annis, former president of the AMA, wrote a letter to his Senator in which he said that he wanted to testify. This was as an individual. We weren't prepared to put him on forthwith as he desired because of our schedule. I was advised yesterday that he has now said he would come as a representative of the AMA. I guess he is on the board. So that is the only note I have received from them. It was after Dr. Annis requested to appear as a PAGENO="0101" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 539 private individual and he subsequently said-he didn't tell me, he told a staff member of one of the Senators-that he would appear then as a spokesman and representative of the AMA. Of course, at some stage he will be scheduled. However, on the point you made about the responsibility of the organizations, Dr. Thomas Hayes is secretary of the Council of Drugs of the AMA. The AMA has over the years, I believe I am correct, been one of the `advisory groups to the Pharmacopeia, and they furnish the professionals who spend the time to decide what drugs should be approved for inclusion in the Pharmacopeia. So I think if they are prepared to do that, they ought to' be pre- pared to give advice on what ought to be done about this very difficult and confusing problem, and I assume that perhaps they are. Cer- tainly we will request that the head of the Council on Drugs and anybody else that AMA wishes to send to appear and give us the benefit of their knowledge which I am sure is considerable. Dr. GARB. I hope that this will be helpful to you. I would want to make a distinction between general advise which of course the Council of Drugs or any other person or group could give ji4st in answer to a question, and the kind of advice they have been giving the Pharma- copeia Committee is largely in the nature of technical advice. Senator NELSON. We have a rollcaJl and we will recess. If some- thing doesn't follow immediately we should be back in 15 minutes. (Recess.) Senator NELSON. We will resume the testimony of Dr. Garb. There will be another rollcall within the next 30 minutes. At that time we will recess for lunch. Hopefully, we will be able to finish Dr. Garb's testimony so we will not have to hold him over. Go ahead. Dr. GARB. Let us return to the three ways of prescribing. The proper way-a combination of generic and manufacturer's name would, of course, be the best. If, however, I am asked to choose between the other two-simple generic prescribing or private product name prescribing, I must choose generic prescribing as being the lesser of two evils. I am quite familiar with the drawbacks, real and imaginary, to generic prescribing. I have heard that generic-name drugs are some- times made in bathtubs, garages, and basements. Senator NELSON. Is it not true that you could add a trade name to that? Dr. GARB. Yes, sir; and it is quite true that if generic-name drugs are made in bathtubs, garages, and basements, so may private product name drugs be made in the same places. Senator NELSON. I just wanted to make the point very briefly that the witnesses come here and they make all the arguments that are made about generic drugs and they fail to say every `single argument can be applied to a brand-name drug. Dr. GARB. This is absolutely true, sir. I am not saying that the drugs are made there. I am saying that I have heard claims that they are. I am not a judge of the accuracy of the claims. If this is still so and if these claims are correct, then the FDA has the power to correct it and should do so promptly. I have heard that generic drugs are not subject to the same quality controls as private product nawe drugs, and that generic drugs are of erratic potency and sometimes pass through the patient without being absorbed. PAGENO="0102" 540 COMP~TITIVE PROBLEMS IN THE 1~UG INDI~STRY Senator NEI~soN. May I Interrupt again for a rnom~nt. it is correct, is it not, that many of the major; perhaps ~til of the ~major drug manufacturers make generic drugs too? Dr. GARB. To the best of my knowledge, it is'correct for most of them. `I do not know about all of them. In fact, many of them make the drugs in bulk lob, and then sell them' to small packagers. Senator NELSON. I just want to point out that this criticism of generic drugs, I suppose, goes across the board. I do not quite accept the critic- ism, but if it does, it goes across the board for little generics, big generics- Dr. GARB. Yes, it certainly does. Any criticism that applies to generic drugs could be just as- Senator NELSON. Or to put it another way, if the quality control is not of a high standard it does not make any difference whether it is a generic or trade name drug or a big company or a little company, the result is exactly the same? Dr. GARB. ~xactly. I cannot judge the truth of these accusations which have been leveled at generic-name drugs. However, since a doubt has been raised about the purity and potency of generic drugs, that doubt should be settled at once. After all, many patient's today are receiving generic drugs. They are entitled to a wholesome, pure, effective and safe product. There is ab- solutely no excuse f-or having anything else on the market. The solution is inspection-not inspection 1 day out of every 2 years, which is the current approximate rate, but continuous inspection every day. Senator NELSON. I assume that if you had adequate inspection, what- ever that consists of, that that would be beneficial not only to the user of the drug, but to those manufacturers who had adopted the highest quality and most sophisticated standards, would it not? Dr. GARB. Absolutely, sir. I would say that I would look with suspicion on any manufacturer who was reluctant to have his product or his factory under continuous inspection. Here is a label from a can of Ken-L Ration dog food, and there is a statement saying "Packed under continuous inspection of U.S. De- partment of Agriculture," I would like to submit this as a piece of evidence. (The label referred to follows:) PAGENO="0103" Vary your dog's diet by feeding all 4 kinds of nu- tritionally b~janced Ken-L Ration . . . it's Govern- ment Inspected. Feed hearty Hash- savory Liver Flavor-suc- culent Stew-and deli- cious Regular Ken-L Ration. These 4 tasty vaneties keep dogs eating well and in top condition. 0 0 rfi 4 4 KINDS OF I~rt~M~I IL~~ KENHI RATION REGULAR LIVER FLAVOR STEW HASH HOW TO FEED: Feed Ken-L Ration (all four varieties) according vto age, size and activity of your dog. A mature 20 pousd doçj requires about 1 can to 1~4 cans daily. Feed at room temperature. WE GUARANTEE: Y0~J~ ~0~EYBACK WITH ~~iLE1F ~0UARE N~T~ATIS1i~D MEalv THE QUMER OATS CO,(HICAGQ, l~L. I. PAGENO="0104" 542 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY Dr. GARB. Seven years ago I asked why we could not have the same safeguards for drugs that we have for dog food. Thus far, I~have not received a satisfactory reply. Some drug company officers with whom I have discussed this problem have told me that inspecting drugs is much more complex and expensive than inspecting dog food. I am sure they are right. However, many companies today say that they have superior quality control inspections of their products. If a drug company can make such inspections, why can't the U.S. Government? I have also been told that the cost of continuous inspection would be astronomical. I cannot see why. Most drugs which are produced in this country today are being inspected by inspectors hired and paid by the manufacturers, and the costs are included in the price of the drugs. If we had continuous Government inspection, the costs should not increase, although they might come from a different pocket. But in the long run, the cost of inspection would still be paid by the person who uses the drugs. I am convinced that there is no place for any kind of substandard drugs, no matter how they are named, anywhere in America, and I hope that prompt steps will be taken to eliminate this prdblem. I think that we ought not have any patients harmed by substandard drugs, and I think we ought not have any patients or any doctors with any mis- givings or anxieties about whether the drug they are getting is a purer potent, wholesome drug or not. When we sit down to eat some meat, we do not start to worry about whether the meat is wholesome or not. If it has been inspected, we are sure it is. I think we ought to have the same safeguard for drugs. Indeed, we ought to have more safeguards for drugs. The patient who is sick is a worried person. He ought not have the added worry about whether the drug he is getting is pure, wholesome, potent, and effective. He ought to be sure of it, and it seems to me that inspection, continuous Government inspection, the same kind that we have fordog food is the `sort of .thing that we need. I have also been told that preparations of the same drug may differ in more than 20 ways, and that the physician is the person who can best judge which preparation is best for his patient. There is an element of truth in this assertion, but it is greatly exaggerated. If a physician prescribes digitalis leaf, it is advisable not to change brands except by plan. This is one of the areas in which there is an element of truth. Also, about 10 years ago, one manufacturer, Wyeth, marketed a preparation of Salk polio vaccine which had no detectable penicillin in it. Other preparations of the vaccine contained penicillin, and therefore were dangerous for patients with a penicillin allergy. Under those circumstances, it is perfectly proper for the doctor to prescribe a particular manufacturer's product, and it is conceivable that such situations could arise again. Senator HATFIELD. Senator Nelson, on this point that you are mak- lug now relating to the need for continuous inspection, and you use the corollary in the food field of dog food or food for human con- sumption, will this get to the problem of potency and efficacy, or will this be more in the line of purity and safety? Dr. GARB. Purity, wholesomeness, and cleanliness. PAGENO="0105" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 543 Senator HATFIELD. Yes. Dr. GARB. And potency in terms of active ingredient being what at is supposed to be. Senator HATFIELD. Labeling? Dr. GARB. Yes, not necessarily in terms of therapeutic potency. Senator HATFIELD. No. Dr. GARB. Questions of therapeutic potency will require another approach. Senator HATFIELD. Do we have evidence or do you have evidence or any knowledge of drugs th~it have been used and have created illness or other ill effects due to the improper handling in the manufacturing of such drugs related to purity or cleanliness or wholesomeness? Dr. GARB. Oh, yes. Recently many batches of drugs were recalled because they were contaminated with penicillin in the manufacture. That is, the machines making the tablets or vials had been used for penicillin and there were residues of penicillin around and they got into other medications. Also, there have been recalls because small amounts of hormones got mixed in with other drugs. This is a common problem. You see, here is another problem that comes up, Senator. When we hear about a recall of a drug, we have to remember that that drug was probably not recalled until a large number of patients had already taken it. Senator HATFIELD. They had evidence? Dr. GARB. Sure. Senator HATFIELD. That there was some ill effect? Dr. GARB. It reminds me of a joke that we had as children. "What is worse than biting into an apple and seeing a worm?" The answer is "biting into an apple and seeing half `a worm." I think the worst thing for a patient is to have taken a drug and then hear that that drug has been recalled, and then have to worry about what has happened to him. Senator HATFIELD. Do I understand you then to say that manufac- turers do not have sufficient quality control programs within their own structures? Dr. GARB. Some do and some do not, but I have no way of knowing which do and which do not. Senator HATFIELD. You have no way to identify except by the evi- `dence of those manufacturers which have had to recall certain drugs? Dr. GARB. Yes, but unfortunately, even the biggest and the best manufacturers have had drugs recalled, so this leaves me without clear-cut guidelines. Senator HATFIELD. Do you know of any of them who have had to recall their drugs who have had quality control within their ~organization? Dr. GARB. Yes, sir. Senator HATFIELD. In other words, their quality control program did not prevent such drugs reaching the market? Dr. GARB. That is correct, sir. Senator HATFIELD. Was this an inadequate quality control of the human factor, or if Government had been in the picture on con- tinuous inspection, would it possibly have been prevented? Dr. GARB. This is a little difficult to answer. I do not know if it would have been prevented by Government inspection or not. PAGENO="0106" 544 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY Some of these things probably would have been prevented and others probably would not. I do not think I could make a generaliza- tion there. Senator HATFIELD. I think to be fair, as you know, we have had instances where certain food products have created ill effects upon the user, and they have been taken off the market, and in such in- stances there has been a quality control program on the part of the manufacturer, and there has been also in some of these same instances governmental inspection. But it slipped by both, so to speak, and so that we do not really have a complete blanket guarantee on that. Would you feel that by requiring a quality control program, it would receive the approval of FDA or some other agency of Government, it would be part of the private manufacturer's own organization, and that .tl~at would be sufficient? Dr. GARB. I would not worry about who actually paid for it or how it was arranged as long as I was sure that there was some reason- able quality control. Now, nothing is perfect, and I realize that things do slip by, and I do not want to leave the impression that I believe we have a lot of bad drugs on the market. I do not know. My point is that I do not kuow and I do not see how any physician can possibly know what percentage of the drugs on the market are perfectly pure and satisfactQry and what percentage are not. There has been a challenge raised. The challenge has been raised to the effect that there are some small manufacturers who do not do a good job. I just want to be sure that no member of my family and no patient that I have anything to do with ever gets these. Well, how d~ I make sure? There is no way we can do this in the absence of some kind of quality control. Now, I am not an expert on the mechanics of quality control inspection. I would simply take the word of somebody who is. Senator HATFIELD. flut you are not recommending that it specifi- cally must be a governmental type of quality control supervision or involvement? Dr. GARB. No, I am not recommending that specifically. It could be arranged with a Government inspector in the plant or it could be arranged with an inspector whom the Government approves or it could be arranged any other way. I do not know enough about the details of quality control to make a recommendation as to the exact way it should be done. But I would like to have stamped on every bottle or box of medication the same sort of thing that is stamped on the cans of dog food. Senator HATFIELD. Continuous Government inspection? Dr. GARB. Yes, sir, it is Government inspection, but as I understand it, the meat companies pay for that service by the Government. Senator HATFIELD. What about the Good Housekeeping stamp of approval; would that be helpful, do you think, that type of thing? I am not being facetious here. Dr. GARB. No, sir, it is a very sensible point actually. I would not accept the Good Housekeeping seal of approval. Senator HATFIELD. This is merely an example. Dr. GARB. Yes, but I would accept the AMA seal of approval. PAGENO="0107" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 545 Senator HATFIELD. Aha, we are back to the AMA again. Dr. GARB. We are back to the AMA again. Now, unfortunately, the AMA gave up its seal of approval programS years ago, which I think was a dreadful mistake. Senator HATFIELD. That is what I am trying to get at, Doctor. It seems to me that we have to get a believable- Dr. GARB. Exactly. Senator HATFIELD. A believable stamp of approval. Dr. GARB. Yes, sir. Senator HATFIELD. And to me the word "Government" in itself does not necessarily answer all these problems. Dr. GARB. I like that word "belieVable." I think that is a fine word and I like it very much. Most of the time, however, the differences between drugs of different manufacturers are not apparent, or are trivial. For example, what are the differences between Miltown, Equanil, and meprobamate sold by McKesson? If there are differences, how does the doctor find out about them? They are not described in the medical journals, in medical textbooks, or in PDR. How does the doctor decide which of these preparations is `best for his patient? What I am getting at here is that we are told that one drug may be put up in a somewhat different size of granule, that it may have more sugar in it than another drug, that it may be ground up a little differently, et cetera, and that only the physician can tell which of these drugs is best `for his `patient. Well, I have heard this argument now for about 7 or 8 years, and so I began to wonder about it, and I have asked the question, how does the physician find out, and I have not been able to find out any way. There is no way to find out, unless perhaps if you write to the com- pany's main offices directly. I have here, for example, a series of the package stuffers that `are used for drugs. These are supposed to contain all the pertinent information about the drugs. These are supposed to be `the most complete thing which the doctor gets, more complete than any ad, for example. I have here the one for Miltown and for Equanil, `both of which are mepro'bamate. They do not tell you anything a'bou't which pill has more sugar in it or which pill has different size granules Or anything else, and in fact I have a whole stack of these package stuffers, and none of them tell you this. So I do not see how this argument can apply. It seems to me that if any group of drug manufacturers wish to use the argument that their brand name drugs are better because of certain differences, and that the doctor knows what these differences are, they should show how the doctor finds out these differences. They should be required to put those differences in writing in these package stuffers. I have some of these here, if any'bo'dy would like to check them. Senator NELSON. The trade association claims there are 20 to 30 ways in which one drug is different from another. Is it not likely' that in whatever ways they differ, if they meet Pharmacopeia sthndards, the difference does not really make very much difference? Dr. GARB. I think the differences are trivial, but my point is I do not know that they are trivial, because I cannot find out what they are. I have never been able to find out what the difference is between one brand of the drug and another brand of the drug. PAGENO="0108" 546 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY Senator NELSON. Then if you cannot find out and have made a con- scientious effort, can you tell us how a busy practicing physician can find out? Dr. GARB. I do not know. Perhaps he `can find out if he writes to the home office of the company and asks them, maybe they will tell him. Senator HATFIELD. A trade secret? Dr. GARB. I think it may be a trade secret in some cases actually, but I am not familiar enough with manufacturing pro'cesses to tell. All I know is that none of these package stuffers have ever told me what percentage of sugar is involved or what kind of sugar they use as the excipient to bind the active ingredients in the pill or anything else. Senator NELSON. And whether it makes any difference? Dr. GARB. I do not think it could make much difference, because af- ter all, how much sugar can you get in a little pill? I do not think it could make much difference, but I would not want to say definitely that it does not, since I `cannot find out what it is in the first place. Senator NELSON. The U.S. Pharma'copeia lists several hundred drugs, all of which have been on the market for their various physi- cians, pharmacists and pharmacologists to decide that it is a drug of therapeutic value. Then they establish in the Pharma'copeia stand- ards for that drug to meet, whether it is a generic, one of a dozen trade names, and then they stand behind that as certain that there is not any difference, that the therapeutic `clinical result is the same, that the differences are of such insignificance that you can use them all. Dr. GARB. I see no reason to question the U.S. Pharma'copeia's state- ment on this at all. I would say that the burden of proof should rest on anybody who wishes to disagree with their statement. Senator'NELSON. Thank you. Dr. GARB. I have also been told that with generic prescribing, the decision on which manufacturer's product to use is left to the pharma- cist, and that the pharmacist may choose an inferior product. I can- not understand why a pharmacist should be `considered less competent or less reliable than a physician in terms of choosing reputable manu- facturers and good products. I had understood that pharmacists were the best trained persons in this field. In this connection, I would like to quote an editorial by George P. Provost in the American Journal of Hospital Pharmacy, volume 24, March 1967, page 103. He says: To `clai~n that pharmacist's are not capaible of selecting quality brands i's to imply that physicians know more about pharmacy than do p'ha'rmacislls and that pharmacists have gone to s~hoo1 5 years for na'u~ht. Traditionally, pharmacists have compounded prescription medications an'd have dispensed generic `prescrip- tions for codeine, phenobarbital, digitalis, and many other drug products. The inferen'ce that the ancient and honore~l profe~sion of pharmacy now `has `so many unethical or incompetent practitioners that it cannot be relied upon is indeed disturbing. And here is a copy of this editorial. PAGENO="0109" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 547 (The editorial referred to follows:) [From the American Journal of Hospital Pharmacy, vol. 24, March 196fl THE AMA AND GENERIC PRESCRIBING (By George P. Provost) The House of Delegates of the American Medical Association, at its meeting In Las Vegas, November 28-30, 1966, reaffirmed AMA's policy that physicans should be free to use either generic or brand names in prescribing and encouraged physi- clans to supplement medical judgment with cost considerations in making this choice. The action was taken as a result of a recommendation by the AMA Board of Trustees, whose report stated: "The issue of cost is not simply a matter of prescribing drugs generically as opposed to brand name prescribing. Often there will be substantial variations in the cost of the same drug marketed under different brand names by a number of reputable manufacturers. However, generic prescribing alone will not assure that the least costly brand will be dispensed or that the savings will be passed on to the patient. Nor will generic prescribing alone assure the physician that his patient is receiving the product of a manufacturer In whom he has confidence... "The attending physician should not delegate this choice-that is, he should not prescribe generically-unless he is convinced that he can rely upon the quality and purity of the drug that will be dispensed to his patient. If this is not the case, then the physician himself should designate the source of supply by pre- scribing by brand name or by adding the name of his choice of supplier to the generic name of the drug. "If medical considerations lead the physician to the conclusion that he can safely delegate the choice of supplier to a pharmacist, a hospital formulary com- mittee or some other third party, he does not abrogate his responsibility to pro- tect the economic as well as the medical interests of his patient . . . Thus, in choosing to prescribe generically, the physician should be assured that whoever actually make the choice of supplier can and will take into account not only the medical needs of his patient but will protect the patient's economic interests as well." Unfortunately, but perhaps not entirely unrealistically, AMA's position is based largely on distrust or lack of confidence or understanding in the ability of the pharmacist. The selection of a brand of a drug is, after all, more of a pharmaceutical than a medical judgment. Drugs become pharm~aceutieals after they are put into dosage forms. Physicians are trained in drug therapy but not in the area of pharmaceaticals. The hospital pharmacist and the physician practicing in the hospital can take comfort in the fact that the Pharmacy and Therapeutics Committee, referred to as the hospital formulary committee in the AMA report, can "take into account the medical needs" of the patient and "protect the patient's economic in- terests as well." This is one of the main reasons for its existence. Indeed, the AMA has endorsed the hospital formulary system by its approval of the State- ment of Guiding Principles on the Operatioli of the Hospital Formulary System. According to the Statement, "The pharmacist, with the advice and guidance of the Pharmacy and Therapeutics Committee, shall be responsible for specifications as to quality, quantity and source of supply of all drugs, chemicals, biologicals and pharmaceutical preparations The document concludes, "A hospital formulary system.. . is considered to be important in drug therapy in hospitals. In the interest of better patient care, its adoption by hospital medical staffs is recommended." Hospital pharmacists operating under the formulary system are well aware that they have assumed full responsibility for the pharmaceutical quality of their products, those they purchase in finished form as well as those they finish in their pharmacies. If hospital pharmacists are not better prepared and more capable of assuming this responsibility than are physicians or nurses, there is little reason for having a pharmacist in a hospital. PAGENO="0110" 548 COMPETITIVE PROBLEMS TN TIlE DETJG INDUSTRY Dr. GARB. Gentlemen, all the pharmacists whom I know are both ethical and competent, and I believe that they can be relied upon to dispense only wholesome, potent drugs. I have also been told that generic prescribing will cause a shrinking of drug company research. I am heartily in favor of such research, but I believe that it should be rewarded by patents where appropriate, not by the present confusing and inequitable system. Accordingly, I recommend that in any purchases of drugs froni tax funds, whether direct or indirect, generic prescribing be made manda- tory, with one stipulation. If the physician has reason to believe that ~ particular manufacturer's product is needed for his patient,. he should be allowed to specify this by writing the manufacturer's name together with the generic name. However, under no circumstances should the private product name be acceptable as a substitute. If this were acceptable as a substitute, we would be right back in the mess we are in now. Doctors Azarnoff, Hunninghake, and Wortman, whose paper I have submitted, have made a similar recommendation. They say: Therefore we strongly recommend that all drugs be prescribed by generic name. In those instances where the physician feels a specific company's product is best for his patient, the generic name of the drug should be followed by the name of the company whose product he wishes. This appears to us to be a logical solution. After' all, if a physician has determined that a specific manufacturer's product is best for his patient, he should at least know the name of the company. I would also like to make a few comments on drug advertising. Since ~inplernentation of the Kefauver-Harris law, the grossly misleading ad has been virtually eliminated, and this is an important achievement of the Congress. However, there are still problems. The enormous vol- ume of drug advertising and promotion is a force which tends to divert the physician from the best type of practice. It is also a major economic waste. We have heard about the expenditures of the drug industry for re- search. We ought to remember, however, that the industry spends on advertising and promotion per year from three to five times as much as on research. I am referring only to the prescription drugs. That is, the drug industry spends three to five times as much each year on advertising prescription drugs as it does on its research. Another comparison might be with medical education. The question of the education of the physicia.n and the postgraduate of the physician was raised yesterday. A justification for this comparison is the repeated statements of drug industry spokesmen that their advertisements ame educational. Our medical schools graduate under 9,000 doctors per year, and ex- pansion is slow because of the expense of educating a medical student-- over $3,000 per year per student-which is only partly covered by tui- tion. Thus, we have a severe and growing shortage of physician~. If the money now being spent on drug advertising and promotion were spent on regular medical education, we could, as far as finances are concerned, graduate not 9,000 doctors per year, but over 50,000. Of course, we do not have that many qualified applicants for medi- cal school. I am not nroposing that the drug industry subsidize medi- cal schools. Indeed, I deplore the existing financial links between the indu~ ~try and medical schools, however small. PAGENO="0111" COMPETITIVE PR0BLEM~ IN THE DRUG INDUSTRY 549 I do, however, wish to point out that in the last analysis, the money being spent-and misspent-on drug advertising is money obtained from the sick American through excessive drug prices. I raise this point here to give some notion of the amount of money being spent on drug advertising and promotion. The problem is not that the physician is uninformed. The problem is that the volume of advertising noise directed at him is so tremendous that it is very dif- ficult to get anything else through. I am not prepared at this time to suggest a remedy for the adver- tising expenditures. Hopefully, generic prescribing will help correct this problem. If not, it may be necessary for the Congress to scrutinize it again. The reason I am hopeful that generic prescribing will correct the excessive volume of drug advertising, is that we have quite a few drugs still which are sold almost entirely under generic name, and the ad- vertising for these drugs is well within reasonable bounds. It is not excessive. It is not inordinately expensive, and I am hopeful that if we have generic prescribing, this will in itself correct the overadver- tising and overpromotion. Senator NELSON. You made some comment in the latter part of the last page about deploring the existing financial links between the in- dustry and the medical schools. In what ways specifically are they aiding financially, and what aspect of it do you think is not sound Dr. GARB. Well, there are actually many financial links between~the drug industry and the medical profession, and I deplore all of them. I am in a minority here. I speak only for myself. I am sure that most doctors and many, perhaps even most medical educators would disagree with me, but I think there is a principle in- volved. I think when a patient buys a drug, and pays for it, he should not be taxed involuntarily to support anything else. The financial relationship between the drug industry and medical schools is a rather minor and trivial one in terms of money, and it is not as objectionable to me as certain other things. For example, every student, or almost every student, on reaching the second or third year of medical school will get a free doctor's bag with instruments and diagnostic equipment from a drug company. Well, now you can say "Why not?" I think it is poor policy. Somehow or other it just does not seem right to me for drug companies to take money which they are getting from patients and turn it over to a medical student or a doctor. I think that the medical student should p~y his own way through medical school or get a scholarship or a loan or something like that, but I do not think he should be supported by the sick people, except, when he becomes a doctor, by direct fees. Now, this as I Say could be considered minor. Then we go a little further along the line, and we get intr pertain financial relationships which I think are absolutely abhorrent. WTe find, for example, that at many medical conventions free drinks and some- times food are supplied by the drug firms. I think this is absolutely wrong and absolutely unethical. I have heard the argument that it does not make any difference. "After all, do you really think any doctor is going to be influenced in PAGENO="0112" 550 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY what he prescribes by the fact that we have given him a couple of free drinks?" My answer to that is, "I hope not, but if giving the doctors free drinks and, free barbecues and free parties influences their prescribing habits, then it is clearly unethical and wrong. If it does not influence them, it is a waste of the stockholders' money, or an overcharge to the patient on the price of the medication, and I just cannot see how any kind of moral society can accept this kind of an arrangement." Doctors make a good living, and I do not see why they need any kind of charity. Senator NELSON. That is another roilcall vote, Dr. Garb. We will recess until 1 o'clock. There will be another roilcall, I assume, another 40 minutes after this so we will resume at 1 o'clock. Dr. GARB. I will be at your service, sir. Senator NELSON. Do you have time to stay? Dr. GARB. Yes, sir, I will be at your service. Senator NELSON. We will resume at 1 o'clock. (Whereupon, at 12:20 p.m., the subcommittee recessed, to reconvene at 1 p.m., the same day.) A~ITRNOON SESSION Senator NELSON. We will resume the hearings. We will call Dr. Fitelson. Dr. Garb, will you stay where you are? Dr. Fitelson of the Fitelson Laboratories, Inc., of New York City. Dr. Fitelson, we appreciate very much your taking the time to come here today. We thought we would ask Dr. Garb to sit there. He may have an observation to make or respond to a question or two, if you do not mind. Dr. Fitelson, you may proceed to present your state- ment which I see is very brief here, and I assume that you will want to present an explanation of the studies you made `for the Medical Let- ter in addition to your statement; is that correct? STATEMENT OP J. PITELSON, PH. B., PITELSON LABORATORIES, INC., NEW YORK, N.Y. Dr. FITEfLSON. There will not be too much. Senator Nm~soN. Go ahead and proceed. Dr. FrrELsoN. I have a small food and drug testing laboratory in New York City. I myself am a Ph. D. in chemistry and my two as- sociates have their master's degrees in chemistry. We have been in this laboratory now for `some 16 years. Prior to that I was a chemist for the U.S. Food and Drug Administration, in New York City mainly. I was in charge of laboratories in New York for about 17 years. As part of our work we test various drugs, and for the past years we have been testing drugs for the Medical Letter, which is a pub- lication, a weekly publication put out by the Drug and Therapeutic Information, Inc., of New York City, which is a nonprofit organi- zation. The results of our findings have `been published in various issues of the Medical Letter. I might explain that our laboratories receive coded vials of tablets. We know what they are supposed to be; that is, prednisone or Miltown PAGENO="0113" COMPETITIVE PROBLEMS IN THE DRUG fl~DUSTRY 551 or that type, but so far as we are concerned, we do not know whose tablets they are. They come in numbers or letters. I understand that the Medical Letter obtains these tablets through various pharmacies, and then they repack them in these unlabeled vials, except for the code marks. We follow the U.S. Pharmacopeia requirements and test exactly, wherever possible. During the past 3 years we have made three series of tests. In 1964 we tested an antihistamine known as chiorpheniramine maleate. There we tested 20 samples of tablets from 20 different manufacturers. The U.S. Pharmacopeia requires for this particular drug that first it shall contain that drug, and our tests showed that all of the samples did contain that drug; secondly, that the tablets disintegrate within a certain time limit, 30 minutes in this case, under certain specified conditions. Senator NELSON. Was this the USP standard? Dr. FrruLsoN. This is the U.S. Pharmacopeia standard, that when the tablets are shaken in water at a certain temperature in a certain way, they will fall apart completely within 30 minutes. Senator NELSON. This is a test for this particular drug? Dr. FITELSON. It is a test for a tablet. Senator NELSON. A tablet? Dr. FIa~LsoN. The drug has nothing to do with it except that dis- integration times may vary with different tableted drugs. In the case of this particular tablet, the U.S. Pharmacopeia requires 30 minutes as a maximum disintegratioii time. Senator NELSON. For a different kind of tablet it may require- Dr. FITEi~soN. Some disintegration times are more rapid, others are much longer. It depends on the tablet. In this case all of the t~ihlets complied with the U.S. Pharm.acopeia requirement for disintegration time. The U.S. Pharmacopeia also requires that the tablets shall each have a certain weight within limits. The limitations vary with the size of the tablet. The smaller the tablet, the greater the percentage allowed because it is more difficult to main- tain rigid limits there. The tablets did vary in size; some manufac- turers prefer to put more excipient in the tablet so you will have larger tablets, with the same dosage of this drug. Senator NELSON. But when you say weight, are you talking about the weight of the- Dr. Frn~soN. The weight of the total tablet, not the amount of drug in the tablet but the weight of the total table and the Pharma- copeia has certain ranges, and all of these 20 samples fell within those required ranges so far as the weight of individual tablets concerned. Then we made the final test for assay, which is a chemical analysis of the amount of drug in the tablet. The Pharmacopeia has again a range limit for each particular drug. I do not recall what it is for this particular drug, but in most cases it is plus or minus 10 percent. In other words, it may have 90 to 110 percent of the labeled amount of drug. In some cases it is a narrower range. In the case of chlorphen- iramine maleate, all fell within the required range of the Pharma- copeia. The results of this particular survey were published in the Medical Letter of February 26, 1965, on pages 18 and 19. 81-280-pt. 2-67-8 PAGENO="0114" ~552 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY I might say that this Medical Letter, in addition to publishing my assay results, also publishes the price per 1,000 tablets. Mr. GORDON. May I ask a question here? I notice that the prices vary considerably, and the highest priced version of the drug had 101.4 percent of the active ingredient; that is, chlorpheniramine, and the lowest priced version had 103.7 percent. Can you tell us if this has any significance? Dr. FITELSON. No. They are both well within the Pharmacopeia limits in the first place, and then it is hard to believe that 1. or 2 per- cent makes any particular difference in a drug, particularly in a drug which is not a potent drug. Mr. GoiwoN. So it is really not meaningful- Dr. FITELSON. No. Mr. GORDON (continuing). To say one is better than the other? Dr. FITELSON. It is not meaningful at all. Anything within the Pharmacopeia limits is quite acceptable. Sometime later we ran another series of tests. Senator NELSON. You are going to a different drug? Dr. FIri~LsoN. Going to a different drug. Senator NELSON. May I ask a question before you do? Dr. FITELSON. Yes, sir. Senator NELSON. These were the 20 companies----- Dr. FITELSON. Twenty different companies~ yes, sir. Senator NELSON. And all of them met USP standards? Dr. FIv~r4soN. That is correct. Senator NELSON. Can it be concluUed from that then that each of them had the same therapeutic value? Dr. FITELSON. I am sure that is a correct conclusion, since they were exactly the same drug in all tablets, and the variations were not sig- nificant. Senator NELSON. May I ask, this was not a test on all companies that make this drug, was it? Dr. FITELSON. I doubt it. There must be others beside's the ones we tested. Senator NELSON. So do we have a situation where drugs meeting the same Pharmacopeia standards range in price from $1.40 for 1,000 tablets? Dr. FITELSON. Per 1,000. Senator NELSON. To $17.50 for 1,000 tablets? Dr. FITELSON. That is correct. Senator NELSON. Insofar as TJ.S. Pharmacopeia is concerned, they are of equal value as drugs; is that correct? Dr. FITELSON. That is correct; yes, sir. Senator NELSON. May I ask Dr. Garb a question? Dr. GARB. Yes, sir. Senator NELSON. As a physician, do you visualize that there would be any difference `between these two drugs from a therapeutic value, or to put it another way, if you had this history before you and were to prescribe, would you have any hesitation about prescribing any one, regardless of the price here, for your patient? i)r. GARB. I can see no reason to have any hesitation. I would say that if anybody wishes to argue against the significance of this fine study, the burden of proof would have to be on them. PAGENO="0115" COMPETITIVE PROBLEMS IN THE DRTJG INDUSTRY 553 In other words, I think that Dr. Fitelson has, produced concrete evidence that these particular drugs all fall within USP standards, and USP standards are more rigid than are absolutely necessary. They are not minimal standards. They are good standards. He has here objective evidence that these drugs are equivalent. Now if somebody wishes to claim that there is some reason why they are not, I think the burden of proof ought to be on them, and they ought to come forward with objective evidence, not with testimonials and not with repeated claims. I think this is the kind of thing t'hat we have needed for years, objective evidence, and I am happy to see that we are now getting it. Senator NELSON. This drug is in the USP, is it not? Dr. FITELSON. Oh, yes, sir. Senator NELSON. Yesterday Dr. Miller, testifying for the USP, said that all of the drugs in the USP are drugs with which there has been clinical experience, and again I am paraphrasing, I would not want to misstate it, but in any event they were satisfied therefore that the drugs that met TJSP standards were of equivalent therapeutic value, I think. Would you at least say that? Dr. GAIIB. Yes. That is the reason why we have the TJSP. Other- wise, what good would it do `to us to have a TJSP? It seems to me we have to assume that all drugs which meet TJSP standards are equivalent, and if they are not equivalent, I would like to know why They are not. I know claims are made sometimes that they are not equivalent, and 11 have never been able to find out exactly why they are not, and here we have objective evidence that they are. Senator NELSON. Are you satisfied that the kind of tests made by TJSP and the kind of tests made by Dr. Fitelson's laboratory, in terms of dissolution time and chemical contents and so forth cover the necessary spectrum of tests to give you some assurance that any one of them that meets this will have an equivalent therapeutic, clinical `value? Dr. GARB. I will put it this way. The TJSP are much more qualified than I to select the tests which are pertinent. Dr. Fitelson has had much more experience than I in this area, and I would certainly rely on people like Dr. Fitelson and the TJSP and on their judgment as to which tests ou~ht to be done. I have no reason to question their judgment as to which tests ought to be done. If these are the tests that the TJSP says ought to be done `and Dr. Fitelson thinks ought to be done and they come out this way, I cannot see any reason to question it. If somebody has a reason, I think they ought to come forward and tell us exactly what the argu- `n'ient is~. Senator NELSON. ,So unless you heard a specific reason to the con- trary, as a prescribing physician, you would be satisfied to rely upon the information furnished by TJSP or by this laboratory's tests in prescribing this particular drug from any one of the companies listed here? Dr. GARB. Yes, sir. Senator NELSON. Go ahead, Dr. Fitelson. Dr. FITELSON. Our second survey was on meprobamate, of which Miltown is one, and here `these were 400 milligram tablets, and there PAGENO="0116" 554 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY were 19 different manufacturers' products tested. The U.S. Pharma- copeia has the same four tests for this product as it had for the chiorpheniramine maleate. Senator NELSON. Which one is this? Dr. Frn~LsoN. Meprobamate or Miltown. It has the identification tests, the disinte~'ration test, time for disintegration, the variation in weights of individual tablets, and finally, the assay of the amount of material in the product, and these tablets met all of the specifications of the USP. They are published in the Medical Letter of April 23, 1965, on pages 34 and 35. They also include the price, this table here includes the price per 100 `tablets. Shall I continue? Senator NELSON. Yes, go ahead. Dr. FrPEL50N. And finally, we recently made a test on prednison& tablets, these are 5-milligram tablets. Predni'sone is a rather potent drug and the U.S. Pharmacopeia, in addition to the four tests I mentioned before, has two additional tests.. One is a test related to foreign steroids. There are chemical com- pounds closely related to prednis'one, which might be present, if the' prednisone were not manufactured properly, and the U.S. Pharma- copeia permits up to 2 percent of such related foreign steroids. This is a special test, and none of the 22 different samples showed more than 2 percent of such related foreign steroids. They came within the Phar- maoopeia limits. Another special test on prednisone is a new one for this Pharma- copeia. The present Pharmacopeia is USP, Volume 17, which became' effective September 1965, and at that time a new test was introduced. entitled "Tablet Uniformity Test" or "Content Unifo.rmity Test." This does more than weigh each tablet. You must make a chemical test of each tablet to determine exactly how much drug is in that tablet. All `of the chemical test's of the U.S. Pharmacopeia are really tests on composites. That is, we grind 20 tablets together, and then we mix it up and take a small sample for our chemical tests or assay. In this new tes't you actually grind only one tablet, and use that whole tablet for the test to see exactly how much predn'isone is in that tablet. You also make what is known as the assay test, which is made on. the composite of 20 tablets. On these individual tablets, the U.S. Phar- macopeia allows, permits not more than one ou't of 30 to show more than 15 percent variation from the declared amount. On the composite it has a much narrower range. As I recall, it is. 90 `to 110 percent of the declared amount. This tablet content uni- formity test is a very rigid test, and some years ago I recall running,. oh, 7 or 8 years ago I recall finding quite a big variation in individual tablets, but these 22 tablets all complied with the U.S. Pharmacopeia test in all respects. Senator NELSON. Did you only do one tablet for each company? Dr. FrPELS0N. The U.S. Pharmacopeia requires testing 10 individual tablets for each company. Senator NELSON. From the same batch? Dr. FITELSON. Plus a composite. In other words, you first take 20 tablets and mix them up, grind them, mix them up an'd run a test of that composite. Then you take 10~ separate individual tablets and run each one separately. PAGENO="0117" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 555 Senator NELSON. How are the 10 individual tablets from the same company selected? Dr. FITELSON. At random. I am given a vial of some 50 or 60 tablets to test and we pick out those 10 at random and run those sep- arateiy, individually. Senator NELSON. Is it known whether they came out of the same batch or not? Dr. FITELSON. I presume they did because when they are pur- chased they are probably purchased out of one bottle. Mr. GORDON. Although there are tablet variations within a bottle; that is, the tablets really are not identical, nevertheless, as I under- stand it, they are claimed to be therapeutically equivalent, are they not? Dr. FIa1~LsON. Oh, yes. The U.S. Pharmacopeia specifies a cer- tain limitation on individual tablets as well as on the composite of the tablets, and they are all therapeutically equivalent so far as I know. Senator NELSON. This was a test of 20 again, was it? Dr. FITELSON. Twenty-two different pharmaceutical companies, and lhis is published in the Medical Letter of Jun~ 2, 1967, just a few weeks ago. Senator NELSON. And you found that all 22 met USP standards? Dr. Frui~soN. All 22 met all of the U.S. Pharmacopeia standards. Senator NELSON. And in this case, then, the price variation was from a low of 59 cents per 100 to as high as $17.90 per 100? Dr. FITELSON. That is right. Mr. GoiuoN. Dr. Fitelson, have you had any reaction from drug `companies since this report has come out? Dr~ FITELSON. I personally would not have a reaction, since this comes through the Medical Letter. I do not know what reactions they have had. Mr. GOnroN. Did you want to comment, Dr. Garb? Dr. GARB. I do have a comment. This may illustrate one of the points I have been trying to make. Ac- cording to this you will notice that the Merck product is $2.90 a 100, and the Parke, Davis product is $17.88 a 100. In other words, the Parke, Davis product is more than eight times as expensive as the Merck product. Now here we have a fantastic spread. Both companies have good re- search programs. Both companies do promotion, et cetera. I `would hardly think that anybody would ever complain that Merck is not as good or as reliable a company as Parke, Davis. Merck is selling this at one-eighth the cost of Parke, Davis, but how does the doctor know about this? How `does he even know that the two medicines are the same con- sidering the way the names are confused? In other words, if the doctor is thinking in terms of Deltra and Paracort, if he does not know they are the same material he may pre- scribe the more expensive one but if he knows they are `both prednisone, if he knows that Merck's prednisone is one-eighth of the cost of Parke, Davis' prednisone, he would almost certainly prescribe Merck's prednisone all the way through. This is, I think, an excellent illustra- tion of what happens when drugs are sold by private product name. PAGENO="0118" 556 COMPETITIVE PRO]~LEMS IN TEE DRUG INDUSTRY I am not saying that Merck is necessarily making a better prerlni- sone than some of these other companies, but here you have two) big companies. Mr. GORDON. Upjohn is another, for $2.25. Dr. GARB. Yes, there is Upjohn. I did not see them at the bottom~ of the list. There is Upjohn too. Now I think this is a perfect example of how the confusion in' drug names leads to a pricing structure which is not really a free' market pricing structure. Senator NELSON. That is a very good point. Did you have anything' more? Dr. FITELSON. No, sir. That completes the work I have done so far for Medical Letter. Senator NELSON. How long have you been doing work for the Medi- cal Letter? Dr. FITELSON. Oh, for about 12 or 13 years on various products. Senator NELSON. Does the Medical Letter have a continuous pro- gram of testing? Dr. FITELSON. From time to time, they seem to get spurts. They decide to test certain drugs. I am now running a digitoxin survey for them. Senator NELSON. I want to thank you very much. Mr. COUGHLIN. Dr. Fitelson, I just have a few questions I want to ask you with regard to testing. I notice on page 2 of your statement where you refer to the predni- sone tablet test conducted, you were looking for various impurities. I would assume one of those impurities would be cortisone; is that right,? Dr. FITELSON. That is right. Mr. CbUGIILIN. Aside from cortisone, what other impurities were" you looking for? Dr. FITEL5ON. As I recall, the U.S. Pharmacopeia specifies each steroid to test for. I think it is hydrocortisone and cortisone. I am pretty sure they are. They vary with the steroid. Mr. COUGHLIN. I also gathered from the first paragraph of your statement that you ran off chemical testing only; is that right? Dr. FTTELSON. I am a chemist; yes, sir. Mr. COUGHLIN. And the results enumerated or enunciated on page ~ of the statement prove that prednisone tablets are chemically equiva- lent, is that right, as far as the steroid content is concerned? Dr. FITELSON. Which are you referring to? Mr. COUGHLIN. In other words, if you were conducting a chemical test, I assume on the basis of the conclusion you made on page 2 that you regarded the number of products tested as being chemically equivalent? Dr. FITELSON. The prednisone you mean? Mr. COUGULIN. Yes; that is right. Dr. FITELSON. Yes. Mr. COUGULIN. Now with regard to them being chemically equiva- lent as far as the steroid content is concerned, do these tests prove also that they are therapeutically equivalent? Dr. FITEL5ON. I can only reason backwards. PAGENO="0119" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 557 If they all contain the same amount of drug, and if that particular drug is identical and is pure in each tablet, I can only assume all have the same effect. Mr. COTJGHLIN. Is there any way in which you would also test for therapeutic equivalency? Dr. FITELSON. No, sir; I have no way of testing. Mr. COTJGHLIN. So this is an assumption you draw? Dr. FITELSON. That is right, an assumption based purely on chemical tests. Mr. C0UGm2IN. Thank you. I was also curious, Doctor. Are you affiliated with a hospital? Dr. FITELSON. No, sir. Mr. C0UGULIN. Thank you very much. Mr. GORDON. These tests were based on TJSP standards? Dr. FITELSON. We followed the U.S. Pharmacopeia test; yes. Mr. GORDON. And is that riot the assumption of the USP also, that if they fall within the TJSP standards, they should be clinically equivalent? Dr. Frr1~r~soN. I think Dr. Garb is better qualified to answer that. Dr. GARB. I will go further than that. That is not only the assumption of the USP, that has been the assumption of the medical profession ever since the beginning of mod- ern medicine. If you have a chemical on the one hand which is the same as the chemical on the other hand, and if they are not identicar in their actions, there has to be a reason for it. Senator NELSON. May I interrupt? You can complete your answer. That is a roilcall. I am going to have to leave. I think that I have asked all the questions, but I want you to conclude your answer, and. I want to say to both of you, I appreciate very much your coming here. The testimony of both of you is very valuable to our hearings and to' this record. Thank you very much. Dr. GARB. The conclusion of my answer is that if we cannot assume' this, then we cannot practice any kind of rational medicine. We have to assume, for example, that a study which was done on phenobarbital 10 years ago still applies more or less to phenobarbital today, unless there is a reason for it being changed, and there can be reasons. There' are changes, for example, in the antibiotics, as the bacteria adapt to them. But this is a fundamental assumption in medicine, that unless there' is reason given to the contrary, we must assume that an equivalent amount of a particular chemical at one time will do the same as the' same chemical at another time. Now, it is conceivable to be sure that there may be differences, but we have to start out on the assumption that there are no therapeutic differences when there is chemical identity, unless somebody comes forward with objective evidence to prove that there is a differeuce. There have been a few rare cases in which differences have cropped up, but they were unusual situations in which a drug manufacturer used a particular chemical in the tablet, and in so doing `he neutralized part of his active ingredient. Mr. GORDON. That was calcium `tetracycline? PAGENO="0120" 558 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY Dr. GARB. That was some years ago; yes. This was complete inadvertence2 and not realizing this, the manu- facturer added something else which neutralized the neutraiizer, but by and large, unless there is objective evidence to the contrary, we must assume that a given chemical will do what that chemical is supposed to do, or else we could not practice any kind of rational medicine, Mr. GoiwoN. We will adjourn until tomorrow morning at 10 o'clock. (Whereupon, at 1:45 p.m., the subcommittee adjourned, to recon- vene at 10 a.m., Thursday, June ~9, 1967.) PAGENO="0121" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY THURSDAY, ~1UNE 29, 1967 U.S. SENATE, MONOPOLY SUBCOMMITTEE OF THE SELECT COMMITTEE ON SMALL BusINEss, W~hington, D.C. The subcommittee met, pursuant to adjournment, at 10:20 a.m., in room 318, Old Senate Office Building, Senator Gaylord P. Nelson (chairman of the subcommittee) presiding. Present: Senators Nelson, and Long of Louisiana. Also present: Benjamin Gordon, staff economist; Daniel T. Cough- un, minority counsel; Susan H. Hewman, research assistant; and Wil- liam B. Cherkasky, legislative director, staff of Senator Nelson. Senator NELSON. The hearing of the subcommittee will resume. Our first witness this morning is Dr. Leighton Cluff, professor of medicine, University of Florida. Doctor, the committee appreciates very much your coming here today to present your testimony. You may present it in any fashion you please, and speak extemporaneously from your statement or read it, elaborate on it, whatever way you wish. If you would, give a brief biography of your professional background. STATEMENT OP DR. LEIGHTON E. CLUFF, PROPESSOR AND CHAIR- MAN, DEPARTMENT OP MEDICINE, UNIVERSITY OP ELORIDA COLLEGE OP MEDICINE, GAINESVILLE, PLA. Dr. CLu~'I?. I graduated from George Washington School of Medi- cine, took my house staff training, intern and residency training at the Johns Hopkins Hospital and Duke University School of Medicine. I had my research training at the Rockefeller Institute in New York. I then joined the faculty at Johns Hopkins University in 1955, and I rose in rank there until I became professor of medicine at the Johns Hopkins University in 1962. I was professor of medicine at the Johns Hopkins University until the summer of 1966, when I became profes- sor and chairman of the department of medicine at the University of Florida. Over the past few years, my major investigative interest has been in the epidemiological study of hospital acquired disease. Senator NELSON. Of what? Dr. CLUFF. Hospital acquired disease, and in the past 5 or 6 years one of my major areas of interest has been in the epidemiological study of drug usage and adverse drug reactions. Senator NELSON. All right, Doctor. If you would, go ahead and pre- sent your statement. 559 PAGENO="0122" 560 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY Dr. CLUFF. I would like to read if I may, Senator Nelson, a very brief statement which summarizes the statement that I presume you have before you. Senator NELSON. Yes. Dr. CLUFF. I shall read this if I may. It is very brief, but I think it summarizes the position and interpretations that are predicated upon the statement that you have before you. Senator NELSON. All right. Dr. CLUFF. An important factor in the cost of drugs for the patient is the number of drugs consumed or prescribed as well as the cost of an individual drug. Drugs are used excessively by the public and are prescribed excessively by physicians. Curtailment of excessive and indiscriminate use of drugs probably would have as great, if not greater impact upon expenditures for drugs as minor adjustments in drug prices. A significant and lasting influence on drug consumption will occur only through changes in attitudes toward. and improve awareness of the uses and abuses of drugs by the public and medical profession. These changes could be fostered by development arid use of educa- tional media and by more judicious and rational drug advertising. A cooperative venture by the Government. the pharmaceutical manu- facturers, and the medical profession, providing for public education and medical education in therapeutics is needed. Senator NELSON. I have some questions. It would be helpful if you * would read your complete statement, Doctor. Dr. CLUFF. All right, and perhaps you can interrupt me if you wish as I go along. Senator NELSON. Yes. Dr. CLUFF. The introductory comments are perhaps not pertinent be- cause in essence I have already said that. This is largely biographical background. While I was professor of medicine at the Johns Hopkins University, epidemiological studies of drug usage and adverse reactions to drugs were done on hospitalized patients during 1962 to 1966. These studies are now being continued at the Shands Teaching Hospital of the Uni- versity of Florida. Observations made during these studies serve as the basis for this statement and are briefly outlined below. All of these statements are based upon the findings that I have obtained in my own investigative work. Observations: (1~ 4 to 5 percent of patients admitted to the medical service of a general hospital are found to have adverse reactions to drugs and 3 to 4 percent of all medical service patients are admitted because of illnesses caused by drugs. About 10 percent of patients ex- perience ill effects from drugs while hospitalized. Senator NELSON. What percentage of the patients who are admitted for adverse reaction to drugs, what percentage of that group could have avoided such reactions if the physicians rirescr~ing-- Dr. CLUFF. You are asking for proportions and that is a difficult thing to give you exactly. I don't think there is any question but that some of these could be avoided by the more judicious use of drugs or at least the physician paying greater attention to ill effects that the pa- tient had previously experienced. There are m~iny exampIe~ of this which I could cite and I would be happy to do so if you wish. PAGENO="0123" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 561 Senator NELSON. I would like to have some examples, yes. Dr. CLUFF. One patient that we have reported was a young pregnant ~woman being followed in the obstetrical clinic of the hospital. During the initial evaluation for her pregnancy she was found to have a urinary tract infection and for this she was treated with a sulfonamide drug. The urinary tract infection cleared but the lady developed a dif- fuse erythematous rash and the drug was discontinued and the rash ~subsided. The notation was made that the patient was allergic to sulfonamides. Senator NELSON. Was this the way it read? Dr. CLUFF. Yes. The patient was then followed through her preg- nancy, had an uncomplicated delivery, but during the postpartum care she was found to have a urinary tract infection again. Because the patient was beyond the postpartum period and no further care was desired in the obstetrical clinic she was referred to the medical clinic in the hospital. In the medical clinic in the hospital she was found to have the uri- nary tract infection as indicated, and the physician caring for the patient represcribed a sulfonamide drug. The patient this time devel- oped a diffuse erythematous rash once more, a very high fever, passed blood in her urine, developed very severe hypertension, and was ad- mitted to the hospital and subsequently died. She was found to have sulfonamide crystals in her urine and in her kidneys and diffuse vascu- lar disease, undoubtedly a manifestation of allergic reaction to the sulfonamide. The problem in this case was that in many hospitals, particularly the one where this study was done, on the initial occasion when the allergic reaction was found, the notation was made in the obstetrical clinic notes but the notes in this instance were kept in a separate part of the patient's chart. When the patient was seen in the medical clinic, the obstetric notes were not reviewed and in reviewing the facts the doctor was not aware she had an allergic reaction from the drug, nor had he inquired of the patient whether she had previous difficulties with sul- fonamides. I think this is a clear illustration of an avoidable situation where if there had been adequate notation the physician would not have repre- scribed the medication. Senator NELSON. Yes, but that is really a case of carelessness in the medical history. Dr. CLUFF. That is correct. Senator NELSON. It is not a case of somebody being confused about drugs. Dr. CLUFF. That is correct. Senator NELSON. We have had testimony here from several phy- sicians, pharmacologists, that one of the problems is that you end up with so many product names or trade names. We had a couple of specific illustrations of a patient who has had a bad reaction to some drug, and then gets another drug by another product name, the doctor not knowing that it is the same drug. That is quite a different case from one where the records are poorly kept. Do you run into any problems like that? Dr. CLUFF. Yes, but I think the problem, Senator Nelson, is equally the case not only with prescription drugs that the physician prescribes PAGENO="0124" 562 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY but nonprescription drugs as well. I would like to cite an example of this, if I may. Senator NELSoN. Surely. Dr. CLUFF. This is a man whom we had observed during the course of our studies, who was admitted to the hospital with a disease known as erytherna multiforme, which is a peculiar skin disease associated with fever and glandular enlargement, and is known to be a common manifestation of an allergic reaction to a drug. One of the most com- monly incriminated drugs in this instance is a constituent of laxa- tives commercially available, nonprescription laxatives. Senator NELsoN. What is that? Dr. CLUFF. Phenolphthalein is the chemical substance that is a com- mon constituent of many nonprescription laxatives. The patient was advised of the fact that he had an allergic reaction to this particular laxative and was told by the physician not to take it again. Now he was advised not to take the drug again by trade name. The patient left the hospital, but was readmitted 1 month later with exactly the same disease again. He had not taken the same trade name product again which had previously caused his difficulty. He had taken another trade name product, a laxative which also contained phenol- phthalein. This time the patient was again advised by the physician not to take these two trade name laxatives. So the patient then returned home, but was readmitted again a short time later with a reoccurrence of the same illness. This time he had taken a third trade name product laxa- tive which also contained phenolphthalein. In order to avoid any subsequent difficulty for this patient, the physician then obtained as complete a listing as he could of all of the known preparations by trade name containing phenolphthalein so that the patient could avoid taking the drug again. I think this is an illustration where designation of a drug by trade name rather than by chemical constituents can lead to serious dif- ficulty. Senator Ni~r,soN. Would this have been avoided if the doctor had used a generic or official name? Dr. CLUFF. Only if the drug was obtainable over the pharmacist's counter by generic name. In this instance this is not, of course, the ordinary way in which the patient will have purchased the drug from the drugstore. In these i~stances the three different drugs were Ex-lax, the other trade name I can't remember, and one was the 4-way Cold Tablet I believe, and I have forgotten what the second one was, but in this instance these drugs contained more than one chemical con- stituent, so that in prescribing of the preparation, if prescribed by generic name, one would have to prescribe it by the name of all of the constituents. In this instance it was just as important for the patient and the physician to be aware of the fact that there wa's more than one trade named product containing phenolphthalein. Senator NELsoN. Thank you. Go ahead. Dr. CLUr1~' (reading.) (2) Approximately 20 percent of untoward reactions to drugs in patients requiring admission to the hospital are attributable to nonprescription, or over-the-counter drugs, including laxatives, analgesics, and antacids. The remainder are attributable to PAGENO="0125" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 563 prescription drugs, including penicillin, digitalis prep'ar'ations, seda- tives, anti-infective preparations, diuretics and tranquilizers. Senator NELSON. You are saying 20 percent of the untoward reac- tions are from nonprescription drugs? Dr. CLUFF. Of those reactions patients acquire outside the hospital which require admission to the hospital. This is a designation of a specific group of patients. They are admitted to the hospital because of an illness `caused by drugs, and of those illnesses caused by drugs requiring admission to the hospital, approximately 20 percent are at- tributable to nonprescription drugs. Senator NELSON. Are these statistics-were your studies such as to be able to say that these statistics would apply on the average? Dr. CLUFF. Yes, I think so. No similar studies of this kind t'hat I am aware of have been performed elsewhere, and I am sure that this committee `has heard of the studies done by Schimmel at Yale. Other similar studies are now being conducted but I don't know of any spe- cific study that designates the statistical data as I have indicated it to you thus far. Senator NELSON. What are some of the drugs which cause bad reac- tion, nonprescription? Dr. CLUFF. I have mentioned one, phenolphthalein. Some of the others are bromide-containing sedatives. I did not bring my data with me, Senator Nelson. If this kind of information is pertinent to your committee's deliberations I would be happy to provide such data for your committee by sending it to Mr. Gordon. But the preparations that I can list which I do recall are bromide- containing sedatives as well as antacids. And the phenolphthalein laxatives, as I have indicated. Senator NELSON. You say. that 20 percent of the untoward reactions were nonprescription drugs and 80 percent were prescription drugs. Dr. CLTJF'F. Yes. Senator NELSON. What are the most common drugs that cause some untoward reactions? Dr. CLUFF. Well, I will just list some of them. Again I don't wish to imply that the list I am giving you is necessarily complete by any means but these will serve as illustrative examples. If this is data you care to have, I will be happy to send it to you. An example would be penicillin, tetracycline, sulfonamide, digitalis, phenylbutazone, and indomethacin. Senator NELSON. What are they used for? Dr. CLUFF. Penicillin, of course, is an antibiotic, indomethacin is a drug with the trade name, Indocin, a drug which recently has been under scrutiny by the Food and Drug Administration. Senator NELSON. Recently what? Dr. CLTiFF. Tinder scrutiny by the Food and Drug Administration and is a drug used for treatment of rheumatic complaints. Phenyl- butazone is similarly used for treatment of rheumatism. Tetracycline is an antimicrobial agent. Digitoxin, often in combina- tion with a diuretic drug with the generic name chlorothiazide and another quinidine, a drug used to control cardiac rhythm. These give you some illustrations of the type of prescription drugs which we have observed to be involved in drug reactions producing ill- ness requiring admission to the hospital, as well as reaction to drugs which we see occurring in the hospital itself. PAGENO="0126" 564 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY Senator NELSON. I note that under item 3, where you stated that illness due to drugs was the seventh most common cause of hospitali- zation. Dr. CLUFF. That is correct. Senator NELSON. It is a rather startling statistic. Dr. CLtJFF. It was to me too, Senator Nelson, when I first uncovered'. Senator NELSON. What you are saying is that this was the cause of the hospitalization. Dr. CLUFF. That is right. This was the cause of the illness requiring hospitalization. Senator NELSON. Do you have any judgment about how much of' that would be avoidable? Dr. CLUFF'. That is asking for a value judgment. I would put it this way, Senator Nelson. I think that some of these reactions undoubtedly' are due to excessive drug use1 Some of it is due to excessive drug use by patients of over-the-counter preparations. Some of it I suspect is due to the excessive and indiscriminate use of drugs by physicians. However, I think that it is very important to point out that ill- nesses due to drugs probably will never be completely abated, and the point here is it is not so much elimination of the problem as it is re- duction of the significance and severity. I think there is no question but that some of the reactions occurring in patients requiring hospitalization are probably unavoidable, with the present knowledge that we have. But I think some of them are probably avoidable, illustrated by the two examples that I cited to you previously. Senator NELSON. In your studies did you get a statistical breakdown' of, for example, how many of these patients who were admitted, ex- perienced a second or a third reaction to a drug? In other words a circumstance such as the one yOu mentioned earlier? Dr. CLUII?. Yes. Senator NELSON. Where the patient knew or the doctor knew or' both knew that the patient had had a reaction before, and for oiie reason or another the drug was administered again? Dr. CLUFF. Well, I have cited two examples where this occurred~ I don't think there is any question but that in some instances the ad- ministration of digitalis preparations, this is a drug necessary in many instances for the treatment of heart failure. In the administration of this drug commonly the physician feels that he can't obtain effective therapeutic action of the drug without increasing the dosage of the drug to the point of toxicity. He may then reduce the dosage of the drug. But subsequently the patient's heart failure may increase, and the' physician may then correspondingly increase the dosage of digitalis again to reintroduce the problem of intoxication. I think there are certain instances where this undoubtedly occurs. On the other hand, the question you are asking is relevant circum- stances where the physician knew the patient had trouble with the drug on one occasion and then readministered it to the patient again. The physician may occasionally knowingly do this. For example, there have been many reports in the literature and many physicians have had such experiences. A patient, for example,, may have had a serious problem with allergic reaction to penicillin. PAGENO="0127" COMPETITIVE PROBLEMS IN TUE DRUG INDUSTRY 565 Then the patien1~ subsequently gets an infection in which penicillin is the only drug that can be considered effective in the treatment of the illness, and the physician is loathe to readniinister the drug to the patient. But if it is a life-threatening illuess, he may be forced to do so anyhow. Here is another instance I think where a reoccurrence of a reaction can occur, knowledgeably and rationally. The physician then, of course, will do what is required to control the reaction. In terms of the frequency or rates or proportion of patients who have reactions to drugs being attributable to the indiscriminate re- administration of the drug to a patient known to have previously re- acted to it, I don't know of any such data. Senator NELSON. Isn't there an effective antidote for penicillin? Doesn't Schenley Laboratories have it? Dr. CLUFF. Schenley Laboratories some years ago introduced a drug, the generic name is penicillinase. Subsequently, this drug has lost favor for the simple reason that it, tOo, is potently antigenic. It can pro- duce an allergic reaction so that the drug is not commonly employed anymore. Furthermore, subsequent contrOl studies have generally re- vealed that the drug probably has little effectiveness in the control of penicillin allergic reactions. Generally, the mechanism whereby a physician controls allergic re- action to pencillin today is by the administration of potent pharma- cological agents which can treat the manifestations of the allergic re- action without necessarily completely reversing it. Such drugs as the antihistamines, cortisone, and its analogs as well as epinephrine in the treatment of anaphylactic shock but there are no specific. antidotes to pencillin reactions. (3) In our studies on a general medical service, illness due to drugs was the seventh most common cause of hospitalization, ranking ahead of blood, musculo-skeletal, genito-urinary, and cutaneous diseases in frequency of admission. (4) Among 714 hospitalized medical patients, observed over a 3- month period of time, eight of 36 patients admitted with drug induced illness died and three of 97 patients died with an adverse drug reaction acquired during hospitalization. These reaótions were attributable to a variety of different drugs, including both prescription and nonpre- scription drugs, the ones that I have already indicated. The point in making this, of course, is to emphasize that not only is the problem of trouble with drugs an important cause of admission of patients to the hospital, but it is also an important cause Of reactions in the hospital, and it is an important cause of death. (5) Patients admitted to the hospital with an adverse reaction to a drug were about three times more likely to ~tcquire a reaction to another drug during hospitalization. When I say another drug here, Senator Nelson, this refers to a drug of a different pharmacological characteristic. The explanation for this. is not entirely clear, but suggests a peculiar predisposition of certain patients to the occurrence of ill effects of drugs. What the factors re- sponsible for this are and their identification I think is a matter for further investigation. But patients who have once experienced ill effects from a drug are potently susceptible to the occurrence of ill. effects from other drugs that they might subsequently receive. PAGENO="0128" 566 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY (6) The average number of different drugs administered during hospitalization to patients on the medical service was 10 to 12, rang- ing as high as 42. That number now should be increased to 52. The drugs given most often were sedatives and tranquilizers, analgesics, digitalis preparations and other cardiac drugs, antacids, and anti- infective drugs, in the order listed. I think that a part of statement No.7 perhaps ought to be combined with this, and that is that the patients receiving the most drugs were sicker than those receiving fewer drugs, at least as measured by duration of hospitalization and mortality rate. This is pretty much as you would expect that the sickest patients are the ones who are going to get the most drugs in the hospital. Nevertheless, the point here that I wish to emphasize is that patients receive a large number of medications in the hospital, and indeed the number at times seems excessive-SQ different drugs, which I think is a little hard to justify. In addition to this statement, I think that it is important to point out that at the present time I know of absolutely no data to indicate the number of drugs that the patient outside of the hospital uses which he buys over the drugstore counter. My own personal experience about this and my personal concern about this was recently reinforced when a pharmaceutical representa- tive came to my office and I was speaking to him about what I con- sidered to be the excessive use of nonprescription drugs by patients outside of the hospital, and he was intrigued by this and went home and counted the number of drugs he had in his drug cabinet at home, and hehad90. Whether or not this is illustrative of the public at large I have no idea, but I have made it a practice over the past few years whenever I visit a friend to go to their bathroom and look in the drug cabinet, and it is impressive to note the abysmal chaotic characteristic of non- prescription drugs that families ordinarily keep in their homes. The next point (7). When increasing numbers of drugs were given to patients, there was an increasing likelihood of adverse reactions occurring to at least one drug during hospitalization. Seven percent of patients in the hospital given 6 to 10 different drugs had an adverse reaction, while 40 percent of patients given 16 to 20 different drugs had an adverse reaction. This is as much as you might expect, that you increase the number of drugs that the patient takes and you increase the total number of reactions that you can ~anticipate observing. The problem here is that the rate rises so rapidly it almost becomes logarithmic, and I think one must raise.the question as to whether or not there are other factors than just additive which are important in increasing the rates of adverse reaction to drugs in patients taking many medications. Our present interpretations are that at least one of the factors which may play a role here is the simultaneous administration to the patient of more than one drug, resulting in an inadvertent interaction of two drugs, resulting in an ill effect that neither drug alone might have produced. I can give you certain examples of that. One of the most common interactions that we observe resulting in ill effects in patients is the simultaneous administration of a drug such as digoxin or digitalis PAGENO="0129" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 567 to a patient simultaneously receiving or subsequently receiving a diuretic such as chiorothiazide. The mechanism of the interaction here is primarily because the chlorothiazide reduces the serum potassium level and this potentiates the reaction of digitalis. One other such example is the simultaneous treatment of the patient with streptomycin and kanamycin for infection. Both have significant toxicity upon the eighth nerve, the hearing nerve, and indeed this still is an important cause of deafness in such patients. In addition, we see patients who are treated with more than one drug for premedication in a variety of instances causing ill effects. I would like to cite for you here one specific example to illustfate the point. During the course of our studies we observed one patient, for example, who was in the hospital because he had chronic pulmonary disease and he had a lesion in his lung. The h~sion in the lung needed investigation because the physician thought it might be a tumor. So he ordered that the patient be bronchoscoped-which is put- ting a tube down the breathing tube-and taking a look in the bronchial tree to see whether or not he can see a tumor or any other lesion. Premedication for bronchoscopic examination commonly employs the use of a barbiturate narcotic such as Demerol, or frequently an- other agent which may include atropine, phenothiazine, or other drugs. He was given such medication prior to his bronchoscopic examination but he developed respiratory arrest. He stopped breath- ing. He was given artificial respiration and recovered but it was de- cided he should not be bronehoscoped because he couldn't be without this premedication. The physician still had no interpretation as to the nature of the man's lung lesion. It was decided to do a bronchogram, which is put- ting a dye down into the bronchial tree and taking an X-ray of the chest. But unfortunately, the physician prescribing the bronchogram didn't realize it required the same premedication as did the bron- choscopy. The three medications were given as premedication. The patient not only developed respiratory arrest but also developed cardiac arrest and died. This illustrates the synergistic effect of different drugs which have a very profound effect upon the respiratory-cardiac functions in an individual who is inordinately predisposed to reaction. This gives you some indication as to the nature of the drug mixtures or the admin- istration of more than one drug to a patient at a time which can result in ill effects which neither drug alone necessarily would pro- duce. Obviously, in a patient who is receiving 16 to 20 drugs or more one correspondingly increases the risk of synergistic drug reaction~ that can produce ill effects. (8) Some of the factors influencing rates of adverse reactions to drugs were: renal failure, gastrointestinal disease, previous history of drug reactions, allergic disease, acute and chronic infection, liver dis- ease, in addition to other factors mentioned above. Interpretations: From the observations we have made, the follow- ing interpretations seem warranted: 8i-280-pt. 2-67-----9 PAGENO="0130" 568 COMPETITIVE PROBLEMS IN THE DRIJG INDUSTRY (1) Adverse effects of drugs are an important health problem. (2) Adverse effects of nonprescription drugs, as well as pre- scription drugs, are responsible fOr hospitalization and death of a significant number of patients; (3) It is unlikely that the large number of nonprescription drugs taken by patients, and prescription drugs administered by physicians are necessary or required. (4) The number of different drugs taken by, or given to, patients undoubtedly contributes to the total cost of drugs for the patient. (5) Reduction of the number of drugs taken by or prescribed for patients would undoubtedly reduce the frequency of adverse drug effects and also reduce total drug costs. (6) Continuous evaluation and study of drug usage and ill effects of drugs in sick persons treated by various physicians should provide increasing understanding and elucidate measures to reduce risk from drugs and prevent indiscriminate drug usage. (7) Development of procedures for public instruction about drugs, their proper and improper use, is necessary. (8) Development of better methods than now available for informing physicians about rational and irrational drug usage is required. (9) Continued reliance upon pharmaceutical manufacturers and their representatives as the only major source for public and physician instruction about drugs is unwise. Much information provided by manufacturers is quite useful, but profit motive and bias are not proper bases for guiding the public and medical pro- fession about the use of drugs. Obviously, there are certain ~dnds of individuals who when given drugs will have trouble with them, whereas other individuals given the same drugs will not. What the factors are that increase the suscep- tibility of one person to the ill effects of the drug and why another person is spared these ill effects I think at the present time is not com- pletely understood, but we do have some information as to what these factors are. Senator NELSON. I notice on item 3, page 2, that you state: It is unlikely that the large number of nonprescription drugs taken by patients and prescription drugs administered by physicians are necessary or required. How serious, in your judgment, is the problem of overprescribing or misprescribing of drugs ~ Dr. CLurF. I would say overprescribing is probably a greater prob- lem, at least as I see it, in the hospital. I can't speak about outside of the hospital because I have not studied the problem out of the hospital and I don't know of anyone who has. But in the hospital I would say that the major problem is overprescribing rather than misprescribing. There are innumerable illustrations of this that I think one could cite. I would like if I may to cite some of my own personal opinions about it. For example, it is common practice in hospitals for the physician to write an order for the patient to receive a sedative at night if the patient doesn't sleep. Now I don't know if any of you have ever been in a hospital. I work in one. I have been in one as a patient. But commonly in the hospital lights are turned out at 10 o'clock or 9, and ind~ed it is expected that the PAGENO="0131" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 569 patient can go to sleep at that time. Now generally my sleeping habits are such that I don't go to bed until 12:30 at night, and in the hospital I find it very difficult to go to sleep before 12:30 anyhow. I think it is a little disconcerting to have the physician order a sedative that the nurse can administer at 10 o'clock at night when indeed I don't feel like going to sleep until 12:30. In essence I think this is a manifestation of indiscriminate prescribing. In addition, another illustration of this would be the common habits of physicians in hospitals to order laxatives, what they call PRN- if necessary. And indeed this leaves the decision as to whether or not the patient should get a laxative up to the nurse. Now the nurse gen- erally walks around the wards every day and asks the patients if they have had a bowel movement. Now many nurses feel that it is absolutely necessary that every patient have a bowel movement once a day, but it is not uncommon at all to find some patients in the hospital whose natural habits are to have a bowel movement every 3 days. But, because the nurse feels that it is important that they have a bowel movement every day while they are in the hospital, they are forced to have one by being given a laxative every night. So that in essence I think this is again excessive use of medication. Sedatives I think are equally overused. It is common when patients are in the hospital for them to be disturbed, particularly if they are elderly. Many patients admitted to the hospital are frightened and anxious, and in order to maintain quiet in the wards, the physician may administer sedatives and tranquilizers to the patient merely to maintain adequate comfort for the environment of the ward, when indeed there are many other ways in which the patient's anxi~ty and fear could be allayed without the administration of drugs. In addition to that, I think that the use of antimicrobial drugs in the hospital is markedly excessive. As an illustration of this- Senator NELSON. What kind of drugs? Dr. CLUFF. Antibiotics. As an illustration of this, in the surveillance of the use of antibiotics at the Johns Hopkins Hospital in the months of December and January, it is not at all uncommon for 40 percent of the patients in the hospital to receive at least one antibiotic, and it is inconceivable to me, because one of my major interests is infection, to believe that 40 percent of the patients in the hospital require an anti- microbial drug, so that in this instance I think that there is no ques- tion but that these drugs are also used excessively. It is not at all uncommon for a physician in practice to administer penicillin, for example, or any other antimicrobial drug to patients with viral respiratory disease when it is patently clear from the scien- tific literature this is absolutely of no value. So in essence I think it is perfectly obvious that drugs are used excessively by physicians. In addition to that I think it is important to emphasize as I hope I pointed out before that the population as a whole, the public itself, seems to have the very distinct impression that you can cure almost any ill out of a tube, box, bottle or can and indeed it is very common for patients as I have indicated before to buy nonprescription drugs excessively in the drugstore, in order to treat whatever ill they happen to think they may have. PAGENO="0132" 570 COMPETITIVE PROBLEMS IN TIlE DRuG INDUSTRY So I think that the problem is very much broader than just over- prescribing by the physician. I think that the public at large also uses drugs excessively. Mr. GORDON. Dr. Cluff, one of our witnesses a couple of days ago stated that the enormous pressure of advertising and promotion causes the use of unnecessary or unsafe drugs. Would you comment on this pk~ase? Dr. CLUFF. Well, I can cite an opinion here if I may, because I don't know of much data on this. I can cite one thesis study that I have read since I have been at the TJniversity of Florida, done by a Dr. Murphree, who examined a rural population of Florida as a part of a sociological study. She tried to get some idea as to what were the factors that in- fluenced the population in the use of drugs, and there was no question that the single most important factor which she uncovered was advertising. I would agree that advertising is probably the single most important force influencing the use of drugs. Many personal examples one could cite about this as well. I am sure that any of you who have families at home whose wives and children go to the drugstore occasionally to buy things are as aware as I am that they too are strikingly influenced by the advertising of the products they buy and the number of products they buy when they go to the drugstore. So I would have to admit that this is a factor about over-the-counter and prescription drugs. There is also no question but that it has a pronounced influence on how physicians use drugs. Many examples of this I think I can cite. I became interested a few years ago in Baltimore of why it was that one of the most commonly used drugs for the treatment of diarrhea disease was a drug named Donnatol, and in this instance I began to make inquiries about this, and it seemed to me, after looking into the situation, that the factor most influential in determining use of this particular medication for diarrhea was that the pharmaceutical repre- sentative for a long time had made it a practice to keep boxes of the drugs in the emergency room at the hospital so that the residents would have it available to treat patients who come in with diarrhea without having to write a prescription for them. This practice we did curtail. Subsequently I believe, the use of this medication did decline in the hospital. These are largely opinions again let me point out. I don't have any factual basis nor any pub- lished papers establishing this point, but I don't think this can be argued. One other example of this which recently came to my attention, which I will be happy to cite if you wish, involves a drug called Declo- mycin-it is an antibiotic-very commonly used in the State of Flor- ida. Coming from a little further north where the winters are much more severe, we were very much concerned even there about the use of Declomycin in the summertime because it is a drug known to be a potent photosensitizer. By that I mean that when this drug is taken, and the patient is exposed to sunlight, he very commonly will have a marked acute skin eruption. But in Florida, where the sun is out so much of the time, the use of De9lomycin in that State seemed to be a little unwarranted when other drugs, most of the other tetracyclines, are pretty well known to be equally as effective against infection. But I suspect the reason for this PAGENO="0133" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 571 is that the pharmaceutical detail man in the State of Florida, who is interested in making sure that Declomycin is sold, is a very forceful, a very aggressive, and a very charming person~ I wouldn't be a bit surprised, again opinion mind you, not statement of fact, I rather suspect that this is an important determinant as to why it is that in the State of Florida, a drug such as Declornycrn is used when my own experience would lead me to believe that this is not a drug that should be employed in people who are readily exposed to sunlight. Senator NELSON. Why wouldn't the prescribing physician be aware of the photosensitive side effect of this drug? Dr. CLUFF. Well, generally it is deemphasized, of course, by the man trying to sell the drug. He is interested in seeing that the physician buys the drug. He isn't interested in discouraging his use of the drug, so generally he will deemphasize it. The usual approach is that most of the patients requiring this drug are sick enough so that they are likely to be in the house and not outdoors. But that doesn't seem to me to be necessarily a justifiable use either. In addition to that, of course, he uses other types of information which may be pertinent. He has certain data on absorption, frequency of administration of the drug and blood levels which he assumes are important in evaluating the efficacy of the preparation, and these are impressive pieces of evidence when one looks at it, but they may not be the important reasons why the physician uses the drug when his con- cern is the treatment and the cure of the patient's disease and these may have no relevance to that. Senator NELSON. Is this Declomycin? Dr. CLTJFF. Yes. Senator NELSON. As a matter of ordinary practice, this drug comes to the attention of a physician. What does he rely upon to make his determination as to whether or not he will use that drug? Dr. CLUFF. He evaluates the information provided by the phar- maceutical representa~tive. Now I am speaking here primarily of the physician out in practice. Within the hospital we have other means of controlling this. But outside of the hospital the physician is to a certain extent dependent, as a matter of fact I know he is pretty heavily dependent upon, the pharmaceutical representative for in- formation about new drugs, even information about old drugs. And if he evaluates the information provided to him, lie will try the drug and gain some personal experience with its use, and predicated on his experience with the drug he will either then continue its use or discontinue it. Senator NELSON. The drug Declomycin, for example, comes to the attention of a Florida physician you say, the drug causes a prob- lem from a photo-sensitive standpoint and it is used a lot there.' Where else can the doctor readily look to find out about the drug other than the detail man or the advertising of the company? Dr. CLUFF. Well, if he happens to come to one of the symposia,~ seminar or local hospitals that I happen to be speaking at or visiting,~ lie will hear about it from me. If he happens to read the New England Journal of Medicine or the American Journal of Medical Sciences or the other established medical journals, the Annals of Internal Medi- cine, he can acquire the information in this regard. Generally, how- PAGENO="0134" 572 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY ever, a busy physician in practice doesn't have the time to devote to reading the available literature. Senator NELSON. Of course, it would only be accidental whether or not he attended a conference at which- Dr. CLtrFF. Of course, my concern about this, Senator Nelson, is that from the studies that have been done, the physicians who go to symposia and seminars for educational purposes are generally the same 10 percent, so in essence one is reaching a very small segment of the total population of physicians. The person who on a person-to- person basis attempts to keep the physician informed about drugs by visiting him in his office and in the hospital where he works is the pharmaceutical detail man. Senator NELSON. It may be very good from his point of view if he has a special case to be made in behalf of whatever product he is handling. Dr. CL1JFF. He is interested in selling it and I would never argue with a man's capacity to sell a product. My concern is really sum- marized in item 9 of my interpretation which indicates that con- tinued reliance upon pharmaceutical manufacturers and their rep- resentatives as the only major source for public and physician In- struction about drugs is unwise. Much information provided by manufacturers is quite useful, but profit motive and bias are not proper bases for guiding the public and medical profession about the use of drugs. Senator NELSON. What, in your judgment, is the solution to this problem, which has been raised with identical observations made by a number of very distinguished witnesses-pharmacologists and physi- cians? What is the answer to this problem ~ Dr. CLUFF. Well, I think that one can look at this in two ways. One~ a personal opinion as to about what I think oup~ht to be done. Second would be to examine what efforts are being made to do this. I think we might examine the latter first. The American Medical Association Council on Drugs has established a series of panels on a variety of different kinds of drugs and the reactións they cause. I hap- pen to be chairman of one of those panels, and indeed a great effort has been made by the use of the Journal of the American Medical As- sociation to make available to the practicing physician expert opinions and expert guidance on the use of drugs by publication in the Council of Drugs reports in the Journal of the American Medical Association. In addition to that, the Food and Drug Administration, as you know, is making some effort in the distribution of advisory comments and warnings to the medical profession about certain types of drugs. In addition to that, the National Academy of Sciences' National Research Council Drug Research Board, of which I happen to be a member, also has currently under consideration establishment of a few centers trying to explore the methods that might be better employed to guide physicians in practice about the use of drugs. My own personal feeling about this is this-in addition to that, of course, there are skads of publications and many brochures. A physi- cian could fill his office up with these. Personally, I don't think these are very effective. The thing that the pharmaceutical representative has done, which is the major reason why he is so effective as an educator of the physi- PAGENO="0135" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 573 cian, is his person-to-person contact. As you will note from the data available, there are many thousands of pharmaceutical representatives in the country whose sole purpose is to visit physicians in their offices and talk to them about drugs. Somehow or other, I don't wish to necessarily imply that we ought to stop this, but somehow or other we have to provide some more rational basis for advising physicians about the use of medication, and I think that somehow or other we must try to foster and capture the methods of the pharmaceutical manufacturers' detail man by establishing some mechanism for better relationship between those individuals who are capable of instructing physicians in practice by making available th~ opportunity to them to visit the physician in their area of operation and work. Senator NELSON. Whom are you talking about now? Dr. CLUFF. The Drug Research Board has a proposal under consid- eration at the present time to establish a few such pilot programs to develop programs of what we might call therapeutic consultants, asso- ciated with medical centers. Persons whose primary responsibility would be to visit physicians in their hospital and provide rational information on drug use. Conceivably, this could be one way of ap- proaching it. I suspect there are others. My other attitude about this is that the medical profession itself must begin to assume an increasing responsibility for its own edu- cation about the use of drugs. I think the medical schools in the country generally have adopted methods of education of the phy- sician in practice which we have already recognized as archaic and no longer used in teaching medical students, and that is the didactic lecture system which is, in essence, what we generally employ when we go out into communities to talk to physicians. We all recognize that this is not the most effective way to teach, and furthermore, as I have indicated, only a small proportion of all of the physicians that practice generally attend such symposia and seminars. In addition to that, I think that medical schools must begin to assume some increasing roles in this as well as the American Medical Association. In terms of advice to the public, how the public can be guided about drugs, I am very much concerned about the fact that the only things they read either damn drugs or praise them~ Neither the advertising material of the manufacturer or the damning articles that are published in the common journals. I think that the public needs to be informed that they have a re- sponsibility to be discriminating in the use of drugs, but they need to be advised as to how to be discriminating. I personally feel that the education of the public should be a joint enterprise between the pharmaceutical manufacturers, the Food and Drug Administration, and the medical profession. How this should be structured I don't know, hut I rather suppose that the Food and Drug Administra- tion should take the leadership. Senator NELSON. If a physician is practicing in a large hospital where you have a formulary, a formulary committee, and a number of specialists of various kinds recommending what goes in the for- mulary, you have the situation where clinical studies can be made PAGENO="0136" 574 COMPETITIVE PROBLEMS IN THE DRIJG INDUSTRY and information given, it is a relative simple matter for the physician practicing there to be informed. Dr. Cr~uFr. Well, I would challenge that to a degree. I would agree that the larger the medical center and the more closely it is affiliated with a medical school, the more likely is there to be an effective for- mulary and educational system. On the other hand, I think that it is important to recognize that the majority of hospitals in this country are not major medical centers, and they are not associated with med- ical schools, and in these hospitals generally they are operated by very busy physicians in practice, and they are dependent upon themselves for controlling this problem, and for the most part I doubt if such institutions have done well. Senator N1~rsoN. I was only as a preface saying that in those hos- pitals where they do have a formulary, it is relatively easy. Dr. CLUFF. Yes. Senator NELSON. Compared to what the individual private prac- ticing physician's situation is. Dr. CLUFF. Yes. Senator NELSON. What puzzles me is why, if it is possible for a New York City hospital or some large group health organization with 94,000 members, over 200 doctors, and a large formulary committee, if it is possible for them to establish a formulary, based upon their experience and the specialists they have, why isn't it possible to have a national formulary that names all the drugs, generic as well as trade name, attest as to their reliability, gives all of the side effects that are known about the drug, so that the physician, when he is prescribing, can open up an index to the book and see the generic name, all the various trade names, the side effects, and so forth? Why isn't it possi- ble to do that? Dr. CLUFF. Well, I might just make one or two comments about that, because I was involved in the development of a formulary at the Johns Hopkins Hospital. In the development of this formulary we took it upon ourselves to review the formularies presently available or at that time presently available in other major medical centers. One of the important things is that the formulary we came up with specifically met the needs and requirements and interests of the physicians on our staff. In other words, they were the ones who decided what drugs were essential in their practice. The formulary that we adopted was not necessarily similar to the one, for example, in a major New York hospital. I think in a sense that the physicians who are requesting the drugs should have the op- portunity to participate in the drugs that they select to use, and in- deed, if you establish a national formulary, you take away from the physician in these various hospitals where they are functioning, the opportunity to participate in the decisions. Senator NELSON. Why would that take that away? Dr. CLurF~. Well, because presumably if you are going to have a na- tional formulary, you are going to have to have some body of people that can't represent all of the many thousands of hospitals in the coun- try involved in the production of such a formulary. I think you could end up with a very desirable and interesting for- mulary to use, but I do believe that it is desirable to provide the physician with some flexibility in the selection of the medication. PAGENO="0137" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 575 Senator NELSON. I am not suggesting that even the doctor would have to pay any attention to it. We have an abundance of testimony from very distinguished professors. Dr. Modell, Dr. Burack, and a whole series of pharmacologists simply saying really that the doctor doesn't have any basis, good basis for making judgment between drugs as to relative efficacy, that there are so many drugs that he really doesn't know. In effect, in his testimony he said-he didn't put it that way-that the doctors really don't know what they are doing with drugs. All I am saying is give them a formulary and let them be guided by it if they wish to. Nobody suggests that a formulary be imposed on the doctors. What basis could a doctor have for making a judg- ment among 7,000 drugs? We had pharmacologists here who spend fulltime in this field, and they say they can't keep up with the drugs. Obviously, the physician can't either, so, as you said earlier, what he is really doing is that he is relying on the detail man. The detail man is incompetent to make the decision. And if he does make it, he makes it in behalf of the corn.- pany he represents. That is the name of the game. It just seems scandalous to me that a private practicing physician really has no place to turn. You say that he can go to attend a con- ference. But you also say this is the same 10 percent. He really doesn't know what he is doing in a substantial number of cases. He doesn't know all the trade names, so he may have a patient with a trade-name drug that has a side effect and the same patient goes to another physician and that doctor prescribes another drug that is the same. He has no way of knowing that it is the one the patient had a side effect with. The doctor is just in a jungle in this field I think. Ac- cording to the distinguished witnesses we have had, a major percentage of physicians really don't know what they are doing. Dr. CL[TFF. I agree. Senator NELSON. I say what is the answer. Do you agree with that? Dr. CLTJFP. I agree completely with what you have said. I think the real difficulty is, can you solve the problem that you have cited by just establishing a formulary, and that I am not convinced of. Even at my hospital at the present time or even at Johns Hopkins where we established a formulary, I don't think that necessarily con- trolled or prevented the indiscriminate and unwise use of drugs. Senator NELSON. At least it is a source of information for the physi- cian, isn't it? Dr. CLTJrF. Well now, it depends on what you mean by a formulary. If you are talking, and perhaps this is a point where we need some definition, if you are talking about a formulary as being a text on pharmacology which in essence has a listing on all of the available drugs by generic name, let's say, and has a description of the pharma- cological action and indeed has information about side effects, their chemistry, and so on we have some superb books available at the present time to provide such information for physicians. The classic in the field is "Goodman `and Gilman on Therapeutics," so in essence such texts are available. My only question is, just providing the book won't necessarily make the physician read it, and thereby won't necessarily improve the wise use of drugs. PAGENO="0138" 576 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY Senator NELSON. Is there a readily available source of information so that the doctor can open up a book and see a listing of all generic names and all trade names and readily available summary as to what the side effects are, a scientific evaluation of the clinical information that is available from experience with this drug from all over the United States. It is one thing to go to the New England Medical Journal, it is another thing to read a medical letter one month and miss it the next month. But we have drugs. They are used all over the United States, and I suppose a relatively tiny, small number cover 90 percent of the treatment, it may be 100 drugs, it may be what, I don't know, but what does the private practicing physician do? Can he turn to an index and see them all listed and a patient comes in and says "I have had Pentids." The doctor knows Pentids but there are 10 other trade names he doesn't know. It doesn't strike a point with him that the person is allergic to, in this case, penicillin. Senator LONG. Could I just interrupt you, Senator Nelson? I want to make a brief statement. I am participating and cochairing a hearing taking testimony from Dr. Galbraith, Mr. Turner, assistant attorney-general, Dr. Mueller of the Fedei~al Trade Commission, and a number of others, dealing with a monopoly problem. I just wanted to pay my respects to the magnificent job you are doing. I was once chairman of this subcommittee, and I must say that I think it was a wise decision that you, Senator Nelson, are now chairman of this subcommittee, because you have found the time to do a magnificent job. As chairman of the Finance Committee and assistant majority leader I have been very busy, as members of the committee so well know, and haven't been able to participate in these hearings as I would have wanted to do. May I say that Senator Nelson and the staff working with him have done a magnificent job in developing this record about drugs and drug prices. We have been keeping up with it in the Senate Finance Committee, and I really believe that the results of the work done here will have a great deal to do with proper Federal legislation, particularly in the medicare area and the medicaid area, where we anticipate that we can find better answers to existing problems and perhaps ultimately save the Government hundreds of millions of dollars a year as a result of the fine job that is being done in exploring and understanding these problems. One thought has occurred to me in connection with, recent dis- closures, particularly those that were the subject of press coverage in this morning's newspaper. We should not permit any company to put any drug on the shelves-any drug which is other than what it is supposed to be-to do so is dangerous. it is a hazard to health. Proper inspection of all drugs should be an absolute must in the future. It should be required. We should not permit someone to market any drug that is not what it should be, or is less than what should be required, and we should have adequate inspection to assure proper quality. I believe that we will be achieving just those goals with legislation in the medicare and medicaid area as exemplified by the bill that the Senator from Wisconsin, Mr. Nelson, joined with me in cosponsormg. Having done that, having assured that these drugs have the quality that they should have, it would then seem appropriate that we ought to PAGENO="0139" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 577 try to guarantee to the public and the Government the benefit of genuine competition in the drug field. What you have done here, Senator Nelson, in bringing the facts out is extremely worthwhile and important. I would hope that when we look at this problem in the Finance Committee in connection with paying for drugs under medicare and medicaid, a great deal of the work will have been done for us by this subcommittee of the Committee on Small Business. I am proud to be a member of this subcommittee, Senator Nelson, once having been its chairman. I think you are doing a magnificent job, and we are very proud that you could find the time and devote the energy to do this vital work along with the capable staff you have here, Ben Gordon and others, who are helping dispose of the old myths and bringing out the truth. I think you are doing a very good job and we appreciate it. Senator NELSON. Thank you, Senator Long. The staff of the Finance Committee, through your direction and cooperation, has been very use- ful to the committee. We have had testimony, as you know, from a number of very distinguished witnesses, including the witness who is before us today. I think it has developed some very valuable and a useful record for the committee, and out of it I think it will furnish the basis for some education plus, possibly, some useful legislation. I appreciate your remarks. Senator LONG. We are happy to make available such competence as our staff possesses in this area, and we would hope that at a suitable time, you could return the favor. Thank you very much. Senator NELSON. Thank you, Senator Long. What I was getting at, Doctor, is this: We have had a number of physicians, pharmacologists in teaching institutions, who say the in- formation isn't readily available to a doctor. All I am saying is, why couldn't something better than what we have got at least be made avail- able to the physician? Dr. CLTJFF. I think it could be, and as a matter of fact, I know at the present time such a formulary as I think you are talking about is either under advisement or is very soon to be developed. My point here was that I had assumed that you were speaking about a restrictive formu- lary. Senator NELSON. No; I was just talking about- Dr. CLTJFF. Now, I gather you are talking about an information formulary. Senator NELSON. I wasn't using the term in the same sense as a hos- pital formulary- Dr. CLTJFF. No. Senator NELSON. Where they may at a hospital say you may not, except with special permission or under certain conditions, use any- thing except what is in our formulary. I realize that each staff-and, perhaps, it depends upon the kind of hospital-determines the nature of the formulary. I was thinking of one that would be informational and useful, par- ticularly to a private practicing physician who doesn't have the bene- fit of a hospital staff and a hospital formulary and easily available PAGENO="0140" 578 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY consultants who are specialists, pharmacists, pharmacologists, or physicians who have been using various drugs. I was thinking of something for him that would be advisory, not compulsory. I am wondering why we couldn't develop, why it would be im- practical, to develop something like that. Dr. CLUFF. I think it would be quite practical and highly desirable, Senator Nelson, in view of that position. I think it was a misunder- standing on the interpretation of the word "formulary." In many hos- pitals, of course, a formulary is considered to be restrictive in terms that these are the only drugs that you can use. We won't give you any others. An informational formulary you are talking about, or a drug com- pendium, it might be called. One providing discriminating information about drugs, their use, their problems, and their hazards, that indeed could be provided every physician in the country; I think is a very worthwhile endeavor, and you perhaps know more about this than I do. But I know that this has been discussed by the National Research Council, Drug Research Board, and it was my understanding that there was at the present time collaborative effort between the pharma- ceutical manufacturers, the Drug Research Board, and the Food and Drug Administration, in an effort to try to come up with just such a compendium as you describe. Senator NELSON. I did not know there was this proposal. I have some legislation in a bill pending on that point. Well, go ahead. Do you have something you haven't covered? Dr. CLUFF. I really don't know whether there is anything else I can add. I would like to summarize, perhaps, the statement that synthe- sizes my own feelings about this, and that is that one of my major concerns about drugs, and indeed this involves their cost, is what I would consider to be an excessive use of nonprescription drugs by the public at large and an excessive use of drugs by the physician. Generally, I think this is attributable to unavailability and inade- quate guidance and information about the actions and interpretations in the use of drugs. I think in this instance that if something can be done to improve the present mechanisms of consumer buying, if one wants to use that point, for the public, about how they buy drugs and how they should not buy drugs, and how they make decisions about buying drugs, and what are some of the things that ought to be considered, this would be of great value. The exact details and implementation of it is something that will have to be worked out. My own personal feeling is that the leadership for the development of such guidance for the public must come out of the Federal Government, probably out of the Food and Drug Administration. So far as the physician is concerned, I agree the compendia would be a very desirable thing. Personally, I am not at all convinced that that would solve the problem of the excessive use of drugs by physi- cians. I still think that one must recognize that some method must be provided for improving our present guidance to physicians about the use of drugs, rather than, as we do now, depending so heavily upon PAGENO="0141" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 579 the pharmaceutical manufacturers' detail representative for the prin- cipal education of the physician about drugs. Senator NELSON. You are addressing yourself to the basic question of the continuing education of the physician in the field of drugs. Dr. CLUFF. Yes; because I happen to feel that that is the only ulti- mate, permanent, long-lasting resolution of the problem we are talking about. Senator NELSON. I would certainly defer to your judgment on that. It is correct, and perfectly logical, that that is probably something that is a responsibility in one way or another of the profession itself. Dr. CLUFF. I agree. Senator NELSON. It seems to me from everything that I have listened to over a period of time, that this is a problem of such size that it is necessary for FDA or somebody in a central place with the authority to test drugs, clinically, and chemically, and the resources to gather all such information together and then to put together a compendium with the advice of the appropriate authorities. Dr. CLUFF. I think it ought to be more than advice, Senator Nelson, because in essence the Food and Drug Administration, does not now have, nor do I visualize it will ever have the necessary highly trained, qualified experts, to prepare such a compendium independent of ac- tive cooperation and collaboration by the medical profession at large. Senator NELSON. I meant that. Dr. CLTJFF. Yes. Senator NELSON. I meant it would have to go in the same way that the pharmacopeia- Dr. CLUFF. Yes. Senator NELSON. They would have to go to all the resources there are, private and public, in the country for assistance in drafting such a compendium and keeping it up to date. Dr. CLTIFF. Yes, this is the only way the medical profession will ac- cept such a compendium as a legitimate guide, is if they were active participants in its structure. Senator NELSON. They would have to be. That is where the source of the information, in fact, is. Dr. CLUFF. Yes. Mr. GORDON. Is there any information to indicate whether brand~ name drugs are more likely or less likely to cause bad reactions than under the generic name? Dr. CLUFF. I have no evidence to indicate that that is the ci~se. Mr. GORDON. Would it be possible to project on a national basis how many people are needlessly injured or killed as the result of poor drug therapy? Dr. CLUFF. Well, you probably know these figures better than I d~, Mr. Gordon, but if one just extrapolates the figure, of 5 percent of the patients being admitted to medical service in a hospital for adverse effects of drugs, and generally the medi~al service of the hospital will represent anywhere between one-third and one-half of all patients in the hospital, then extrapolation nationwide in terms of the total numbers of patients in hospitals in the country, I think these figures would stand up. Essentially compai~able data has been obtained in three different institutions. I think one can ~et a rough estimation as to the total magnitude of the problem of the ill effects of drugs requir- ing hospitalization in th~ country at the present time. PAGENO="0142" 580 COMPETITIVE PROBLEMS IN THE DRuG INDIJSTRY Mr. GORDON. That would be? Dr. CLUFF. It would be staggering, but I have never sat down and figured it out. Mr. GORDON. But it would be a good, at least, first approximation? Dr. CLTJFF. Yes. I happen to feel that the problems from the ill effects of drugs is a major public health problem at the present time. Senator NELSON. A major? * Dr. CLUFF. A major public health problem. Mr. GORDON. One other question: concerning false and misleading advertising, what effect does that have on drug-induced illness? Dr. CLUFF. The way it has an influence on drug-induced illness is because it increases the indiscriminate and excessive use Of drugs, and one of the premises of our observations is that you increase the total number of drugs that the patient gets, and you correspondingly in- crease the trouble you are going to have with drugs. Mr. GORDON. When you use the term "education" with respect to the detail man as a source of education, are you using the word "educa- tion" with quotation marks around it, or are you not? Dr. CLUFF. Well, even bad education is education, Mr. Gordon, and in this instance I would say that it is a matter of judgment `as to whether what he is providing in the form of educational material is good or bad. I personally feel that in every instance that T know of, it is always biased, it is always associated with profit motives, and for that reason, I don't think that it is good guidance alone for the physician in prac- tice to use. Senator NELSON. That is all the questions we have. Dr. Cluff, we appreciate very much your taking the time from your busy schedule to come here. Your testimony has been very constructive and very valuable to us, and w~ appreciate your taking the time. Dr. CLUFF. Senator Nelson, I appreciate the opportunity to come here. Thank you. Senator NELSON. We will take a 5-minute break, and then we will take the next witness. I have `some other business this afternoon. (Whereupon, there was a short recess.) `Senator NELSON. We will resume the hearings. We will now hear from Dr. Margaret McCarron, associate clinical professor of medicine, University of Southern California School of Medicine. Dr. McCarron, we appreciate very much your taking the time to come and testify today. You may present your testimony~ in any way you wish. If you don't mind, we may interrupt from time to time with questions. PAGENO="0143" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 581 STATEMENT OF DR. MARGARET M. McCARRON, P.A.C.P., ASSOCIATE CLINICAL PROFESSOR OF MEDICINE, UNIVERSITY OP SOUTHERN CALIFORNIA SCHOOL OF MEDICINE~; ASSISTANT MEDICAL DI- RECTOR AND CHAIRMAN OP THERAPEUTIC COMMITTEE, LOS ANGELES COUNTY GENERAL HOSPITAL, LOS ANGELES, CALIF. Dr. MCCARRON. I would prefer to read it. The first paragraph is an explanation of the size of the hospital and the type of staff we have. The Los Angeles County General Hospital is a 3,000-bed acute medi- cal and surgical hospital with a physician staff composed of the teach- ing faculty of two medical schools-the University of Southern Cali- fornia School of Medicine and the California College of Medicine of the University of California. This hospital serves as the primary clinical facility for 311 medical students. It also has an intern staff of 225 and 336 resident physicians in training. There are 213 hospital-based physicians and 2,444 attend- ing physicians; these physicians are all in private practice, supervis- ing the care of the patients and instructing the students, interns, and residents. The hospital also has a school of nursing with an enrollment of 389 students. One of the primary purposes of this hospital is to train physicians and nurses. A drug formulary system has been in effect at the Los Angeles Coun- ty General Hospital since July 1964, and has had enthusiastic accept- ance by the medical, nursing, and pharmacy staffs. The formulary system depends on a competent, well-informed ther- apeutics committee. The committee, serving in an advisory capacity to the medical director, formulates all policies and procedures relating to drug use in the hospital. The therapeutics committee at the Los Angeles County General Hospital consists of physicians from medical admin- istration and the departments of medicine, surgery, outpatient serv- ices, and clinical pharmacology; a pharmacologist, the chief hospital chemist, the chief hospital pharmacist, and the director of nursing. I. REASONS FOR ADoi~rING FORMULARY SYSTEM A. Need for "standard" familiar medications Before the formulary system was adopted, more than 1,500 different drugs were stocked in the Los Angeles County General Hospital phar- macy. These were dispensed either by generic name or by brand name, depending upon the physician's order. Because of the similarity of the names of some drugs with widely different activity-for example: disodium edathamil, used to lower blood calcium levels; and calcium disodium edathamil, used as an antidote for lead poisoning-and the confusion resulting from having the same drug ordered by generic name or by one of its several brand name-for example: generic name, tetracycline; brand names, Achro- mycin, Panmycin, Polycycline, Steclin, and Tetracyn-an accurate ready reference was needed by the hospital nursing staff to prevent errors in drug administration. PAGENO="0144" 582 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY Senator NELSON. May I interrupt for a moment. Dr. MOCARRON. Yes. Senator NELSON. You mention on page 1 the similarity of the names of two drugs which have distinctly different uses. Do you~ have, from your experience, any examples of errors or confusion that has resulted from the multiplicity of brand names or names for any one drug? Dr. MOCARRON, Yes, we do. This is one that I picked because a doctor ordered disodium edathamil and the nurse was unfamiliar with that drug; she went to the shelf and found calcium disodium edathamil, she thought he forgot to put the calcium before it. We had one episode `where this particular drug was administered. If she has any question she can now go to the formulary and see that they are two distinctly different drugs. We felt that this was very important. We also had instances where a doctow would stop Achromycin and give Tetracyn. Senator NELSON. And do what? Dr. MOCARRON. And give Tetracyn-the same thing by a different brand. He didn't know it. There was one hospital in the Los Angeles area that did bacteriological sensitivity studies to tetracycline and to Panmycin, and they were the same drug. The doctors were giving two different sensitivity tests, because somebody in the bacteriology de- partment had gotten sensitivity discs for these two antibiotics, not realizing they were the same thing. We try to teach our doctors a little better than that. Because of recent advances in pharmacology, many potent thera- peutic agents are available that require special knowledge for safe administration. The medical staff needed an authoritative guide to the selection of drugs, an understanding of their pharmacological properties, information regarding adverse effects and oontraindica- tions, and specific instructions regarding the policies and procedures for using these drugs at the Los Angeles County General Hospital. Believing that the chance for error would be less if the entire staff became familiar with a limited number of medications, the thera- peutics committee at the Los Angeles County General Hospital evalu- ated each of the 1,500 drugs in the pharmacy, and in consultation with the medical staff, selected 550 items to be included in the hospital formulary as "standard" hospital drugs. Senator NELSON. These 550 made up your formulary; is that correct? Dr. MCCARRON. Yes. Senator NELSON. And the doctors are required to prescribe from the formulary? Dr. MOCARRON. Yes. Senator NELSON. Is your formulary all in generic terms? Dr. MCCARRON. Yes. In our formulary the drugs are listed in alpha- betical order by generic name. I have included a sample for you to see. It is exhibit D. We have the generic name at the top of the page, and that is how the drug is filed. We have brand names over at the side; in this case it was only one brand name, but the brand name is for iden- tification purposes. Then we have a cross index that lists the drugs by generic and brand name and refers a person to the proper page listed by generic name. Senator NELSON. Then you give the known clinical effect of the drug, side effects and so on? PAGENO="0145" COMPETITIVE PROBLEMS IN TILE DRUG INDUSTRY 583 Dr. MoCAimoN. Well, if you look at this particular one, you will find that there are many judgments in the write up that we include in our formulary. These are judgments made by the therapeutic committee. For example, where it says "Use of this drug," we start right out by saying "The usefulness of this drug is limited by its toxicity." Then we describe the toxicity in detail, and we try to discourage the use of this drug. We ask them only to use it for short periods of time, and it tells them in what situations this might be detrimental. Then we include in our formulary the scientific references so that they can look it up and get more detailed information if they are in- terested. But here is a concise summary. Senator NELSON. I notice that at the top on the right, you have the generic name. Then you list brand name. In your formulary, do you list all of the brand names? Is there only one brand name for this? Dr. MOCARRON. Yes, there is just one here that is commonly used. I am not sure if there is another one, but we would use all the common ones. Senator NELSON. So if you had tetracycline, for example, you would list all of the brand names, also. Dr. MCCARRON. Yes; that has eight or nine. Senator NELSON. Thank you. Dr. MCOARRON (reading). B. Use of the drug formnlary to protect the patient against eiroi~s in drug administration Although most of the necessary prescribing information is available in the package insert which accompanies each drug, these are easily misplaced on a busy ward and are not available to the physicians in the outpatient clinic. The hospital drug formulary provides ready access to concise, pertinent information. It provides information re- garding drug storage, mixing, and incompatibilities, as well as a cross- index of drug names, usual therapeutic range, maximum dose, and other information vitally needed to decrease errors and provide maxi- mum protection for the patient. Certain dangerous and rarely used drugs are available only to phy- sicians who have experience in treating the condition for which the drug is used. For example, all chemotherapeutic agents used in the treatment of cancer are only released to members of the hermatology department and the cancer chemotherapy team. This restriction is clearly noted in the drug formulary. U. Use of the forn'tulary system by the pharmacy for inventory con- trol in relation to cost saving and efficiency of operation The annual drug budget at the Los Angeles County General Hos- pital is approximately $2 million. This is based on maintaining an inventory of about 550 drugs. If we were not operating on a formulary system, the inventory would be multiplied many times on some items and the total inventory would probably be doubled. For example, the 1~67 edition of the "Physicians' Desk Reference" lists 108 different brands of antihistamines. The Los Angeles County General Hospital Drug Formulary lists eight. If we carried each brand according to the physician's preference, we would be unable to accurately gage consumption and would lose our advantage in com~ petitive bidding. 81-280-Pt. 2-67-----1O PAGENO="0146" 584 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY The drug purchasing system of the county of Los Angeles operates as follows: 1. The thei~apeutic committee evaluates the drug thoroughly and accepts it as a standard hospital item. 2. The chief pharmacist places the order and gives the purchasing department an estimate of consumption. 3. A drug specification committee writes the specifications for the drug. 4. Bids are accepted from all companies meeting the specifications. 5. The contract is awarded to the company with the lowest bid. These contracts are usually for large quantities of a drug-a 3-month, a 6-month, or a 12-month supply. Senator NELSON. How do you determine whether or not the com- pany bidding can meet your specifications? Dr. MCCARRON. Well, we have our own little internal system for this. First of all, we categorize companies by A, B, and C companies. Senator NELSON. By what? Dr. MC'CARRON. We call them A companies, B companies, and C companies. These are our lists that we have made up from experience. We also have some companies that we have had trouble with, for one reason or another, that we do not accept bids from. Either the labeling has been wrong, or we have consistently gotten into some type of problem, and we don't feel we can depend on that company, and we don't accept bids from them, they are informed of this. Then, when the specifications are made, we select the things that we think are important, and later in my statement, I will give you a little example of this. Some drugs we buy only from A companies; other dfugs aren't that critical, and we buy from whatever company makes it. When the drug is delivered, we quarantine it in the pharmacy. We bave a division in our purchasing department that does testing for us. There are certain standard tests that we do, such as tab~Eet disinte- gration time, and we check the labeling, and we see that the drug doesn't deteriorate on the shelf or change color. The specifications are different for each of these drugs. If they don't meet the specifications, then we return it to the company unused. We have quite an elaborate system to guarantee that the drugs we use in the hospital are effective drugs. Senator NELSON. Do you basically test them to determine whether they meet TJSP standards? Dr. MCCARRON. It depends. Some ,f them we actually analyze. If we are buying a drug from a company that we haven't dealt with before, and we feel it is an important drug, in our contract requirements we say that if we feel that the drug should be analyzed by an independeiit firm that we may have the right to do this, and the company pays for the analysis. We have done that on occasion. Mr. GORDON. Dr. McCarron, you assume, as I understand it, that if the drug, when you test it, meets your standards, your specifications, it will do the job you expect it to do; is that correct? Dr. MCCARRON. Yes. Mr. GoRDoN. And you have never been disappointed in that, have you? Dr. MCCARBON. Yes. Twill get to that. PAGENO="0147" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 585 Mr. GolmoN. All right. Dr. MCCARRON. It takes approximately 3 months between the letting of the bid and the arrival of merchandise-except in emergency situa- tions. I would like to emphasize here that at no point is the patient's welfare jeopardized. The hospital has a system of emergency drug ordering. Any physician may obtain any drug for a specific patient if he has an adequate reason why the standard medication is not suit- able. A pharmacist is on call 24 hours a day to provide this service. By controlling the number of items stocked in the pharmacy, an adequate flow of drugs can be maintained. All orders are placed when the inventory reaches a certain level, and the pharmacist has reason- able assurance that the drug will continue to be used. Before the for- mulary system was instituted, we had a significant problem in drug wastage. An item would be ordered for an individual physician; by the time the drug arrived, the physician may have decided to use something else, or he may have even left the hospital. Because the drugs were not thoroughly evaluated before the order was placed, some drugs were later found to be unsatisfactory or no longer popular and were not used. The hospital has recently implemented a program for computer control of drugs. At the present time, the pharmacist, using a type- writer computer terminal and a code system, generates a computer record of the patient's therapy and a label by generic name for all prescriptions. This information is also used for mvei~tory control. I would like to insert here that we have had problems when our prescriptions were not labeled by generic name. A very good example of this is hydrochlorothiazide, which is a diuretic agent that is. in wide use. This drug is made by three drug companies, Hydrodiuril for Merck, Oretic from Abbott, and Esidrix from Ciba. Because of our system of bidding, and the size of our hospital, we may have three brands of this drug in the hospital at the same time. Patients go to various clinics, and there are several conditions in which the patient would have edema, for which this type of drug would be used. The doctor in the medical clinic would order Esidrix. I am not sure of these colors. I think Esidrix is yellow. Then the patient would go to another clinic and the doctor there would see a little edema and would give her Oretic or hydrochlorothia- zide. The patient might end up with three bottles labeled with different names of drugs that were 0± different colors. The patient obviously thinks they are three different drugs and takes all of them. We have had patients admitted to the hospital with low potassium levels and with digitalis intoxication and all kinds of things that result from the fact that they have taken an overdose of this medicine-hydrochloro- thiazide. Now, we are trying to obviate this: one, by using generic names and having our pharmacist print the generic name on the label, so that the patient can at least see that, although the tablet colors are different, and the sizes are different, the drug is the same drug. We have also instituted a computer method, which isn't fully opera- tional at this date. What we would like to do is have a computer record of all the medicine that has been dispensed, and present that to the doctor when the patient comes in to the clinic. The computer record would also include any adverse drug reactions that the patient has had PAGENO="0148" 586 COMPETITIVE PROBLEMS IN TUE DRUG INDUSTRY or any known allergies, so that every physician, every time the patient is seen, has a record of the drug therapy, and any complications to it. Mr. GORDON. Dr. MeCarron, you heard Dr. Cluff's statement before, did you not? Dr. MCCARRON. Yes. Mr. GORDON. Now, wouldn't you say that the example you just gave us about Esidrix, hydrocholorthiazide, and the other one, is a good example of how the use of brand names induces overmedication? Dr. MOCARRON. Yes. Mr. GolmoN. Thank you. Dr. MCCARRON. Well, these errors, and they are errors that shouldn't occur, are errors that do occur in a very large hospital where many doctors are taking care of a patient and a patient goes to various clinics. We are trying to set up an administrative method to decrease that, but we have an added problem in that the names of the drug are not the same and the colors are not the same, and the patient gets con- fused. However, the patient could pick up some of these errors him- self, if he knew what he was taking. Senator NELSON. Is it also a problem of confusion to the physician? Dr. MCCARRON. Yes. Senator NELSON. Does he necessarily know all of the brand names? Dr. MCCARRON. No; and the generic names have helped us tremen- clously this way. The conversion to the new system was relatively easy because of the small number of items stocked in the pharmacy ai~d the availability of the drug formulary. A pharmacist without prior training in com- puter techniques was able to type 500 labels in 1 day after 1 week's experience with the method. If the number of drugs available was not limited, a significant portion of her time would have been spent in non- productive work inquiring the code name of the drug from the com- puter, with the hope that the computer had been programed for the item. II. SELECTION OF DRUGS To BE INCLUDED IN THE HOSPITAL FORMULARY Requests to add a drug to the hospital formulary are submitted to the therapeutic committee by a staff physician with the approval of his department head. The therapeutie committee determines the ac- ceptability of a drug on the basis of the following: 1. The drug should have specific pharmacological and bene- ficial actions. 2. The drug should have been adequately investigated, and well- documented clinical studies of the drug must be available. 3. The drug should have no serious untoward effects which would prohibit its use. 4. The cost of the drug must not be excessive as compared to the advantages over similar preparations. 5. If special packaging is involved, the committee evaluates whether the packaging constitutes enough of a saving in profes- sional time and ease of administration to justify increased ex- pense. (. With few exceptions, all medications combining two or more active drugs in one dosage form are not acceptable. The hospital PAGENO="0149" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 587 staff strongly feels that active drugs should be prescribed in amounts calculated to best serve the patient's needs; if two drugs are necessary, each should be specifically prescribed. In our ex- perience, set combinations of two or more drugs in one pill or capsule tended to make the physician think in terms of one or two tablets of the combination rather than the amount of each drug the patient actually required. After the drug has been accepted as a formulary item a drug bulletin is prepared and sent to the entire medical, nursing, and pharmacy staffs. This drug bulletin is an evaluation of the drug with specific instructions for use. (See exhibit A: Sample drug bulletin.') This shows the type of evaluation we give to a drug, the blue page. I would like to point out that this drug bulletin is sent to our staff mem- bers, and we have almost 2,500 doctors in private practice. They get these. We have requests from seven or eight of the private hospitals in the Los Angeles area, they get these and put them in their library. Physicians call us and ask to be put on our mailing list, so there is an active interest in achieving information about drugs. Senator NELSON. How often do you publish the bulletin? Dr. MOCARRON. About twice a month. Senator NELSON. And is this just one drug? Dr. MOCARRON. This happens to be one drug. What we try to do is, one drug bulletin a month describes in detail a new drug, and this isn't to- Senator NELSON. A new drug? Dr. MCCARRON. A new drug that we are adding to the formulary. Senator NELSON. I see. Dr. MOCARRON. The next drug bulletin is on adverse drug reactions, and in this we use the experience in our hospital. The Therapeutic Committee coordinates the adverse drug reactions, and the informa- tion that we receive from the FDA, and other sources in medical liter- ature, so that one bulletin describes a drug and the next one reports adverse reactions, especially ones that have occurred in the hospital. This has pretty wide circulation. A modification of the information contained in the drug bulletin is then prepared for the hospital formulary. The formulary page is then sent to the wards for insertion into the formulary. (See exhibit B: Sample page from Los Angeles County General Hospital Formulary.~) III. USE OF GENERIc NAMES It is the policy at the Los Angeles County General Hospital to stock and dispense drugs only under their generic or official names. The attending staff has agreed to prescribe by generic or official name and has approved of the dispensing of a drug by its generic name even when the prescription is written with a proprietary or patented name. The prescriptions used at this hospital are printed as follows: "R.X- or USP, NF, NND, or generic equivalent." (See "Exhibit C: Los An- geles County General Hospital Prescription Form." 3) All `drugs are purchased by generic name on a bid basis, with some exceptions. Certain critical drugs are specifically designated by manu- `See p. 595. 2 See p. 596. ~ See p. 598. PAGENO="0150" 588 COMPETITIVE PROBLEMS IN THE DRUG INDtTSTRY facturer. Example: Spinal anesthetics are purchased by brand name; the brand is changed only on the recommendations of the anesthesia department. On occasion, noncritical drugs are also specified by manufacturer because of previous experience in obtaining ineffective drugs when generic equivalents were used~ Mr. GolmoN. May I interrupt at this point? In these cases, did you attempt-I mean, did the hospital attempt-to determine whether those ineffective generic drugs, in fact, met the tSP or national for- mulary standards? Dr. MCCARRON. Yes. I will give you an example of that. We bought generic thyroid hormone. The TJSP standards for thyroid hormone are based on the iodine content which should have a relation to the hormone content. We started using drugs that had met our specifica- tions. Of course, we had no way of doing biological assays on this. After this generic thyroid hormone was in use in the clinic, the physician in charge of our thyroid clinic came in and told us there was something wrong with the medicine. People who had been well- controlled on two grains of thyroid a day were now taking three, four or five grains and were slipping out of control. On the basis of this, and he had at least 30 cases to show us, we pulled all the generic thyroid out, and we substituted it with the Armour brand thyroid. After we started using Armour, these patients went back to their two grain dose and we therefore said that we did not want to take any chance like this again. We know that Armour works, and we know that we have no way of evaluating the other preparations of thyroid and that the iodine is not an accurate evaluation. Therefore, we have specified only Armour brand thyroid. This has not been a thgnificant problem; the hospital purchases less than 50 drugs by brand name, and most of these are low-use items. But I would like to say that some of these things th~tt we buy by brand name are mainly used in critical situations. The cardiac glycosides, which are used for treating a patient with a severe condition where his life is threatened are very important, especially if you are giving this medication intravenously. We want to have standard medicines that the doctors are familiar with, and we just buy them from one company so that he always knows what he is giving. IV. VALUE OF MANUFACTURING CERTAIN ITEMS AT THE Los ANGELES COUNTY GENERAL HOSPITAL The pharmacy at the Los Angeles County Gene~d Hospital manu- factures many items for use within the hospital. This is not a com- mercial business. The manufacturing division was established to de- crease the cost of pharmaceutical supplies, to provide better service, and to aid the physician in the initiation of new treatment programs. Eighty-five percent of the intravenous fluids used at the Los Angeles County General Hospital are manufactured by the hospital pharmacy; 15 percent-or that amount used by the pediatric division-is pur- chased from commercial vendors on a bid basis because pediatric solutions are needed in small sizes and requires special bottles. PAGENO="0151" COMPETITIVE PROBLEMS IN T1~IE DRUG INDUSTRY 589 The pharmacy also prepares many medications in multiple dose vials and manufactures certain liquid preparations, detergents, oint- ments, and creams. The types of items manufactured by the hospital pharmacy are listed in exhibit D. (See exhibit D: Items Manufactured by the Los Angeles County General Hospital Pharmacy.4) Many ointments and creams are formulated by the hospital staff and are not available commercially. Other ointments are very expensive and are available only in small containers, such as 5-gram, or 15- gram tubes-these items are prepared by the pharmacy and pack- aged in amounts usually ordered by the physicians. When new treatment programs are initiated, the pharmaceutical materials specified by the staff are often unavailable commercially; 0.5 percent silver nitrate solution was recently found to be very bene- ficial in the treatment of burns. Our burn service requires 200 gallons of this solution per week, The pharmacy prepared this because there was no other way of doing it; when the solution became commercially available, we continued to manufacture it because of cost saving. An- other example of this service to the physicians was in the peritoneal dialysis program for renal failure. The chief pharmacist formulated the necessary solutions and manufactured them. It is estimated that $1,130,000 is saved annually by our manufactur- ing division. Senator NELSON. As I recall it, in the first part of your statement you stated that you spend $2 million a year on drugs? Dr. MCCARRON. Yes. Senator NELSON. And you calculate then, if you were not manufac- turing that you would be spending $3 million? Dr. MCCARRON. Yes; definitely. And we can show that just by multi- plying the cost of what we make by the retail cost, or rather the whole- sale cost. SUMMARY In summary, the drug forr~iulary system at the Los Angeles County General Hospital provides the staff with standard, familiar medica- tions and enough information to use the drugs intelligently. It has improved the teaching of physicians and nurses and thus affords an added degree of protection for the patients. It has eliminated from the drug supply at the hospital those items with little or no therapeutic effectiveness, has substituted some toxic agents with less toxic ones, has replaced some very expensive items with less costly ones, and has allowed the pharmacy to maintain a manageable inventory. The manufacturing division of the pharmacy improves service to the patients and the staff and has contributed to the overall saving in the hospital drug budget. Senator NELSON. I notice, Doctor, referring back now to your for- mulary, that this is a representative excerpt? Dr. MOCARRON. This is a printed front and back of one page. I had it Xeroxed. The formulary sheet is a half-sized page. You can see that this would be the formulary, printed front and back. ~ See p. 598. PAGENO="0152" 590 COMPETITIVE PROBLEMS IN THE DRIYG INDUSTRY Senator NELSON. What resources do you use in addition to your own physicians, for determining side effects? Dr. MCCARRON. Well, we have a system for this. First, as I men- tioned, we have an adverse drug reporting program for adverse side effects that we have observed ourselves. We keep a file on every drug that is in the formulary, and many of them that aren't. `We subscribe to the Medical Letter, Olinalert, and there are many publications like these besides the medical journals that give us information on drug effects. We get information from the manufacturers. We get as many re- prints as we can find, and then we subscribe to certain journal's. One of my jobs is to go through all `these journals and look for all the drug material. This is then filed in the drug file, and we do this for all formulary drugs and for a drug that we think may be coming up for deliberation. We assemble these things. Whenever something is being written up in medical literature pertaining to drugs we make sure that we accumu- late this information. Then, when it comes time to evaluate the drug for the therapeutic committee we have the necessary information. All of the members of the committee have similar systems, and we spend a lot of our time going through the medical literature, and this formulary page is the compilation of that information. This is not all of the things, by any means, but these are the signi- ficant things that we quote ill the formulary write up. Senator NELSON. As I remember the early part of your statement, there were some 2,700 attending physicians, privately practicing phy- sicians? Dr. MCCARRON. 2,400 physicians who are in private practice, and you see, we do this work for them. They don't have enough time to go through the niedical literature, but we do, and we abstract it for them, and we give them either the formulary sheet or the drug bulletin, and they accept this as an authoritative guide to their drug usageS Senator NELSON. Are the private physicians who are not on the per- manent ~nd full-time staff of the hospital required to prescribe from the formulary for their patients who' are in the hospital? Dr. MOOARRON. The attending physicians do not have patients in the hospital. The system in our hospital is that the patients are assigned to a resident supervised by a full-time staff member, who is a member of the faculty of the medical school. The' attending physicians come in to help with the therapy, and they suggest things, but we all use the same formulary. Senator NELSON. I don't understand the function of the 2,400 attend- ing physicians. Dr. MC'CARRON. They come into supervise the care of the patients on the ward. Senator NELSON. Are they their patients? Dr. MoCAmioN. No; they are not their patients. Senator NELSON. The hospital hires them? Dr. MCOARRON. No; they come voluntarily. An attending man in practice comes to the hospital to help in the teaching of the residents and interns. All of these attending physicians are on the clinicai faculty of the medical school. They come in. They operate on the patients. They do tests. They do whatever has to be done, in an advisory capacity. PAGENO="0153" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 591 Senator NELSON. This is all donated services? Dr. MOCARRON. Yes. Senator NELSON. But this formulary is available to all of the 2,400 physicians; is that correct? Dr. MOCARRON. Oh, yes; and many of them have asked for personal copies. They take them home or use them in their offices. Senator NELSON. Do you get requests for your formulary from phy- sicians who are not on the staff and not attending physicians, but sim- ply private physicians? Dr. MCCARRON. We have had requests for our formulary from all parts of the country, to the point where we are having it printed next year, and we will probably sell it. Mr. GORDON. I have several questions, Senator. On page 12, in discussing your formulary, you say that "it has elim- inated from the drug supply" the cost of "those items with little or no therapeutic effectiveness." Can you give us some specific examples on that? Dr. McCARRON. Yes; I think meprobamate is a good example. We took meprobamate out of the formulary. It was a very commonly used tranquilizer and it was used as a muscle relaxant. We found no good scientific evidence that this drug did either. It had mainly a placebo effect, and we felt we were spending too much money buying meproba- mate, that we had cheaper placebos, and we just took it out. Now, when we do that, we write a drug bulletin and explain to the staff what the scientific evidence is behind this decision. Mr. GORDON. That is one of them. Do you have a couple more, offhand? Dr. MOCARRON. I can't think of-yes, I can think of many things. We had an ointment, Allantoin Ointment, that had been in the phar- macy forever, and the physicians in the hospital had gotten used to using it. They did not know what it was, really, because nobody had ever evaluated it. But they used it for burns. It turned out that Allan- tom is a chemical that is found in the urine of maggots and maggots were found to clean wounds during World War I. Somebody discovered that the Allantoin in the maggot urine was also present in the urine of horses and dogs, and then they extracted it and chemically synthesized it, and put this into an ointment base. We started using it as an oint- ment for the treatment of wounds, and obviously, this had little if any therapeutic effectiveness. There are many other drugs that were much better. Mr. GORION. On what basis did the doctors use this in the first place? Dr. MCCARRON. Well, for something like that, it had been in the hos- pital for years. It had started out when we did not have a formulary system, and people applied this to wounds. It had gotten to the point, and this is one of the things that we try to overcome, that instead of knowing what you are doing and what the drug is, you learn from some- body else that this is good for this condition. Mr. GORDON. Are there any figures available which show how great the savings are as a result of adopting a formulary system? I don't think I have it here. Maybe I missed it, but I can't seem to find it. Dr. MOCARRON. Now, that is very hard to say. We can give you ex- amples on individual items. Mr. GORDON. That would be fine, if you could. PAGENO="0154" 592 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY Dr. MOCARRON. We now buy hydrochiorothiazide on a bid basis. Previously, we had chiorothiazide, Diuril, which is only made by one manufacturer, as the standard diuretic in the hospital. Chlorothiazide was the first thiazide diuretic out, and it became popular with the physicians. We deleted chlorothiazide from the formulary when hydro- chiorothiazide came out because hydrochlorothiazide, we thought, had a little advantage over chlorothiazide, but mainly, it was made by three companies, and we had a competitive advantage, so we took out the chiorothiazide and accepted bids on hydrochlorothiazide. Both of these drugs at the beginning were $5.50 a hundred. Mr. GORDON. All three of them? Dr. MOCARRON. The hydrochiorothiazide, yes, from three manufac- turers, and the chlorothiazide were the same price. The first bid that we got came in at about $5.50 a hundred. The nest time, the bid came in at about $3.80 or $3.60. The next time it was down to about $2.70 a hundred, and we finally got this drug down to about $1.20 per 100. However, the retail price of the drug has not changed, using the "Red Book Guide to Pharmacy Prices." So that by having three companies bid against one another for the large business in the county hospital, we were able to effect a true sav- ing, and that item happens to be used in all, or practically all, of the departments in the hospital. Mr. GORDON. But here is a case where you can have competition among different trade names; is that correct? Dr. MCCARRON. Yes. We ask for hydrochlorothiazide. It happens that this drug is made by three major companies, and we had no qualms about accepting the drug from either one of the three. Mr. GORDON. In selecting drugs for inclusion in the formulary for the Los Angeles County Hospital, 950 drugs previously stocked were eliminated from the hospital inventory. How about the 550 remaining drugs? Do they cover all types of illnesses for which a patient may be hospitalized? Dr. MOCARRON. Yes. Mr. GORDON. And would it be fair to say, then, that many of the drug products on the market are duplicative? Dr. MCCARRON. I am sorry, we didn't just eliminate duplicates. Mr. GORDON. Duplicates, as well as useless drugs? Dr. MCCARRON. Well, many drugs are a little bit different, and you can't say they are therapeutically equivalent, but they are used for treating the same condition. Mr. GORDON. Yes. Dr. MCCARRON. And we can pick a particular drug. Say there are 10 drugs available `for treating this particular condition, and they each may vary a little bit, so they are really not duplicates. But we can~pick three or four of those to start. Mr. GORDON. The variations were not sufficient to keep them in the formulary? Dr. MOCARRON. That is right. Mr. GoiwoN. They were not meaningful variations; is that correct? Dr. `MCCARRON. That `is right. Mr. GORDON. Do all of the 2,400 attending physicians prescribe generically? PAGENO="0155" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 593 Dr. MCCARRON. As I said before, the orders are written by the resi- dents. Mr. GORDON. I see, and they prescribe generically? Dr. MCCARRON. Yes. Mr. COUGHLIN. Dr. McCarron, I notice on page 5 of your statement you enumerate the system followed in the purchase of drugs, and No. 3, you say, "A Drug Specification Committee writes the specifications for the drugs." I am curious to know whether these are chemical specifications only, or are branded or trade-name drugs included, listed, if a therapeutic difference has been noted by the committee? Dr. MOCARRON. Yes. The specifications are written by the committee and they use the generic name unless there is a reason for not using the generic name, but most of the specifications are chemical. Some of them have to do with labeling also, and packaging. In certain cases, if we want to limit the drug to one manufacturer, we must justify this to the Drug Specification Committee. The Thera- peutic Committee sends in a statement saying why we will not accept anything but this particular drug. Mr. COUGHLIN. Is this predicated upon your own independent testing? Dr. MOCARRON. It is usually because of experience we have had with the drug. Mr. CO1JGHLIN. I am interested in a quotation which appears on page 10 of your statement, doctor. I quote: On occasion, non-critical drugs are also specified by manufacturer because of previous experience in obtaining ineffective drugs when generic equivalents were used. I notice that you alluded to the thyroid hormone during your testi- mony as an example of this. I was wondering if yOu have any other examples or if you know of other drugs that fall in that category? Dr. MCCARRON. Well, I have a list here of all the drugs we buy by specified manufacturer. I am not sure what all the reasons were for this, but I can tell you some of them. Tinder antibiotics, for parenteral use, we specify chloramphenicol from Parke, Davis. We found when you added the generic equivalent for chioramphenicol to water the drug clumped and did not go into solution so obviously the patient wasn't going to get the right amount of drug. We just said we don't want to have this happen. We haven't had any trouble like this using Parke, Davis' brand, so we buy Chioromycetin. Mr. COUGHLIN. May I ask you, Doctor, whether the generic brand satisfies the requirements of the U.S. Pharmacopeia? Dr. MOCARRON. It apparently did, or we wouldn't have accepted it in the pharmacy at all. Mr. GORDON. Excuse me, doctor. Concerning chloramphenicol, when was this that you are talking about, what was the date? Dr. MOCARRON. June 8, 1967. That is when this last list came out. Mr. GORDON. The patent just came off. Dr. MCCARRON. The chioramphenicol patent just came off. Mr. GORDON. That is a dangerous drug anyhow, isn't it, doctor? PAGENO="0156" 594 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY Dr. MOCARRON. Yes, and we have restrictions on it. But it has thera- peutic usefulness in certain conditions. Mr. C0UGHLIN. And you use it? Dr. MCOARRON. Oh, yes. The corticosteroids for parenteral use we also specify by brand. This is mainly because the patients who need these drugs need them in a hurry for emergency conditions, and we want- to use drugs that we have had experience with and know are effective, and we do not want any variation. For cardiac glycosides we have six that we specify by brand. Ten- silon, which is a drug used to make the muscles tense up again after a patient has received a muscle relaxant during surgery, is another very important drug that we buy oniy by brand name. Some of our estro'genic substances were found not to' be effective. Again, these are hormones, and we have a very difficult time with hormones. Even if they meet the standards that have been laid down, sometimes they don't have biological activity. So we have specified certain hormone substances by brand names. We also had some problem with heparin. We bought generic heparin, and the patients were noit anticoagulated as they had been before. There were variations in the dose required, so we standardized on the liquaemin heparin. There are several other drugs listed here, vaso- pressors, glaucoma agents, demercarium, and all of our spinal anaes- thetic agents. Mr. CouGrn~IN. Will you make that list available for the record, with the permission o'f Senator Nelson? Dr. MCCARR0N. Yes.5 Mr. COUGHLIN. One final question with respect to this general dis- cussion. Doe's your hospital accept any brand of oral antidiabetic product? Dr. MCCARRON. Any brands? Mr. COUGHLIN. Any brand. On a generic basis, or do you purchase by brand name? Dr. MCCARRON. Well, we specify chlorpropamide tolbutamide acetohexamide, and as I understand it there is only one company that makes each of these drugs. Mr. COUGULIN. Thank you, Senator Nelson. Senator NELSON. Did I understand that out of yo'ur formulary of some 550 drugs that less than 50 are ordered by brand name? Dr. MCOARRON. That is right. There are 43, and I have the list here. Senator NELSON. Forty-three.? Dr. MCCARRON. Yes. Senator NELSON. And the other 500 are generic? Dr. MOCARRON. Generic. Senator NELSON. Doctor, I want to thank you very much fo'r your very valuable testimony. We are very pleased that you inserted an example from your formulary. This has been very instructive and useful for the committee. We appreciate your taking the time to come here. Dr. MCCARRON. Thank you. (The supplemental information submitted by Dr. McCarron follows :) ~ ~ See p. 599. PAGENO="0157" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 595 EXHIBIT A DRUG BULIJITIN: COUNTY OF Los ANGELES, DEPARTMENT OF HOSPITALS [No. 50, Los Angeles County General Hospital Therapeutics Committee, May 25, 1067] FIJROSEMIDE (LASIX, HOECHST CO.) Furosemide, a monosulfamylanthanilic acid derivative, is a non-thiazide diuretic quite similar in potency and mode of action to ethacrynic aid. In maxi- mally effective doses, furosemide is probably 8 to 10 times as potent as thiazides in increasing the excretion of sodium (1). In most cases potassium excretion is slight in relation to the natriuretic effect. Because of its mode of action, there is a strong tendency toward fluid and electrolyte disturbances, especially bypovolemia, hypokalemia, and hypochloremic alkalosis. In con- trast to mercurial diuretics which lose effectiveness when alkalosis appears, furosemide-like ethacrynic acid-continues to be effective and may augment the electrolyte disturbance. To provide a safe diuresis, rapid decrease in plasma volume must be avoided, alkalosis must be prevented, and potassium balance must be maintained. Action of furosemide: The biochemical basis of action is not known. Furosemide probably inhibits the reabsorption of sodium and water in the proximal tubules and the loop of henle and may also have some effect on the distal tubule. Sodium reabsorption may be decreased by as much as 30% (2). During maximal diuresis with furosemide, urine output may reach 1/3 of the glomerular filtration rate (3). Chloride is also excreted in large amounts and bicarbonate is re- tained; this may lead to bypochioremic alkalosis (4). The amount of potassium loss is variable, but is usually more marked in patients with cirrhosis of the liver. Effect of furosemide with other drugs Furosemide has an effect similar to thiazides in lowering blood pressure and potentiates the hypotensive effect of antihypertensive agents. It decreases the arterial responsiveness to pressor amines and enhances the effect of tubocurarine. Maximal diuresis with thiazides can be enhanced by the administration of furosemide, but maximal diuresis with furosemide is not altered by adding thiazides. Robson concluded that there was no advantage in combining thiazides with furosemide (3). However, the administration of spironolactone with furo- semide in patients where there is danger of hypokalemia seems to be of benefit. Use of furosemide Because of its potency, this drug should be used with caution. Furosemide is particularly useful when an agent with greater diuretic effectiveness than the thiazides is needed for patients with refractory endema. Furosemide is effective in the presence of depressed glomerular filtration, acidosis, alkalosis, and hypo- albuminemia (5). This drug has been used successfully in patients with renal insufficiency and the nephrotic syndrome (5, 6) but should not be used when the patient is anuric. When used in `the management of ascites due to cirrhosis of the liver, special care must be taken to avoid rapid fluid depletion and electrolyte disturbances. If excessive diuresis is avoided, furosemide may be used for the treatment of acute pulmonary edema. Outpatients may be treated with furosemide, usually on an intermittent schedule, but the patient should be followed closely and electrolyte disturbances should be anticipated. Contraindications to the use of furosemide: The safety of furoseinicle in preg- naincy has not been determined. The drug is not recommended for cirrhotic patients in hepatic coma or those with severe electrolyte disturbances until the basic condition is improved or corrected. Furosemide is contraindicated in anuria. It is not recommended for the treatment of hypertension. Until further evidence of its safety is obtained, it is noit recommended for children. Since furosemide enhances the effect of `tubocurarine, great care should be exercised in administering curare-like drugs to patients receiving furosemide. NOTE-It is advisable to discontinue furosemide therapy for one week prior to surgery if possible. PAGENO="0158" 596 COMPE~UITIVE PROELEMS~ IN THE DRUG INDUSTRY Ur,Jtoward Effects of Furosemide Adverse effects related to the drug's potency include rapid massive diuresis, bypokalemia, byponatremia, and hypochioremic alkalosis. Excessive diuresis may result in hypovolemia and shock which may lead to arterial thromboses- particularly in elderly patients. Sometimes a marked fall in plasma volume results in decreased renal function-this is a result of the potent diuresis rather than a toxic effect of furosemide. Electrolyte disturbances may be manifested as lethargy, weakness, dizziness, leg cramps, anorexia, vomiting, and/or mental disturbances (2). Hypokalemia may be a special problem in patients with cirrhosis of the liver and may precipi- tate hepatic encephalopathy. Cardiac patients being treated with digitalis may develop arrhythmias if hypokalemia occurs. Some patients may complain of epigastric discomfort when therapy with furosemide is started; this may dis- appear with continued treatment or may necessitate stopping the medication. Skin rash, paresthesias, blurring of vision, j~ruritus, postural bypotension, and diarrhea may also occur. Hyperurecemia (6) and acute gouty attacks (2,6) have been reported. Hyperglycemia may also complicate treatment with furos- emide (4). One case of thrombocytopenia and several of leukopenia have been reported in patients taking this drug. Absorption and E~i,cretion of Furosemide: Furosemide is well absorbed from the GI tract. About 40% of the drug is excreted in the stool, 10% in the urine, and small amounts in the bile and milk (6). Timing of Therapeutic Effect With Furosemide After oral administration, diuresis begins within 1 hour and lasts for 3 to 5 hours. Maximal effectiveness, if this is desired, can be obtained by giving the drug every 4 to 6 hours. In most instances, 1 dose per day is sufficient. After I.V. administration, the drug acts within about 5 to 30 minutes and lasts from 11/2 to 4 hours. (NOTE: an I.V. preparation is being tested and is not yet available commercially.) Dosage and Administration of Furosemide: Furosemide is given orally. The patient should be carefully followed and excessive weight loss should be avoided. Usual Adult Dose: Use the smallest effective dose. Begin with one dose of 40 to 80 mg in the morning. If the diuretic response over the next 4 to 5 hours is inadequate, a second dose of 40 to 80 mg can be given 6 to 8 hours after the first dose. For More Resistant Cases: Up to 300mg daily may be given. For Maintenance Therapy: The dosage should be adjusted according to the patient's requirements for continued diuresis and his serum electrolyte levels. 40 to 80 mg ever~sr other day may be safe and adequate. Children's Dose: At this time furosemide is not recommended for children. How ~9upplied: Tablets 40 mg Approce. Retail Cost: About $8.40 for 100 tablets. REFERENCES 1. Early, N.E.J.M., 276: 966, April, 1967 2. Stokes & Nunn, Brit, M. J., 910, Oct., 1964 3. Robson, et al., Lancet, 1085, Nov., 1964 4. Hutcheson, et al., Arch. hit. Med., 115: 542, May, 1965 5. Muth, JAMA, 195: 1066, March, 1966 6. Wertbeimer, et aL, Arch. mt. Med., 119: 189, Feb., 1967 ExuIBIT B [Page from the Los Angeles County General Hospital Formularyl PHENYLBUTAZONE (GENERIC NAME) Brand name: Butazolidin (Geigy) Category: Analgesic; antipyretic Description: Phenylbutazone is a potent analgesic and antipyretic drug. Like aniinopyrine, from which it is derived, phenylbutazone may be toxic to the bone marrow and may cause severe and even fatal reactions. PAGENO="0159" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 597 Action: The mechanism of action is unknown. In addition to its analgesic and antipyretic effects, the drug may act on the renal tubules to inhibit the reabsorp- tion of urate and to increase the reabsorption of sodium. Use: The usefulness of this drug is limited by its toxicity. Phenylbutazone is not recommended for prolonged administration, but it has some usefulness when given for very short periods (2 or 3 days) in the treatment of acute musculoskeletal disorders such as gout or bursitis. Untoward effects: In 1955, Mauer (1) found 22 deaths due to this drug in the literature and added a case of his own. Since then other deaths have been recorded. Fifty serious complications and 18 deaths were reported in the United Kingdom during a 20-month period in 1964-1965. Incidence of adverse reactions with this drug is 40%. In general, untoward effects are more apt to occur with high dosage or prolonged administration. However, death has occurred from small doses and short-term therapy. The most frequent reactions are nausea, edema, rash, epigastric pain, vertigo, and stomatitis. The most serious are reactivation of peptic ulcer-sometimes with severe hemorrhage, agranulocytos~s, thrombocytopenia, aplastic anemia, ex- foliative dermatitis, O.N.S. stimulation or depression-occasionally with psycho- sis or visual hallucinations, hypertension, and toxic hepatitis. In addition, acute renal failure has been reported in a healthy man on the sixth day of treatment for back pain (2). This complication has also been noted before (3, 4). "Allergic granulomas" may occur. Rash,. fever, lymphadenopathy, and hepatosplenomegaly were reported after 200mg daily for six weeks; biopsy showed "sarcoid-like" granulomas which disappeared in four month after the drug was stopped (5). Another patient had rash and generalized lymphadeno- pathy on three separate occasions when the drug was given-after taking it for six weeks, for a few days, and after only one tablet (6). Another patient had painful swelling of parotid and submaxillary glands on two occasions after taking phenylbutazone (7). It is suggested that "allergic grandulomas" may also occur in the heart. In 1957, two fatal cases of phenylbutazone-induced cardiac complications were reported-one with pericardial effusion and interstitial myocarditis; the other with multiple focal perivascular granuloma (8). A woman who bad taken the drug for one week developed pericarditis and recovered (9). One patient devel- oped phenylbutazone skin rash and died; at autopsy, extensive perivascular granuloma-like lesions were found in the heart (10). Phenylbutazone depresses the bone marrow in some patients and causes leu- kemoid reactions in others. In 1960, Bean (II) reported six cases of leukemia in patients who had taken this drug and suggested a cause and effect relation- ship-which has not been proved although many additional cases have been reported. The only statistical study comes from Western Australia where eight of 55 patients with acute leukemia bad taken phenylbutazone. Since rheumatoid arthritis may be associated with leukemia, Innis (13) cautioned against incrim- inating phenylbutazone until the incidence of leukemia in rheumatoid arthritis treated with and without phenylbutazone was studied. However, cases of leu- kemia in non-rheumatoid patients are of interest, along with cases who developed sensitivity reactions to phenylbutazone followed in a short time by the onset of leukemia (14, 15, 16, 17). Timing of Therapeutic Effect: The pain of acute gout is usually relieved within 24 hours after phenylbutazone administration, but joint swelling usually does not subside for 3 or 4 days. The drug is sl4wly excreted over a 7-10 day period. Dosage c~ Administration: The smallest effective dose should be used for the shortest amount of time possible. The patient should be closely followed for signs of toxicity. The drug is given orally. Adult Dose: 600 to 800 mg daily in 3 or 4 divided doses for 2 or 3 days. Maintenance therapy is not recommended. How supplied: Tablets: 100 mg Approx. Retail Cost: About $1000 for 100 tablets (100 mg). special drug request forms must accompany orders for this drug because of toxicity. REFERENCES 1. Mauer, N.E.J.M., 253 :404, 1955. 2. Richardson, et al, N.E.J.M., 268:809, 1963. 3. Lipset & Goldman, Ann. mt. Med., 41:1075, 1954. 4. Miatello, et al, Pres. Med. Argen., 46:2551, 1959. 5. Goldstein, Ann. mt. Med., 59:97, 1963. PAGENO="0160" 598 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 6. Plunkett, et al, Lancet, 1 :448, 1967. 7. Cohen & Banks, Brit. M. J., 1 :1420, 1966. 8. lodge & Lawrence, Med. J. Aust., 1:640, 1957. 9. Shafar, Brit. M. J., 2:795, 165. 10. Edeistein, Amer. Heart J., 69:573, 1965. 11. Bean, Brit. Med. J., 2 :15~2, 1960. 12. Woodliff & Dougan, Brit. M. J., 1 :744, 1964. 13. Innis, Brit. Med. J., 1:1440, 1964. 14. Cadman & Limont, Brit. Med. J., 1:798, 1962. 15. Hart, Canada Med. A. J., 91:449, 1964. 16. Cast, Brit. Med. J., 2:1569, 1961. 17. Thorpe, Brit. Med. J., 1:1707, 1964. EXHIBIT C-Los Angeles County General Hospital Presoription Form LOS ANGELES COUHTY GEHE~AL HOSPITAL 1200 N. Stato, Lox Angeles, Calif 90033 1~(or USP, NF, NND, or Generic Equivalent.) Date CHECK: Non-Rop 0. Rep: XI 0. X2 0. X3 0. 75p574.~543..-2.64 Reg. No._~_~-~_-_----- EXHIBIT D.-Items manufactured by the Los Angeles County Hospital Pharmacy Category and sample items Annual production Estimated annual savings Intravenous solutions (1 liter size) 5 percent dextrose in water, 5 percent dextrose in saline, 5 percent dextrose in 3'~ normal saline, normal saline, and multiple electrolyte solution. 500,000 liters units $130, 000 Multiple-dose vials (15 cc., 30 cc., and 60 cc. sizes) Amiriophylline for injection, calcium salt solutions, distilled water for injection, epinephrine solution, normal saline for injection, procaine solution, Vitamins for injection, and 50 percent dextrose solution. Liquid preparations Antisceptics, disinfectants, detergents, laboratory reagents, cough syrups, potassium supplements, and silver nitrate solutions. Ointments and creams Amnioniated mercury ointments, coal tar ointments, hydrophilic petrolatum, lanolin and cold cream, triamcinolone ointments, arid sulfur ointments. 140,000 100,000 gallons 11,000 pounds 500,000 500,000 Total yearly savings 1,130,000 No. P.F. # Name - Address Surname J?irat Name Number Street City PAGENO="0161" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 599 Los ANGELES COUNTY GENERAL HOSPITAL, JuNE 8, 1967 List of drugs to be restricted to specific vendors (`when listed), to "A" class com- pany (if printed in italic), or to `previously acceptable vendors (if marked with asterisk). Any other vendor for these items must be cleared by the Drug Specifi- cations Committee and by the service moist involved and/or the Therapeutic Com- mittee of the Hospital ordering. This list was developed by the Los Angeles County General Hospital Therapeutics Committee for the protection of this lies- pital and the guidance of the `County D'rug~Purcha'sing Agent, and may 1e periodically revised. Antibiotic's for Parenteral Use: Heparin Uh2oramphenicol Isoproterenol Parenteral Penicillin* Oxytocin (Syntocinon, Sandoz, or Polymycoin B Pitocin, PD. only) Streptomycin* Pentylenetetrazol Tetra~oyoline Piorotocoin Corticosteroids `for Parenteral Use: Procainwinide Co,rtisoue* 9 icinidine Injection Hydrocortisone* Spinal Anesthetics: Hydrocortisone Acetate* Dib aca'ine (Nithercaine) Hydrocortisone sod. S'uccinate Procaine (Novocaine) Hycirocortisone 21 Phosphate Lidocaine (Xylocaine) Prednisolone Tetraoiiae (Pontocaine) Triamcinolone Succinyl Choline (Amectine, B&W AUTH only) Cardiac Gtlycosides: Thyroid (Armour brand only) Deslanoside d-Tubocurarine Digitalis & the Davies Rose Co. Vasopressors: Digitocoin Tablets Levarterenol Digocin~ Tablets & Fo'u'gera & H. & Mepiventermine Co. Meteraminol (Annine, M'SD or Digit ocoin Injectable & Fougera Pres'sonex, Winthrop only) Digocoin Injectable & Premo & Vi- Metho~va'.nine tarine Phenyleplirine Pairenteral Bdrophonirm (Tensilon, Ciba) War/arm Parenteral Epinephrine 1 :100 icc War/arm Tablets Estrogen's: Glaucoma Agents: Estrogenic substance, conjugated Demercarium Br. (Hu'morsol, injection (Piremairin) MSD) Estrogenic substance, conjugated Ecivotiviophate Iodine (PIho'spholine ta'blets (Premarin) Iodine) Diethyl Stiibestro,l* Iso flurophate (Fioropryl, M'SD) Diagnostic agents and kits are not to be changed froim item ordered unless cleared by the hospital or physician. Senator NELSON. The next hearing of the subcommittee will be on July 24, 1967, at 10 a.m., in this room. (Whereupon, at 12:35 p.m., the subcommittee adjourned, to recon- vene at 10 a.m., Monday, July 24, 1967.) 81-280--pt. 2-67-11 PAGENO="0162" PAGENO="0163" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY MONDAY, JULY 24, 1967 U.S. SENATE, MONOPOLY SUBCOMMITTEE OF THE SELECT COMMITTEE ON SMALL BUsINESs, Washington, D.C. The subcommittee met, pursuant to adjournment, at 10:05 a.m., in room 318, Old Senate Office Building, Senator Gaylord P. Nelson (chairman of the subcommittee) presiding. Present: Senators Nelson and Javits. Also present: Benjamin Gordon, staff economist; Daniel T. Cough- un, minority counsel; Susan H. Hewman, research assistant; and William B. Cherkasky, legislative director, staff of Senator Nelson. Senator NELSON. The Subcommittee on Monopoly of the Small Business Committee will open its hearings this morning. Our first witness is Mr. Harold W. H. Burrows, president of Parke, Davis & Co. I understand, Mr. Burrows, that Mr. Kenneth McGregor, vice presi- dent and general attorney, is accompanying you. STATEMENT OP HAROLD W. H. BURROWS, PRESIDENT, PA1~KE, DAVIS & CO., DETROIT, MICH.; ACCOMPANIED' BY KENNETH D. McGREGOR, VICE PRESIDENT AND GENERAL ATTORNEY Mr. BURROWS. Yes, sir. Senator NELSON. Mr. Burrows, we appreciate very much your tak- ing the time to come here this morning and appear before the Monop- oly Subcommittee. You may present your statement in any way you see fit, either by reading it or extemporaneously. Mr. BURROWS. Senator, would you prefer that I read the statement? Senator NELSON. However you prefer to present it. It is a short state- ment, and perhaps you would prefer to read it. If it does occur to me to ask questions during the course of your presentation I assume you have no objection. Mr. BURROWS. No. Senator NELSON. The committee is happy to have you as representa- tive of one of the distinguished drug companies in this country. De- spite what you may have read in some of the journals and trade maga- zines, we are not antidrug companies. We think the druggists and drug manufacturers have made a great contribution to medicine and the health and welfare of the people of this country, and your company is among the leading ones in the drug manufacturing and invention field. You have made a great contribution to the health of the country, and we are sure your company will continue to do so. 601 PAGENO="0164" 602 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY This committee is interested in some matters that we think are of public concern, but that doesn't make the committee antimedicine or antidrug company or antianything else. It is conceivable w~ may have some differences in our interpretation of the practices and in various aspects of the field, but they certainly would be honest differences of opinion, and we are very pleased to have you come here and make your contribution. It will be of value to the committee and to the Con- gress and to the country. Mr. BURROWS. Thank you very much, Senator Nelson. I appreciate those comments. I also might take this occasion to express my appre- ciation of the manner in which I was invited. I thought perhaps I might get a letter saying "laying aside all your excuses and the like, appear." Instead I received a very, courteous letter embodying very fine use of the ICing's English. Other committees who have occasion `in the future to invite witnesses might well take the text of your invi- tation as an example. Senator NELSON. `I might say, Mr. Burrows, that we appreciate your courtesy and willingness to postpone your appearance. At the time we had asked for 10 days advance on your statement, and I know that it was impossible to give us 10 days, and we appreciate your willingness to set another date. Some questions have been raised in the trade about why I asked for 10 days. The answer is very simple. We have a staff of one economist and one fine young lady researcher, and with my busy schedule it is necessary for me to read all the testimony in advance if I am to attempt to ask any questions whatsoever. Therefore, I have to have 10 days if I am going to go through the testimony and familiarize myself with it so that I can attempt to ask some questions that would be of value. That is the reason for the request that we have 10 days advance, and we appreciate your courtesy in complying with our request. Mr. BURROWS. Shall I proceed with my statement? Senator NELSON. Yes. Mr. BURROWS. As the committee is well aware, prednisone is a steroid compound used primarily in the field of arthritis. It has been generally available in the market since about the middle 1950's. In 1956 Parke-Davis decided to add a prednisone product to our list of products `under the Parke-Davis label. When we made that decision, several of our major competitors already were selling this compound and it seemed probable that it would be a standard pharma- ceutical item that would continue to be prescribed' by physicians for a long time. At that time we had a major interest and program in steroid research and development and we felt it important to be repre- sented in this apparently growing field. "Paracort" is the name under which we offered our brand of prednisone for sale beginning in 1957. When we introduced the product, we did not expect to become a major factor in the prednisone market; however, as a minimum, we wanted to have it available as a standard item in our line. During the first 2 years we made an earnest effort to establish our product in the market and actively promoted Paracort to the medical profes- sion. For the next sentence in the formal statement I would like to add the words "United States" after the first word so `as to read: "Our United PAGENO="0165" COM?ETITIVE PROBLEMS IN THE DRUG INDUSTRY 603 States sales in those early years achieved an annual volume in the range of $225,000 but subsequently steadily declined." Senator NELSON. May I interrupt, Mr. Burrows? Was that mainly on the retail market? Mr. Btrmiows. It was to all classes of trade with which we did busi- ness at the time. I don't believe that I have with me a breakdown of the sales volume by classes of trade at that time, but most of our sales then were directly to the retail trade. Senator NELSON. Directly tO the retail trade? Mr. BURROWS. That would be our normal channel of distribution. Senator NELSON. Is $225,000 the maximum you reached in total sales? Mr. BURROWS. That was the maximum amount that we received. It was not the total at list prices. It was the total of our selling prices to whoever our customer happened to be, the retailer, the wholesaler, or whoever. Senator NELSON. But is this the maximum that you reached in sales? Mr. BURROWS. Yes, it was the maximum. Senator NELSON. Would it b~ feasible for you to -furnish the corn- niittee what amount of this was the retail market-when I say retail market I mean your wholesalers who sell to the retailers-versus to Defense Supply Agency or hospitals directly. Mr. BURROWS. I believe we can get you that information, but I do not have it with me today. Senator NELSON. The committee ~vould appreciate it if you would supply it to us. Mr. BURROWS. Thank you. We will submit that information.' Mr. GORDON. What are your total worldwide sales of this product? Mr. BURROWS. In the first year of introduction, we had additional sales outside the United States of $35,000, and the second year addi- tional sales outside the United Statesof $156,000. Mr. GORDON. That was the most foreign sales you ever had. Mr. BURIiOWS. Yes. Mr. GORDON. Can you give us any idea as to why the sales steadily declined? Mr~ BURROWS. As I noted previously in my statement, several of our competitors already were on the market before we entered the market, and that gave them quite a competitive advantage inasmuch as we could not claim for our product attributes which were superior to the products already on the market. The first one on the market with an effective drug has quite a competitive advantage. I will continue with the reading of my statement. One of the con- tributing factors in the decline during this period of time was the fact that other manufacturers with significant research programs in this field were able to introduce newer and improved steroid com- pounds for use in treating similar conditions. As a result, we con- cluded that our potential for prediiisone sales was on the decline and we lost active interest in the product. 1 ~ information requested by Senator Nelson was subsequently supplied. Parke, Davis states, "that on the basis of the best available estimates approximately $145,000 of the total i957 sales were made to the retail trade either directly or through wholesalers." PAGENO="0166" 604 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY Parke, Davis is still very interested in making an original con- tribution in the field of arthritis and related diseases. We have con- tinued with our own research work and we have expended substantial sums of money for this purpose. It has been estimated that in the year 1966 the industry sold about $4 million of prednisone in the United States. Parke-Davis sold only $29,465 of this drug in that year in the United States, representing less than 1 perceiit of that market. Senator NELSON. May I ask a question at this point? As I understood you a moment ago, the maj or portion of your sales were into the retail trade. Does the fact that your sales declined relate to the question of how or by what name the doctor prescribes the drug? Mr. BURROWS. You mean insofar as the retail trade is concerned? Senator NELSON. Yes. Mr. BURROWS. The chances are that the doctor who prescribes the original compound put out by the first house on the market with that compound found it to be effective and satisfactory. It did what was claimed for it and there was no reason why the doctor should change. Presum~thiy he kept on with the first, product that he found to be safe and effective. Senator NELSON. So this is the question of familiarity to the prescrib- ing physician in the competition for the prescription of various brand names of prednisone. Mr. BURROWS. That certainly is a factor. Senator NELSON. Did your company consider reduction in the price to the retail trade to meet the competition? Mr. BURROWS Apparently we did not. As I am about to say iii a fol- lowing part of my text~ I dotibt that w~ can justify carryi4ig this 4t&n for sale to the retail trade, because we are such an insignificant factor in this field. I think that we probably didn't do the best job that we might have done in monitoring our catalog. I really am surprised that it con- tinues to be listed there considering the small volume of sales that we have. But sales departments are inclined to be sort of product "string savers," and once an item gets into the catalog, it can be difficult to persuade them to remove it. Senator NELSON. But originally, as I understand it from your statement, you made a genuine effort to sell your product at the retail trade level. Mr. BURROWS. That is right. Senator NELSON. You did achieve a level of somewhere around what- ever portion of $225,000 is within the retail trade field. Mr. BURROWS. That is right. Senator NELSON. And then decided at some stage that you couldn't meet the competition with the more established drug Meticorten? Mr. BURROWS. I wouldn't want to identify any one drug. But what- ever the competition was, we weren't making any headway against it despite the fact that we spent reasonable amounts of money for ad- vertising and promotion. Prednisone sales represented only an insignificant fraction of our $138.700,000 sales in the United States during 1966. We do not now advertise the drug or promote it in any way to doctors or pharmacies, regarding it largely as an accommodation item. In fact, with our very low volume of present sales, I doubt if we can justify continuing to carry it in our catalog. PAGENO="0167" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 605 Our catalog net price to the retailer for 100 5-milligram tablets is $17.88. This is higher than the prices listed by maiiy of the more than 70 other companies in this highly competitive business. Senator NELSON. You mean 70 other companies that are producing prednisone? Mr. BURROWS. Either producing or selling. But since we make no effort to sell the product through retail chan- nels our catalog price has no real significance or importance. Further, in recent years we have not actively promoted our product to physi- cians, and sales by us to retail drugstores have been practically non- existent. The few sales of any consequence we do make are to hospitals and institutions on the basis of bids which we have submitted as a result of requests for quotations sent to us by such as city, county, State, and Federal agencies. In 1966 our average sales price of prednisone to such institutions in the United States was $1.36 per 100 tablets. This compares with the prednisone prices of various other suppliers which were cited in earlier testimony given to this committee ranging from 46 cents to $2.09 per 100. You have asked for our costs and I am obliged to say that because of the very small amount of business we have done, it is not practical to determine our costs with any great degree of accuracy. We buy the basic raw material and then subject it to a number of quality and production tests and controls in processing it into final form for dis- tribution. Senator NELSON. From whom do you buy the basic material? Mr. BURROWS. At the present time I believe we are buying from Upjohn. In the past we have bought from Roussel and Schering of Germany, and at the present time we are buying from TJpjohn. As best we can figure, the bare manufacturing cost of this item in 1966, including the purchase price of the raw material, was about 50 cents out of the average selling price of $1.36, or 37 percent of the sell- ing price. This does not include any allocation for such as research, general overhead, handling, distribution, inventory carrying costs, and administrative expenses. Senator NELSON. When you say research, did you do any research on prednisone? Mr. BURROWS. Possibly. I think we did very little work on predni- sone per se but we have done quite a lot of research on steroids in gen- eral. By about the time that prednisone was introduced, I think we had filed some 60 U.S. patent applications in the steroid field. Senator NELSON. This price of $1.36 per 100 is the average sales price to hospitals and other sources on a competitive bid basis? Mr. BURROws. That is right; but it includes whatever minimal busi- ness we did at the retail level, which was practically nothing. Senator NELSON. These bids to hospitals and other institutions were submitted on a generic or a brand-name basis? Mr. BURROWS. They probably were requested on a brand-name basis? Mr. MCGREGOR. Entirely. Mr. BURROWS. We would submit our response to the bids with our product name Paracort, but it is quite conceivable that the requests for bids were on the basis of the generic name, prednisone. Senator NELSON. Is it not correct that what you manufacture is prednisone and the name you give to your generic prednisone is your brand name of Paracort? PAGENO="0168" 606 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY Mr. BURROWS. That is right. Senator NELSON. Is there any difference, so far as you know, be- tween your brand name, if it meets the USP standards, and any other prednisone that meets USP standards? Mr. BURROWS. I don't know of any significant difference. On the' positive side, however, I do know something about the drug that Parke, Davis manufactures, and I do know something about the quality con- trols that we introduce during, the steps of manufacture that we are' responsible for. I can speak for Parke, Davis quality, but I don't think I am in a position to speak for the quality of~ other manufacturers. By that I don't mean to imply that other manufacturers have some lesser stand- ards or lesser accomplishments of quality than does Parke, Davis. I only am capable of speaking for ourown controls. Senator NELSON. You are familiar with the Medical Letter which was published June 2 of this year, in which it reports on tests of 22 prednisones. Your' company's product was among the 22 that was tested. Are you familiar with that? Mr. BURROWS. Somebody handed me a copy of that Medical Letter just as I left Detroit, and I have read it. Senator NELSON. In the Medical Letter it' states that all of the 22 brand' or generic prednisones that were tested .met the USP stand- ards, and yours was among those that met lISP standards. If drugs meet lISP standards, doesn't that mean that those that do' are, according to lISP anyway, equivalent drugs? `Mr. BuRRows. They are equivalent in terms of those standards. Agair~, I am not a scientist, but I understand that the results in in- dividual ~atieñts for drugs that meet lISP stand'a*ds may not neces- sarily be identical results. Even in this Medical Letter you will see a recitation on page 2, and I don't know what significance this has, of v~riations in the percentage of cortisone found in `the various predni- sone drugs of other manufacturers. The variations are all within the limits of the standards, but you will note that to the extent of the' variations apparently all the drugs are not identical. Senator NELSON. No; it isn't possible, I suppose, for any two drugs to be identical or even any two tablets out of the same batch to be ideii- tical, if we use t'he word "identical" in the strictest sense of the word. The representative of the lISP who testified here sai'd that they established `the highest standards in the world `for drugs. Based upon their careful studiesq .they set limits within which there may be varia- tions, and the variations may not `ekceed these limits and comply with lISP standards. As they stated to us, their standards are the highest in the world, and they set a variation tolerance which is narrow enough so that, in their judgment, all drugs that meet the standards are equivalent. As you will notice, and as I am sure you know, the tSP standards are set as a consequence of' the deliberations of very distinguished pharmacologists, pharmacists, clinical physicians, the representatives of the drug industry. Mr. BURROWS. That is right. Senator NELSON. And it may very well be that Parke, Davis has a representative on the council that establishes the IJSP standards. PAGENO="0169" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 607 Now I read to you from page 42 of the Medical Letter of June 2, 1967, and under the title "Prices" the Letter states: The great price spread among tablets purchased from different pharmaceutical companies suggest the desirability of prescribing by generic name and specifying, at least for patients of limited means, that the prescription be filled with low priced prednisone tablets. On page 41, it states: None of the variations are outside Pharmaeopeia limits- That is of the 22 drugs they tested- None of the variations are outside Pharmacopela limits or of sufficient magni- tude to have an adverse effect in the treatment of conditions requiring the use of corticosteroids. This disintegration test measures, only disintegration and not the rate of dissolution or physiological availability. There is nothing however, either in the reports of the clinical trials or in the experience of Medical Letter consultants to suggest that variations in formulations are causing any problems in the treatment of patients. Do you have any evidence that would refute that statement? Mr. Brumows. On this product? Senator NELSON. Yes. Mr. Btamows. No. Senator NELSON. Are you aware of any clinical evidence from any source in medical literature or any source from the scientists within your company that would indicate there is any difference in the thera- peutic efficacy or therapeutic equivalency of any of these 22 prednisone products that have been tested by the Medical Letter? Mr. BURROWS. No, I am not aware of any such differences. But let me state again that I am not a scientist or a technician, and I am only in a position to stand behind the products that Parke, Davis makes and sells. We want to have our name associated with whatever we sell so that the doctor will continue to have the choice of prescribing a Parke, Davis product as such, be it a generic product or be it a spe- cialty product with a brand name that includes directly or indirectly a reference to the Parke, Davis standards of quality that we have built into our drugs for so long. By that statement let me say again that I am not intending to reflect on the quality capabilities or quality accomplishments of any other manufacturer. But we are in the business of advancing Parke, Davis as a company, advancing our products, and hopefully finding new products which we can introduce. That has been our business for 100 years. We have done it by building and maintaining a. reputation for the name of Parke, Davis that the medical profession can rely on. They can rely on other names also. But we want the doctor and the pharmacist and the public to feel that they can rely on the Parke, Davis name and it is for this reason that we want to have our name associated with the products which we sell. Senator NELSON. I think that the public and the medical profession certainly can rely upon the quality of the products that the drug companies produce, though all companies as you know may from time to time produce a product that represents a failure in quality control, as is inevitable. My question is aimed at the problem that is highlighted here by the Medical Letter. . Mr. BURROWS. I am not in a position to refute anything that is in the Medical Letter. I know of no evidence to the contrary. PAGENO="0170" 608 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY Senator NELSON. Thank you. Go ahead. I think you were on the last sentence, page 4. Mr. BURROWS. Actually, we may not in fact have achieved any profit on the small volume of prednisone sales which we made. Senator NELSON. In the selling of the product at $1.36 for 100 tab- lets, I assume that whoever is responsible for setting the sales price intended at least that the product would make a profit and not a loss; is that not correct? Mr. BURROWS. That. would be their hope, but it doesn't necessarily follow that they are good accountants. Senator NELSON. Do you have any evidence to submit to the commit- tee that in selling at $1.36 for 100 tables, that the. company did in fact sustain a loss in the production of and sale of this item? Mr. BURROWS. I don't think that I could prove that the company actually incurred a loss. However, as an exercise, if we prorated our unallocated expenses in the United States such as our general and administrative expenses; our selling expenses and I will leave out ad- vertising from the selling expense group because we did no advertis- ing on this product; our excess of actual production costs over standard costs; a percentage factor for research; and if we add these prorations to our 50-cent base standard cost of manufacturing, we come out about even-steven. These added charges also would include the royalties paid on the product sold, cash discounts allowed on sales and the like that were involved in this particular product. Senator NELSON. Do I understand you to say that if you took into consideration all factors of cost- Mr. BURROWS. As we incurred them in the TJnited States and related them to this average U.S. selling price of $1.36. Senator NELSON. That you think you would have about broken even, is that correct? Mr. BURROWS. About broken even. Obviously, we are not in the busi- ness of breaking even. Senator NELSON. I assume, would this be correct, that part of the factor in your breaking even was the fact that your volume was not very large? Would it change, in other words, if your volume were $1 million worth of sales at $1.36 instead of $29,000 of sales? Mr. BURROWS. That is a hypothetical situation which we haven't experienced, and I don't think I would like to speculate on what might happen if we had sales of $1 million. In the first place, if you are going to sell at that level, you certain- ly are going to have to do some advertising, which was not involved in our product. The larger your inventory investment, the greater your risk of obsolescence and the like. The larger your production process- ing, the greater your risk of production hazards, which as they occur have to be written ofF. So, not having experienced a capacity or a volume in the range of $1 million or more, I would not like to speculate on what might have happened if we had been in that fortunate posi- tion. Senator NELSON. So that it is clear in my mind, I understand you to have said in your statement that you paid 50 cents for the raw ma- terial; is that correct? Mr. BURROWS. No. Fifty cents is the basic standard cost. Senator NELSON. The manufacturing cost. PAGENO="0171" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 609 Mr. BURROWS. The standard cost including the raw material was 50 cents a 100. Senator NELSON. And that with a sales price of $1.36 a 100, your best judgment is that you about break even on that. Senator PJAVITS. Would the Senator yield? Senator NELSON. Yes. Senator JAVITS. Give us a description. You get the raw material? What does that mean? What is the raw material? Mr. BURROWS. The raw material is prednisone. Senator JAVITS. Is it a powder or a tablet or what? I think we ought to have some concept of what happens. I mean is the raw material the very same tablet you put in a bottle and sell for $1.36 or is it some- thing else? What is the processing that it goes through, et cetera? Mr. BURROWS. There is a certain amount of processing involved to the raw material after we get it. We have to make it into tablets, among other things. Senator JAVITS. Is that the only processing? Mr. BURROWS. I think there is additional processing. Senator JAVITS. How can we find that out? I think those are impor- tant points. We ought to know just what goes on here. Mr. BURRoWs. I will be glad to send you an outline of the steps that are involved in our production of Paracort. Senator JAVITS. Can you tell us now? Mr. BURROWS. I don't have the information with me. Senator JAVITS. Senator Nelson, may I request that the next wit- ness, Mr. Conzen, perhaps by being given notice, may try to find out exactly what steps are followed. What is the raw material, what do they do with it, et cetera? Senator NELSON. Maybe the competition doesn't want to furnish that information. Senator JAVITS. If they don't they can say so. We have the liberty to ask questions. They have the liberty not to answer them. Thank you, Senator. Senator NELSON. Included in this price of $1.36 a hundred, is also the royalty that Parke, Davis pays to the Schering Co.? Mr. BURROWS. The royalty is included in the factors that I proposed to recognize in my previous exercise as an addition to the 50-cents manufacturing cost. Senator NELSON. And that royalty is- Mr. BURROWS. The royalty is based on the selling price, our realized sell1ng price, so that if, on the average, we realized $1.36, the royalty would be based on $1.36. Senator NELSON. Is that 6 percent? Mr. BURROWS. Six percent; yes. Senator NELSON. Do you have at hand the amount that you have paid to Schering based on that 6-percent royalty? Mr. BURROWS On Paracort through 1~66 we paid to Schering, $48,004. This is on U.S. sales. On international sales to Scherico Limited, a Switzerland-based company, which I understand is a sub- sidiary of Schering, $20,972. In addition, for the period from Novem- ber 14, 1956, to June 30, 1959, we paid some $2,733 to Upjohn. Senator NELSON. What was the last figure you gave? PAGENO="0172" (610 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY Mr. BURROWS. $2,733 to Upjohn for the period from the latter part ~of 1956 through the middle of 1959. Senator NELSON. Go ahead. Mr. BURROWS. In summary, our U.S. catalog price has no real sig- nificance because sales are virtually nonexistent to or through the retail drug trade. Further, our average sale price of $1.36 per 100 tablets in the United States during 1966 is competitive with other suppliers in this country and also is lower than our prices for the same product abroad. Senator JAvITS. Senator Nelson, may I ask one question? Senator NELSON. Sure. Senator JAYITS. I must say that I am very puzzled by this last state- ment, Mr. Burrows. Why would you publish this catalog price if it is so completely misleading and misleading in such a manner as to be harm- ful to you? The drug industry complains that they are being crucified by exaggerated reports of what they charge as compared with the nongeneric price, and yet you yourself by printing this catalog and making this offer to the retail druggist, I don't want to speak a con- clusion. You say it for me. Why do you do it? Mr. BURROWS. I wish I knew. Senator JAvITS. Well, are you going to continue to do it? Mr. BURROWS. We are going to have a little session on the subject with our sales people. As I said initially, I doubt that we can justify carrying this product when we sell less than $30,000 a year, and prac- tically none to the retail drug trade. Senator JAVIPS. Well, people are often their own worst enemies, and, as I have said many times before, it is high time that we had all the facts in toto. This is one evidence that all the facts may do you the most good, though many in your business started out by thinking they do you the most harm, in terms of cleaning up your own situation. It seems to me really beyond belief that you torture yourself with this kind of standard, which you don't observe yourself. Thank you, Senator Nelson. Senator NELSON. I understand you buy the prednisone compound from Upjohn. Mr. BURROWS. Yes, at the present time. Senator NELSON. Do you manufacture- Mr. BURROWS. This is the bulk chemical. Senator NELSON. Yes. Do you manufacture, does your company manufacture and sell any bulk chemicals to other companies ~ Mr. Btriu~ows. The prednisone bulk chemical? Senator NELSON. Of any drug. Mr. BURROWS. As a finished drug I can't think of any we sell in bulk. We sell some intermediate chemical compounds in bulk to other companies. Senator NELSON. Is this a bulk chemical compound that is not in tablet form, that requires final processing by another company? Mr. BURROWS. I can't think of any compounds of the same category as prednisone would be. Senator NEI~soN. No, I mean of any category, any drug. Mr. Binu~ows. I can't think of any drug that we sell in bulk in any quantity. PAGENO="0173" COMPETITIVE PEOBtEM~ IN THE DRTJG INmismy Senator NELSON. In addition to the prednisone that you buy in bulk from Upjohn, do you purchase any bulk compounds manufactured by other drug companies for the purpose of processing into tablet or other form for sale? Mr. Bumiows. We purchase a steroid in bulk from Syntex to which we add another compound. I am not in a position to identify the other compound which is added but I can get that information if it is im- portant to the committee. We process and sell the end product as Norlestrin. Senator NELSON. What you purchase is the compound and then you ~dd the excipients. Mr. Buimows. Right. It is more than an excipient. It is another active ingredient. Senator JAVITS. I just asked Senator Nelson what an excipient is. Senator NELSON. Neutrals, nonactive ingredients. Mr. Bumiows. Nonactive ingredients. Senator NELSON. Syntex, is that a Mexican corporation? Mr. BURROWS. I think it is organized in Mexico and has an American affiliate or subsidiary. Its manufacturing facility for this particular compound is in Mexico. Senator NELSON. Do you buy this steroid compound under its generic name, or do they have a brand name? Mr. BURROWS. No, we buy it under the generic name and sell the end product under our own brand name. Senator JAVITS. Mr. Burrows, I must say I am very bothered about this catalog business as far as the retail druggist is concerned, and may I tell you why? Perhaps you could help us. This very morning it is widely advertised that the retail druggists in New York City are allegedly going to refuse to fill medicaid ~rescrip- tions for the city of New York on the ground that the city is insisting that they be filled in generic terms. Now, doesn't the maintenance of what you say is, for practical purposes, a fictitious catalog price enor- mously complicate our problems in that regard-in giving an air of unrealism to everything, including the practices of the retail merchant? Here you say, "Our U.S.. catalog price has no real signifi- cance because sales are virtually nonexistent to or .tl'iro'ugh the retail drug trade." Yet with this catalog price I suppose there are a few sales really be.ing victimized. It gives ~ completely false impression to the whole business, with your catalog 20 times your actual average sales price, as disclosed on page 4. As a merchandising proposition, isn't this bound to cause us tremendous difficulty with the retail druggist unless it is corrected throughout the whole pharmaceutical industry ?~ Mr. BURROWS. I don't think it is as simple as that. First, I think the doctor, if he elects to prescribe a Parke, Davis product, should have the right to prescribe `a Parke, Davis product. I don't find fault with the price of $17.88 per 100 tablets at which this item is included in our catalog. I find fault with the fact that we leave it in the catalog when this is not the kind of business that we should be pursuing. We made an attempt at that business. We didn't `succeed. We should have directed our attention to other more promising fields, and let this one drop. That should have been our alternative, and I think that it would have been prudent on our part if we `had taken the product out of our list entirely. That we neglected to do, and it is the neglect PAGENO="0174" 612 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY that bothers me rather than the price. We never expect to he able to compete with drug houses that for their own good and sufficient reasons have elected not to be research oriented, and there are a number of them. Obviously, if you have no research program, you can afford to sell at a smaller margin of profit than can a strongly research- oriented company such as Parke, Davis. Our sales policy has to be such as, hopefully, to produce an economic climate in which we will be inspired and encouraged to spend money for research. Somebody has to spend money for research, if the health and well being of this country and of the world is going to be advanced. I think that the ethical pharmaceutical industry, including Parke, Davis, has made a significant contribution in that field, and we hope to continue to do so. If by way of advocating so-called "low" prices we are going to dis- courage the research-oriented pharmaceutical manufacturers from continuing to pursue research for new and improved products, then the health and well being of this country and of other countries in the world are going to `suffer, unless there is a substitute for such research. Perhaps some people might advocate the Government as a substitute. For myself, I would prefer to place reliance on private enterprise sup'- plemented by whatever may be appropriate for the Government to do in this field. Senator JAVITS. Mr. Burrows~ I too would prefer to place the em- phasis on private enterprise, which I think is more productive, but I think private enterprise must also meet public interest standards. That is the purpose of our hearing, `and I am very pleased that you are cooperating, as are the other witnesses. I would like to ask you this question because I `think it is very perti- nent. First let me make a correction: I used the figure of 20 times $1.36. That is increase. I gather that it is somewhere in the area of 10 to' 12 times, because your listed price is $17.88. I correct that. I would like to ask you this question. Based upon the practices of your industry, is it, in your judgment, necessary to price an item at 10 or 12 times the price at which it is sold to the categories of city, county, State and Federal agencies, in sales to the retail druggist in order to deal with the manifold cost, including reasonable profit problems? It seems to me that would be way, way out of line. But you tell us. Is it, in your judgment, legitimate and honorable business to charge 10 or 12 times the city, State, county and Federal agencies price to the retail druggist? Is it necessary, in terms o'f your business? Mr. BURROWS. It i's necessary to charge somebody. Let me put your question somewhat in reverse. If Parke, Davis, for our 1966 year, had reduced our prices by 20h/~ percen't, we would not have made any money. So on a worldwide average of all that we make and sell, and despite this item o'f 10 times or 12 times which you have mentioned, and taking everything that we do as a whole, had we realized 20~ percent less than we did realize, we would make no money. That is the maximum margin that we are talking about, assuming that we maintain our present level of research expense and the like. Senator JAvTTS. Mr. Burrows, if I may-I apologize for interrupt- ing, sir, but I would like to pinpoint the question of the internal struc- tural difference between the sale to the governmental agencies and the sale to the retail druggist. It seems to' me that, even accepting your PAGENO="0175" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 613 explanation, the internal structural difference seems unduly lopsided to the retail druggist. Is it esser~tial in the structure of your business that there be this lop- sided relationship? Isn't the retail druggist, and, therefore, the retail buyer, being asked to pay far too much of these costs, and an equitable share not being assessed, as it were, upon other buyers, to wit, city, county, State and Federal agencies? That is my question. Mr. BURROWS. I don't know that I can provide an answer for that. I have to assume that we used our best judgments under the circum- stances when we made those bids. It is conceivable that for one reason or another we wanted the Parke, Davis label represented in these insti- tutions. We knew from previous experience and previous bids what the bid prices were liable to be, and if we wanted to have our name repre- sented in the institutions by our product, we knew that we would have to bid at or near `the past prices in order to accomplish that end. Senator JAVITS. Senator Nelson, I have an urgent summons to the Education Subcommittee. May I ask the Chair's indulgence to excuse me. May I ask also if the Chair would be kind enough to give me notice before the next witness is through, so I may come back and ask some questions. Senator NELSON. Thank you, Senator. I want to pursue a couple of questions raised by Senator Javits of New York. As to your ob- servations about the necessity for making certain charges and mak- ing a certain profit in order to carry on resea rch, isn't that whole question settled by the fact that under our law, if you discover a product, you have an exclusive patent for 17 years, and may charge any price that the manufacturer of the new product wishes to charge, and isn't it sufficient to make the necessary profit to do the research in that 17-year period? Mr. BURROWS. I don't know that I could speculate on that. By whatever fair means we can, we at Parke, Davis want to', as I say, create that atmosphere and climate in which we are encouraged to continue to do research and encouraged to earn profits that will justify an extensive and we hope effective research program. After a patent has expired, anyone who has the competence to make an item can come in and sell in competition, and it is normal to expect that the price structure would, by the very nature of that competition, be adjusted downward. Senator NELSON. Well, I still want to get at the question that we build into the law a 17-year exclusive right to the discoverer of a new drug. He may charge whatever price he wishes. He may license or not license anybody else. He may charge a royalty. And then once the 17 years have gone by, his drug is well established in the retail market, and I am sure you are aware that there are a number of drugs on the market on which the patent has run out, and yet the original owner of the patent is charging a price far higher than the competi- tion, but the competition can't get on to the market because the pre- scribing physician is only familiar with the drug he has been prescribing for 17 years. Mr. BURRows. I think you use your own best business judgment as to what you do under `those circumstances, and act accordingly. Senator NELSON. Isn't it really the fact that when the drug com- panies bid on an offer from the Defense Supply Agency or the city PAGENO="0176" 614 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY of New York, or a large hospital, that they are bidding on a generic solicitation, and they are bidding in competition? That accounts for the fact that in every single case that we can find, the brand-name companies will bid far lower in that competition, sometimes a 10th, a 20th or a 30th of what they charge the retail druggist, because it is competitive, and the fact is that on the retail market where the brand is established, there is no competition, no serious competition. Therefore the American free competitive system is not working on the retail market. For example, Schering can charge $17.90 on the retail drug market when there are drugs available at a fraction of that price, because the prescribing physician is prescribing that well-known drug. I do not want to select out Schering. This is true of any number of drugs that have been called to the attention of the druggist. Now, what is your observation about competition against a standard brand name? For example, your attempt to establish Para- cort versus the competition in the retail trade which you failed to do. Mr. BURROWS. The competition was very fortunate, and as I say the company that is there with a sound drug first has a competitive advantage. That is what most of us are looking for, something that gives us a competitive advantage and contributes to our capability to expand and do better and provide better. Senator NELSON. Would you explain to me why is an established name in the retail market able to sell at the much higher price than the competition, but yet as soon as that established brand name is bid to the Defense Supply Agency, it goes down in an attempt to meet the competition of all the rest, and come in at a much lower price? Why doesn't that occur on the retail market? Mr. BURROWS. I think it does occur on the retail market with pre- scription drugs providing the physician is prepared to substitute an- other drug, a non-brand-name drug, for example, for a brand-name drug. Senator NELSON. What I am trying to get at is why does the phy- sician prescribe the high cost predni~one, for example, when the best evidence we can find is that there are a large number of competing prednisones `which the Medical Letter says are equivalent, and recom- mends be prescribed generically. Why doesn't the physician prescribe those? Mr. BURROWS. I am not a physician and I am not sure that I should be providing a physician's answer, but T imagine that he prescribes the drug in which he has confidence, and he probthly is not inclined to cut and fit and experiment. Senator NELSON. What is most puzzling in any case, however, is that in looking at the list of drugs in the Medical Letter, there is included a low priced prednisone that meets Pharmacopeia standards. It is as pure as the leading drugs on the market, practically the same percent- age of impurities. It sells for 61 cents a hundred to the pharmacies, and the highest priced one-Parke, Davis is listed as $17.88 but I guess that has been settled, you sell at an average of $1.36-is listed at $17.90. Why would a physician prescribe a drug costing $17.90 a hundred to his patient, when there is one available at 61 cents a, hundred, which the Medical Letter, the most respected source of information according to the physicians' testimony before this committee, is available at 61 cents? Can you explain that? PAGENO="0177" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 615 Mr. BURROWS. I cannot explain it, except I am sure that the phy- sician is doing what he thinks is in the best interests of his patient, all things considered, including the reputation of the company that sup- plies the drug that he is prescribing. Senator NELSON. Is the individual practicing physician better pre-. pared to judge the therapeutic value, and quality of the drug than the Medical Letter which does scientific research and has the advice and consultation of distinguished pharmacists, pharmacologists, clinical physicians and all of this information? Is he really better prepared to make that decision than the Medical Letter? Mr. Buimows. I think you will have to give to the physician the final responsibility for his patient, and he cannot and should not be expected to pass the buck for his responsibility to the Medical Letter or to any other source, and again I am not reflecting on `the Medical Letter. The Medical Letter in absolute terms may be entirely accurate and correct, but in the last analysis, it is the physician that has to decide what he thinks is in the best interests of his patient. Senator NELSON. Nobody is suggesting, as has been reported in some of the literature, that somebody is going to take away the physician's. right. I think what is questioned very seriously by the facts in the Medical Letter is the physician's judgment. U.S. Vitamin Corp. is a very distinguished drug company in this country, isn't it? Mr. BURROWS. It certainly is. Senator NELSON. And it meets USP standards, selling prednisone at $2.50 a hundred. On what basis would any physician make a judg- ment that his patient ought to pay $17.90? What is the basis for making the judgment? Mr. BURROWS. Again I should not be speaking for the physician,. but physicians apparently feel that the product at $17.90 for their particular patients is worth the difference. Otherwise they would not prescribe it. Senator NELSON. Isn't it really a fact that we are facing the same problem that Parke, Davis had in trying to get into' the retail market. but failed to do so? In your statement you said you tried vigorously for 2 years, and you could not meet the competition. Now, your~ product in your judgment is as good as any one of the other predni- sones on the market, isn't it? Mr. BURROWS. Yes. Senator NELSON. You testified earlier that you were not aware of any information indicating that there was greater therapeutic value. to any other drug than your own? Mr. BURROWS. That is right. Senator NELSON. Therefore on what basis does that individual' physician make his judgment? Mr. BURROWS. I would suggest that among your witnesses you will have some individual physicians here, and that they would be in a better position to answer than I would. Senator NELSON. We have, of course, had some very distinguished physicians, pharmacologists, who say that the ordinary physician does. not have any basis for making such a judgment, that `he does not have the necessary information. I think this is what we are getting at, that the advertising and the promotion on the retail market i~ what deter- 81-280-pt. 2-67-----12 PAGENO="0178" 616 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY mines what the physician finally prescribes. Of the 22 prednisones available here the doctor prescribes one that cost $17.90 because that is the one that has been advertised successfully to him.. The doctor is really unaware that the Medical Letter has said that all 22 are equivalent and that he ought to prescribe generically, particularly for his impecunious patients. I guess that means if they are rich it really does not make any difference if they pay a higher price, but doesn't it suggest to you that it is the advertising to the doctor that deter- mines what he is going to prescribe, and not the quality of the drug, when you have a case right here of 22 drugs of equal quality? This is the puzzling thing that the committee is trying to get at. The smoke- screen is repeatedly thrown up in the literature that these drugs aren't equivalent. The fact of the matter is, if you look at the Medical Letter, you will find that the highest priced drugs here are not the purest. There are some that are not selling on the retail market very much although they are pure. You keep saying that purity is a factor. The fact is that they are within TJSP limits and whichever one you use really does not make any difference clinically. This is the issue that the committee is trying to get at and trying to get an explana- tion, without, if I may say so, very much success. Would you as a physician, if you read the Medical Letter and looked at their assertions about this, would you order the highest-priced one for your patient, unless you had some clinical evidence that one was better than the other? Mr. BURROWS. That is a speculative question. I am not a physician, and I don't know what I would do if I were a physician other than to do what I thought was best for my patient, and if I thought, all things considered, that a drug at $17.90 a 100 was the best thing for my patient, that is what I would prescribe. Senator NELSON. I am sure you would, and so would I and so would anybody else. The real question here is that the- Mr. BURROWS. I think possibly too that I would keep in mind as a physician and as someone that was interested in the future develop- ments in `the health care field-that I would be mindful of whether the company whose drugs I was prescribthg, assuming other things being equal, was likely to contribute in the future something new and im- proved over what was available to me now versus another company which had elected not to indulge in that phase of the drug business. Senator NELSON. Yes, but of the companies listed here-some I as- sume produce ouly generically-perhaps do not do any research. But Merck, one of the great corporations in the country, is listed here and is selling 100 tablets for $2.20. Would you say that there would be any doubt in your mind as a physician about the quality of the product of Merck? Mr. BrmRows. No, I would have no reservations about Merck as being a research-oriented house, certainly. Senator NELSON. U.S. Vitamin Corp is selling prednisone at $2.50. That is a research-oriented corporation, isn't it? Mr. BURROWS. I presume it is. Senator NELSON. There is the very distinguished company Upjohn which puts out Doltasone. That is one of the two drugs with the lowest amount of impurities in it and is selling for $2.25 a 100. They are re- search-oriented are they not? PAGENO="0179" COMPETITIVE PROBLEMS IN THJ~ DRuG INDuSTRY 617 Mr. BURROWS. Very much so. Senator NELSON. So I still do not get the explanation of why the doc- tor would be requiring his patients to spend $17.90 or some other price, $8.70, or $17.88, when well-known corporations are producing the same drug which meets 1IJSP standards at much lower prices. There is no difference in therapeutic value, as far as we can find out. I still don't understand why a physician would prescribe the highest-priced one. On what basis does he make his judgment, is what I am trying to get at. Mr. BURROWS. I do not think I am capable of answering that other than what I already have said. Senator NELSON. All these prices that I have been reciting, Mr. Bur- rows, are prices to the druggist. They do not involve the retail price or the markup that he charges, just for clarification of the record. Would YOU think it would be of any value to establish a national compendium of drugs? I assume it would have to be done in cooper- ation with the industry, the medical profession, and other advisers, but that it would have to be done largely, I am assuming, by the Fed- eral Government. Do you think it would be of value to establish a national compendium in which the drugs are all listed by their generic names, brand names, and with all of the known clinical information recited alongside them? A physician would open up the national compendium, and find there all the drugs, their side effects, and the companies that manufacture them. This, of course, would also involve testing by FDA, and also involve putting in the known clinical in- formation? Do you think this type of a national compendium would be of value to the country as a whole? Mr. Btrmiows. I think it would as long as the doctor is still allowed his prerogative of prescribing the particular drug of the particular manufacturer that he thinks best, and providing that we, as a manu- facturer, are not stopped from attempting to advance and advocate our particular line of products. Those are the ones we know about. Those are the ones that we are in business to make and sell, and those are our potentials for corporate progress for the future. Senator NELsoN. I want to be sure that I was understood. I was saying national compendium, not formulary. I am not sug- gesting that you have a formulary from which a physician must pre- scribe. I am simply saying you list the drugs in a national compendium with the pertinent information and the manufacturer as informational matter to the medical profession, the teaching hospitals and the prac- ticing physician. That will be all that is intended, and it should not interfere with the private operations of the drug companies. That is my question. Mr. BURROWS. I can see nothing wrong with having facts on such an important subject as drugs and health available for reference by people who have occasion to use and benefit from such information. Senator NELsoN. Thank you. Mr. GolmoN. I would like to clarify a couple of points. Do you sell any prednisone at all today at the price of $17.88, any at all? Mr. BURROWS. I think during 1966 we sold 117 bottles of 100 tablets each. Mr. GORDON. But at one time you did sell at $17.88; is that correct? Mr. BURROWS. That is right. PAGENO="0180" 618 coi~E'rInvE PRO~EMS IN ¶1~1~[R DRUG INDUSTRY Mr. GORDON. Now, T just want to clarify another point and that is this: When you sold it at $17.88, it was the same drug as the drug you are selling for $1.36 at present; am I correct there? Mr. BUimows. That is correct. Mr. GORDON. So there is absolutely no difference in quality, efficacy or purity or anything else? Mr. BURROWS. There might be some difference and some small sav- ing if you sell in bottles of 1,000, for example, inasmuch as the price per 100 tablets in a container of 1,000 would be less than the cost per 100 tablets in a container of 100. Mr. GORDON. But the difference between $1.36 and $17.88 would not be accounted for by this? Mr. BURROWS. Oh, no. Mr. GoRDoN. I just want to make sure of that. Mr. Buimows. No. Mr. GORDON. And you also stated, if I recall correctly, that your' prednisone, as far as you know, is just as pure, safe, and efficacious as anyone else's; is that correct? Mr. Bum~ows. I don't know anything against our prednisone, and I do not know anything against any other prednisone. Mr. GORDON. Now, you stated that $1.36 is your average competitive price. Can you give us the range of prices at which you sell the prod- uct, the high and the low? Mr. Buimows. Certainly the high would be not more than $17.88. Mr. GORDON. Yes. Mr. BURROWS. As for the low, I do not know if I can cite that price. No, I am sorry, I do not have the low information. Mr. GORDON. But the $1.36 is not your price but merely an average price? Mr. Buimows. That is right. It is the average that we realized during `the year 1966 on our sales to all customers. Mr. GORDON. In fact, the chances are you may not have sold any at $1.36 but some at lower prices and some at higher prices? Mr. BURROWS. That is right. Mr. GORDON. Now, this $1.36, as you told Senator Nelson, includes a 6-percent royalty to Schering. When did you start paying this royalty? Mr. BURROWS. I am informed that the first payment was made in 1958 on 1957 sales. I think probably at that time it was at a tentative 5-percent rate which rate was to prevail until and unless Schering re- ceived the patent on the product, which it did in 1964. Mr. GORDON. This is my next question. Since Schering got its patent on May 26, 1964, can you please tell the subcommittee, then, why you paid royalties to Schering for about 61/2 to 7 years before it received a patent? Mr. BURROWS. May I ask my associate, Mr. McGregor, to comment on that. Mr. McGRI~GOR. As Mr. Burrows has said, we decided in 1956 to enter this market with a product under our own brand name. There was a patent interference then pending in which a number of research'- oriented houses were involved. We felt it desirable to try, if we were going to enter the market, to get a solid position in furtherance of whIch we negotiated licenses with the firms that were involved in that interference. PAGENO="0181" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 619 Mr. GORDON. Are you paying royalty or did you pay royalties to :Syntex? They were included in the patent interference, were they nOt? Mr. MoGIu~xioR. We had a license agreement with Syntex on this product also. Mr. GORDON. And you paid royalties to them? Mr. MCGREGOR. No; we did not. We knew or we believed that Schering was the inventor of the product. We knew that they were the first on the market with it. It was our opinion, after getting all the patent information we could, that Schering had the best chance of success. Mr. GORDON. Of course, if they did not succeed, you would have been out on the royalty payments? Mr. MCGREGOR. Yes. Mr. Goi~ON. Up until that time? Mr. MCGREGOR. Yes. Mr. GORDON. Now, is it customary in industry to pay royalties on an unissued patent? Mr. MCGREGOR. It is not unusual. Mr. GORDON. You have done this on other occasions? Mr. BURROWS. We have done it, and reciprocally, both ways. We have had people pay us on patents as well. Mr. GORDON. Not on patents. Mr. MCGREGOR. On applications. Mr. Gor~DoN. On applications only? Mr. MCGREGOR. Yes. Mr. GOIWON. Now; is this because you feel that if you do not pay the royalty, you may not get a license afterward? Mr. MCGREGOR. Of course. Mr. GORDON. Were any conditions imposed upon you by the license that you eventually got? Mr. MCGREGOR. What do you mean by conditions? Mr. GORDON. For example, am I correct that you were not allowed to manufacture the bulk material? You could manufacture only the finished material? Mr. MCGREGOR. I am not aware of any such condition. I haven't examined the license agreement with that specific thought in mind. Mr. GORDON. But you could have manufactured the bulk material if you desired to do so? Mr. MCGREGOR. I don't know, Mr. Gordon. I would have to look that tip and tell you later. Mr. GoJmoN. Would you please supply the license to the committee. Mr. MCGREGOR. I would be glad to. It already is in the Kefauver record and I assumed you had looked at it. Mr. GORDON. I did but I was just wondering if there is a newer one. Mr. MCGREGOR. No, there isn't. Mr. GORDON. Well, that one did impose a condition that you could not sefl the bulk, or manufacture the bulk. Mr. MCGREGOR. I see. That is quite possible. Mr. GORDON. I don't know if Senator Nelson has already asked this question, but do you manufacture for other companies? Mr. BURROWS. You mean do we do contract manufacturing for other companies? Mr. GrnrnoN. Yes. PAGENO="0182" 620 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY Mr. BURROWS. No. We used to but we have gotten out of that field. Mr. GORDON. Do other companies do contract manufacturing for you? Mr. BURROWS. Yes, R. P. Scherer Corp. makes some of the products whic1~ we sell in the United States as soft gelatine capsules. We have other manufacturers that put some of our products in special kinds of containers or dispensers. By and large, however, apart from the Norlestrin item from Syntex that I spoke of previously; we do most of our own manufacturing. Mr. GORDON. Coming back once again to licensing, when you secured your license and started producing the finished form of prednisone, did you establish a price similar to Schering's? Was it exactly the same price, $17.90? Mr. BURROWS. I think the two prices were within pennies of each other, and I imagine there were other prices in the same range, but I am not sure. Mr. GORDON. Do you have any other examples showing a great dif- ference in the price of your drugs when sold under a generic name or when sold under a brand name? For example, what I had in mind was some material submitted to us by the city of New York to whom you sold Benadryl, 1,000, 50-milligram tablets for $15.63 under its trade name and $3 under the generic name. Here is the material sub- mitted to us by the Purchase Department of New York City. Mr. BURROWS. I am not familiar with this particular transaction. As you will recall, Mr. Gordon, we came prepared to discuss the sub- ject of prednisone, as had been requested. If there are other drugs that Parke, Davis makes in which this committee has an interest, we would be very glad to give those the same research as we have given the prednisone subject. Mr. GORDON. My point here is that regardless of the price at which you sell the product, whether at $3 or $15.63, they are both of high quality? Mr. BURROWS. You can assume that for sure. Mr. GORDON. So, really, price is not the criterion? Mr. BURROWS. That is right. Mr. GORDON. Is prednisone the kind of a drug used for short or long periods of time? Mr. BURRows. I understand that it could be used for a long period of time in certain types of arthritis, but I am not a medical man and I wouldn't want anyone to start taking it on my say-so. Senator NELSON. I just have one more question. There is some ques- tion raised from time to time about the adequacy of the inspection of the testing of drugs, the adequacy of the inspection of plants. One of the problems as you are aware, is that there is a very large number of manufacturers, some quite small. Would you consider it in the public interest if the Food and Drug Administration had continuous inspec- tion of all drug manufacturing plants in this country? Mr. BURROWS. Senator, what do you mean by "continuous"? Senator NELSON. Well, perhaps, I am raising too general a question. I am not familiar enough to make a comparison, and I realize it is probably difficult. As you know some drugs do get onto the market that do not meet appropriate or proper standards. In the meat in- dustry, for example, for all meat moving in interstate commerce, there PAGENO="0183" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 621 is in the plant at all times a Federal inspector. I realize that is all en- tirely different problem. It is no doubt much simpler, but do you think it would be in the public interest to broaden the nature of the inspec- tion testing of drugs? Mr. BURROWS. It well might be. In our own case, being prejudiced, we wouldn't think it was necessary, but if it was felt that that would add to the assurance of quality in drugs that are made available to the public, on that basis, I can see nothing wrong with it. We are as you know subject to periodic inspection at the election of the Food and Drug Administration and other agencies of the Government. Senator NELsoN. As a practical matter, how often does the Food and Drug Administration inspect your plant? Mr. BURROWS. I don't have that information, but I could get it for you if you wish. As far as I know the inspections are unannounced with no such advance notice as "come 3 weeks from now we are going to be there, so you can tidy up." We try to operate so that we do not have to do any tidying up. We hope we always are reasonably tidy. Senator NELSON. Would you mind submitting to the committee the number of inspections that have been done by FDA, say in the last 2 or 3 years, so we can have some idea? Mr. Brumows. Yes, sir.2 Senator NELSON. I don't have any more questions. Mr. Burrows, we thank you very much and your general counsel for taking the time to come over here today, and we appreciate very much your contributions to these hearings. Mr. BURROWS. Thank you very much. Senator NELSON. We will have a 5-minute recess and then we will resume. (Short recess.) Senator NELSON. The hearing will resume. Our next witness is Mr. W. H. Conzen, president of Schering Corp. Did you have somebody you wish to have with you? STATEMENT OP W. H. CONZEN, PRESIDENT, SCHERING CORP., BLOOMPIELD, N.J.; ACCOMPANIED BY DR. DONALD R. LONGMAN, VICE PRESIDENT; AND IRVING H. JUROW, VICE PRESIDENT AND GENERAL COUNSEL Mr. CONZEN. Yes, Senator Nelson, I have Mr. Jurow and Dr. Long- man with me. Mr. Jurow is our general counsel. Dr. Longman is our vice president for domestic operations. Senator NELSON. Will you give their names to the reporter so the record will be clear as to who is appearing. Mr. Conzen, we are very pleased to have you appear here as president of the Schering Corp. I know that we will find your testimony very helpful to the committee record. You may proceed to present your testimony in any way you see fit.. If you don't object, I may interrupt from time to time with a ques- tion. If you prefer, I can always wait until you get through. Do you have any objection to questions during the course of your presenta~ tion? 2 At the time of going to press, this information was not available. PAGENO="0184" 622 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY Mr. CONZEN. No, sir. Senator NELSON. Why don't you go ahead and proceed in your own fashion. Mr. CONZEN. Thank you, sir. And in the interest of time, instead of reading my entire statement, which will be part of the record, I will summarize certain sections. Senator Nelson and members of the subcommittee, I am W. H. Conzen, president of Schering Corp. Schering is an international phar- maceutical company serving the medical profession throughout the free world. Its administrative and research headquarters are in Bloom- field, N.J.; its manufacturing facilities are in New Jersey, Wisconsin, and a number of foreign countries. I am accompanied by two of my associates. May I introduce them: Dr. D. B. Longman, our vice president for domestic operations, and Mr. I. H. Jurow our vice president and general counsel. We are here in response to your invitation of June 12 to appear and to answer your subcommittee's inquiry concerning the price of our product Meticorten. It is our purpose to cooperate fully so that you may hear all sides and reach a fair evaluation of the criticisms of prescription drug prices that have been made here. In your letter to me, you asked that I discuss pricing policies and practices of our brand of prednisone. You said that "striking differ- ences in prices of prednisone among various manufacturers" had been referred to in recent testimony before your subcommittee. During these hearings there have been frequent) references to the price of Schering's Meticorten tablets and comparisons of that price with the prices charged for so-called "generic" prednisone tablets. Obviously, the reference to "striking differences * * * among * * * manufacturers" pertains to these comparisons in the testimony. However, so that there is no misunderstanding as to precisely what is being discussed, I believe a few words of explanation are in order as to what prednisone is, what Meticorten is, and how significant they are in the pharmaceutical field. Prednisone is the official, or established, name of a chemical sub- stance which was discovered by Schering research scientists in 1954. Tt. is what is known in chemistry as a steroid, more specifically, a cor- ticosteroid. We have developed and marketed a number of pharma- ceutical nroducts which contain prednisone and its sister compound prednisolone-14 to be exact. These product's provide a variety of pharmaceutical dosage forms, many of which are offered in `several package sizes. In addition to plain tablets, there are injectables, creams and ointments for dermatological use, ophthalmic preparations, and a number of combination products. Meticorten is Schering's brand name for tablets formulated with prednisone as the active ingredient; it is a typical example of what many people have chosen to call "miracle, drugs." It is used by people of all ages for the treatment of a variety of short- and long-term med- ical problems such as allergies, asthma, arthritis, skin and eye infiam- mations. Elderly people with chronic arthritis represent a relatively small portion of its users. Prednisone, in addition to being the official name for the chemical comnound, is also the so-called "generic" name for pharmaceutical products made available by many generic distributors, which ccntain, as the active ingredient, this particular chemical substance. PAGENO="0185" COMPETITIVt~ PROBLEMS IN THE DRUG INDIJSTR~ 623 Before I address myself to your specific question, I think it would be helpful if I explained for the subcommittee some of the magnitudes involved to establish the relative significance of what we are discussing. In the first place, the domestic ethical pharmaceutical industry is estimated to have a volume of about $3 billion at the manufacturers' level. The term "ethical pharmaceuticals" as used here refers to those products which are promoted only to the medical and allied profes- sions, and available through pharmacies. The sales volume of all cor- ticosteroid tablets totals approximately $40 million; this not only in- cludes prednisone, but all other corticosteroid tablets. The estimated volume `of prednisone tablets is $3 million. Consequently, this product represents one-tenth of 1 percent of this country's total ethical phar- maceutical market. Senator NELSON. Would you tell me, sir, what percentage of the total amount of prednisone sold in this country is sold by your corporation? Mr. CONZBN. This I was going to read in the next paragraph, but to answer your specific question, our total sale of prednisone tablets in this country is approximately $1 milli6n. Senator NELSON. In this country. Now, you have sales overseas. Mr. CONZEN. Yes. They are less than that. Senator NELSON. Do you know what amounts? Mr. CONZEN. Approximately three-quarters of a million dollars, I would estimate. Senator NELSON. Three-quarters of a million dollars? Mr. CONZEN. Dollars. Senator NELSON. Sales by your company? Mr. CONZEN. Our brand name, Meticorten, yes. Senator NELSON. And do you know what the rest of the industry in this country sells overseas? Mr. CONZEN. No', I don't.kno'w that. Senator NELSON. What percentage of your sales in this country are in the retail drug market, that is either to the wholesaler or directly to the druggist for the retail trade? Mr. CONZEN. By far the largest portion of our business in Meticorten tablets is to the wholesale and retail trade. Senator NELSON. When yo'u say, by far the largest percentage, can you give me some rough `estimate of what percentage? Mr. CONZEN. I can give you a rough estimate. I would say it would be about 80 percent or more. Perhaps 88 percent, my colleague tells me, is more accurate. Senator NELSON. About 88 percent? Mr. CONZEN. Yes. Senator NELSON. Is this retail? Mr. CONZEN. And wholesale trade. Senator NELSON. And wholesale trade. What is the total wholesale- retail trade in this country, do you know, of the $3 million total sold here? Mr. CONZEN. At the rate of 88 percent, it would be over $21/2 million. Senator NELSON. As I understand your testimony, the Schering Corp. sells abo'ut one-third of the total sales in this country, $1 million. Of this, the Schering Corp. sells about 88 percent to the wholesale~ retail trade market. PAGENO="0186" 624 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY Mr. CONZEN. Yes. Senator NELSON. Now, of the balance of the $2 million that are not sold by Schering, how much of that is sold in the retail-wholesale market? Mr. CONZEN. I am sorry, I don't have that information, Senator Nelson. Senator NELSON. Is that available in the drug literature? Dr. LONOMAN. It could be obtained. We don't have it. Mr. CONZEN. I don't know whether there is such a market survey available. Senator NELSON. All right, thank you. Mr. CONZEN. Second, within the pharmaceutical industry, Schering is about 16th in size, with a domestic ethical sales volume of some $65 million. Of that total, Meticorten tablets represent less than $1 million. In other words, Meticorten tablets amount to only about 21/2 per- cent of the total corticosteroid tablet market. The relative importance of Meticorten volume, both in terms of the consumer's drug bill and with respect to Schering, is certainly not large. Nevertheless, those who require this medication have every reason to ask why ~{eticGrten tablets should cost. more than products which contain the same active substance available from other companies at mu~h lower prices. The answer lies in the basic difference in the nature of the functions and services performed by Schering Corp. in our economy, as con- trasted with those performed by distributors of generic prednisone. Schering Corp. and the generic distributor operate in such different ways as to be engaged in totally different businesses. I am riot, bQwcver, going to discuss the merits of the so-~ca1j~d generic products and the so-called brand-name products and the question of therapeutic equivalence. There is a considerable difference of opinion in the scientific community on that subject. The study now going on under Government auspices, hopefully, will throw light on this question. Let me explain what I mean by "different kinds of businesses." Schering Corp. is fully equipped and fully staffed with highly skilled research scientists to discover and to develop new drugs, to produce them under the most rigid standards of good manufacturing procedures and quality control, to disseminate promptly throughout the scientific and professional world full and complete information about such new drug discoveries, to make available a wide range of dosage forms to meet all physician needs, to market them widely in all parts of the free world, and to continue to service its discoveries for the medical profession. These are the characteristics of our company; it is research-oriented, it manufactures products of the highest quality, it markets its products worldwide, and it is devoted to total service to the medical profession for the benefit of its patients. Implicit, however, in this succient state- merit is a host of detail, activity, and responsibility. Senator Nelson, in my statement, which you have, I have gone into some detail as to what we did and what Schering actually did in con- nection with the discovery and marketing of Meticorten. In the in- terests of time I will not read it; I will merely summarize. I refer there to our continuous search for new compounds, to the one success out of the many, many thousands of tries, to the extensive PAGENO="0187" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 625 laboratory and animal testing, the extensive and critical clinical test- ing in human beings, the development of safe and effective pharmaceu- tical formulations, of sound manufacturing procedures, of precise specifications and standards, the preparation of voluminous records and reports for Government approval, which as you know, Senator Nelson, takes many, many years to obtain, the critical quality control activities, the preparation of labeling and informational material for the profession, the activities of our detail men in bringing all this information to the profession, the preparation of symposia, films, brochures, et cetera, all this not only in the United States but through- out the world, and, of course, the marketing and distribution of the product, its many dosage forms, and its variations on a worldwide continuous basis. Senator NELSON. If I may interrupt, you referred a moment ago to research in the field. Did any other of the drug companies do research in prednisone, in the development of it? Mr. CONZEN. I am not aware of any research that has been going on in prednisone in recent years, except in our own company. We con- tinue to search for new indications in ~1iis field with our drug Meti- corten. `SV~ supply the medical profession, clinical investigators, and approved- Senator NELSON. Are you talking about the clinical research? Mr. CONZEN. Clinical research which is still going on today with Meticorten in different strengths, for instance, in such fields as leu- kemia. I understand that we are the only company which continues to do research with Metioorten, or for that matter, wit.h prednisone. Senator NELSON. You are familiar with the research that has been done by~ the National Institutes of Health with .prednisone, are you not? Mr. CONZEN. They were originally working with prednisone when we discovered it; yes, sir, if my memory serves me right. Senator NELSON. Is it not correct that the first clinical experiments done with prednisone were done by the National Institutes of Heallh? Mr. CONZEN. Yes; I understand this is correct, with material pro- vided free by Schering Corp. Senator NELSON. Just for the record, NIH informs us that intra- mural research expenditures related to prednisone and prednisolone, fiscal years 1953 through 1965, amounted to $2,114,000. Mr. CONZEN. I am not familiar- Senator NELSON. Excuse me, let me correct the record. In the years 1953 through 1967, NIH informs us, they spent a total of $2,114;000 in intramural research on prednisone and prednisoloçne. Were you aware of that? Mr. CONZEN. No. I find it somewhat difficult to believe, because pred- nisone and prednisolone were only discovered in 1954. Moreover, I don't know whether this figure may include research done with other corticosteroids. Senator NELSON. Unless they misinformed us, which is possible, the information they gave us was that research on prednisone and pred- nisMone in 1953 amounted to $15,000, 1954, $68,000, and increasing progressively to fiscal 1967 when they will spend $552,000 in research in this field. In 1966 they spent $409,000. Anyway, that totals $2,114,000 and I would ask that listing identified at~ the top as "Estimated NIH intra- PAGENO="0188" 626 C0MPETIflVE PROEL~MS IN THE DRTJG INDUSTRY mural research expenditures" be printed in the record at the con- elusion of your testimony.1 They also submitted to us expenditures by NIH in extramural re- search grant obligations. This involved 639 grants from the period 1953 through 1967. These grants were not, I understand, exclusively to~ do research in prednisone and prednisolone, but in each of these 639 grants, research was done on prednisorie and prednisolone, and that totaled $14,384,144. I ask that this table entitled "NIH Extramural Research Grant Obligations" be printed at the conclusion of your testimony.2 You'~re aware thatthey are engaged in this kind of research? Mr. CONZEN. In this general field, yes, as far as I know. All supplies of prednisone and prednisolone were made free of charge to the Institute. In other words, there are no sales involved. This is part of our contribution to the research program. Senator NELSON. Thank you. Maybe at this point I ought to ask if you can give an estimate of how much the `Schering Corp. is. spending in research on prednisone? Mr. CONZE~. I can't give y~i ~ dollar figure; but I can give YOU some figures which may be of interest and help to you and your subcom- mittee. As far as Meticorten is concerned, there are 1,979 published clinical papers available to date. Senator NELSON. Published what? Mr. CONZEN. Clinical papers, attesting to the efficacy and therapeutic value of Meticorten in human medicine. Senator NELSON. Are these clinical studies in the strictest sense of the word, or are they in the nature of testirnonials~? Mr. CONZ1~N. They are strictly clinical work published in reputable medical journals and available. I could make available to you a bibliography, if you would beinterested. Senator NELSON. Were these in the United States? Mr. OoNzE*. These are all in which our product was involved, both here and abroad. Senator NELSON. Do you know how maily were in the United States? Mr. CONZEN. I don'.t have that figure with me, but I could let you have it. Senator NELSON. These are papers that have been written on clinical studies of prednisone. Mr. CONZEN. On Meticorten, Schering's particular brand of predni- sone. Senator NELSON. Were these clinical tests done at the request of Schering Corp.? Mr. CONZEN. Either sponsored by us or done spontaneo~isly, in which cases, as a rule, we make these supplies available free of charge. Senator NELSON. Were these done `by independent clinical investi- gators? Mr. CONZEN. Yes, sir; entirely. Senator NELSON. Were any of these test double-blind tests measuring the clinical efficacy and the~rapeutic equivalency of Meticorten i'ersus any other predmsone? 1 See p. 656. 2 See p. 656. PAGENO="0189" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 627 Mr. CONZEN. I can't answer this question. I can find out. Probably there are such studies in these nuutbers. Senator NELSON. I would appreciate it, for the record, if you would advise us, when you have the chance to check it, whether any of these were double-blind clinical tests evaluating the therapeutic compara- tive value of Meticorten versus any other prednisone, and if they are, the committee would appreciate it if you would send us copies of those double-blind clinical tests. Mr. CONZEN. Yes, sir. (The information referred to, subsequently received, follows:), SOHERING CORP., Blooinfield, N.J., Aagust 15, 196?. lion. GAYLORD NELSON, U.S. Senate, Washington, D.C. DEAR SENATOR NELSON: In the course of his appearance before your Monopoly Subcommittee on July 24, Mr. Conzen referred to the i~act that there were, to date, some 1,979 published clinical papers on Meticorten, and he was interrogated by you as to how many covered clinical work in the United StateS, as dis- tinguished from abroad. Mr. Conzen replied that he did not have the information with him, and that he would furnish it (Tr. pp. 1033-4). He also was asked whether any of these included double-blind" tests; again he offered to obtain this information for you (Ibid). Additionally, you inquired as to our "nonprescription" sales totals in the United States; Mr. Conzen agreed to supply that figures (Tr. p. 1042). Finally, in the course of the discussion concerning the marketing of prednisone overseas you expressed interest in ascertaining whether "competing foreign- produced prednisone" was being marketed in Switzerland; it was indicated that this information could be made available. Responsive to the foregoing, we submit the following information: (1) Of the total number of publications to which reference was made, namely 1,979, our review indicates that 1,416 were in the United States and 563 were outside the United States. (2) Four publications appear to have consisted of "double-blind" studies: a. Smyth, Chancy J. A method of drug evaluation in rheumatoid arth- ritis: results with phenylbutazone, oxyphenylbutazone, cortisone and predni- sone, Ann. N.Y. Acad. Se. 86 :292-300, March 30, 1960. b. Spilka, Conrad J. The place of corticosteroids and antihistamines in oral surgery. Oral Snrg. 14:1034-42, Sept. 1961. c. Combined Rheumatic Fever Study Group. A comparison of short-term intensive prednisone and acetylsalicylic acid therapy in the treatment of acute rheumatic fever. New England J. Med. 272:63-70, Jan. 14, 1965. d. Dordick, Jack R. and Gluck, Edward J. Preliminary clinical trials with prednisone (Meticort~n) in rheumatic diseases. J.A.M.A. 158:166-70, May 21, 1955. Six publications appear to have been "controlled," although not "double-blind," studies: a. Hutchison, J. L. and Burgen, A.' S. V. Infusion of non-autologous plasma. Effects of cblorpheniramine, prednisolone and achenaline. Brit. M.J. 2: 904-8, Oct. 12, 1963. b. Bollet, Alfred J., et al. Treatment of systemic lupus erythematosus with prednisone and prednisolone. J.A.M.A. 159: 1501-7, Dcc. 15, 1955. c. Bunim, Joseph J., et al. Studies on metacortandralone and meta- cortandracin in rheumatoid arthritis. J.A.2W.A. 157: 311-18, Jan. 22, 1955. d. Calkins, Evan, et al Comparison of the metabolic effects of prednisone and cortisone. Ann Rhenmat. Dis. 14: 419, Dec., 1955. e. Bosch, Samuel J., et al. Prolonged use of prednisone in rheumatoid arth- ritis and disseminated lupus erythematosus. Medicina panam. 11: 258-62, Sept. 15, 1958. f. Sicuteri, F. and Ficini, M. Effects of prednisone on the symptomatology and histamine cranialgic sensitivity in medical cephalea. Minerva med. 46: 1744-48, Dec. 12, 1955. As Mr. Conzen stated in his testimony, we are not aware of any "double-blind" studies comparing Meticorten with other brands of prednisone. However, the PAGENO="0190" 628 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY three studies to which he referred, the results of which appeared in the publica- tions furnished with my letter of July 28, were comparative studies involving diffei~ent brands of prednisone. (3) Of our total 1966 sales of $131 million (as reflected in our Annual Report), $65 million represented domestic "ethical" sales, $49 million represented all for- eign sales, and $17 million represented domestic proprietary sales. (4) We have been advised that in Switzerland the substantial portion of the market for prednisone/prednisolone tablets is covered by some 13 companies; of these 10 are Swiss companies, marketing locally manufactured products, and three are non-Swiss companies. Of the 13, five market under brand names, seven market under "generic" designation, and one Swiss company markets both a brand name and a "generic" designation prednisone and prednisolone. We appreciate the opportunity to submit this information for inclusion in the record. Very truly yours, IRVING H. Junow, Vice President and General Uonnsel. Senator NELSON. To go back to the question on the amount spent, do you have any idea how much you have spent that is attributable to research? Mr. CONZEN. I am afraid not, because we have an overall research budget this year of over $12 million. Now, this is broken down into various areas of research, such as cardiovascular diseases and inflam- matory diseases. Now, this would fall more into the area of inflammatory diseases, and another area, allergies and related indications. There we research on n~any compounds, most of which never see the marketplace. A few will finally be of sufficient value to the medical profession to warrant intensive clinical studies, and finally an application-a new drug application-and after that has been granted it appears on the market. So, we have many compounds which fall under this general area of research, and to break it down to any specific compound would be very arbitrary and possibly misleading. Senator NELSON. What do you inciude in your $12 million of annual expense for res~arch? `What I am trying to get at here is, do you include only laboratory research, or do you include the distribution of samples of drugs and responses from the institutions, their observations about them? What do you call research? Mr. CONZEN. This term research, as I used it, encompasses; first of all, the laboratory work and chemistry and microbiology to synthesize or discover new compounds, to put them through biological screens to determine whether there is some biological activity which would be of interest aud importance to the medical profession. It includes pharmacology in animals. It includes extensive toxico- logical studies before the drug can be given to man on an experimental basis. It includes pharmaceutical development to develop a form or dosage form or vehicle in which the active drug can be safely and effectively administered. It includes the production of the initial quantities which go both into animals and into men. Senator NELSON. What do you mean the initial quantities? Mr. CONZEN. Of the active drug and the preparation of the product form which is given to animals first and later on when it is considered safe to go into clinical pharmacology, to give it to man whether in the form of injection or in the form of an implantation or a tablet or an ointment or whatever it may be. PAGENO="0191" COMPETITIVE PROBLEMS IN TIlE DRUG INDUSTRY 629 It includes the setting up of clinical studies which will determine whether there is sufficient material available to satisfy the Food and Drug Administration for us to apply to the FDA for approval of a new drug application, and these samples or trial quantities during this initial phase are included in research. However, once the drug has been introduced on the market, whatever samples are then being distributed do not fall under research unless they are for indications which have not yet been approved and are still in the experimental stage. Senator NELSON. So you either do the laboratory research and the research on animals yourself or you contract it out; is that correct? Mr. CONZEN. Most of it is done by ourselves; yes. Senator NELSON. Then after you are satisfied that it has some thera- peutic efficacy so far as animals are concer~aed, the next stage is to test it on human beings? Mr. CONZEN. There is one step in between, and that is toxicology, to satisfy the Food and Drug Administration and ourselves that the side effects or the toxic effects do not endanger the patient, or that the side effects outweigh possibly the beneficial effects of a new drug. Senator NELSON. And if this drug gets the approval of FDA, then you are authorized to test its efficacy on human beings? Mr. CONzEN. Well, this is not exactly so. We file an investigational new drug application with the Food and Drug Administration, and in the absence of any notification to the contrary, we are authorized to proceed with clinical trials. Senator NELSON. These clinical trials include sending samples to specific physicians to test; is that correct? Mr. CONZEN. They are special studies set up under regulations of our Government, and the investigators have to file very strict pro- tocols and procedures, and we again have to comply with very strict regulations as to what we send, how we send it, and to whom. Senator NELSON. And then you also do clinical testing by arrange- ment with teaching hospitals and that sort of thing? Mr. CONZEN. Yes, sir. Senator NELSON. Then what you are saying is that to this point all the steps you described are chargeable to research. Mr. CONZEN. Yes, sir. Senator NELSON. Beyond that, your distribution to physicians, once a drug is approved, is not chargeable to research. Mr. CONZEN. Unless it is a new, not yet approved indication which still falls into the realm of experimental research work. For instance, I mentioned leukemia. This is not an approved indication in the high doses in which experiments are being conducted, and this would still be chargeable to research; but in the approved indications, the mate- rial which we sell, and the amount of money which we spend would appear in our financial statements under selling expenses, including samples. Senator NELSON. So, no aspect of the market promotion is charge- able against research? Mr. CONZEN. That is correct. Senator NELSON. A few moments ago you said it was not possible to break down the amount spent by your corporation on research on prednisolone or prednisone. It isn't possible then for your corporation PAGENO="0192" 630 COMPETITIVE PROBLEMS IN TUE DRUG INDUSTRY to do a cost accounting, so to speak, of the costs that went into the development of prednisone, so that' you can price in accordance with the cost of your development? Mr. C0NZEN, I don't think so, because the clinical staff and the laboratories are used for all drugs, whether they are in research or con- tinuing research, and we can't intelligently allocate all these expenses `to a specific drug. Senator NELSON. I understand. Mr. GORDON. May I interrupt for just a moment? Can we say that NIH was the first to introduce prednisone into clinical medicine? Mr. CONZEN. I wouldn't say that, no. As far as I remember, the first clinical paper was published under the auspices of NIH using Scher- lug's prednisone, namely Meticorten. Mr. GORDON. I have here excerpts from hearings on drug safety before a subcommittee of the House Committee on Government Opera- tions. NIH stated that the first clinical studies of these new steroids were conducted on patients with rheumatoid arthritis in the National Institute for Arthritis and Metabolic Diseases. The results were en- couraging and so on and so forth, and NIH reported these findings to the scientific community in November 1954. Mr. CONZEN. Yes, sir. Mr. GORDON. Now,,wouldn't you say that the, report of these findings by NIH ~ras really the introduction of prednisone to the scientific community? Mr. CONZEN. I would' say the introduction to the scientific communi- ty was made by Schering Corp. when it made the product available to NIH. Mr. GORDON. I mean the medical community, clinical medicine. Mr. C'ONZEN. As .far as the clinical findings are concerned, this would be correct as to this particular work. Mr. GORDON. Now, isn't it also true that in getting a new drug application, you depended to a considerable extent on work done by or for the National Institutes of Health? Mr. CONZEN. Only for one part of the new drug application, be- cause the new drug application has to satisfy the Government that the manufacturing procedures and processes. ~re sound, that the toxicology is good, that you observe the usual standards of manufacture and quality control, and they would also undoubtedly expect' clinical trials beyond those from one source. Mr. GoRDON. Did you mention efficacy? Efficacy has to be proven, too, does it not? Mr. CONZRN. Yes, efficacy and safety. Mr. GORDON. And you used the work done at NIH? Mr. CONZEN. Oh, yes. Mr. GoRDoN. As part of your contribution. Mv. flON~EN. Absolutely. Mr. GORDON. To the FDA. Mr. OONZEN. Yes. Mr. GORDON. And you are not trying to claim, as I see it, that Scher- p r ~l~ne was responsible for `the research and development of pred- nisone? Mr. CONZEN. I would say that we were alone responsible for the discovery of the drug and the development of the drug, but that we PAGENO="0193" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 631 did not have our own clinical faciiities within the company, and we had to go outside to have the therapeutic value of the drug and different indications proved outside. As a matter of fact, we have studied 45 disease indications wit1~ M~tioorten. Senator NELSON. If I may go bacl~ a moment, I neglected to ask you on page 3, where you state that the domestic ethical drug sales volume of Schering Corp. is $65 million, what your sales amounted to outside of the United States? Mr. CONZEN. Our sales abroad last year were approximately $46 million, if I remember correctly. The balance between these two figures; namely, 65 and the 40 odd million in foreign sales, refers to jomestic sales in other than prescription products. Those are lay products, those are products which can be sold without a. prescription, and they also refer to products in the animal health field. Senator NELSON. Do I understand you to state that your sales out- side the United States in ethical drugs are $46 paillion? Mr. CONZEN. No; the foreign sales also include sales of nonprescrip- tion products. Senator NELSON. I see. It's a total of $46 million? Mr. CONZEN. That is correct, sir. Senator NELSON. Then so that the record is clear, what are your nonprescription sales totals in the United States, over and above the $65 million? Mr. CONZEN. I don't have the exact figure with me, but I will be glad to supply it. I would estimate these to be in the neighborhood. of between $20 and $25 million.8 Senator NELSON. Does the $65 million figure in domestic ethical sales include royalties received? Mr. CONZEN. No. Senator NELSON. What are the royalties received on domestic sales? Mr. CONZEN. The royalties received by the corporation are stated under other revenues. As far as Meticorten is concerned, at a royalty rate of 6 percent and estimated sales by licensees of approximately $2 million per annum, it would amount to about $120,000 per year. Senator NELSON. As I understand it, your total royalties on domes- tic sales of prednisone or Meticorten are what? Mr. CONZEN. On prednisone tablets, approximately $120,000 per annum, I estimate. Senator NELSON. These are royalties paid by companies that are producing prednisone? Mr. CONZEN. That sell prednisone as tablet preparations licensed by us in the United States. Senator NELSON. But they are not selling it under the name Meti- corten. They may be selling it under their own brand name or they may sell it generically, is that correct? Mr. CONZEN. Yes, sir. If I can continue, whet follows is an over- simplified and only a partial list of what Schering does, and must do, to fulfill its role i~ today's complex and h~ghly cor~petitive world of medicinal products. Moreover, it is what Schering actually did for prednisone. . In the first place, we must search constantly and~ continuously for~ new and better compounds which may be formulated into new end 8See p. E27. 81-280-Pt. 2-67-----13 PAGENO="0194" 632 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY better medicines. The industry's average, as you know, is one success for every 6,000 probes. We must investigate each promising new com- pound in a series of costly, time-consuming steps: first in the labora- tories and then in animal testing, to determine the usefulness, and more importantly, to in~ure the safety, of any such compounds for testing in human beings. We must then develop pharmaceutical formulations so that the useful compound can be made available as a medicine in a variety of dosage forms. Additionally, we must develop manufacturing procedures, often novel and frequently complex; we must learn how to make, initially, limited quantities for release to a limited number of doctors for clinical investigation of the compound's effectiveness and safety in human patients; and later, if successful, larger quantities for marketing throughout the world. These investi- gations on the part of clinical investigators must be carefully super- vised and monitored, the results meticulously correlated and analyzed, and a host of detailed information accumulated, which would take much too long here to catalog. Suffice it to say that the research work that has to be done in connec- tion with the investigation of a new and promising medicine, in view of the elaborate and strict rules and regulations of the Food and Drug Administration in our country-and similar requirements abroad- is costly, time-consuming, and involves a myriad of details. All this takes a number of years-nowadays usually from 5 to 8 years. In the meantime, considerable additional investigation proceeds, more data are developed, more reports prepared and flied with the FDA. Other areas of our company's operations are involved: Our engineers must learn how to make the new drug in large quan- titie.s for commercial use-both economically and accurately. Quality control scientists must develop standards, design tests to validate them, so that up to 24 different factors contributing to the safety and effectiveness of a single tablet or capsule or vial of injec- table liquid can be guaranteed. A marketing organization must be established and continually main- tained to assure that the product will be speedily available through- out the United States and the free world. Scientific and clinical documentation about all aspects of the new drug must be carefully created and produced by us and then cleared by the FDA in Washington. Our representatives-or detail men-receive a thorough, in-depth course of training so that they are fully knowledgeable concerning every aspect of the new drug-its usefulness, its limitations, in advan- tages, its "problem points"-in short, they must be thoroughly briefed to be able to provide full information and to answer the questions about the new drug which the physician might ask. Our detail men must then call on those doctors who might possibly use the new drug in their practice, brief them fully on the drug's prop- erties and recommended uses, and provide them with samples so that they can become acquainted with the drug. These personal calls on physicians, hospitals, and pharmacies must be supplemented with. further information in medical journals, in direct-mail literature, in brochures and the like-all of which must be consistent with FDA requirements. PAGENO="0195" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 633 I could easily devote more time to explain to you the wide scope of the activities that actually did go into our discovery, development, and marketing of prednisone. I could, for example, refer to the symposia on prednisone which we sponsored for the scientific and medical com- munity, the brochures we prepared, the films we created and dis- tributed, the host of things we did to make this new and dramatically useful product known to the physician and available to his patients throughout the world. How completely different is the business carried on by the large majority of the distributors of generic prednisone. For the most part, they are essentially distribution operations; in fact, many of them have the finished product manufactured for them. These companies do not develop hew drugs. They do not have the scientific staffs nor the facilities to develop them. They do no animal testing or clinical investigation. Usually generic distributors do not work for years to gain Government approval. They do not introduce new drugs. They lack the personnel and skill necessary to communicate to doctors all that needs to be communicated to them dbout the indications for the drug, the dosage regimen, the methods of application, the side effects and precautions, and so on. They cannot answer questions about the drug's use in individual cases or provide other services to the doctor. They do not supply samples liberally to provide special formulations of the drug to use in treatment of eyes, ears or other organs, or special strengths for treatment of cliii- dren, the elderly or other groups. These markets are usually too small and specialized. They limit quality control activities to legal require- ments. They do not, in short, encounter the major burden of costs nec'- essary to develop and launch a new drug successfully and prove its worth. Without these activities, generic distributors contribute little to medical progress. On the other hand, after someone else has developed a drug and after someone else has incurred the costs of introducing it properly, so that it gains widespread usage, they are able to copy it as soon as copying is legal. When the active ingredient is well known and highly regarded, they take advantage of this to sell it cheaply, in quantity, and fre- quently on a mail order basis. They concentrate on the one or two forms in widest use and on types of users easiest to reach. Sometimes such companies concentrate on Government bids only and operate in such a way as to minimize investment in facilities and personnel. Their entire business is built upon the pioneering work of others. Their ap- peal is based solely on their contention that their cheaper versions have the same active ingredient. In fact, this is what happened in the marketing of prednisone. When all is said and done, it was `Schering's research which dis- covered prednisone, Schering's development which gave that product to `the world and to the medical community, Schering's marketing and distribution which made it known and used throughout the world, Schering's activities which broadened its usefulness, and Schering's licensing which made it available from so many dstributors. Without all this, there would not be today any generic prednisone at all. We at Schering are proud of our discovery of prednisone; it repre- sented a real breakthrough. Indeed, every corticosteroid tablet prepa- PAGENO="0196" 634 coMPwrITIvE PROBLEMS IN THE DRUG INDUSTRy ration introduced since the discovery of prednisone embodies the unique principle that characterizes the prednisone molecule and that distinguishes it from cortisone and hydrocortisone. Prednisone blazed a new trail in anti-inflammatory steroid therapy. Moreover, as the discoverer of prednisone, we are even today in- volved in servicing that compound, continuing research with it, in seeking to broaden its application and to expand the line of prednisone products. As the discoverer of prednisone, we carry, and must assume, the responsibility of continuing research not only with respect to that product, but with derivatives of it. At this point, some 12 years after we first introduced prednisone, we continue to supply clinical inves- tigators with experimental forms of prednisone for further exploration of its potentials. These things, costly as they are, are not performed in any way by any of the generic distributors of prednisone. To achieve our objectives, to maintain the kind of organization we are-research, development, Government clearance, worldwide mar- keting, total service to the physician and the trade-all this far exceeds to cost of operating a generic enterprise which ordinarily requires bare manufacturing cost and nominal sales expense. Many of our costs apply to failures, as well as successes, but only the successes are copied. The "striking differences" in price you referred to are the inevitable consequence of these contrasts. In my judgment, they are fully justi- fied. At generic-level prices, we cannot have new discoveries. At ge- neric-level prices we will stifle research and the development of new medicines, and soon we will have neither the new drugs nor the generics. If we were to attempt to compete at the same price level as the generic distributors, we would have to eliminate a large proportion of the activities and services which I have described as characteristics of our company. We would have to limit our activity to simple manufac- ture and distribution of drugs discovered, proven, and established by others-and they do-and one important source of new drugs for the treatment of sickness will have been removed from this country. I do not believe this would be in the public interest-certainly it would not advance medical science nor contribute to further development of higher health standards. You also asked me to discuss our pricing policy with respect to prednisone. Let me answer that by giving you some of our guidelines in pricing-the highlights of the criteria we consider in establishing, and subsequently in reviewing, the prices for Schering products. The ultimate responsibility for pricing policy at Schering rests with me as president. Pricing decisions and approvals, in each mar- keting division, must be in accordance with procedures and practices which I approve. Schering prices are established at a level which covers our research budgets, including the cost of both our successes and our failures, the cost of materials and of efficient manufacture at reasonably attaina- ble volumes, the cost of quality control under the highest standards, the cost of efficient marketing, including that of communicating prod- uct facts and benefits, the administrative cost of operating the com- pany, and the taxes payable to national, regional or local governments. The cost of the acthe substance is a small portion of total costs. PAGENO="0197" COMPETITIVE PROBLEMS IN THE DR~JG INDUSTRY Our prIcing should also provide an average, long-run corporate- wide, after~tax return on stockholders' equity at a rate at least equal to that of the pharmaceutical industry as a whole, since we require earnings to support continued corporate growth and to compensate investors for the use of their capital. All of this is evaluated against a background of the high risk in- volved in bringing a new pharmaceutical to market. We consider the expected response, based on analysis of value of the product to the user, as compared with the value and price of alter- natives he may have. We attempt to forecast the attainable sales vol - ume for the product at various possible price levels, and at various times during the expected product life cycle. We give thought to the significance of the product with respect to our entire product line and its effects, if any, on the prices, sales, and profit margin of our other products. And, finally, we consider the magnitude of the invest- ment required and the degree of risk we undertake. These are broad principles-and like all broad principles, there are exceptions. We make exceptions under certain circumstances; for ex- ample, where economies in production or marketing are attainable in serving certain types of customers and where making a product available at a special price is expected to result in increased long-term usage. There are also situations where we believe we have an obligation to provide vital drugs in rare and unusual conditions, even though they must be provided at a loss. In pricing Meticorten and in our periodic review of its price, we have sought to apply these principles. Throughout the entire period that we have been marketing Meticorten, prednisone has been gener- ally available to the public from a number of sources, and for the last 8 years, at a wide range of prices, so that the carrying out of our busi- ness judgment in this respect has in no way been in conflict with the public interest, but in fact, has served to advance it by enabling us to continue the creative development of the compound itself, and of suc- ceeding therapies. Many physicians prescribe Meticorten, knowing that prednisone is available at lower prices. We thing there is sound reason for their doing so. We think Meticorten is the best product-the one fully proven in patients and the most carefully prepared and controlled. Their experi- ence has confirmed this. They continue to prefer Meticorten for their patients, despite its higher price. We think they are right. Schering Corp.'s annual report for 1966 indicates that the applica- tion of this pricing policy has not resulted in exceSsive profits. Over the past 5 years, Schering has averaged a return on investment which is slightly below the median for the industry, and certainly not out of line with the risks and cOmpetitive situation with which it is faced. We have on a number of occasions considered reducing the price of Meticorten tablets and have consistently arrived at the conclusion that this would not be sound business economics, given the nature and scope of the services the medical profession and the public expect from us. As I indicated earlier, the volume of Meticorten tablets and the sales of Meticorten tablets are such that any substantial reduction in he price to meet the generh~ price level would simply mean that we di- minish our capacity to provide these services. PAGENO="0198" 636 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY If Schering is `to discharge successfully its responsibilities and achieve its objectives in our society, if it is to he the source of break- throughs in the future, if, as I am persuaded, the community expects it to discover, to test, to produce, to market, and `to service the new, high-quality, safe `and effective medicines of `t'he future-~and to con- tinue to make available those on the present scene-and to do all `this in active and aggressive compeitition with con~panies like itself, then it must have the resources to take `all the risks implicit in `these activities and to `attract the `scientific manpower `that `is necessary `to do that job successfully. I believe that the large `majority of our society expects this of us `and is prepared `to accept, and does accept, `the fact that the economics of these circumstances demand `that our prices be substantially higher than the prices which the generic distributors charge. To them the com- munity does not look for, `and from `them it does not expect, these necessary services and `activities. From them the community expects and receives only price-oriented distribution. That is w'hy our price for Meticorten is what it is, and why the generic distributor's price is wha't it `is, and in my judgment these strik- ing differences are justified by the contrasts I `have attempted to pu't before you here `today. Nevertheless, I should not le~ve you with `the impression that we are unaware or unmindful of the continued cri'tical attacks in these hear- ings and in the press. Even `though we regard our position as sound, for `the reasons I hav'e ou'tlined, we have `always reviewed our judg- ments in the light of the challenge of criticism; we plan to continue to do so. We are not callous to `the difficulties which our older ci'tizens face because, due `to their limited, fixed incomes, and often chroni'c illnesses, medical costs, including drugs, `are high. Because of `their limited in- comes and greater needs, `the difficulty they face in keeping pace with our inflationary economy is `augmented. They need to be helped, and governmental and voluntary programs are doing just that. Moreover, under our present economic system and structure, we must look to the continued development of these programs `to provide the help that is needed. It will serve our society poorly if, in seeking `to resohfe these difficul- ties, we limit the `ability of our creative pharmaceutical industry to serve the professions and the public through `the discovery of new drugs. Thank you, Senator Nelson. `Senator NELSON. Thank you very much, Mr. Conzen. You were here this morning, I assume? Mr. CONZEN. Yes, sir. Senator NELSON. Y'ou heard the testimony of Mr. Burrows of Parke, Davis. I would like to repeat to you a couple of questions that I asked Mr. Burrows,at that time. I will be referring to the Medical Letter. On page 14 of your testimony you state that you think Meticorten is the best product, and I am sure as the president of Schering Corp. and knowing its operation you believe that. You state it is the one fully proven in patients and the most carefully prepared and controlled. You feel that doctors' experience has confirmed this and they continue to prefer Meticorten `for their patients despite its higher prices and "we think they are right." PAGENO="0199" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 637 Now, I refer to the Medical Letter of ~June 2, 1967. As you know, the Medical Letter is a very highly esteemed professional publication. A number of witnesses, pharmacologists, physicians, medical spokes- men have referred to it as a very reputable high-quality publication. The Medical Letter asked the Fitelson Lab in New York to test 22 brands of prednisone, some generic `and some brand name products. In the Medical Letter, on page 41, they state that none of `the variations of the 22 products tested are outside of Pharmacopeia limits or are of sufficient magnitude to have an adverse effect in the treatment of con- ditions requiring the use of corticosteroids: The disintegration test measures only rate of disintegration and not rate of dissolution or rate of physiological availability. There is no'thing, however, either in the report of' the clinical trials or in the experience of Medical Letter con- sultants to suggest that variations in formulation are causing any problems in the treatment of patients. Then on page 42 the Letter continues under the heading "Prices": The great price spread among tablets purchased from different pharmaceutical companies suggests the desirability of prescribing by generic name and specifying at least for patients of limited means that the prescription be filled with low- priced prednisone tablets. You state on page 14 that you think yours is the best product. Now, have you any clinical evidence to demonstrate that your product priced at $17.90 a 100 is a better product than TJpjohn's Deltasone priced at $2.25 a 100? Mr. CONZEN. Available clinical testing still does not allow us to say just how much the drug products of one manufacturer differ from those of another. The clinical evidence does indicate that current qual- ity control testing cannot guarantee that two supposedly identical drug products deliver the same amount of drug chemical at the same rate to the patient. `There are three `medical papers which have reported experience in patients treated with two preclnisone products. In each instance one product was effective, the other failed. Senator NELSON. May I interrupt a moment. Were these double blind tests? Mr. CONZEN. I cannot answer that. Senator NELSON. Do you know the names of the products? Would you name them? Mr. CONZEN. The names of the products were not disclosed in the studies. I refer to the Journal of Pharmaceutical Sciences, volume 52, page 605, in 1963, by Drs. Campagna, Cureton, Merigian, and Nel- son; and the other one by Drs. Levy, Hall, and Nelson in the Amei~ican Journal of Hospital Pharmacy, volume 21, page 402, published in 1964, which established these data. I will be glad to make copies of these publications available to the subcommittee. Senator NELSON. We have those studies. Unless my memory is in- correct, Dr. Feldmann, Director of the National Formulary, said they were not double-blind tests. Mr. CONZEN. I cannot, from personal knowledge, state whether these were double-blind studies or not. Senator NELSON. If my memory is correct, he also said that they were testimoiiials and not scientific clinical studies. `Mr. CONZEN. These studies by these scientists state that they provide additional evidence to previously published work suggesting that the PAGENO="0200" 638 COMPETITIVE PROBLEMS IN THE DRUG INDUSTt~Y USP distintegration time test should be reevaluated as a method to predict correctly physiological availability invivo. Senator NELSON. What I am getting at is that the Medical Letter stated that from theft consultants, pharmacolo'~isth, cihiloal physi- cians, they can find no differences or variations in formulations that are causing any problems in the treatment of pati'ehts. They ad~ris~ that the doctor prescribe generically especially ft~r the patIents: of limited means. What I am asking is doct the Schering C~rp. have any double-blind clinical test to pro~re that the therapeutic efficacy of its prednisone is better than any Other one of the 22 prednisones listed in the Medical Letter? Mr. OONZEN. No, sir. SCñator ~ELSO~. Is there a~y evidence at all that it is better than Upjohn's Deltasone in terms o~its therapeutic efficacy? Mr. CONZEN. We have no such comparative clinical studies. Senator NELSON. Then looking at the test, as a matter of fact, Upjnhn's is a purer drug than Schering's. Upjohn has only a trace of foreign bodies in it, that ~s cortisone. Schering's has five~tenths of 1 percent. So if you are using the question of purity, Upjohn's at $2.25 a 100, if that is as important as many drug companies insist, is a better drug in that respect than Schering's. And then Merck's has zero corti- sone in it. Schering's has five-tenths of 1 percent. On the basis of purity then, Merck's prednisone, selling at $2.20 a 100, is of higher quality than Schering's selling at $17.90. Although I do not think that is a fair argument, the drug companies use it consistently by saying that they do more refining and pvoduce a higher quality product. These are USP standards, and USP says the vaH~tions li~ted here really do not make any difference If the drug companies are going to stand On the propo~ition that they do more work than some other company and get more purity, and that USP standards are not high enough7 then Schering's drug is not as high a qua'ity as the two drugs listed hei~e, so far as purity is concerned. There are two with only a trace, and there are several, five that have the same amount of impurity, cortisone, in them. ~Vhat is your observation about that? Mr. C0NzEN. My observation on this is that, in my opinion, titO acid test as to .the value of the quality o~f a product lies when the physician treat~ his patient, and how this drug acts and is e~ective in the pa- tient himself. These physical or analytical tests in 4~he laboratory are uo~ the only criteria by which equivalency should be judged. Senator NELSON If that is the case, I again ask what proof does Schertn~ have that their drug is a better drug from a therapeutic sta~.dpoint than any one of the 22 drugs listed in the Medical Letter? Mr. OONZEN. We have no proof that it is better, but we have abun- dant proof that it is the best documented drug on the market, through these thousands of independent clinical studies, and the fact that physicians eontmue to prescribe our drug. senator N1~soN. The fact that a physician prescribes it does not make i~ a bet~ter drug, does it? Mr. CONZEN. It means that he considers it, for his patient and this particular, indicatioi~i, and case, the best he should prescribe. Senator ~ELSON. What `is your response to the Medical Letter's statement that there is nothing, however, d~either in reports of clinical trials Or eiperience of the Medical L~t~e~ consultants" who are better PAGENO="0201" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 639 prepared than the individual practitioner to make judgment, "there is nothing to suggest that variations in formulations ar& causing any problems in the treatment of patients." Mr. CONZEN. I cannot comment on the findings of these scientists, pharmacologists, chemists, and physicians. All I can testify to is to the quality and efficacy of our own brand. Senator NELSON. The Chair, of course, won't argue with that. I am sure it is of very high quality, one that ranks with all the other 22 as meeting LiSP standards. But the Medical Letter is so concerned a,bout the great price spread that they suggest the desirability of pre- scribing by generic name. Are you suggesting that the Medical Letter is not qualified to make a judgment about this, after the tests they have made and the consultations they have made with distinguished clinicians and pharmacologists around the country? Mr. CONZEN. Sure they are, but I have not seen any clinical evidence conducted by the Medical Letter or anybody else to prove that other brands of prednisone are therapeutically, in patients, more or less or equally effective. Senator NELSON. What we are really concluding here is that there is no clinical evidence to prove that any one of these 22 is any better or any less effective, including Schering's? Mr. CONZEN. That is right. Senator NELSON. Isn't that correct? Mr. CONZEN. Yes. Senator NELSON. Then, the doctor who is prescribing the drng for $17.90, when Merck has one available for $2.20 and Upjohn for $2.25, is simply charging his patient a lot of dollars for a drug on which there is no proof that it is any better than these that are available at a cheaper price; isn't that correct ~ Mr. CO~ZEN. No; I differ. Senator NELSON. Then we get back to where we started. What is the proof? Mr. CONZEN. The proof is the abundant experience of a practicing physician of the results which he has achieved in his patients. Each patient, each case, differs, and if he is satisfied that he gets the best response with our product, Meticorten, he obviously feels justified to continue to prescribe it, notwithstanding the fact that he knows that there are less expensive prednisone preparations available, Senator NELSON. What about the doctor who. is prescribing Merck's Deltra? Mr. OONZEN. That is his judgment, but I believe their sales are very insignificant, and it is more of a service item probab]y than a widely prescribed brand~ product. Senator N~soN. I doii't want to put words in your n~puth, but what you are really saying is that whatever doctors prescribe the most provides a satisfactory scientific judgment of what is best? Mr. CONZEN. I would agree with this. Senator NELsoN. Since S'chering is. confident that its drug has greater therapeutic value than any of the other 21, why doesn~t Scher- ing sponso~ clinical double blind: tests versus half a. 4o~en of the rrest of these th~igs,, so that yoi~ wçgi~cl b~ able to cowe before the subeo~n- mittee ~nd s~y tb~t the. cU~4~c~l~ ~qi~bl~ blind tests prove that Q~irs is the best? Since this is a very important i~t~ip~ ii~ th~ ~les qçI~ y~m~ company, and it wouldn't be very expensive to conduct a double blind PAGENO="0202" 640 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY test in terms of what it would mean to you in the market if you are correct, why hasn't the company conducted them? Mr. CONZEN. First of all, it is a relatively small item in our total sales. Senator NELSON. It is $1 million a year. Mr. CONZEN. $1 million; yes. Senator NELsoN. Out of a $3 million market, and if you are correct in what you say, you probably could have the whole $3 million market. Mr. CONZEN. It is a $40 million market in which we compete with Meticorten, because prednisone isjust one corticosterioid within a large number of other corticosteroids. The share of the market of predrnsone and Meticorten has been constantly declining and will continue to do so, and this is simply the result of our research-oriented industry where product obsolescence is a very serious matter in our competitive society and we have to live with it. In other words, I do not think we would be justified to expend the money and effort to carry on double blind clinical studies with our brand against over 100 brands of pred- nisone to prove this point, since we have such abundant evidence that our product is the best, which does not imply that it is better than others. Senator NELsoN. Are you suggesting, then, that when the Defense Supply Agency purchased a 1,000 prednisone tablets on a bid basis, at $4.94, the DSA is supplying Walter Reed-where Presidents, Con- gressmen, and generals are treated-and Bethesda, and the soldiers overseas, are you suggesting that when they buy Upjohn's tablets at $4.94 on a competitive bid, that they are jcniying a drug that is not equivalent in its therapeutic value to Schering's? Mr. CONZEN. I cannot say whether it is therapeutically equivalent. I can say that they are definitely buying a first-class drug which com- plies and meets the tests and standards of the agency, which are very exact. Senator NELSON. But you see the Government is buying millions of dollars' worth of drugs, tens of thousands of dollars' worth of pred- msone, and they test it. They use it in veterans' hospitals, they use it in Walter Reed, an excellent hospital. The city of New York, where Senator Javits comes from, buys it generically. They are buying pred- msone that is not Schering's, and buying it on a bid basis. Are you suggesting that the Defense Supply Agency and all the veterans' hospitals, the soldiers overseas, purchasers like the city of New York that test their drugs, use them in their hospitals and see the clinical results, are you suggesting that they are buying a drug that is not equivalent to what Schering sells? Mr. CONZEN. Therapeutically it is not proven that they are equiva- lent, but I do not suggest that they are buying inferior drugs for their patients. Senator NELSON. What is there about Meticorten that makes it worth $170 a 1,000 when the Government is buying it for $4.53, New York City is buying it for $4.58 a 1,000, the. Government is buying it in various bids for $4.52 to $4.94? What distinguishes Meticorten which should justify this price differential is what I am trying to get at. Mr. CONZEN. Several points. One, the overwhelming clinical evi- dence as to the efficacy of our brand which is unmatthed by any other brand or make of pr~dni~one.. PAGENO="0203" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 641 Second, our continuing research and the contributions which the sale of Meticorten make to enable us to continue to compete in this business as a research-oriented company, which strives for innocvation, and plays its part in bringing benefits to the public which, in terms of health and anything else, are unsurpassed anywhere in the world. Senator NELSON. But doesn't Upjohn do research and U.S. Vitamin do research? Mr. CONZEN. Certainly. Senator NELSON. And since you do not separate your research so that you can tell how much it costs you to develop Meticorten, I sup- pose neither do they. Don't they have exactly the same problem? Mr. CONZEN. I don't think, and I am not aware that, they have done and continue to do research on prednisone. Senator NELSON. No. Mr. CONZEN. They do it on other drugs. Senator NELSON. That is correct. Mr. CONZEN. And our share of the Meticorten market supports our overall research. Senator NELSON. You are basing your statement on the over- whelming selection by individual physicians in prescribing Meticorten in the retail market around the country, is that correct? Mr. CONZEN. Yes. Senator NELSON. Do you think the judgment cf an individual prac- ticing physician is better than the judgment of all the combined doctors, surgeons, physicians, pharma~ologists, in Walter Reed Hos- pital who have an opportunity in a clinical situation to observe the value of the drug prednisone that they are using? Do you think the individual doctor's judgment is better than that of a fine hospital in New York or Walter Reed? Mr. CONZEN. I would say that the practicing physician who is faced with a particular case history of illness in a particular patient uses his own best judgment, based on his experience with the drug and his diagnosis and his prognosis, and that this will be, I hope, always the overriding consideration of the practicing physician. Senator NELSON. I would agree that that is exactly what the prac- ticing physician does, but that does not answer my question which is this. Is his individual judgment better than the combined judgment of all the various medical services in the distinguished hospitals such as Walter Reed, in determining the value and quality and therapeutic effectiveness of a brand of prednisone? Mr. CONZEN. I find it difficult to relate the conclusion which is reached by a large Government agency to put it into juxtaposition with the problem with which the physician is faced when he has his patient in front of him and has to make this judgment. I find it diffi- cult to do this. Senator JAvIT5. I am troubled by another aspect of this matter. I must say I am also troubled by the aspect which troubles Senator Nelson. But what about the built-in failure to allocate all the research costs which you speak of, the initiatory costs, and the commendable initiative in your company which produced this drug, when you bid on Government business? For example, this Defense Supply Agency chart shows that in October 1965 Schering bid on the same contract that Upjohn got. They bid $9.20 a 1,000. According to our chart, you PAGENO="0204" 642 COMPETITIVE PROBLEMS IN TILE DRUG INDUSTRY are selling at $~70s a 1~000 to the druggist, or a difference there of over 1,800 percent. How do you justify the hiiure to allocate. in your 1~id~ enough of all of tJa~se bu~ilt-iu ~o~ts, ot, cetera, to a Federal Government bid as against taxing so very laeaviiy the patient ot~ the doctor and the customer of the druggist? Mr. CONZEN., I would like to comment on this. First of all, the basis of our business is the prescription business and the business which flows through the pharmaceutical wholesale and retail trade, Govern- ment agencies purchase pharmaceutical products in large quantities on the basis of competitive bids. Such orders may be highly attractive and many companies are convinced that these orders should be sought even at prices which. would be unprofitable if normal accounting prac- tices were followed. They do this in the belief that such business should be regarded as incremental business, and that only additional cash out of pocket in- cremental costs directly traceable to the specific order should be con- sidereci. Incremental costs a~re the specific net additional cash costs of that order alone, namely raw materials and variable direct labor costs. They do not include even such other manufacturing costs as those for labor supervision or for plant and equipment and its maintenance. No thought is given to any other costs of business operation, be it research and development, for marketing, for administration, taxes, and so forth. They also sometimes ignore even these low incremental costs, if this is done, on the theory that widespread use of a branded product in Government hospitals has a net insignifiOant promotional value, and that doctors who use products in Government institutions or military practice will carry over their experience to private practice. The effect of this practice is to establish a two-price system, a i~or- mal price for regular sales on the basis of which the business is built, and a lower price for incremental or "plus" volume. This is not unlike the system of printers who quote a base price for the first 1,00.0 copies of a job, and a much lower price for a second 1,000. Even though there are substantial economies in handling single large orders, as well as economies in sa~e to Government agencies as opposed to wholesalers ~nd retailers, any real accounting effort to determine the full cost of products sold to Government agencies would show the cost to be higher than the prices which are typically quoted for Government prednisone business, not only by others in the industry, but also by Schering. We at Sehering could no more operate our whole business on the basis of prices quoted to the Government or its agencies than could printers on the basis of prices for "extra" copies. Senator JMTITS. Now, what about the differentialbetween what you charge domestically and what you charge abroad for the same type of customer? Mr. O0NZEN. There are many reasons why there are differences in pricing abroad and at home. Senator JAvITS. What is the difference first? Can we get that? Mr. CONZEN. First the difference. There has been in our newspapers over the last weeks, they have carried the story that Sobering sells prednisone, Meticorten tablets, 30 for 37 cents, stated in U.S, dollars, in Mexico when its price in the United States is $5.65 to the drug trade~ PAGENO="0205" COM?ETITIVE ~ROBLEMS I~ TH~ JYRUG nt~smy 643 No~, we do not sell in 11.5. dollars in Mexico. We sell in pesos and the price for 30 taMets~of Meticorten in Mexico is 46 pesos. Now., the o~lci- ally recognized exchange rates is 12 pesos and ~0 `centavos to the U.S. dollar. Somebody in converting this peso price ii~ito U.S. dollars at this exchange rate apparently made an arithmetical error by moving a deci- mal poir~t in thC wroig direction, because if yoi~tcoitve~t 46 pesos into U.S. dollars, you have a price of $3~8 in Mexico, ~hich is a very different story from the ohe which I read in the paper; namely, of 37 cents. Senator JAVITS. I don~t follow you, sir. What quantity is this that you are selling at $~.48? Mr. CONZEN. Thirty tablets. Senator JAVITS. Now, you are selling 100 tablets then `at $17 in this country; is that right? Mr. CONZEN. That is the drug list price. This does not mean that we realize $17.90. We have computed that in 1966 the average price for 100 tablets of Meticorten realized in the United States was $11.36. This price in Mexico- Senator NELSON. May I interrupt for a moment? Mr. CONZEN. Yes. Senator NELSON. You said the average price in the United States? Mr. CONZEN. Yes. Senator NELSON. But what is your price to the retail druggist~? Mr. CONZEN. The price which appears in our price list as the drug list price, at which the retail druggist buys, is $I7.~0. Senator NELSON. You are including in your average price sales to other than retail druggists? Mr. CONZEN. Yes. The bulk of our business goes to wholesalers to start with, and they too have a margin of profit. Senator NELSON. But you list in your book $17.90 to the druggist, is that not correct? Mr. C0NZEN. That is the price to the retail pharmacist, yes. Senator NELSON. In purchasing on the open market for purposes of their tests, the Medical Letter said a price of $17.90. In other words, the druggists they checked were paying $17.~X0. Mr. CONZEN. That is right. Senator NELSON. Are you saying that you sell to many other drug- gists at less than ~$17.90? Mr. CONZEN. No. What I tried to convey is that these druggists buy usually from wholesalers, and that the wholesalers who buy from us buy at a lower price than the drug list price of $17.90. Senator NELSON. But is the druggist around the country paying $17.90 when he gets it from you or the wholesaler? Mr. CONZEN. That is right. Senator NELSON. So then when you say the average price of 11 some- thing, you aren't referring to what the druggist pays? Mr. CONZEN. That is correct. Senator JAVITS. Go ahead with your foreign sales. You say in Mex- ico you are still selling it for your average equivalent; is that right? Mr. `CONZEN. In Mexico our price is, as I indicated, 46 pesos for 30, or $3.68. Senator JAVITS, What about other countries; is that the same Mr. CONZEN. Now, take Brazil, which was another country men- tioned in the press reports. We introduced Meticorten in Brazil in PAGENO="0206" 644 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 1956 at 320 cruzeiros for 20 tablets, which at that time waS the equiv- alent of $4.41. Now, between 1956 and 1967 the price for Meticorten in Brazil has been increased eight times, and has risen from 320 cruzeiros to 2,480 cruzeiros. If one relates these steep price increases to U.S. dollars, because of the galloping inflation an4 the devaluation in Brazil of the cruzeiro, the price has actually come down to $1.05. Now, we have no control over the prices which the government in Brazil permits the pharmaceutical industry, because when there is a devalu- ation, prices in these planned economies are frozen, and then after a `while the Government usually permits an arbitrary increase in price for all commodities including drugs. Senator JAVITS. We have some information which indicates that in Rio de Janeiro and in Bern, Switzerland your prices are very low, going down to $1.59 and $1.37 respectively for 30 tablets. Mr. C0NzEN. In Brazil my information is the price is $1.05 for 20 tablets. Senator JAvIT5. What about Bern, Switzerland? Mr. CONZEN. In Switzerland our price is five francs and 95 cen- times, which, for 30 tablets, would be, at the usual rate of exchange of $4.20, the equivalent of $1.37. Senator JAVITS. How do you account for that very marked difference between the Swiss price and the U.S. price? Mr. CONZEN. I account for this difference as follows. The price has gradually come down in Switzerland where we do not operate our- selves, but where the business in Meticorten tables is in the hands of an accredited sole distributor who sets his own price, and these again are usually the result of negotiations with Switzerland, in other words, their social security system. Senator JAVITS. Is the distributor taking the loss between what he pays you and what he sells it for at $1.37? Mr. CONZEN. He carries this item as a service item I would say, because the total sales in Switzerland of Meticorten in 1966 amounted to the equivalent of $6,340. Senator JAVITS. Nonetheless, in selling to him, are you accommodat- ing your price to his need? Mr. CONZEN. It is part of our overall foreign business to accom- modate him, yes. Senator JAVITS. So that there are wide differences between your prices to governments, which you call incremental, and your .prices abroad-between those and your prices in the United States? Mr. CONZEN. Yes, sir. Senator JAvITs. This morning I explained to Mr. Burrows the prob- lem of passing the cost at the retail level on to governments through the medicaid program, for example. Do you feel any need for adjust- ment, in order to deal with indirect governmental sales, to wit, where the Government pays the bill-as it does under medical `aid-to your governmental sales where you sell direct `to Government? How do you rationalize those two? In that one case apparently an enormous pre- mium is being paid, if the Government pays indirectly through medic- aid. On the other hand, if it seeks to get bids directly, it pays a very small amount. Now, doesn't that dictate that Government just ought to pick it up and distribute your product, or a product equivalent to it instead of letting the medicaid client go to the drug store? PAGENO="0207" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 645 Mr. CONZEN. I would say, Senator Javits, that this would amount to adopting a national policy of cheap drugs,. which in my opinion would be extremely shortsighted and would constitute a direct threat to medical progress and impair substantially the leading role which the United States today has acquired throughout the world. It is a signifi- cant part also of what our industry contributes to the balance of payments. The economics of our company and of our industry are based on innovation, and a cheap drug policy would take this leadership away from our industry and our country. Senator JAVITS. I do not pretend to expertise, but just as you want us-and I agree with you thoroughly-to encourage initiative and in- vention in our country in the flowering of the private enterprise system which it represents, I think we have a right to turn to the private enter- prise system and say, in view of what has been revealed, that we think you had better have a pretty hard look at your own situation. I don't think the public is going to take very kindly to a 1,800 percentile differ- ence between sales to them and incremental sales, or a 200 or 300 percent difference between domestic sales and sales abroad. I am no inexperi- enced person in business, as you know, but I do think that a case is being made out here for a very critical review and appraisal by the industry itself of the situation which is being laid before the people of the country. Especially is this true, sir, because a new situation has occurred. A good deal of what is now paid for drugs is indirectly paid by Gov- ernment, and hence it becomes a very critical aspect on our part. I tell you again that as one Senator, I `am anxious to preserve this system, and I am very troubled about whether these differentials can be justi- fied in order to preserve it. I would beg the industry itself to give consideration to that, not only in the interests of its own situation, but in the interests of the economic system of the Nation, of which this is a very critically important part. We have always rewarded invention, and we should, magnificentily. It is very necessary to us, and yet there is a question of degree even there. That is what I lay before you as an intelligent man heading a very great company. Mr. CONZEN. May I make a comment, Senator Javits? Senator JAvIT5. Surely. Mr. C0NzEN. On this point, on this differential between U.S. prices and foreign prices, there are a number of other points which I could make. It is a very complex business. But the living standards and pur- chasing power of people abroad differ greatly from those in our coun- try. The expense of doing business abroad varies greatly from country to country. The purchasing power of an average workman in terms of minutes worked to earn the equivalent of a dollar differs very greatly by hundreds and hundreds of percent compared with the United States. I have already mentioned the fluctuating exchange rates and the different places in which we do business. The discount pattern differs significantly from each country to each country, and again vis-a-vis `the United States. Senator NELSON. May I ask one question. You referred to the pur- ~chasing power of the citizens of these countries. Mr. CONZEN. Yes, sir. PAGENO="0208" 646 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY Senator NELsoN. Switzerland, England, Rome, italy, and Germany are all very prosperous countries. Is their purdha~smg power lower than the purchasing power of poor citizens who live in ghettos thrdughtuit kmerica, who have almost no income at all? They buy `thdrugs, too. Mr. CONZEN. It is very difficult to compare these in terms of `U.S. dollars. I have lived and worked in this industry in practically every continent of this i~~rld, and I am struck by thehigh standard of medi- cal cafe which prevails in this country and which I sincerely believe is unmatched by any other country in the world, and 1 would hate to see anything done to jeopardize this outstanding position which we enjoy in this country. That th~re ~re poor ~~eople, this is :understandable, and' it is the oblig~ition of society and `Government to do something about it. To revert briefly `to Senator Javits' impression that we might be doing business abroad which is subsidized in a way by the U.S. citizens who pay `our prices for prescription drugs, I' do not think this is quite correct, because as can be seen from our annual reports, our foreign business is actually more profitable than our `domestic business, so there cannot be any question that our citizens here help to support low~r-priced.drugs of our company in foreign countries. Senator JAVITS. Do you meet competition abroad that you do not meet here? Mr. CONZEN. Yes, sir. `SenathrJks~rrs. In thi's~very product? Mr. `Co~zE~. Y'es,sir. Senath~' JNVIPS. So that is a factor, too, isn't it? Mr.'CONZEN. Certainly. Sei~ator JAVITS. Nonetheless I will say, sir-~and `I hope you will un- derstand ~I am nOt accusing anybody of arjything-~here is a problem the `amttomy of which isbeing laid bare'to the country, that the per- ~entages involved, I'must' s~iy,certeii~ly~aee ~very troublesome in terms of the relationships `which I have described. Now, may I ask `you a summ~ryquest'ien ~which Mr. Burrows sug- gested "to us ~this morning? He `said that they `would have eliminated profit entirely if they had reduced prices across the board 20 percent, wh'ich gave sOme order of m'agnitude~t'hat he~felt it is in the abyss with a runaway profit operation. I just wondered whether you would sub- s'cribe td that for your company, or whether there is `some other stand- `ard of judgment whieh'wou'ld indicate the reasonableness ef the overall `profit, `whatever niight' be our complaints. I think there is a serious complaint frankly, about the weighting which isbeing given to various eu~tomer'elemetits In the tOtal s~les. Mr.' CON~N. I would prefer to answer this question as follows. If we were faced with an overall price cut df X `percent, 20 percent, we would h~ve to conduct, from that point onward, a very different business from `the one we have been able to conduct until now; and I sincerely believe that this would not be in the best interest of our peo- ple and our country. Senator JAvrrs. One last question. Do you have any suggestions for us on this subject; or do you just say let it run as it is? Mr. CONZEN. I think the point that there are indigent patients who find it difficult or impossible to pay for medical care suggests that PAGENO="0209" Ct~MPETTTIVE I~ROBLEMS IN THE DRUG INDUSTRY 647 something has to be done, but I would also suggest that the price of drugs in this overall picture plays a very small and rather insignificant role. In the report ~to the President which was published by HEW in April of this year, it was confirmed that our industry has done some- thing which nobody else in this country I believe has been able to ac- complish, namely, to keep the overall cdst for its commodities level over the last 10 years, when the other much more significant parts of health care have risen very significantly. Senator JAVITs. Of course, that may only indicate that prices in your industry were already very high. Therefore, you did not have to raise them. But I am not drawing that conclusion invidiously. I just say it could be accounted for this way. I would like to ask you just one other question which stems from what you have said. You have not said anything about your licensing policy. Now, it is a fact, isn't it, that your licensing policy does bring about competition with your own product; is that right? Mr. CONZEN. Correct; sir, yes. Senator JAVITS. And would you say thaI the 6~pcrcent license fee-- ~w~hich is 6 pet~cent of what, by the way, selling' ~rice? Mr. CONZEN. Of the price which the seller realizes when he sells. Senator JAvITs. Would you say that your 6-percent licensing fee is a very reasonable one, which does develop the kind of competition which apparently you yourself are faced with in Government orders? Mr. CiNZEN. I would say yes, sir. Senator JAVITS. Now, what philosophy of your bu~iness dictates your esta~blishin.g that fee, which you consider very modest? Mr. CONzEN. This ~fee is in line with-it varies, of course, from product to product and situation to situation, but it lies within the general range of royalties which the industry charges and pays throughout the world; and in terms of a contribution to our research budget, it makes a contribution, but we wouldn't be able to exiSt eco- nomically on this 6-percent because we spend 9 or 10 percent of our own sales on research, for instance. Senator JAvrrs. Is this license available to any firm of probity and credit, or do you pick and chooseamong licEnsees'? Mr. CON~EN. We have adopted a liberal licensing ~poiicy, and we have not declined any request or application for a license. Senator JAVrPS. May I suggest, Senator Nelson, that we develop and have the staff find out if there are any complaints ab~ut the licensing policy pursuod in this ~field? I think that `might bea very u~efnl point. I yield. Senator N~soN. When you say you follow a liberal `policy of licens- ing, are you referring to prednisone? Mr. CONZEN. Yes, sir. Senator NELSON. You have a number of patents on the drugs, I as- sume, is that correct Mr. CONZEN. Yes, sir. Senator NELSON. When you have patented a drug, have you always forthwith licensed a number of companies to sell it, or have you some- times waited out the 17-year patent period? Mr. CONZE~. It is not the usual policy to license liberally as has been done in the case of prednisone because otherwise we would not be able `to conduct our type of business. 81-280-pt. 2-87-14 PAGENO="0210" 648 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY Senator NELSON. Let me ask you what your policy is. If Sch,erin discovered a new and very valuable drug, and you patented it, woul you license a number of other drug companies to sell in competition or not? Mr. CONZEN. This would be a question of business judgment in each particular case. If it is a drug which we believe we cannot handle ourselves alone in sufficient volume and sufficient degree to insure that it is widely available to all those who need this drug, we might license somebody. If we think we can take care of it ourselves, we do it ourselves. Senator NELSON. You have testified that Meticorten accounts for less than or around one-half of 1 percent of the total income of your business and your sales in the United States of this product are $3 mil- lion. Would you license because your company wasn't capable of producing and supplying the market for $3 million worth of prednisone. Mr. CONZEN. In 1955, when this drug was marketed for the first time, this was definitely one factor in our consideration, but there were other factors. At that time we were faced with the situation in the Patent Office where other companies laid claim to this invention or discovery by filing patent applications and an interference was declared. At that time we could not be sure, until the Patent Office had finally ruled,. who in the end would be permitted to sell and who would not be per- mitted to sell, so this was ai~. additional factor why we adopted this licensing policy with prednisone. Senator NELsoN. If the company discovers a new drug that is pat- entable and in great demand, because of its value, isn't it the normal practice unless there is patent interference or some other compelling reason, for that company to market it exclusively domestically for the next 17 years of the patent? Mr. CONZEN. For whatever period the company may decide in its best business judgment, the answer is yes, because neither the industry nor Schering Corp. could afford the investment necessary in develop- ing these drugs, unless we would have our patent system, and it is inter- esting to note that in those countries where we do not have a patent system, not one single novel drug has been made available to mankind over the years. Senator NELSON. Does Germany have a patent system? Mr. CONZEN. Oh, yes, sir, very much so. Senator NELSON. Do they have a product patent or just a process patent? Mr. CONZEN. There is a process patent, but about 4 or 5 weeks ago the Bundestag in Bonn passed a new law whi~h is tantamount to recognizing product patents. Senator NELSON. Do they have product patents in France? Mr. CONZEN. Yes, sir. Senator NELSON. In Italy? Mr. CONZEN. In the pharmaceutical field? In Italy there are no n&ents at all in our field, and this is one of the reasons why in my iudpment never has a product been developed and discovered in Italy, that is of significant importance to public health. The same applies to Russia incidentally. S'nator NELSON, The staff asserts that there are no product patents in France on drugs. I do not know whether that is correct or not. PAGENO="0211" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 649 Mr. CONZEN. There is a patent system which in effect in our partidu- lar field of pharmaceutical therapy is to all intents and purposes as far as I know as effective as the product patent system. Senator NELsoN. Is there any competitive prednisone on the market in Europe? Mr. CONZEN. Yes, sir. Senator Nrn~soN. Who competes with Schering? What foreign com- panies compete with Schering in supplying prednisone to the Euro- pean market? Do you happen to know? Mr. CONZEN. I do not know the number, but there are innumerable companies that are marketing and selling prednisone preparations. Senator NELSON. They are not licensed by you? Mr. CONZEN. In Europe where we have patents they are licensed by us. In countries where there are no patents or which are behind the Iron Curtain of course they are not licensed by us. They are just pirates. Senator NELSON. Is there competition from foreign companies in Italy on prednisone? Mr. CONZEN In order to do business in Italy, the drug has to be registered and approved by the Italian health authorities, and in order to get this approval, the drug has to be made in Italy, so these are all prednisone preparations actually manufactured in Italy. Senator NELSON. Are they manufactured there in your case, or do you send the compounds over and then just tablet there, final finish- ing? Mr. CONZEN. The pharmaceutical manufacturing is done by us in `Italy. Senator NELSON. What do you mean by pharmaceutical? Mr. CONZEN. The tableting. In other words, the Italian-affiliated company of Schering Corp., buys bulk prednisone. Senator NELSON. And it is all prepared except the tableting? Mr. CONZEN. Only the active ingredients are imported into Italy. Senator NELSON. The mechanical process of putting it in tablet form is performed there? Mr. CONZEN. It is more than a mechanical manipulation, inasmuch as it involves, in our particular case, it involves 93 checks and tests between the arrival of the bulk active ingredient and the final release of the packaged and labeled product to the trade. Senator NELSON. Let me ask this. In Switzerland is there compet- ing foreign-produced prednisone on the market? Mr. CONZEN. I would guess yes. I do not know for sure, because I have not any personal first hand knowledge of this particular product in that particular market today. Senator NELSON. Would your company know? I would think that your sales people would know- Mr. CONZEN. Sure. Senator NELSON (continuing). Whether or not prednisone is foreign produced and sold competitively, in Switzerland, wouldn't they? Mr. CONZEN. The answer is "Yes." Senator NELSON. Do any of the gentlemen with you know for sure? Mr. CONZEN. No. I think I know about the international business more than my colleagues, because I have worked in it for most of my PAGENO="0212" 650 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY life, and I would feel pretty sure that there is both Swiss made and imported foreign prednisone tableted and packaged forms available today in Switzerland. Senator N~so~. And is foreign~-producecl, competing prednisone available on the market in Italy? Mr. CONZEN. Not in terms of the finished packing. As far as I romember, you cannot sell an imported finished packing today in Italy. It has to be registored and made in Italy. Senator NELSON. But I mean to say, does any foreign corporation in Europe prodnce prednisone, in competition with Schering's Meti- corten? Mr. CONZEN. Yes, sir. Senator Nm~sON. And is it on the market in competition in Eao? Mr. OO~EN. Oettainly; yes, sir; everywhere. Senator I~TELSON. I?oreign-produeed competing prednisone is what I am talking about. Mr. Oo~z~. ~I would like to avo~isd any misunderstanding as to the term "foreign-produced." Senator N~so~. Foreign to us. Mr. CoN. It is made in Brazil. Brazil does not permit the im- portation of finished packaged prednisone products, so what happens is that the a~the bulk snbstance is imported. into Brazil horn various sources from different ~oi~ntries, and then manufactured into flnished. products and packages nnder Brazilian labels. Senator NELSON. And is that true of Mexico? Mr. Co~z~r~. Yes, sir. Senator NELSON. Is that true in Australia? Mr. Co~e~. Yes, sir. Senator NBL~ON. Is it true in Canada? Mr. CONZEN. Yes, sir. Senator NELsON. Not one of these companies from Europe or else- where may market prednisone under any label in the United States, may they, unless they are licensed by you? Mr. CONZEN. That is right. Senator N~iLsON. Well, then, doesn't it really appear that the reason the price is lower in Rome, Mexico City, Rio, Bern, Australia, is due' to the fact that you have competition there? Mr. CONZEN. No, sir. Senator NELSON. Why don't you sell it for more money then? Mr. CONZEN. It is impossible for the rOasons wJthch I tried to ex- 1~lain. We have a 12-year market history now in each country, and each country has different circumstances and factors which has influ- enced the price structure in that particular country over the years to the point thatwe have today a price in Brazil of 2,840 cruzeiros, when it was only 320 cruzeiros when we tro~lueed~it. Senator NEr~soN. But that is only $1.59. Their oruzeiros are- Mr. CO~zEN. At theexohange rate. Senator NELSON. They are inflated? Mr. CONZEN. Yes. Senator ~Lsow. Sofor $1.59 youareselling~packages of 30 in Brazil versus $5.65 in the United States ~ Mr. O0NZEN. That is right. Senator NELSON. You have to send it down there, distribute it, pack- age it, finish it down there, and yet it is selling for a third of the price PAGENO="0213" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 651 you sell it for in the United States. Now, isn't it competition that is doing it? Mr. CONZEN. Not only competition. One of the main reasons has been the galloping inflation, and the devaluation of the cruzeiro in terms of the U.S. dollar. Senator NELSON. Was that true, is that the reason~-there isn't gal- loping inflation that I am aware of in Bern, Switzerland, and it sells there for less than it does in Brazil. It sells for $1.37, according to the State Department. Mr. CONZEN. This is a price which, as I indicated before, was estab- lished by our distributor with the Swiss social security authorities, and has gradually come down to this price, to this level. Senator NELSON. Tn Australia it sells for $7.07 per 100, We trans- posed that to $2.31 for 30. How do you account for that price in Aus- tralia? That is not a destitute country. Mr. CONZEN. This is the price which probably, I can find this out, lies substantially above the price of other prednisone brands in that country. Moreover, the cost of doing business in Australia is a very different one from doing business in this country. Senator NELSON. Well, I must say just for myself that itis not a very convincing explanation. Wherever you have competition, you charge a substantially lower price than you do in the United States, where there is not any competition except as you have licensed it. Mr. CONZEN. I think we have at least as much competition here as we have in other countries. Senator NELSON. Let me read something to you from testimony of a former president of the Schering Co., Mr. Brown, who appeared be- fore the Kefauver Committee on December 7 and 8, 1959. This is on page 7,888 of the hearings on administered prices: Senator KEFAUVER. I know but the problem is that we want to get cheaper medicine in that one house where one percent is sick. What would you have done- This is to Mr. Brown, president of the Schering Co. at the time- what would you have done if Merck had offered to sell their Deltra product- Which is their prednisone- at $25? Would you have gone down? Mr. BROWN. Senator, in this industry you don't sell your product if a com- pany of equal standard has a lower price, so you have to meet their price. Senator KEFAUVER. So had Merck gone down, you would have gone down? Mr. BROWN. We would have been forced to go down just as we were forced to price our product in competition with cortisone and ]aydrocortisone when we first brought it out. Now, Merck reduced the price of its preciBisone called Deltra, in January of this year from about $17.90 to $2.25 per 100. Your presi- dent, Mr. Brown, said in 1959 that you would have to go down to meet competition. The competition lowered its price in January. How come you haven't gone down to meet the competition as your president in- sisted that your company would have to do? Mr. CONZEN. I believe that this statement was a correct one in 1S~9 when prednisone was th~ leading corticosteroid in the mar1~et. Today we have a~ ~ntirely changed ~et of oirc,um~tanoes. The bulk of the corticosteroid tablet market no longer lies in prednisone but in other products, and our price today of Meticorten is not out of range with PAGENO="0214" 652 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY the other corticosteroids which compete in this particular therapy area. Senator NELSON. But they are way out of line with other pred- nisones? Mr. CONZEN. That is right. Senator NELSON. President Brown of Schering said in 1959: We certainly would have to reduce our price to meet the competition if Merck reduced its price. What has happened since then to invalidate that judgment and statement by President Brown? Mr. CONZEN. What has happened is that the market in corticosteroids has so drastically changed in these intervening 8 years that this state- ment of 1959 is no longer applicable to today's market situation in this product. Senator NELSON. But $3 million worth of prednisone is being sold annually on the market here, and if the reduction in Merck's price of 1959 would have forced Schering to go down to meet the competition, I still don't understand why it would not force it to go down to meet the competition in this $3 million market. Mr. CONZEN. I think the answer lies in that Merck, to my knowl- edge, does not sell prednisone to any significant degree, so it is no longer an important factor in the market. Senator NELSON. I think that is exactly correct. I think that is the reason. There is no competition on the retail market. This demonstrates what I have been trying to say all along. The one thing known on the market is Meticorten and Merck can reduce its price to a nickel, and. no doctor is going to prescribe it because he does not know that Merck, or any of the other producers, meet the Medical Letter's standards or TJSP standards. The dominant name on the market is Meticorten; isn't that the case? Mr. CONZEN. I would say that with 130 different manufacturers products of prednisone available on the market, there are few items in today's armamentarium to the physician which have that much or more competition. In other words, there is more competition in this than in many other instances I know of. Senator NELSON. I cannot answer the question of my own knowl- edge, but before we are through we are going to check some drug- stores. I think you will find out what I found out from half a dozen checks that all the drugstores have Meticorten. You can take the list of firms mentioned in the Medical Letter to your independent drug- stores. Most of the druggists have never heard of them, they do not stock their products for the very reason that the doctor does not pre- scribe them. Therefore, you can hold your price any place you please, because if the physician does not know about comparable products- and it is said that he does not-then you have no competition. But in the foreign market, where you have to compete, where there are com- peting prednisones on the market, your price is down. That explana- tion is, I must say with all clue respect to you, more convincing to me than your explanation. Mr. CONZEN. Senator Nelson, I would submit that- Senator NELSON. I think you have done an excellent sob. I `am not critical of you. PAGENO="0215" COMPETITIVE PROBLEMS IN THE DRUG INDUS~rRY 653 If I were running your company and could make my product dominant on the market, arid that is the rules of the game, I certain- ly would do it. I am not saying there is anything wrong with that from the standpoint of your company ethically or anything else. I have some concern about the way the system works, but I do not have any criticism for you and your success in convincing the doctors that Meticorten is the one they ought to buy. I am not critical of that at all. Mr. CONZEN. But I would like to submit that first of all Meticorten is not the leading seller in the prednisone field. Senator NELSON. Retail? Mr. CONZEN. Anywhere, because it isP- Senator NELSON. A little while ago I asked you what percentage of the market you had, and you could not tell me. Now, how do you con- clude that it is not the leading one in the retail market? Mr. CONZEN. I said in my prepared statement that we estimate the total market in prednisone tablets in this country to be approximately $3 million, out of which we have $1 million, so the majority of the market is serviced by other brands. The other point- Senator NELSON. May I ask this one question at this point? Mr. CONZEN. Yes. Senator NELSON. Is there any other company in the United States that sells more prednisone on the retail market than you do? Mr. CONZEN. In terms of dollars? Senator NELSON. Yes. Mr. CONZEN. No; not that I know of. Senator NELSON. How many firms, did you say, sell prednisone? Mr. CONZEN. 130. Senator NELSON. 130. It may very well be that you could be like General Motors. They are very dominant in the market. They have got 50 percent. They have only three other competitors. You have 130 and they may each have a percent or two, or three or five or six, but I would guess from my checks around that Meticorten seems to be the one that is dominant. I don't have the facts. I want to get them. Mr. CONZEN. That is in dollar volume. If you think in terms of units,, actual tablets prescribed and taken by the patient, Meticorten amounts to approximately 5 percent, and 95 percent of the rest of the market. is handled by other brands. Senator NELSON. On the retail market? Mr. CONZEN. Yes, sir; on the total patient market. Senator NELSON. Pardon? Mr. CONZI4N. On the total market, including I would say retail, it is probably 90 percent of other makes. Senator NELSON. In the retail market 90 percent of tablets sold are~ sold by? Mr. CONZEN. By other companies. Senator NELSON. Other companies. Mr. CONZEN. Competitors, yes. Senator NELSON. And 5 percent or 10 percent is sold by Schering? Mr. CONZEN. That is right. Senator NELSON. On the retail market? Mr. CONZEN. That is right, roughly. Senator NELSON. And yet through your sales you represent one-thirct of the total of the $3 million market, is that correct?~ PAGENO="0216" 654 COM]~ETITIVE PROBLEMS IN THE DRUG INDUSTRY Mr. CONZEN. That is right; but I' also believe that it would be hard to find a practicing and prescribing physician in this country- Senator NELSON. Pardon me? Mr. CONZEN. It would be hard to find a practicing physician in this country who is not aware of the fact that prednisone is available at much lower prices than Meticorten, because physicians' are highly trained and educated people. They have been solicited by salesmen and by mail for years now that prednisone is available at these much lower prices, so I do not think it would be right to assume that physicians are unaware of this price spread. Senator NELSON. I think you have to make two different assumptions about' that based upon our experience. We have had testimony, as you probably know, from very distinguished professors in our medical schools, pharmacologists and doctors who assert quite flatly that it is impossible for a practicing physician, busy as he is, to keep up with the names of the various drugs, to say nothing about prices. I do not know whether their testimony is correct or not. I hope to find out. But I have a suspicion that there is a substantial element of truth in their claims that it is impossible for the doctor to keep up, and whichever firm does the best job of convincing the doctor about its product is the one whose product he prescribes. But that is my feeling. I might be wrong and we will find out in the course of these hearings. Mr. CONZEN. If I may suggest a pharmacologist and university professor who does not treat patients may be less ~ ware of this than the practicing physician who has to deal with this individual patient and who is constantly solicited by the industry and the trade for the products which we make available. Mr. GORDON. I have a question in the nature of a summary. You stated before that the differences of prices throughout the world depend on conditions, on the income of people and so on and so forth. Now, aren't you really saying, when you say that, that you charge what the traffic will bear? That the markets outside this country will not bear high prices? Here `they will bear higher prices? Aren't you really say- ing that? Mr. CONZEN. No, I am not. Mr. GORDON. You are not? Mr. CONZEN. No. Mr. GORDON. I am not sure that I understand wha1t the explanation is then. Mr. CONZEN. If we take the specific price which is charged today for Meticorten abroad- Mr. GORDON. Let's take Australia as a specific concrete example. Mr. CONZEN. yes. Mr.. GORDON. From where do you import the bulk material into Australia? From the United States? Mr. CONZEN. I don't know where they buy~ but let's assume from the [Jnited States. Mr. GORDON. Let's assume from the United States. Mr. CONZEN. Yes. Mr. GORDON. And since this bulk material i's not something small, the transportation costs are not too low~ isn't that correct? `Mr. CONZEN. Ttñ~m'inimal, because it i's small. Mr. GORDON. But ~ôu.have't'i~wns.portat4on costs'.? Mr. CONZEN. Small transportation costs, yes. PAGENO="0217" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 655 Mr. GolmoN. From here to Australia which is half way around the world? Mr. CON~E~. Yes. In terms of value of the material it is insignificant. Mr. GORDON. Now, how about all other costs? Are there any costs~ there that are any lower than here? Mr. CONZE~T. Oh, yes. For instance, we do maintain a research estab~ lishment which costs us over $10 million a year in this country, but not in Australia. Mr. GORDON. All right, you did the research in the United States. But don't you have to pay for the research that you conduct here(? Mr. CO~ZEN. We continue to do so. Mr. GORDON. Why aren't you asking the Australians who used pred- nisone to help pay for the research? Mr. CONZEN. They have to pay their share, and the total foreign business, as I said before, yields a profit which compares favorably with the profit which our domestic business contributes to the overall corporate earnings. Incidentally our total volume in Australia on. Meticorten is about $2,000 a year. Mr. GORDON. That is beside the point. Are you saying that you are making as much profit selling it at $7.70 in Australia as you are when you sell it here for $17.90? Mr. CONZEN. Oh, no; I am not saying this. Mr. GORDON. Then they are not paying for their share of the research costs, isn't that right? Mr. CONZEN. They are paying a share but we cannot break it down to a few dozen bottles of Meticorten in Australia as to what their share to our overall $11 million budget is. It is impossible. Senator NELSON. But I do not think you could claim a lower cost of doing business in Australia because the research plants are located in the United States any more than you could claim lower costs in Los Angeles if your research plant is in New Jersey. You are selling the product same place. Mr. CONZ1~N. Yes. The difficulty is the allocation. Senator N~T~SON. That is a roilcall vote. I think we are going to spend some mon~y ~nd I do not like to miss it, so I have to go up the~ and vote. I have asked all the questions I had in mind, and you have been a ~rety g~raci6u~ ~tnd fh~e ~ritness. Even though ~e m~y have asked a~ sharp question or two, it is all in the objective of seeking information. We appreciate your coming very much. You have been very helpful and your testimony has been valuable to the committee. We have some charts that I have used in part which will be printed in full in the record. PAGENO="0218" 656 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY (The charts referred to follow:) Estimated NIH intramural research expenditures 1 related to prednisone and prednisolone, fiscal year 1953-67 Fiscal year NCI NIAMD NINDB NIAID .1953 1954 1955 1956 0 0 0 $10,000 57,000 13,000 74,000 19,000 29,000 11,000 84,000 231~ 000 394,000 409,000 552,000 15,000 50,000 40,000 30,000 20,000 10,000 10,000 0 0 0 0 0 0 0 0 0 18,000 18,000 10,000 10,000 0 1957 1958 - 1959 1960 1961 - 1962 1963 - 1964 1965 1966 1967 Total Total, NIH 1,883, 000 175, 000 $56, 000 0 $2,114,000 .- 1 Funds spent for purchase of drugs for the treatment of NIH Clinical Center patients not included. NIH extramural research grant obligations, fiscal year 1953-67 1 Fiscal year Total funds Number of grants 1953 1954 1955 1956 1957 1958 1959 1960 1961 .1962 1963 1964 1965 1966 1967 Total $156,237 327,711 394,817 350,554 326,554 655,725 783, 502 930,866 1,134,729 1,229,653 1,338,872 1,384,401 1,683,464 1,695,827 1,991,232 12 12 18 15 21 37 44 52 56 68 60 60 69 61 254 14, 384, 144 639 1 Extramural obligations overestimate funds devoted to prednisone and prednisolone since all grants in which prednisone -and/or prednisolone were named were counted in the total. 2 Incomplete data for fiscal year 1967. PAGENO="0219" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY Prednisone-International price comparisons-Price to druggists I Derived from 100's price. 2 Derived from 30's price. SCHERING 657 Source: Foreign prices secured by US. State Dep8rtment through Embassies. U.S. prices secured from the Red Book Prednisone-1,000 5 mg. tablets DEPARTMENT OF PURCHASE, NEW YORK CITY Om PA No. Period of agreement Successful vendor Award price Esti- mated amount (bottles) Merck Sharp * Dohme price Scher- ing price Parke, Davis price 3543 (1 yr) - 3356 (1 yr.)..... 3170 (1 yr.)_ - 3081 (6 mo)..... 2961 (6 mo.)_. 2891 (6 mo.).... 2804 (6 mo)..... 2231 (6 mo)..... .2677 (6 mo.).... ~119 (6 mo.)~ 2583 (6 mo.)__ Apr. 1, 1967 to Mar. 30, 1968 Apr. 11, 1966 to Mar. 30, 1967_ - -- April 1965 to Mar. 30, 1966 Oct. 1, 1964 to Mar. 30, 1965 Apr. 1, 1964 to Sept. 30, 1964 Oct. 1, 1963 to Mar. 30, 1964 Apr. 1,~963 to $ept. 30, 1963 Oct. 1, 1962 to Mar. 30, 1~63 Apr. 1, 1962 to Sept. 30, 1962 Oct. 1, 1961 to Mar. 30, 1962 Apr. 1, 196k to Sept 30, 1961 Lannett Davis-Edward-.... Pan Ray No contract do Davis-Edward_ do do Success do Bryant Pharma- ceutical. $4. 58 4. 69 4. 95 6. 65 5. 2$ 5. 65 7. 90 8. 25 8. 75 1, 500 1, 500 1, 500 600 500 500 700 400 650 $9. 73 26. 00 26. 00 26. 00 26. 00 26. 00 26. 00 26. 00 28. 00 28. 00 28. 00 $12. 00 12. 00 12. 00 12. 00 12. 00 11. 00 17. 00 16. 25 14. 00 14. 00 9. 98 (1) $7.70 (1) (1 (1 (1 13. 80 (1) 20. 25 (1) (1) 5mg. 30's 5 mg. 100's `No bid. PAGENO="0220" Prednisone tablets 5 mg. (1/1~ grain) 1000's unit: Bottle 00 Contract No. Date Method Successful bidder Unit price Total price Other bidders Prices bid Price to druggist Percentage difference 1 ~ Dec. 8,1966 Adv Upjohn Co $4.94 $43, 630. 08 Nysco Labs Panray Division, Ormont Drug & Chemical Co American Pharmacal $5. 35 5. 80 7. 00 2....._._... Dec. 9,1965 Adv do 4.98 18,732.80 Upjohn Panray Division, Ormont Drug & Chemical Co American Pharmacal Dome Chemical 4.94 6. 17 7.00 6.25 $20.94 424 3........__. May 20,1966 Adv StrongCobbArner ~ 4.72 19,484.16 Schering corp Upjohn do Halsey-Drug Kirkrnan Laboratories Panray Division, Ormont Drug & Chemical Cc~ American Pharmacal 8.20 4.95 4.95 5.29 5. 88 5.95 7.00 170.00 20.94 20.94 2,073 423 423 4.._._...... 5 Oct 29,1965 Dec. 27,1966 Neg Neg Upjohn Co Strong-Cobb Amer 4.95 4. 52 22, 809. 60 22, 129.92 Schering Schering (commercial item) Upjohn do 8.20 9. 20 4.95 4. 95 170.00 170. 00 20.94 20.94 2,073 1,848 423 423 0 C 00 z ci 0 PAGENO="0221" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 659 Senator NELSON. Again thank you all very much for coming. We :appreciate your appearance. Mr. CONZEN. May I thank you, Senator Nelson, for the opportunity you gave me to appear here today. SenatorNELS0N. We are very pleased to have you. Mr. CONZEN. Thank you. (The prepared statement of Mr. Conzen follows:) STATEMENT OF W. H. CowzEN, PRESIDENT, SOIIERING CoEPo1wi~xoN Mr. Chairman and Members of the Subcommittee, I am W. H. Conzen, President of Schering Corporation. Schering is an international pharmaceutical company serving the medical profession throughout the free world. Its admin- istrative and research headquarters are in Bloomfield, N.J.; its manufacturing facilities are in New Jersey, Wisconsin, and a number of foreign countries. We are here in response to your invitation of June 12th to appear and to answer your subcommittee's inquiry concerning the price of our product Meticorten. It is our purpose to cooperate fully so that you may hear all sides and reach a fair evaluation of the criticisms of prescription drug prices that have been made here. In your letter to me, you asked that I discuss pricing policies and practices of our brand of prednisone. You said that "striking differences in prices of prednisone among various manufacturers" had been referred to in recent test!- mony before your subcommittee. During these hearings there have been frequent references to the price of Schering's Meticorten tablets and comparisons of that price with the prices charged for so-called "generic" prednisone tablets. Obviously, the reference to "striking differences * * * among * * * manufacturers" pertains to these com- parisons in the testimony. However, so that there is no misunderstanding as to precisely what is being discussed, I believe a few words of explanation are in order as to what prednisone is, what Meticorten is, and how significant they are in the pharmaceutical field. Prednisone is the official, or established, name of a chemical substance which was discovered by Schering research scientists in 1954. It is' what is known in chemistry as a steroid, more specifically, a corticosteroid. We have developed and marketed a number of pharmaceutical products which contain prednisone and its sister compound prednisolone-14 to be exact. These products provide a variety of pharmaceutical dosage forms, many of which are offered in several package sizes. In addition to plain tablets, there are injectables, creams' and ointments for dermatological use, ophthalmic preparations, and a number of combination products. Meticorten is~ Schering's brand name fo'r tablets formulated with prednisone as the active ingredient; it is a typical example of what many people have chosen to call "miracle drugs." It is used by people of all ages for the treatment of a variety of short and long term medical problems such as, allergies, asthma, arthritis, skin and eye infiammations. Elderly people with chronic arthritis represent a relatively small portion of its users. Prednisone, in addition to being the official name for the chemical compound, is also the so-called "generic" name for pharmaceutical products made avail- able by many generic distributors, which contain, as the active ingredient, this `particular chemical substance. Before I address myself to your specific question, I think it would be helpful if I explained for the subcommittee some of the magnitudes involved to establish `the relative significance of what we are discussing. In the first place, the domestic ethical pharmaceutical industry is estimated to have a volume of about $3 billion at the manufacturers' level. The term "ethical pharmaceuticals" as used here refers to those products which are promoted only to the medical and allied professions, and available through pharmacies. `The sales volume of aU corticosterold tablets totals approximately $40 million; this not only includes precinisone, but all other corticosterold tablets'. The es'ti- mated volume of prednisone tablets is' $3 million. Consequently, this product represents 1/1oth of 1 percent of his country's total ethical pharmaceutical market. Secondl3r, within the pharmaceutical Industry, Schering Is about 16th in size, with a domestic ethical sales volume of some $65 milllou. Of that total, Meticor- ten tablets represent less than $1 million. PAGENO="0222" 660 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY In other words, Meticorten tablets amount to only about 21/2 percent of the total corticosteroici tablet market. The relative importance of Meticorten volume, both in terms of the consumer's drug bill and with respect to Schering, is cer- tainly not large. Nevertheless, those who require this medication have every reason to ask why Meticorten tablets should cost more than products wbic~ contain the same active substance available from other companies at much lower prices. The answer lies in the basic difference in the nature of the functions and services performed by Schering Corporation in our economy, as contrasted with those performed by distributors of generic prednisone. Schering Corporation and the generic distributor operate in such different ways as to be engaged in totally different businesses. I am not, however, going to discuss the merits of the so-called generic products. and the so-called brand-name products and the question of therapeutic equiva- lence. There is a considerable difference of opinion in the scientific community on that subject. The study now going on under Government auspices hopefully will throw light on this question. Let me explain what I mean by "different kinds of businesses." Schering Corporation is fully equipped and fully staffed with highly skilled research scientists to discover and to develop new drugs, to produce them under the most rigid standards of good manufacturing procedures and quality control,. to disseminate promptly throughout the scientific and professional world full and complete information about such new drug discoveries, to make available a wide range of dosage forms to meet all physician needs, to market them widely In all parts of the free world, and to continue to service its discoveries for the medical profession. These are the characteristics of our company; it is research-oriented, it manu- factures products of the highest quality, it markets its products worldwide, and it is devoted to total service to the medical profession for the benefit of its. patients. Implicit, however, this succinct statement is a host of detail, activity, and responsibility. What follows is an oversimplified and only a partial list of what Schering does,. and must do, to fulfill its role in today's complex and highly competitive world~ of medicinal products. Moreover, it is what Schering actually did for prednisone. In the first place, we must search constantly and continuously for new and better compounds which may be formulated into new and better medicines.. The industry's average, as you know, is one success for every 6,000 probes. We must investigate each promising new compound in a series of costly, time- consuming steps: first in the laboratories and then in animal testing, to deter- mine the usefulness, and more importantly, to insure the safety, of any such~ compounds for testing in human beings. We must then develop pharmaceutical formulations so that the useful compound can be made available as a medicineS in a variety of dosage forms. Additionally, we must develop manufacturing procedures, often novel and frequently complex; we must learn how to make, initially, limited quantities for release to a limited numbr of doctors for clinical investigation of the compound's effectiveness and safety in human patients;~ and later, if successful, larger quantities for marketing throughout the world. These investigations on the part of clinical investigators must be carefully supervised and monitored, the results meticulously correlated and analyzed, and a host of detailed information accumulated, which would take much too long~ here to catalogue. Suffice it to say that the research work that has to be done in conneciton with the investigation of a new and promising medicine, in view of the elaborate and strict rules and regulations of the Food and Drug Administration in our- country-and similar requirements abroad-is costly, time-consuming, and involves a myriad of details. All this takes a number of years-nowadays usually from ~ to 8 years. In the meantime, considerable additional investigation proceeds, more data are developed, more reports prepared and filed with the~ FDA. Other areas of our company's operations are involved: Our engineers must learn how to make the new drug in large quantities for- commercial use-both economically and accurately. Quality control scientists must develop standards, design tests to validate them, so that up to 24 different factors contributing to the safety and effective- ness of a single tablet or capsule or vial of injectable liquid can be guaranteed. A marketing organization must be established and continually maintained PAGENO="0223" COMPETITIVE PROBLEMS IN THE 1~RUG INDUSTRY 661 to assure that the proclu'ct will be speedily available throughout the United States and the free world. Scientific and clinical documentation about all aspects of the new drug must be carefully created and produced by us and then cleared by the FDA in Washington. Our representatives-or detail men-receive a thorough, in-depth course of training so that they are fully knowledgeable concerning every aspect of the new drug-its usefulness, its limitations, its advantages, its "problem points"- in short, they must be thoroughly briefed to be able to provide full information and to answer the questions about the new drug which the physician might ask. Our detail men must then call on those doctors who might possibly use the new drug in their practice, brief them fully on the drug's properties and recom- mended uses, and provide them with samples so that they can become acquainted with the drug. These personal calls on physicians, hospitals and pharmacies must be supplemented with further information in medical journals, in direct- mail literature, in brochures and the like-all of which must be consistent with FDA requirements. I could easily devote more time to explain to you the wide scope of the activi- ties that actually did go into our discovery, development and marketing of prednisone. I could, for example, refer to the symposia on prednisone Which we sponsored for the scientific and medical community, the brochures we prepared, the films we created and distributed, the host of things we did to make this new and dramatically useful product known to the physician and available to his patients throughout the world. How completely different is the business carried on by the large majority of the distributors of generic prednisone. For the most part, they are essentially distribution operations; in fact, many of them have the finished product manu- factured for them. These companies do not develop new drugs. They do not have the scientific staffs nor the facilities to develop them. They do no animal testing or clinical investigation. Usually generic distributors do not work for years to gain government approval. They do not introduce new drugs. They lack the personnel and skill neces- sary to communicate to doctors all that needs to be communicated to them about the indications for the drug, the dosage regimen, the methods of applica- tion, the side effects and precautions, and so on. They cannot answer questions about the drug's use in individual cases or provide other services to the doctor. They do not supply samples liberally to provide the doctor free trial and experience with thB drug and free materials to use on indigent patients. They do not provide special formulations of the drug to use in treatment of eyes, ears or other organs, or special strengths for treatment of children, the elderly or other groups. These markets are usually too small and specialized. They limit quality control activities to legal requirements. They do not, in short, encounter the major burden of costs necessary to develop and launch a new drug successfully and prove its worth. Without these activities, generic distributors contribute little to medical progress. On the other hand, after someone else has ijeveloped a drug and after some- one else has incurred the costs of introducing It properly, so that it gains wide- spread usage, they are able to copy it as soon as copying is legal. When the active ingredient is well known and highly regarded, they take advantage of this to sell it cheaply, in quantity, and frequently on a mail order basis. They con- centrate on the one or two forms in widest use and on types of users easiest to reach. Sometimes such companies concentrate on Government bids only and operate in such a way as to minimize investment in facilities and personnel. Their entire business is built upon the pioneering work of others. Their appeal is based solely on their contention that their cheaper versions have the same active ingredient. In fact, this is what happened in the marketing of prednisone. When all is said and done, it was Schering's research which discovered predni- sone, Schering's development which gave that product to the world and to the medical community, Schering's marketing and distribution which made it known and used throughout the world, ~chering's activities which broadened its useful- ness, and, Schering's licensing which made it available from so many distributors. Without all this, there would not be today any generic prednisone at all. We at Schering are proud of our discovery of prednisone; it represented a real breakthrough. Indeed, every corticosteroid tablet preparation introduced since PAGENO="0224" 662 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY the discovery of prednisone embodies the unique principle that characterizes the prednisone molecule and that distinguishes it from cortisone and hydrocortisone. Prednisone blazed a new trail in anti-inflammatory ste~roid therapy. Moreover, as the discoverer of prednisone, we are even today involved in servic- ing that compound, continuing research with it, in seeking to broaden its applica- tion and to expand the line of prednisone products. As the discoverer of predni- sone, we carry, and must assume, the responsibility of continuing research not only with respect to that product, but with derivatives of it. At this point, some 12 years after we first introduced prednisone, we continue to supply clinical in- vestigators with experimental forms of prednisone for further exploration of its potentials. These things, costly as they are, are not performed in any way by any of the generic distributors of prednisone. To achieve our objectives, to maintain the kind of organization we are-re- search, development, Government clearance, worldwide marketing, total service to the physician and the trade-all this far exceeds to cost of operating a generic enterprise which ordinarily requires bare manufacturing cost and nominal sales expense. Many of our costs apply to failures, as well as successes, but only the suc- cesses are copied. The "striking differences" in price you referred to are the inevitable con- sequence of these contrasts. In my judgment, they are fully justified. At generic level prices, we cannot have new discoveries. At generic level prices we will stifle research and the development of new medicines, and soon we will have neither the new drugs nor the generics. If we were to attempt to compete at the same price level as the generic distribu- tor, we would have to eliminate a large proportion of the activities and services which I have described as characteristic of our company. We would have to limit our activity to simple manufacture and distribution of drugs discovered, proven, and established by others-as they do-and one important source of new drugs for the treatment of sickness will have been removed from this country. I do not believe this would be in the public interest-certainly it would not advance medi- cal science nor contribute to further development of higher health standards. You also asked me to discuss our pricing policy with respect to prednisone. Let me answer that by giving you some of our guidelines In pricing-the highlights of the criteria we consider in establishing, and subsequently in reviewing, the prices for Schering products. The ultimate responsibility for pricing policy at Schering rests with me as president. Pricing decisions and approvals, in each marketing division, must be in accordance with procedures and practices which I approve. Schering prices are established at a level which covers our research budgets, including the cost of both our successes and our failures, the cost of materials and of efficient manufacture at reasonably attainable volumes, the cost of quality control under the highest standards, the cost of efficient marketing, including that of communicating product facts and benefits, the administrative cost of operating the com~~any, and the taxes payable to national, regional or local governments. The cost of the active substance is a small portion of total costs. Our pricing should also provide an average, long-run corporate-wide, after-tax return on stockholders' equity at a rate at least equal to that of the pharmaceu- tical indfistry as a whole, since we require earnings to support continued corpo- rate growth and to compensate investors for the use of their capital. All of this Is evaluated against a background of the high risk involved in bringing a new pharmaceutical to market. We consider the expected response, based on analysis of value of the product to the user, as compared with the value and price of alternatives he may have. We attewpt to forecast the attainable sales volume for the product at various possible price levels, and at various times during the expected product life. cycle. We give thought to the significance of the product with respect to our entire product line and its effects, if any, on the prhces, sales and profit margin of our other products. And finally, we consider the magnitude of the investment required and the degree of risk we undertake. These are broad p~i~ciples-and like all broad pri~clples, there are exce~- tions. We make exceptions under certain circumstances; for example, where economies in production or marketing are attainable in serving certain types of customers and where making a product available at a special price is expected to result in increased long-term usage. PAGENO="0225" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 663 There are also situations where we believe we have an obligation to provide vital drugs in rare and unusual conditions, even though they must be provided at a loss. In pricing Meticorten and in our periodic review of its price, we have sought to apply these principles. Throughout the entire period that we have been market- lug Meticorten, precinisone has been generally available to the public from a number of sources, and for the last 8 years, at a wide range of prices, so that the carrying out of our business judgment in this respect has in no way been in conflict with the public interest, but in fact has served to advance it by enabling us to continue the creative development of the compound itself, and of succeeding therapies. Many physicians prescribe Meticorten, knowing that prednisone is available at lower prices. We think there is sound reason for their doing so. We think Meticorten is the best product-the one fully proven in patients and the most carefully prepared and controlled. Their experience has confirmed this. They continue to prefer Metieorten for their patients, despite its higher price. We think they are right. Schering Corporation's Annual Report for 1960 indicates that the application of this pricing policy has not resulted in excessive profits. Over the past 5 years, Schering has averaged a return on investment which is slightly below the median for the industry, and certainly not out of line with the risks and competitive situation `~dth which it is faced. We have on a number of occasions considered reducing the price of Meticorten tablets and have consistently arrived at the conclusion that this would not be sound business economics, given the nature and scope of the services the medical profession and the public expect from us. As I indicated earlier, the volume of Meticorten tablets and the sales of Meticorten tablets are such that any sub- stantial reduction in the price to meet the "generic" price level would simply mean that we diminish our capacity to provide these services. If Schering is to discharge successfully its responsibilities and achieve its objectives in our society, if it is to be the source of breakthroughs in the future, if, as I am persuaded, the community expects it to discover, to test, to produce, to market, and to service the new, high-quality, safe and effective medicines of the future-and to continue to make available those on the present scene-and to do all this in active and aggressive competition with companies like itself, then it must have the resources to take all the risks implicit in these activities and to attract the scientific manpower that is necessary to do that job successfully. I believe that the large majority of our society expects this of us and is pre. pared to accept, and does accept, the fact that the economics of these circum- stances demands that our prices be substantially higher than the prices which the generic distributors charge. To them the community does not look for, and from them it does not expect, these necessary services and activities. From them the community expects and receives only price-oriented distribution. That is why our price for Meticorten is what it is and why the generic dis- tributor's price is what it is, and in my judgment these striking differences are justified by the contrasts I have attempted to put before you here today. Nevertheless, I should not leave you with the impression that we are unaware or unmindful of the continued critical attacks in these hearings and in the press. Even though we regard our position as sound, for the reasons I have outlined, we have always reviewed our judgments in the light of the challenge of criticism; we plan to continue to do so. We are not callous to the difficulties which our older citizens face because, due to their limited, fixed incomes, and often chronic illnesses, medical costs, in- eluding drugs, are high. Because of their limited incomes and greater needs, the difficulty they face in keeping pace with our inflationary economy is augmented. They need to be helped, and governmental and voluntary programs are doing just that. Moreover, under our present economic system and structure, we must look to the continued development of these programs to provide the help that Is needed. It will serve our society poorly if, in seeking to resolve these difficulties, we limit the ability of our creative pharmaceutical industry to serve the professions and the public through the discovery of new drugs. (Whereupon, at 2 p.m. the subcommittee was recessed, to reconvene subject to the call of the Chair.) 81-280-pt. 2-67-------15 PAGENO="0226" PAGENO="0227" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY TUESDAY, AUGUST 8, 1967 U.S. SENATE, MoNOPoLY SUBCOMMITTEE OF THE SELECT COMMITTEE ON SMALL BUsINEss, Washington, D.C. The subcommittee met, pursuant to call, at 10:10 a.m., in room 318, Old Senate Office Building, Senator Gaylord P. Nelson (chairmaft of the subcommittee) presiding. Present: Senators Nelson, Javits, and Hatfield. Also present: Benjamin Gordon, staff economist; Susan H. Hewrnan, research assistant; and William B. Cherkasky, legislative director, staff of Senator Nelson. Senator NELSON. Out first witness this morning is Dr. Martin Cher- kasky, director of Montefiore Hospital and Medical Center, of New York. Dr. Cherkasky, the committee appreciates very much your tak- ing the time from your busy schedule to come down here and present your testimony for the benefit of the committee. You may proceed to present your statement in any way you see fit. If you don't mind, I might interrupt with questions as you go along. STATEMENT OP DR. MARTIN CHERKASKY, DIRECTOR, MONTE- PIORE HOSPITAL AND MEDICAL CENTER, AND ON BEHALF OP THE GREATER NEW YORK HOS~ITAL ASSOCIATION, NEW YORK, 1~.Y.; ACCOMPANIED BY KURT KLEIN1~!ANN, DIRECTOR OP PHARMACY SERVICES Dr. CHERKASKY. I would like to do it the way that you would like, Senator. Shall I go ahead and read parts of this? Senator NELSON. That is the best way, from my viewpoint. You may extemporize or elaborate on any statement you make at any stage if you wish, but if you follow the text I think it would be helpful to me. Dr. CHERKASKY. Thank you, Senator. I appear before you today on my own behalf as director of Montefiore Hospital and Medical Center, in New York City, and on behalf of the Greater New York Hospital Association. Montefiore Hospital and Medical Center is one of the large teaching hospitals in the city. As of July 1 we had 766 beds rendering treatment in all major clinical areas with the exception of obstetrics. We are not against obstetrics, Senator. I want you to know that. All of our chiefs of service are on full time and are salaried, and we have over 100 other full-time physicians. There are over 800 attending physicians, all of whom are board eligible and/or certified in one or several areas of specialization. 665 PAGENO="0228" 666 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY In 1966, 226,404 days of care were given to almost 12,800 patients. Our operating expenses for 1966 amounted to more than $19 million in the operation of the hospital. We have a very extensive research program. As of July 1, 1967, our research program amounted to $6.8 million, of which $6.6 million came from the Federal Government. Senator NELSON. Are those NIH funds? Dr. CHERKASKY. Mostly NIH funds. Senator NELsoN. What kind of research does your hospital do? Dr. CHERKASKY. Across the board, Senator, we do research in heart cancer, neurological disorders. We uctually are doing some drug re- search in the se~nse that we are using therapeutic agents in drug ther- apy in cancer. Senator NEr~soN. I assume that since this is federally supported research, that it is on a contract basis for specific research projects. Dr. CHERKASKY. Yes, it is substantially on `a project basis. There are certain broad Federal funds that we can use as we see fit, but the bulk of it is on a project basis. Montefi'ore Hospital and Medical Center is a primary te'aching af- filiate hospital for the Albert Einstein College of Medicine in the Bronx of which I am acting chairman of the department of preventive medicine and community health. rpIiird and `fourth-year medical stu- dents serve clinical clerkships and subintern~hips, respectively, at Montefiore as part of their medical school education. As of July 1, we had GD interns, 248 residents, and 20 fellows participating in an active medical education program. You know we have had serious difficulty in the city of New York with the quality of care in the municipal hospital system, and shice 1962, Montefiore Hospital, by contract with the city, has assumed the responsibility for the professional services at the Morrisania City Hospital, a 400-bed institution. We also have a medical group program which we have had for some 20 years, and through this group program we provide total medical care for more than 30,000 people in the community in which we live. Senator NELSON. Who manages the group program? Dr. CHELRKASKY. We operate it. We `own and operate the group. It is a prepaid group practice unit, one of the units of the health insur- ance plan of Greater New York. Since I also represent at this hearing the Greater New' York Hos- pital Association, just a note that it is the largest of its kind in. the country. It represer~ts 124 institutions, 81 ~ionprofit voluntary `hos- pitals, homes, 25 municipal institutions with a total of about 55,000 beds. I have appeared on this subject before, before the Kefauver drug hearings in 1961 and 1962. It appears to me, Senator Nelson, that we are still faced with substantially `the same problems that we faced at that time. While the Food and Drug Administration, under Dr. God- dard's very vigorous leadership, has become a much more effective instrument, there are still grave defects in the ethical drugs field. I am here because as a physician, as a hospital administrator, as one who has devoted my life to medical care, I would like to see proper things happen in the field of prescription drugs. It is clear that what- ever regulations or recommendations come from this committee, we must encourage by rules and regulations the kind of sound research PAGENO="0229" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 667 and development needed to devise the cures for the many serious disease problems which still plague us. However, I would like to feel secure, and I think this is almost the main point that I wish to make here today, Senator, I would like to feel secure for our hospitals and our doctors, and all of our people, that when a drug is ordered, it will be of the quality, purity, potency, and safety that it is purported to be. Senator NELsoN. Under the present law, all drugs are required to meet USP standards; isn't that correct? Dr. CHERKASKY. Yes. Senator NELSON. The issue you are raising here is that they do not meet those standards with sufficient consistency so that physicians can rely upon them all over the country? Dr. CHERKASKY. Well, I think that that is one of the points, but there is also I think we are dealing partly with fact and partly with fiction, but the fiction in some ways is as disturbing as the fact. We are told that even if it meets USP standards, that does not necessarily mean it has a therapeutic efficiency that it should have. Maybe the granules should be of a different size. As I say, partly in fact and partly in fiction, the whole climate has been created in this country with regard to drugs, primarily generic drugs, and with drugs as well from some of the major houses which makes us feel very uneasy about the use of a drug, depending upon its source of manufacture and so forth, and this to me is an intolerable situation. Senator NELSON. You cite quality, purity, potency. Those are all factors for which USP sets standards. I don't know exactly what you mean by safety. Dr. CHERKASKY. Make sure that it is not contaminated. Senator NELSON. Those are all factors for which the tSP sets standards and, according to the law a drug must meet those standards before it goes onto the market. Now we know from some tests con- ducted by the FDA that around 7 percent of the generic and trade. name drugs in a 4,600 sample test they made did not meet the stand- ards. They were either under, or over potency or deficient in some other ways. But you also claim that even if all drugs meet tSP standards, they may not necessarily be therapeutically equivalent. Dr. Lloyd Miller of tSP testified here that it is his opinion that if drugs met tSP stand- ards, there is no reason to believe or evidence, as I recall, that would show that they are not therapeutically equivalent. Do you have any observations on that? Dr. CHERKASKY. Well, the drug companies, the major drug com- panies, should be authorities; I don't necessarily mean that they are. On the plane coming up, one of my colleagues gave me this handsome red book, which is entitled "Statements on Chemical Equivalence and Therapeutic Efficacy of Generic Drugs," given to us by Warner-Chil- cott Laboratories, and the first item in the first section says: It has been shown by means of several examples- This quotes an article- that neither tSP or NF standards nor FDA regulations assure the therapeutic equivalency of generically Identical phannaeeutieai products. PAGENO="0230" 668 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY Well, if presumably responsible publications or firms make this kind of statement, I think that all of us have to be assured more effectively than we have to date that DSP or FDA or these other standards are, in fact, providing safe, secure, potent drugs. Senator NELSON. Would you suppose that you could rephrase the statement you quoted and substitute a couple of words and come out the same, such as, even though two drugs meet DSP standards, and each of them has a distinguished brand name, they may not be thera- peutically equivalent? Dr. CHER~ASKY. This is apparently true, Senator Nelson, I think, as I said before, part of this is fiction. It is obvious there has been a campaign to throw question upon the efficacy of "generic drugs," and I think this must be laid to rest. Senator NELSON. Of course, you are very well aware of the fact that many of the most distinguished drug manufacturers also make generic drugs. Do you suppose they are suggesting that the generic drugs made by major brand-name companies aren't as reliable as- Dr. CHERKASKY. No. Senator NELSON. Do you assume they are talking about generic drugs made by companies that aren't brand-name houses? Dr. CHERKASKY. As you know, and previous testimony here has shown, that where we have examined the recalls, for example, that the brand-name houses have very serious faults. I believe that last year among some 15 citations, we had such distinguished names as Squibb & Abbott and Charles Pfizer, so that while I am concerned about be- ing secure when we purchase a generic drug from a small company, that it will be what it purports to be, I must tell you that I feel quite insecure at the same time about the performance of some of the major drug companies in this country. Senator NELSON. Did you happen to see the June 2 issue of the Med- ical Letter, volume 9, No. 11, issue 219, which is devoted to tests of prednisone tablets? Dr. CHERKASKY. No; I did not see that, Senator. Senator `NELSON. The interesting thing about that to me was' that they tested 22 prednisone products put out by 22 different companies, and found that they all met DSP standards, and though there were variations, they were within the TJSP- Dr. CHERKASKY. Limits. Senator NELSON. And they state that: There is nothing, however, either in reports of clinical trials or in the expe- rience of Medical Letter consultants to suggest that the variations in formulation are causing any problems in the treatment of patients. Then they go on to say: The great price `spread among tablets purchased from different pharmaceutical companies suggests the desirability of prescribing by generic name and specify- ing at least for patients of limited means that the prescripions are filled with low priced prednisone tablets. In the course of his testimony before this subcommittee, the presi- dent of the Schering Corp., stated that `Meticorten, w'hich sells for $17.90 a 100 to the pharmacist, is better than other prednisone products, and obviously many doctors are convinced that it is better. However, the company has no clinical evidence to support its contention. And the variation in price is so dramatic that it is a matter of great sig- PAGENO="0231" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 669 nificance to the patient. It varies from tablets selling at $17.90 a hun- dred to the pharmacist, to as low as 59 cents a hundred supplied by the Wolins Pharmacal Corp. That is an incredible difference in price, with the Medical Letter saying that there is no clinical evidence to support any conclusion that one is therapeutically more effective than the other. Now, based on this conclusion by the Medical Letter, and the testi- mony by the president of the Schering Corp. that he has no clinical evidence that Meticorten is better, would you have any hesitation in following the recommendations of the Medical Letter in prescribing a lower priced prednisone? Dr. CIIERKASKY. No. As a matter of fact, we `do. We don't buy Schering's Meticorten, and I think that what the president of Scher- ing was saying is a bunch of nonsense. This is part of the prthlem, Senator. I think `that doctors and the public have been intimidated. They have been made fearful by that sort of statement, and as I said earlier, I think someplace along the line we must once and for all deal with this particular problem. I will note further on in my testimony that in many instances we use the generic equivalent, feeling very secure that we are providing for our patients the best possible drug that is available. Senator N1~r4soN. I think the FDA itself, and Dr. Goddard, will be testifying on Thursday, states that chemical and clinical testing ought to he expanded. Would it be your view that one of the problems here is that from the standpoint of a prescribing physician, you don't feel absolutely certain that if the drug is on the market and it meets USP standards that it is therapeutically equivalent, or that enough evidence has been developed to either prove or refute it? Dr. CITERKASKY. I don't think there is any question about that, Senator. I think that where charges have been raised that Meticorten is better than prednisone, there are testing mechanisms available to pharmacologists and physicians that can definitively settle this issue, and I think that when some of these things are dealt with definitively, we are going to have a new climate which is going to enable us to take much better advantage of inexpensive but just as potent `and just as pure drugs in the future. I think this is a medical and an economic consideration of great importance. Senator NELSON. Thank you. Mr. GoRDoN. May I ask one question here? Dr. CHERKASKY. Yes, Mr. Gordon. Mr. GORDON. Isn't it to the economic advantage of the large drug manufacturers to create this climate of fear? Dr. CHERKASKY. I think, like most other groups, they do things which they see to be in their interests, and it is clearly in the interests of the major drug houses who have brand names to make people feel more secure with their brand name than with the chemical equivalent which may be therapeutically equivalent. There is no question about this in my mind. This document which I showed to you before is just that kind of document. 4ny physician reading the various items in this booklet would quiver when he ordered prednisone, or any other generic drug, and this is obviously the objective. Senator NELsoN. Is there any place in that document where they PAGENO="0232" 670 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY take any drug and assert that they have done double-blind clinical testing and proved that different products are not therapeutically equivalent? `Dr. CHERKASKY. I haven~t had the chance to look. I just read the first couple of pages on the way down here, Senator. I haven't had a chance to look through it so I can't answer that question. Senator NELSON. I haven't been able thus far to find any place where the drug companies, who assert that their brand name is better, produce clinical evidence of it. Why do you suppose that is? Dr. CHERKASKY. I would say it would be highly unlikely that they would be willing to undertake that kind of study. I think that sort of, study has to `be undertaken under other auspices for with all due refer- ence `to the great drug companies and the great names `they have made they are self-serving. They have biased interests. I think the kind of testing you are talking about must clearly be done under auspices which are more devoted to the public interest than any proprietary drug company. Senator NELSON. The president of the Schering Co. asserted that the proQf that Meti'co'rten is better is that doctors prescribe it. I said: Well, is your test the test of how many doctors prescribe it as to whether or not it is c1ipiea1i~ better? And he said: Yes. Isaid: If the drug is really therapeutically more effective, wouldn't it be in your interest to contract with aa independent scientific laberatory or contract with a hospital to do double~blind testing? Then when you had the evidence that it was better, you would have the whole market, `because the medical profession wants to `do the `best it can do by its patients. He said that he didn't think that such testing would be worth- while. Dr. CHERKASKY. I think he is right, but not for the reasons that he implies. It is almost like Alice in Wonderland. You know a drug `has a chemical `formula, and persumably if it is produced properly, to `claim that because you put some "magical" different label on it that this then gives it other than some psychological appeal makes no sense. If these claims were true, the `whole fundamental `basis df our chemistry would be in question. Senator NELSON. I know, and you probably reach the same conclu- sion, you did, in fact, make some reference to it earlier, that it is possi- ble that in some of these drugs a different size crystal or something may cause a different therapeutic result. This could be true `whether it is a brand name or generic `name. But what strikes me as strange is why the major brand-name companies which `have items selling in large amounts to the public would assert that their products are better with- out offering any clinical evidence. Can you explain why they don't? Dr. `OHERKASKY. Because I don't think that the testing would vali- `date their statements, and I would say, Senator, I feel like I have `been here before. We were talking about this same thing 5 or 6 years ago. It is time that the Federal Government, which in my view has the prime responsibility for the protection of the health and security of PAGENO="0233" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 671 our people, should see to it that these studies are made, so that we can deal with the innuendo~ which it often is. Senator NELSON. I have some other questions that are more pertinent to your testimony a little later on, so you go ahead. Dr. CHERKASKY. One of the things that I would like to see done, and I am sure that is what we are all here for, is to see drug costs brought down to a reasonable level with reasonable profits for maim- facturer and dispensing pharmacists, not only to curb exaggerated costs, but to deal with new inflationary trends that we are facing in medical care. The costs of medical care are increasing at a faster rate every year, with no letup in sight. I won't go through the figures here, which show how they have outstripped every other item in the consumer index. During 1966, the costs of hospital care have escalated at an almost unbelievable rate of 16.5 percent, as reported by the Department of Health, Education, and Welfare in a recent report to the President on medical care prices. I hesitate to even give you this next sentence, because it frightens me. It now looks as if Montefiore's costs may inCrease ~O percent dur- ing 1967, and I must tell you that in my discussions with other people in the field, it looks like we are not going to be alone in this. In other words, we are going to have a huge incremental increase in medical care costs. Senator N1~LsoN. You say that Montefiore may experience increas- ing costs. When you say "our costs," are you talking about hospi~tals alone? Dr. CHEEXASKY. At Montefiore. Senator NELSON. You are not talking about medical costs or phar- maceuticals. Dr. CHERKASKY. It is all inclusive; the total per them cost of our hospital, the cost of caring for a patient for 1 day, including the phar- maceutical costs, the doctors costs, and everything else, is going to go up 20 percent. Senator NELSON. When people talk about hospital costs, they are talking about the management, the cost of the bed, the medical cost, the physician cost, drug costs, and others. You are talking about the total cost. Dr. CHERKASKY. I am talking about the total per diem cost of the hospital. Now that in some instances includes doctors and in some in- stances does not include doctors. In other words, if a patient comes in as a private patient with his own doctor, the per diem cost would not include this doctor's coverage. Senator NELSON. So that figure is a little difficult to deal with. Dr. CHERKASKr. I think the figure as generally understood, when you use the term per diem cost, includes aU the costs of providing care for the patient except the private doctor's fee. Senator NELSON. Are all of your physicians part of a full-time paid staff? Dr. CHERKASKY. They are a part of our per diem cost, except that these full-time physicians? primary responsibility in the hospital is not with the direct provision of patient care. They provide supervision and teaching, and some patient care. It is really difficult to extract the entire medical component from the per diem cost. When you talk PAGENO="0234" 672 COMPETITIVE PROBLEMS IN THE DRuG INDUSTRY about per diem costs in hospitals which have full-time staffs, you are including some doctoring, but most hospitals in the country do not have full-time staffs. When you talk about the per diem cost, that means exclusive of most doctoring. Unfortunately, it is not simple. Anyway, what is simple is that it is going up a great deal, Senator. Senator N1~soN. Twenty percent in 1 year seems like, an incredible amount. Dr. CHERKASKY. That is over 16.5 percent the previous year, over 12 or 13 percent the previous year. It is a very distressing and frighten- ing escalation and, of course, drugs are only one part of it. We are faced with a serious problem. The Federal Government, with its medicare and medicaid programs which pays these costs, are going to face very serious actuarial prob- lems, no question about it. Senator NELSON. What are the main factors going into the increase in costs? Dr. CHERKASKY. The major factor is personnel. Two-thirds of our costs are personnel. Doctors are in very short supply. Therefore, doc- tors' salaries and other things are going up. Technicians are in short supply. Nurses are in short supply. And, of course, other items, includ- ~ng the item of drugs. At Montefiore in 1962 we filled about 170,000 prescriptions. It cost us $326,000, or 2.7 percent of the total hospital budget. In 1966, we filled 220~00 prescriptions, for $550,000 or 3 percent of our budget. The United Hospital Fund, voluntary nonprofit hospitals in the city of New York, spent more than $12 million in their drug bill so that drugs in hospital and out of hospital represent a very significant and important part of the medical care bill. One of the things that we are concerned with is that one of the items in the report to the President on medical care prices showed that people over 65 spend more than two and a half times other age groups for drugs, and as you know, medicare does not provide drug coverage for these people outside of hospital, and the purchase of drugs for older people can be a very serious and threatening fiscal problem. I remember that back 6 or 7 years ago, 10 percent of the people over 65 were spending more than $200 a year on drugs, and that figure must be much higher today. Senator NELSON. Ten percent of the people over 65? Dr. OHERKASKY. Ten percent over 65 were spending more than $200 a year on drugs. Senator NELSON. What year was that? Dr. CITERKASKY. It was about 1960 or 1961. One of the ways hos- pitals and an increasing number of consumer groups have found effective in helping to reduce drug costs and maintain high quality and standards of care is by use of a formulary system, and we have enclosed a copy of our own formulary.1 According to a Public Health Service study project on the audit of pharmaceutical services in hospitals, published in 1964 by the Amer- ican Society of Hospital Pharmacists, a formulary system is defined, and I presume I had better read this one: method whereby the medical staff of a hospital, working through a pharmacy and therapeutics committee which it appoints, evaluates, appraises, 1 Retained in committee files. PAGENO="0235" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 673 and selects from among the numerous medicinal agents available those that are considered most useful in patient care, together with the pharmaceutical preparations in which they may be administered most effectively. Drugs com- piled in this manner, then, comprise the hospital's formulary. Thus, the hospital formulary is a compilation of pharmaceuticals which reflects the clinical judg- ment of the medical staff. Continuous provision is necessary to maintain an up-to-date formulary. According to this study, over 50 percent of the Nation's hospitals operate under a formulary system, and an additional 25 percent of chief pharmacists would like to operate under such a system. Senator NELSON. When you say 50 percent operate under a form- ulary system, what percent would that 50 percent be of the total beds? Dr. CIIERKASKY. I would presume it would be more than 50 percent of the total beds. This is a presumption, because the large hospitals, almost without exception, have found that a formulary is essential for the protection of the patient, the education of the doctor, and for fiscal reasons. Dr. Charlotte Muller did a study reported in 1966, which again showed that the overwhelming proportion of hospitals in the city of New York, 89 percent, had a formulary. The Governor of the State of New York, seriously concerned about medical care costs in the State, created a commission under the chairmanship of Marion Folsom, the first Secretary of Health, Edu- cation, and Welfare, which became known as the Fólsom Committee or Governor's Committee on Hospital Costs. The report to the Governor stated: The most effective technique for controlling the cost of drugs to hospital patients- Senator NELSON. Excuse me 1 minute. Dr. CHERKASKY. Yes, sir. Senator Javits, how are you, sir? Good to see you. Senator JAVITS. Senator Nelson, while we have a moment's halt, I am sorry that I came a moment late. I have other committee responsi- bilities, and I may not be able to stay all through the hearing. I wish to express my satisfaction at having one of our most distinguished medical leaders, who is personally known to me, as today's primary witness. I have gone through the whole statement, Dr. Cherkasky. I find it most inforn~ative. I know it will be very helpful to us. I express the satisfaction of the Senator from New York to be able to contribute through you so markedly to the deliberations of this subcommittee. Dr. CHERKASKY. Thank you, Senator. Senator NELSON. Thank you, Senator. Dr. CHERKASKY. That is very generous of you. This committee recommended to the Governor: The most effective technique for controlling the cost of drugs to hospital patients and for assuring the highest standards of prescribing is a well-organized and efficiently run hospital drug formulary system. They go on to make two other recommendations: Those hospitals in the State that have pharmacies but do not have effective formulary systems should be required to initiate them. PAGENO="0236" 674 COMPETITIVE PROBLEMS IN THE DRUG INDTJSTRY And then: The State board of social welfare should make payment for the care of public charges to hospitals contingent upon the existence of effective drug formularly systen~ and generic ~reseribing programs in such hospitals. Senator NELSON. Your educated guess a moment ago was that it is probably the smaller hospitals that don't have a formulary system. To respond to the suggestion made by the Governor's Committee of New York, would it be feasible for some of these smaller hospitals who may not have the adequate number of pharmacists or clinical experts to adopt the formulary of another hospital in the State? Dr. OHEBKASKv. I would think that that is really the way that it should be done, and a case in point, Montefiore had been very vigorous in this area, and when we became intimately related to the Albert Einstein College of Medicine, they were very much concerned about the drug problem. They turned to us and said, "We would like to use your formulary for our institutions," and now the formulary which started out as a formulaiy for Montefiore Hospital alone, with 700 beds, is the formulary for over 3,000 beds. We have involved some of the physicians from the other institutions in our pharmacy committee, and thus have been able to serve a sub- stantial part of the Borough of the Bronx. I think it will be necessary and ndvisahle for groups of hospitals to get toget~her and to create joint formularies. Senator NELSON. Is your formulary available to any hospital that would like to use it? Dr. CHERKASKY. Yes; it is. Montefiore Hospital and Medical Center uses a joint formulary de- veloped by a strong and active pharmacy committee. The committee has broad representation from full-time people and participating physicians, and represents all the important specialties in medicine. We also have an adverse drug reaction committee. I guess in the last couple of years one of the things that has come to the forefront are `that drugs are not only therapeutic and `curative but can also produce illnesses, of their own, and this requires a lot more attention than we have heretofore given, `so that we have a very aggressive group follow- ing up drugs and drug reactions to find out why and how. Senator NELSON. Later on in your statement you state that Monte- fibre publishes quarterly information on adverse drug reactions. Dr. CHERKASKY. Right. Senator NELSON. In a bulletin? Dr. CHEREASKY. That is right, `sir. Senator NELSON. Is this information about adverse drug reactions available in any orderly fashion to the rest of the medical profession? Dr. CHERKASKY. I am sure-now I am going to-may I turn my back to you `for a moment and I will find the answer to that question. Senator NELSON. Yes. Dr. CHERKASKY. It is transmitted to the FDA. That was my phar- macist I talked with. Senator NELSON. You may invite him to sit with you, if you would like. Senator JAVIT5. Dr. Cherkasky, if I may, Senator Nelson, while you are interrupted anyhow, may I ask you this question? I gather from your statement that hospitals are not too much the victims of these tre- PAGENO="0237" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 675 mendous price differentials which distinguish the getieric froni the trade name or trademark ethical drug; isn't that a fair statement? Dr. CUERKASKY. I think that that is substantially correct. However, we purchase a great many brand name; and I think that the prices for those are higher than they should be if the entire practices of the drug industry were sound, but other than that reservation, yes,~ Senator. Senator JAVITS. And what is endemic in this situation as it has been gradually demonstrated to us is apparently the unbelievably large advertising and promotion content which even invalidates the idea that the overall profit is necessarily so sky-high as to be shocking~ Yes, they do very well, these drug companies, extremely well, but apparently the built-in promotion and advertising expense is beyond belief. We might just as well eliminate possibilities as a conclusion. Are you aware of any impropriety in the relationship between prescrib- ing doctors and druggists? You know, there was a time in the past where that was quite scandalous. I gather because it hasn't even been referred to, that these are things that happened before, but there is no attribution of any relationship to any propriety practice insofar as these high prices for ethical drugs that are trademarked and trade brands, as a matter of general repute. Dr. CHERKASKY. I think that is correct. I think it was a problem at one time. I think that if it is one, it is not a major one. Senator JAvITS. Exactly. Dr. CHERKA5KY. That particular abuse. Senator JAVIT5. Now, Doctor, I think what we are after is two things. I don't want to characterize the subcommittee which has been led in a very gifted and, I think, a very able way by our chairman, Senator Gaylord Nelson. One, is all of this promotion and advertising necessary to the dis- semination and acceptance by the medical profession of the latest ad- vances? That would be point one. And point two, if it is necessary, assuming it is necessary, is it being done in an extremely wasteful way and at extremely high cost, far more than its economic worth? Dr. CHERKASKY. Well, I would say to you that I think the advertis- ing campaign is destructive. In fact, Senator, it confuses. I think that it is a huge expenditure. I won't make any comment about what the return is on that expenditure because I am not able to do that. I think, however, that one of the serious problems that we must deal with is to bring this whole terribly costly campaign of advertising, which I guess costs upward of three-quarters of a billion dollars a year, under some kind of control. Unfortunately, what has happened, because of the blandishments of our terribly clever advertising people, is that advertising ha~ become a substitute for doctor education, and a very poor one. I think that a large part of this advertising expense clearly makes no contribution to the community, to the doctor, and, as you have indicated, maybe not even to the profits. Senator JAVITS. There is, however, some expense factor which is necessary. In other words, there is some dissemination of information to the doctor, or even to the hospital, perhaps even some advertising to give the public a sense of institutional confidenee, I notice you speak of PAGENO="0238" 676 COMPETITIVE PROBLEMS IN THE DRUG I~T3t1STRY something which we all reaiize, that there is a certain premium cachet of the name of the top drug house on anything, even if it is a generic drug, and I suppose that there is a certain amount of institutional advertising that would go into that, and really, Doctor, just to narrow the problem, aren't we talking about what techniques in law or practice, or both, could `be employed as between this upper and lower bracket, the lowest bracket being what is really necessary to get the information around, some institutional advertising, because they are competing, which is part of our system, and the top bracket of what they are doing now, which you feel has just gotten inflated beyond all reason. Dr. CUERKASKY. I think that I would fully agree with that. I would like to make the point that this `advertising leads us to other unneces- sary expenditures. I don't have the latest data, but in the early 1960's a report was put out that in the United States over 400 "new drugs" were produced by the pharmaceutical industry and advertised, to cap- ture the prescription pad of the doctor. On examination, only 29 of those were really ne~ contributions. The rest of them were gimmicks, new dosages, new combinations that really hadn't much value. It would seem to me that this activity goes hand in hand with the promotion. Huge amounts of money could be saved because that manipulation I referred to is not what I consider research. Senator JAVITS. Now, Dr. Cherkasky, just one other question. If we found a way, therefore, perhaps the Government has to move into the field, of bringing the information to the doctor: `Couldn't the doctor himself put an end to the payment of these tremendously inflated patient costs by the method and nature of his prescription, and isn't that the most effective and the most targeted way in which we can bring about the results of which we speak ~ Use the very competitive system itself, which has produced this, to end it, because if the customer isn't `buying, that is going to be the end of the matter. These drug companies are going to turn to some other methods of distribution, other exploitations, other techniques, and not engage in these inflated practices, which are so costly to the public. Dr. CHERKASKY. I would think that one of the things that we need to do for the express purpose you noted is to provide the doctor with a more rational, unbiased, continuous, critical flow of information about drugs. I feel very sorry for the doctor, because we all attribute great valid- ity to things in print, especially w'hen it is credited to important estab- li'~hments. The doctor is in a state of confusion about drugs, and I would agree with you that if we could develop some more effective method of conveying adequate informa't~on to the physician, and also preparing him in medical `school to more effectively deal with this kind of problem, we would begin to resolve this difficulty. Senator JAVITS. Doctor, the formulary system can be used perhaps on a regional basis by the Public Health Service of the United States. Dr. OHERKASKY. I would agree. We have 550 drugs in our formulary. About 400 of them are so~cal'led ethical drugs. There are literally thou- sands and thousands of drugs available for the physician to purchase. Yet we feel that we can meet 99 or 99.5 percent `of all the needs of our patients with that small number of drugs. I would agree with you if the whole city of New York were to use a formulary like ours, allowing a small number of exceptions, the care would be better, the savings would be huge. PAGENO="0239" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 677 Senator JAVITS. I think you have helped us very much, Doctor, and I am very grateful to you. Thank you, Senator Nelson. Senator NELSON. I would like to continue with the question I raised a few moments ago about the availability of the information accumu- lated by your hospital on adverse drug reactions. As I understand it, you publish a quarterly bulletin, and furnish that information to the FDA. Dr. CHERKASKY. Yes; and we also furnish that bulletin to all of our physicians. Senator NELSON. In what form is this bulletin on adverse reactions? I-low would you characterize the scientific status? In other words, do you have some evaluation as to whether it is a peculiar reaction of a particular patient? Do you include all the clinical information that you gather? Dr. CHERKASKY. Yes, we try to determine whether it is the drug, whether it is the patient, whether it is his particular disease, and so forth. S~nator NELSON. And if you are using a drug and you get an adverse reaction, do you attempt to decide whether it is due to the peculiarities of the particular patient? Dr. CHERKASKY. Or the drug. Senator NELSON. Of course, we are going to have Dr. Goddard here and he can speak better to that perhaps than you, but do you know whether or not any place in the United States centrally collects ad- verse-drug-reaction information, collates it, and makes it available for physicians? Dr. CHERKASKY. I would say to you that the FDA, so far as I know, is the one area that does that, and tries to make that information available. Senator NELSON. Is there some place where a privately practicing physician, without the benefits of a drug formulary committee, can find out very quickly whether there is clinical evidence of adverse re- actions for any drug? I realize that the advertising in the Physicians' Desk Reference and in of1ber places may cite adverse reactions, but is there any place where all of this information is gathered together and evaluated? Does the AMA do it? Dr. CIIERKASKY. Dr. Goddard can address himself to this authori- tatively. It is, however, quite clear that an effective continuous method of informing the doctor about these sorts of things is not yet available, ~tnd should be. It would seem to me that under governmental aegis we would have to make sure that this kind of information is forcefully available to the physician. Senator NELSON. Senator Hatfield. * Senator HATFIELD. Doctor, I would like to just go back to a little bit of the testimony you were giving to Senator Javits a moment ago. Did I understand you to use the word "destructive" in reference to and in identification of, the drug advertising program? There was a de- ;structive factor? Dr. CHERKASKY. In some ways, yes, Senator. That is what I said. Senator HATFIELD. I would like to have you spell that out a little PAGENO="0240" 678 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY bit further to clarify my understanding of your use of the word "destructive." Will you? Dr. CHERKASKY. Well, I think in the sense that it confuses the physician, in the sense that it makes it quite difficult for the physich~n to exercise sound judgment, because of conflicting claims and counter- claims which he has great difficulty sorting out, because, as we know, there has been drug advertising which has overlooked dangers. I remember we talked about this defect in advertising when I testi- fled 5 or 6 years ago, and you would presume that the problem was now resolved. I just came across an ad which had appeared in the American Medical Association Journal for several months, and in Juiie, at the direction of the FDA, the manufacturer sent a letter to all doctors pointing out a whole list of restrictions and concerns and dangers. By allowing this we are tempting the drug companies, because obviously they want to sell their product. The result of this kind of loose advertising has been physical damage, and we have seen created very serious economic problems in the drug field. I think also that the rewards which advertising will produce, in itself leads to haste, to shoddy research. You know they quip about this. They had a whole list of tranquilizers that were coming out and the doctors used to say that you had better use them quickly before they lost their efficacy. We unfortunately know that there have been drugs which have made huge profits for companies which have then turned out to be very, very dangerous drugs. So I would say to you that the present inadeQuately controlled advertising is dangerous-you know, when an ad appears in the Journal of the American Medical Association, it carries with it, you know, all kinds of authority. I know it is not supposed to but it does. Senator HATFIELD. Then, as I understand it, you feel that the average physician is not in a position today to know or to determine the efficacy, the potency, all the other characteristics of certain drugs, aaicl is inevitably led into some of these actions and pathways through advertising? Dr. OHERKASEY. There is no question that that happens more fre- quently than it should. Senator HATPIEW. And then as I understand it, not only did you use the word "destructive," but you also make an economic observation or evaluation about the ratio of the costs of advertising to the benefits received. Would you spell out a little bit more the economics of this as you see it? Dr. OHERKASKY. Well, there are all kinds of figures given. I don't know, maybe Mr. Gordon of the committee has more accurate figures, hut we are told that at least $3,000 a year p.~er doctor is spent by the companies in advertising. Senator HATFIELD. Is this in pi~escriptaon-only drugs or does this include such. things as aspithi, Ooinpoz, Bufferin, Allta-Seltzer? Dr. OBERKASKY. As far as I know, it relates to ethical-drug adver- tising. In fact, the figure that 1 used 6 years ago was $5,000 per phy- sician, so that the new figure we are using is $3,000, and that adds up to about three-quarters of a bilhon dollars. Senator HATFIELD. What would be a reasonable figure do you think, or are you opposed to advertising per se? Dr. CHERKASKY. Well, I would say to you that I-on my list of priorities, advertising of drugs and the amount of their advertising is PAGENO="0241" COMPETITIVE PROBLEMS IN TIlE DRUG INDUSTRY 679 low. Now it may be as Senator Javits pointed out, there may be some reason for very modest advertising. When I say modest, I am talkmg about a 10th of what they are spending. Senator HATFIELD. Are you talking now about the ecoflomics of it or are you talking about the destructive character of it? Dr. CHERKASKY. I am talking about both aspects. First of all, I think it is an expenditure of money which ultimately is paid by taxes or the patient, which is an unnecessary burden. It aTho is damaging to the practice of medicine. It creates confusion. I noted in my statement that a very well known physician in a very well known hospital who didn't get the effect that he expected from the drug then ordered another drug. What he didn't know is that he was ordering the same drug by another name. I understand that there are drugs in the thousands. Where you have drugs in the thousands, and you only need them in the hundreds, you are talking about huge expenditures, as well as confusion for the physician. Senator HATFIELD. Will you address yourself to the economics of ad- vertising, are you opening up a whole field here? Your argument could be applied in the field of advertising tobacco products. Your argument could be used in the advertising for time payment sales, for people who are not economically in a position to commit themselves so deeply, and yet time payment plans are attractively presented to them by advertising. Dr. CHERKASKY. No, I don't think so. Senator HATFIELD. Are you opening up the question of politicians being wrapped up in pretty ribbons and being presented and marketed in the public political arena? Are you opening up the whole question of advertising in its relation to American products, other than those in the drug field only? Dr. CHERKASKY. I would suspect that those extensions could be arranged, but I think that the problem of advertising, mind you, ad- vertising to 250,000 doctor people, because that is all we are talking about, and to some institutions, in a highly professional area is by no means the same as advertising other kinds of products. Senator HATPIELD. No, usually the professional people have more education, perhaps a greater ability to differentiate between fact and fancy than maybe a lot of the general public has as far as being put upon by some shrewd advertising. Dr. CHEREASKY. I wouldn't argue with you on that one, Senator. Senator HATFIELD. I only point up the fact that I think we are talk- ing about- Dr. CIJERKASKY. I am moving a little bit out of my area of compe- tence, as you know. Senator HATFIELD. I think we get into a w~hoie question of advertis- ing and the ratio of costs of advertising to the product field and to its general gross thicome and so forth. These factors, I think, are mean- ingful to us on this committee, but I don't think it would be restricted just to the d;rug industry. I wouldn't point to the dii~ug industry here with an a~cu'sing finger ~i~ihout being ~illin~ to go to the whoie field of adverti~in'g audits relation to the public. Dr. CHERKASKY. Well, I would say to you, Seniator,. that I haven't thought about the areas you touched on very carefully. I think that probably something needs to be done. 81-280-pt. 2-67---i6 PAGENO="0242" 680 COMPETITIVE PROBLEMS IN THE DRTJG INDUSTRY I believe, however, that when you are dealing with drugs, which are really quite a different category from washing machines, and when you are dealing wIth a sharply focused scientific pop'u'1'a~tion, it seems to me th~t we can deal, or should be able to deal, wIth this particular prob- lem, to bring it under more control and make it more rat~ona'1 and more responsible, wIthout necessarily, for e~ainpie, at the Same time saying that we have got to not package politIcians in fancy ribbons. Senator HATFIELD. But I would also point out that the tobacco in- dustry is trying to convince the American public that cancer is de- sirable. Dr. CHERKASKY. Well, I understand that if you spend enough on your advertising budget, you can do that. Senator HATFIELD. They are succeeding, evidently, according to the sales. Senator JAVITS. Senator Hatfield, I think from what you have said and developed with the witness, it might enable us to make a basic point. In the first place, what Dr. Cherkasky is really testifying about is that he feels the advertising budgets are considering their impact on the physician as getting out of hand. Now, what I would like to ask i's this: Perhaps our committee ought to consider very seriously how to restore the competitive situation which seemIngly ha's escalated these costs, according to this witness and other witnesses, and deesoalate these costs by the same application of the competitive system, and that is wl~y I suggest the possibility of our giving thought to the formulary idea. Perhaps if projected on some kind of a regional or national level, we could be setting the standard to which drug companies would be re- quired, would have to repair as a competitive proposition, and that may cause the same competitive situation to deescalate, which has brought about in the judgment of this and other witnesses such an out-of-hand escalation. Senator HATFIELD. I would certainly agree with my colleague from New York. I would only point out that when we do open up this Pan- dora~s b~x ~f trying to e~tthTish a measurement of what is a reason'ab'le ratio of `advertising costs to the general bi~tstiness budget, that the esca- lation that has taken place here is reflected in many other areas of our naitontLi life. If I may just be personal `a moment, I had a budget of $80,000 when I ran for my first statewide office in politics in Oregon in 1956. It cost the immoral sum of $350,000 this last year to run in a State that has only 900,000 registered voters, and so consequently the coSts in this whole field have escalated in advertising not only in the drug industry, I am sure. I am not defending the drug industry, but I am just point- ing it out as not exclusively a characteri~tie of the drug industry. I think it is true in every field. Senator JAVITS. If the Senator will yield further, I would agree thoroughly with the Senator, and also I think the thrust of my own thinking on the question is the fact that we cannot forbid any phy- sician from prescribing any drug he wishes to, including every `one of the thousands that are available. The only thing we can do is to try to capitalize standards equally with those which the drug companies are trying to popularize, which will competitively bring down the height of the pyramid. That is what I had in mind. I didn't have in mind cutting anybody off. I don't think you can do that. PAGENO="0243" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 681 Dr. CHERKASKY. No, and I don't think anybqdy would realJy want to do it. Senator HATFIELD. Thank you, Senator Nelson. Senator NELSON. You cited a few moments ago an acT that was run in the American Medical Association Journal. The FDA required the company to send out a whole series of disclaimers or explanations. I take it that what you are saying is that if you are `advertising to a pro- fessional group who have to make a judgment which affects the health of the public, that there are some different rules that ought to govern that kind of advertising `as `against the advertising `of other products. Dr. CHERKASKY. I think that is true. As an American, I am, of course, interested in all the extensions `that Senator Hatfield raised, and would be delighted at some time to comment `on them, but I do think that here we are dealing with a highly specialized situation, and with a very small and select group-doctors-and this professional group is not really able to make critical judgments about advertising for drugs. You are dealing with complex advertising in pharmacology and really the best doctors can do is to have responsible people advise them. They really are not in the position t'o make these kinds of individual judgments themselves. Their professional knowledge and their critique doesn't extend that far. Senator NELSON. Isn't there also this rather fundamental difference in that the doctor is the patient's purchasing agent, and the patient has no way in the world of knowing whether the doctor is prescribing the best quality product for him? There is a public interest among all the people in this country in being assured that the patient's health is best protected when the purchasmg agent, the `doctor, has the best scientific information available before he prescribes. Dr. CHERKASKY. I think that is exactly correct, Senator. Senator HATFIELD. Doctor, you have returned to a subject that is very dear to my heart, and one as to which I have interrogated pre- vious witnesses. It is your, just stated, comment that doctors are not in a position to make such professional judgments on these various drugs that are advertised. I am wondering, though, where can we- I say "we" collectively here as a part of society, not of this committee- where can we in our educational program or in professional training experience,, fill this particular void? If I understand your statement correctly, eliminating advertising is not going to solve our problem, because if the doctor has read no `advertisements, and still has all of these various manufactured products lined up on the table, he still isn't in any better position, if I understand your statement, to make a judgment than if he had read an ad. So what are we going to do to correct this situation? Advertising and its elimination is not going to correct that. Dr. CHERKASKY. No. What has happened to the physician is that ad- vertising has become synonymous, though it really can't be, with edu- cation. Let me point out to you, for example, about a formulary. Let's say that we were to create a national formulary. Let's say we were to have a formulary which was going to be applied for all drug pro- grams which are supported or paid for by State, local or Federal funds. That formulary in itself is an extraordinarily educational device, PAGENO="0244" 682 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY and a continually updated educational device, because we do have new drugs and new developments. In. other words, I don't think that the only way that we can provide information is through either advertising, or as you have said, just put all the items on the doctor's desk and let this very busy man try to find his way through dozens of drugs. We do have expertise in this society which can make those judg- ments, about drugs and their value., and you can take the 4,000 or 5,000 drugs and you can narrow them down to a reasonable group and provide all the information that the doctor can assimilate and use, no question about it. In other words, it isn't that this job can't be done. It is that no one has really brought together the forces necessary to do this. I suggest later on in my paper that the FDA, along with the medical schools who have the expertise, along with responsible drug people ought to put their heads together to come up with the kind of informational pro- gram which would enable the doctor, to keep abreast of new develop- ments under the best of circumstances, with the expansion of medicine and new techniques and new drugs, we have a tough time keeping the doctor up to date, when this difficulty is compounded by all kinds of items which may produce a profit, but which are not contributory, you make the educational problem that much more difficult. Senator NELSON. The ultimate answer then is the formulary. Dr. CHERKASKY. The formulary and a broad educational program. The education and particularly the continuing education of the physi- cian in this country is inadequate. Unfortunately the drug problem is just one of the features, though an important feature. A program to bring proper information about drugs to physicians, must be extended to keepmg the physician abreast of what goes on elsewhere in medicine, which again is done very poorly. No doctor can wade through all the literature produced. Public funds under the cancer, heart, and stroke program provide a great deal of money for continuing education, and we ought to use the opportunity to extend the education of the physician broadly, which would clearly include an education having to do with medications. Senator NELSON. Is there any other area of medicine in which the continuing education of the doctor is left substantially or in some substantial part in the hands of a private product manuf~cturer? In other words, do the instrument manufacturers tell the doctors how to perform surgery, or js there any other field wherethere is ~o much- Dr. CHERKASKY. I wouldn't make that suggestion. Senator NELSON. Is there any other field where the private manu- facturer of a product is so deeply involved in the continuing educa- tion of the doctor? Dr. CHERKASKY. No. . Senator NELSON. Any other field of medicine? S Dr. CRERKASKY. No. I would.thiuk not. Senator HATFIELD. One last question. Do you have~- Dr. CHEmtASKY. I hope .not a last one,. Senator. Senator HATFIELD. Well, for me. Taking these two phases of the educational life of the doctor, the continuing educational phase and the initial medical school phase, do you see the present curriculum that is followed in general medical schools today as sufficient in pro- PAGENO="0245" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 683 vidin~ the doctor with that initial exposure to this problem and the technique to make a more profound determination of such drug uses? Or do you see a void or inadequacy or what in this respect in present medical school programs? Dr. CHERKASKY. Very inadequate, Senator. I don't think that this is being given anywhere near the attention and consideration that it merits. I am pretty sure the schools don't even know exactly how to do it. I would say to that, one of the things I would like to see done is an examination of how the medical curriculum could more fully encompass and prepare the doctor in the matter of drug advertising. I noted that the Albany Medical College did run a program for a couple of years, in which it tried to prepare the physician to withstand the onslaught of the detail man, and I think that we have to do much more of a job than we are doing now. Senator HATFIELD. What about the graduate area in the field of such a specialty as internal medicine. What do you consider is the adequacy of the curriculum and the teaching and learning experience in that area? Dr. CIIERKASKY. Well, most of that learning, of course, as you know, is the part that takes place during the hospital. Senator HATFIELD. Yes. Dr. CHERKASKY. And here I think that our formulary thing is hav- ing a very good effect. Everything is by generic name, even if purchases of a trade-name drug, and I think we are beginning to have some effect. However, again so that we shouldn't lull ourselves, it is very hard for the doctor2 once he leaves that sheltered environment and becomes busy, not to slip and begin to rely upon the attractive readily available crutches. You have got to do both ends of it. I think we must do much with medical education, and must do much about continuing education. I think also that we must do something about lessening the blandish- ments which seduce them. Senator NELSON. You mentioned that there was an ad run in the AMA Journal, and that after some period of time the FDA intervened. Was it the FDA? Dr. CHERKASKY. The FDA. Senator NELSON. The FDA intervened and required the company to send notices out to the physicians? Dr. CHERKASKY. Yes. Senator NELSON. There were various inaccuracies or improper claims made for the drug, or something to that effect? Dr. CHERKASKY. That is correct, sir. Senator NELSON. Do you have the ad? Dr. CHERKASKY. Someplace in this mess I brought. Mr. GORDoN. Dr. Cherkasky, wasn't this ad run after an article had appeared in the Journal of the American Medical Association? Dr. CHERKASKY. Raised some questions about it? Mr. GORDON. Raised some questions about it. Dr. CHERKASKY. I testified to that effect on a previous occasion. An article appeared in a journal which pointed out serious defects and dangers in a drug, the same journal had been advertising that drug and that advertising continued in the journal for 3 months after a sound scientific article pointed out that there were such hazards that PAGENO="0246" 684 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY this drug should not be used as advertised. Well, that is history. That is some years ago. Mr. GoRDoN. How do you account for that, Doctor? Dr. CHERKASKY. Well, again you are going to get me into. the areas' of speculation. Is that permissible in this kind of hearing? It has been said that the advertising parts of the AMA Journal and the prnfessional part don't-they sort of operate independently. Senator NELSON. Last year the Congress became so concerned about' the safety of citizens on the highway that they passed legislation re- quiring the automobile companies when a defect is discovered in a car, to make public notice of it and to require the dealers to contact all the people who have that automobile in order that the defect may be corrected. Tens of thousands of automobiles were recalled for that purpose. Yet at the same time there is no law apparently that requires the AMA to be sure that the claims made for a very ~rnportanL ii~r~g are accurate, and that as a consequence, claims have been made that aren't accurate1 and ads which fail to enumerate serious side effects have appeared in `the AMA Journal. Doesn't that strike you as a rather ironic circumstance? Dr. CHERKASKY. Well, it does, and more than that, it is a matter of concern that one of the things that we are constantly faced with is post hoc, after the fact. It would seem to me that the circumstances that cause the FDA to require the manufacturer to send out a letter to physicians with a whole series of warnings could as easily have been done before the ad appeared. Ads are in one day and patients are getting it the next day. This is one of the ways that some doctors maintain status, by getting the newest drug the most quickly. In the meantime I will guarantee you people were damaged because this ad ran for a couple of months betore the warning letter came out to the physician. What is the haste'? I could see the reason for haste, for example, if we are talking about a drug that is going to cure cancer or some great new discovery that you don't want to withhold and you want to take the chances. I understand that. But in ordinary circumstances before' a drug can be widely advertised, the advertisement and the evidence' having to do with the drug and its efficacies and its dangers should be reviewed by the FDA, not after the fact. Senator NEI~soN. Go ahead, doctor. Dr. CHERKASKY. We have covered some of the things in my prepared statement so I will just skip. On page 7 I note that Montefiore's formulary covers one-third of the beds in the Bronx and also' that we find it necessary only to go outside of our formulary of 400 ethical drugs about 1 percent of the time. I think that is of considerable significance. In other words, with 400 or 500 drugs, you can really cover just about everything. Mr. GORDON. When a drug is excluded from your formulary would it be fair to conclude that your pharmacy committee has decided that there are better drugs available to treat a particular illness, namely the ones that you put on the formulary? Dr. CHERKASKY. Or `that they are combinations, for example, which are noncontributory. Let me point out something that I think is a little amusing. Th'ere is a drug called Fiornal, which is used for head- ache. The drug was developed at M'ontefiore Hospital. In fact the name PAGENO="0247" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 685 "Fiornal" comes from Montefiore. Our pharmacy committee a year ago reexamined this drug. We had been using 5,000 tablets every 6 weeks,. which is a great deal. They decided that it was a collection of various items where no fur- ther scientific evidence has been deduced that it really was a major con- tr~bution, and we discontinued Fiornal from our formulary. My pride was hurt, but I think that was the righ't thing to do. Mr. GORDON. Now, assuming that there are several thousand dif- ferent drugs on the market, would it also be fair to conclude as a corol- lary that except for the 400 drugs in your formulary, you consider the rest as perhaps duplicative or unnecessary? Dr. CHERKASKY. I would think that with certain reservations the answer would be yes. The reservations would be that there are other parts of the country and there are other climates and areas where there may be other disease entities or problems which might call for drugs which we do not commonly stock, but with a very varied popula- tion, 400 ethical drugs cover 99 percent of our needs, and I would say to you that yes, most of the rest are duplicative, many of them non- contributory. Mr. GORDON. Does the existence of so many unnecessary and dupli- cative drugs make rational drug therapy extremely difficult for the ordinary practicing physician? Dr. CHERKASKY. I would say to you that there probably isn't an ordinary practicing physician, or even an extraordinary one, who' knows what these drugs are for. Mr. GORDON. Is it your opinion that from a public interest point of' view a considerable amount of research man-hours, a very scarce re- source, is being wasted in the development of unnecessary, duplicative or inferior drugs? Dr. CHERKASKY. There is just no question about that. I don't mean to minimize the fact that sometimes even changing a drug so its dosage form would be more desirable is not a contribution, because it some- times is, but again the ability to advertise and to capture a quick mar- ket, seduces the companies as well, and I think it is not constructive to allow talent that we could use to resolve some of our pressing prob- lems~ to be dealing with really noncritical areas of putting things to- gether so they make a neater package and seem like a new drug when' in fact they are not. Mr. GORDON. Would it be fair to say that the large figures of money that the industry says it spends on research exaggerate the benefits accruing to the public? Dr. CHERKASKY. Well, I don't know how they produce their figures, but to the extent that some of that money is spent for manipulative research I don't think it is constructive. Senator HATFIELD. Doctor, let me make an observation first and then pose a question. I have had opportunities since these hearings started' to talk to a goodly number of physicians, and I am convinced that there is a preponderance of practicing physicians today, each of whom is convinced in his own mind that there are certain preferences that he has for brand names, that he likes the freedom to prescribe brand names and not be forced to a purely generic system. Let's assume that we established a national formulary of some kind. Let's assume that we could even restrict and reduce the impact of ad- PAGENO="0248" 686 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY vertising as now carried on. How long do you estimate it would be before the preponderance of physicians would be willing to accept and use such formulary procedure? Or how long would they continue using their present base for prescription? Dr. OHERKAS~Y. Well, of course, you are asking me to make a guess. Senator, I would say to you that if we could attribute to a formulary user status and being a good doctor, it wouldn't take long at all for doctors to accept it. When we instituted the formulary, we cut across many of the drug ordering habits of seyeral thousand doctors, 800 or more at Montefiore, and more than that at Einstein College, and after a bit of adjustment, we have had not more than 1 percent requests outside the formulary. If we could establish that the superior physician was the one who was dealing with drugs by using a formulary, I think you would find doctors flocking to its use. Senator HATFIELD. Plus a new approach in the educationai format. Dr. OHERKASKY. ~7es. Senator HATFIELD. The educational programs. Dr. CHERKASKY. I think you have got to do the whole tIiin~. Senator HArrrELn. What would be the response, do you think, to such a proposal by way of cooperation of the American Medical Association and other medical groups? Dr. CHERKASKY. Well, the American Medical Association has not dealt with this particular problem as constructively as I think that they should. Whether this has to do with the huge advertising revenues is speculation. I have no facts on this. Senator HATFIELD. That would just be restricted to the journal. Dr. CHERKASKY. Yes. It would seem to me that the American Medical Association has exactly the same interest which I express here, and that is to have all the drugs we need, but no more than we need,to have the doctor receive every bit of information about the drugs and their dangers. Organized medicine, if it has any responsibility to the public, cannot be satisfied with the method of education of the physician by drug advertising and detail men, that would be inconceivable. Of course, I would note that the American Medical Association some- times does carry on activities that are inconceivable. Mr. GORDON. Dr. Cherkasky, when a doctor practices in a hospital that has a formulary, doesn't that formulary place a limitation on his prescribing habits? Dr. CHERKASKY. Yes. Well, obviously there is. One of the interesting byproducts has been that because we have a formulary whith covers so many beds, the drug companies are very anxious to get their drugs in that formiilary, and it gives us another competitive tool to' get better prices. We get the drug that we need, hut it becomes very important to the drug company, for they recognize that there are going to be followups on this. The doctors in training having used these drugs in this formu- lary will tend to move in that direction when they got out and practice. Senator NErsoN. No witness before the committee and no member of the committee has suggested a compulsory national formulary. So I don't want anybody to be misled into thinking that the adoption of a compulsory national formulary has been advocated. We have discussed a national compendium, and I would like at a `later time to ask you something about that. PAGENO="0249" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 687 May I interrupt simply to say I have to go to the floor of the Senate. They are going to vote at 12, and there is a bill for which I have to participate in a very brief colloquy. We will recess until 12:40. That will give everybody time for lunch, and we will resume your testimony at that time and hear the next witness after that. (Whereupon the subcommittee recessed at 11:45 a.m. to reconvene at 12:40 p.m. the same day.) AFTERNOON SESSION Senator NELSON. We will resume the hearing. Dr. Cherkasky, I don't remember exactly where you left off in your testimony, but you may resume from wherever it was. STATLMENT OP DR. MARTIN CHERKASKY ET AL.-Resumed Dr. CHERKASKY. If it is all right with you, Senator, I just will paraphrase some of the material so we won't have to go through all these words. Senator NELSON. Fine. Dr. OHERKASKY. I want to talk a little bit about our expenditures in our use of generic drugs. We spent over a half million dollars on drugs in 1966, and despite the fact that we have a commitment to pur- chase generic drugs whenever they are suitable, we spent only $67,000, or 12 percent of our total expenditures on a generic basis. One of the things, however, which is pointed up very excitingly by this fact is that while only 12 percent of our purchasing dollar went for generic drugs, it provided 40 percent of all the medication we used. If anybody wants to talk about the kinds of savings that are inherent in generic drug purchasing, this is a very apt demonstration. Senator NELSON. Have you had any experience in your hospital to demonstrate that this 40 percent of the drugs which are purchased generically are inferior in any way to brand-name drugs that are used in the hospital? Dr. CHERKASKY. Absolutely not, Senator Nelson. We would never compromise with the safety and security of our patients for a fiscal savings. Senator NELSON. Now, when you see that they can be purchased gen- erically, as I understand it, you let competitive bidding? Dr. CHERKASKY. That is right. Senator NELSON. You let all your bids in generic terms, and then all companies can bid whether or not they are producing a generic or a brand name; is that correct? Dr. CHERKASKY. Right. What we do, however, is, we try to be selec- tive about the companies that we allow to bid, trying to reassure our- selves that they produce quality drugs. One of the things that is in- teresting as well is that if we had purchased these $67,000 by the avail- able brand names, it would have cost us $200,000. We have at Monteflore a group practice unit with a variety of pro- grams. One of them is a comprehensive group practice program with the Teamsters and Management Hospitalization Trust Fund. Part of the coverage for this group of 3,500 people is drugs, and we were able, because we had this group, to arrange for them to purchase drugs at PAGENO="0250" 688 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY somewhat less than the going cost, just to take a few of them, mepro- bamate, a generic, we checked with the pharmacies and they gave us this information, that for a walk-in customer they would charge him $1.95 for 30 tablets. Our Teamster patient gets it for $1.45, and we provide it to our OPD patients at the hospital for $1.20. Of course, if we went to buy the brand name, Equinal, it wouM cost $2.75. Reserpine is $1.75 as compared to $4.95 for the Serpasil which is the brand name. However, we give this drug to patients in the out- patient department in Montefiore Hospital for 35 cents:, and that in- dudes, by the way, our handling charges. Senator NELSON. Does the hospital make a profit? Dr. OHERKASKY. No; we try not to make a profit on that. Senator NELSON. But you do cover all your costs? Dr. OHERKASKY. We cover all our costs. We are going to try to work out an arrangement with the union people whereby we will provide the drugs directly from the hospital pharmacy because, as you can see, the savings even on the better price we can get them from the local pharmacies is huge. Tetracycline $1.95 to the walk-in customer, $1.25 for the union from the same pharmacy, and 60 cents at our out- patient department. Senator NELSON. I assume that one of the reasons you can furnish it more cheaply is that you get a better price on your purchase. Dr. `CHERKASKY. Than the pharmacist does. Senator NELSON. Than the retail pharmacist does. Dr. CHERKASKY. That is right; and that is what is brought out, by 4he way, on the next page. We purchase the first drug, dioctyl sodium sulfosuccinate, $156, but the blue book for the same drug, $1,080 for 25,000 tablets, represents a huge difference between the generic name and the cost of the trade name to the neighborhood pharmacy, as opposed to our own cost at the hospital. Senator NELSON. So, as I understand it, you are buying a generic product here and paying $156.25 for 25,000 tablets. That is the cost to the hospital. Dr. CHERKASKY. Cost to us, 25,000 under the brand name will cost the pharmacy $1,080. Senator NELSON. Where does this figure come from? Dr. CHERKASKY. This is the blue book. This is the stated figure. We don't know about the exact arrangement between the pharmacy and the manufacturing company, but this is the stated listed price. Senator NELSON. Is the generic bought from a generic house or is it a generic from- Dr. CHERKASKY. I couldn't tell you about this one, but we buy either from a generic house or from one of the major companies which pro- duces generic. Because we are very uncertain about the quality of the generic drugs, we will not buy from every generic house, and in fact, we carry on a kind of an independent inspection system, which is a very poor way to do it. We don't believe that we have the manpower to do the proper kind of an inspection, but we feel more secure if we go into a plant to make sure that, at least as far as we can see, it has modern equipment and instrumentation, and so forth. And, of course, this really raises what is clearly one of the critical points. The FDA must have the kind of manpower and program to enable me at Montefiore to purchase any drug from any place which is PAGENO="0251" COMPETITIVE PROBLEMS IN THE DRuG INDUSTRY 689 licensed, with security. I shouldn't have to wonder about whether the inspection or quality control is good or whether their labeling is proper. This should be policed in a much more rigorous and effective way than it now is. Now, I cast no reflections on the FDA. 1 don't believe that they have anywhere near the kind of manpower that they need for the kind of job that needs to be done, and I think that that is one of the very im- portant things that has to be pushed. It is interesting. I asked our pharmacist, why don't you use that huge list which the armed services uses. It is called "IResponsible Pro- spective Oontractors," as defined in Armed Services Procurement Regulations, part 9, revision 11. This is on page 11. I s'aid why don't you use the same firm; there are hundreds of them. He pointed out to me that this would not be sufficiently secure be- cause the armed services can order a huge order of a single item with rigid specifications, that the particular drug house might be able to meet, but for small orders at another time and of multiple prepara- tions, we could not be secure that they, in fact, were maintaining the level of control that we think is necessary. Senator NELSON. I wouldn't think that it could necessarily be as- sumed that the quality control of a small company is better if it is handling a large order than if it is handling a small order. Dr. CHERKASKY. No. Senator NELSON. The second point I would like to make is that the Defense Supply does make small orders. I have looked at contracts amounting to no more than $25,000 or $26,- 000, which wouldn't be considered a tremendous contract. So, I wouldn't accept on its face, at least, the argument of your pharmacist that a company can produce a mass of drugs and have good quality control, but cOuldn't produce a small quantity and have good quality control. Dr. CHERKASKY. I would think that you are absolutely correct. I think it really has to do with the matter of our sense of security, Sena- tor. Obviously if they can produce a massive order of good quality, you can produce a drug of good quality, but I think that we ought to be relieved from this sense of insecurity which is fostered all the time. I don't mean to imply that, in fact, they don't produce good drugs, because we do buy substantial amounts of generic drugs from small generic houses which we have assured ourselves are good manufactur- ing concerns. Some of the errors that we talk about in quality control don't apply only to the small houses. In fact, it seems to me, a more serious breach when serious quality control has been found in the major houses, as evidenced by citations last year of Squibb and Abbott for drugs manu- factured without satisfactory controls. When you say this about a corn- pany like Squibb, that is shocking. I would like to read a quote that we took from the report to the President on medical care costs. It states that: Brand name prescribing raises the cost of drugs not only to patients but also to the taxpayer when drug costs are covered by public programs. There is con- siderable sentiment in Congress to require or encourage generic purchasing or prescribing of drugs under all federally financed programs, Before such legisla- tion becomes feasible, however, doubts about the therapeutic equivalence of drugs PAGENO="0252" 690 cOMPETrrIVE PROBLEMS IN THE DRUG INDUSTRY with the same generic name must be erased. A major study should be undertaken of the most frequently prescribed drugs to determine the efficacy of brand-name products and their supposed generic equivalents. And also, Senator Nelson, there is the point that you made earlier about the statement of the president of Schering about Meticorten and prednisone. There is really no evidence that that statement has any validity, and I think that in some official way, that must be imprinted upon the minds of the doctors in this country. Mr. GoimoN. Doctor, how about antibiotics which are batch tested? Dr. CHERKASKY. I would have no question about that. Mr. GORDON. Would you recommend batch testing for all drugs? Dr. CHERKASKY. I am not really technically competent enough to tell you exactly what the process should be, but I am certain that there are technically competent people, our pharmacologists and others who could prescribe a method of testing or control which would provide me with the security that I feel that I require, so that while I can't give you the technical answer to that question, but I don't think it is a. serious technical problem. Senator NELSON. On this question of the careful testing of drugs, bet- ter investigations to determine generic equivalency and so forth, which is an important issue, I notice that in the testimony from the repre- sentatives of the companies and in their advertising they keep referring to generic drugs versus brand-name drugs without making it very clear that as a matter of fact, a large number of brand-name companies make generic drugs. So if you are talking about generic drugs you are talk- ing about generic drugs made by- Dr. OHERKASKY. Everybody. Senator NELSON (continuing). Everybody. Next we take a look at prednisone, for example, in the Medical Letter. For all practical pur- poses many of the 22 drtigs there are generic products. These firms were licensed by Schering to manufacture prednisone. Dr. CHERKASKY. Right. Senator NELSON. Some of them decided to sell to a certain market where it isn't necessary to advertise and establish a brand name, so they don't sell under a brand name. It is prednisone. Some of them decide to go into the retail market and compete and therefore they spend money to popularize their brand name. But all that brand is, I take it, is their generic prednisone with their brand name added; is that not correct? Dr. CHERKASKY. Identical, absolutely, sir. This is what the trouble is. It is really misleading advertising. Senator NELSON. So, the real question here is for the FDA to expand its inspection, chemical testing, quality control, and clinical testing of brand-name drugs made by brand-name companies, generic-name drugs made by brand companies, and generic drugs made by generic companies. We are talking about the whole drug field, and it shouldn't be isolated as though there was something perfect about all drugs made by brand-name companies and something suspect about all drugs made by companies that only make generic drugs; is that not correct ~ Dr. CHERKASKY. Not only is that correct, Senator, but I would say to you that the responsibility with regard to the great drug houses~ is greater because of the confidence we have vested in them. PAGENO="0253" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 691 You know we tend to be a little more concerned about the smaller companies .and tend to take it for granted that when we deal with a "large company," we are secure about the quality controls. We have to recognize that in both the great brand and great pharmaceutical houses and the smaller one, much needs to be done to secure the safety and the potency of the drugs. Senator NELSON. One of the things that concerns me as chairman of the subcommittee is the assumption that is made by so many people in the medical field that if it is a generic drug, especially one produced by a generic house, it is assumed that there is something suspect about its quality. The FDA's own tests of 4,600 drugs demonstrated that, with respect to the brand-name drugs, there was a 1 percentage greater miscalcula- tion either over or under potency than there was with generic drugs. That is a rather bothersome statistic to me when you consider that the assumption is made throughout the profession that somehow gen- erics are suspect, and brand names are accepted when in the only tests available in recent years the generics came out slightly better off on this test of potency than the brand names. Dr. CHERKASKY. Well, I don't think this is accidental. I think that there has been a deliberate attempt, successful, to raise serious question about the generic drugs and the not-so-well-known drug manufac- turers, which has made the doctor and the public insecure and I think what you are in a position to do is to establish the security of the physician and the public with regard to drugs, no matter who makes them. Senator NELSON. Do you think it is feasible and worthwhile for the FDA to commence a program of taking the most frequently prescribed categories of drugs and contracting in one way or another with dis- tinguished hospitals and laboratories to do clinical and chemical test- ing, so that the medical profession, on the basis of these studies, can have confidence in all drugs on the market? Do you think this is a feasible project? Dr. CHERKASKY. I think it is feasible, it is reasonable, and I happen to believe it is long overdue and absolutely essential that it be done, Senator. I think that if we take this one step, we will move quite a way to rationalizing the whole drug situation. In any way I could I would support that kind of activity on the part of the Federal Govern- ment and the FDA. It is essential. Senator NELSON. And do you see it as practical for them? Dr. CHERKASKY. Yes. Senator NELSON. There would `be no problem, for example, for your hospital to participate in that kind of a program of double-blind test- ing in order to come up with clinical evidence? Dr. CHERKASKY. I think you would find that every one of `the very large number of great institutions and medical schools that we have in this country would be willing and clearly able to undertake these kinds of studies and to settle the questions definitively. I would like very much to see that done. Senator NELSON. What page are you on? Dr. CLIERKASKY. Page 13, the story of David Bird in the New York Times on July 24. He is reporting what had happened at the previous ~day. Drugstore owners decided not to comply with the city of New PAGENO="0254" 692 COMPETITIVE PROBLEMS IN THE DRuG INDUSTRY York's orders that generic drugs be substituted for more expensive brand-name drugs in prescriptions for medicaid patients. The city had decided that they were going to ask pharmacists to fill them in this way. The pharmacists refused to do this, and he goes on to say: "If it is effective" this move on the part of the pharmacists, "could at least double the cost of drugs in the medicaid program, which draws on Federal, State, and city funds to pay health costs for the needy." With the huge amounts of money that Federal, State, and local gov- ernments are spending for medical care, hospital care, and doctor's care, which are going to continue to soar, we clearly must do what we can in the drug field and in every field to control these costs as much as possible. I then go on in my prepared statement to note the use of the formu- lary and the pharmacy committee in the education of the doctor, The point that I make is that the hospital really is, in many ways, the best institution to continue the education of the doctor after he leayes his medical school and his residency training. Unfortunately a good many hospitals have no really significant educational programs. Unfortu- nately a goodly number of doctors, particularly in urban areas, do not have hospital appointments. It may startle you, Senator, to know that one-third of all the doctors in New York City have no hospital affiliation. Senator NELSON. On that figure, is it necessary that they all do? It occurs to me-say, opthalmologistsr- Dr. CHERKASKY. I would say to you that we are talking about prac- ticing doctors. No practicing doctor can continue to be a good prac- ticing doctor if he doesn't continue his education, and while it is theoretically possible to continue education in other ways than belong- ing to a hospital, it is not practically possible. I would say that if a doctor who has not been related to a hospital over some period of time after he has left his medical school, it would be quite miraculous if he continued to be a first-class physician. Senator NELSON. Are you saying hospital affiliation? Dr. CHERKASKY. Being a part of the staff of a hospital, working in some hospital, in some capacity. Senator NELSON. Do you mean by that a doctor who has patients who go to a hospital and are treated by them while they are there? Dr. CHERKASKY. Attendance at the hospital is part care of the pa- tient and part educational experience. A doctor who is bu the staff of a hospital, for example, like ours brings his patients in and he treats them there. But he also participates in the educational program of the interns, the residents, the medical students, and his own. When you find that there are one-third of the doctors who haven't got this kind of a relationship with any hospital, and mind you, many of the hospitals don't have much of an educational program, that even that bare minimum is not available to a huge number of doctors in New York City, and I am sure that this is true in many urban areas, and is a very serious problem. This relates itself to the drug situation be- cause if he is part of our hospital, with a formulary, and with a pharmacy committee, and with a drug newsletter, he is exposed to an educational process. Of course this hospital relationship really transcends the matter PAGENO="0255" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 693 of drugs alone. It has to do with the whole problem of continuing edu- cation of the physician. Then I go on to note in my prepared statement that one of the things that needs to be done is that the FDA and the medical schools and teaching hospitals and responsible drug manufacturers ought to get together to take this mass, this huge mass of data and numbers of drugs and bring it down to some kind of manageable level and pro- vide simplified, clear data, and arrange for the doctor to have easy access to proper information. I talk about closed-circuit television, but we must use all kinds of methods. We talked about this earlier, some new method of providing a continual education for the phy- sician with regard to drugs and drug usages. Senator NELSON. How do you suppose that a closed-circuit television system would work in educating the doctor? Dr. CHERKASKY. Well, for example, if we had something like this in the city of New York, and if we get some of the better medical schools and hospitals together, we could run a seminar daily or three times a week, in which we would talk about the drugs, what drugs are out, what drugs are best used. For example, we had a discussion at lunch, we decided that even though we had 400 ethical drugs in our formulary, most doctors only use 25,30, or 35 drugs. It is an illusion to believe that the doctor has at his disposal all those thousands of drugs. He can't make use of them because he doesn't understand how to make use of them. We could, by use of closed-circuit television, have programs from week to week about dif- ferent disease' entities, and then talk about the drugs related to those diseases, which ones are available, and which ones are the sound ones. We must, not only in drug therapy, but in connection with the entire continuing education of the physician, develop some kind of creative mechanisms of communication to keep them abreast. Senator NELSON. You are thinking then that you would have a pro- gram to be given at certain regular time intervals? Dr. CIIERKASKY. Yes. Senator NELSON. During the day, so many days `a week? Dr. CHERKASKY. Right. Senator NELSON. Some announcement of what the subject matter was to be? Dr. CHERKASKY. Right. Senator NELSON. The doctor could set aside some time in his office and get the benefit of this current information on some subject? Dr. CHERKASKY. There are all kinds of educational devices that we could use. For example, the doctor could probably call up at his re- quest information having to do with drugs of certain kinds. I think we have got to think through a body of material and a method of com- munication sounder than what we have now. Senator NELSQN. Doctors and pharmacologists have testified before the committee that there ought to be a national compendium which would have the approval of the FDA and which would list all drugs by generic name and brand name, list the purpose and clinical use of the drug, and list the known side effects so that any doctor could open up the compendium, start with the generic name, and select whatever PAGENO="0256" 694 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY company's product he wished to buy. There would then be an official compendium that was reliable and approved by the FDA which doc- tors all over the country could use. Do you think that this is a useful concept? Dr. OHERKASKY. Absolutely. I think again, it is one of the essential things that we should have done before and that we ought to do now. It is sound in my view. I then wind up my prepared statement with the notation that I talked with Senator Hatfield, that in medical schools we ought to ex- amine how we are preparing the doctor to deal with the problems of drugs and that a lot of thought ought to be given to the body of inf or- mation necessary and how we would get it into the medical curriculum. I would like to sum up that the medical care expenditures as we know, are rising at an accelerated rate. The drug costs are a significant component in this rise. To moderate and control this trend, there must be maximum use of generic prescribing. However, we must be absolutely secure about the potency and safety of every drug by any manufacturer. The model of the hospital formu- lary system must be expanded to include Government-financed pro- grams, and techniques for expansion and improvement of continuing education for physicians must be developed and perfected. Thank you, Senator. Mr. GORDON. On page 16 of your statement you say: Stories are told about doctors in even great teaching institutions who have been so bemused by the confusing array of drugs that, dissatisfied with the effect of one drug upon the patient's condition, they switched to what they thought was another drug-when in fact, they were prescribing the very same drug by some other fetching title. Isn't this one of the consequences of the use of brand names? Dr. OHERKASKY. This is. That couldn't possibly happen with generic names. This actually happened. I won't identify the institution. One of the great institutions in the city of New York, before they developed a formulary, and the doctor, a very good doctor, very well trained, just got caught up by the multi- plicity of different names, and he thought he was prescribing another drug because the names are, you know, so different and so attractive. Mr. GORDON. So the use of trade names or brand names involves certain dangers? Dr. CHERKASKY. It certainly does. Senator NELSON. We have had testimony from other distinguished witnesses on this exact point, confirming what you say at this stage in your testimony. Mr. GoRDoN. Does the use of hospital formularies have any effect on the prescribing habits of a physician in his private practice? Dr. CHERKASKY. We believe that it does. We haven't studied this, and I think that this is one of the things that we ought to take a look at and we will try to do so. It clearly must affect doctors prescribing practices. The doctors who are at Montefiore who spend a considerable part of their time there, who get to learn to use this particular formulary, you would have to expect that this will have a significant effect. They are not very likely to use different drugs outside the hospital. What is more, many of their patients at one time or another go through the hospital, and for those same patients they are almost PAGENO="0257" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 695 certain to continue the same kind of drugs that we have within our formulary. The answer is I think the formulary is a good educational tool that is a useful one and does have meanings beyond the hospital as far as the doctor's practice is concerned. Mr. GORDON. Now, one other question. Is it your opinion that the competition fostered by the use of a formulary accounts for the lower prices to the hospital? Dr. CHERKASKY. I would think that this is very certainly an effect. I think I mentioned it before, that getting into our formulary becomes very important, and I think that has helped us in our dealing with the pharmaceutical houses on price, the fact that we do have a very hmited and restricted formulary. Senator NELSON. Thank you very much, Dr. Cherkasky. You have been very kind to take all this time in your testimony. It will be of great value to the subcommittee. We appreciate your coming today. Dr. CHERKASKY. Thank you for having me come, Senator. (The prepared statement and supplemental information submitted by Dr. Cherkasky follow:) STATEMENT OF DR. MARTIN CJIERKASKY I appear before you today on my own behalf as Director of Montefiore Hospital and Medical Center in New York City and on behalf of the Greater New York Hospital Association. Montefiore Hospital and Medical Center is one of the large teaching hospitals in the city. As of July 1 we had 76 beds rendering treatment in all major clinical areas with the exception of obstetrics. All of our chiefs of service are on full time and are salaried, and we have over 100 other full-time physicians. There are over 800 attending physicians all of whom are board eligible and/or certified in one or several areas of specialization. In 1966, 226,404 days of care were given to almost 12,800 patients. Our operating expenses for 1966, amounted to more than $19 million. As of July 1, 1967, our research program amounted to $6.8 million of which $6.6 million came from the Federal Government. Montefiore Hospital and Medical Center is a primary teaching affiliate hospital for the Albert Einstein College of Medicine in the Bronx of which I am Acting Chairman of the Department of Preventive Medicine and Community Health. Third and fourth year medical students serve clinical clerkships and suhinternsbi:ps, respectively, at Muntefiore as part of their medical school education. As of July 1, we had 69 interns, 248 residents and 20 fellows participating in an active medical education program. We had an affiliation contract, since 1962, with the City of New York for professional services at the Morrisania Municipal Hospital, a 402~bed institution. Our house staff rotates through Morrisania as pert of their program. In addition, over 32,000 persons in the community receive their total medical care on a prepaid basis from the Montefiore Medical Group a group practice unit owned and operated by the hospital and affiliated with the Health Insurance Plan of Greater New York. The Greater New York Hospital Association represents 124 institutions: 81 non~profit voluntary hospitals, 18 non-profit voluntary homes, and 25 municipal institutions for a total of approximately 55,000 beds. This group of hospitals and homes represented by the Greater New York Hospital Association is the largest organized urban group of hospitals in the country. Since my last two testimonies at the Kefauver Drug hearing in 1961 and 1962 in support of S. 1552 and HR. 6245, it appears to me that we are still faced with substantially the same problems. While the FDA under Dr. Goddard has become a much more effective instrument, there are still grave defects in the ethical drugs field. I think it is only fair for me to tell you what I, as a physician, as a hospital administrator, and as one deeply concerned with the overall problem of medical care would like to see happen in the field of prescription drugs. First of all whatever regulation we institute must encourage the kind of sound research 81-280-pt. 2-07-----17 PAGENO="0258" 696 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY and development peeded to devise the cures for the many serious disease problems which plague u,s. I would like to feel secure for our hospitals and all of our doctors that when a drug is ordered, it will be of the quality, purity, potency and safety that it is purported to be. I would like to see drug costs brought down to a reasonable level with reasonable profits for the manufacturer and dispensing pharmacist_not only to curb exaggerated costs,. but to prepare for tomorrow when new developments and inflationary tremls will make all drug and medical care costs go up. The costs of medical care are increasing at a faster rate every year, with no let-up in sight. We are currently spending about 6 percent of the G.N.P. for health care and 1906's health expenditures amounted to $43 billion, compared to $3.6 billion in 1928. The percent increase in Medical Care in the Consumer Price Index, from 1947-49 to 1901 was greater than that for any other major group in the Index; a 61 percent increase for medical care compared to 48 percent for transportation, 10 percent for clothing and 21 percent for food. The various components of medical care have been increasing, however, at different rates. Between 1940 and 1902 there has been an over 250 percent increase in hospital cost per patient day. During 1966, the costs of hospital care have escalated at an almost unbelievable rate of 16.5 percent as reported by the Department of Health, Education, and Welfare, in a recent report to the President on Medical Care Prices. It looks now as if our costs at Montefiore may increase almost 20 percent during 1967. All elements of medical care cost must be carefully scrutinized. Drugs represent an important part of hospital costs and a major item in medical care expenditures. At Montefiore Hospital, where in 1962 our pharmacy filled 169,492 prescriptions (inpatient and out- patient), accounting for drug expenditure of $326,610 or 2.7 percent of the total hospital budget, in 166 we filled 220,111 prescriptions, accounting for $550,000 for drug expenditures or 3 percent of our budget. According to the United Hospital Fund, reporting on Voluntary Non~Profit Hospitals in the city, in 1965, $12,140,710 was spent by member hospitals on pharmaceuticals. According to the recent H.E.W. Report to the President on Medical Care Prices, persons aged 65 and over spend 21/2 times as much as do other age groups; and it is important to remember that Medicare does not provide coverage of prescription drugs except in the hospitals. One of the ways hospitals and an increasing number of consumer groups have found effective in helping to reduce drug costs and maintain high quality and standards of care is by use of a Formulary System such as that at Montefiore Hospital and Medical Center (Exhibit #1). According to a PHS study project on the Audit of Pharmaceutical Services in Hospitals (published in 1964 by the American Society of Hospital Pharmacists, Mirror to Hospital Pharmacy) a Formulary System is defined as a: "method whereby the medical staff of a hospital, working through a Pharmacy and Therapeutics Committee which it appoints, evaluates, ap- praises, and selects from among the numerous medicinal agents available those that are considered most useful in patient care, together with the pharmaceutical preparations in which they may be administered most ef- fectively. Drugs compiled in this manner, then, comprise the hospital's formulary. Thus, the hospital formulary is a compilation of pharmaceuticals which reflects the clinical judgment of the medical staff. Continuous provi- sion is necessary to maintain an up-to-date formulary." According to this study, over 50 percent of the nation's hospitals operate under a formulary system and an additional 25 percent of chief pharmacists would like to operate under such a system. Thus, three out of four hospitals either now employ the formulary system, or would like to employ it. These figures are probably higher today, in that this study was conducted before the availability of the American Hospital Forniulary Service in 1958. In addition, about three out of four hospitals with pharmacists have a pharmacy committee. From a study conducted by Dr. Charlotte Muller as reported in the January 16, 1966 issue of Hospitals, pages 97-102: "A questionaire was sent to all short-term general hospitals in New York City with 104 of the 117 responding, accounting for 89 percent of the general hospitals and 96 percent of the short-term beds in the City. Of the respond- ing hospitals 89 percent had a formulary, 7 percent were developing one PAGENO="0259" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 697 rmd 4 percent had no formulary at all. In three-quarters of the hospitals, the formulary was developed by a committee usually a standing committee of the medical staff." The report of the Governor's Committee on Hospitals Costs (New York State) it~fi5, to which I was a consultant, stated that: "The most effective technique for controlling the cost of drugs to hospital patients and for assuring the highest standards of prescribing is a well- organized and afficiently run hospital drug formulary system." The Committee necommended that: (f) "Those hospitals in the State that have pharmacies but do not have effective formulary systems should be required to initiate them." (g) "The State Board of Social Welfare should make payment for the care of public charges to bosiptals contingent upon the existence of ef- fective drug formulary systems and generic prescribing programs in such hospitals." un addition, the ~Folsom) Report stated that: "The use of formularies and generic dispensing among hospitals in New York is widespread. Among 240 hospitals responding to a survey made by the State Hospital Association on behalf of the Governor's Committee all but 11 had pharmacy committees, all but 24 bad established formularies and all but 69 used generic dispensing of drugs. It now needs to be made universal." ll~Lontefiore Hospital and Medical Center utilizes a joint formulary developed by a strong and active pharmacy committee. This committee is composed of sevisral full-time chiefs of service, full-time attending physicians, our chief pharmacist and a representative from administration. Clinical services repre- .sented on this committee include anesthesiology, cardiology, dermatology, gastro- intesttaal medicine, neoplastic medicine, obstetrics and gynecology, pediatrics, and psychiatry. The committee makes all decisions with respect to additiona and/or deletions to the formulary. All requests for new drugs and those not in the formulary are carefully screened for approval by the appropriate chief of service and the committee. The committee meets on a formal basis once a month. In addition, the adverse drug reaction committee is a subcommittee of the pharmacy committee and meets every two weeks. All adverse drug reactions are reported and followed up. If necessary, intensive studies are conducted to deter- mine the cause of the action if it is not immediately determinable. The Montefiore Formulary is a joint formulary, utilized by. five hospitals in the Bronx, with 3440 beds, representing close to 90 percent of the municipal hos- pital beds and almost one-third of all the beds In the Bronx. There are many ad- vantages to such a formulary. The physician is not burdened by having to make a decision among hundreds of available competitive drugs, rational drug therapy is insured and costs are reduced. With about 400 ethical drugs in our formulary, the use of drugs in the hospital outside the formulary represents only about 1 percent of total usage. All drugs are listed generically. Brand names are also listed but that is all that is given. A cross-reference to the appropriate generic equivalent contains the additional information: drug category, available dosage forms, and so forth. That drugs are listed generically encourages our physicians to prescribe in that manner. When physicians, however, prescribe for a brand-name drug, there is an understanding that the pharmacy may substitute the equivalent generic drug if it is available. We will not make any substitutions unless we are sure that both drugs are therapeutically equivalent. All generic drugs that we stock in our pharmacy are therapeutically equivalent to brand-name drugs. We are assured of this via our active pharmacy committee composed of experts In clinical medicine and pharmacology. In summary, .then the use of the formulary assure~ us of quality, serves as an educational device and saves us money. The formulary contains about 550 drugs of which about 400 are the so-called "ethical drugs." We spent $550,000 for drugs at Montefiore Hospital during 1966, despite a commitment to the purchase of generic drugs' whenever they are suitable and whenever we are secure about `the standard of preparation. Only $67,000, about 12 percent of our total expenditure, were on a generic basis. Let me note however a point which dramatically points up the financial meaning in generic drug pur- chasing. This 12 percent of our total purchasing for drugs provided 40 percent of all the medication we made available to our patients. When drugs have reached the stage where they can be purchased generically, we usually find that the cost PAGENO="0260" 698 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY of the same drug under its brand name has also dropped. Despite that, the ~67,000 worth of drugs purchased generically would have cost approximately ~200,000 under its brand or `trade name. Even purchasing under the trade name can produce extraordinary variations. One of the effects of having a formulary particularly a formulary which is tightly observed and which covers the large number of beds I noted as covered by the Mo'ntefiore Formulary, is that the drug companies are very anxious to have their drug included among the only 400 we make available through our formu- lary-and therefore give us better prices. In addition, mass purchasing such as is done by the city of New York can produce tremendous savings in brand-name drugs. A prime `area of concern must be the man who needs to fill a prescription for himself or his family. It Is clear that the drug costs for individuals depend upon the auspices under which these drugs are purchased. We presently have underway a pilot program in group practice with 1,000 families representing 3,~00 people of the Teamster Joint Council Number 16 and Management Hospitalization Trust Fund. This program is the most comprehensive program of group practice ever put together in this country, to my knowledge. It includes complete cover- age for all drugs. We have arranged this so that the doctor in the group can issue any prescription he wishes and it is filled by certain local pharmacies. I have here listed a comparison of a few drugs comparing what the walk In customer pays at the retail pharmacy; what `the member of this comprehensive group practice unit, designated TCP pays; and what we charge at the Montefiore Hospitals pharmacy for the oaitpatients we care for-for the same drug. PRICES CHARGED TO REGULAR RETAIL WALK-IN CUSTOMERS AND MONTEFIORE OPD Walk-in cu~tomer TCP in retail Montefiore OPD at retail pharmacy Meprobamate, 400 mg., No. 30 (generic) Equanil (or Miltown), 400 mg., No. 30 (brand) Reser~ine, 025 mg., No. 100 (generic) - - - Serpasil, 0.25 mg., No. 100 (brand) Tetracycline,250 mg., No. 12 Dilantin, 100 mg., No. 100 $1. 95 2. 75 1. 75 4. 95 1.95 2.25 $1. 45 2. 25 1.25 2.00 `$1. 20 - 35 .60 .75 1 0.04 tablet. We are all familiar with the enormous savings available in the purchase of generic names as opposed to brand names. I will just give a few examples: COMPARISON: TRADE NAME/GENERIC COST Cost to hospital Cost to Generic name Trade name Unit community Generic Trade pharmacy Dioctyl sod. sulfosucc., 100 mg. (capsules) Colace 25, 000 $156. 25 $1, 080. 00 Reserpine 0.25 mg. (tablets) Serpasil 1,000 3. 50 $33. 58 39. 50 Theophylline compound (tablets) Tedral 25, 000 67. 50 600. 00 One of the obstacles to the purchasing of generic drugs rather than trade name drugs at every opportunity has do with the questions which have been frequently raised about the quality of generic drug manufacture as opposed to the quality of manufacture by the great drug houses. Recent publications have indicated that there are approximately the same number of drugs recalled from both sets of manufacturers. I must however note that most physicians and I suspect most lay people feel more secure with a drug either generic or trade name which has been produced by a great manufacturing company such as Merck, Squibb or one of the other large producers. This is for two reasons: (1) There is a widespread view that huge organizations have a greater capacity for maintaining quality control and a corollary concern that (2) despite the great improvement of the FDA under Dr. Goddard, there is insufficient control of drug manufacturing and labelling in smaller, less well-known companies. In our own institution where we purchase from local manufacturers of generic drugs we have instituted our own inspection system. We use the form attached as Exhibit No. 2. We do not feel secure with it. When I raised with my pharma- PAGENO="0261" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 699 (1St the question: Why can't we use the list of "`Responsible prospective con- tractors' with respect to drugs and medical supplies as defined in the Armed Services Procurement Regulations, Part 9, June 1965, Rev. 11"-saying, what's good enough for the armed forces with their high standards should certainly be good enuogh for us, my pharmacist demurred noting that the armed forces could come along with a huge order and rigid specifications and while the generic house would be capable of producing this large quantity of drug with these standards, it did not necessarily follow that small orders of a variety of drugs would be provided of an equaly high standard. It is quite clear that in view of the increasing amounts of public and private funds expended for drugs, we must pursue to the limit the huge savings possible in the use of generic drugs. To do this, however, there must be an absolute security that every drug produced by every drug manufacturer, large or small, generic or trade name, must have met a high set of standards, fully policed by an FDA with the kinds of manpower and resources it would take to do this job. It seems strange indeed to me that I can walk into any supermarket or grocery store and pick up a can of food without the slightest thought crossing my mind "is it safe?". The same kind of security both for health and economic reasons must be extended to every nook and cranny of the drug industry. I am enclosing as Exhibit No. 2 the inspection reports which we use at Montefiore Hospital. The need to be asured about the safety of generic drugs is sharply pointed up by the following: "The HEW report to the President on Medical Care Costs states: Brand names prescribing raises the cost of drugs not only to patients but also to the taxpayer when drug costs are covered by public programs. There is considerable sentiment in Congress to require or encourage generic pur- chasing or prescribing of drugs under all Federally financed programs. Before such legislation becomes feasible, however, doubts about the thera- peutic equivalance of drugs with the same generic name must be erased. A major study should be undertaken of the nmst frequently prescribed drugs to determine the efficacy of brand-name products and their supposed generic equivalents". That there is a need for the Federal Government to mandate the use of generic drugs wherever possible is highlighted by a news story by David Bird in the July 24, 11967 issue of the New York Times: "Drugstore owners decided at a stormy meeting yesterday not to comply with the city's orders that generic drugs be substituted for more expensive brand-name drugs In prescriptions for medicaid patients. "If it is effective, the move could at least double the cost of drugs in the Medicaid program, which draws on Federal, state and city funds to pay health costs for the needy". Since we are here because we are interested in the health of the American people and theretfore we are interested in making sound drugs available at fair costs, we must consider the continuing education of the physician as it relates to drugs. Much of the physician education about drugs comes through the drug industry which currently spends about $3,000 per doctor per year in advertising to the medical profession. I am afraid I have misused the word education for that term could hardly be applied to much of the journal advertising, the mass of mail, and the blandishments of the detail men who bombard the busy doctor. It is unreasonable to expect the doctor to be able to discriminate between the valuable and the specious. All of us are impressed by things in print, particularly in living color. The problem relates to the continuing education of the physician at a time of rapid change in medicine and medical therapeutics. Advertising and detail men by definition are biased and yet for many doctors they represent one of the major organized and readily available sources of drug information. How many physicians have the time to read and evaluate the myriad of articles- some good and some poor-about new drugs. The carefully tailored drug com- pany releases help him. But can we allow this critical area of physician educa- tion to be monopolized by the self-service interests represented by the drug companies. In hospitals such as ours the doctor not only cares for his patients, but is involved in an extensive educational program with medical rounds, conferences, teaching of interns, residents and medical students. In this educational process PAGENO="0262" 700 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY the pharmacy committee and its formulary as well as a pharmacy bulletin (Exhibit No. 3) and our adverse drug committee all combine to equip the physician to make better use of drugs, old and new. It enables hhn to stay abreast of the most recent advances and modalities of treatment including effective and rational drug therapy. In view of this, I cannot stress enough the importance of every physician having a hospital appointment. This is `a necessity; the hospital is, and will continue to be, the focal point for medical care and the physician without hospital privileges Is going to be lost, and the hospital without an edu- cational program is falling both the doctor and the community. In New York City alone there are about 6,500 physicians, more than 1/3 of the 17,000 practicing physicians in the city, without hospital privileges~-this represents a menace to the community's health. As I noted above, a pharmacy committee has important meaning for doctor education. It is also responsible for maintenance of an up-to-date formulary on drug therapy, periodic examination of drugs, regular review of new innovations in drugs, therapy, and review of requests for additions and/or deletions to the formulary to prevent unnecessary duplication of the same basic drug or its combinations and review of adverse drug reactions. These advisory and educa- tional functions do represent some of the major areas of concern for the pharmacy committee. In addition to these functions and the adverse drug reaction committee, (a subcommittee of the pharmacy committee) we are constantly evaluating drugs being used. Currently, a special committee is studying all of our antibiotics and will come up with recommendations relating to additions, deletions, new dosage, forms, and so forth. This type of activity insures us that we are using the best drug therapy possible. Our physicians are also kept abreast of recent developments via our pharmacy bulletin (Exhibit No. 3). This Is issued quarterly and contains information on drug therapy, drugs, adverse drug reactions, additions and deletions to the formulary, pharmacy committee notes, and investigational drugs. While the hospital is or can be a major educational force for the physician, it is quite clear that this alone will not provide all the physicians in our country with the kind of secure drug information that they require. Under the cancer, heart disease and stroke programs we will have an opportunity among other things to provide community-wide educational programs. There should be no limit on the imagination and creativity*exercised to help keep the doctor abreast of all that goes on in medicine and pharmacology. We will probably have to arrange that every doctor In his office will have access to closed-circuit television which will be utilized by the m~dica1 schools and teaching hospitals in coopera- tion with the FDA and responsible drug manufacturers to bring him factual, reasonably simplified, data which will clear away the confusion. Stories are told about doctors in even great teaching institutions who have been so bemused by the confusing array of drugs that, dissatisfied with the effect of one drug upon the patient's condition, they switched to what they thought was another drug- when in fact they were prescribing the very same drug by some other fetching title. Medical education is undergoing and requires a thorough re-examination for many reasons. I would hope that in the restructuring of the new curriculum, recognition would be given to this dilemma the practicing physician faces with respect to drugs and arm the prospective doctor with more knowledge and infor- mation to deal with this. The Department of Pharmacology of Albany Medical College developed a drug advertising evaluation project which helped the stu- dents to learn how to cope with pharmaceutical advertising pressures, the detail men, and other such forces. To sum up, the medical care expenditures are rising at an accelerated rate. Drug costs are a significant component in this rise. To moderate and control this trend, there must be maximum use of generic prescribing; we must be absolutely secure about the potency and safety of every drug by any manufacturer; the model of the hospital formulary system must be expanded to include Govern- ment financed programs, and techniques for expansion and improvement of con- tinuing education for physicians must be developed and perfected. PAGENO="0263" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 701 EXHIBIT 21 M0NTEFIORE HOSPITAL & MEDICAL CENTER Inspection report of the Name of company Date Inspector I. General Information: A. Name of company: B.Address: (Street) (City) (Zone) (State) C. Type of ownership: P. Name of owner(s): - E. Location of plant: 1. Part of city: 2. Appearance of äurrounding neighborhood: F. Brief description of plant: 1. Number of buildings: 2. Approximate size: 3. General appearance of buildings: 4. If located within another building, describe briefly: G. List name and title of person interviewed: II. Information of physical plant: A. Floor: 1. General appearance: 2. Maintenance (Wet-pickup, waxed, etc.) 3. Use of disinfeetants: B. Walls: 1. General appearance: 2. Maintenance: (with or without disinfectant:) C. Ceiling: 1.Height: 2. General appearance: D. Lighting: 1. Type: 2. Adequacy: E. Ventilation (Number of windows and size, fans, air conditioning): F. Over-all maintenance: 1. Dust control system: 2. Dust (On top of cabinets, around radiators, etc.): 3. General appearance: 4. Is there `a planned program of vermin control? (Yes___No___) If so, elaborate briefly G. List name and title of person interviewed: 1 Exhibit 1, Montefiore Hospital and Medical Center Formulary System, has been retained In committee files. PAGENO="0264" 702 COMPETITIVE PROBLEMS IN THE DRIJG INDUSTRY III. Information on personnel facilities: A. Type of clothing: B. Is clothing supplied by company? C. Where applicable, are personnel supplied with safety glasses, safety shoes, masks, etc.? D. Are washing and lavatory facilities adequate and conveniently located? E. Are separate eating facilities provided? F. List name and title of person interviewed: IV. Commercial information: A. Products manufactured: 1. List representative items by trade and official names : 2. Attach price list, catalog, samples, circulars, literature, etc. 3. Does company repackage items under its own label? a. If so, what is the percentage in respect to total output? b. Name representative sources of such items : c. Are these items routed through Control prior to and after repackaging? 4. Are items packaged to be sold under another company's name? a. If so, what is the percentage in respect to total output? .B. Sales: 1. Does company have a sales force? (List approximate no.) 2. Does company sell mainly to (I) Wholesalers? (2) Physicians (3) Direct Pharmacy Accounts? 3. Professional relations: a. Who receives and handles complaints concerning quality of products? How often? 4. Return goods: a. Is there a definite policy concerning return goods ?____ If yes, attach copy of statement. b. Are return goods: (1) Reprocessed?~~_~_~ (2) Repacked? (3) Discarded?______ 5. List name and title of person interviewed : V. Professional information: A. Raw materials: 1. List major sources from which company receives these :____ Yes No 2. Does company have procurement specifica- tions at least equal to official (U.S.P. and N.F.) requirements? 3. Are raw materials pretested before use? 4. Are materials quarantined before release? 5. Are control samples of raw materials retained? How long? 6. Are facilities available for reprocessing of raw materials? 7. Are specific identification markings used? 8. Are materials stored properly? (Containers, Temperature) 9. Are adequate records kept? PAGENO="0265" COMPETITIVE PROBLEMS IN THE DRIJG INDUSTRY 703 \. I professional information-Continued B. Manufacturing pTant: 1. Equipment: a. Type and make of equipment (Tablet machines, homogenizers, etc.) Yes No (1) Properly located? (2) Adequate for required operations? (3) Constructed to facilitate cleaning? (4) Properly maintained? 2. Personnel: a. List number of employees : b. Percentage of Professional Employees : c. List name, education and experience of the head o~ the manufacturing operation : d. List qualifications of all other professional employees in the manufacturing operation: (i.e., B.Sc. Phar- macy, B.Sc. Chemistry, etc.) (Use back of page, if necessary) 3. Are manufacturing operations controlled by: (Determine by following a specific item during manufacturing) Yes No a. Use of suitable batch numbering system b. Preparation of formula or batch records c. Checking of ingredients (Identity, weight, measure) d. Maintaining identity during processing e. Checking yield against theory f. Checking quality during processing g. Adequate sampling and testing h. Compliance with specifications i. Maintaining of appropriate records and samples C. Packaging operations: (Determine by following a specific item during packaging) 1. Does company use only new containers? 2. Are packaging and finishing procedures con- trolled by establishment of specifications 3. A formal procedure providing for the inspec- tion and issue of packaging materials includ- ing labels and labeling 4. Provisions for proper disposition of unused labels 5. Use of suita~ble batch, lot, or control numbers 6. Maintaining identity before and during packaging 7. Checking yield against theory 8. Sampling and checking 9. Provision for release by quality control 10. Maintaining of adequate records and samples (a) List name and title of person interviewed PAGENO="0266" 704 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY V. Professional information-Continued D. Control laboratory: (Determine by checking on a specific product supplied by the hos- pital Pha'rm~cist) Yes No 1. Does the company utilize outside control facilities? 2. Does company have a quality control labora- tory a. List number of employees b. Percentage of professional employees: c. List name, education, and experience of head of the Control Laboratory: d. List qualifications of all other professional employees (i.e. B.Sc. Pharmacy, B.'Sc. Chemistry, etc.) (Use back of page if necessary) 3. Does the *control laboratory receive or collect samples and regulate the release of materials from: Yes No a. Receiving Department (Raw Mate- rials) `b. Manufacturing Department In-Process. goods Finished Preparations 4. Does the control laboratory have the final authority to reject ite~ns which do not comply with specifications? If so, are these items a. Reprocessed? (By authority of__..._~_) b. Repacked? (By authority of ) c. Discarded? (By authority of ) 5. Are stability data on finished items awaiting shipment periodically collected and reviewed by the control laboratory? 6. If tests are performed by an outside laboratory, does the company have a policy to' spotcheck tests?' - 7. If analytical control is performed by company itself; does the head of control laboratory check his use `of "Dummy" products? - 8. List name and title of person interviewed: VI. Inspector's Comments: A. Do inspector's recommend this company as a supplier of com- petitive Pharmaceutical products for use by J.M.C.H. Yes No, B. In the inspector's opinion, is a return visit indicated? Yes No [SIGNATURE] (Name) (Title) (Date) EXHIBIT 3 [From the Montefiore Hospital and Medical Center Pharmacy Bulletin, vol. ~, April 1967] INVESTIGATIONAL DRUGS Investigational drugs at Montetfiore Hospital can be divided into two groups. The first group consists of drugs which are approved by the Food and Drng Administration (FDA) for the use intended by the investigator and which are on the market but which are not in the hospital formulary. Before using such a drug, it is only necessary to complete the Request and Approval for Investi- PAGENO="0267" COMPETITIVE ~P1IOELEMS IN ~iMltJ~ bU~t~Y 7O~~ gational Drug, F.D.A. Approved, Form P11-1210, obtainable in the pharmacy, have it sigped by the Chief of the Division to which the investigator belongs a ad to forward the form to the pharmacy. The pharmacy will then acquire the drug and notify the investigator if and when it is available. The second group of drugs consists of compounds which are either not approved by the FDA for marketing and general use, or which are approved by the FDA, hut not for the purpose for which the investigator intends to use it. To obtain permission for the use of such a drug it is necessary to complete the Request and Approval for Investigational Drug, Non-F.D.A. Approved, Form P11-1228, which is also obtainable from the pharmacy. This form first has to be signed by the investigator and then by the Chief o~ the Division to which the investi- gatoir belongs. The properly completed and signed Form P11-1228 must be then forwarded to the Chairman of the Research Drug Subcommittee. The application should be accompanied with as much inforipative material, in the form of reprints or information supplied by the sponsoring drug company, as possible. The completed applications are promptly reviewed by the Research Drug Subcommittee and if the use of the drug is approved, then the investigator is notified by the Office of the Director that he can proceed with the use of the drug. (In the past, in the vast majority of instances, applications have been approved by this committee.) It should be emphasized that only those drugs can be employed for experi- mental use for which proper application has been made by the sponsoring drug company or agency with the FDA. In the case of drugs that have been synthesized in a research laboratory and not by a drug company, the individual who synthesized the compound can also be the sponsor. (Norii.-Additions or deletions to the Hospital Formulary will be found on the last few pages of the Bulletin. Please cut out and insert the pages In the front of your formulary.) Under no circumstances may a drug which has not been approved by the FDA for experimental use or by the ~esearcb Drug Subcommittee be employed for investigational purposes at Montefiore Hospital & Medical Center. FBANCIS F, FOLDES, M.D., Chairman, Research Drug Subcommittee. The procedure also requires that consent be obtained from a patient or his representative. Consent forms are available from the Pharmacy. They should be made out in duplicate, the original should be placed with the patient's chart and the duplicate serving as the physician's copy for his personal records. If for some reason the physician feels ihat it i~ not feasible to obtain consent or, in his professional judgement, contrary to the best iiiterest of these patients, a formal statement (using. Form OD--1158, available in the pharmacy) must be submitted to the Chairman of the Research Drug Subcommittee stating the reason for this decision. The procedure concerning patient consent is required by the Food and Drug Administration. This procedure should be adhered to for it protects the phy- sician and the hospital as well as the patient if a question of liability arises. The Pharmacy Department is responsible for packaging, labeling and dis- tributing the drug in accordance with the requirements arranged with the investigator and only to other authorized physicians. We are happy to assist physicians with details involved in double blind studies and in many cases maintain the codes for these studies. Since the pharmacy is now open 24 hours a day, it is valuable to have this information in a central location should an emergency arise. We will, of course, maintain records of the distribution of the drug for the investigator, and provide the nurses with basic information concerning the drug since such information is not available in any of the general reference books. The Research Drug Subcommittee will allow an investigator to maintain his own supply of a drug only in special cases provided that it has assurance that adequate controls will be maintained. We would like to discourage physicians from this practice, if for no other reason than that the pharmacy will invariably receive a call from a nursing unit requesting an additional srt~pply of a research drug which is not available in the pharmacy and the physician cannot be located. In many instances the course of therapy is then interrupted. PAGENO="0268" 706 COMPETITIVE PRDBLEMS IN THE DRUG~ INDUSTRY ADVERSE DRUG REACTIONS An adverse drug reaction committee was formed in December 1965 at Monte- fibre Hospital and Medical Oenter. Dr. Milton R.eisch was appointed as principal reporter for this program in August, 1966. Due to his efforts the number as well as the quality of the reports have improved. However, it is still felt that we are probably receiving only a fraction of the adverse drug reactions occurring in the hospital. We would like to encourage everyone's participation in the program. If a reaction is suspected, it is only necessary to complete an Adverse Drug Reaction Notice Card available on all nursing uCits (ordered from the Storeroom) and send it to the pharmacy. The following is a summary of the past 15 months that the program has been in operation. There have been approximately 16,000 admissions to the hospital in the past 15 months. 197 reactions were reported in 164 patients during this period. The majority of the reactions were caused by the following groups: Cases Percent Antibiotics Antimicrobial Antituberculous Radiographic preparations Sedatives Hormones Tranquilizers Diuretics 46 7 12 19 15 10 8 5 23. 3 3. 6 6. 1 9. 6 7.6 5. 1 4. 1 2. 5 Total 122 61.9 In only six of of these cases, the patient had a previous history of a drug reaction. Penicillin and semi-synthetic penicillins accounted for twenty-five reactions- 54.3% of total anttbiotics-1Z6% of total reactions. 11 patients with gastrointestinal disease had 7.2% of reactions-66'% of these reactions were due to antibacterials and radiographic preparations. The neurology and psychiatric services reported 9.2% of the reactions. Anti- biot.ic~, pihenothiazines and antiepileptic drugs accounted for 50% of the reactions in `thus group (14 cases). The pulmonary service reported 17.7% of the reactions'. Antibiotics, anti- bacterials, antitubereular drugs accounted for 100% of the reactions (9 case's). The genitourinary service reported 5.9% of the reactions. Antibiotics and anti- bacterials accounted for 100 % of the reactions (9 cases). The diagnostic radiology department reported 15.1% of the reactions (23 cases) - 60% were due to intravenous pyelograpby. The cardiovascular section had 14.4% of the reactions (22 cases') -45% of reactions were caused by `sedatives and hypnotics. Diuretics were responsible for 20% of the reactions. 9 patients had at least two reactions 1 patient had three reactions 1 patient had five reactions 1 patient had eight reactions 72 reactions were cutaneous in `response 4 reactions were due to monillasis and cryptococcosis 2 reactions of ototoxieity were noted-kanamycin and strep'tomycin 2 reaction's of gastrointestinal bleeding due to aspirin 3 reactions of tihrombocytopenia due to thiazides 4 anaphylactic reactions-one due to mercuhydrin; two due to penicillin; one due to ACTH There were four deaths related to drug reaction. Three were due to hospital acquired reactions. I~HARMACY DE?ARTRtENT PROVIDES 24 HOUR SERVICE Effective April 2, 1967 the Pharmacy Department will be open 24 hours a day seven days a week. This will enable us to provide complete pharmacy service around the clock. PAGENO="0269" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 707 Because the tube room is closed from midnight to 8 A.M., a pharmacy mes- senger will be stationed in the department to pick up and deliver orders during this time. SHORTAGE OF SERUM ALBUMIN CONTINUES It is still difficult to purchase 25% Normal Serum Albumin (Human) Salt Poor. A limited supply of 20 ml. vials hasi been obtained by the pharmacy. These will be issued in place of the 50 ml. vials until further notice. PHARMACY COMMITTEE NOTES 1. Puorosemide (Lasix) tablets 40 mg. and Ethacrynic Acid (Edecrin) tablet 25 mg, 50 mg. and 50 mg. vials for IV. use only have been added to the formulary. These diuretics have shown to provide good results. However, they are potent diuretics and are likely to result in potassium depletion. The following brief summaries of these preparations are therefore provided: F'urosernide (Lasix) Ethacrynie acid (Edeerin) Site of action: Mainly on distal On the ascending limb of the loop of tubules; inhibits Na and water reab- Henle and on the proximal and distal sorption in both the loop and the ascend- portions of the tubule. ing limb of the loop of Henle and possi- bly in the proximal tubule. Onset and duration of action: Within one hour. Peak effect in 1-2 hours. Du- ration of 6-S hours. Dosage: Usual initial dose is 40 to 80 mg. for adults giveii in a single dose. If diuresis is inadequate, a 2nd dose is given 6-8 hours later; maintenance dose is then given once or twice a day. Within 30 minutes after oral dose, 15 minutes after I.V. injection. Peak effect in 2 hours. Duration 6-8 hours. Oral: The smallest effective dose should be utilized, usually 50 mg.-100 mg. for adults given after meal. To determine smallest effective dose: 1st day: 50 mg., P.C. 2nd day: Depending on response in- crease to 50 mg. twice daily p.c. 3rd day: 100 mg. in the morning and 50 mg. to 100 mg. the following after- noon or evening meal, depending on response to the morning dose. Maintenaace dose: 50-200 mg/day continuously or intermittently-alter- nate days or more prolonged rest periods. IV. 50 mg. for the average adult. Both of these drugs are powerful diuretic agents, having a rapid onset of action. If not properly used they can lead to excessive diuresis with water and electrolyte depletion. Careful medical supervision is required of the patient. The physician should be aware of the dosage requirements, precautions, warnings and contraindica- tions so as to prescribe these drugs effectively and safely. Such additional in- formation is available in our pharmacy. 2. Fibrinolysin and desoxyribonuclease combined (Bovine) Blase was approved for the formulary. This preparation will replace Varidase Jelly which was deleted. In a recent review of proteolytic enzymes by "The Medical Letter," they con- cluded that "the clinical value of systemic proteolytic enzymes has not been es- tablished. Despite the absence of definite evidence, it is possible that topical ap- plication of a preparation such as Blase may be useful in the treatment of some wounds." The committee pointed out that such preparations do not replace good nursing care and that enzyme preparations can cause irritation of the skin. ADVERSE DRUG REACTION COMMITTEE NOTES 1. Reports indicate that 5% Of the total population show some sensitivity to Tetracycline and 10% to Penicillin. 2. Reaction reviewed concerning Novocaine indicated that when given intra- venously it should not be administered faster than 1 mg/Kg/mm. and should generally be given in isotonic sodium chloride injection or 5% dextrose injection. PAGENO="0270" 708 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 3. Thiazide compounds should be administered with caution to patients who show elevated Urea Nitrogen (BUN). 4. Patients on tranquilizers may experience ~aintness due to the development of orthostatie hypotension. The blood pressure of these patients should be checked in a sitting or standing position. If low, the tranquilizers should be dis- continued, or the patient kept in bed. The following is an addendum (as of April 1, 1967) of all additions or dele- tions to the Formulary since October 1, 1966. New drugs 1. Auralgan Ear Drops 15 ml. 2. Chlordantoin Cream (Sporostacin) 3. Ethacrynic Acid (Edecrin), Tab- lets-Capsule shaped, 25 mg., 50 mg.; In- jection-for I.v. use 50 mg. vial. 4. Fibrinolysin and Desoxyribonu- eleas Combined-Bovine (Elase Oint- ment) 30 Gm. tubes 5. Furosemide (Lasix) 40 mg. tablets 6. Hyperphos-oral 7. Imphos-intravenous 8. Medroxyprogesterone Acetate (De- po-Provera) Inj. 9. Polymyxin B (Aerosporin) Otic Solution 10 ml. 10. Pseudoephedrine HOl (Sudafed) Syrup, 10 ml. New dosage forms 1. Amitriptyline HC1 (Elavil) 50 mg tablets. 2. Ampicillin: injection, 500 mg. vial; Capsule, 500 mg.; Suspension, 250 mg./ 5 ml. 3. Atropine Sulfate Ophthamlic Oint- mentl%. 4. Bethanechol Chloride 25 mg. tab- lets. 5. Chloroprocaine HCL (Nesacaine) 3%. 6. Dexamethasone Elixir 0.5 mg./ 5 ml. 7. Echothiophate (Phospholine Io- dide) 0.25%. S. Methenamine Mandelate 1 Gm. tablets. 9, Methenamine Suspension 500 mg./ 5 ml. Note: Replaces the 250 mg./5 ml. 10. Methotrexate Sodium Inj. 5 mg. vial. 11. Penicillin G. Potassium 250 mg. tablets. 12. Penicillin, Potassium Phenoxy- methyl-250 mg. tablets. 13. Perphenazine (Trilafon) 16 mg. tablets. 14. Trifluoperazine (Stelazine) 10 mg. tab. Drugs available for special departments only 1. Sparteine Sulfate Inj. 150 mg. am- pul; OB-GYN Service. 2. Isoxsuprine (Vasodilan), Injection 5-mg/mi., 2 ml. ampul; OB-GYN Serv- ice. 3. X-Prep, Radiology Service of re- questing hospitals only. 4. Hydroxyzine (Vistaril), Injec- tion-25 mg. disposable syringe; Neuro- surgery Service. Deletions 1. Streptokinase - Streptodornase (Varidase) Jelly. Note: Replaced by Elase Ointment. 2. Ampicillin Suspension, 125 mg/S ml. Note: Replaced by 250 gm/S ml. 3. Methenamine Suspension 250 mg. / 5 ml. Note: Replaced by 500 mg./5 ml. Please cut along dotted line, fold in half and place in front of your Formulary. Do not discard previous addendum. New pages for the Formulary replacing the addendum will be available by the end of April. Pharmacy Bulletin-Published quarterly as a service to the Medical Staff of Montefiore Hospital and Medical Center by the Pharmacy Department. Appreciation is expressed to Dr. Francis Foldes and Dr. Milton Reisch for their assistance in the preparation of this issue of the Pharmacy Bulletin. Kurt Kleinmann, M. Sc., Director of Pharmacy Service. Robert J. Petrick, M.Sc., Asst. Director. Margaret S. Oppedal, M.Sc., Supervisor. Louis Kalaboke, B.S., Supervisor. Zina Fediay, M.Sc., Supervisor. Senator NELSON. Our next witness is Dr. Calvin M. Kunin, associate professor of preventive medicine and medicine, TJniversity of Virginia School of Medicine. Doctor, your statement will be placed in full in the record, including your professional credentials. You may proceed to summarize your statement and, if you don't mind, I may occasionally PAGENO="0271" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 709 interrupt with questions. The committee appreciates very much your taking the time to come here today, and your patience in waiting so long to appear before the committee. STATEMENT OP DR. CALVIN M.. KUNIN, ASSOCIATE PROFESSOR OF PREVENTIVE MEDICINE AND MEDICINE, UNIVERSITY OP VIR- GINIA SCHOOL OP MEDICINE, CHARLOTTESVILLE, VA. Dr. KUNIN. Thank you, Senator Nelson. I will begin my testimony literally from the text, and then summarize parts of it. I would appre- ciate it if you would interrupt from time to time, for illustrations. Before I begin my testimony, I would like to state clearly that the views which I shall present are my own and in no way represent those of the University of Virginia School of Medicine, where I am employed. My qualifications include the following educational background and experience: A.B., Columbia College, 1949, M.D., Cornell Medical College, 1953. Intern in medicine, the New York Hospital, 1953-54. Senior assistant surgeon, U.S. PHS assigned to the Communicable Disease Center, 1954-56. Assistant resident in medicine, Peter Bent Brigham Hospital, Boston, Mass., 1956-57. Research associate, Thorn- dike Memorial Laboratory, Harvard Service, Boston City Hospital working under Dr. Maxwell Finland. Assistant professor of preven- tive medicine and medicine, University of Virginia School of Medi- cine, 1959. Promoted to associate professor, 1964, and to become chair- man and professor of preventive medicine, effective September 15, 1967. I am certified by the American Board of Internal Medicine and the American Board of Microbiology. My fields of special interest include internal medicine, infectious disease, epidemiology, and, specifically, pharmacologic aspects of anti- mocrobial chemotherapy. I make no pretense of being an economist or a sociologist, but will try to present my views as a clinical inves- tigator and teacher. You have presented me with an outline of general questions to be discussed with some latitude to present opinions on other topics and personal experiences. I will follow your outline: (1) Views concerning drugs under generic names as against brand names: I would take very much the position of the preceding witness', in which we feel that generic names are much to be preferred in `teach- ing brand names. This is the only way to present a `systematic ap- proach to pharmacology to the medical students. I give some examples here of how one would use penicillins and teach these drugs with generic names, such as benzyl penicillin, aminobenzyl penicillin, phenoxymethyl penicillin, dimethoxyphenyl penicillin, oxacillin, and so fo'r'th, and then a series of different brand names which have no real relevance to the student's interest `in the chemical structure, for example, what would Wycillin, Polycillin, Pen-V-K, Stapheillin, Prostaphlin and Tegopen, and many more, depending upon the names of firms selling them mean? The same could be said for totracyline derivatives on the market now with more than 20 brand names. PAGENO="0272" 710 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY Mr. Gordon asked me to list some of these names. I just sat down and took about 5 minutes to collect them. These are all tetracylines. They are variations on the same theme, and essentially the same therapeutic agent: Terramycin, Aureomycin, Declomycin, Rhondo- rnycin, Achromycin, Tetrex, Sumycin, Panmycin, Tetracyn. They are. all essentially the same preparation. So there are variations on the theme, but basically they have the same pharmacological properties. This multiplicity of brand names is a source of confusion to students and practitioners and makes it exceedingly difficult to know exactly what they are using and the relative cost to the patient, as has been pointed out before. Senator NELSON. May I interrupt? Dr. KUNIN. Sure. Senator NELSON. This is as appropriate a place as any. I just asked Dr. Cherkasky about the question of establishing a national compen- dium. I don't know whether you were listening. Dr. KUNIN. Yes, I was. Senator NELSON. Then I need not repeat what I mean by a. national compendium. Would you find that a useful compendium to have for the practicing physician? Dr. KUNIN. I think it is good in principle, but I believe it depends on how it is executed in practice. For example, I can visualize where a compendium would be so large that it would be impossible for any physician to really find it useful in his hands. On the other hand we have, for example, an extremely good text- book of pharmacology, which would have to be very slightly expanded to include the drug names. This is the textbook by Drs. Goodman and Gillman, which essentially is a textbook of medicine, so to speak. It is such a marvelous and well-written document, that I would say that I would approve the thought of a compendium in principle, but I would like to see how it is constructed in actual practice, before I would blanketly say, this is the answer, the solution to our problems. Senator NELSON. I am not exactly sure how it ought to be compiled, although I would assume that if there were to be a national compen- dium, the distinguished authorities in the field of drugs and the prac- tice of medicine would be used as consultants and advisers in determin- ing the scope, size, and nature of the compendium, and at least to my mind it ought to include something like quarterly inserts. It ought to have the approval of the FDA in order to be certain that the information in it would be based upon the best medical information available. I assume that the FDA will, some time in the not too distant future, engage in an extensive program for quality control and clinical testing to determine the therapeutic value of drugs, so that the com- pendium would include this kind of information. This kind of compendium would be available to the substantial number of physicians in this country who do not work in a hospital with a hospital formulary system. This is the kind of thing I am posing as a question. Do you have any observations about that? Dr. KUNIN. I am in favor of this, certainly, and I believe that if conducted under the conditions that you outline, it would be a very valuable instrument. It certainly would be much more valuable than the Physicians' Desk Reference, which is essentially a compendium of brand names. I think it would be very valuable in that respect. PAGENO="0273" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY I would like to make one comment, however, in relation to IDr. Cherkasky's concepts of who is testing all of the generic drugs in mass programs all over the country. I think that there should be certainly a good deal of this kind of testing, and that testing is being done. But to extend it to every single generic preparation simply to do it, to speak when one can perhaps satisfy many of these questions by chem- ical analysis alone may be overwhelming. It may not be necessary. Senator NELSON. I don't know that he was suggesting that. I had asked him whether it would be feasible to take the most often pre- scribed drugs and start a program of clinical testing. I think it is cor- rect that if there are 40 or 50 versions of a particular drug, 40 or 50 manufactured by that many different companies, that you would have to select a few of this number for clinical and chemical testing, and then probably conclude that if the rest of them come within the range of those that have passed the tests, until proven otherwise, it is likely that they are equivalent. Dr. KUNIN. That is quite reasonable, sir. Mr. GORDON. Are you assuming, Doctor, that if certain drugs are chemically the same, they will have about the same therapeutic effect? Dr. KUNIN. This would be correct, assuming that the formula- tions that are used in the mixers are the same. There is the classical story with the tetracyclines which I alluded to in my text, in the story of the gilded antibiotics. Here different corporations used different methods of manufacturing these drugs. It turned out that the excipients that were used; that is, the materials to make up the capsules actually were inhibitory to the final product, so that although they all contained tetracycline, the presence of calcium and magnesium salts was detri- mental. Actually this whole story even became worse when it was found that one company, which had done quite a good job of putting in a good excipient to enhance absorption of their product and it later turned out that this particular excipient in the presence of moisture and heat turned the product into a toxic substance which then was quite dangerous. So that one cannot ignore, you might say, the pharmacist's art here in terms of how the drug is compounded and one cannot use potency alone. On the other hand, it is quite easy to state what type of excipient should be used, and this could be characterized very nicely, so I see no major problem here. Senator NELSON. Dr. Miller of the DSP testified here. I don't have the exact quotation but the impression he left with me was that if all products listed in the U.S. Pharmacopeia meet DSP standards for dissolution time, potency, purity, et cetera, they are clinically equiva- lent and for any drug included in the DSP there is no evidence to the contrary. Is that your judgment? Dr. KTJNIN. Yes, that is right. One learns of many of these things retrospectively. For example, the companies that work with the tetracyclines did this in all good faith. It was only in retrospect that one learned that certain problems were encountered, so that one can only go in good faith and on the basis of his best information. I believe that under those conditions I would agree completely. 81-280-pt. 2-6T---18 PAGENO="0274" 712 COMPETITIVE PROBLEMS IN TUE DRUG INDUSTRY I next summarize this section essentially as saying yes, I do think generic names are worthwhile and in the process of teaching medical students, in talks that I might give to physicians about the country, I always use the generic term. Now, I include a remark here concerning Dr. Burack's book, "I-land- book of Prescription Drugs," and note that I do quarrel with him about a few technical points, which always occurs in the medical world, and find that this book is really not the compendium that you are referring to. I find that it is very useful in terms of costs, and I agree with the thesis that he presents in the book. Senator NELSON. I believe he states in his book that it is not in- tended to be a comprehensive compendium. Dr. KTJNIN. That is right. Senator NELSON. It was intended so the layman could understand it. Dr. KUNIN. That is right. Senator NELSON. And it is not the final word on the subject. Dr. KIJNIN. Yes. I find this to be a valuable book in those terms. Senator NELSON. I might add that I have received a letter from a very distinguished professor at a fine school of medicine. He said he was very pleased with the book and wished that such a book had been available when he started out as a practicing physician. Dr. KUNIN. Well, I make the point in my text that Dr. Burack is primarily concerned with the interest of the patient and the cost of drugs to him, and that most physicians are equally concerned about cost and that the lists such as these are very helpful. The practicing physician, however, and I include myself here, is troubled by what the commercial pharmacist might do with his care- fully worded generic prescription. How can the physician be certain that the pharmacist will always give the patient the least expensive preparation, or even that he will carry it in stock? It is entirely possible that the pharmacist may charge prime prices for a low cost generic preparation. This problem is minimized, of course, in the large hospitals armed with a formulary system and conscientious pharmacists and by agencies which make bulk purchases, but what about the corner drugstore? I believe this point is very important, because this is one of the points that physicians have raised with me in conversations. We are very conscientious about prescribing generic drugs, but what does it really mean in terms of the patient? Senator NELSON. To use he example of prednisone, if a doctor numbers himself among the 0,000 physicians who read the Medical Letter, couldn't he very well rescribe prednisone and then select the company whose product he pr fers for his patient? Dr. KUNIN. Sure. Senator NELSON. Now, isn' it also true that the pharmacist is at quite a disadvantage here in that he can't stock everything, and so if the doctors are prescribing an expensive drug, there are 22 predni- sones, and if the doctors are prescribing one that costs $17.90, and that is what comes in on the prescription, then under the law he is not permitted, in 40 States, to s bstitute? Dr. KUNIN. That is right. Senator NELSON. To substitu e a generic for a brand name? PAGENO="0275" COMPETITIVE PROBLEMS IN THE DRTJG INDUSTRY 713 Dr. KUNIN. That is right. Senator NELSON. Then isn't it likely that he stocks what the doc- tors are prescribing and that it is not the pharmacist's fault at all if a patient receives a high priced drug; it is the doctor's fault? Dr. KUNIN. Well, I would like to offer my own personal solution to this problem. I believe that this is particularly suitable in an area such as ours, which is more rural, and perhaps does not have the large hospitals playing such an important role, I propose here that there be a meeting by a subcommittee of each medical society, each county medical society, with a similar group of pharmacists in the locality, and that these individuals go over the problem of what the physicians are prescribing in their area, and what the pharmacist's problem is in terms of his inventory, and that together they can pre- pare a formulary which would be perhaps somewhat broader than the ones that one would see in a more restricted hospital pharmacy, but would in such a way meet the needs of the patient, and that this be accompanied by a price list for that locality for the physician in the area. Now, I started at this point because I believe that one should also always try to give the individuals in a free enterprise situation the opportunity to get together and to try to work out something that is reasonable for their locality, and so I suggest this particular mech- anism. I am not aware of this ever having been tried, but I think that it ought to be. Senator NELSON. Is it your feeling that the county medical society, particularly in places where there isn't a hospital with a good formu- lary, could itself with the pharmacists develop a formulary of the most commonly prescribed drugs in the practice in that area? Dr. KUNIN. That is right. They can, of course, model from the formulary of large institutions. This would be very valuable to them but it would be good to have a dialog between the physicians and the pharmacists so that, for example, if the physicians in the area feel that all prescriptions should have the generic name on the label, unless stated otherwise in the prescription, this could be an agreed to ar- rangement. They could also decide when they say generic prednisone, this is what they mean. When they say precinisone, they mean generic drug, so that there is some meaning here across the board, so that the physician doesn't have to sit down with a large reference text or the Medical Letter. He knows that he has confidence in the subcommittee that have worked this out for him. Senator NELSON. It sounds like a very creative suggestion, but the pharmacist has no control over what the doctor is going to prescribe, and if the doctor prescribes the generic name, the pharmacist may in some 40 States substitute a brand name? Dr. KUNIN. That is right. Senator NELSON. I would guess that often when a doctor prescribes a lower priced generic, since he is one of the rare doctors who does so, the pharmacist doesn't stock the drug generically and has to give the patient a brand name. Dr. KUNIN. That is right. Senator NELSON. So if they if they got together and it was under- stood that among these most commonly used drugs covering 80 or PAGENO="0276" 714 COMPETITIVE ROBLEMS IN TIlE DRUG INDUSTRY 90 percent of the cases, doctors would like to have generics in stock that you might very we 1 solve some problems. Dr. KUNIN. That is ri ht. The physician in a sense is in a vacuum away from the pharmaci t and the pharmacist in a vacuum away from the physician. They mu t talk to each other. They must straighten this out together. Now, the second porti n of this deals with the advertising and pro- motion of drugs, with w ich I, like every witness here, am very con- cerned. I will state this a dramatically as I can. One has to be blind, deaf, and dumb, to lock is office if he wishes to avoid being deluged with direct mail adverti ~ng, visits by detail men, and more recently heavy promotion in "thr waway" unsolicited journals which, for the most part, serve as adver ising vehicles. One can read in the financial sections of the newspaper about the success of these throwaway jour- nals, which, in my opinio , are taking a tremendous toll in trying to take over medical educati n. Booths are set up in hospitals and agents of drug firms walk the floors. I have no objection to e hical promotion of products, but the matter is out of hand. I cite an instance here in which we tried to teach some students certain facets of the diagnosis of infectious disease, illustrating a par- ticularly difficult diagnost c problem. We had a break for a fe minutes, and the students were in the hall and saw one of the detail men who roam the halls of hospitals, and they chatted with him abo t this problem. He had a very simple solu- tion: "Why don't you us my drug?" The answer is: "Don't think, Doctor. Just use our drug. It will solve all your problems." When the students came ack they essentially said, "What kind of a teacher are you? You are telling us to do all this work and all this complicated reasoning wh n all we had to do is use drug X and we would have solved our pro lem." This is the antithesis of ood education, and I think this practice is to be deplored. I call this the hail medic 1 school. Now, there are technique to combat this. In our institution, as well as others, a section of the p armacology course deals with therapeutics in which the students do go through a large number of advertisements and very carefully go over he claims. They have very little difficulty in seeing through these clai s under minimum guidance. I have an example here, if you would like. May I present this, sir? Senator NELSON. Yes. Dr. KUNIN. This is an ex mple. It is called: A case for Keffin, Sodium Ce halothin. Temperature down in twenty-f ur hours; patient free of infection after 8 days. Patient was 51-year-old male ith past history of heart disease, alcoholism, and anemia of unknown etiology. This is the advertisement. Temperature spiked to 103° . on third day after admission t~ hospital for impending delirium tremens. W C count was 19,800, and clinical findings were consistent with pneumonia of tb right lower lobe. Temperature dropped to 101° F. after one day's penicillin the apy, but patient became hypotensive and more toxic. The BUN rose from 70 to 1 1 mg./100 ml. Treatment was begun with Keflin (1 Gm. I.V. q. 4 h.) and large dose of corticosteroids. One day later, temperature ha dropped and blood pressure was controllable with pressors and cortico~tero& s. Patient was more responsive but still dis- PAGENO="0277" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 715 oriented. BUN was 96. Dosage of pressors, antibiotic, and steroids was gradually reduced as the patient slowly and progressively improved. Keflin discontinued on twelfth hospital day. Patient continued in hospital for evaluation of anemia. Now, this is supposed to be a case for this particular drug. Senator NELSON. Is this an ad? Dr. KUNIN. This is an ad. Senator NELSON. In what publication? Dr. KUNIN. This you will find in any medical journal. This comes in all of them. This could be in the JAMA. Senator NELSON. AMA has run this ad? Dr. KUNIN. Oh, yes. Actually, I believe I took this one from the overseas edition of Lancet which is now published in the United States and filled with American advertisements. Now, what is wrong with this advertisement? What is wrong is that we never are told what waswrong with the patient. They don't describe the fact that the patient had a sputum ex~unination that was stamed for certain bacteria which could well explain what he had. They don't tell us about blood cultures that would have been necessary for diag- nosis. It is quite probable that the penicillin was working quite effec- tively and they just simply changed `to another drug which did the same thing. The effect of corticosteroids are dramatic and one does not know what role they played here. We really don't know anything about this patient that we should know in terms of rational therapeutic practice. rfhis is an example of "don't think; use our drug." (The advertisement referred to follows:) A CASE FOR KEFLIN® (SQDLUM OEPHALOTHIN) Temperature down in twenty-tour hours; patient free of infection after eight days* Patient was 52-year-old male with past history of heart disease, alcobolisni, and anemia ~f unknown etiology. Temperature spiked to 103°F. on third day after admission to hospital for impending delirium tremens. WBC count was 19,800, and clinical findings were consistent with pneumonia of the right lower lobe. rremperature dropped to 101°F. after one day's penicilin therapy, but pa- tient became hypotensive and more toxic. The BUN rose from 70 to 111 mg./100 ml. Treatment was begun with Keflin (1 Gm. I.V.q. 4 h.) and large doses of corticosteroids. One day later, temperature had dropped and blood pressure was controllable with pressors and corticosteroids. Patient was more responsive but still dis- oriented. BUN was 96. Dos'age of pressors, antibiotic, and steroids was gradually reduced as the patient slowly and progressively improved. Keflin discontinued on twelfth hospital day. Patient continued in hospital for evaluation of anemia. Keflin is potent enough for the most severe susceptible infections: respiratory tract, urinary tract, surgical wounds. soft tissue, skin, bone, or blood. Keflin has proved to.be outstandingly effective in a wide range of severe infections lo- cated in a variety of sites. Its broad 8pectrum covers virtually all gram-positive organisms; a great majority of gram-negative organisms are moderately sus- ceptible, with the IV. route affording maximum concentration. The bactericidal action of Keflin helps assure rapid, decisive patient response. This is especially important when host response is poor, as in debilitated patients, Keflin is' active against both penicillin-sensitive and penicillinase-prodUciflg staphylococci. It is often effective when other antibiotics fail. *Case history on file with the Lilly Research Laboratories. This case, of course, does not typify every aspect of therapy with Keflip. For further information on indications, precautions, and adverse reactions, see accompanying text. PAGENO="0278" 71:6 COMPETITIVE P OBLEMS IN THE DRUG INDUSTRY Keffin is especially useful i patients with redttced'kidney function. Keflin has demonstrated a remarkably 1 w toxicity. It may be used even When dehydration, oliguria, or other factors su gest the possibility of reduced renal functiori-a condition in which many ot er antibiotics are contraindicated. However, total daily dosages for such cases re proportionately less than those recommended for patients with normal renal ft ction. A cumulative report of 48 patients; many were seriously ill or hospitalized with respiratory-pulmonary I fections or infections of the urinary or gastro-in- testinal tract, skin and soft t ssues (including postoperative wound infections), bone, or blood. Percent Satisfactory 73 Equivocal 9 Failure - - 18 References: 1. Anderson, K.. N., nd Petersdorf, R. C.: Antimicrob. Agents & Chemother., p. 724, 1962. 2. Flux, M., Riley, . D., Jr., and Bracken, E. C.: Antimicrob. Agents & Chemother., p. 254, 1963. 3. Griffi h, R. S., and Black, H. IL: J.A.M.A., 189: 823 1964. 4. Heftier, M. S., et al.: Antimicrob. Agents & ChemOtber., p. 261, 1963. 5. Herrell, W. B., Balows, A., and Becker, J.: Clin. harmacol. & Therap., ~: 709, 1963. 6. Holloway, W. J., and SCott, 13i, C.: Antimicrob, Age ts & Chemother, p. 251, 1964. 7. Philson, J. R., Clancy, C.. F,, an~1 Alexander, J. D.,: Anti. icrob,. Agents & Cbemother., p. 267, 1963, S. Sideil, S., et al. Arch. Int, Med., `112~:' 21, `1 63. 9. Wkiters. B. W., Romatisi~y, M, J., and Johnson, A. C.: Antimicrob. Agents & Chem ther., p. 247, 1963.. LILLY. S~nator NELSON. Why buld a distinguished journal such as the Journal of the American edical Association run an ad that on its face is incomplete and misle ding? Dr. KUNIN. I am not pri y to their point of view, sir; and want to try to explain their positio . I think that they might want to testify as to ~hy they would run an dof that kind. Senator NELSON. But tha ad appears regularly in a number of the medical journals? Dr. KUNIN. Wefl, this on is a little unusual, I must say, the case report, is so poorly documen ed. Usually the statements are more over- all. I can give you another cx mple. This would be more characteristic in terms of hyperbole. This ne deals with Erythrocin, and the state- ment says: After 15 years Recent studies show it clinicall effective in 94.8 percent of patients with every- day bacterial infections with no known toxic effects on b ne, blood, vital organs or teeth "Erythrocin" or Erythi~om cm, which is the trade name. Now, what are these? Is t is the drug of choice? What should the physician do to diagnose ,these everyday infections? It'is essentially meaningles. This is more typical. That is a general statement rather than a speci c case. It is easy to pick on the poor spe- cific case as I did a few mome ts ago, but I think this is equally poor. Senator NELSON. Where was that ad run? Dr. KTJNIN. This one was fr m one of the disposable journals, prob- ably, what is it- Mr. GoRDoN. Medical World~ ews. Dr. KUNIN. Medical World ews, yes. Senator NELSON. That is par of the continuing education of the phy- sician, T take it.' Dr. KUNIN. Yes,' sir.' Mr. GORDON. May we have a c py of that? Dr. KUNIN. Yes. (The advertisement referred 0 follows:) PAGENO="0279" COMPETITIVE PROBLEMS" IN THE DRUG INDUSTRY 717 PAGENO="0280" 718 COMPETITIVE PR BLEMS IN THE DRUG INDUSTRY PAGENO="0281" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 719 Senator NELSON. In discussing the question of the advertising and promotion of drugs, is it your view that someone, perhaps the FDA, ought to more carefully supervise and approve the claims of drug ads appearing in medical journals and elsewhere? Dr. KUNIN. Yes, I believe so. Now, it is my understanding that there are two mechanisms. One is the Federal Trade Commission's role here, and the Food and Drug Administration's role, and I have difficulty in distinguishing between whose responsibility belongs where. It is my understanding that the Food and Drug Administration is able to examine these advertise- ments and see that they follow to the letter the package insert. Senator NELSON. The committee counsel informs me that the Federal Trade Commission deals with over-the-counter drugs. Dr. KUNIN. Pardon me, sir? Senator NELSON. Exclusively. Dr. KUNIN. O.K. Senator NELSON. Aspirin is aspirin, you know. Dr. KUNIN. Right. Senator NELSON. If you read Time magazine, you can find out. Dr. KUNIN. There is a committee that has been set up by the National Academy of Sciences, which is dealing with review of drugs for effi- cacy, those drugs licensed from 1938 to 1962, I believe. A considerable length of time has been spent analyzing this problem, and their report, of course, is not ready yet, hut I believe that this is a tremendous effort and a step in the right direction. Thus there is a major effort being undertaken. Of course, this was begun by Dr. Goddard and the Food and Drug Administration in conjunction with the National Academy of Sciences. Mr. GORDON. This deals with efficacy? Dr. KUNIN. Yes, sir. Mr. GORDON. But not relative efficacy? Dr. KUNIN. That is right. Now, this next section of my text deals with relative efficacy, espe- cially of antibiotics. It is certainly true that antibiotics differ in relative efficacy for various infections. The subject, however, is very complex because of the great variety of disease states which must be treated and the large number of good drugs that are available. And I want to point out here that an agent may be the drug of choice under one circumstance while another drug be the secondary agent, but in another circumstance the second agent may be the primary drug. I cite Rocky Mountain spotted fever, for example, where one would use tetracycline whereas in pneu- mococcal pneumonia one would prefer to use penicillin, so that tetra- cycline would be a secondary drug for pneumonia but a primary drug for Rocky Mountain spotted fever. One has to relate it to specific disease efficacy. This is covered in textbooks of pharmacology and the AMA new book "New Drugs" which makes an effort in this direction. One of the factors that play a very important role in the hospital should be emphasized. This is the problem of antibiotic sensitivity testing. This laboratory test will be misleading if one does not know how to interpret it properly, and one requires a fair amount of sophistication PAGENO="0282" 720 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY to interpret these tests properly. For example, if we did a sensitivity test for a pneumococcus, which is an agent which causes pneumonia, against 20 different antibiotics, we might find that all 20 work per- fectly well in the sensitivity test. We know from our clinical experience, however, that penicillin is the drug of choice so the sensitivity test in this case is not applicable. In another situation we might find, for example, with a staphylo- coccus that this agent is sensitive to many drugs but we know from our clinical experience that only few drugs are really the drugs of choice, so that sensitivity testing in our hospitals, must be almost like a formu- lary system. We have to reduce the number of drugs that we would use for testing, so that they are appropriate. Now, I will give you an example of this. In an advertisement for methacycline, a tetracycline, this is called Rondomycin, the advertisement states: Intense activity where infection strikes most often. It talks about in vitro susceptibility tests in the test tube. One of the points it makes is that it has intense activity against Staph. aureus, which is the first organism they list. Now, this is not the drug of choice against staphylococcus. This drug is a second line preparation in this area, and we would generally not use or even test our staphylococci against this particular drug or any related drug, and yet the adver- tisement implied that this might be a firstline drug. I think this is misleading. (The advertisement referred to follows:) PAGENO="0283" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 721 Intense activity where infection strikes most often demonstrated by Contraindicated: In individuals hypersensitive to methacycline. Warning: In the presence of renal dysfunction, reduce usual Protective dose50 (PD50) tests' oral dosage and consider serum level determinations to avoid Intense activity against Stthph. aureus, liver damage. Discoloration of developing teeth may occur although such Str. pyogenes, D. pneumoniae in toothstaining has not been reported with methacycline to date. comparative studies. in certain hypersensitive individuals treated with methacycline, exposure to direct sunlight may precipitate a photodynamic reaction. Such reactions have not been reported with In vitro susceptibility studies2 Rondomycin to date. In individuals with a history of photo- allergic reactions to tetracyclines, exposure to direct sunlight Of 271 cultured organisms from isolatéê should be avoided and treatment should be discontinued at of patients with respiratory tract first evidence of skin discomfort. Precautions: As with any antibiotic, overgrowth of nonsuscep- infections, 260 were sensitive to tible organisms may occasionally occur. If such super- Rondomycin. infections are encountered, Rondomycin should be discontinued and replaced by appropriate therapy. Before treatment of gonorrhea, if concomitant syphilis is suspected, a darkfield Clinical results2 examination should be made of any lesion and serological tests for syphilis should be made monthly for at least three months Over 900/0 success rate in respiratory- afterwards. Increased intracranial pressure has occurred tract bacterial infections in 331 occasionally In infants treated with methacycline but has disappeared promptly and without sequelae, once therapy was patients studied. discontinued. Adverse Reactions: Glossitis, stomatitis, proctitis, nausea, diarrhea, vaginitis, dermatitis, and allergic reactions may occur Activity across a truly broad spectrum rarely. If adverse reactions, Individual idiosyncrasy, or allergy Therapeutic blood levels that last occur, discontinue medication. Supply: Rondomycln (methacycline) Is available as 150 mg 24to 36 hours after the final dose capsules containing 150 mg methacycline HCI equivalent to 140 mg. of base and 300 mg. capsules containing 300 mg. of 150 mg. q.l.d. and 300 mg. b~Ld. dosage methacycline HCI equivalent to 280/mg. of base. Rbndomycin syrup contains 75 mg per 5 cc. of metha- schedules are equally dependable cycline MCI equivalent to 70 mg per 5 cc. of base. Good toleration with minimal risk of More defailed professional information available on request. References: 1. Research data on file, Medical Department, Pfizer photodynamic reactions LaboratorIes, 2. ciinlcat data submilted to F.D.A. Available to physicians on reqaest, Medical Department, Plizer Laboratories. ~ new Science for the wend's well-being® iioiiiIiaiiiiiiii a® meth~cycIi ne PFiZER LABORATORiES Division, chat. Pfizer&co., nc, New York, N.Y. 10017 adds depth to true broad-spectrum activity PAGENO="0284" 722 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY Dr. KUNIN. Now, one of the best advertising devices of all is to be able to put one's own company sensitivity testing into a hospital, and supply you with the little pads that will go on the wards with the brand names showing how sensitive this particular drug is. Very often there are two drugs that are essentially the same, but the brand name catches on. If I were trying to advertise a drug, this is the way I would do it, and I think the companies are very clever in trying to do this type of promotion, but I think this is to be deplored, also. Now, the fourth item here deals with problems with continuing education of physicians. I believe that the drug companies must be given a great deal of credit for trying to support continuing educa- tion for physicians. Some of these meetings are well attended. They use a soft sell, and they are not obnoxious. I think that one company that does it very well is Lederle. which sponsors a good number of excellent sessions of this kmd with a mini- mum amount of fanfare. Nevertheless, I believe one must remember that a physician earns an adequate income, and the courses are not so expensive as to be bet- ter funded by medical societies, hospitals, and medical schools without direct support by drug firms. I have no objection to the firms sup- porting hospitals and medical education, indeed, they must arid should be more generous, but I would urge that this be done by general in- stitutional grants that really amounts to something, rather than the little frills of a sporadic meeting. The problem of continuing education is one of the major responsi- bilities of medical schools. At the University of Virginia this is a serious area. We have an assistant dean who is in charge. He was in practice for many years and knows the physicians and their problems. We are making a good effort in this area. I think this should be supported by unobligated funds from both the Government and from industry. I would like to go back a minute to one part of advertising that I left out. I think this should be brought about. This is on page 5 at the top. This is about the detail man. He often does serve a useful purpose and these are very pleasant people. We always try to talk to them and see what their pitch is, `and sometimes they are very helpful. But sometimes they go a little far, and some of these little gimmicks are annoying. There are presents that are useless, like calendars that have their drug names on it, executive pointers and so forth, steak parties for house officers, gifts of books and medical bags to graduating students, and trips to the big city, includ- ing wives of medical students. This seems to be going much too far. I think what the companies are trying to do, and they are perfectly deliberate, is try to find favor with the people who are going to be the individuals who are going to prescribe their products in the future. But this is a little bit, I think, too much. I wanted to just emphasize that that point was not left out in the verbal testimony. ~The last section deals with so-called fixed combinations of anti- microbial agents. I point out that use of combinations of drugs is an old story in medicine. It was part of the mystique of medi~a1 care and PAGENO="0285" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 723 is still used over the world. In some instances there are good reasons to use combined preparations. In the world of antibiotics, combinations are used to broaden the coverage in individuals when you don't know what you are dealing with and it is an emergency situation. Another use is to delay the emergence of resistance to one of the drugs. This is commonly used in tuberculosis, or to achieve an effect, a so-called synergistic effect, when the effect of the combination is greater than the addition of the prop- erties of the two agents. Actually, however, except in tuberculosis and one form of heart disease, use of drugs in combinations are really not essential. Senator NELSON. When Dr. Miller, representing the USP testified here he said that the TJSP does not list any combination drugs in the belief that since drugs administered separately give the physician greater control, there is no good reason for listing combination drugs. You say basically the same thing except in reference to cases in tuberculosis and rare infections of the heart where combinations are of value; is that correct? Dr. KUNIN. Well, we must make a distinction between the combined use of drugs and the fixed combination of a drug in one package. Senator NELSON. I was referring to the fixed combination. Is that what you are talking about? Dr. KUNIN. in tuberculosis they don't use the fixed combination. I am sorry if I implied that. There are drugs used in combination, but they are used separately. There is no fixed combination there, neces- sarily. Senator NELSON. Do you see any value in the fixed combination drugs appearing in one capsule? Dr. KUNIN. No. Senator NELSON. For any disease that you know of? Dr. KUNIN. No. I will give you an example from an advertisement if you wish. Tirobiotic-by the way, it took me only 10 minutes to pull these out. These are available so easily in all the medical journals that one doesn't have to work hard to find these examples. Here is one called Urobiotic, which is a combination of oxytetracy- dine, a tetracycline derivative, which is an excellent drug, glucosarnine, which is simply an excipient and a sulfonamide, and a material to turn the urine red. The dose of oxytetracycline is very low, 125 milligrams. This is lower than we would customarily use. It does have sulfonamide, 250 milligrams. It might work. But this would be an unnecessary com- bination, perhaps not as effective as the tetracycline Terramycin com- ponent all by itself, and so I think this is an example of a fixed combination that has no place in the market. (The advertisement referred to follows:) PAGENO="0286" 724 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY In the treatment of genitourinary tract infections, when the need arises for antimicrobial and analgesic action consider Urobioticm EacH capsule contains, Terrumycin® (oxytetracycline as the HCI), 125 mu. with glucosamine HCI, sultamethizole, 250 mg.; phenezopyridine HCI, 50 mg. Product Information Actions: Urobiotic is a product designed for use specifically in urinary tract infections. Terramycin® (oxytetracycline) is a widely used antibiotic with clinically proved activity against gram-positive and gram-negative bacteria, rickettsiae, spiro- chetes,lorge viruses,and certain protozoa. Sullamethizole is a chemotherapeutic agent active against a number of impor- tant gram-positive and gram-negative bacteria. Phenazopyridine is on orally absorbed agent which produces prompt and effec- tive local analgesia in the urinary tract. indications: Urobiotic is indicated in the therapy of a number of genitourinary in- fections caused by susceptible organisms. These infections include the following: pyelonephritis, pyelitis, ureteritis, cystitis, prosratitis, and urethritis. Both antibac- terial components are active against the most common urinary pathogens, includ- ing Escherichia cofi, Pseudomonas aerugi- noso, Aerobacter aerogenes, Streptococ- cus laecalis, Streptococcus hemofyticus, and Micrncoccus pyogenes. Urobiotic is particularly useful is the treatment of in- fections caused by bacteria more sensi- tive to the combination than to either com- ponent alone. The combination is also of value in those c~sex with mixed infec- tions, and in those instances where identi- fication of the causative organism is peed- ing laboratory isolation. Contraindications: This drug is contrain- dicated to individuals who have shown hypersensitivity to any of its components. This drug, because of the sulfonamide component, uhould not be used in pa- tients with a history of sulfonamide sensi- tivities, in pregnant females at term, in premature infants, or is newborn infants during the first week of life, Warnings: Reduce usual oral dosage and consider serum level determinations in patients with impaired renal function, to prevent possible liver touicity. Onytetracycline, which is one of the ingredients of Urobiotic, may form a stable calcium complex in any bone- forming tissue with no serious harmful effects reported thus far in humans. Use of ouytetrscycline during the last trimes- ter of pregnancy, neonatal period and early childhood may cause discoloration of dyveloping teeth. This effect occurs mostly during long-term use of the drug, but it has also been observed in usual short-treatment courses. Certain l:ypersensitive individuals may develop a photodynamic reaction precip- itated by exposure to direct sunlight which may also be produced by other tetracycline derivatives. Should such a re- action occur and in individuals with a history of such reactions, exposure to direct sunlight should be avoided and the drug should be discontinued at first evi- dence of reaction, NOTE, Photoallergic reactions to Terra- mycin (oxytetracycline) ore exceedingly rare and phutotoxic reactions are not be- lieved to occur. Because of its sulfonamide content,this drug should be used only after critical appraisal in patients with liver damage, renal damage, urinary obstruction, or blood dyscrasias. Deaths have been re- ported from hypersensitivity reactions, agranulocytosis, aplastic anemia, and other blood dyscrasias associated with sulfonamide administration, When used intermittently, or for a prolonged period, blood counts and liver and kidney func- tion tests should be performed, Precautions: As with all antibiotic prepa- rations, use of this drug may result in overgrowth of nonsusceptible organisms, including fungi, If superinfection occurs, the antibiotic should be discontinued and appropriate specific therapy should be instituted. Increased intracranial pressure with bulging fontanelles has been observed occasionally in infants receiving therapeu- tic doses of ouytetracyclise. Although the mechanism for this phe- nomenon is unknown, the signs and symp- toms have disappeared rapidly upon ces- sation of treatment with no sequeloe. This drug should be used with caution in persons having histories of significant allergies and/or asthma. Adverse Reactions: Nausea, diarrlreo, glossitis, stomatitis, proctitis, vaginitis and dermatitis, as well as reactions of on allergic nature, mayoccurduring oxytetra- cycline therapy, but are rare. If adverse reactions, individual idiosytrcrasy, or al- lergy occur, discontinue medication, As in all sulfonamide therapy, the fol- lowing reactions may occur, nausea, vom- iting, diarrhea, hepatitis, pancreatitis, blood dyscrasios, neuropanhy, drug fever, skin rash, injection of the confunctiva and sclera, putechioe, purpura, hematuria and crystallunia. The dosage should be decreased or the drug withdrawn, de- pending upon the severity of the reaction. Dosage: In adults, 1-2 capsules q.i.d. is suggested. In children under 100 lbs., 1 capsule q.i.d.; in children under 60 lbs., 1 capsule t.i.d. In acute urinary tract in- fect'nDnx, therapy should be continued for a minimum of seven days or until bacterio- logic cure occurs. To aid absorption of the drug, it should be given at least one hour before or two hours after eating. Aluminum hydroxide gel givenwith antibiotics has been shown to decrease their absorption and iS con- traindicated, Supply: Urobiotic Capsules, buttf as of 50. More detniled professional information available on request. Science (or the worlds welf.being® Since 1849 PFIZER LABORATORIES Division, Chas. Pfizer & Co., Inc. New York, New York 10017 PAGENO="0287" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 725 Senator NELSON. Isn't it correct that most of the fixed combinations are more expensive than if the drugs included were prescribed separately? Dr. KUNIN. It is my understanding that that is correct although I have not looked into that specifically. Mr. GoRDoN. Then, why do doctors prescribe them? Dr. KUNIN. I would suspect that this is related to the amount of advertising, the beautiful name Urobiotic, which is designed around the indication, the frustrations that one deals with in terms of indi- viduals who may have infections or other disease stages in which one uses one drug or another and has difficulty with results. In other instances, there may be a historical reason for a particular combination. The reason, perhaps, no longer exists, but the tradi- tion may still continue. Senator NELSON. But aren't additional fixed combinations still being placed on the market? Dr. KUNIN. Sure. Senator NELSON. Is there anybody of distinction in the field of medi- cine who argues that there is value to fixed combinations? Dr. KUNIN. Not to my knowledge, sir, not to my knowledge. I know of no one in the field of antimicrobial therapy who you might say is academically concerned with the problem who would feel that a fixed combination would be essential or really required or needed. Senator NELSON. Then aren't you really saying that the doctor who prescribes such a combination doesn't know really what he is doing? Dr. KUNIN. No. What I am saying is that the doctor who prescribes it doesn't believe perhaps what I say or what my colleagues might say. He may have his own reasons and perhaps he should have his day to present his position here. I see no personal reason to do this. Senator NELSON. Well, if you state that you are not aware of any- body of any distinction in the medical profession who claims that there is any value to a fixed combination, can you then think of any reason for a doctor to prescribe one? Dr. KUNIN. Well, I would suppose that it is a reflection once again of advertising, of detail men pressing certain products, of our failure in the field of postgraduate medical education. Senator NELSON. Are you saying that the doctor really doesn't know what heis doing when he is prescribing? Are you implying a failure of education in the field of drugs? Is that so hard for you to say? I think it is a very sad commentary on the medical profession, and I would like to have a doctor of your distinction say it more directly than say it is a failure of- Dr: KUNIN. I would like to dilate on that point, because if a physician finds that a particular fixed combination that he is using works, and many of these are effective agents, he may say, "This is an effective agent which in my experience works perfectly well." What we are really saying is not that this agent does not work well or isn't effective essentially. What we are saying is that `the combina- tion is really no greater than one with more potent ingredients, and. that it would be wiser in practice to use one drug. It does not mean that he is using a drug which will hurt his patient necessarily. It means that he is using something more complicated when he could use something more simple. PAGENO="0288" 726 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY Now, lawyers sometimes use big words when they could use a little word, so it is the same sort of a thing in many respects. Senator NELSON. But they don't charge more for big words than for little words. The fact is that the patient's pocketbook is affected. I don't know if it is true of all drugs, but those that I have seen that are in fixed combinations cost more than its components would cost if purchased separately. Dr. KUNIN. Yes. Senator NELSON. And previous witnesses from schools of pharmacy and medical schools have said exactly the same thing. I think it is a rather sad commentary on the gullibility of the medical profession that they will prescribe drugs in fixed combination which pharma- cological authorities say are not any better than separately admin- istered drugs, but do cost the patients more. Dr. KUNIN. Sure. Senator NELSON. That is a matter of importance to the people of this country, and I think it is about time that the doctors woke up. Dr. KUNIN. I agree with you. Mr. GORDON. Isn't it also correct that when you use a fixed combina- tion, you lack flexibility in varying the amounts to be used? Dr. KUNIN, Oh, sure. Mr. GORDON. There are certain disadvantages both to the patient and the doctor; isn't that correct? Dr. KUNIN. Oh, sure. I list these disadvantages here. I am not try- ing to be a weasel here, Senator. What I am trying to do, though, is put this in the perspective of how the physician would look at it in the sense that if he has had a good experience with a particular preparation, and there are individuals who I might personally dis- agree with who would say, "I have had such good experience with the combination of penicillin and sulfur for earaches," that this becomes a part of the common teaching among certain groups of physicians. Now, I might stand up and say that I think this is nonsense and that you could use one drug, but there is a large body of, we might say, folklore or medical practice that is accustomed to this way of doing things, and that one shouldn't, I don't believe, accuse the physician of direotly trying to hurt the patient or his pocketbook, but trying to follow a practice which has been part of the American medical scene for a long time. So I think one has to have a more dispassionate view, so to speak, of this, and to try to change this practice, but not in the punitive way, necessarily, by saying that physicians don't know what they are doing. They know what they are doing, but they are doing it in a different, way. It is, perhaps, not the best way, but it is an effective way in their type of practice. Now, I agree with you in principle, but I don't think it is wise to make blanket statements that physicians are not doing or are not desir- ing to do what is best for their patients. Senator NELSON. I don't think anybody has said that here, although several witnesses have said that they think that many of the doctors are not well informed about the drugs that they are using. Dr. KTTNIN. That is true. Senator NELSON. And I think that this is probably the case. Dr. KUNIN. That is right. PAGENO="0289" COMPETITIVE PROBLEMS IN : TIlE DRUG INDUSTRY 727 Senator NELSON. In the March 16, 1967, issue of the New England Journal of Medicine a letter from you was printed. You make a~ ~ery interesting point2 and I' wQuld li1~e to have the letter printed m the record at `this point. I would like to h~ye~youlo~~t it, refresh yo~ir memory, and exteiflpora~neQuSly give us your oomludnts about it. (The letter referred t~ ~ollows :) NEw ENGLAND JoURNAL o~' M~pIcI~R, March 16, 1967. PRIOR FACTOR IN ~LA~ION TO DRVGS To the Editor: The price of the drug is virtually never stated in advertise- ments from pharmaceutical `houses. Informed laymen are particularly annoyed by this, and in some recent books and popu1~ar magazine articles, physici~ns have been, perhaps, unju~tly, accused of lack of concern for the costs that the patient must bear. This is of course, only a half~truth since most physicians, particularly those in pri~tate practice, are deeply concerned with such matters. A series of recent experiences ~n treatnient of bacterial menir~gitls with `anrpicilllzi brought patient costs to mind once again. It seems of particular importance i~ow tiMit Tim~e magazine, in a recent issue, has seen fit to report the value of this drug' to the general public. The advocates of the use of ampicillin have presented convincing evidence that this d~~iig is effective, when used alone In the treatment of meningitis due to the pn~umococcus, meningococcus and JJuemophilus inflnenzae,, and that it Is as good as or better than other forms of therapy. I have no argument with the use of the drug, particularly in cases in which the offending organism cannot be definitely characterized in stained specimens of spinal fluid, and when 1 of the 3 organisms listed above is probably the responsible etiologic agent. I am concerned with the relative cost of ampicillin versus penicillin ~, however, `and would advocate a switch of therapy to the latter, less expensive drug, once the bacteriology labo- ratory bas reported~ the pneumococcus or nieningococcus to be present. I believe that most clinicians would agree, including those who MvO performed the' valu- able studies with ampicillin. The cost to the patient in our hospit~l for penicillin Gis $0.2~ per 1,000,000 units (600 mg.-suppliéd in vials containing 20,000,000 units), as compared to $3.00 per 500 mg. of ampicillin for parenteral administration. Projectlr~ this to a ten-day course `of parenteral therapy, the cost for an adult receiving 1,000,000 units of penicillin every two hours would be $30, and that for `ampleillin given as 1 gm. every four hours would be $360. Many clinicians would use even larger dose of the latter drug, particularly in the early stage of treatment. Costs will vary among `hospitals and dose schedules in. children, but the order of magnitude of the difference between penicillin G and ampicillin will probably be about the same. I believe that the facts clearly speak for themselves. OALVIN M. KUNIN, M'.X~., Associate Professor, Department of Preventive Medicine, University of Virginia &hoo'l of MedicIne. CHARLoTTEsvILLE, VA. Dr. KUNIN. Well, this concerns the treatment of meningitis with a new penicillin, Ampcillin, and I think that here we' have had a wonderful addition to our medical armamentarium, the addition of this new particular penicillin, because of its great breadth of activity and its effectiveness in this particular form of disease. It does help the physician very often when he has to treat meningitis, which is a serious disease and which may be due to any one of three common organisms. This drug alone will often be quite effective.' Now, the problem arises in that this drug is Very, very much tuore expensive than, say penicillin G alone, and all I point out here is that once the physician does actually have the diagnosis perhaps in a day or two, he can then stop the more expensive drug and go on to a very much less expensive agent for the same therapeutic purpose. Senator NELSON. Why? Is one of them a specific drug for one of the causative agents? 81-280-pt. 2-67-19 PAGENO="0290" 728 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY Dr. KUNIN. `rhat is right. One is more broad and one is more specific. SenatOr `NELSoN. The broad one is the expensive one? Dr. Ku~IN.' That is right; so that if one uses his diagnostic labora- tory facilities, he may in 24: to 48 hours find out wknt the true offend- ing agent is. Under those conditions he may decide that it is better to use the broader agent because it still has what he wants, or he may find that he has a fairly simple organism that is treated with a much less expensive agent, in whh~h case he can switch his drugs to the less expensive agent. This emphasizes the importance, actually, of going back to this advertisement and to my section with the students, about `why it is so important to try to find outS exactly what is causing the infection or the problem, so that one might use the most specific and `least ex- pensive drug, rather than say, "The patient is sick, therefore, I use a drug." Senator NELsON. You cite an instance of prescribing each of these tw~ drugs over a certain period of time. Dr. KUNIN. Yes. If one uses 10 days of therapy, I calculated from going down to our hospital pharmacist, the relative price would be $30 for, say, penicillin G, which is fairly cheap and available, versus $360 in our particular hospital formulary for the other preparation. Now, this is in no way saying that the other drug is not valuable and not worthwhile and we should not continue to have it. It is really to emphasize the problem of trying to make the diagnosis so one can use the less expensive drug under the conditions that will permit him to do so. That is why it is so important for the student to learn, you might say, the natural history of disease and diagnosis rather than blind therapy. Mr. GoiwoN. I would like to ask you about Pentids, which is the Squibb version of penicillin G. Now, I notice that it is a big seller and it is about six or seven times more expensive than the generic. As you know, all antibiotics are batch tested. Can you give any good reasons why Pentids should be prescribed by a doctor rather than a generic penicillin? Dr. KtrNIN. No; I have no reason to' prescribe this over a generic penicillin. It is the buffered variety. This is probably the buffered penicillin G. Except, perhaps, as I may have mentioned to you, the fact I believe that there is a formulation for a liquid oral form which is very nice for young children. Mr. GORDON. I am talking about the tablets. Dr. KUNIN. In the case of the tablets they are probably essentially identical so far as I know. They have the same amount of the same drug and if it is buffered penicillin G, it is fine. Mr. GORDON. But the doctor prescribes it simply because it is the name made familiar to him by advertising and promotion? Dr. KUNIN. Sure. This is a reflection of the tremendous effect of heavy promotion of drugs on the practice of physicians. Senator NELSON. I `think that is all the questions we have, Dr. Kunin. We appreciate very much your taking the time to give us your very valuable testimony. It will be very `helpful to the record that the sub- committee is compiling. ` ` ` Dr. KUNIN. Thank you very much. ` PAGENO="0291" COMPETITIVE PROBLEMS IN' Tim bRUG INDUSTRY 729 (The prepared statement and supplemental information submitted by Dr. Kunin follows:) STArEMENT OF DR. CALVIN M. KUNIN Senator Nelson, members of the subcommittee, staff and guests: Before I begin my te~timony, I would like to state cl~arly that the views which I shall' present are, my own and in no way represent those ~f the University of Virginia' School of Medicine, where I am employed. My qualifications include the foll'~wing educational background and experience: LB., Columbia College, 1949. M.D., Cornell Medical `College, 1953. Intern in Medicine, The New York Hospital, 1953-54. Senior Assistant Surgeon, U.S.P.H.S. `assigned to the Communicable Di'sease Center, 1954-56. Assistant Resident in Medicine, Peter Bent Brigham Hospital, Boston, Massachusetts, 1956-57. Research Associate, Thorndike Memorial Laboratory, Harvard Service, Bos'ton City Hospital working under Dr. Maxwell Finland. Assistant Professor of Preventive Medicine and Medicine, University of Virginia School of Medicine, 1959. Promoted to associate professor, 1964, and' `to become chairman and professor of Preventive Medicine,' effective Septem- `ber 15, 1967. I am certified `b~ the American Board of Internal Medicine and the American Board of Microbiology. My fields of `special interest include internal medicine, infectious disease, epidemiology and specifically, pharmacologic aspects `of antimicrobial chemo- `therapy. I make no pretense of being an economist or a sociologist, but will try to presen't my views as a clinical investigator and tea'cher. You have presented me with an outline of general questions to be discussed' with some latitude to present opinions on other topics and personal experience's. I will follow your outline: (1) Views concerning drugs under generic names as against brand names In general, I prefer characterization of drugs by their generic rather than brand names. This is certainly `essential in teaching a systematic approach to. drug usage to medical students `and to people In allied health p'rofession~. The relation of drug structure to function is exceedingly important. Generic names usually render themselves much more readily to classification than do brand names. For example, `among penicillins it is much easier to discuss the pharma- cologic differences between generic names such as: benzyl penicillin, aminoben- zyl penicillin, phenoxymethyl penicillin, dimetboxyphenyl penicillin, oxacillin and cloxacillin than the multiple brand names for' each of these which would be, for example, Wycillin, Polycillin, Pen-V-K, Staphcillin, Prostapblln and Tegopen and many, many more, depending upon the names' of firms selling them. There are only five tetracycline derivatives on the market, bnt more than 20 different brand names for them. This multiplicity of brand names is a source of confusion to stu'dents and practitioners and makes it exceedingly difficult to know exactly what they are using and the relative cost to the patient. It is not uncommon to see the same `drug advertised by different manufacturers to be a superior product to. itself. About 10 years ago, the competition among purveyors of tetracycline was so~ intense that various excipients were added, each purporting to give higher blood~ levels. These "gilded" antibiotics were shown by a number of investigators to~ be essentially the same and although the noise in this area has quieted some- w'hat, much of the advertising energy has been directed to long acting prepara- tions which really are not very much, if any more, effective. All of these promo- tional schemes did not increase the physician's therapeutic armamentarium, bu~ led to much confusion. Small variations on such themes appear to be designed to keep the companies one step ahead of the clinical investigators who require time to catch up with them by careful comparative studies. Thus, from the point of view of clarity of expression and understanding, generic names are preferred over brand names and I attempt to use only generic terminology in all my lectures and conferences and talks with practitieners It is of great aid in the ideal hospital formulary in keeping drug inventories minimal and less expensive to the patient. PAGENO="0292" 730 COMPETITIVE PROBLEMS IN THE DRUG INDU5TRY I have read carefully Dr. Richard Burack's book, Handbook of Prescription Dru~s, and, although I might quarrel about a few technical points, and find his catalogue of drugs too Incomplete for an adequate reference for physicians other than for cost, I agree with his general theses. Dr. Burack Is primarily concerned with the interest of the patient and the cost of drugs to him, Most physicians are equally concerned about cost and the lists supplied are very helpful, indeed. The practicing physician, however, and I include myself here, Is troubled by what the commercial pharmacist might do with his carefully worded generic prescription. How can the physician be certain that the pharmacist will always give the patient the least expensive preparation, or even that he will carry it in Stock? It is entirely possible that the pharmacist may charge prime prices for a low cost generic preparation. This problem Is minimized, of course, in hospitals armed with a fo.rinulary system and con- scientious pharmacists, and by agepcies which make bulk purchases; but, what about the corner drugstore? It would seem to me that this Issue could be resolved, in part, by routine meetings between a committee of each county medical society with a counterpart committee from the local pharmacists. A semiofficial formulary with enough flexibility to meet special situations could be devised, Care would be taken that marginal manufarturers not be included. I would visualize that both generic and brand name preparations be available, but that the physician and pharma- cists decide exactly where generic drugs may be Included to best benefit patients. I believe that the physicians should then be supplied with a list of costs in his area so that he may prescribe wisely. In this way, it is hoped, that confidence between the two groups may be established and that the patient will also gain more confidence In the professions that guard his health. This Is the Monopoly Subcommittee of the Senate Small Business Committee and I may seem to have overstepped my bounds by presenting you with what might appear to be collusion between physician and pharmacist; although this is not my intent. I would like to see some force from the private sector protect the patient's pocketbook from `overzealous promotion of drug firms, and enable the pharmacist to maintain a smaller inventory. (2) The advertising and promotion of drugs and their impact upon medical practice One has to be blind, deaf and dumb and to lock his office if he wishes to avoid being deluged with direct mail advertising, journal advertising, visits by detail men and more recently heavy promotion in "throwaway" unsolicited journals which, for the most part, serve as advertising vehicles, Booths are set up in hospitals and agents of drug firms walk the floors. I have no objection to ethical promotion of products, but the matter seems almost out of hand. I was particularly disturbed one day when my group was given the opportunity to spend time with a medical school class to teach careful diagnosis and manage- ment of patients with infectious disease. One of the patients we discussed had a rare, but complicated problem which required good clinical judgment and thanagement. We were very pleased to present to the students the details of the evolution of the problem. We then had a class break for 30 minutes, When the students returned, some reported that they had discussed the problem with one of the detail men. lie confidently promoted his product and the students then asked, "If so-and-so's drug is good, why do we have to bother about learning how to diagnose the patient's problem? We could just use that drug." This is, of course, the antithesis' of good medical practice and almost undid our teaching effort. Sometimes I feel as though the detail man has more time allotted to him in the "hall medical school" than do teachers of infectious disease in, the medical school curriculum. Similar problems are encountered in house officer training. Medical student exercises in analyzing claims made in drug advertising are very enlightening to them and to their teachers. Such discussions are an im- portant training ground for the future practitioner, It would be wrong to blankedly condemn detail men. They are often helpful to physicians and simply doing as they are told. Their gimmicks, however, are dis- turbing. These include unnecessary and useless presents. Steak parties for house officers, gifts of books and medical bags to graduating students and trips to the big city including wives of medical students. This seems to be going much too far. The companies seem to be trying ~to make friends of impressionable medical students and house offlcab~ to open the' future `office doors to their detail men. A paper by Hagood and Owen, Virginia Medical Monthly 9f: 110-114, 1967 sup- porting this position, is attached. PAGENO="0293" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 731 (3) The reZati've efftcac~i of drugs, e~pedli~zZZy antibiotio8 It is certainly true that antibiotics differ, in relative efficacy for various in- fections. The subject, however, is very cothp1e~ because of the great variety of disease states which must be treated and the large number of .good drugs that are available. One drug can be more effective in a given situation than another while the reverse might be true under different circumstances. For example, penicillin would be preferable in pneumococcai pneumonia to tetracycline, whereas tetracycline might be preferable to penicillin in~ an infection of the urinary tract or in Rocky Mountain Spotted Fever. This problem is well covered in good text books of pharmacology in the AMA's new book New Drugs, which is updated each year in the medical literature and as brought out in teaching conferences, lectures and seminars. One factor that frequently governs choice of antibiotics, is antibiotic sen- sitivity testing. This laboratory test is usually helpful when properly conducted, but can be misleading. For example, pneumococei (the causative agent oct many cases of pneumonia) are uniformly sensitive to penicillin G, the drug of choice. Erythromycin is available for those patients who are allergic to penicillin. No sensitivity test need be done, indeed if they were done, the physician might use an inferior agent. Similarly, in importaut staphylococcal infections, the drugs of choice are penicilling G for sensitive or one of the new enzyme resistent penidilhins for resistent organisms. Patients allergic to ~enieillltt could be given cephalothin or vancomycin. Accordingly, at the University of Virginia Hospital, we do sensitivity testing only for the drugs of choice. If we were to include all the available agents, an inferior drug which looks good in the test might be used and the patient suffer from poor or inadequate therapy. Unfortunately, it has become a standard practice for certain drug firms to offer to donate sensitivity tests for their own bran.d of drugs, and to give the laboratory large supplies of report forms with the brand name listed. This often results in duplication, since the generic drug is already being tested, or to the most direct form of advertising of what may be an inappropriate agent. I be- lieve that this practice should be stopped. (4) Problems conaected with contiav4ng education of physicians Many enlightened drug firms support continuing education programs for phys.. icians. These are usually well attended and the "sell" is so soft as not to be obnoxious. Nevertheless, physicians earn adequate incomes and the courses are not so expensive as to be better funded by medical societies, hospitals and medical schools without the direct support by drug firms. I have no ohjection to the firms supporting hospitals and medical education, indeed, they must and should be more generous, but I would urge that this be done by general in- stitutional grants that really amount to a sizeable contribution rather than to the frills of a sporadic meeting. The problem of continuing education is one of the major responsibilities of medical schools. These efforts are now beginning to be well organized. I be- lieve that unobligated funds from the drug firms and government would be of great help in their growth. (5) Other aspects of this subject I would like to take the rest of m.y time to decry the use of fixed combina- tions of antimicrobial agents. The combined use of drugs has an ancient history which dates back to an age when therapeutic medicine was little better than witchcraft. Most of the old classic prescriptions which prescribed a variety of ingredients are no longer part of modern medical practice. Ct'mbined use of drugs are, however, some- `times of value and a case can be made for using them in antimicrobial therapy. These can be generally summarized as in cases of 1) desiring to broaden cover- age in unkown infection, 2) delaying emergence of resistant bacteria to one of the drugs (this is commonly used in treatment of tuberculosis) and 3) achievIng an effect not possible with a single agent, so-called synergism when the effect of `the combination is greater than that achieved by the addition of the properties of the two agents. Actually, except in tuberculosis and a rare form of infection of heart valves, combined use of drugs is of little value, except in desperate situations before the physician has adequate information about what bacterial infection is occurring and must use his clinical judgmen:t. A careful review of fixed branded combinations on the market, including com- binations of penicillin and sulfomamides, penicilling and streptomycin, tetra- PAGENO="0294" ~732 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY cycline and antifungal agents and tetraç~yclir~e and novoblocin, does not sub- stantiate claim's that the combinatioli is superior to one of the agents used sep- -arately. These combinations are expensive, deny the physician flexibility in dosage, are primarily promotional devices and have the inherent problem'that the patient undergoes the risk of serious adverse reaction to two or more drugs rather than to a single defined agent. The physician can not determine which component is causing trouble if a bad reaction is encountered. I personally believe that we would do much better without these preparations. In summary, Mr. Chairman, I have tried to give you a brief and honest pres- entation of my personal views on some of the problems of drug usage in infec- tious disease. I may have seemed rather hard on the drug industry; I do not mean to subject them to harassment since they have made major contributions to good medical care and will continue to do so. I hope that they wUl not be overburdened with rules and regulations. I speak to them as a friend who finds some faults, but does so to be helpful. The physician's primary responsibility is to his patient; all other considerations must be secondary. Thank you. Enclosure. [Reprint from Virginia Medical Monthly, vol. 94, pp. 110-114, February 1967] THE IMAGE OF THE Dnua INDUSTRY, AS SEEN BY TOWN AND GOWN William J. Hagood, Jr., M.D., Clover, Va., John A. Owen, Jr., M.D., * Charlottesville, Va. (Presented before the Public Relations Section of the Pharmaceutical Manu- facturers Association, Sixth Annual Meeting, Hot Springs, Virginia, October ~-7, 1964. (From the Division of Clinical Pharmacology, Department of Internal Medi- cine, University of Virginia School of Medicine, Charlottesville. Aided by Train- ing Grant HE 5544 from the United States Public Health Service.) Results of a questionnaire with regard to the pharmaceutical industry and products are presented During the last years the pharmaceutical ipdustry has repeatedly made head- iines-not always to its advantage. Perhaps for this reason, the Public Relations Section of the Pharmaceutical Manufacturer's Association included in its 1964 ~onvention program a panel discussion on the industry's image in the eyes of the physician. In preparing our independent presentations for this program we distributed two questionnaires: one to 200 general practitioners in the rural areas and small towns of Virginia and the other to the medical students, interns, and residents of the University of Virginia Medical Center. The contrasting re- spouses from the two groups have given rise to some discussion and conclusions ~which may be of interest. THE GENERAL PRAOTITIONERS' QUESTIONNAIRE There were five general questions on this list, as follows: 1. What is your impression of the pharmaceutical industry? Why do you have the opinion you have expressed? 2. What influences you to use a drug company's product? Why do you think the influences yäu have expressed are important? 3. Do you favor the continuing use of the medical service representatives or "detail men" by the drug companies? Why? 4. Do you think the cost of drugs is too high, too low, or about right? What would you suggest the pharmaceutical industry do to better inform the patients why drugs cost what they do? 5. What is your opinion of the apparently growing practice of physicians gaining a finahcial interest in pharmacies and drug distribution firms? Why do you have this opinion? Of the 200 physicians queried, 80 (40%) responded; these 80 resided in 55 of Virginia's 99 counties and had practiced medicine from three to 61 years in offices located either in open rural country or in villages ranging in population up to 4200. In the following paragraphs, percentage figures will be based on the 80 responses. * PAGENO="0295" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 733 In reply to the first question, 64 physicians (80%) affirmed that they have a good impression of the pharmaceutical industry, based primarily on the indus- try's extensive research programs and high ethical relations. Another 9% were non-commital. Only nine physicians (11%) actually criticized the industry be- cause of exorbitant prices, pushy and garrulous, detail men, or e~eessive adver- tising. As reasons for using a specific company's product, 40% claimed to be guided mainly by previous results with the product, 33% by the positive, influence of detail men, 28% by the over-all integrity, of the company, 21% by medical jour- nals, and 14% each cited the research behind the drug and the relative cost of the drug as being crucial to their decision. There were in all 17 reasons given, the least popular (1 physician, 1%) being the evaluation of the drug by the Zkfedioai Letter. Regarding the utility of the detail man, 85% of general practitioners gave him a strong vote of confidence, because his new drug information was valuable to them and he could order drugs directly for dispensing physicians. The other 15% felt that In view of the abundant available literature his services could be eliminated and the resultant savings be passed on to the patient. Questioned about drug prices 51% of general practitioners thought that they were "about right", and 45% thought that they were "too high"; none considered them "toO low." Furthermore, 24% urged a better public relations attempt to help the layman understand why drugs cost what they do. However, one phy- sician urged the opposite course; "reduce the cost instead of spending more money to tell the patient why drugs are expensive." Finally, the general practitkmers were definitely opposed (75%) to the practice of physicians gaining a financial intereSt in pharmacies and drug distribu- tion firms. THE MEDICAL CENTER QUESTIONNAIRE Questions 1 and 2 required a listing of material gifts from drug companies and stock ownership in them. Questions 3-5 asked for a graded evaluation of the pharmaceutical industry on its (1) record in the development and testing of new drugs, (2) margin of profit in prescription drugs, and (3) performance in dissem- inating information about new drugs. Questions 6 and 7 trIed to assess the impact of the new Food and Drug Administration regulations concerning clinical trials in terms of general awareness and reaction. In question 8, each person was asked to compare and rate the following over-all sources of comprehensive information about new drugs: faculty and house staff, scientific meetings, scientific articles, advertisement in medical journals, mail literature from drug companies, detail men, the "Physician's Desk Reference," the Medica' Letter and drug inserts. Question 9 asked for a correct matching of both the generic names and the thera- peutic effects to the trade names of twenty common drugs. Question 10 was multiple choice: "The pharmaceutical industry could better serve the medical profession by (1) continuing just as it is; (2) cutting prices; (3) developing more new drugs at a faster r~tte; (4) sponsoring more post-gradu- ate courses; (5) distributing more educational material; (6) changing its ad- vertising policy as follows; (7) changing its drug development policy as follows; (8) changing its detail man program as follows; (9) changing its drug sample policy as follows; or (10) other." Question 11 asked each person to assign a grade rank to the following factors as strongly affecting his opinion (good or bad) of a specific drug company: "(1) advertisements; (2) experience with its products; (3) gifts and services to you; (4) research support; (5) assistance in post-graduate and medical educational programs; (6) detail men; and (7) others." Return~ from this questionnaire were scattered, ranging from a 7% response from the second-year class to a 30% response from the fourth-year class. There were 73 questionnaires completed and returned from the 384 persons polled, an over-all 19% response. Almost everyone had received some sort of gift from one of the drug companies. Eli Lilly and Company had donated 57 pen lights, 46 medical bags, 45 percussion hammers, 35 stethoscopes, 30 pocket notebooks, 28 tuning forks, 19 pen knives, and 18 tape measures, as well as sundry other diagnostic aids, to the 73 persons polled. Burroughs Welleome & Company had given 18 pocket notebooks, Ciba Pharmaceutical Company had distributed 11 subscriptions to the Ciba~ ~ym~posia, and Wyeth Laboratories had given 10 pen lights. In all, 19 drug companies were listed as donors, some only once, of generally minor and inexpensive gifth. PAGENO="0296" 734 COMPETITIVE ~ROBLEMS IN THE flEUG INDUSTRY Of the 73 polled, si~ owned stock in one or more drug companies *~ncl 58 o~ the non-owners conslde~rd such stock tb be a good fir~aneial in~restment. Meet answers rated the flilarm'aceutlcal fndu&t~ry's reeord in development arid testing of new drugs as good (41, or 56%), Its' xàarging of profit in prescription drugs as wide (35, or 48%), and lt~ performance in difiseminating `information about new drugs as good (39, or 54%). Most of the other answers were equally divided between the twO evaluations nearest the mode ("very good," and "fair"). I~nowledge ~f tile culrreult Food and Drug Administration tegulations regarding clinical drug trials seemed to be greater among residents than `medical students: 26 out of 35 students had at most a vague cognizance of them; 17 out of 3~ r~sidenfis had a fairly good or exact knowledge. Most medical students felt they ~~bre "ne~essary and reasonable", but the residents were divided equaIl~ between t1~is viewpoint and "necessary and unreasonable". In addition, five residents felt them to be "unnecessary and un'rea's~onal~1e", and three "highly commendable and lOng over-due". The ratings of best sources of coipprehensivé information about new drugs are shown in Table I. The influence of faculty and house sta~ rises to a peak during the intern ~rear and then progressiveIy~ decUnes. Articles' in medical ~ournals' appear to be `the, most co~islste~iUy respected authority throughout, with the Medicca Letter running a close second during the post-graduate period. Adver- tisements,, mailed~ literature and thO detail man are usually at the bottom of the' list, although the latter performs better during senior residency years. TABLE l.-Q.8. WHICH DO YOU BELIEVE TO BE THE BEST OVERALL SOURCE FOR COMPREHENSIVE INFORMATION' ABOUT NEW DRUGS? VLegend: MS-medical student; 1.-intern; R.-resident. Numbers indicate years of training. Abbreviations for sources self-explanatory.) M.S.2 M.S.3 M.S.4 I. , R.l R.2 R.3 R,4 Insert Journ. FacHS. Meets. P.D.R. Ads. P.D.R. Journ. FacHS. MedLet Meets. Mail Insert Detail Ads. Journ. FacHS. PO.R. Insert MedLet Meets. Mail Ads Detail. FacHS. Journ. P.D.R. Medlet Meets. Insert Ads Mail De1~aiI. Journ. MedLet FacHS. Meets. P.D.R. Insert Ads Detail Mail. Journ. MedLet FacHS. Insert P.D.R. Meets. Mail Ads Detail. Journ MedLet Insert FacHS. Detail P.D.R. Meets. Mail Ads. Journ. MedLet Meets. FacHS. Detail P.D.R. In the matching quiz, s'ome generic names `were almost as familiar as their corresponding trade names but there were some impressive dis0repancies: 60 persons correctly described Elavil (Merck Sharpe and Dohme) as a mood elevator hut only 14 of these knew that its' generic name was amltriptyline; 60 persons knew the therapeutic action of Duleo'lax (Geigy) but only 23 knew its generic name. The last two questions produced the most spontaneous responses. The sug- gestions for the pharmaceutical industry are summarized in Table II. The same general sentiments are reflected In the responses to the last question, illustrated in Table III. The same three Sources of `dissatisfaction (detail men, advertise- ments, and gifts) are again apparent. TABLE II.-~Q. 10. The drug industry conid best serve the medical profession by Sponsoring more po'st-gradiipte courses 18 Distributing more `educational material 18 nutting prices 16 Changing its advertising policy 15 Changing Its drug sample policy 15 Changing its detail man policy - 14 Developing morO new drugs at a faster rate 7 Changing its drug `development policy_~ 7 Continuing just as it is PAGENO="0297" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 7~ TABLE I .-Q. 11. YOUR OPI NION (GOOD OR BAD) OF A SPECIFIC DRUG COMPANY IS MOST STRONGLY AFFECTED BY Factor ". Total response Favorable Unfavorable Either ,." Experience with products . Qetail men .~_ Advertisements 57 9 - -, 1 32 1 12 1 23 2 7 3 8 3 Personal gifts, ~ Postgraduate educafional support~- - - Research support i9 17 8 -- -~ 14 8 -- -- ~ :, ~ OOM~INP It would be imprudent to attempt multiple interpretations of the responses to two different questionnaires, distributed to two different and beterogenous groups, with such a variable percentage of replies. However, the following similarities deserve emphasis. 1. There is general appreciation for and `satisfaction with the over-all per- formance of the pharmaceutical industry. 2. A feeling that drug costs are too high o'r profits too wide is evident in 45% of the answers from the general p~'actitione'rs' and in 48% of tho'se from the M~dicai Center. ~. Most do~cto'rs judge a drug company by the efficacy of its products, with the activities o'f the detail man receiving second place in consideration. In addition, one may aisk what is t'he comparative efficacy ef the three forms of advertising: direct mailing, m~edical journal ads, and the detail man? The physician hais a built-in bias against them all, knowing that none is likely to give him what he wants: a carefully balanced comparison of the product vs. (a) older, simpler si~b!stances, (b) new prolducts of competitors, and (c) no treatment at all. Also, to ma3ce best nse of his limited reading time he `gladly dispenses with all save the moist authoritative sources of information. So' It is unlikely that mail literature and journal advertising have any lasting impact; both could probably be curtailed completely without much effect on the practice of medicine. `This is true because in their alsence the detail man could serve the same functions. Conversely it is hard to see how impersonal mailings and glossy adver- tisements could take the plaice of an ideal detail man; cheerful, helpful, disarm- ingly proprietary, willing to listen and happy to debate. Althougti the physician `spend,s time with him, he spends it as he choo~ses; he can in effect carry on a conversation `with a person, with a drug company, o'r with the entire pharma- ceutical industry. If the ideal `detail man exists, he is clearly outnumbered 1y his i~perfect brethren who reportedly interrupt the office routine, parrot steretoyped encomi- urns, hawk their wares in a truculent manner, and talk without listening. This confrontation dest'ro~s the one thing the physician wants: a ichai~ce to learn some valid information. Since the physician jim unlikely to change his attitude, the pharmaceutical industry must `become mo're information-oriented. The metamor- phosis cannot occur ,spontaneouuly b'ut requires active an'd vocal effo'rt on the part of the physician. The following avenues of information have h~en worked `out at many teaching medical centers: 1. A hospital `policy for detail men requires that any "detail visit" (five mm- utes) to any physician be ~c'beduled through a central office. 2. A similar `policy encourages drug `companies' to work through a central office in arranging clinical trials of new drugs, thus bringing together the most promisin'g drug and the bost-qualified investigator. 3. Book's, films o'r other educational material can be useful in both medical and po'st~graduate education; `courseS and lectureships, research fellowship's and honoraria for visiting ispaakers have been `deeply appreciated `gifts from the pharmaceutical industry. 4. O'dca'sionally the drug `company may `support an entire laboratory or clinical rctea'rcb area, where patients a're ho'sp'italized for `study by all the newer tech- niques of clinical pharniacology. Implicit in all of these programs is the presen!ce of a piro'fesis'ional p,er'sons or `persons who maintains a liaison with the `drug house `representatives and ar- ranges these collaborative efforts. At every opportunity `such a perSon works toward one `specific goal-to help bring the best information available fro'm the drug houses to the phySicians. PAGENO="0298" 736 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY Whenever the physician works activcty in cooperation with the pharina- ceutical indnstry in these areas~ be appreciates anew its acienti~c contribution's and puts auide his built-in reststan~e to its `commercial aspects. Thus these possible approaches to a elo~er working relationship, while Sometimes apparently restrictive, `cannot fail to increase the physician's appreciation of the Industry- a `reservoir of good will which is a powerful reality anki capable of even greater enihancement. The medical profession and the pharmaceutical industry, working together, (Should bend themselves to that task. (Whereupon, at 2 p.m., the subcommittee recessed, to reconvene at 10 a.m., Thursday, August 10, 196~T.) PAGENO="0299" COMPETITIVE PROBLEMS IN TILE DRUG INDUSTRY THURSDAY, AUGUST 10, 1967 U.S. SENATE, MoNoPoLY SUBCOMMITPE'E OP THE SELECT COMMITTEL ON SMALL BusINEss, Wa~shington. D.C. The subcommittee met, pursuant to recess, at 10:10 a.m., in roocill 318, Old Senate Office Building, Senator Gaylord P. Nelson (chair- man of the suboommittee) presiding. Pres~nt: S~nators ison, Soott, Javits, and Hatfield. Also present: Benjamin Gordon, staff economist; Susan H. Hew- man, research assistant; and William B. Cherkasky, legislative di- rector, staff of Senator Nelson. Senator NELsoN. The committee will come to order. Our witness today is Dr. James L. Goddard, Commissioner of the Food and Drug Administration, U.S. Departme~iat of He~alth, Educa- tion, and Welfare. Dr. Goddard, the committee is grateful that you were willing to come here today to give your constructive and valuable testimony. You may proceed in any way you see fit. I assume you have no ob- jection to my interrupting from time to time with questions. STATEMENT OF DR. JAMES L. GODDARD, COMMISSIONER OF THE FOOD AND DRUG ADMINISTRATION, U.S. DEPARTMENT OP HEALTH, EDUCATION, AND WELFARE, ARLINGTON, VA.; ACCOM- PANIED BY WILLIAM W. `GOODRICH, GENERAL COUNSEL; DR. HERBERT L, LEY, DIRECTOR, BUREAU OF MEDICINE; ALFRED BARNARD, DIRECTOR, BUREAU OF REGULATORY COMPLIANCE; AND DR. DANIEL BANES, ACTING DIRECTOR, DIVISION OF PHAR- MACEIJTICAL SCIENCE Dr. GODDARD. Not at all. We are pleased to be here today. Accompanying me are William Goodrich, general counsel; Dr. Herbert Ley, Director of the Bureau of Medicine; Mr. Alfred Barn- ard, Director of the Bureau of Regulatory Compliance; and Dr. Daniel Banes, who heads our Division of Pharmaceutical Science. We appreciate this opportunity to appear before you and comment on the drug questions this committee is considering. It has been sev- eral years since the Senate has considered in such depth the relation- ship between the pharmaceutical industry, those who prescribe and those who use drug products. `Since this relationship-at this time, so closely bound together by new Federal and State health programs- is of principal interest to the Food and Drug Administration, my staff and I are most pleased to appear before you this morning. 737 PAGENO="0300" 738 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY As you, Senator Nelson, have indicated several times, one of the major interests of this committee is the pricing o'f drugs, the actual costs to the patient or the ~nsti;tutional purc'hasrng agent `of the life- protecting and lifesaving drugs available. While our agency `does not have jurisdiction over prices, nor have we sought it, we are concerned primarily that the American consumer receive quality drugs. The operations of the Food and Drug Administration are geared toward assuring that all drugs are reliable. The administrative work of our agency, the review ~f data that comes into our medical and compliance bureaus, and our constant surveillance over the drug industry are aimed toward this goal. If all drugs are reliable, then there i's a basis for price competition. I would like to sta~te, and later discuss briefly, the factors that must operate if w~ are to be sure that all marketed drugs are reliable: 1. There must be honest, soundiy conceived, and well-executed research to establish a drug's safety and effectiveness fOr its in- tended use before it is marketed commercially. 2. There must be proper manufacturing, packaging, labeling, storing, and shipping `of `the drug. In short, there must be goo'd manufacturing practice. 3. The existence of goOd manufacturing practice must be checked not only, by the producing firm, but also by a separate impartial agency. The FDA~ is the impartial agency. 4. Users must have adequate, truthful information itbout the drugs they employ. Drug names should be as simple and useful `as possible, drug, labels and advertising should be honest, and summary information about the entire drug arinamentarium should be readily available `to every professional in `the health team. There is, o'f course, an additional safeguard which needs no elab'ora- tijon from me, that is the continuing communication throughout the medical community of information about the results o'btained with drugs in clinical practice. The 1962 drug amendments to the Federal Food, Drug, and Cos- metic. Ac.t signifl~antly expanded onr agency's authority over drug commerce, and for the first time placed FDA in a position to require correction of `a number `of abuses that were then apparent. Senator NELSON. May I interrupt just a moment? Does your agency supply directly to physicians any information, clinical or other, that is important? Dr. GODDARD. We rarely do that, Senator. We have, I believe twice in the past year, sent `a letter directly to physicians. This is a very costly procedure for us as `an agency. These were unbudgeted costs and I think each letter ran approximately $40,000 in direct costs to the `agency. Now, there is, therefore, a limitation in dollar costs in direct communications. Senator NELSON. Would you consider it of value for your agency to have more continuous direct contact with physicians? Dr. GODDARD. Yes; I think it would be extremely valuable if we had a continuing contact and channel of communication. A two-way channel, by the way, would be most effective between the practicing physicians and the Food and Drug Administration. We would like PAGENO="0301" COMPETITIVE PROBLEMS IN THE DRUO INDUSTRY 739 to be able to share more effectively information that we have about drugs and in turn, have physicians inform us about their experiences with the drugs that they are using on their patients. Now, I have no question that as our data processing capabilities develop and as the communications linkages now being tentatively explored are developed that we can be involved much more directly with the practicing community. In some countries-Australia, Eng- land, for example-they do have much more - frequent comniunica- tions between the Government agency and the physician than we do~ These are smaller countries with fewer physicians, of course. Senator NELSON. Would it be feasible as some partial achievement of that objective of communication to regularly communicate with the president of the county medical societies, or that your communica- tion be read at county medical society meetings, or that they dupli- cate it and send it to physicians, that sort of thing? Dr. GODDARD. This is a possibility that we had discussed in the past. It is one that we have not used and need to explore further, Senator Nelson. There are 3,000 counties in the United States today and this should not be an excessive burden in communication costs for us. The only problem is whether the next step is actually taken to get infor- mation from the county medical society secretary to the members. I think in most instances we could count on that being done. Senator NELSON. What kind of information did you send in the two letters? Dr. GODDARD. Well, the letters that we have sent primarily are con- cerned with changes in labeling and adverse reactions to drugs. We have also caused other letters to be sent by firms with respect to their advertising. This was done under our direction, so iti a sense, we caused a communication to occur then, too. Senator NELSON. I think the idea of better communications is a good one. As a matter of fact, I did not know that you had sent the letter, but in 1 week's time, two physicians mentioned to me that for the first time during the course of their practice, they had heard directly from the Commissioner and they were very pleased to have received your communication. Dr. GODDARD. We get a fair number of letters from physicians, Sena- tor Nelson, who express their point of view about a given drug or about these letters sent to them and raise questions with us. That is fine, too. There is just the very beginning about some communication now between the Food and Drug Administration and the practicing community. We badly need to encourage that. We would welcome the more frequent direct communication, particularly on drug experience, from the practicing physicians. In turn, we need to get information out to them and we will be exploring a variety of methods for doing this. Mr. GORDON. Dr. Goddard, can you conceive of a communications network tying the FDA in with every doctor in the country? Dr. GODDARD. I can if it is a network that is created for purposes other than communication only with the FDA. We did look into the possibility and had a number of meetings with A.T. & T. in early fall of last year, with the American Medical Association, PMA and others involved in these meetings to try to explore the use of the existing tele- phone network to get messages to doctors quickly when there was a PAGENO="0302" 740 COMPETITIVE PRO EM~ IN TIlE DRTJO INDUSTRY need for this. Such a capability does exist. The costs at that time were considered to be perhaps excessive. We are also exploring at the present time the possibility of a communication system using the phone, with a number listed here in Washington that physicians could call from, say, 9 in the mormng until 10 at night and let us at FDA know their experiences with drugs. Hopefully, this sort of system could someday be expanded to provide information to the physicians upon their request. I would say in direct answer, yes, we do visualize the possi- bility someday, but no, the price of such a system would not be justified by our need to communicate, but rather, as the communications capa- bility develops in the medical community, we wish to take advantage of it. The 1962 drug amendments, as I said, significantly expanded our authority over drug commerce and put us in a position to require correction of a number of abuses that were then apparent. For example, enactment of the 1962 law: Required new drugs to be proved effective, as well as safe be- fore marketing. Provided better means for withholding or withdrawing ap- provals of new drugs.' Gave us authority for th'e `first time to make complete.inspection of factories making prescription drugs. Required drugs to be produced under current good manufac- turing practice. Authorized us to establish simple, useful common or generic names for drugs. Established an effective control over prescription drug advertis- ing and placed it under FDA. Extended batch certification to all antibiotics for humans. The 1962 law also expressed the desire of Congress for more and better control of drugs being tested clinically on man, and required strengthening of revised regulations that FDA had proposed that same year. Let me now `discuss those four factors that must be present if our Nation is to have a good drug supply. Senator NELSON. Is there any reason why batch certification of all drugs used on humans would not be feasible? Is there anything pecu- liar about antibiotics? Dr. GODDARD. You recall antibiotics are used in what one would have to term lifesaving situations. The antibiotics developed largely after World War II in terms of the number that were being marketed, and it was felt that careful control had to be exercised because of the com- plex production process. Thus these controls were put into effect and batch-by-batch certification has been carried out now since 1962 for antibiotics. I believe that insulin batch-by-batch certification pre- ceded that in 1941. These were `the basis for batch certification. Senator NELSON. Are there any other drugs that ought to be batch tested? Dr. GODDARD. We did propose to Congress last year, Senator, that the Secretary of Health, Education, and Welfare be given the author- ity to extend batch certification to those drugs that were significant drugs or for which' the health of the public might be more directly protected under such circumstances-such potent medications as corti- PAGENO="0303" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 741 costeroids, for example, were considered as potentially susceptible of this approach. This legislation was not acted on last year. It is some- thing that is currently under study by the Food and Drug Adminis- tration along with other methods of helping to assure the quality of drugs in the marketplace. Senator NELSON. Thank you. Dr. GODDARD. Before 1938, drug research and investigation was pre- dominately empirical; the law did not require conclusive establish- ment of either the safety or the efficacy of a drug before marketing. Many discoveries were fortuitous. In many instances serious side ef- fects were discovered only after the receipt of complaints as the drug was distributed widely. One of the most important provisions in the 1938 Food, Drug, and Cosmetic Act was a requirement that all new drugs be studied and evidence of their safety be submitted to this agency for approval before the products were shipped. Here we see a major step toward rational therapeutic science. This was a substantial improvement in scientific method as well as in the law. After 1938, the accumulation of at least some clinical data was necessary before a drug could be marketed. The Food and Drug Administration, in administering the law, could require the accumulation of preclinical and clinical data according to a reasonable protocol before allowing the drugs to be marketed. But again let me emphasize that approval of drugs under this 1938 act was only contingent upon a showing of safety-not a showing that the drug would be effective for all of the conditions for which it was to be offered. The 1962 amendments correct this defi- ciency by requiring a showing of effectiveness, as well as safety. At present, no drug may be shipped across State lines for experi- mental use in man until certain requirements, which are set forth in our investigational new drug regulations, are met. Some of the key provisions of these regulations are: The sponsor of an investigation shall prepare and present an accept- able plan for the investigation. The plan describes the drub, outlines the experimental procedure, and identifies the qualified person who will conduct the studies. It establishes mechanisms for monitoring the studies, reporting on their progress, keeping all investigators as well as the agency informed of any hazards that are discovered, and taking the needed steps to carry the investigations out in a way that would minimize the risks to subjects of the experiment. The subjects, inci- dentally, must consent to participate, except in certain well defined situations where obtaining consent is not feasible or is not in the in- terest of the patient. Senator NELSON. Has this provision of the law been complied with consistently by those doing the testing? Dr. GODDARD. This particular provision was implemented under the regulations that we issued last September, as I recall, and took effect July 1 of this year. This was debated rather extensively in the scientific community. We had a number of meetings with olin ical in- vestigators about the provisions of these regulations and modified them slightly in accord with and following these discussions. But we think we have followed the lines that Congress intended us to in the 1962 amendments. Senator NELSON. Did the 1962 amendments require that patients PAGENO="0304" 742 COMPETITIVE PROBLEMS I~ THE DRUG INDUSThY be informed if an experimental drug is going to be used in treating them? Dr. GODDARD. Yes, except in those two instances. Senator NELSON. In what two? Dr. GODDARD. Where it was not feasible because of the state of the patient in terms of either his consciousness or awareness, and second, when it would be detrimental to the best interests of the patient. Senator NELSON. Then those cases which we have read about where physicians actually either falsified the record, or didn't ask the patients, were clearly violations of the law? Dr. GODDARD. They would have to be construed that way, sir. I would like to point out that in terms of physician investigators, the agency has had relatively few of these whose data has been falsified. This has only happened in a handful of cases, and we do have 25,000 investigators of record at this moment. So by and large, I would have to sa~ that the physicians have conducted themselves in an exemplary fashion. Se4ator NELSON. 25,000? Dr. GODDARD. Yes, sir. Senator NELSON. Full-time investigators? Dr. GODDARD. No, sir. Not full time. You see, the firms, particularly in la~'ge pharmaceutical manufacturers, who sponsor much of the research, use large numbers of investigators, particularly in phase 3 investigations, when they are trying to test the, drug under conditions of usual usage. They may go to 100 obstetricians and gynecologists to try a drug that would be particularly useful in their practice. Then there may not be occasion: for that particular company or any other company to call upon that group of physicians for some time-severa1 years or even longer. So there are a large number of persons whose names are on our files as active investigators, "active" in quotes. Senator NELSON. You are not talking about investigators who review the work done by the physician who experimented with a new drug? Dr. GODDARD. No, no. Senator NELSON. I see. Dr. GODDARD. They are clinical investigators. The agency keeps current on investigators, either from reports or through inspection, requires that the studies be carried out accOrding to a rational plan, requires modification of the plan if necessary, and occasionally orders the investigations discontinued if the plans were not adequate, were not being followed, or if the investigation produced evidence that it was unsafe to continue. Ourrently, the Food and Drug Administration has 2,188 active investigational new drugs-IND's-oxi file, with an annual entry of new IND's running at a current rate of approxmiately 700. Thus, about a third of the IND'S on file at any one time are new for the year; another quarter will be discontinued within the year. The point which I wish to make here, Senator Nelson, is that with the IND procedure, FDA has a chance to follow drug research from the beginning; we are thus better able to react when the manufacturer requests that we approve commercial marketing of the new drug. The manufacturer requests such approval in an application~ which we call a New Drug Application, or simply an NDA. The NDA contains or PAGENO="0305" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 743 refers to all the evidence upon which the manufacturer bases his belief that the product is safe, and effective, and also contains copies of the labeling which he proposed to use in promoting and selling the prod- uct-the submission of this labeling and our approval of it h~ve an important bearing on truthful advertising of prescription drugs as will be discussed shortly. Senator NELSON. The New Drug Application does not involve the question of patent? Dr. GODDARD. No, sir. Senator NELSON. So this is a nonpatentable drug? Dr. GODDARD. The drug itself may be in addition patented by the manufacturer. I believe the patent period is 17 years, which gives him. commercial exclusivity. Senator NELSON. Are most of the New Drug Applications drugs that are n.onpatentabie? Dr. GODDARD. Of the NDA drugs in the past decade, as a rough estimate, 50 percent of them, I am told, would be drugs that are not patented. However, I must point out that the members. of the industry have said to me in discussions that holding a valid NDA is as good or better than having a patent. Senator NELSON. Why? Dr. GODDARD. Because of the policy of the Food and Drug Admiais- tration. We do not make public the information submitted by a manu- facturer with respect to the clinical studies, the preclinical animal studies, the toxicity data- Senator NELSON. What is that now? Dr. GODDARD. We do not make public any of the data submitted by the manufacturer in his NDA. Senator NELSON. So if a nonpatentable drug goes on the market,, and another company desires to manufacture it, it would have to make a chemical analysis of the drug, perform the animal and clini-. cal testing that the law requires, and then present the New Drug Appli- cation to FDA for exaëtly the same drug that has been adequately tested before, is that correct? Dr. GOIiDARD. That is correct. Now, the timespan covered from the discovery of a chemical entity until its ultimate marketing, on the average, through the NDA pro-. c.edure is about 7 years. Senator NELSON. The timespan for what? Dr. GODDARD. The discovery of the chemical entity, its testing in the. laboratory and all the steps it has to go through right up to marketing with a valid NDA, is approximately 7 years. So you see if a company can get an NDA approved and get into the marketplace with .a drug,. their leadtime may be sufficiently great that they can capture a signi~- cant share of the market and hold it for a long period of time. Senator NELSON. Well, the same applies if a drug is patented. Then. for 17 years, if it is a good, valid patent, the manufacturer has ex- cli~sive control in `this country over the sale and distribution of that. drug; is that right? Dr. GODDARD. That is correct, sir. Senator NELSON. I assume that the circumstances are different be-. tween a, New Drug Application and the requirement that any competi- tor go through the experimental process when a patent. expires. 81-280-pt. 2-67----20 PAGENO="0306" 744 COMPETITIVE PROBLEMS IN THE DRuG INDUSTRY Dr. GODDARD. The difference there would be that there would be a body of established literature after 17 years that would permit the truncating of the New Drug Application. The individual firm then in- volved could submit a shortened NDA, a short form NDA, in essence, citing the world's literature with respect to clinical safety of the drug and so on. It would still have to submit, however, the manufacturing procedure, the quality controls, the labeling that is to be used and in some instances, even some clinical studies showing that the drug man- ufactured by that process would produce the effect that to be claimed. This is particularly true in the antibiotics field. Senator NELSON. Did I understand you correctly that once the pat- ent expires, Food and Drug does not require any manufacturer of the drug on which the patent has expired, to repeat through all the clinical testing. Dr. GODDARD. Not all of it, no. As I say, some of the information to support an NDA that the manufacturer sends in can be drawn from the existing world literature. But there is still some duplication, Sena- tor, make no mistake about this. Some of the toxicity studies would have to be repeated on animals and some of the clinical studies may have to be repeated-not in every instance, though. Senator NELSON. Is there any reason for requiring any extensive testing of prednisone which has been on the market for 17 years and is being produced by 50 companies? Along comes a company which wants to produce the drug and if they meet the requirements of TJSP, is there any reason why they should go any further? Dr. GODDARD. We think there is a reason they should submit a New Drug Application in order that we may control the labeling, the ad- vertising that surrounds the drug, have knowledge of the manufactur- ing process that is going to be employed. We feel that the drug should come in under the NDA procedure. Now, the part that Congress itself has never discussed, Senator, is whether or not this information that we hold in our files should be made public and thus avoid duplication of scientific effort and repe- tition of certain kinds of experiments. And it is not only for the drug that is now coming out of the patent protection status after 17 years. This holds true for those drugs that are not patented and thus could be marketed by additional firms at any time. In other words, those in which 17-year exclusivity is not involved. Now, in most of those instances, the complete work has to be dupli- cated. All the clinical trials, additional subjects studied, all the pre- clinical animal data has to be duplicated. I think this is a question that Congress must examine, however, with respect to the policy of FDA. In the 1962 amendments, the language, the legislative history, shows no consideration of this at any time. Senator NELSON. But there is no statute that sets out this require- ment- Dr. GODDARD. No, sir. I think that with regard to a policy that has been in effect as long as this one has by the Food and Drug Administration, I would, as an administrator, `be guilty of overturning what amounts to-.- Senator NELSON. A `bad rule. Dr. GODDARD. I do not mind overturning a bad rule. But this is something that I think the Congress itself has to study. This is an established policy, it is an accepted policy. I think it needs debate and PAGENO="0307" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 745 `discussion by the scientific community as well as the drug firms in- volved. Senator NELsoN. Well, speaking for a moment of a patented drug. The company that has the patent has gotten from the Congress 17 years of exclusive use, which is a good long time. Then, as the Commis- sioner is well aware, once a drug has occupied the market for 17 years, the habit of prescription is such that the original product most often dominates the market thereafter. They may reduce the price, but they ~have the advantage of having dominated the market, and of having ~had 17 years of experience with producing the drug. Is there any reason at all why, once a patent runs out, that the FDA should not then open up its files to reveal all of the information and background testing, instead of preserving an unfair competitive situation at great expense to the public? The Congress did not intend a patent to run beyond 17 years, but in effect, this kind of secrecy keeps small compet~ itors who could not afford the testing out of the market. It just ham- pers competition unnecessarily. What is the justification? Dr. GODDARD. Mr. Goodrich, do you want to supplement my earlier remarks on this? Mr. GOODRICH. Our concern, Senator, is not with t.he patent, but with the drug being safe and effective for the purposes for which it is offered. Now, through the drug procedures, there are fundamentals that the labeling be controlled and that there be established a system to keep us up to dateon those drugs. It is a gross oversimplification to say that simply because the two drugs are the same by clinical test, they will have the same chance or you will get the same experience from them. Now, it is important to us- Senator NELSON. That you get the same experience? Mr. GOODRICH. You may get a report of an adverse effect from one drug that you do not get from another. It is very important to us, we think, that we get complete reporting of ~linical experience with the drugs and the only way to do that is through the new drug proce-~ dures. Now, even with an unpatented drug, before the 17 years runs out, if the date is made available in the scientific literature, it is pos- sible for other manufacturers to use that to obtain an effective ap- proved New Drug Application. Senator NELSON. You can't get a New Drug Application when there is an existing patent. Mr. GOODRICH. No, I am speaking of the unpatented drug. With an existing patent, he might get an approved New Drug Application, but would not be allowed to market it because of the patent laws. Senator NELSON. I do no't think you have responded to me. Maybe I did not state the question very clearly. The question is what is the policy reason, at the expiration of 17 years of the patent, for the FDA not immediately making public all the information it has about the drug, including the experiments on the animals, experiments on hu- man beings, and so forth. Why should that not become public informa- tion forthwith? Dr. GODDARD. There is no reason why it should not be, but when the Congress passed the Freedom of Information Act, which provided that commercial and business information be exempted from public disclosure. There is a provision in the Criminal Code that prohibits PAGENO="0308" ~46 cOMPETITIV1~ PROBLEMS IN THE DRUG INDUSTRY us from divulging information of this kind. Also, there is provisions in the Federal Food, Drug, and Cosmetic Act about trade secrets. Now, these provisions collectively were the basis for the policy established sorne years ago. It has been followed. We have said in 1962, and repeat here again today, that if Congress wishes us to make that information available generally to other manufacturers, we are prepared to do that. But we think it was presented to us as business and counnercial information and thus we have not made it generally available. We do, however, accept in New Drug Applications scien- tific data. about these drugs which is reported in the open literature and allow other firms to rely on that. Senator NELSON. Have you been advised by the Attorney General's. office that it would be illegal for you at the expiration of a patent, when all legal protection is ended under the law, to disclose everything you know about a drug? Mr. Goonnion. We have not. We have asked them several times their interpretation of title 18, section 1905, I believe it is, how they inter- pret that. We have not received an awful lot of help from them. Senator NELSON. You have not had an answer? Dr. GODDARD. They have not told us that we could do it and in the~ recent Attorney General's manual on the Freedom of Information Act, there is a discussion of commercial and business information which covers this kind of information. That is an exception to the open disclosure. Senator NELSON. You mean commercial and business information. that the Government picks up from a business you are noLperinitted~ to reveal to his competitors? Dr. GODDARD. Right. That is what we are talking about here. Senator NELSON. It is really not the same question where a patent is involved, is it? Dr. GODDARD. I think it is broader than the patent policy. This is the very point. Senator NELSON. This does not seem to me to be a very sound public policy position. The Congress gave a 17-year exclusive right of pro- tection under a patent. I do not think atiybody intended that such~ protection should continue beyond that time. Let me ask you another question. You are much stricter then, under the requirements of the New Drug Application. Do I understand correctly that if company A makes a New Drug Application for a drug that is not patentable, is on the market for 4 or 5 years, is a good drug, and then another company wants to ~ut it on to the mar- ket, you require company B to go through the same clinical testing: that you required of company A; is that correct? Mr. GOODRICH. We may or may not. Dr. GODDARD. We may if the scientific literature does not provide a sufficient amount of information with respect to clinical studies. In that case, company B may be required to repeat, in e~ect, those studies carried out along the same lines by company A. Senator NELSON. How often do you permit a company to submit a New Drug Application on* the same chemical formula as one that is. on file without requiring any clinical tests at all? Mr. GooDRron~ It is very infrequently that we say no tests are necessary. PAGENO="0309" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 747 Senator NELSON. Clinical tests. Dr. GODDARD. Very rarely. Mr. GOODRICH, But we say in every instance, Senator, that you can * refer to and use in your New Drug Application scientific data in the open published literature as part of the New Drug Application. We want to be sure that these drugs are safe and effective and we believe that as a general rule, there should be at least some clinical testing of all new drugs by whomever put them on the market. Senator NELSON. Well, I understand the Commissioner to say that the New Drug Application is almost better than the patent. Dr. GODDARD. That is what I am told, Senator. Mr. GORDON. It is better. Senator NE~JSON. Now, when company A makes a New Drug Applica- tion which meets the standards of clinical and other testing and you issue the New Drug Application, is there anything to prevent company A from licensing company B to produce that drug? Dr. GODDARD. Company B would then have to provide proof that they had obtained such permission and also get an NDA approval by FDA. This would be done on the basis of incorporating by reference in their NDA the material submitted by company A. Senator NELSON. So we are in the most unusual position where a pri- vate company has more authority to delegate the right to manufacture a drug than is exercised by the FDA? Dr. `GODDARD. Yes, sir; in a sense. Senator NELSON. That is an incredible situation, Dr. GODDARD. We hold the final approval authority. Now, that is a business arrangement, the licensing arrangement, over which I do not believe we should have any control. Now, we do, however, control the NDA that the second firm may get. Senator NELSON. If you require that company B makes a New Drug Application for exactly the same compound for which an NDA has already been granted to company A, the basis for your position that there has to be some clinical testing is, I assume, the protection of the patient. Why is it that then company A, fine as it may be, which has no official public responsibility, can take the New Drug Application that the FDA gave them and license B, C, D, E; if you look at pred- nisone there are at least 22 companies that Schering licensed. You say you do not have any right to interfere in licensing. This is not a licens- ing question, it is a health question. Dr. GODDARD. Oh, we do have the authority to make certain that the health of the public is `being protected in this fashion. E~ach one of those 22 firms then has to get an NDA approved by FDA. Senator NELSON. But you allow them, if I understand you correctly, Doctor, to incorporate the testing that was done `by company A. Dr. GODDARD. The clinical testing. senator NELSON. Yes. Dr. GODDARD. The manufacturing controls and manufacturing pro- cedures and submission of samples and the factory inspection, how~ ever, are carried out de novo. The labeling is also under our jurisdic- tion, and thus the advertising is controlled. The only thing that is omitted in that instance is the animal toxicity study and the clinical testing on humans. Senator NELSON. But why can't you have confidence in company B taking a compound that is available to everybody in the market, and PAGENO="0310" 748 COMPETITIVE PROBLEMS IN THE DRTJG INDUSTRY without any clinical testing at all, produce tablets to go on the mar- ket-B, C, D, E, F, G, H, the whole series of companies-just because Schering, say, licensed them? You say, well, if Schering licensed them, they are able to incorporate Schering's clinical research into their application and that excuses them from going this long route, which you have testified takes as long as ~T years. Dr. GODDARD. That is correct. Senator NELSON. I do not get an answer that rings any music in my' ears. Dr. GODDARD. We are having trouble communicating, Senator. What I are trying to say is we are protecting the public's health in that instance by making certain that the company is capable of pro- ducing the drug and producing it properly, with the right manufac- turing controls, quality controls, under sanitary conditions, without contamination of the tablet. Now, we yield and say, yes , company A proved this drug to be safe and effective. We don't need any further proof than that because Schering, or company A, has on a business artangemient- permitted. all the~e other companies to use the clinical information they submitted. Now, we accept that, just as we will accept use of the world's litera- ture to prove safety and effectiveness for drugs that are not patented~ It is the same situation, Senator. In those instances- Senator NELSON. Did you say same or strange. Dr. GODDARD. Same. Senator NELSON. I just wanted that in the record. Well, it is a strange situation to me. It seems to me that you have a situation where- Dr. GODDARD. Well, I think I can see why you feel it is a strange sit- uation. I also feel t'hat there is some unnecessary duplication involved in these activities, and that is why the question comes up. I think prop- erly that the question should be discussed by Congress in terms of the scientific community and the business community involved. Congress should get down to the issues involved here and see whether or not the interest of the public at large might better be served by a public policy which permitted disclosure of the clinical, the scientific information incorporated in New Drug Applications. Senator JAvIT5. Would the Senator yield? Are you prevented in making that public now? Dr. GODDARD. Senator Javits, we think we are. I as an administra- tor think the past policy of not~ revealing this type of information in effect binds me not to change the policy until there is proper discus- sion by Congress. Senator JAvIT5. Well, why do you say discussion? Do you want law by Congress, do you want a recital in the congressional report? What do you want? Dr. GODDARD. I think it would require law in this instance-a change' in the law. Senator JAvIT's. So though the law does not actually foreclose you. you still want affirmative law to release you, is that right? Dr. `GODDARD. That is correct, sir. `Senator JAvITs. Because you say the practice has been such that it makes you feel you cannot do it? PAGENO="0311" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 749 Suppose the President told you to do it? Would you have authority to do it under the law? Dr. GODDARD. I would have to ask Mr. Goodrich, my general counsel. Senator JAVITS. What about asking him, then? Mr. GOODRICH. The recently passed Freedom of Information Act which you are, of course thoroughly familiar with, continues the ex- emption for commercial and business information from public dis- closure. This is the policy that we have followed over the years and we propose to follow it from here in, up until the time that Congr~ss changes the law. If the President directed us to make commercial and business in- formation available, this is an exemption from the disclosure which could be waived by Executive direction at that level. Senator JAVITS. Well, I have been kind of browsing through your statement. You indicate that you would recommend that where firms are marketing the same compound, that is page 14; that is correct, is it not? Dr. GODDARD. Yes. Senator JAVITS. FDA would recommend that this be done and that is one of the things that can be recorded if we choose to espouse it as a recommendation of these hearings. Is that correct? Mr. GOODRICH. We are recommending that that issue of. policy be examined by the `Congress and according to our position in the testi- mony, we believe that it might be very worthwhile to shift from an individual licensing situation to a rulemaking situation. Senator JAvITS. One other thing you said that finds an echo in my mind. You said something about your authority with respect to ad- vertising, a subject which we have heard a good deal at these hearings dealing with the alleged overwhelming volume and intensity of ad- vertising as very much boosting costs. Yet I see you claim to be pretty powerless in this regard. Your statement says at the top of page 12: To say that our Agency has had some difficulty with claims made by many companies in drug advertising is to understate our experience of the past year or so. Do you wish us to believe that you do not have enough authority? If so, where are you deficient in authority? Dr. GODDARD. I iwas not raising the question of authority there, sini- ply trying to cite the problems we have had with firms exceeding the permitted labeling and the difficulties we have had to get them to adopt the basic concept that drug advertising is educational and thus should be truthful, that it differs from advertising of motor vehicles and other items in our economy, that there is a special significance here. That is what I was trying to get at, Senator `Javits. Senator JAVITS. Well, do you have authority to enforce that? Dr. GODDARD. Yes, and we are enforcing it now. We have proposed for adoption new regulations on drug advertising. September 1 is the final date for receipt of comments. These regulations are being studied by the pharmaceutical industry at the present time. Senator JAVITS. Well, one would get the impression that you are being run by events and tha't you are not running `them. You have the authority and yet you sort of give the feeling that your hands are tied. What are we to conclude? PAGENO="0312" 750 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY Dr. GODDARD. Well, perhaps this is not properly stated, Senator. I have 10 men in the `advertising division who have to, review all drug ad- vertising put out by the pharmaceutical industry. Now, as a matter of priority, we have tried to conceiitrate on new products en'tering the marketplace, to try ito catch misleading promotional campaigns in the Pearly days before tl~ie misinformation gets firmly implanted in the phy-. sician's rniiid, So, in terms of extent of coverage,, we perhaps have not been as comprehensive as one could or might determine desirable. But we think we have the authority. In fact, we have been getting correc- tions of misleading advertising put out by ~pharmaceutical firms in the form of "Dear Doctor" letters mailed to every physician. Senator JAvrrs. But we are justified, then, `in the impression that up to now you have been sort of' overwhelmed by the problem arid by these practices and you have not been able to do too much about them. You have gotten some corrections, you have amassed some "Dear Doc- tor" letters; you have a small staff, you are issuing regulations which are being considered, but really, the problem has inundated you? It has certainly been testified to us as if you did not have any ppwer over it at all, and that things were just running wild. Dr. GODDARD. Well, Senator,' I think it is just a question of the volume that is involved. I am told the expenditures in drug advertis- ing, in all forms of drug prQmotion, exceed $800 million a year. Now, we in truth can't review every ad in every journal. I do not think this would be desirable. What we have been trying to accomplish is, through our selective actions, to get. the pharmaceu~ieal manufacturers to exer- cise some leadership and to voluntarily see to it that their ads are honest, truthful, and provide the information as Congress intended, in fair balance. Senator JAvIT5. Well, now, you have not even issued adequate regula- tons to make them do that, let `alone policing the authority that you have. Dr. GODDARD. `Senator, we think these regulations that are out now are more adequate than the ones that were issued in 1963. I personally thought the ones issued in 1963 were adequate in both the degree of detail they provided and in expressing what was intended. But, con- tmually I heard the complaint from the firms that came into my office that the regulations were not explicit enough, they were not clear on what is meant by "in fair balance." So these new regulations are more detailed. Senator JAvITS. Well, now, have you tried any enforcement against firms you thought were abusing the old regulations? Dr. GODDARD. Yes; we have seized products in the marketplace in at least three instances in the past year. We have in other instances had the firm come in and we have sampled their product. In the event that they chose not to issue corrective letters and drop their misleading journal advertising, we have been prepared to go the other, route of bringing the issue before the courts. So we have taken action of that nature. Senator JAvrrs. But you have obviously not taken enough action to have a material effect on the situation. Dr. GODDARD. Senator, I may be an optimist, but I begin to feel that I am seeing some improvement in journal advertising. I look at these journals and I have greater difficulty in finding violative ads PAGENO="0313" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 751 just on quick inspection. I think that the firms have a desire to improve their advertising. They believe that we are going to enforce the law and the regulations that were put out under the law. And this has been an important factor. The agency did not, from 1963 until 1966, take many actions on drug advertising. Senator JAVITS. Well, now, with reference to the efforts at self -regu- lation, have you had any meetings of the whole industry where you laid down the law? Dr. G0DDAm. We have had meetings on self-regulation with repre- sentatives of the PMA, a committee that was appointed by their orga- nization to discuss this. We have had. meetings with individual com- panies. I have spoken to the entire membership of the PMA, as well as the Drug and Allied Products Guild and expressed my concern on this subject. We had a meeting of the adirertising firms in New York that was attended by over 700 individuals last fall. We met in Chicago. I personally spoke before the midwest advertising group and' people from the west and east coast were also in attendance. The ballroom was filled at that hotel. I think that the industry has had ample oppor- tunity to learn from us what our position is. Senator JAvITS. Under those circumstances, I request that you sub- mit for the record your plan, including personnel and cost, that you feel would be required in order to really perform the duties vested in you by the law in respect of this matter. Dr. GODDAIID. I would be happy to do so. (The information referred to, subsequently received, follows:) STATEMRNP OF THE FOOD AND Dnuo ADMINISTRATION REoARDING THE PLAN FOR IMPLEMENTING MEDICAL ADVERTISING SECTIONS OF THE 1962 AMENDMENTS The Division of Medical Advertising currently has a staff of eight full-time professional employees. It includes one Medical Officer, the Division Director; four PHS Scientific Associates, two physicians and tw'o pharmacists assigned to FDA by P115; two Food and Drug Officers; and one advertising analyst. The cost in fiscal year 1967 for this program, including the salaries and expenses of the professionals together with benefits and clerical support, was approximately $125,000. The following is a list of some of the activities of the Division of Medical Advertising in fiscal year 1967: Citations and hearings 7 Seizures (Lincocin, Lasix, Indokion) Prosecutions filed 3 Letters to firms regarding corrections', advisory opinions, etc 70 Meetings with firms `on advertising matters 75 PDR and supplement monographs reviewed in fiscal year 1967 170 PDR and supplement monographs reviewed in fiscal year 1966 36 Participation by division personnel in public meetings, seminars, etc., on medical. advertising 4 Drugs subject of "Dear Doctor" remedial letters issued by the drug sponsors at request of FDA 14 P0 accomplish the desired program in fiscal year 1969 would require a total staff of 13 physIcians and 10 other professional health personnel. The cost of such a program, including clerical support, benefits and miscellaneous expenses, would require `a funding of approximately $418,000. In addition, it should be noted that the Division of Medical Advertising regularly uses as consultants Medical Officers. of other areas of the Bureau of Medicine, especially those Medical Officers whose evaluations contribute to the approval of the NDA for the drug being advertised. PAGENO="0314" 752 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY Senator JAVITS. That seems tome to lead to the key thing which our chairnian has directed our discussion. It seems as if you have; the au- thority to wqrk out names for these drugs, so the public can buy generic drugs and be confident in purchasing drugs. Is this a field where you have inadequate staff and inadequate organization to do what needs to be done? Dr. GODDARD. 1 believe we have an adequatestaff in this area, Sen- ator. We have been working with the tTSAN, U.S. Adopted Name Council. Last fall we did propose for adoption 27 names that they had recommended. We now have membership on the council, something that we did not have before so we have a voice in the actual selection of the generic name that is to be used. Senator NELSON. What is the composition of the committee that selects the names? Dr. GODDARD. A representative of the USP, a representative of the industry, a representative from the American Medical Association, a representative from the National Formulary, and an FDA repre- sentative. Senator JAVITS. But the 1962 amendments, you say, authorized FDA to establish simple, useful names for drugs. Now, people who have been in business, and I have very extensively as a lawyer, realize that when you ht~,ve the muscle, it is a lot easier to get cooperation than when you have not. Has the FDA asserted this authority to fix the brand names itself in a wholesale way-that is, fix the names itself, if the industry did not? Twenty-seven certainly sounds like a real drop in the bucket. Dr. GODDARD. We have not on the generic names. Now, every firm that brings a drug into the marketplace has to suggest a generic name at that same time. This has been done since 1962, but FDA as an agency has not exercised that authority and did not until last fall. Senator JAVITS. Will you be good enough to give us also a memo- randum as to what it will take to exercise that authority effectively so we get some action in this field which as one Senator, I feel is more im- portant than anything else in this business. That is how competitive forces operate. If a fellow calls for a drug with a very simple name, it takes all the Romans out of the name business. Thank you, Senator Nelson. (The information referred to, subsequently received, follows:) STATEMENT ON A PLAN OF ACTION i~r FDA FOR IMPLEMENTING THE PRovIsIoNs OF THE 1962 AMENDMENTS Wirii RESPECT To ADOPTION OF OFFICIAL NAMES OF DRUGS The United States Pharmacopeia (USP) and the American Pharmaceutical Association (APhA) through its publication of the National Formulary (NF) have been selecting nonproprietary names as the official names for drugs included in these comj~endia since well into the last century. The Council on Pharmacy and Chemistry-later the Council on Drugs-of the American Medical Association (AMA) undertook in 1910 the selection of non- proprietary names for new drugs in collaboration with the respective sponsoring pharmaceutical firms. This served a useful function in that the inclusion of newly developed drugs in official compendia was often delayed for several years or they were never accepted as official drugs. On eventual acceptance of new drugs by these compendia, however, the nonproprietary names selected by the Council on Drugs of the AMA were usually adopted as official names. This mutual interest between these organizations led to the formation of an AMA-USP Nomenclature Committee in June 1961 and then to the United States Adopted Names (TJSAN) Council in January of 1964 for the purpose of selecting nonproprietary names. PAGENO="0315" COMPETITIVE PROBLEMS IN TUE DRUG INDUSTRY 753 The USAN Council, sponsored by the AMA, tSP and APJiA (publisher of the NP), negotiates with manufacturing firms in the selection of nonproprietai'y ~names for drugs which it is un~lerstood will be adopted as official names if the drugs are included in either compendia. On tentative selection by the Council of a nonproprietary name It is submitted for comment to collaborating organiza- tions-FDA, WHO and the pharmacopeial commissions of the British, French end Nordic countries. By this procedure conflicts of the proposed names with existing nonproprietary names or trademarks may be revealed and avoided in the final selection. This collaboration, however, does not assure the selection of the same names by these organizations. Although the names adopted by the USAN Council do not have statutory recognition many of them eventually echieve this recognition by acceptance in official compendia and they have as a general rule been accepted as nonproprietary names in the approved labeling of drugs by FDA. The 1962 drug amendments gave the Secretary authority to "designitte an official i~ame for any drug if he determines that such action is necessary or de- sirable in the interest of usefulness and simplicity." FDA has initiated action to assure the selection of names which are in fact simple and useful and to des- ignate them as official by publication in the Federal Register. On April 20, 1967, official names for 28 drugs were published in the Federal Register, following publication for comment in August 1966. These were names originally selected by the USAN Council. The list would probably have included others if there bad been no question of their usefulness and simplicity. In the fall of 1966 FDA approached the USAN Council In the interests of pro- moting the selection of simpler names which would be more useful to the health professions, in order that the names selected by the Council could routinely re- ceive official recognition by publication, in the Federal Register. This led to two important developments. The first was a revision of the existing guiding prin~ ciples of the Council for the selection of names. This was accomplished by in- corporating into them a number of guidelines recommended by FDA. The re- sulting "Guiding Principles *`~*" are published in the current (number 5) edi- tion of "United States Adopted Names," and in the 1967 edition of "New Drugs Evaluated by the AMA Council on Drugs." A second development was an agreement between the sponsors of the USAN Council (AMA, USP and APhA) and 1~DA whereby the latter would appoint a member to the Council and agree to accept any name on which the Council is unanimous as the established or official name. In the event that the USAN Coun- cil cannot reach a unanimous agreement on a name the Commissioner of the Food and Drug Administration reserves the right to select the official name. For the latter purpose it is the intention of the Commissioner to appoint a committee, expert in this area, to advise him should the occasion arise. The program under this agreement has been operative since June 24 of this year with Dr. Ralph G. Smith as the FDA representative on the Council. An intramural Advisory Com- mittee on Drug Nomenclature is being appointed to assist Dr. Smith on any special nomenclature problems encountered in relation to USAN activities or otherwise. The publication of additional official names is currently in process and it is intended that such publications will be a continuing operation. This arrangement promises to have merit in that FDA obtains the services of an experienced organization with established procedures for the~ selection of appropriate and available names while retaining its legal authority to make its own selection in case of disagreement. It is also advantageous to the USi~~N Council to the extent that the names which it unanimously selects will be ac- cepted as legally official names. Through our policy of cooperation with the USAN Council will result in gradual, periodic designations of official names, it has the overriding merit of using a recognized orga~nization with established procedures and expertise in this area. The Food and Drug Administration budget allots some $50000 per y~ear for thiS activity which is carried forward by a medical officer and support staff, `aided by expert consultants. Senator NELSON. When did Congress take the power away from the companies to formulate the generic name for the drugs they develop? Mr. GOODRICH. Congress did not take the authority from the com- panies to formulate names. What it did in 1962 was to provide that PAGENO="0316" 754 COMPETITIVE PROBLEMS IN THE DRUG INDTXSThY the agency could adopt established names in the interest of simplicity and usefulness. The step we took `to implement that was to require soon after the passage of the law that. each new drug application pre- sented to us: provide for an~ established name `for the drug. Then, as Dr. Goddard said, last year we took' a number of established names, adopted through this USAN committee, and adopted them as our o,wn as simplified names. This is the only way those USAN names can be given legal effect, either by our adoption or by an adoption by the U.S. Pharmacopeia. or the National Formulary. Senator NELSON. Who has the' authority to decide what' the estab- lished name shall be? Mr. GOODRICH. The ultimate authority rests in the agency. however,. Congress did continue the practice o'f recognizing USP and Na- tional Formulary names as the `established names unless we establish an established name as an agency name. Senator NELSON. So the law `historically was that the company that developed a drug provided the name `which became' the generic or established name'; did it not? Dr. GODDARD. That is correct, Senator, NELSON. Now, they still supply a generic or established name and it may or may not be accepted by USAN; is that correct? Dr. GODDARD. That is correct. And' it may or may not be accepted by FDA. Mr. Goom~icu. And for us to make the USAN name binding, it would have to be adopted by the agency or by one of the official compendia. Senator NELSON. You did not happen to bring along a list of generic names supplied by brand-name companies that are shorter than the brand names `they created for themselves; did you? Dr. GODDARD. That would be a very short list, Senator. Senator, NELSON. If company A gets its New Drug Application ap- proved as submitted then it may license company B and several other companies. These other companies then just submit their New Drug' Application and use the clinical evidence originally submitted by the licensing company, company A. That takes away several years of work? Dr. GODDARD. Yes. Senator NELSON. Maybe you could tell me how much of the 5 years. that you say it takes from the beginning to the NDA approval really involves clinical testing on animals as against clinical testing on humans. Now, we have the situation `where company A might license 50 com- panies, some of, them quite small. Each one of that 50, big or small, distinguished or unknown, may incorporate all of the experience of company A. Along comes one of the biggest drug companies in America. Com- pany A did not and will not license them. So they come in and produce a drug that meets all lISP standards-dissolution rate, potency, purity~ and so on. In fact, it meets them better than company A and all the others. , Yet it cannot put the drug on the market without going through that 5 years of research. Is there any ~vidence whatsoever to justify making, this requirement of the large company and not of Ihe other com~anies? PAGENO="0317" COMPETITIVE PROBLEMS IN THE DRUG JNDUSPR'~ 755 I do not quite grasp what you are protecting in the public interest by allowing this company to. license freely. It's licensees have not done the clinical testing. On what grounds do you allow the licensees not to have clinical testing and yet you require tests from the biggest companies in America if they have not been licensed by the original company? Dr. GODDARD. Senator, in the first instance, of the 25 companies, we do know that the drug, as they propose to produce it, has been proven to be safe and effective, because we have the manufacturing control data submitted to us in each of those instances. Senator NELSON. Let's say there is just one supplier. All the firms are using exactly the same compound from the same source. Dr. GODDARD. Right. Senator NELSON. So the only question left is in the formulation of the tablet, is it not? Dr. GODDARD. Yes, Senator NELsoN. If they all meet USP standards why decide that the drug of one of the biggest companies does not get a license when nll the rest do? Dr. GODDARD. Senator, in this instance, if company B's manufactur- ing process were identical with that of company A, I intellectually `would not be able to defend any position here. I could not say that there is a lack of prior proof of safety and effectiveness. Now, the probability of the process being identical is, however, slight, I think. In that instance, then, with the variation in the manufacturing process, the Congress does require that we have proof of safety and effective- ness. The drug has to be demonstrated by the manufacturer to do that job. Senator NELSON. But, doctor, you are undertaking what I think is a marvelous, program. I want to commend you. You have done a great job in your position as Commissioner in behalf of the public interest without being unfair to private interests. You are undertaking a pro- gram now of clinical testing. You confront exactly the same question, because as I understand it, you will take a drug of which there are many versions on the market, and test a certain number of them. Then you will assume that if the rest meet proper standards, they will get the same `clinical result. Now, why can't you do that when company X comes in with a drug which meets all the chemical standards of the version of the drug that is on the market? Dr. GODDARD. The burden is on the company in that instance, Senator Nelson. Also, we do feel that because of the Freedom of Information Act and past policies we would be turning business information over to these companies. And that has been our reason for not doing so. I am ~simply trying to raise before Congress the issue and say this needs to be discussed and our national policy on it examined. I do not happen to agree with it. I think in these instances that it is wasteful of scientific talent and that we ought to devise a better method of handling the problem than we currently have. Now, maybe I am just a coward, Senator, because I am afraid to do this on our own initiative. But I have been açlvised by our General Counsel that we should not take this step and that it is something that the scientific community and Congress need to discuss along with the :business community that is involved. PAGENO="0318" 756 COMPETITIVE PROBLEMS IN TIflt DRUG INt~USTE1' There is one further point. I mentioned before the difficulty in manu- facturing process. A slightly different process might also give unanti- cipated toxic impurities in a drug, too, and thus the safety of the drug has to be checked in those situations. We are dealing with a very complicated issue here, Senator. It is one that I wish I could make extremely simple. But it is not one that I can make simple. Again, it is something that I feel needs adequate discussion here in the Senate and in the Congress. Senator SCOTT. On that question, could I ask a question directed to that? Senator NELSON. Surely. Senator Soo~rr. This is a general question right here, then, Doctor. Would the policing of clinical data furnished by an individual com- pany in the public domain, in your judgment, encourage or discourage more research in private industry? Dr. GODDARD. Senator, I am hard put to answer you on that. Some people have the opinion that it would discourage it. I would hope it would not. I tend to think it would not, because the firm that gets the drug into the marketplace first, as Senator Nelson pointed out earlier, has the marketing advantage in terms of intensive advertis- ing, does tend, the record shows, to hold a competitive advantage in the continuing sale of that product through prescriptions written by physicians. So I do not think it would. But that is just a personal opinion. Senator SCOTT. Not meaning to run ahead of your statement-I am anxious to hear the rest of your statement. You mentioned this on page 14. But just to close off the questions I have on that, let me just ask you, do you feel that this proposal that we are discussing would subsidize those companies who have not done substantial research in the drug field and would, therefore, if that is so, be equitable under our economy? Is there not danger that you're subsidizing the companies not doing the research? Dr. GODDARD. Well, I suppose theoretically, that would be correct, However, Senator, for those products developed from new research which are patented, there is a method available to the firm who chooses to go this route. They then have 17 years of exclusivity granted. Senator SCOTT. Well, what, then, in your opinion would be the future role of the pharmaceutical companies in medical and pharmaceutical research if there were a requirement that the clinical data be put in the public domain? Dr. GODDARD. I would hope their role would continue to be that of the primary producers of new drug products in our economy. This has been a very strong industry. I think it is today. I can't see that this would change. Senator SCOTT. You do not think it would discourage the drug com~ panies from doing a major part of the research? Dr. GODDARD. Well, if their research produces a new product, one that is patentable, I think the economic awards under our system are very great and would continue to provide incentive to the firm. I think that is good, Senator. Senator SCOTT. So long as the Government does not take it all back in taxes. PAGENO="0319" COMPETITIVE PROBLEMS IN THE ~EUG INDUSTRY 757 Dr. GODDARD. That is a different problem. `rhat is out of my province; Senator SCOTT. Thank you, Senator Nelson. Senator NELSON. If I understand correctly, you said that about half the New Drug Applications were for patentable products? Dr. GODDARD. That is an estimate we have made in the past decade; that about half of them are patentable. Senator NELSON. Do the firms usually get a patent if the drtig is patentable? Dr. GODDARD. I assume they do. We do not know. The Patent Office has a serious backlog problem, too, Senator. Senator NELSON. Under the law2 all that is necessary is that the new drug be proven safe and efficacious; is that correct? Dr. GODDARD. Those are the general requirements, and also that they will provide us information on their quality controls and provide good manufacturing practice, et cetera. Senator NELSON. Then, what percentage of these nonpatentable new drugs are really just molecular manipulation or a fixed combination? Senator SCOTT. Would you excuse me, that is how we got here as a result of molecular manipulation, is it not? Dr. GODDARD. Yes, sir, we are products of RNA and DNA, going back to earliest forms of life. Senator NELSON. The results you get by manipulating depends on who you are and what quality you have? Dr. GODDARD. That is right. Senator Scorr. The process provides a good deal of amusement to the human race. Dr. GODDARD. Though one can't take any given year as being com- pletely representative, last year we approved 83 New Drug Applica- tions. Fourteen of these were new products, Senator, really new chemical entities. Senator SCOTT. Under the criteria used- Senator NELSON. Fourteen of- Dr. GODDARD. Eighty-two. So 69 of them were what have been called "me too's" or molecular manipulation. Senator NELSON. They did nothing that some other drug already on the market did not do? Dr. GODDARD. That is right. These 69 represent another tranquilizer, another new diuretic, et cetera. Senator NELSON. No clinical superiority of those 69 over older drugs? Dr. GODDARD. There would be differences in levels of clinical superiority. Senator NELSON. How many of those 69 were fixed-combination drugs? Dr. GODDARD. If I can refer to the record here, less than a third, I would say. I am guessing now. I would like to submit that for the record to be entirely accurate. Senator NELSON. If you would. (The information referred to, suibsequently received, follows:) STATEMENT OF THE FOOD AND DRUG ADMINISTRATION REGARDING THE NUMBER OF FIxED COMBINATIONS APPROVED FOR MARKETING IN FISCAL YEAR 1967 Of the 69 NDA's approved in fiscal year 1967 other than those for new single chemical entities, 11 were NDA's for combination products. Seven of these were PAGENO="0320" 758 COMPETITIVE PROBLE1\~!S IN TH~ DIWG INDUSTRY NDA's for new combination products; four for duplicates of combinations ~tlready marketed~ Counting the latter four, 62 NDA's were approved for ilrugs which were, in effect, "me too" drugs. Senator NELsoN.. We have a situation here.where 69 out of 83 New Drug Applications last year were for drugs that added nothing for all practical purposes to the improvemeut of the, health of the public? Dr. GODDARD. I would be careful on that, Senator, because it is a little early to tell. You kiiow, `the `time a drug is marketed- Senator NELSON. There is nothing that you do know about' it that would prove that it has different functions from any other drug. Otherwise, it would be patentable as something else. Dr. GODDARb. Yes. We know the drugs we have `approved are safe and effective for the conditions `that they are intended to be used. Then we keep them under surveillance for the next couple of years- in fact `from then on in the marketplace-to see if changes have to be made in labeling and if new problems develop. So I am hard pressed, to be really responsive and say there is not anything really good in these drugs. One of those "me to&s" may be a better drug in terms of having fewer side effects in the long run. Senator NELSON. Do you think your clinical tests would not have demonstrated that? Dr. GODDARD. In the number of people involved, side effects might not have shown up. Senator NELSON. But anyway, the 69 had nothing new about them? Dr. GODDARD. Nothing to jump up and down about. Senator NELSON. So what we have really done with the process of New Drug Applications is to take products that are not patentable or whose patents have expired and then, by keeping secret the results of clinical testing, have guaranteed a monopoly or an extension of it. This has been done with no statute on the book that Congress very affirmatively passed. Is that correct? Dr. GODDARD. (Nods affirmatively.) Senator NELSON. You' said that a third of these were fixed combinations. Dr~ GODDARD. I am guessing at that. I would have to get an ac- curate count. Senator NELSON. We have had testimony from pharmacologists, professors, physicians, including Dr. Calvin Kunin on Tuesday, to the effect that there was no reason for using fixed combinations at all. I asked Dr. Kunin if doctors prescribe them because they did not know any better. He was not prepared to say that. He did say, how- ever, that it meant a lack of education in the use of drugs. What's your judgment about fixed combinations? Dr. GODDARD. Senator Nelson, I am in favor of a limited number of fixed combinations. I think they serve a useful purpose in the market- place and they ought to be available for those physicians who view them as offering an advantage to their patients. In the practice of medicine I did use fixed combinations myself. As a patient, there have been times I have enjoyed the advantages of fixed combinations, being able to take one drug instead of two. I think there is a rational place for combinations. I am not a distinguished pharma- cologist and I do not pretend to be. But as a former practicing physi- cian, I would have, to say that I see a very real pla~e for fixed corn- PAGENO="0321" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 759 binations, ones that are rational, particularly in pediatric usage. There are some real advantages. Senator NELSON. I am glad to have your observation. Senator SCOTT. That is equivalent to saying it is easier to get one pill down a child instead of two; is that it? Dr. GODDARD. Is that not right, Senator? Senator SCOTT. Yes. Senator NELSON. And, of course, if the patient suffers an adverse drug reaction, you do not know which drug caused it. That is one of the criticisms made and both pharmacologists and M.D.'s have said they think it was much better to administer them singly. Dr. GODDARD. I submit that you cannot tell if you administer them singly, either. If you are giving a child three different medications during a day, I think it is difficult to sort out which might have pro- duced the side effect. Side effects do not come on in every instance in a time relationship within a half hour of administering the drug. It may be a delayed reaction. Take the common kinds of reactions you experience-urticaria, for instance. In urticaria, a reaction may not appear for several days after the drug has been initiated. So one is hard put to determine at times which drug has caused it. I did mention that there should be some rationality in the situation. We should not have subtherapeutic doses in these combinations. We should not have drugs that are not effective in the combinations. The combination itself should be proven to be an effective one. There are certain rules of science here that should pre- vail as well. Senator NELSON. You have said in some limited circumstances, you approve of fixed combinations. But that is not the rule under which you issue a New Drug Application, is it? If it is effective and so forth, then it can be issued whether it has any additional value over- Dr. GODDARD. That is correct. Mr. GOODRICH. That was a judgment Congress made in 1932 in rul- ing out relative efficacy as a test for approving a drug. Mr. GORDON. Dr. Goddard, I have a question on these NDA's. Sup- pose during clinical testing of a drug, somebody died as a result of taking the drug. Is such information made available? Dr. GODDARD. Are you talking about a drug that is approved and in the marketplace now? Let's say four people have died during clinical testing of drug X which has now been approved by FDA. Mr. GORDON. That is right. Dr. GODDARD. The package insert would include the information that there had been four deaths reported. Mr. GORDON. Suppose it was not approved in that particular form, what then?~ Dr. GODDARD.' If it involved the same chemical compound in a dif- ferent form, there would have to be, as I understand it, a cautionary note, including that information. Senator NELSON. You said that if there were deaths that se'~r'~e(1 to be attributable to the drug and the drug was subsequently approved anyway, the package insert would have to contain the information? Dr. GODDARD. Final labeling. Senator NELSON. Who gets the package insert? 81-280--pt. 2-67-21 PAGENO="0322" 760 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY Dr. GODDARD. Usually the pharmacist. The physician quite often does not get it. Senator NELSON. What good does it do the doctor, then? Dr. GODDARD. This same information would have to appear in the advertising. So there would be not just one channel of attempting to get this information to the physician. Now, I also have a fair degree of confidence that this kind of in- formation would be the subject of a paper in a scientific journal, too. Mr. Goodrich wishes to add something to this. Mr~ GOODRICH. We also have provision in the investigational new drug regulations that all investigators be kept advised as to any ad- verse reactions encountered by any other investigator. Let us say one out of 100 investigators encountered an adverse reaction. We require that that information be disseminated back to us and to all other investigators. On the approved new drugs, every hazard that is relevant is a part of the final printed labeling and that provides the base line for all promotion. By promotion I mean the direct mailing, all the sampling, and all the promotions in the journal and other media. Mr. GoRDoN. My understanding is that a large part of the clinical testing is paid for by the U.S. Government, either within Govern- ment institutions as in VA hospitals, PHS hospitals, Army, Navy, and so forth, or extramurally through Government grants. Dr. GODDARD. Under our public information policies of the Govern- ment that is available, yes. Mr. GORDON. Is that a recent development, or has that been the sit- uation all along? Dr. GODDARD. I am going to have to ask counsel that because I have not been on the scene that long. Mr. GOODRICH. I am not exactly sure of the complete extent to which this information is available, but I do know that the results of the Government-supported research are generally made available to all comers. Senator NELSON. That raises this question. If the Government,then, has done clinical testing on a new drug and finds that the resu J ~s are good, will you allow the firm which submits the NDA on that drug to incorporate your research? Mr. GooDRICH. Yes, if it is in the public domain, of course. Senator NELSON. And you will approve their manufacturing of the drug without going the route of testing it on animals and human beings? Mr. GOODRICH. If the data in the public domain already shows that it has been adequately tested, of course. All we are talking about, Senator, is turning over the business information supplied by one firm to another firm. Any information in the public domain can be incor- porated in a New Drug Application and relied upon. Senator NELSON. Supposing a drug in a New Drug Application has been on the market for 5 years with good clinical results, Company A applies for a New Drug Application on the same drug. Do you still require this applicant to go through the route of testing on animals and humans or do you let him incorporate the public knowledge? Mr. GOODRICH. We let him incorporate the public knowledge. But we want to be sure what the drug is, how it is made, how it is con- PAGENO="0323" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 761 trolled from identity, strength, quality, and purity, how it is going to be labeled, how it is going to be controlled, and that it is indeed the drug that has been tested and has shown itself to be safe and effective. Now, all that is in the literature does not necessarily mean that is all the knowledge about this drug. Senator NELSON. But it is clear to me in any event-that when some- body licenses 25 other companies, the licensees do not really have to meet the same standard as somebody who applies for a New Drug Application for the same compound. Mr. GOODRICH. They have to meet the same standard. Senator NELSON. We went through that. If they all meet TJSP stand- ards they are allowed to manufacture the drug because we assume the clinical results will be good. But the one new applicant is not auto- matically approved, because we assume that he has to prove safety and efficacy. Mr. GOODRICH. We do not make any such assumptions. We make the decision on the basis of the data and the data is used to make that decision depending on whether it is in the public domain and all comers can use it or whether it is private business information in which the owner of that information controls its use. But we would not approve a new drug simply because a second company was licensed. We require the presentation of hard scientific data showing- Senator NELSON. But you remember that you require from the li- censed people that they meet standards of production and USP standards. Mr. GOODRICH. We require the presentation of clinical data and this may take the form of incorporation of the previous clinical data on a business arrangement. Senator NELSON. Does that improve the quality and the proof of the clinical value of that company's drug, whereas B can't incorporate the data and therefore he does not? That is nonsense. Mr. GooDRIcH. I do not agree with that, but since you are the chair- man, I will have to. Senator NELSON. You would be better off if you said there is no justification at all for allowing one company to license five com- panies, incorporate their clinical tests and then because the licensees incorporate the application of the original company, say that the proper standards are being met. Senator ScoTT. I do not want you to feel you have to agree with Sena- tor Nelson, because none of us- Senator NELSON. None of us do. Senator SCOTT. We have various degrees of blood pressure up here and each of us would require different medical treatment, probably. Senator NELSON. My 6-year-old gives me arguments like this some- times. Senator SCOTT. I have found that sometimes the children are right. Dr. GODDARD. The New Drug Application is evaluated by FDA scientists, medical officers, pharmacologists, chemists, who are now organized along team lines handling similar action drugs. We must reach a decision as to whether the usefulness of the drug outweighs its possible dangers. All the experimental data-both aDimal and human -are reviewed. During this past fiscal year-the year in which we PAGENO="0324" 762 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY eliminated the so-called "NDA backlog"-the FDA's Bureau of Medi- cme approved 83 drugs for marketing; approximately 2 dozen of these are considered to be new chemical entities. The discrepancies in this figure and the one I mentioned earlier, Senator Nelson, is that of the 24, 10 of them were different dosage forms of the same chemical entity, but under the rules, they have to get a new NDA for each form. Senator NELSON. If the new drug is approved and there are a dozen other drugs on the market that perform the same function as far as you can tell, the company in its advertising can't claim that it has anything, can it? Dr. GODDARD. Not unless they can substantiate that claim. In fact, that happens sometimes, Senator. A drug, let's say, for example, a tranquilizer produced by 28 different firms, may be advocated in the advertising for minor psychiatric illnesses, tension states, anxiety-we might find almost anything that tranquilizers are good for. Another company may come along and do some entirely different research which shows that children who have, let us say, enuresis, benefit by the use of tranquilizers. That would be the only firm that could make a claim of enuresis relief in that advertising, despite the fact that the other 28 in the market have the same chemical compound. That is another irrationality. During this same fiscal year, Senator Nelson, we received a number of other NDA's and found them not approvable. Five times as many NDA's were found to be not approvable as were found to be approv- able. If, however, two groups of applications, those for pentaerythri- tal tetranitrate-PETN's-and dipyrones-which represent special problems-are excluded from consideration and further discussion, three times as many applications were found to be not approvable as were found to be approvable. The majority of those rejected were found to be deficient in several aspects. Forty-five percent of these unapprovable NDA's did not have enough animal safety data-gener- ally, considerably more animal data are required for commercial marketing than for clinical trial. Seventy-two percent of the unap- provable NDA's did not show adequate clinical safety when used in humans; 76 percent were lacking in clinical efficacy; component and composition data were not adequate in 30 percent and 41 percent of the NDA's returned, respectively. In 71 percent of these NDA's the ap- plication did not stipulate manufacturing controls which we felt would assure a quality drug product. Samples submitted were unac- ceptable in 46 percent of those returned. And in 53 percent of these NDA's we refused to allow proposed labeling. We can anticipate a claim by PMA that these refusals were based on our medical bureau's subjective judgments-with which they disagree. We are prepared to present any of these NDA's to the scientific com- munity for its evaluation of our actions if PMA will obtain agree- ments from its members to release the files. Mr. Goiuow. Would you be prepared to conclude that the work sub- mitted to support the NDA's is pretty sloppy? Dr. GODDARD. What I would say is that it is the present level of sub- mission is not an acceptable level and we intend to take steps to cor- rect these deficiencies. PAGENO="0325" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 763 Senator NELSON. What kind of work are the PMA companies doing on the NDA's as compared to the work submitted by the non-PMA's? Dr. GODDARD. We did this kind of analysis in preparation for the hearing because in a recent meeting, the president of the PMA said there were two drug industries. He raised the issue, so I thought it was a fair way to analyze this kind of data. I can submit the record if you wish, to comparable applications for each category. In general, the PMA did about as well as one would expect on a representative basis, except in two categories where the performance was indeed superior. That was with respect to composition and components, where their percentage of deficiencies were 29 and 23 percent, respectively. Now, in animal safety, PMA. member firm submissions had deficiencies of 49 percent, clinical safety, 60 percent. Clinical efficacy, 56 percent. Senator NELSON. These are deficiencies? Dr. GODDARD. That is right, in the incompletes: Composition and components I mentioned earlier. In manufacturing they also did bet- ter, 46 percent; samples, 44 percent; and labeling, 51 percent. Now, the number of incompletes in fiscal 1967 from PMA was 137 out of 258. So PMA had 53 percent of all incompletes that year. Their overall percentage of performance was about 53 percent, about which one might expect. So you see, it is not a function of size. Senator NELSON. They were not any better off than the others? Dr. GODDARD. That is our evaluation and I am prepared to defend this before the scientific community by letting the scientists evaluate any 10, 20, or any number of applications we rejected as not being complete. Senator SCOTT. Of those rejections how many would you think would be due to differences in interpretation between the FDA and industry scientists? Dr. GODDARD. We, of course, Senator, feel we are correct in our judg- ment and are willing to place it on the line with the scientific com- munity and let them be the final arbitrator. Senator Scorr. In your opinion, are industry scientists on the whole capable and well directed? What do you think? Dr. GODDARD. Well, I must admit we have had considerable dialoge since I have been Commissioner with the industry scientists and I have explained about the quality of IND's and NDA's. I have asked industry scientists to review our IND requirements and suggest im- provements. We have talked at meetings involving industry scientists about the quality of submissions and that quality had to be improved, that we were coming into a different era of drugs; therapeutic agents that were more potent, intended for longer term usage. I just do not find this to be an acceptable record of performance from the phar- maceutical industry. I am not differentiating between large and small and I am trying to be fair about this, Senator. Too often the research offering in the IND's and NDA's seem to have been designed to get `the drug to the market with the minimum data that the manufacturers think we will accept; they are not gen- erally models of scientific planning and clinical execution to produce the evidence that will promptly admit drugs to the market on the basis of proven safety and effectiveness. This is the only conclusion I can draw to explain the large number of applications that are PAGENO="0326" 764 COMPETITIVE PROBLEMS IN THE DRTJG INDUSTRY seriously deficient, except for the few cases in which false data have been submitted to us. Senator Nelson, I have not been satisfied with the research results presented to us. We have taken some steps to try to help industry improve the quality of its NDA submissions; it seems that still more steps are necessary. The high percentage of poor applications must be greatly reduced. There is no reason why a manufacturer cannot do the job properly the first time. Poor new drug studies and appli- cations are wasteful economically; but much more important, they are wasteful of the very limited scientific talent and resources avai]- able for conducting and evaluating clinical trials. Such poor work delays the introduction into medical practice of valuable new thera- peutic agents, and increases the cost of research with no benefit to the public. We have taken a number of corrective steps such as: Working with industry scientists to explain the requirements for good testing. Outlining improved methods for organizing and submitting NDA's. Terminating clinical trials where necessary, and in a few cases barring certain investigators from the privilege of participating in further trials. We are inaugurating a further step that may be of some help; we are going to resort routinely to more formal procedures. IL-leretofore, we have usually advised firms informally of the deficiencies found in their NDA's and given them an opportunity to correct them. The result often has been a time-consuming series of phone calls, confer- ences, or memorandums, meetings. Henceforth, we plan to file each application submitted-unless there are obvious gross deficiencies immediately apparent-and then make a formal decision on that application. This we believe is the procedure the law contemplates. If a manufacturer knows he may not be able to make continuing corrections in his submission, he will have a greater incentive to send us the best possible submission the first time. Further, where the situation warrants such action, our rejection of a poor NDA will be with prejudice to the resubmission of that particular document or its further use if the firm still wants that drug approved. Senator SCOTT. Right there, doctor, when you say these will be rejected with prejudice, does that mean with prejudice also to those whom the drug might help if it is ultimately accepted? How do you handle that? Dr. GODDARD. You are talking about the patients who are being thus denied the benefit of the drug? Senator Scorr. Yes, sir. Dr. GODDARD. Sir, I submit if we are not in a position to evaluate properly the material the manufacturer has submitted, if it is so poorly done, then there must be real doubt in our minds as to whether the patients will benefit. It may ultimately be proven that they will, but we cannot tell the future. We just have to have the proper kind of data. Senator SCOTT. You are making the decision there? Dr. GODDARD. Yes, sir. That is reason for administrative review, Senator, that is available in such instances and we have used this PAGENO="0327" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 765 upon a number of limited occasions in the past and the firms affected have chosen to have a hearing. There is no question that the more stringent provisions of the Kefauver-Harris amendments were intended to require sponsors of new drugs to conduct more meaningful research which will lead to improvement in the drug supply. In many cases the improvement is already becoming evident. This is one of the beneficial results of the passage of the amendments by the unanimous vote of the Congress in 1962. ~nd I might add that the improvement is taking place without ~Eamaging the industry as some of its spokesmen warned would happen-and occasionally still do. The drug industry is healthy, viable, and growing. Mr. GORDON. Dr. Goddard, the material submitted, as I understand it, has to show only that the drug is more effective than nothing, than a placebo, and not more effective than another drug, is that correct? Dr. GODDARD. We are barred by Congress from determining relative efficacy, but it is not quite as simple as saying more effective than nothing. Now, a drug that was only 10 percent effective against a serious condition-in 10 percent of the cases the patient benefited-for instance, if the drug were to be used against cancer, we would approve this drug, even though it had limited effectiveness. Now, 10 percent effectiveness on a new tranquilizer-what would your feeling be there, Dr. Ley? Dr. LEY. There would be very little probability of that drug having really demonstrated effectiveness. "Beyond reasonable doubt," I believe is the phrase utilized in such decisions. Mr. GOoDRICH. That is, substantial evidence upon which it can fairly and conclusively be divided that the drug will have the effect claimed in the labeling. Senator NELSON. Have you departed from the text of the law now? Mr. GOODRICH. No, sir; I have not. My point was that in this area of relative effectiveness, although Congress said we were not to make that type decision in allowing the drug to go on the market or not, they also made the decision that where a drug claimed in its labeling that it was a superior product, there would have to be substantial evidence that it would actually perform in that way. Senator NELSON, I realize this gets into a very difficult area. But supposing a New Drug Application issued on a drug to combat a serious disease, say pneumonia, is only half as effective as a dozen others on the market and is not misrepresented by the marketing firm. What do you do about that? Dr. GODDARD. Dr. Ley? Dr. LEY. This is a matter of balancing the benefit obtained from the drug with the risk of using it. If it has some unusual characteristic that makes it useful in a group of infections which other drugs may not be useful in, the decision is very clear. It depends also on the side effects observed with the drug, that i~, if your benefits are less, if you have less risk of damage due to the drug, the balance may be in favor of approval of the application. Senator NELSON. I am thinking of a case which may not occur very often where you have a drug to treat a serious condition. There is no problem of side effects, but there is a question of efficacy. It takes twice as long for this drug to have the proper effect as it does for another PAGENO="0328" 766 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY drug, but it is still effective. How does the physician know? What do you do about it? Dr. GODDARD. The only way for him to know, Senator, would be through the advertising and this would be strictly controlled by the claims that are permitted in the final printed label and our enforce- ment of the regulations on truthful advertising. So that is the only way he would know. The labeling has to say that the drug is effective against these organisms and that- Senator NELSON. But there is. no comparative proposition there? Dr. GODDARD. No, sir. There is no comparative proposition there. There are other sources of information available to the physician which he may use. A Medical Letter often provides that kind of information. The AMA publica- tion, New Drugs, often provides data on relative effects. Senator NELSON. If the clinical evidence reveals that a new drug is half as effective as other drugs on the market for treating the same disease, why doesn't the FDA require the advertising to state that it is half as effective? Dr. GODDARD. We do in that instance. Senator NELSON. You do? Dr. GODDARD. Yes, we have. Mr. GoRDoN. How do you notify the doctor of this relative efficacy you are talking about? Dr. GODDARD. In this instance, it is by implication. I would like to give you an example. Say an ad for a drug which is only 50 percent effective against pneumococcus, is advertised in such a way that it is misleading. We would cause the sponsoring firm to send out to the medical profession a "Dear Doctor" letter which says in effect "The FDA has determined our ad to be misleading and we have failed to provide certain information about this drug; namely, that this drug is only effective in 50 percent of the instances of pneumococcal infection." The physician already knows that he has other agents that are of a higher level of effectiveness. Mr. GORDON. Is that correct, that a physician really knows that there are other agents that are more effective? Dr. GODDARD. Well, I can only go on averages, Mr. Gordon. I hope he knows. That is what the practice of medicine is about. He has had ample experience with these other drugs in the marketplace. He cer- tainly, in the instance of the antibiotics, uses enough of them to have experience. Mr. GORDON. Well, practically all our medical witnesses have testi- fied that this knowledge is unavailable to the ordhtary practicing physician. Dr. GODDARD. In an organized, systematic fashion, yes. Now, I am very much interested that we do a better job of providing the practic- ing physician with good information on therapeutic agents that he is using. I asked the PMA a year ago to revive their interest in a drug compendium. They had at one time asked my predecessor, Mr. Larrick, to permit individual member firms to drop the publishing of the pack- age insert and in return for this exemption, they would cause to be published a drug compendium. Mr. Larrick said he would agree with this, I am told, provided that there was a year's experience of publish- ing the drug compendium and distributing it to physicians before the package inserts were dropped. PAGENO="0329" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 767 I am told the package inserts, the printing and the packaging, thus required to insert costs the major PMA manufacturers about $6 million a year. I am perfectly willing to drop the package insert requirement at the moment a good drug compendium is distributed to the profes- sion-the pharmacists, the physicians. Senator NELSON. Drop what requirements? `The insert? Dr. GODDARD. The insert for all except intravenous and parenteral drugs. Senator SCOTT. What would the compendium provide and how would you handle the distribution? Dr. GODDARD. It would be distributed free of cost to every physician, pharmacy, and hospital in the United States. It would be assembled by a distinguished board of editors in the scientific community and, hopefully~ paid for by the members of the pharmaceutical firms. Both the drug and allied products field and PMA have had these subjects discussed with them. There does not seem to be too much interest on their part in going this route, I am sorry to say. I had hoped they would exert leadership in this field. Senator SCOTT. Now, with regard to what it would comprise. Dr. GODDARD, On composition, the drugs sold in interstate com- merce, listed by both generic and trade name; a brief description of the drug, its action, its recommended dosage, indications for usage, side effects, contraindications, and warnings, in brief. Now, this is not a compilation of the current package labeling as some people have mis- understood me to be recommending. This is a well done, in brief sum- mary that could be useful to the practicing physician, just as PDR now is. Senator SCOTT. It would seem to me that industry and the profes- sion would be helped, would be glad to have such compendium. You said there did not seem to be much interest. What efforts have been made to enlist interest in this proposal? Dr. GODDARD. Senator2 let me comment if I may, first on your re- mark about the practicing physicians and others involved viewing this as being desirable. For 10 years, the council on drugs of AMA have said this would be desirable. I know that for 4 years at least that the National Acad- emy of Sciences Drug Research Board has recommended such a .com- pendium. Now, as to what has been done. There have been meetings held with the PMA leadership, both between FDA and PMA and the FDA and National Academy of Sciences and PMA. Specific recommendations have been made and no action has been taken. Now, I am very dismayed by this, because I would like to see this done by the private sector of our economy. It would have to have FDA approval, because it would constitute labeling of sorts. We are perfectly willing to do this and to drop immediately the require- ment that packaged circulars accompany every drug sold in the marketplace. Now, I think that this is one of the most important things that could be done in terms of enhancing communications on therapeutic agents to those who need this kind of information. Senator Sco'rr. Have you made that statement before with regard to dropping immediately the package insert? PAGENO="0330" 768 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY Dr. GODDARD. Yes, this has been clearly known to the Pharmaceuti- cal Manufacturers Association and the Drug & Allied Manufacturers Guild. Senator Scorr. At this time, your agency can't assure physicians that the chemical equivalent drugs now on the market are therapeu- tically equivalent, but is it not a fact that you are working toward that end, that you are seeking to be able to do that? Dr. GODDARD. Yes, sir. I do not think anyone can provide absolute assurance that thera- peutic equivalency exists for every drug in the marketplace. But by the same token, I have not seen any good evidence from any firm, large or small, that their drugs are superior to anybody else's. I hear the statement made time and time again. I have challenged represent- atives from firms who have made this statement to show me the evi- dence that its drugs are superior. Generally now, we are talking, you understand, about the pre-1962 drugs, where effectiveness did not have to be proven. Senator SCOTT. Is that not where the proverb applies that one man's Anacin is another man's Empirin? Dr. GODDARD. I have not heard that proverb before. Senator SCOTT. It is an old eastern proverb that I just made up. Dr. GODDARD. There are two instances of lack of therapeutic equiv- alence know that have been cited in the literature. With one, tetra- cycline, that was sugar coated, involved all the producers of tetra- cycline. I do not think that size is any assurance of freedom from worry in this field. We are going to begin some clinical trials on those drugs that are available from more than one manufacturer on those 200 most frequently prescribed drugs. At some place down the line, I think we are going to have to make a hard nosed business decision in the Government. I am not opposed to doing that, either. Senator SCOTT. I would applaud you for doing that. Dr. GODDARD. If we find in group after group that there is thera- peutic equivalency and we have gone down this road 30 times with 30 different drugs, I think I would be derelict in my duties if I did not cut off further clinical studies. Also, I would not want to expose un- necessarily the patients to the risks that can be involved. S6 this kind of a question, we think, can be answered in about 18 months. But make no mistake: I think the examples of lack of therapeutic equivalency are in the minority. The possibilities are actually that only in very few instances does therapeutic equivalence not exist. Among ourselves, physicians would argue as to whether or not it would be noticed in the intermittent therapy that is given in the private practice of medicine without continuous supervision. That is a valid point. That is why we are going ahead and carrying out these trials. But as I say, I have not seen good data from any company, large or small, that says that their pre-1962 drug is more effective than anybody else's. Senator NELSON. We have had testimony from a number of wit- nesses who have said that the burden ought ~o rest on those who assert that they are not therapeutically equivalent to come forward with the evidence. We had the Schering Co. president here last week. We read PAGENO="0331" COMPETITIVE PROBLEMS IN TIlE DRUG INDUSTRY 769 the issue of the Medical Letter to him that demonstrated a cost dif- ferential of $2.59 a 100 tablets of prednisone to Schering's price of $17.90. He asserted that his firm's product is of higher quality. The proof is that doctors prescribe it. I said you have one-third of the market; why don't you contract for double blind clinical testing with an independent respected research lab? Then when you prove what you assert, you will have the whole market. The answer to that was it is not worth it. Dr. GODDARD. On the other hand, I know one representative of a pharmaceutical firm, when this same issue came up in a meeting, who said, "I can assure you we are going to do that with our product and we will be able to say to the physician, ours are superior." I said that they were welcome to do it. Senator NELSON. Have they done it? Dr. GODDARD. Not yet. This meeting was within the past month. They have not had time to. Senator NELSON. We are probably going to find out. I will recess the hearing until 1 :15. (Whereupon, at 12 noon, the above hearing recessed, to reconvene at 1:15 p.m. of the same day.) AFTERNOON SESSION Senator NELSON. The hearing will resume. Dr. Goddard, just at noon, the Pharmaceutical Manufacturers As- sociation issued a news release taking issue with statements you made-maybe they take issue with you before you made a statement. I am not sure. STATEMENT OP DR. JAMES L. c+ODDARD `ET AL-Resumed Dr. GODDARD. I think they must have. It is a printed statement, Senator Nelson. Senator NELSON. The statement says: Commissioner Goddard commented in his statement before the Senate Sub- committee today that many NDA's-New Drug Applications-were "reviewed" by the FDA and "found not approvable." Unfortunately, Commissioner God- dard's statement does not adequately describe the present FDA procedure. The following four points are important: 1. Commissioner Goddard referred to the "review" of NDA's. It would have been helpful if he had explained the preliminary review by FDA of a submis- sion by a company to determine whether an application should officially be filed under FDA published regulations. The regulations of FDA expressly provide for this preliminary review and exchange of information between scientific per- sonnel of FDA and industry. Under this present procedure, companies will submit-"not file"-NDA's for the purpose of clarifying questions which FDA scientific personnel may have so that the applicant company can expeditiously complete its application for filing. Do you want to comment on that? Dr. GODDARD. Senator, could I comment? I think they have missed the point. The point here is that the sta- tistics I have referred to were based on submissions that we had received. We were not carrying out a preliminary review. These sta- tistics were derived from data compiled from formal, incomplete letters issued to the company, so I think they missed the point. PAGENO="0332" 770 COMP]1~TITIVE PROBLEMS IN THE DRUG INDUSTRY Senator NELSON. So his statement that these were preliminary is incorrect? Dr. GODDARD. Their statement is incorrect. Senator NELSON. Now, as to item 2: 2. Present FDA regulations expressly provide that after this preliminary review and upon completion of the application, it will then be accepted for filing by FDA. and for formal consideration in accordance with the time sched- ule provided by statute. Requests by FDA for additional information from a company during this "review" process does not constitute a rejection by FDA of a New Drug Application. Would you comment on that? Dr. GODDARD. Yes. Again I do not understand their use of the word "rejection." It does constitute the filing of an "incomplete." We send an "incomplete" letter which spells out in detail where all the faults are with this particular NDA. It is not a rejection. It is an "incom- plete" and the company receives written notice of the faults that I cited in this morning's testimony. So, again, it is- Senator NELSON. So you did not assert that it is anything other than an incomplete in this particular case, is that right? Dr. GODDARD. That is correct. Senator NELSON (reading). Commissioner Goddard stated before the Committee today that he planned to adopt a new procedure whereby each application submitted would be immedi- ately "filed" within the technical meaning of the statute. We think his comment on this point would have given a "fairer balance" if he had noted that the Pharmaceutical Manufacturers Association in March 1963, and again in De- cember 1966, expressly recommended to FDA in writing, on behalf of its member companies, the filing procedure which Commissioner Goddard now says he will adopt. Dr. GODDARD. I do not think that is quite accurate, either, Senator. The PMA wanted us to start the clock running, the 180 days the Con- gress says we will have on these technical applications, on any kind of application. This is not what we contemplate. We said in our state- ment and this is how we intend to implement this. If we perceive im- mediately that an application is grossly inefficient, we are not going to waste our time, we are just going to box it up and send it back to them. On the other hand, if after a preliminary review, the NDA seems to contain the required elements, we will notify the applicants and the clock will start running. So, again, this is what we said before. I do not disagree that in general terms, they have suggested that the normal filing mechanism be adopted, but there was that nice little technicality in there that I wanted to bring to your attention. Senator NELSON. At this point, we will formally give them credit for whatever they did get. Dr. GO~DARD. Thank you. Senator NELSON (reading). 4. It would have been appropriate, accurate and scientifically supportable if Commissioner Goddard had said, in commenting upon the statistics of the re- view procedure, that there are often honest and justifiable differences of sci- entific opinion between FDA staff and industry scientific personnel. Commissioner Goddard also made other observations on which PMA and member companies will undoubtedly have some pertinent comment when we have the opportunity of testifying before Senator Nelson's subcommittee. Dr. GODDARD. I think I covered that. I am perfectly willing to sub- ject our judgment to the review of the scientific community and I only hope they will be willing to do so as well. PAGENO="0333" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 771 Senator NELSON. Have you requested that they agree to submit these applications to review by the scientific community? Dr. GODDARD. I did this morning in my testimony. I suggested that we could settle this difference of opinion about our subjective judg- ments by taking the last 10 or 20 IND's that we have deemed to be in- complete, have the PMA get from its member firms permission to open up this scientific data to acceptable review groups in the scientific com- munity and, then, let the judgment be made by those groups. So in that fashion, I think we can get a pretty good fix on it. Senator NELSON. That sounds fair. You said there have been a few cases in which false data have been submitted to the agency. Was this data intentionally false? Dr. GODDARD. Well, it is difficult to make a judgment of intent, Sen- ator. There were only about five cases involving the submission of false data in a recent period of time. I cannot really ascribe intent in these instances. I have tried to point out, and I think it is significant, that with 25,000 investigators on our file, we have only had five such instances. Senator NELSON. I think that is a good record. Dr. GODDARD. I think it is a good record, too. I am not saying that there might not be others that exist, but I think there are very few. Mr. GoRDoN. On page 5 of your statement, you talk about the quality of research in connection with the NDA's. In your opinion, does the poor quality of research in connection with the NDA's, apply also to other research conducted by the industry? Dr. GODDARD. Are you talking about the TNT)? Mr. GoRDoN. The IND's and the NDA's. Dr. GODDARD. The IND's are the precursors of the NDA's and it is during the investigation and new drug exemption stage that these clinical studies are carried out. Of course, we think by initiating closer surveillance over the IND submissions and review of these at an earlier point in time, we can have a better understanding of the drug and perhaps will have a little better scientific data finally come into us. This, of course, is where we have in our meetings with the scientists in the industry been urging placement of greater emphasis on the need for better science. I submit that we are entering into an entirely different era of therapeutics-an era of more potent agents, as I men- tioned before, agents intended for long term usage. We have to have rather exquisitely detailed knowledge of the effect of these drugs at the cellular level. We do not get that very often and I think it is just going to be absolutely mandatory that this kind of information be developed. Mr. GORDON. Then would it be fair to say that a large number of drugs submitted to you are only minor modifications of old drugs developed in order to be able to secure patents? Dr. GODDARD. I cannot, again, know why they are-whether they are submitted for us to- Mr. GORDON. I did not ask why. I said is it correct? Dr. GODDARD. You said in order to get patents. Mr. GORDON. All right, let's forget that. They are just minor modi- fications rather than really interesting developments? Dr. GODDARD. I said this morning that out of the 83 new drugs, 69 of them were not what would be described as new chemical entities, PAGENO="0334" 772 COMPETITIVE PROBLEMS IN THE DRIJG INDUSTRY significant new products. And, in general terms, I would have to agree with you, yes. Mr. GORDON. What page of your statement were you on doctor? Dr. GODDARD. Page 6, good manufacturing practice. There are 20,000 firms registered with the FDA as engaged in the drug busmess, but 13,000 of these are in medicated feeds. Of the re- maining 7,000 firms, some are in veterinary drugs, and some are re- packers, leaving close to 2,000 companies who eiigage primarily in the manufacture of prescription or nonprescription drugs for human use. Senator NELSON. When they register with the FDA do they describe the size of their operation, number of employees, things like that? Dr. GODDARD. No, they just register the name of the corporation and the legal address. Senator NELSON. That is all? Dr. GODDARD. That is all of them, 900 of these, by actual count, Sen- ator, 861 as of July 1, are principally manufacturers of prescription drugs. We are obliged by law to physically inspect each register firm no less than once every 2 years. Senator NELSON. All 2,000? Dr. GODDARD. Yes. During inspection of the plants, we check the manufacturing and quality control procedures to see if the general regulations establishing Current Good Manufacturing Practices are being followed in actual production. For the most part, this is the case; however, as in any other manufacturing situation, there can be a tendency for those on the line and in quality control to deviate from approved guidelines. To do so is a violation of Current Good Manufacturing Practices. Our field investigations reveal numerous deviations from Current Good Manu- facturing practices. These deviations are of varying degrees of import- ance and may be found in plants of every size and description. Senator NELSON. In the first line of this section, you referred to 13,000 of these drug manufacturers engaged in manufacturing medi- cated foods for animals, livestock and so on? Dr. GODDARD. Yes. Senator NELSON. What kind of surveillance do you perform over them? Dr. GODDARD. Very poor. Let me clarify that by telling you the situation is this: Many of these medicated feed manufacturers are completely mobile now and they operate in trucks. We cannot carry out inspections of many of these establishments. With those that are fixed operators, so to speak, what you might call fixed base operators, we do inspect their establish- ment and try to determine that they are using the proper quantities of antibiotics in mixing a feed to be used specifically to prevent infection or to promote weight again in certain animals. Senator NELSON. As you know-we did not, when I was on the farm, feed them anything but what they could find in the yard. There were no medicated feeds. What concern do you have about the problem of an excessive accumulation of these drugs in fatty tlssue of the ani- mals-sheep, beef, chicken, turkey-which are then consumed by the human being at the end of the food chain?~ Dr. GODDARD. Senator, besides commenting on this, may I submit for the record a brief statement that I made at a meeting that was con- PAGENO="0335" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 773 cerned solely with this subject that took place here in Washington earlier this year. I spoke at a meeting that the National Academy of Sciences sponsored, and we were specifically talking of these problems. We are concerned about improper use of medicated feeds. For one thing, failure to stop the use of them in adequate time before slaughter to permit clearance from the tissue. Second, we were concerned about general recent findings which suggest that certain medications may persist in the animal tissue far longer than we had ever known here- tofore. Some of these feeds are capable of sensitizing human beings to the drugs used so that subsequently the same drug could not be effec- tively used. (The information referred to, subsequently received, follows:) THE QUEST FOE DATA (Welcoming Remarks by James L. Goddard, M.D., Commissioner of Food and Drugs) INTRODUCTION One year ago, you may remember, a report was delivered to me by the Ad- visory Committee on The Veterinary Medical and Non-Medical Uses of Anti- biotics. Several members of that eminent Committee are, I am pleased to see, on the program for this Symposium. The Report was brief and to the point-and gave the Food and Drug Administration a great deal of valuable guidance on new directions we might explore in both research and regulation. I regard the holding of this Symposium as being the same kind of necessary activity in which we must engage in order to gather and evaluate all the research information we can, while moving forward-step-by-step-in our regulatory activity. Eleven years ago, another Symposium on Medicated Feeds was held by the Food and Drug Administration. The issues raised at that meeting-and the sub- sequent developments in the use of drugs in animal feeds-have given all of us much to ponder. I think former Commissioner Larrick made a wise decision in organizing the veterinary advisory committee in 1965, for its Report last year was both timely, as far as the state of the art was concerned, and significant, as far as the state of the public health issue was concerned. And, if I may, I would wish to emphasize that it is the health of the public which must be maintained and which must serve as the ultimate measure of ~ur success, whether in research or regulation. I am sure, as I review your pro- gram and your list of speakers and participants, that all of us here today are quite aware of the heavy responsibility we must increasingly assume. I would like to point out, however, that this responsibility is two-fold: certainly we in the FDA see it this way and I would suspect that others in this audience do, also. First, there is the responsibility for maintaining the health of the public, as I noted before. There is increased concern about the possibility of drug residues in edible meat, milk, eggs, poultry, and fish products. This concern has been expressed in a number of ways by veterinarians, by leaders in the drug and animal feed industries, by leaders in animal agriculture, as well as by Govern- .ment officials. A great deal has been said, of course, about antibiotics. Back in 1963, the Expert Committee of the World Health Organization published in its report on antibiotics in food and feedstuffs this warning on the problem of sensitivity: "Individuals not previously sensitized might become so, or persons pre- viously sensitized as a result, for example, of medical treatment with an antibiotic, might develop reactions of hypersensitivity." The FDA's Advisory Committee was equally concerned in 1966 and asked that our agency, "give greater emphasis to its responsibilities for ascertaining and ~evaluating the long-term ecologic effects of the veterinary medical and non- medical uses of antibiotics. "Criteria developed from such studies," the Com- mittee said, "should be applied to the evaluation of new uses and the reevaluation of current uses and practices." It further recommended "continuous evaluation and surveillance of the safety and efficacy of these uses in terms of the public health." PAGENO="0336" 774 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY The other aspect of the responsibility we all share at this time is to move forward in such a way that our supply of food-especially those foods that are protein-rich and vital to the people of the world-that this food supply continue to expand and not become entrapped by inflexible scientists, producers, or Govern- ment officials. We are achieving a higher meat yield from our herds today with our supply of feed, and this is due in large measure to the addition of antibiotics and other drugs to both the feed and the animals themselves. We have, then, found ways to produce healthier, heavier animals through new uses of drugs; we can draw additional benefits from a not-unlimited feed supply. Now the question seems rather clear-cut; How can we maintain progress in the field of animal agriculture without jeopardizing the public health? I doubt if an answer will be that celar-cut. But I believe that a response, satisfactory to everyone involved, can be formulated and made effective. You will note that I am speaking in terms of the future. This is no reflection on my part that our present situation is one full of danger. But it does reflect, to be sure, my feeling that we are conducting our business today more on hope and faith-and less on hard data. And we need much more hard data on veterinary drug usage-and the results of such usage-than we now have. Last fall, Dr. M. It. Olarkson, who was then our Director of the Bureau of Veterinary Medicine, sought out what pertinent information was available from a number of other Government agencies. The yield, frankly, was small. Since then, Dr. C. D. Van Houweling, our present Bureau Director, has continued to gather data, not only from Government sources, but from non-government vet- erinarians, other related scientists, and from industry sources as well. A great deal of new information has come to us as a result of our policy statement of August 23, 1966, requiring all sponsors of veterinary antibiotics to come forward with residue data from treated animals. In reviewing the work of the agency of the past half year-and, in particular, in reviewing the kinds of data we are receiving-it is clear to us that we are still only on the threshold of understanding the total problem. We are aware of the following actions the FDA bad to initiate during the past year: The recall of a number of products from the market, specifically mastitis prodi~cts, as a result of new findings. The denial of certification for new products because of a lack of acceptable information being submitted to us. The revoking of certification of other products already on the market, be- cause of uncertainty about the back-up data. The denial of certification for oil~based injectable penicillin products, which required an unrealistic withholding time. As you can see, one of our major problems at this time is to bring together and stabilize what we actually know and can count on as being scientifically assured. This is essential for both the protection of the public health and for maintnining orderly growth in this field of veterinary drug usage. To use a more familiar phrase, it is time for us to "get a better handle" on the entire situation. And, as the title of this symposium indicates, we are not concerned only with antibiotics- we are conceriied with drugs in general, as they are applied to veterinary use. I urge everyone taking part in this three-day meeting to lend his best efforts here and to return to work later with a renewed sense of purpose and a deeper understanding of the significance of his. future contributions. They will have a great bearing on the course of this valuable development in the expansion of the world's food supply. But let me recall once again that, during the past year, we have had to exercise a number of cautionary measures because of the lack of-or the conflict in-the data that our agency received. We plan to publish shortly another Statement of Policy on antibiotics used in food-producing animals. This statement will be based on studies we ha ye carried out, as the Advisory Committee recommended, and on the kinds of industry information received since the last request for data, published in August 1966. This will outline the status of the oral, injectable, or other types of veterinary antibiotic prepara- tions-except for topicals, ophthalmics, and those for which we have acceptable residue data and covered by a New Drug Application or antibiotic approval, with particular reference to prior sanctions. And, I must add, we are in the process of reviewing the data that supports those current approvals as well. In order, however, to keep the industry moving ahead, to keep the information flowing in, and to protect the supply of food, this should lead to early publication of appropriate Food Additive Regulations; under those new regulations, new PAGENO="0337" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 775 data will be processed, and, we believe, progress in this whole area will be main- tained. We expect many more products to be covered by Food Additive Regula- tions and/or placed in new-drug status. Shortly, we will be receiving the results of the NAS-NRC Efficacy Review Panels now working with veterinary drugs. As data from these different sources converge, we may all need to take a second look at labeling of these drugs, so that proper warnings, restrictions, and direc- tions for use are well displayed. In addition, we will continue to eliminate wherever possible those purely ad- ministrative delays in the introduction of new drugs for animal use, in the eval- uation of Good Manufacturing Practices in premix establishments, and in other areas of our veterinary medicine activity. I personally am satisfied that our Bureau of Veterinary Medicine, with the generous help of the scientific commu- nity and with the cooperation and understanding of industry, is carrying well its share of responsibility. However, that responsibility grows weightier as drug investigation expands in the veterinary field. We are meeting today in the wake of another Symposium co- sponsored recently by Georgetown University School of Medicine and our agency. That Symposium was concerned with infectious multiple drug resistance. We are carefully reviewing the papers presented at that Symposium-which drew a number of international experts to this city-and we will attempt to fit the con- clusions into the emerging patterns of new drug mechanisms, as we are now beginning to see them. I doubt that I need go into the details of the R-factor-or Resistance Transfer Factor-with this distinguished audience. But I would want to emphasize here that the Food and Drug Administration is approaching these new investigational areas with the utmost seriousness. Ultimately, we will have to come to sensible conclusions to carry out our regulatory mission in the interest of the public health. Those conclusions must have as their base the best research and the best deductions that are available. That is why I am grateful to be among you this morning, to convey to you the welcome of the Food and Drug Administration, and to assure you that your pres- ence at this Symposium is extremely significant. We are bound together in these opening phrases of new scientific frontiers. And we are bound together in a com- mitment to the protection of the Nation's health. As colleagues-in science or in industry, in Government or In the private sector-we can cross those frontiers and fulfill that high commitment. President Seitz, Dean Poppensiek, ladies and gentlemen, it has been a privilege to be a part of this morning's program. I look forward to reviewing your deliber- ations here. Thank you. Senator NELSON. Are there allergic reactions? Dr. GODDARD. This is what I am referring to. Also, it cou] cl create a situation where the drug might not be effective against the organisms that are involved when an individual needs it to ward off an infection. So there are a number of scientific concerns that are being examined carefully today by those who work with veterinary feeds. These are veterinary medical specialists; the National Academy of Sciences, USDA, FDA, and Public Health Services are working cooperatively in this area. Senator NELSON. What concerns me is that if we proceed, in the same fashion here as we have with pesticides, the consequence, which I think we will recognize within a year or two will be that we will have dan- gerously polluted the whole atmosphere with DDT, that we are killing the bald eagle, the fish, accumulating DDT in the fatty tissue of deer and other creatureS. We have no idea what the consequence is to the human consumers of the DDT. We can only guess. But who is really carefully monitoring or examining the consequences of the feeding of medicated foods to find out what residues are there, what their effect is, and what ought to be done about it ~ Dr. GODDARD. Well, our Bureau of Veterinary Medicine and the U.S. Department of Agriculture both are working in this area, looking at 81-280-pt. 2-67-22 PAGENO="0338" 776 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY residues. We are intensifying our activity with respect to residues, medications, and meats. Our program for this year calls for, I believe, 4,000 samples to be taken and analyzed for drug residues. We have met with the U.S. Department of Agriculture-Assistant Secretary George Mehren, myself, and staff members-twice within the past 30 days to look at how we as two agencies involved in this area can tackle the problems and not duplicate efforts and unknowingly go down sep- arate paths working on the same problem. So the scientists brought together by the National Academy of Sciences are working together. There are efforts being funded by NRC in this area as well. Senator NELSON. How many samples are there? Dr. GODDARD. I think we are taking 4,000 this year in our veterinary medical program to check for drug residues-4,000 samples of meat. Senator NELSON. From all over the country? Dr. GODDARD. Yes. Senator NELSON. Then is somebody else doing some checking in addition? Dr. GODDARD. I understand the USDA also is doing considerable checking in this area. That is why our staffs are now meeting to parcel out the particular problem. Senator NELSON. Has this ever been done before? Dr. GODDARD. We have never done it. Senator NELSON. Has anybody in the Government ever done it? Dr. GODDARD. The USDA is responsible, of course, for meat surveil- lance. That means poultry as well. Senator NELSON. I mean, has anybody been doing a continuous scientific study of the residue of various drugs in the tissue of animals? Dr. GODDARD. I cannot answer that accurately, Senator. I would rather refrain. I know they have done some testing, but I do not know on how broad a scale it has been done. Senator NELSON. I do not want to reflect on the Department of Agri- culture, which leans very strongly to what the farmer wants. It was a long time before any of us could get them to slow up on DDT, before they would recognize that it had any damaging effect. One of the greatest supporters of pesticides is the Department of Agriculture. I wonder what kind of a careful study they are doing. I know it was brought to Secretary Freeman's attention that of all the jobs he has, he should be interested in it and push forward on it. I don't know who is doing what. Dr. GODDARD. You recognize in the pesticide field, Senator, there are three different agencies that have responsibility. First, the USDA must make a determination that the pesticide proposed for use on a given crop has economic significance. Then the Public Health Service must make a determination that the manner in which the pesticide is to be applied is safe for the operator who is going to be making appli- cation. Then the Food and Drug Administration must make a deter- mination whether or not a residue will occur and if so, what tolerance will be allowed. How much residue is to be allowed? Is this harmful to human beings in terms of our food supplies? None of these are easy questions. The Department of Agriculture probably has the easiest one to answer; that is, the economic signifi- cance. The long term effects of pesticide residues have not been ade- quately documented, and that is our job. PAGENO="0339" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 777 Senator NELSON. I think the system has been a tragic and colossal failure. The scientists attacked Rachael Carson because she had not accumulated scientific evidence, which to the scientist means if the pa- tient dies the hypothesis was correct. Well, it turned out that her whole thesis was correct, but we are late now in dealing with the problem of DDT in many States. The community is saying, for heavens sake, let's not destroy the insects, fish, animals, and birds, but it is awfully late in the game. That is what concerns me. Dr. GODDARD. I think Rachael Carson actually did a very fine service in the very forceful manner in which she brought before the public and the Congress some of the abuses that are going on, just as Ralph Nader and others did. Senator NELSON. Go t~head. Dr. GODDARD. I would like to submit for the committee's information, Senator Nelson, this copy of our Current Good Manufacturing Prac- tices regulations. Senator NELSON. Is that a report to be printed in the record? Dr. GODDARD. If it is your desire, sir. Senator NELSON. We will print it in the record. (The information referred to follows:) PART 133-DRUGS; CURRENT GOOD MANUFACTURING PRAcTICE IN MANUFACTURE, PRoCEssING, PACIUNG, OR HOLDING DEFINITIONS Sec. 133.1 Definitions. FINISHED PHARMACEUTICALS; MANUFACTURING PRACTICE 133.2 Current good manufacturing practice. 133.3 Buildings. 133.4 Equipment. 133.5 Personnel. 133.6 Components. 133.7 Master formula and batch-production records. 133.8 Production and control procedures. 133.9 Product containers. 133.10 Packaging and labeling. 133.11 Laboratory controls. 133.12 Distribution records. 133.13 Stability. 133.14 Complaint files. MEDICATED FEEDS; MANUFACTURING PRACTICE 133.100 Current good manufacturing practice. 133.101 Buildings. 133.102 Equipment. 133.103 Personnel. 133.104 Components. 133.105 Formula and production records. 133.106 Production and control procedures. 133.107 Packaging and labeling. 133.108 Laboratory controls. 133.109 Distribution records. 133.110 Complaint files. AUTHORITY: §~ 133.1 to 133.110 issued under secs. 501, 701; 52 Stat. 1050 as amended 76 Stat. 780, 781; 1055; 21 U.S.C.A. 351, 371. DaarINITI0N5 *~ 133.1 Definitions. (a) As used in this Part 133, "act" means the Federal Food, Drug, and Cos- metic Act, sections 201-902, 52 Stat. 1052 (21 U.S.C. 321-392), with all amend- ments thereto. (b) The definitions and interpretations contained in section 201 of the Federal Food, Drug, and Cosmetic Act shall be applicable to such terms when used in the regulations in this Part 133. (c) As used in this Part 133, the term "medicated feed" means any "complete feed," "feed additive supplement," or "feed additive concentrate," as defined in PAGENO="0340" 778 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY ~ 121.200 of this chapter, which feed contains one or more drugs as defined in section 201 (g) of the act. The term "medicated feed" does not include any un- diluted drug or "premix," as defined in § 121.200 of this chapter, intended for manufacturing use in the production of a medicated feed, since these are subject to §~ 133.3-133.14, inclusive. Fiwisnnn PHARMACEUTICALS; MANUFACTURING PRACTICE § 133.2 äurrent good manufacturing practice. The criteria in §~ 133.3-133.13, inclusive, shall apply in detersining whether the methods used in, or the facilities or controls used for, the manufacture, processing, packing, or holding of a drug conform to or are operated or adminis- tered in conformity with current good manufacturing practice to assure that a drug meets the requirements of the act as to safety, and has the identity and strength, and meets the quality and purity characteristics, which it purports or is represented to possess, as required by section 501 (a) (2) (B) of the act. The regulations in this Part 133 permit the use of precision automatic mechanical or electronic equipment in the production of drugs when adequate inspection and checking procedures are used to assure proper performance. § 133.3 Buildings. Buildings in which drugs are manufactured, processed, packaged, labeled, or held shall be maintained in a clean and orderly manner and shall be of suitable size, construction, and location in relation to surroundings to facilitate main- tenance and operation for their intended purpose. The buildings shall: (a) Provide adequate space for the orderly placement of equipment and mate- rials used in any of the following operations for which It is employed, to mini- mize any risk of mixups between different drugs, their components, packaging, or labeling, and to control the possibility of cross-contamination of one drug by another drug that is manufactured, stored, or handled on the same premises: (1) The receipt, sampling, or storage of components. (2) Any manufacturing and processing operations performed on the drug. (~) Any packaging and labeling operations. (4) Storage of containers, packaging materials, labeling, and finished products. (5) Control and production-laboratory operations. (b) Provide adequate lighting and ventilation, and when necessary for the intended production or control purposes, adequate screening, filtering, dust, humidity, temperature, and bacteriological controls, as for example, to prevent contamination of products by extraneous adulterants (including the prevention of cross-contamination of one product by dust or particles of ingredients arising from the manufacture, storage, or handling of another drug); to prevent the dIs- semination of micro-organisms from one area to another; to facilitate the steri- lization of special work areas, such as those used for production of parenternl preparations; to provide suitable housing for any animals; and to avoid other conditions unfavorable to the safety and Integrity of the product. (c) Provide for adequate washing, cleaning, toilet, and locker facilities. § 133.4 Equipment. Equipment used for the manufacture, processing, packaging, labeling, holdin°. or control of drugs shall be maintained in a clean and orderly manner and shall he of suitable design, size, construction, and location in relation to surroundin°s to facilitate maintenance and operation for its intended purpose. The equipment shall: (a) Be so constructed that any surfaces that come into contact with drugs are suitable, in that they are not reactive, additive, or absorptive to an extent that, significantly affects the identity, strength, quality, or purity of the drug or its components. (b) Be so constructed that any substances required for the oneration of the eauipment, such as lubricants or coolants, may be employed without hazard of becoming additive to drug products. (c) Be constructed to facilitate adjustment, cleaning, and maintenance as necessary to assure the reliability of control procedures, to assure uniformity of production, and to assure the exclusion from drugs of contaminants, includ- ing those from previous and current manufacturing operations. (d) Be of suitable size and accuracy for use in any intended measuring, mix- ing, or weighing operations. PAGENO="0341" COMPETITIVE PROBLEMS IN THE DRTJG INDUSTRY 779 § 133.5 Personnel. The key personnel involved in the manufacture and control of the drug shall have a background of appropriate education or appropriate experience or com- bination thereof for assuming responsibility to assure that the drug has the safety, identity, strength, quality, and purity that it purports to possess. § 133A3 Components. Components used in the manufacture and processing of drugs, regardless of whether they are intended to appear In the finished product shall be identified, stored, examined, tested, inventoried, handled, and otherwise controlled in a manner to assure that they conform to appropriate standards of identity, strength, quality, and purity, and are free of contaminants at time of use, and are so stored and handled as to assure that dust or particles resulting from such storage or handli~ig does not contaminate other substances or preparations on the premises, and to provide that appropriate records are maintained of their origin, receipt, examination, testing, disposition, and use in. drug manufacture or processing. § 133.7 Master-formula and batch-production records. (a) For each drug product, master-formula records shall be prepared, en- dorsed, and dated by a competent and responsible individual and shall be inde- pendently checked, reconciled, endorsed, and dated by a second competent and responsible individual. The record shall include: (1) The name of the product, a description of its dosage form, and a speci- men or copy of the label and each other portion of the labeling contained in a retail package of the drug. (2) The weight or measure of each ingredient per dosage unit or per unit of weight or measure of the finished drug, and a statement of the total weight or measure of any dosage unit. (3) A complete batch formula for each batch size to be produced from the master-formula record, including a complete list of ingredients designated by names or codes sufficiently specific to indicate any special quality characteris- tic; an accurate statement of the weight or measure of each ingredient, regard- less of whether it appears in the finished product, except that reasonable varia- tions may be permitted in the amount of components necessary in the prepara- tion in dosage form, provided that the variations are stated In the master formula; an appropriate statement concerning any calculated excess of an in- gredient; appropriate statements of theoretical weight or measure at various stages of processing; and a statement of the theoretical yield. (4) A description of the containers, closures, packaging, and finishing materials. (5) Manufacturing and control instructions, procedures, specifications, special notations, and precautions to be followed. (b) A separate batch-production and control record shall be prepared for each batch of drug produced and shall be retained for at least 2 years after dis- tribution has been completed. The batch-production and control record shall include: (1) An accurate reproduction of the appropriate master-formula record, checked and endorsed by a competent responsible individual. (2) Records of each step in the manufacturing, processing, packaging, label- ing, and controlling of the batch, including dates, specific identification of each batch of components used, weights or measures of components and products in course of processing, in-process and laboratory-control results, and the en- dorsements of the individual actively performing or the individual actively supervising or checking each step in the operation. (3) A batch number that permits determination of all laboratory-control procedures and results on the batch and all lot or control numbers appearing on the labels of drugs from the batch. § 133.8 Production and control procedures. Production and control procedures shall include all reasonable precautions, including the following, to assure that the drugs produced have the identity, strength, quality, and purity they purport to possess. (a) Each critical step In the process, such as the selection, weighing and measuring of components; the addition of active ingredients during the process; weighing and measuring during various stages of the processing; and the de- termination of the finished yield shall be performed by a competent, responsi- PAGENO="0342" 780 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY ble individual and checked by a second competent, responsible individual, or if such steps in the processing are controlled by precision automatic meehanical or electronic equipment their proper performance is adequately checked by one or more competent, responsible individuals. (b) All containers and equipment used in producing a batch of drugs shall be' clearly labeled at all times to identify fully and accurately their contents, the stage of processing, and the batch, and shall be stored and handled in a manner adequate to prevent mixups with other drugs. (c) Equipment, utensils, and containers shall be thoroughly cleaned and pre- vious identification removed between batches and in continuous batch opera- tions at suitable intervals, to prevent contamination and mixups. (d) Appropriate procedures control the hazard of contamination with micro- organisms in the production of parenteral drugs, ophthalmic solutions, and any other drugs purporting to be sterile, and appropriate procedures to control the hazard of cross-contamination of nonpenicillin products by penicillin in those' establishments that manufacture, store, or handle penicillin products and non- penicillin products. (e) To assure the uniformity and integrity of products, there shall be ade- quate in-process controls, such as checking the weights and disintegration time' of tablets, checking fill of liquids, and checking the adequacy of mixing, the homogeneity of suspensions, and the clarity of solutions. (f) Competent and responsible personnel shall check actual against theor- retical yield of a batch of drug, and in the event of any significant unexplained discrepancies, key personnel shall prevent distribution of the' batch in question and other associated batches of drugs that may have been involved in a mixup with it. § 133.9 Products containers. Suitable specifications, test methods, cleaning procedures, and when indicated, sterilization procedures shall be used to assure that containers, closures, and other component parts of drug packages are suitable for their intended use, in~ that they are not reactive, additive, or absorptive to an extent that significantly affects the identity, strength, quality, or purity of the drug, and furnish adequate protection against its deterioration or contamination. § 13~.1O Packaging and labeling. Packaging and labeling operations shall be adequately controlled to assure that only those drugs that have met the specifications established in the master- formula records shall be distributed; to prevent mixups between drugs during the packaging and labeling operations; to assure that correct labeling is em- ployed for the drug; and to identify finished products with lot or control num- bers that permit determination of the history of the manufacture and control of the batch of drug. Packaging and labeling operations shall: (a) Be performed with adequate physical segregation of such operations from operations on any other drugs to avoid mixups. (b) Provide that each type of labeling used shall be stored in a manner that avoids mixups between labelings and shall be carefully checked for identity and conformity to the labeling specified in the batch-production records. (c) Provide adequate control of the quantities of labeling issued for use with the drug. (Competent, responsible personnel shall reconcile any discrepancy between the quantity of drug finished and the quantity of labeling issued. In the event of any significant unexplained discrepancy, key personnel shall prevent distribution of the batch in question and other associated batches of drugs that may have been involved in a mixup.) (d) Provide for an inspection of the facilities to be used prior to labeling a drug to assure that all the previously used labeling and other drugs have been removed. (e) Provide for adequate examination or laboratory testing of adequately representative samples of finisbed products after packaging and labeling to safe- guard against any error ~` the ~-~i~hir~ oper~~ions. end to prevent diF~vibuti~rt of any batch until all specified tesf~ hare been met. § 133.11 Laboratory controls. Laboratory controls shall include the establishment of adequate specifi mtion~ and test procedures to assure that components, drug preparations in the course of pr~eersing, and finished products conform to apuropriate standards of iden- tity, strciigth, quality, and purity. Laboratory controls shall include: PAGENO="0343" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 781 (a) The establishment of master records containing appropriate specifica- tions for each component used in drug production and a description of the test procedures used to check them, including provision for testing adequately repre- sentative samples. Such records shall also provide for appropriate retesting of materials subject to deterioration. (b) The establishment of appropriate specifications, when needed, for drug preparations in the course of processing, and a description of the test pro- cedures to check them, including provision for testing achrqua.tely representative samples. (c) The establishment of appropriate finished-product specifications and a description of laboratory test procedures to check them, including provision for testing adequately representative samples. (d) Adequate provision for checking the identity and strength for all active ingredients of drugs, for assuring the sterility of articles purporting to be sterile,. and the freedom from pyrogens of articles that should be tested for freedom from pyrogens. (e) Adequate provision to check the reliability, accuracy, and precision of any laboratory test procedures used. (f) A reserve sample of at least twice the quantity of drug required to con- duct all the tests performed on the batch of drug shall be retained at least 2 years after distribution has been completed. (g) Provision for complete records of all data concerning laboratory tests per- formed, including the dates and endorsements of individuals making the tests, and provision for specifically relating the tests to each batch of drug to which they apply. Such records shall be retained for at least 2 years after distribution has been completed. (h) Firms that manufacture nonpenicillin products, including certifiable anti- biotic products, on the same premises or use the same equipment as that used for manufacturing penicillin products, or that operate under any circumstances that may reasonably be regarded as conducive to contamination of other drugs by penicillin, shall test such nonpenicillin products to determine whether any have become cross-contaminated by pencillin. Such products shall n~t be marketed if intended for use by man and the product is contaminated with an amount of pencillin equivalent to 0.05 unit or more of pencillin 1 per maximum single dose recommended in the labeling of a drug intended for parenteral ad- ministration, or an amount of penicillin equivalent to 0.5 unit or more of penicillin 0 per maximum single dose recommended in the labeling of a drug intended for oral use. § 133.12 Distribution records. Complete records shall be maintained of the distribution of each batch of drug in a manner that will facilitate its recall if necessary. Such records shall be retained for at least 2 years after distribution has been completed, and shall in- clude the name and address of the consignee, the date and quantity shipped, and the lot or control numbers identifying the batch of drug. § 133.13 Stability. Adequate provision shall be made for testing the stability of components drug preparations in the course of processing, when needed, and finished drugs. Such stability tests shall: (a) Make adequate provision for determining the reliability and specificity of stability test methods employed. (b) Make adequate provision to determine the stability of products in the containers in which they are marketed to assure, among other things, that the container is suitable, in that it is not reactive, additive, or adsorptive to an extent that significantly affects the identity, strength, quality, or purity of the drug. (c) Provide for stability studies of any solution prepared as directed in the drug labeling at time of dispensing. (d) Provide for suitable expiration dates to appear in the labeling of the drug when needed to assure that the drug meets appropriate standards of identity, strength, quality, and purity at time of use. § 133.14 Complaint files. Records shall be maintained of all written or verbal complaints for each product. Complaints shall be evaluated by competent and responsible personnel and, where indicated, appropriate action taken. The record shall indicate th~ evaluation and action. PAGENO="0344" 782 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY MEDICATED FEEDS; MANUFACTURING PRACTICE § 133.100 Current good manufacturing practice. The criteria in §~ 133.101~-133.1l0, inclusive, shall apply in determining whether the methods used in, or the facilities and controls used for, the manu- facture, processing, packing, or holding of a medicated f~ed conform to or are operated or administered in conformity with current good manufacturing practice to assure that a medicated feed meets the requirements of the act as to safety, and has the identity and strength, and meets the quality and purity characteristics which it purports or is represented to possess, as required by section 601(a) (2) (B) of the act. The regulations in this Part 133 permit the use of precision, automatic, mechanical, or electronic equipment in the produc- tion of a medicated feed when adequate inspection and checking procedures are used to assure proper performance. § 133.101 Buildings. Buildings in which medicated feeds are manufactured, processed, packaged, labeled, or held shall be maintained In a reasonably clean and orderly manner and shall be of suitable size, construction, and location in relation to sur- roundings to facilitate maintenance and operation for their intended purpose. The buildings shall: (a) Provide adequate space for the orderly placement of equipment and ma- terials used in any of the following operations for which they are employed, to minimize any risk of mixups between different medicated feeds, their compo- nents, packaging, or labeling: (1) The receipt, control, and storage of components. (2) Any manufacturing and processing operations performed on the medi- cated feed. (3) Any packaging and labeling operations. (4) Storage of containers, packaging materials, labeling, and finishing products. (b) Provide adequate lighting and other physical facilities necessary to pre- vent unsafe contamination of raw materials and finished products before, dur- ing, and after production. (c) Provide for adequate washing, cleaning, toilet, and locker facilities. Work areas and equipment used for the production of medicated feeds or for the storage of the components of medicated feeds shall not be used for the pro- duction, mixing, or storage of finished or unfinished insecticides, fungicides, or rodenticides or their components. § 133.102 Equipment. Equipment used for the manufacture, processing, packaging, bulk shipment, labeling, holding, or control of medicated feeds or their components shall be maintained in a reasonably clean and orderly manner and shall be of suitable design, size, construction, and location in relation to surroundings to facilitate maintenance and operation for its intended purpose. The equipment shall: (a) Be so constructed that any surfaces that come into contact with medi- cated feeds are suitable, in that they are not reactive, additive, or absorptive to an extent that significantly affects the identity, strength, quality, or purity of the medicated feed or its components. (b) Be so constructed that any substance required for the operation of the equipment, such as lubricants, coolants, etc., may be employed without hazard of becoming an unsafe additive to the medicated feed. (c) Be constructed to facilitate adjustment, cleaning, and maintenance, and to assure uniformity of production and reliability of control procedures and to assure the exclusion from medicated feeds of unsafe contamination, including cross-contamination from manufacturing operations. (d) Be suitably grounded electrically to prevent lack of uniform mixing due to electrically charged particles. (e) Be of suitable size and accuracy for use in any intended measuring mix- ing, or weighing operations. § 133.103 Personnel. `The key employees and/or consultants responsible for the formulation, manu- facture, and control of the medicated feed shall have a background of educa- tion or experience or a combination thereof that is adequate to assure proper composition and labeling of the medicated feeds. PAGENO="0345" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 783 § 133.104 Components. (a) Drug components, including undiluted drugs and any intermediate mixes containing drugs used in the manufacture and processing of medicated feeds, shall be received, stored, handled, and otherwise controlled in a manner to maintain the integrity and identification of such articles. Appropriate receipt and inventory records shall be maintained for 1 year and such records shall show the origin of any drug components, the batches in which they were used, and the results of any testing of them by or on behalf of the medicated-feed manufacturer. (b) Nondrug components shall be stored and otherwise handled in a manner to avoid unsafe contamination, including cross-contamination from manufactur- ing operations. (c) Statements relating to the identification and the quantitative composition appearing on the labels of undiluted drugs or other drug components received by the medicated-feed manufacturer from other suppliers may be relied upon by the medicated-feed manufacturer as acceptable evidence of the identity and composition of the drug or drug components in lieu of actual testing of each such drug or drug component if such reliance is made in good faith. § 133.105 Formula and production records. (a) For each medicated feed, a master formula record or card shall be pre- pared, checked, and maintained by a responsible key employee and retained for at least 1 year after production of the last batch. The formula record or card shall include at least the following: (1) The name of the medicated feed, together with any other information necessary for the correct identification of the feed. (2) The weight or measure of each ingredient, adequately identified, to be used in manufacturing a stated weight of the medicated feed. (3) A copy, description, or notation adequately identifying the label, labeling, or placard necessary to be used on or with the complete medicated feed. (4) Manufacturing instructions for each medicated feed produced on a batch or continuous operation basis, including mixing steps, mixing times, and batch formulas that have been determined to yield an adequately mixed methcated feed; and In the case of medicated feeds produced by continuous production run, any additional manufacturing directions including, when indicated, the settings of equipment that have beeen determined to yield an adequately mixed medicated feed of the specified formula. (5) Appropriate control directions, including the manner and frequency with which any necessary samples of the medicated feed are to be taken for specified laboratory tests, the criteria for using laboratory test results to change formu- lations or manufacturing procedures, and the procedures to be observed to ai7oid unsafe contamination of the medicated feed with other medicated feeds or drug components. (b) A production record shall be prepared for each batch or run of medicated feed produced, and shall be retained for at least 1 year. The production record shall include: (1) Product identification, date of production, and endorsement by a respon- sible individual. (2) A record of the quantity of drug components usedL (3) A record of the quantity of medicated feed produced. (c) In the case of a customer-formula feed made to the specifications of a customer, the formula and production records required by this section may con- sist of copies of customers' purchase orders and sellers' invoices bearing the information required by this section. § 133.106 Production and control procedures. Production and control procedures shall include all reasonable precautions, including the following, to assure that the medicated feeds produced are of proper composition and labeling: (a) Each critical step in the process, such as the selection, weighing, and measuring of components; the addition of drugs or components during the process; the control of mixing times; the adjustment of the equipment involved in continuous production processes; and the determination of the finished yield, shall be performed in a manner that has been determined by appropriate methods, including laboratory testing of the medicated feed, to be adequate to assure the Integrity of the final product. If such steps in the processing are PAGENO="0346" 784 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY controlled by precision, automatic, mechanical, or electronic equipment, provision shall be made to adequately check its performance. (b) All containers to be used for undiluted drugs, drug components, inter- mediate mixtures, and finished feeds shall be received, adequately identified and properly stored and handled in a manner adequate to prevent mixups or contamination. (c) Equipment, including dust-control and other equipment, such as that used for holding and returning recovered or flush-out materials back into pro- duction, shall be maintained and operated in such a manner as to prevent unsafe contamination of the medicated feed. (d) The steps used to prevent unsafe contamination of medicated feed include one or more of the following, or other equally effective procedures: (1) Cleaning of those parts of storage, mixing, conveying, and any other equipment coming in contact with the drug component of the medicated feed for the purpose of cleaning out of the equipment any drug, drug component, or medicated feed prior to the use of the same equipment for the production of a different medicated feed. (2) The cleaning of the equipment as required in subparagraph (1) of this paragraph, may be achieved by flushing all feed-contacting surfaces of such equipment used in the production of a medicated feed with a quantity of an appropriate drug-free feedstuff that has been found sufficient to remove any significant quantity of a drug component or an intermediate mix or complete medicated feed prior to the production of a different medicated feed. The yield from any such flushing operation may be incorporated in appropriate amounta in the subsequent production of a medicated feed intended to contain the same drug component (or components) to produce a complete medicated feed conform- ing to its composition and labeling specifications. (e) If there is sequential production of batches of a medicated feed containing the same drug component (or components) at the same or lower levels, there shall be sufficient safeguards to avoid any buildup above the specified levels of the drug components in any of the batches of the complete feed. (f) A sampling and assay schedule on the finished medicated feed, or a schedule at least as reliable, for checking on the composition of the finished article shall be applied as follows: (1) In the case of a medicated feed that requires an approved new-drug application or antibiotic form 10 for its manufacture and marketing, the schedule of assays established in such application shall be used. (2) In the case of a medicated feed that does not require an approved new- drug application or antibiotic form 10 for its marketing, three appropriately drawn samples from each 400 tons of such medicated feeds produced shall be taken at appropriately spaced intervals over the production period, and, in any event, not less than three such samples of each particular medicated feed during any 1 year shall be collected and analyzed. For the purposes of this subpara- graph, the term "each particular medicated feed" shall be construed to include all feeds containing the same drug component (or the same mixture of com- ponents) at different levels. The collection and analysis of samples shall be from the medicated feed containing the highest level of the drug component (or mix- ture of components). (3) A medicated feed covered by subparagraph (2) of this paragraph shall be exempt from the prescribed sampling and analytical schedule under the fol- lowing conditions: (i) The manufacturing practices used in the production of the medicated feed were consistent with the regulations of this part; and (ii) The manufacturer of the medicated feed has produced at least 3 batches of such feed conforming to composition and labeling specifications during the 1-year period immediately preceding the date of manufacture of the feed and durin~ that period has not been notified by the Food and Drug Administration or any State regulatory official that his manufacturing practices were in conflict with section 501 (a) (2) (B) of the act or the regulations of this part and has not distributed a medicated feed during that period which has been proceeded against under the nct because of failure of such feed to comply with its composi- tion or labeling requirements or which has been analyzed by any State official and found to be deficient: and (iii) The medicated feed contains only, as the drug component (or com- ponents), a low-level growth-promotion antibiotic (or antibiotics) as provided by and In accordance with the regulations in Part 121 of this chapter; it was PAGENO="0347" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 785 manufactured from a feed additive premix, feed additive concentrate, or feed additive supplement that, at the time of receipt by the medicated-feed manu- facturer, bore a label, or was accompanied by labeling, containing a quantitative composition statement of its antibiotic content together with directions for its use in the manufacturing of a legal medicated feed; and the medicated-feed manufacturer, in good faith, relied upon and followed the feed additive premix, concentrate, or supplement label or labeling information and directions for use in the manufacturing of the medicated feed; or (iv) The medicated feed contains only, as the drug component (or com- ponents), a drug (or drugs) as provided by and in accordance with the regula- tions in Part 121 of this chapter; it was manufactured from a feed additive con- centrate or feed additive supplement that, at the time of receipt by the medi- cated-feed manufacturer, bore a label, or was accompanied by labeling, con- taining the quantitative composition of its drñg content together with directions for its use in the nianufacturing of a legal medicated feed; and the medicated- feed manufacturer, in good faith, relied upon and followed the feed additive concentrate or supplement label or labeling information and directions for use in the manufacturing of the medicated feed; or (v) The medicated feed contains only drug components as provided by and in accordance with the regulations in Part 121 of this chapter and was manu- factured from a feed additive supplement, a low level growth-promotion anti- biotic premix, a low level growth-promotion antibiotic concentrate, a feed addi- tive concentrate, or a combination of any two of these used in accordance with the conditions set forth in subdivisions (ii), (iii), and (iv) of this sub- paragraph. (g) Production and control procedures shall include provision for discontinuing distribution of any medicated feed found by the assay procedures, or any other controls performed, to fail to conform to appropriate specifications. Distribution of subsequent production shall not begin until it has been determined that proper control procedures have been established. `~ 133.107 Packaging and labeling. Packaging and labeling operations shall be adequately performed and con- trolled to assure that only those medicated feeds made in compliance with established formula records and manufacturing and control directions shall be distributed; to prevent mixups between the medicated feeds during the packag- ing and labeling operations; and to assure that correct labeling is employed for the medicated feed. In the case of medicated feeds distrihuted in bulk, corn- Plete labeling shall accompany the shipment and be supplied to the consignee at the time of delivery. Such labeling may consist of an invoice or placard identi- fying the medicated feed and bearing adequate information for the safe and effective use of the medicated feed. Labels and labeling shall be received, handled, and stored in a manner that avoids labeling mixups. Previously used containers shall be adequately cleaned and labeled before reuse to avoid adult- eration or misbranding. § 133.108 Laboratory controls. Laboratory controls shall include the establishment of adequate specifications `and test procedures to assure that the drug components and the finished medi- cated feeds conform to appropriate standards of identity, strength, quality, and purity. Laboratory controls shall include: (a) The establishment of master records containing appropriate specifica- tions and a description of the test procedures used to check them for each kind of drug used in the manufacture of medicated feeds; this may consist of the manufacturer's or supplier's statement of specifications. (b~ The establishment of finished-product specifications for medicated feeds and a description of any necessary laboratory test procedures to check them, including methods of assay for the active drug ingredient. (c) A determination that the drug components remain uniformly dispersed and stable in the medicated feed under ordinary conditions of shipment, stor- age, and use; this may consist of a supplier's or consultant's determination made on a feed of substantially the same formula. (d) Adequate provision to check the reliability, accuracy, and precision of any laboratory test procedure used: the official Methods of Analysis of the Association of Official Agricultural Chemists, methods described in an official compendium, and any method, submitted as a part of a food additive petition or new-drug application, which has been accepted by the Food and Drug Admin- istra tion shall be regarded as meeting this provision. PAGENO="0348" 786 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY (e) Provision for the maintenance of the results of any assays, including dates and endorsement of analysts. Such records, together with records of analyses reported by any State feed control official shall be retained in the possession of the manufacturer or In the possession of a consulting laboratory operating in his behalf. Such records shall be maintained for a period of at least 1 year after distribution of the medicated feed has been completed. § 133.109 Distribution records. Complete records shall be maintained for each shipment of medicated feeds in a manner that will facilitate the recall, diversion, or destruction of the med- icated feed, if necessary. Such records shall be retained for at least 6 months after the date of the shipment, and shall Include the name and address of the consignee, the date and quantity shipped, and the manufacturing dates, control numbers, or marks identifying the medicated feed shipped. If the medicated feed is held under control of the manufacturer for further shipment at estab- lishments other than where produced, records as outlined in this section shall be maintained at these establishments. § 133.110 Complaint files. The medicated-feed manufacturer shall evaluate by responsible key personnel each complaint received by him on a feed that is manufactured or distributed by him and, where indicated, make such further investigations or take such. appropriate action as appears to be warranted in the circumstances. A record of complaints and the action taken by the feed manufacturer shall be main- tained for a period of 2 years. If the medicated feed is the subject of an approved new-drug application held by the feed manufacturer, he shall make such reports as are required by § 130.13 of this chapter. Dr. GODDARD. We are at this time reevaluating the current good manufacturing practices regulations for prescription drugs. Frankly, we are going to have to make them more definitive, much as the drug industry requested in regard to prescription drug advertising regula- tions. We had expected that the present regulations would assure ade- quate quality control by all manufacturers, large and small. But the increasing recalls indicate that we must provide more detailed specifica- tions to be followed and precautions to be observed to cut down the risk of failure of drug products to perform properly when they are admin- istered to the patient. Senator NELSON. How many firms had drug recalls last year? Dr. GODDARD. 584 in fiscal 1967. Senator NELSON. How many of those were products marketed by members of the Pharmaceutical Manufacturers Association? Dr. GODDARD. 131 were members of the PMA and 471 were non-PMA members. Let me make certain these statistics are right. Let me go back over those. There were 584 drug recalls for all reasons. One hundred thirteen of these involved PMA members. Mr. GoiwoN. We are talking about firms having recalls. Dr. GODDARD. There were 46 PMA firms that were responsible for the 113 recalls. One hundred eighteen firms were responsible for the 471 recalls of drug products manufactured by non-PMA members. Senator NELSON. So 32 percent of PMA's members had recalls last year? Dr. GODDARD, Now, in order that there wilT not be any arpument about the numbers at a later date. Senator, may I submit a t~b1e for the record, because we did exclude from our published recall list in preparing for this hearing 38 investigator determinations, six veteri- nary vitamin preparation recalls, 20 veterinary drug recalls, two diag- nostic agents, and one medicated feed recall. So the numbers would PAGENO="0349" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 787 not jibe if someone were to add up our weekly recall lines and check it against this testimony. (The information referred to follows:) DRUG RECALLS, FISCAL YEAR 1967 -- --- ~- .-. --`- -. Reason Total PMA number Non-PMA member Label mixup 29 12 17 Subpotent 120 26 94 Ex. potent 8 2 6 X. con. pen 1 1 0 X. con. other 3 1 2 Substandard 41 4 2 Rx-OTC 2 0 5 NoNDA 5 0 IND term 0 5 Disintegration 42 Adulteration 180 33 147 Misbranded 19 6 13 Decomposition 8 5 3 Nonsterile 15 1 14 Cert. revoked 42 1 41 Other 61 18 43 Total 12584 0113 ~471 `Excluding 38 investigator terminations, 6 vet, vitamins, 20 vet, drugs, 2 diagnostic agents, and 1 med. feed. 2584 recalls by 164 firms. 2113 recalls by 46 firms. 4471 recalls by 118 firms. RECALLS, FISCAL YEAR 1967-DRUGS Reason Rx Non-Rx Anti- Bulk New Invest Vita- Total biotics drugs drugs new drugs Human -.. .... --.. -... .-- .-.-..-.. .__.__ Labelmixup 25 4 0 0 0 0 0 29 .Subpotent 75 3 30 0 0 0 12 120 Ex. potent 8 0 0 0 0 0 0 8 X-Con-Pen 0 0 1 0 0 0 0 1 X-Con.-Other 1 1 1 0 0 0 0 3 Substandard 29 2 1 0 0 0 9 41 Rx-OTC 2 0 0 0 0 0 0 2 NoNDA 0 0 0 0 5 0 0 5 lNDterm 0 0 0 0 0 5 0 5 Investor, term 0 0 0 0 0 38 0 38 Disintegration 25 19 0 0 0 0 1 45 Adulteration 112 14 3 31 0 0 20 180 Misbranded 10 3 5 0 0 0 1 19 Decomposition 3 4 0 0 0 0 1 8 Nonsterile 4 6 5 0 0 0 0 15 Certificate revoked 0 0 42 0 0 0 0 42 Other 41 9 6 0 0 0 5 61 Total 335 65 94 31 5 43 49 `622 `Excluding 6 vet, vitamins, 20 vet, drugs, 2 diagnostic agents, and 1 med. feed. Mr. GoiwoN. As I understand it, 46 firms of the PMA's 140 had recalls? Dr. GODDARD. That is correct. Mr. GORDON. That means 32.5 percent, is that right? Dr. GODDARD. Yes, sir. Mr. GoItroN. Of the 760 non-PMA members, 118 firms had recalls, is that correct? Dr. GODDARD. That is correct. Mr. GoRDoN. That is 15.5 percent of non-PMA firms. In other words, PMA members had twice as many recalls as non-PMA members? Dr. GODDARD. Correct. As far as number of firms go. Now, they -manufacture 19 times the units of drugs as the small companies, so that has to be taken into account, too. PAGENO="0350" 788 COMPETITIVE PROBLEMS IN THE DRTJG INDUSTRY Senator NELSON. I am going to put in the record, a chart showing some major recalls in fiscal 1966-67. I am not inserting it to embarrass the PMA firms, but since the PMA is continuously insisting that other firms do not do well, the record ought to be balanced. I have a list here of nine drugs on which there were recalls. One of them involved 570,- 374,450 tablets; serious recall; injuries sustained. Only 17.9 percent of that quantity was recovered. They were tablets and they were adulterated. There is another recall listed here involving 17,000,500 tables of Mycostatin. I would like to ask a question about this drug.. It is an antibiotic, is it not? Dr. GODDARD. That is correct. Senator NELSON. Since you do batch testing, this was not a very serious recall I suppose. It was subpotent. Dr. GODDARD. I think that is serious, Senator. Senator NELSON. It is listed here as moderate hazard. Dr. GODDARD. Any time a subpotent antibiotic gets out, I think that is serious. I am not talking about hazard. I ~m talking about it is a serious breach of good manufacturing practive. Senator NELSON. How would a subpotent antibiotic get by your' batch testing? Dr. GODDARD. I can submit for the record the history on this one. Do not forget, with some of these recalls you have to keep in mind that the drug has a shelf life. Some of the recalls occurred because the drug is obviously becoming subpotent. It was not necessarily sub- potent at the time of its manufacture. So this may have simply been an earlier decline in the potency of the drug. Senator NELSON. This will be printed in the record. (The documents referred to follow:) PAGENO="0351" 1 Not given 0 H H 0 z H MAJOR RECALLS, FISCAL 1966-67 Company Drug Quantity Hazard Depth Percent recovered Reason Ayerst Laboratories (American Home Products). Squibb Progesterone (Lingusords) Nystatin (Mycostatin) 15,045,092 tablets 18,500,000 tablet Moderate do Doctor Branch ware- house. 30.0 10.0 Cross contamination peecillin. Subpotest. Nonsterile. Abbott Roche Pfizer Ciba Pfizer Richardson-Merrell Burroughs-Wellcome Sterile water solutions Chlordiazepoxide (Librax) Meclizine HC-1 (Bonine) Aminoglutethimide (Elipten) NDA~.. Physician's samples Bacitracin (Bacimycin) Polymixin B sulfate (Aerosporin) 3,500,000 bottles 570,374,450 tablets 6,905,408 tablets 41,600,000 tablets 40,000,000 tablets 656,700 3/2-oz. tubes; 810/100 gm. jars; 10,450 5/~ tubes. 1,258,533 10 cc Serious Serious (injury) Moderate (injury) Serious (injury) Serious .do Moderate Doctor do Retail Doctor do Wholesale Retail 10.0 17.9 40.0 20.0 (1) (1) 4.0 Adulterated. Not given. Do. Label mixup. Subpotest. Do. PAGENO="0352" 790 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY STATEMENT OF THE FOOD AND DRUG ADMINISTRATION REGARDING THE HISTORY OF THE DRUG RECALL ON MYCOSTATIN (RECALL No. 49) The antibiotic (Nystatin) potency of most lots of this drug dropped below label strength before the end of the one year expiration date, thus causing a reduction in the antifungal properties of the preparation. No adverse reactions have been reported. Approximately 1,300,000 cartons containing 15 tab1ett~ each were originally manufactured under 26 lot numbers and packaged under 48 package control numbers. A total of 45,876 cartons were frozen at the Brooklyn manufacturing plant. Remaining cartons were distributed domestically and also exported to many countries. During July of 1965, stability studies by the manufacturer, E. B. Squibb & Sons, found that several lots fell below label strength. On August 23, 1965, Squibb notified by letter FDA's Division of Antibiotic and Insulin Control that seven lots packaged under 18 controls had fallen below labeled strength. In November and December, 1965, they notified our New York District office by phone of other lots being recalled. After conferring with the Division of Antibiotic and Insulin Control, the firm had voluntarily sent recall telegrams to their 17 distribution branches. (These telegrams were sent July 20, August 20, September 2, November 11, and Decem- ber 10, 1965.) In addition to this branch level recall, the firm informally instructed its salesmen to remove recalled lots from retail and wholesale shelves. FDA monitored the firm's branc~i level recall and also tabulated returns from salesmen. During September 1965, certification privileges were suspended for this product until labeling and formulation changes were made. The firm voluntarily destroyed the following recalled merchandise on two occasions by grinding in a Somat waste disposal unit: 75,238 Strips (5 tablets each) frozen plant stock destroyed: November 23, 1965. 45,876 cartons (15 tablets each) frozen plant stock destroyed: November 23, 1965. 13,320 cartons (15 tablets each) branch returns destroyed: November 23, 1965. 15,481 cartons (15 tablets each) salesman returns destroyed: November 23, 1965 and March 9, 1966. Mr. GORDON. Can we conclude, Dr. Goddard, that when PMA mem- bers have a recall, the consequences are considerably more serious because of the firm's size, than when one of the smaller, non-PMA firms has a recall ~ Dr. GODDARD. I would have to qualify that by saying all other things being equal. In other words, if we are dealing with a serious hazard, the more units of a drug that are out, the more magnified the effect. So the answer would be yes with that qualification. Senator NELSON. Go ahead, Doctor. Dr. GODDARD. Our district offices, in cooperation with our Bureau of Education and Voluntary Compliance, have held 22 regional sem- inars and workshops involving 912 firms during the past year on this very subject. Five national conferences have also been held on GMP. We hope that voluntary compliance will prevail and that all companies will greatly improve their manufacturing processes. The FDA's inspection and sampling programs are a necessary safe- guard between each company's quality control system and the patient's use of the drug. Members of the drug industry and the Food and Drug Administration recognize that there is much to be accomplished in this area of quality control. My own first inkling of the magnitude of the problem came from the rising recall lists. I determined that we had two basic problems which needed imme- diate attention. First, I was not satisfied that all drugs on the market were of the highest quality. PAGENO="0353" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 791 Second, I was not satisfied that the FDA was properly tooled up to monitor the drug supply so that the public had the assurance it wants and deserves-that all drugs in the marketplace will perform as intended. To answer my first dissatisfaction, we have brought to the atten- tion of the drug industry-through the seminars and workshops I mentioned, as well as through personal contacts between our people and industry quality control managers-our serious concern about ad- herence to Current Good Manufacturing Practices. To answer my second dissatisfaction, we have established a Na- tional Center for Drug Analysis in St. Louis to act as the public's con- trol laboratory. Using automated equipment, the newest assay tech- niques, and a constantly evolving technology, this National Center will help our agency keep abreast of industry's output and assure the con- sumer that drugs in the marketplace are, closer to perfection than be- fore. Let me repeat, Senator Nelson, that this National Center is an endpoint, it is after the fact. The samples are collected from commer- cial channels providing us with a consumer-level reading of the drug supply-but leaving us with the disadvantage of having to go back through the entire drug distribution system, if we find anything seri- ously wrong with one of them. We believe probably as many as 300,000 samples a year will be re- quired in order to have good statistical sampling, but this has to be worked out in detail at the present time. We have begun modestly at the National Center, checking out our equipment and giving our chemists and pharmacists the experience which the later expanded efforts will necessitate. Our goal is to ex- amine many thousands of samples a year. We are m~tking good prog- ress, but it is too early to draw any conclusions from the relatively few samples that have been tested. We are still in the "shakedown" period. Mr. Gon1~oN. Although you say it is too early to draw any conclu- sions so far from the National Center, can you give us any indication of what the results have shown to date? Dr. GODDARD. Dr. Banes, do you wish to comment? Dr. BANES. There are two programs now in progress, one on anti- coagulants and the other one in mild tranquilizers. There are 870 sam- ples that have been collected in each of these two categories, but this is not enough to give significant results. On the basis of what we have already seen, the ratio of samples outside of the required limits runs about half a percent in the minor tranquilizers and about 2 percent in the anticoagulants. The anticoagulants are considered a much more significant class of drugs and the 2 percent is something to cause us concern. Dr. GODDARD. Again, may I caution that these are preliminary re- sults and one cannot draw conclusions from them. The additional samples are programed for both of these categories in the very near future-in fact, in a matter of weeks, and we could perhaps, before your hearings have ended, give you a readout on these first two categories. Senator NELSON. We would like to have that at a later date when it becomes available. I have something I would like to clarify for the record. When 8i-280-pt. 2-67---23 PAGENO="0354" 792 COMPETITIVE PROBLEMS IN THE DRUG INDUSThY Dr. Durward Hall testified some weeks back, we had a little colloquy about the 4,600 drugs that FDA tested. I quote from his testimony: I agree with you and with Dr. Goddard perfectly, when we hear that all drugs are the same but It is a myth-and that Dr. Goddard himself has exploded the myth. He says be would like to say that they are all the same potency, that they are all of the same value, that they will all have the same effect on the human, which is what we are interested in, and that will have the same quality, but that actually it is not true. Now, actually, you know, and I know that recently, his studies- ref erring to Dr. Goddard's studies- on potency have been found to be off and I think that he and his office have admitted this. Senator NELSoN. No, I am sorry. They concede out of 4,600 samples only five errors; is that not correct? And that is a small margin of error. Dr. `HAIL. Mr. Chairman, I would have to disagree with that source of informa- tion. I don't know where you got it because I spent all day Friday with Dr. Goddard and in his laboratory, and with his chief scientists in his laboratory where these analyses are performed. Dr. Summerson, and they are very free to admit that the initial analysis-and they have no funds for further detailed analysis-was very sketchy and they wished that the' statement, had not been made. They made the statement. Senator NELSON. They made the statement, as I understand it on Friday, conced- ing five mistakes, and we checked with their office. Do you want t~ make an observation about this so we will have the record straight? The PMA, I believe, has criticized the study to me personally in my office and in news releases. I think it would be helpful to have the record correct. Dr. GrnDARD~ If I may, sir, I have a brief statement I would like to submit for the record on this. Senator NELSON. It will be printed in full in the record. (The document referred to follows:) MARKET AND MANTJFACTTJRERS Sunvnx: POTENT DRUG5-1966 This program. projected the analysis of approximately 5,000 samples of drugs in 20 categories to be completed by May 6, 196(3, based on available analyttcal resources. The program was limited to composition analysis of products containing one of the following listed drugs as the single or principal active ingredient: 1. Digitalis and cardiac glycosides 12. Antiarrhythmic-cardiac Drugs 2. Corticosteroids 13. Diuretics 3. Ababolic steroids 14. Nitrites 4. Sex steroids 15. Anticonvulsants 5. Other Hormones 16. Central Nervous System Depres- 6. Anticoagulants sants 7. Antibypertensives 17. Central Nervous System Stimulants 8. Ergot Preparations 18. Antimalarials 9. Hypoglycemlcs 1~. Chemotherapeutics 10. Menadione and derivatives 20. Antithyroid Drugs U. Antihistainines The stated objective of the sampling program was to obtain at least one sample of each dosage form `in the listed categories from each primary manufacturer. Repackers and distributors were specifically excluded. Provision was made, at the Districts' discretion, to collect more than one sample from manufacturers having a substantial production of a given drug or where there was a ques- tionable compliance bckground. Official lISP or NP analytical procedures were specified for' some drugs and reference made to NBA procedures for others. In absence of specific instructions the Districts were Instructed' to examine ofi3clal drugs by methods in official i~ PAGENO="0355" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 793 compendia and non-official drugs by procedures from the NDA. The assign- ment directed that regulatory action be instituted as usual where violations were encountered. Samples were classified at headquarters as being outside potency limits if the results were beyond: Official compendia limits, NDA specifications, and (for other drugs) 90-110% of label declaration. A total of 245 manufacturers were represented in the 4,573 samples examined. The Districts originally estimated 261 primary manufacturers of drugs in the 20 categories. A total of 371 samples, or 8.1%, were classified as outside the potency limits defined above. The detailed findings were made public, after the general findings were an- nounced, on repeated requests from the drug industry. As expected, a number of the manufacturers (38 to date) reguested additional information concerning code and batch numbers, methods of analysis, and quan- titative findings. On receipt of this information, some of the manufacturers examined portions of the same code or batch. In one instance, the manufacturer told us FDA findings were confirmed. In 16 instances the manufacturer reported different results within the acceptable potency range. In 6 samples involving 5 firms after review of the original data, FDA concluded that the original find- ings were in error. In three samples involving two firms the NDA potency limits were incorrectly tabulated. In the remaining 3 samples the examining labora- tory had not followed the prescribed methodology. In such cases, a letter acknowl- edging the error was sent to the firm. These were: Hygroton Tablets-Geigy Pharmaceuticals, Ardsley, New York Furadantin Sodium Sterile-Norwich Pliarmacal Company, Eaton Labora- tories Division, Norwich, New York Thyroid Tablets-Parke, Davis & Company, Detrolt~ Michigan Methotrexate-Lederle Laboratories, Pearl River, New York Aristomin Capsules- Dartal Tablets-G. D. Searle & Company, Chicago, Illinois The gravimetric method used on the sample of Suspension Tydrocortone TBA, manufactured by Merck, Sharp and Dome, West Point, Pennsylvania, was not sufficiently accurate to warrant the conclusion that the product did not meet potency limits. In other Instances, it has not been concluded that the original findings were incorrect. The following compliance actions resulted from this survey: 6 seizures 15 citations 41 product recalls 11 products discontinued 2 prosecutions filed 2 injunctions granted 4 voluntary destructions Dr. GODDARD. In summary, this program was carried out between March 24, 1966, and the end of May 1966, when some 4,600 samples were drawn from manufacturers' available stocks. `The repackagers and distributors were not included in this survey. Senator NELS'O~. Just manufacturers' stock, not products already on the retail market and- Dr. GODDARD. Those are the instructions that were issued. `To my knowledge, `that is the procedure that was followed. Now, we wanted `to get `at least one sample of each dosage form in 20 listed categories from each of the primary manufacturers. Now, these 20 categories include drugs that commonly used such as digitalis and cardiac glycosides, corticosteroids, diuretics, nitrites, and so forth. The districts were given discretion to collect more than one sample from manufacturers, where they had a substantial producti'on of a given drug or where there `was a questionable compliance background. Now, the procedures that `were to be followed were the lISP, NF, or NDA procedures and in the absence of a lISP or NF standard the PAGENO="0356" 794 COMPETITIVE PROBLEMS IN TIlE DRUG INDUSTRY tolerances allowed were a range of 90 `to 110 percent of the stated label potency. Now, this was not presented as being a statistically significant sur- vey. That has been talked about a great deal, and I think the facts still speak for themselves. There were 245 manufacturers represented in these 4,573 samples examined. Three hundred and seventy-one of those saniples, or 8.1 percent, were classified as being outside the potency limits defined as I have mentioned. We did make available the detailed findings, both to the public and to the industry, after repeated requests from the drug industry. Thirty-eight of the manufacturers to date have requested additional information concerning the code and batch number, method of analysis, and quantitative finding. Now, upon receipt of this information, some of these manufacturers e~amine(l portions of the same code or batch and in one instance, the manufacturer said "Yes, you were right, we confirmed your findings." In 16 instances, the manufacturer reported different results within the acceptable potency range. In six samples involving five firms, after the review of the original data, we did concede that we had made an error. Now, in three of these six samples involving two firms, the NDA potency limits were incorrectly tabulated. in the other three samples, the examining laboratory had not followed the prescribed.methodology and the letter acknowledging the effort were sent to `five firms: Geigy, Norwi4ch, Parke-Davis, Lederie, and Searle. Now, the other original findings, I still say, are correct. We stand behind those as long as it is understood that this is not a representative sample of `the market place. The compliance action- Senator NELSON. It `was a random sample, so to speak ~ Dr. GODDA1rn. No, it was not random. The compliance actions result- ing from this survey were six seizures, 15 citations, 41 product recalls, 11 products discontinued, two prosecutions fi~led, two injunctions granted, and four voluntary destructions. Now, I do not know what else we can say about this survey. Mr. GORDON. I do not think you have to say anything else. Senator NELSON. I am happy to have that in the record. Dr. GODDARD. Later, the reports from the National Center, combined with those from our 17 district laboratories, will give a good picture of manufacturing and quality control of drugs throughout the Nation. One indicator we now have is our weekly recall list, a list of those products recalled from the market, either voluntarily by the manii- facturer or distributor or at the request of the FDA, during each 7-day period. Drug recalls have risen over the past year. During fiscal 1966, out of 538 recalls of all foods, drugs, cosmetics, devices, and hazardous sub- stances, there were 446 drug recalls. Out of 900 total recalls in fiscal 1967, there were 651 drug recalls, an increase of 45 percent for drug recalls. Some of the factors to consider in evaluating this rise in recalls are the following: An increased ability-through better programing-of our agency to sample the drug supply and turn up defective products. An increase in hospital, clinic, physician, and patient reporting leading to product investigation by either the manufacturer or our agency. PAGENO="0357" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 795 An increased sense of responsibility by drug makers that quality assurance is essential to continued industry growth, and corre- sponding efforts on their part to catch their own defective products. The introduction of new methodology and new technology to accomplish more sample tests in less time than before, thus increas- ing the identification of products warranting action. When all of these things are considered, we find that the record of drug recalls in recent months shows that the drug industry-large companies as well as small-has much to do before we can conclude that the drug supply is what the Nation deserves. We hope to see the time when it is rare indeed that we must ask a company to remove a drug from the market. Your staff already has a print-out showing drug recalls by company during this past year. One of the questions you have raised with me and my staff, Senator Nelson, is the therapeutic equivalency of identical drugs. All of our efforts in St. Louis and in production control are aimed at making every drug available today a drug which the doctor, the pharmacist, and the patient may trust to achieve the desired results. As a preface, I must stress, Senator Nelson, that drugs are intended to affect physio- logical funetioning of the body. Thus, the values of the effect of a drug must be weighed against the dangers of the disease or condition being attacked. No drug can ever be guaranteed to be completely safe. You do not have "safe drugs" on the one hand and "unsafe drugs" on the other. When we talk about drug safety, we are talking about relative safety. The Secretary of Health, Education, and Welfare has appointed a task force which is studying the problems of including prescription drugs in the medicare program. This study, among other things will of necessity cover in depth the areas of relative drug safety and of relative therapeutic equivalency. Here, as you know, Senator Nelson, certain guidelines are available for our use. The IJ.S.P. and the N.F. have for many years set stand- ards for laboratory examination in the expectation that every drug conforming to these standards will produce the required results in pa- tients. The manufacturing and testing procedures contained in NDA's and the test procedures in antibiotic and insulin regulations also con- stitute such standards. In large measure, we believe that these standards serve their in- tended purposes. This appears to be particularly true for most anti- biotics and insulin; as you are aware, the FDA certifies each batch of antibiotics and insulin to be marketed to see that each meets the appropriate standards, but, as noted before, are not necessarily full guarantees. However, the science of drug production and formulation is becom- ing increasingly complex. The establishment of standards adequate to meet our increasingly complicated needs is a continuing process in which the private organizations maintaining the U.S.P. and the N.F., and the Government working with them, are constantly striving to keep ahead. I think it is important, Senator Nelson, to keep this question of therapeutic equivalency in perspective. There are some who would PAGENO="0358" 76 COMPETITIVE PROBLEMS IN THE DRIJG INDUSTRY have you believe that no reliance can be placed on any drug unless it has been produced by a firm that is widely known. There are others who would have you believe that you can buy any drug in the market- place and expect it to be therapeutically equivalent to others sold under the same name. I must reiterate that we do not have controlled clinical studies to decide the issue in all cases. We are preparing to have the necessary studies made on about 50 widely employed drugs. Mr. GoRDoN. You say in all these cases you have controlled clinical studies showing the lack of therapeutic equivalency? Dr. GODDARD. It is my understanding that controlled clinical studies have been carried out in a number of instances demonstrating lack of therapeutic equivalency. Mr. Go1~noN. low many such cases are there altogether? Dr. GODDARD. Well, we were talking about this in preparation for the hearings. The best figure we could come up with was approxi- mately two dozen such instances have occurred where lack of thera- peutic equivalency has been demonstrated. Mr. GORDON. Do you know what they are? Can you name the 12 of them? Dr. GODDARD. Dr. Banes, perhaps, who has been involved in this field-you see, even one of these is significant and we then have to try to ferret out the reason. Some of these are the sugar-coated tetra- cycline, chioromycetin, and diphenylhydantoin. Mr. GORDON. So far you have named antibiotics. Dr. GODDARD. Diphenylhydantoin. Prednisone is one. Senator NELSON. One what? Dr. GODDARD. That there has been demonstrated lack of therapeutic equivalence. Senator NELSON. When was that case? Dr. BANES. There have been reports in the literature, isolated re- ports from physicians, stating that one brand of prednisone would maintain a patient satisfactorily, but when the brand is switched, the new medicaments will not maintain that patient. On the other hand, going back to the first product, the patient responded satisfactorily. We have recently received a letter from a physician from the Mayo Clinic to the same purport. These situations, of course, require investigation and we have looked into the possible differences in these medications. It turns out that chemically they appear to be the same, but that pharmacologically on testing in animals, there are some differences apparent. Senator NELSON. It might be valuable, then, if you would be willing to look at the Medical Letter showing the results of their tests on 22 prednisone products. They found no clinical evidence to indicate a lack of equivalency among these drugs. They go on to say, "We there- fore recommend that at least to the impecunious patients, you ought to nrescribe generically." Would you look at the Medical Letter and see whether or not any one of these drugs you are mentioning is included in the Medical Letter? It would be interesting to find that out. Dr. GODDARD. I would be happy to do so. I might also add that in the potency survey we did there were two prednisone products that were below potency. So there may be no reason for there being substance to the com- plaints of these individual physicians. PAGENO="0359" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 797 Senator NELSON. I suppose that in order to be scientific about it, you have to check some other batches to find out whether this is a shelf problem or accident. Dr. GODDARD. Surely. Exactly; yes, sir. Dr. BANES. These products are used, of course, in huge volume and these instances that I have cited are isolated instances. Nevertheless, we do wish to investigate them to see if there is any substance to these complaints. Mr. GORDON. Do you know from the FDA's own experience that, even in these limited cases, there was a lack of clinical equivalence? Dr. GODDARD. Do you mean our own direct experience? No; for ex- ample, the Defense Supply Administration has asked us upon occasion to check a particular drug they have purchased for potency and all other aspects that can be measured in the laboratory-particle size, dissolution rate, all the other characteristics. This we have done. They have told us there are problems with therapeutic equivalency, that their physicians have complained. And in at least one instance that I can recall, we checked it and chemically it was identical. But it sub- sequently developed on that one that too much of the crystalline form was present, not enough of the amorphous form, so there was a ration- ale for the physician's complaint. Mr. Go1~oN. Did it meet DSP standards? Dr. GODDARD. At that time. Mr. GORDON. How about at the present time? Dr. GODDARD. DSP standards are in the process of being changed. Mr. GORDON. So if it meets DSP standards, today's DSP stand- ards, it might have been violative? Dr. GODDARD. I do not wantjo leave the cOmmittee with the impres- sion that I am convinced that simple adherence to DSP standards alone or NF standards will guarantee therapeutic equivalency. This is a complicated business. I think it is our job, however, to make cer- tain that if manufacturers adhere to those standards, there is a very slight probability that there will not be therapeutic equivalency. That is going to require some clinical testing and that is what we are en- gaged in. Senator NELSON. Would it be fair to extend your remark further to say that there is very little clinical evidence to show that if DSP ~standards are met, drugs are not clinically equivalent either? Dr. GODDARD. That is correct. They are only isolated instances. Senator NELSON. And the FDA intends presently to begin selecting frequently used drugs and to test them to settle this issue? Dr. GODDARD. Yes, sir. Senator NELSON. I think that this testing program will be a great contribution to the public, the medical profession, and even the manu- facturers if we can settle the question of equivalency. Dr. GODDARD. Even at this time I would challenge the claim that you always have to buy a brand-named product in order to be sure that a drug is good. Poor manufacture and control will produce a bad brand- named drug just as surely as it will produce a bad generic-named drug. Manufacturers of brand-named drugs have yet to show that their products are, in fact, produced in all cases to meet subtle refinements over and above basic standards of therapeutic excellence that in any significant way affects the health and well-being of our people. I hope PAGENO="0360" 798 COMPETITIVE PROBLEMS' IN THE DRUG INDUSTRY you will not misunderstand me; many brand-named drugs are good products just as many generic drugs are. The scientific community has long recognized that in some cases laboratory tests applied outside the body may not give an accurate index of the clinical response that will follow administration of a drug to man. It was for this reason that liver extracts used in treating pernicious anemia had to be tested on patients suffering from the disease to determine their true effectiveness. Representative batches were so tested by' a special board recognized by the TJSP. We now know that pernicious anemia can be treated adequately with vitamin B12, we know how to produce vitamin B12 and how to test it for potency in the chemical-bacteriological laboratory; and I know of no one who doubts that the USP potency test for vitamin B12 gives a true measure of its therapeutic effectiveness in treating pernicious anemia. Senator NELSON. You mean there has been enough clinical experience so that that would seem to be the indication? Dr. GODDARD. That is what I am told. Thus, we have moved in the past 30 years in this particular area from a situation in which representative batches of a drug for treating pernicious anemia had to be tested on sick people to insure therapeutic equivalency, to one in which an active principle of the original drug is available in highly purified form and is reliably tested for therapeutic equivalency outside the human body. In the years since the 1930's, we have found a few other products who clinical effect was not accurately measured by the in vitro tests then being applied. No doubt there will be such examples from time to time in the future. But this does not mean that the tests now employed to check the effectiveness of the drug supply are generally bad, nor that you always have to buy a brand-named drug to get the therapeutic effect desired. At the present time, our feeling is that in only a limited number of drug categories will two drug products with the same active ingredients not produce clinically equivalent results. Senator NELSON. This is a rather blunt refutation of the brand-name claims, is it not? Dr. GODDARD. I have to qualify it by saying it is our feeling, now. As I say, I have challenged brand-name representatives, manufacturers of brand-named drugs, to produce their evidence. I have not received that evidence. One or more have admitted that they have no more evidence than anybody else. . The exact number is now under intensive examination by the Gov- ernment, but for most drug preparations, the identical dosage forms seem, for practical purposes, to perform the same. In those relatively few instances in which a drug product complies with current specifications but nevertheless fails to deliver the desired therapeutic effects, the deficiency is a proper subiect for concern, and a proper justificatio~i for considering changes in the speciftcations. Failure of drug products to yield predictable results represents a po- tential hazard to thousands of patients, and accordingly cannot be dis- missed as unimportant. It is our purpose to discover the reasons for drug failures, or drug malfunctions, and to eliminate them. We have much to learn in this PAGENO="0361" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 799 field. It will require a great deal of research in the laboratory and in the clinic. Through our own activities, those of the Public Health Service, hopefully those of the Veterans' Administration, with whom discussions are also being held, and Secretary Gardner's task force on prescription drugs, we are now embarked on such investigations. TRUTHFUL INFORMATION After the research, after the product comes off the production line, the sponsor must sell it. Most promotion of prescription drugs is di- rected to the prescriber, not the patient. Honest, fair promotion must be fully realized whether it is through circulars, detail men, magazine ads, TV or whatever medium is employed. The recent history of the regulation of prescription drug advertising is set forth in one of our newest FDA publications-"Compendium of Medical Advertising"- which I offer to the committee at this time. Senator NELSON. Thank you. Dr. GODDARD. I would also like to present for the committee's infor- mation a copy of our proposed advertising regulations, which reflect a number of items published in the "Compendium." We have extended to September 1 the period for comment on the proposed regulations; after that date, we will review all comments and objections, and then issue the best regulation possible. 1/Ve solicit a constructive response from the pharmaceutical industry. The promotion of a drug to physicians, Senator Nelson, is based upon the approved claims that may be made for the product. If a claim or an indication for use does not appear in the final printed labeling- the package insert-then it cannot appear in any of the promotion for the drug. The package insert, then, is a guide for prescription drug advertising and promotion. The insert represents the clinical data sup- porting the drug, it reflects the ability of the sponsor to produce it according to exacting specifications, and it is the authentic guide to the prescribing physician, short of a complete review of all the NDA flies-an impossible task for the busy practicing physician to perform, even if the files were available to him. Senator NELSON. We will print the proposed advertising regulations. What is the previous bulletin? Dr. GODDARD. It is called "Compendium of Medical Advertising." Senator NELSON. What does that mean? Is it a collection your agency has made of the different types of advertising? Dr. GODDARD. The contents-I might read a portion of it to give you an idea of the coverage: The "Pharmaceutical Manufacturers Association Principles"; ex- cerpts from the Federal Food, Drug and Cosmetic Act; general regu- lations on drug advertising; questions on prescription drug advertis- ing; answers on prescription drug advertising; memorandum of un- derstanding between PMA, FDA, and industry- Senator NELSON. Who published this? Dr. GODDARD. We did. Senator NFLSON. I will make that available in the committee files, but it will not be printed in the record. Dr. GODDARD. It is available through GPO. Senator NELSON. But the listing of your advertising regulations, will be printed in the record. PAGENO="0362" 800 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY (The document referred to follows:) [Reprinted from Federal Register of May 23, 1967; 32 P.R. 7533] DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE-FOOD AND DRUG ADMINISTRATION Prescription drug advertising and labeling regMiations [21 CFR Part 1] NOTICE OF PROPOSED RULE MARING On the basis of experience with and in response to requests from the pharma- cutical manufacturing industry for clarification of the regulations concerning prescription drug advertisements (§ 1.105) and the regulations establishing ex- emptions from the requirement that prescription drug labeling bear adequate di- rections for use (~ 1.106 (b) and (c)), the Commissioner of Food and Drugs proposes the amendments set forth below. A. Under the authority vested in the Secretary of Health, Education, and Welfare by the Federal Food, Drug, and Cosmetic Act (secs. 502 (n), 701(e), 52 Stat. 1050, as amended 76 Stat. 791; 1055 as amended 70 Stat. 919; 21 U.S.C. 352(n), 371(e)) and delegated by him to the Commissioner (21 CFR 2.120), it is proposed that § 1.105 be amended by revising paragraph (e) and (1) and by revoking paragraphs (f), (g), (h), and (1). The revised paragraphs would read as follows: § 1.105 Prescription-drug advertisements. * * * * * * * (e) True statement of information in brief summary relating to side effects, contraindications, and effectiveness: (1) When required. (i) Any advertisement for a prescription drug shall pre- sent a true statement of information in brief summary relating to side effects, contraindications (when used in this section, side effects and contraindications include side effects, hazards, warningS, precautions, and contraindications), and effectiveness, if the advertisement recommends or suggests any indication for use in words or by written, printed, or graphic matter, or suggests a dosage for use of the drug (other than quantitative ingredient information), or con- thins any claim for safety or effectiveness. (ii) A so-called "reminder advertisement" may be employed if it contains only the name of a drug (which necessitates declaring the established name ,if any, naming a dosage form, and furnishing its quantitative ingredient informa- tion) and information relating to quantity, price, and the name and address of the manufacturer, packer, or distributor. To qualify for exemption from the requirements of subdivision (i) of this subparagraph, the advertisement shall not recommend or suggest by printing or graphics any Indication for use, drug dosage, or claim for safety, effectiveness, or other quality of the drug. (iii) An advertisement that incorporates the name of a drug, dosage form name, and quantitative ingredient information, with similar information for other drugs in a composite price list, but does not recommend or suggest any indication for use or dosage for use of the drug, Is not required to include inf or- mation relating to side effects, contraindicatlons~ and effectiveness. (iv) An advertisement for a drug sold in bulk packages, in accordance with the practice of the trade, solely to be processed, manufactured, labeled, or re- packed In substantial quantities, is not required to include a statement of infor- mation relating to side effects, contraindications, and effectiveness if it does not contain claims for the therapeutic safety or effectiveness of the drug. (v) An advertisement for a drug sold for use as a prescription chemical or other component for use by registered pharmacists in compounding prescriptions, and which otherwise complies with the conditions for the labeling exemption contained In § 1.106(k), is not required to include a statement of information relating to side effects, contraindications, and effectiveness if it does not contain claims for the therapeutic safety or effectiveness of the drug. (2) Scope of information to be included in brief summary. (I) The advertise- ment as a whole and each representation and suggestion in the advertisement shall be consistent with the requirement that it present a true statement of in- PAGENO="0363" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 801 formation in brief summary relating to side effects, contraindications, and effec- tiveness whether or not it relies on a distinct part of the advertisement to present information relating to side effects and contraindications. (ii) The information relating to effectiveness may be limited to the effective- ness and limitations of the effectiveness of the drug in the conditions for which it is recommended or suggested in the advertisement. (iii) The information relating to side effects and contraindications shall dis- close all of the side effects and contraindications pertinent to the uses of the drug dosage form (s) recommended or suggested in the advertisement, all other uses for which the advertised dosage form is commony prescribed, and all other uses for which such dosage form (s) is recommended or suggested in any labeling or advertising disseminated by or on behalf of the manufacturer, packer, or distributor of the drug. (3) Substance of information to be included in brief summary. (i) (a) An advertisement for a prescription drug covered by a new-drug application ap- proved pursuant to section 505 of the act after October 10, 1962, or any approved supplement thereto, shall not recommend or suggest any use that is not in the labeling aecepted in such approved new-drug application or supplement. The advertisement shall present information from labeling approved or permitted in a new-drug application concerning all side effects and contraindications men- tioned in such labeling; each side effect and contraindication idea in the label- ing shall be contained in the advertisement. (b) If a prescription drug was covered by a new-drug application or a supple- ment thereto that became effective prior to October 10, 1962, an advertisement may recommend or suggest: (1) Uses contained in the labeling accepted in such new-drug application and any effective or approved supplement thereto. (2) Additional uses contained in labeling in commercial use on October 9, 1962, to the extent that such uses did not cause the drug to be an unapproved "new. drug" as "new drug" was defined in section 201 (p) of the act as then in force, and to the extent that such uses would be permitted were the drug sub- ject to subdivision (iii) of this subparagraph. (3) Additional uses contained in labeling in current commercial use to the extent that such uses do not cause the drug to be an unapproved "new drug" as defined in section 201 (p) of the act as amended. The advertisement shall present information from such labeling concerning all side effects and contraindications mentioned in such labeling. (ii) An advertisement for a prescription drug subject to certification under section 507 of the act shall not recommend or suggest any use that is not in the labeling covered by the certification or covered by the applicable certification regulations or regulations providing for exemption from certification. The adver- tisement shall present information from such labeling covered by the certification, or the applicable certification regulations, or regulations provided for exemption from certification, concerning all side effects and contraindications mentioned in such labeling and such regulations. (iii) In the case of an advertisement for a prescription drug other than a drug the labeling of which causes it to be an unapproved "new drug" and other than drugs covered by subdivisions (i) and (ii) of this subparagraph, an adver- tisement may recommend and suggest the drug only for those uses contained in the labeling thereof: (a) For which the drug is generally recognized as safe and effective among enperts qualified by scientific training and experience to evaluate the safety and effectiveness of drugs; or (b) For which there exists substantial evidence~ of safety and effectiveness, consisting of adequate and well-controlled investigations, including clinical in- vestigations, by experts qualified by scientific training and experience to evalu- ate the safety and effectiveness of the drug involved, on the basis of which it can fairly and responsibly be concluded by such experts that the drug is safe and effective for such uses; or (c) For which there exists substantial clinical experience, adequately docu- mented in medical literature or by other data (to be' supplied to the Food and Drug Administration, if requested), on the basis of which it can fairly and re- sponsibly be concluded by qualified experts that the drug is safe and effective for such uses; or (d) For which safety is supported under any of the preceding clauses in (a), (5), and (c) of this subdivision and effectiveness is supported under any other of such clauses. PAGENO="0364" 802 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY The advertisement shall present information concerning all of the side effects and contraindications that are pertinent to the uses of the drug recommended or suggested in the advertisement, all other uses for which the dosage from adver- tised is commonly prescribed, and all other uses for which such dosage form is recommended or suggested in all labeling and/or advertising disseminated by or on the behalf of the advertiser. The information relating to effectiveness shall include specific Indications for use of the drug for purposes claimed in the advertisement; for example, when an advertisement contains a broad claim that a drug is an antibacterial agent, the advertisement shall name the types of infections and micro-organisms for which the drug is effective clinically, con- sistent with the information required or permitted in the drug package labeling. (4) "True statement" of informa~tioii. An advertisement does not satisfy the requirement that it present a "true statement" of information in brief summary relating to side effects, contraindications, and effectiveness if: (I) It contains any untrue statement; or (ii) It fails to present adequately a fair balance between claims for safety or effectiveness of the drug and information relating to the limitations of safety or effectiveness pertinent to the uses of the drug; or (iii) It fails to reveal facts material in the light of its representations or ma- terial with respect to consequences that may result from the use of the drug as recommended or suggested in the advertisement or under such conditions of use as are customary or usual; or (iv) It is misleading in any other particular. (5) False, lacking in fair balance, or otherwise misleading advertisement. An advertisement for a prescription drug is false, lacking in fair balance, or other- wise misleading, among other reasons, if it: (i) Contains a representation or suggestion, not approved or permitted for use in the drug package labeling, that a drug is better, more effective, useful in a broader range of conditions or patients, safer, has fewer, or less incidence of, or less serious side effects or contraindications than has been demonstrated hy sub- stantial evidence, whether or not such representations are made by comparison with other drugs or treatments, and whether or not such a representation or sug- gestion is made directly or through use of published or unpublished literature, quotations, or other references. (ii) Contains a drug comparison claiming advantages for a drug without simultaneously disclosing any pertinent disadvantages (including, for example, disclosure of the fact that the advertised drug has the other disadvantages of a category of drugs and additional disadvantages). (iii) Contains favorable information or opinions about a drug previously re- garded as valid but which have been rendered obsolete by contrary and more recent information, or fails to contain significant recent literature references that are less favorable to a drug than older references used. (iv) Contains information from published articles that report no side effects with a drug but fails to contain significant information from the literature or other sources that report side effects, or otherwise selects information from any source in a way that makes a drug appear to be safer than it is. (v) Contains information from a study in a way that implies that the study represents larger or more general experience with the drug than it actually does. (vi) Contains literature references or representations that may exaggerate the effectiveness of a drug by failure to disclose the extent to which claimed re- suits may be due to placebo effect or concomitant therapy. (vii) Contains data or conclusions from studies of a drug in animals or in vitro in a way that suggests they represent clinical studies, or in a way that suggests they have clinical significance when in fact no such clinical significance has been demonstrated. (viii) Contains information from published or unpublished reports or opinions erroneously represented or suggested to be authentic or authoritative. (ix) Contains Information or an opinion from a recognized authority or based on a study favorable to a drug, but fails to reveal that such information or opinion is contrary to or Inconsistent with information or opinions from other recognized authorities or other reliable studies. (x) Uses a statement by a recognised authority that is apparently favorable abnut a drug, but fails to use unfavorable data or statements from the same authority. (xl) Contains information or conclusions from a study that lacks significance because It was uncontrolled or for other reasons. PAGENO="0365" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 803 (xii) Uses a quote or paraphrase out of context to convey a false or mislead- ing idea. (xiii) Uses literature quotations or references that purport to support an advertising claim but in fact do not support the claim or have relevance to the claim. (xiv) Uses literature, quotations, or references to recommend or suggest con- ditions of drug use that are not approved or permitted in the drug package labeling or for which there is insufficient evidence to establish safety and effectiveness. (xv) Offers a combination of drugs for the treatment of patients suffering from a condition amenable to treatment by any of the components rather than for patients who require concomitant therapy as provided by the fixed combina- tion drug, unless approved or permitted drug package labeling recommends the drug for such use. (xvi) Uses a study on a small number of patients or on normal subjects without disclosing the limitations of the study by calling attention to the small number of patients or the fact that the subjects were normal. (xvii) Uses "statistics" on numbers of patients, or counts of favorable results or side effects, derived by pooling data from various insignificant or dissimilar studies in a way that suggests that such "statistics" are valid or are derived from large or significant studies supporting favorable conclusions. (xviii) Uses the concept of "statistical significance" to support a claim that has not been demonstrated to have clinical significance or validity, or fails to reveal the range of variations around the quoted average results. (xix) Uses statistical analyses and techniques on a retrospective basis to dis- cover and cite findings not soundly supported by the study, or to suggest scien- tific validity and rigor for data from studies the design or protocol of which are not amenable to formal statistical evaluations. (xx) Uses inversely or otherwise erroneously a statistical finding of "no significant difference" to claim clinical equivalence or to deny or conceal the potential existence of a real clinical difference. (xxi) Uses tables or graphs to distort or misrepresent the relationships, trends, differences, or changes among the variables or products studied, or uses graphs that are not appropriately titled; for example, fails to label abscissa and ordinate so that the graph is not readily interpretable without reference to the text. (xxii) Uses reports or statements represented to be statistical analyses, inter- pretations, or evaluations that are inconsistent with or violate the established principles or statistical theory, methodology, applied practice, and inference, or that are derived from clinical studies, the design, data, or conduct of which substantially invalidate the application of statistical analyses, interpretations, or evaluations. (xxiii) Uses statements or representations that a drug differs from or does not contain a named drug or category of drugs, or that it has a greater potency per unit of weight, in a way that suggests erroneously or without substantial evidence that the advertised drug is safer or more effective than such other drug or drugs. (xxiv) Contains claims concerning the mechanism or site of drug action that are not supported by substantial evidence. (xxv) Uses those parts or the whole of studies or reports of studies that in- clude dosages in excess of those authorized in approved package labeling if the drug advertised is subject to section 505 or 507 of the act, or in the case of other drugs, if the dosages employed were in excess of those recommended in the labeling and generally recognized as safe. (xxvi) Uses misleading headline, subheadline, or pictorial or other written, printed, or graphic matter. (xxvii) Fails to present the pertinent limitations of the effectiveness of the drug in immediate conjunction with and as prominently as any claim for effec- tiveness, whether or not such limitations are disclosed in another part of the advertisement. (xxviii) Fails to present with equal prominence the limitations of safety of the dri~g; fQr. example, specific side effects or contraindications pertinent to any claim for safety in immediate conjunction with each such claim for safety even though such limitations are disclosed in another part of the advertisement. (xxix) Fails to present information concerning side effects and contraindi- cations in as much depth and detail (not exceeding that required in the drug PAGENO="0366" 804 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY package) as claims for effectiveness or safety of the drug, taking into account the length of the advertisement and the nature of its message. This means that there maybe two permissive levels of summarization: (a) If the claims for effectiveness or safety are presented briefly without dos- age information and the advertisement as a whole appears on three pages or less, the side effects and contraindications may be presented concisely provided that each such idea expressed in the approved or permitted drug package label- ing is presented in a "Brief Summary"; or (5) If the claims for effectiveness or safety are presented in detail or in dis- cii~sion form, or dosage Information is presented, or parts of the advertisement appear on more than three pages of a periodical of page size larger than 50 square inches, or more than four pages of a periodical of 50 square inches or smaller page size, the side effect and contraindication information shall be presented as a "Brief Discussion Summary" comparable in depth and detail with the information required in the drug package labeling under § 1.106(b) (3). (xxx) Fails to provide sufficient emphasis for the information relating to side effects and contraindications contained in a distinct part of an advertisement by reason of repetition or other emphasis in that part of the advertisement of claims for effectiveness or safety of the drug. (xxxi) Fails to present informatioti relating to side effects and contraindica- tions with a prominence and readability reasonably comparable with the presen- tation of information relating to effectiveness of the drug, taking into account all implementing factors such as typography, layout, contrast, headlines, para- graphing, white space, and any other techniques apt to achieve emphasis. (xxxii) Fails to present on a page facing another page (or on another full page) of an advertisement on more than one page, information relating to side effects and contraindications when such information is in a distinct part of the advertisement. (xxxiii) Fails to provide adequate emphasis by the use of borders, headlines, or other copy that extends across the gutter for the fact that two facing pages are part of the same advertisement, when one page contains information relating to side effects and contraindications. (xxxiv) Fails to include on each spread of an advertisement of more than one page a prominent reference to the presence and location of the Information relating to side effects and contraindications when presented as a distinct part of an advertisement. (f) Revoked. (g) Revoked. (h) Revoked. (1) Revoked. * * * * * * * (1) (1) Advertisements subject to section 502(n) of the act include advertise- ments in published journals, magazines, other periodicals, and newspapers, and advertisements broadcast through media such as radio, television, and telephone communications systems. (2) Brochures, booklets, mailing pieces, detailing pieces, file cards, bulletins calendars, price lists, catalogs, house organs, letters, motion picture films film strips, lantern slides, sound recordings, exhibits, literature, and reprints and similar pieces of printed, audio, or visual matter concerning a drug and which are disseminated by or on behalf of its manufacturer, packer, or distributor including reference publications (for example, the Physicians' Desk Reference) for use by medical practitioners, pharmacists, or nurses, containing drug in- formation supplied by the .manufacturer, packer, or distributor of the drug, are regarded as labeling not subject to section 502(n) of the act, but subject to the labeling requirements of § 1.104 and § 1.106 (b) or (c). B. Under the authority vested in the Secretary by the act (sees. 502(f) (1) (n), 701 (a),, 52 Stat. 1051, as amended 76 Stat. 791; 1055; 21 U.S.C. 352(f) (1) (n), 371(a)) and delegated as cited above, it is proposed that: 1. Section 1.105 Prescription-drug advertisements be amended by adding to the end of paragraph (d) (2) a new ,sentence reading "The requirement that an advertisement name at least one dosage form. and furnish the related quantita- tive ingredient information for a drug does not apply. to advertisements pro- moting the sale of a drug in bulk for use In the manufacture of another drug or for use as a component In prescription compounding.". 2. Section 1.106 Drugs and devices; directions for use be amended: PAGENO="0367" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 805 a. By adding a heading to paragraph (b) (3) and by revising subdivisions (1) and (ii) thereunder, as follows: (3) Adequate information for use In drug package: (i) Labeling on or within the package from which the drug is to be dispensed bears adequate information for its use including jndications, effects, dosages, routes methods and frequency and duration of administration, and all side effects, hazards, warnings, precautions and contraindications under which prac- titioners licensed by law to administer the drug can use the drug safely and for all purposes for which it is intended, including all purposes for which it ~s advertised or represented; and (ii) If the article is subject to section 505 or 507 of the act, the labeling in- corporating such information is the labeling approved or permitted under the provisions of section 505 or 507, respectively. b. By revising paragraph (b) (4) to read as follows: (4) Promotional labeling options and requirements. (i) When required. All matter determined under § 1.105(1) to the labeling as defined in section 201 (m) of the act shall conform to one of the following options unless it is subject to the requirements of subparagraph (3) of this paragraph or optionally conforms to such requirements: (a) "Full Disclosure." (1) All labeling disseminated by or on behalf of the manufacturer, packer, or distributor of the drug purporting to present adequate information for its use, or intended for employment as a reference to drug-use information, incorporates as an integral part of such labeling adequate "full dis- closure" information for Its use, including ittclications, eff~ects, dosages, routes, methods, and frequency and duration of administration, and all side effects, hazards, warnings, precautions, and contraindicatlons under which practitioners licensed by law to administer the drug can use the drug safely and for all pur- poses for which it is intended, including all purposes for which it is advertised or represented; and (2) If the article is subject to section 505 or 507 of the act, the labeling in- corporating such information is substantially the same as the labeling approved or permitted under the provisions of section 505 or 507, respectively. (b) "Full Warning Disclosure." Unless such labeling is subject to or option- ally conforms to the requirements of subparagraph (3) of this paragraph or (a) of this subdivision, if the labeling: (1) Recommends or suggests a drug dosage; or (2) Presents information for drug use relating to one or more selected indica- tions, but not all indications; or (3) In the case of brochures, booklets, mailing pieces, and related presentations is of more than three pages, the labeling shall present with respect to each indication for use of the drug suggested in such labeling, substantially the same information for its use, in- cluding effects, dosages, routes, methods, and frequency and duration of admin- istration as the corresponding information in the approved or permitted drug package labeling, and shall incorporate as an Integral part of such labeling a "Full Warning Disclosure"; i.e., substantially the same information concerning all side effects, hazards, warnings, precautions, and contraindications as that in the approved or permitted drug package labeling. (c) "Bvief summary." Unless such labeling is subject to, or optionally con- forms to the requirements of subparagraph (3) of this paragraph or (a) or (5) of this subdivision, the labeling shall present a true statement of information in brief summary relating to side effects, contrainclications (when used in this sec- tion, side effects and contraindications include side effects, hazards, warnings precautions, and contraindications), and effectiveness of the drug, if the labeling recommends or suggests any indication for use in words or by written, printed, or graphic matter, or contains any claim for safety or effectiveness. * (d) Reminder labeling. If the labeling is not subject to the requirements of subparagraph (3) of this paragraph or (a), (5), or (c) of this subdivision so- called reminder labeling may be employed. Such labeling may contain the name of a drug (which necessitates declaring the established name, if any, naming a dosage form, and furnishing its quantitative ingredient information) and in- formation relating to quantity, price, and the name of the manufacturer~ packer or distributor, but shall contain no other information or representation in words or by means of graphic matter. PAGENO="0368" 806 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY (e) Price list or catalog. Labeling that incorporates the name of a drug, dosage form name, and qualitative ingredient information with similar information for other drugs in a composite price list or catalog, but does not recommend or sug- gest any iiidjcation for use, or dosage for use of the drug, or contain any in- formation reg~irding frequency or duration of administration or any claim for safety, ei!fectiveness, or other quality of the drug, is not required to include in- formation relating to side effects and contraindications, `U) Motion picture films, film strips, sound recordings, and related audio or visual promotional labeling. (1) Motion picture films, film strips, sound record- ings, and related audio or visual presentations by or on behalf of the manufac- turer, packer, or distributor of a drug that promote the use of a drug distributed by such a person, irrespective of whether the drug is named specifically or is In a category of drugs named, shall present, unless it conforms to the requirements of subparagraph (3) of this paragraph or (a), (5),, or (c) of this sub-division, as an integral part of such audio or visual presentation information relating to the major side effects and contraindications of such drug. The audio or visual pres- entation shall close with a statement to the effect that the drug has side effects and contraindications in addition to those mentioned in the presentation and that "full disclosure" information to supplement the audio or audio-visual pres- entation will be presented to the audience in printed form. If the drug is sub- ject to section 505 or 507 of the act, the information relating to the major side effects and contraindications of the drug is information that is approved or per- mitted by written notification from the Food and Drug Administration for such use in motion picture films, film strips, sound recordings, and related audio or visual promotional labeling under the provisions of section 505 or 507, respec- tively: Provided, however, That the requirement that information relating to the major side effects and contraindications of a drug be presented as an integral part of audio or visual promotional labeling will be met in the case of such label- ing produced prior to the effective date of this requirement if such information is added to the end of the audio or visual presentation, and if information re- lating to any major side effects and contraindications acquired after production of the audio or visual promotional labeling is added to the end of the audio or visual presentation. (2) Audio and audio visual aids that are generally promotional, in the sense that they relate to a class of drugs one n~ember of which is~ marketed by the firm sponsoring the preparation or the presentation of the film or recording, be- come product labeling when used in a promotional setting (such as when used by detail men), when associated with product promotional pieces, or when other means are used to associate the general message with a particular product in the class. c. By adding to the proposed revision of paragraph (b)(4) above new sub- divisions (ii), (iii), (iv), and (v) that would be similar with respect to labeling as proposed § 1.105(e) (2), (3), (4), and (5) above would be for advertising. d. By inserting the following subdivisions after § 1.106(b) (4)(v) as cOn- templated in proposal "c" above. (-) Fails to incorporate as an integral part of any labeling, required informa- tion relating to side effects and contraindications; for example, the required in- formation shall be incorporated in the audio or visual elements of films or sound recordings, bound as an integral part of a reprint, printed on the reverse side of a letter, etc.; provided, however, that in the case of an exhibit, this requirement will be met if a "Brief Summary" of side effects and contraindications is pre- sented on at least one panel of the exhibit, other panels bear a prominent reference to the presence and location of the "Brief Summary" on the exhibit, and drug package or other "Full Disclosure" labeling is made available to viewers at the exhibit. (-) Fails to present in the case of motion picture films, film strips, sound recordings, and related audio or visual promotional labeling, required informa- tion relating to side effects and contraindications so that it will be seen or heard with a prominence reasonably comparable to the information relating to effec- tiveness of the drug, taking into account all implementing factors such as space, timing, and audio-visual or any other techniques apt to achieve emphasis. (-) Disseminates reprints of literature reports, reports of symposia, or other reports that include claims' of effectiveness or safety or recommend or suggest conditions of use of the drug not approved or permitted in the drug package labeling unless such representations are excluded prior to dissemination. PAGENO="0369" COMPErITIVE PROI3LEMS IN THE DRUG INDUSTRY 807 e. By revising paragraph (b) (5) to read as follows: (5) All labeling, except labels and cartons, bearing any information for use of the drug, or information relating to side effects, contraindications, safety, or ef- fectiveness of the drug also bears the date when the labeling was placed into use and the same information concerning the ingredients of the drug as appears on thedabel and labeling on or within the package from which the drug is to be dispensed. f. By revising paragraph (c) (3), (4), and (5) to be similar in effect to para- graph (b) (3), (4), and (5) as proposed above. Any interested person may, within 60 days from the date of publication of this Notice in the FEDERAL REGISTER, file with the Hearing Clerk, Department of Health, Education, and Welfare, Room 5440, 330 Independence Avenue SW., Washington, D.C. 20201, written comments, preferably in quintuplicate, on this proposal. Comments may be accompanied by a memorandum or brief in support thereof. Dated: May 17, 1967. JAMES L. GODDARD, Com,missioner of Food as~A4 Drugs. Senator NELSON. Does the law require a package insert? Dr. GoDDARD. The regulations and the law both require that a pack- age insert be available. However, the Secretary of Health, Educa- tion, and Welfare may exempt the company or the industry from this requirement. Senator NEr~soN. But the regulations now require it, and as I under- stood your testimony this morning, it costs the industry about $6 mil- lion a year? Dr. GODDARD. I am told that this was their estimate when they were discussing with my predecessor the possibility and their desire to pub- lish a compendium in lieu of the package insert. It would simplify their entire packaging problem; individual cartons would not be required. Now, I think that is fine. More important, however, is the desire to get accurate, reliable information to all physicians, and this is not occurring today. I think it is extremely important. I am mystified as to why the industry will not pick up the ball and exert some leader- ship in this field and say, yes, we do want good information to get to the practicing physician; we do want them to know about the drugs that are available to them tQ be used, and we therefore on our own initiative, have caused this compendium to be published. I was hope- ful that by now, we could say we are well down the road, but I still have not gotten any response from the industry on this issue. Senator NELSON. As you know, the idea of a compendium has been widely supported by medical educators and practicing physicians. When the PMA appears before the committee, we will explore this in some detail to find out their viewpoint and to determine whether or not the industry is prepared to support it. Dr. GODDARD. I think we really have a unique opportunity. The National Academy of Sciences' National Research Council review of the 2,000 drugs still in the marketplace that were marketed between 1938 and 1962 will provide a basis for updating the claims of efficacy of all of these drugs. This means, in effect, that we will have a sound basis for a good compendium as far as the therapeutic claims are con- cerned. It would seem to me with relatively little additional work, we could cause a truly important book on therapy to come into existence.. It should be something that is done,, hopefully, with private venture capital, and would not require us to come before Congress and say we 81-280-pt. 2-67-24 PAGENO="0370" 808 COMPETITIVE PROBLEMS IN TIlE DRIJG INDUSTRY need additional authority to impose a tax upon the industry. Such a tax might accompany th~ registration, for example, and say for every drug in the marketplace and for u~ number of units of that drug, so many dollars per annum might be charged for a revolving fund in order for the Government to cause a compendium to come into~being. Sir, I would like to avoid that. I would like to see us operate as men of science~ with good reason behind this, a demonstrated need, a desire on the part of everyone to have this occur on a voluntary basis, Those who decry Government regulations, it seems to me, should be in the leadership of avoiding them by their own voluntary efforts, and I would hope this would occur. Senator NELSON. Thank you. Dr. GODDARD. To say that our agency has had some difficulty with claims made by many companies in drug advertising is to understate our experience of the past year or so. Basically, the issue has been the inclination of a number of companies to go beyond the approved claims in the inserts and to evade the requirements for a brief, honest state- ment of the bad and the good to be expected from a drug. In a way, this has been a remarkable situation because at times FDA has not been as rigid on the language in package inserts as it might have been. But even with sonie small latitude, a number of companies sought even more. At this time, I would like to deposit with this committee copies of eight so-called "Dear Doctor" letters concerning 14 heavily pro- moted prescription drugs. These letters were sent to the medical com- munity during the past 7 months. You will note that these letters seek to correct misinformation contained in advertising and labeling. in each instance they were written and mailed at our insistence. Would you like to have for the record, Senator Nelson, the "Dear Doctor" letters that have been sent out? Senator NELSON. Yes. Dr. GODDARD. Thank you. (The documents referred to follow): FLINT LABORATORIES, Dxvisio~ o~ TRAVENOL LABORATORIES, INC., Morton Grave, Ifl., July 20, 1967. DEAR DOCTOR. The Food and Drug Administration has asked us to call your attention to the Initial advertisements for Choloxin® (sodium dextrothyroxine), currently appearing In several journals, which are regarded by the FDA as misleading. The headline, "A significant new advance in the management of hypercholest- erolemia", does not Include the qualification that Choloxin is indicated for the treatment of hypercholesterolemia in selected patients, i.e., eilthyroid patients with no known evidence of organic heart disease. Also, the ads fail to stress that Choloxin is not intended to replace or to lessen the desirability of considering dietary regulation in the management of hypercholesterolemia. The FDA points out that, while the ads emphasize that Choloxin effectively lowers blood cholesterol levels, they fail to emphasize that this effect has not been proven to alter the morbidity and mortality of atherosclerotic disease. The claim in the ads that Choloxin (sodium dextrothyroxine) is "significant in its accepted physiologic mode of action" is considered to oversimplify the extent of knowledge of its mode of action. Further, the reference to "over 6,~OO patients treated In clinical studies" overstates pertinent clinical experience, since only 2,967 patients were In the diagnostic categories for which the drug is currently indicated. The FDA also considers the summary of warning Information In the ads to be Incomplete. The enclosed "Brief summary" contains information in capital letters that was not present In the current ads, but will be Incorporated into future ads for Choloxin. We are discontinuing the ads in question. The safety PAGENO="0371" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 809 and efficacy of Choloxin are not in question when used in accordance with the official package circular, which remains unchanged. Sincerely, THOMAS A. GARRETT, Vice President, Medical Affairs. SUMMARY (N0TE.-This revised "Brief Summary" for use in future medical journal adver- tising contains additional phrases and items (printed iti capital letters) from the official package insert which remains unchanged.) THE USE OF CHOLOXIN® (SODIUM DEXfl~OTHYROXINE) DOES NOT REPLACE OR DIMINISH THE DESIRABILITY OF DIETARY MANAGE- MENT OF HYPERCHOLESTEROLEMIA. THE INFLUENCE OF LOWERED SERUM CHOLESTEROL ON MORBIDITY AND MORTALITY OF ATHER- OSCLEROTIC DISEASE CANNOT BE ASSESSED UNTIL LONG-TERM CLINICAL TRIALS HAVE BEEN COMPLETED. INDIUATION~: THIS IS NOT AN INNOCUOUS DRUG. Strict attention should be paid to the indications and contraindications. Indicated for treatment of liypercholesterolemia in euthyroid patients with no known evidence of organic heart disease. Also indicated for treatment of hypothyroidism in patients with cardiac disease who cannot tolerate other types of thyroid medication. CONTRAINDW4tTIONS: 1) Known organic heart disease, INCLUDING ANGINA PECTORIS; HISTORY OF MYOCARDINAL INFARCTION; CAR- DIAC ARRHYTHMIA OR TACHYCARDIA, EITHER ACTIVE OR IN PATI- ENTS WITH DEMONSTRATED PROPENSITY FOfl ARRHYTIIMIAS; rheumatic heart disease; HISTORY OF CONGESTIVE HEART FAILURE; AND DECOMPENSATED OR BORDERLINE COMPENSATED CARDIAC STATUS. 2) Hypertensive states (OTHER THAN MILD,, LABILE SYSTOLIC HYPERTENSION). 3) Advanced liver or kidney disease. 4) Pregnacy. 5) Nurs- ing mothers. 6) History of iodism. A relative contraindication is impaired liver or kidney function; WHEN EITHER OR BOTH ARE PRESENT, THE ADVANTAGES OF SODIUM DEXTROTHYROXINE THERAPY MUST BE WEIGHED AGAINST THE POSSIBILITY OF DELET1~RIOUS RESULTS. WARNINGS: Because the effects of anticoagtilants may be potentiated, RE- DUCE DOSAGE OF ANTICOAGLANTS BY ONE-THIRD ON INITIATION OF TITERAPY and rea~ijust as necessary ON THE BASIS OF W]3~EKLY TESTS OF PROTHROMBIN TIME. Concentration of Factors VII, VIII, fl~, and plate- let activity SHOULD ALSO BE MONITORED, since these factors may be de- creased. CONSIDER WITHDRAWAL OF CITOLOXIN (SODIUM DEXTRO- THYROXINE) 2 WEEKS BEFORE SURGERY IF USE OF ANTICOAGUL- ANTS IS CONTEMPLATED. Careful consideration of dosage schedule in hypothyroid patients WITH CAR- DIAC DISEASE is required, and the drug should be withdrawn or dosage re- duced if AGGRAVATION OF ANGINA, INCREASED MYOCARDIAL IS- CHEMIA, CARDIAL FAILURE, OR CLINICALLY SIGNIFICANT ARRHYTH- MIA develops. HYPOTHYROID PATIENTS ARE MORE SENSITIVE THAN EUTHYROID PATIENTS, ESPECIALLY IF TREATED CONCOMIT- ANTLY WITH OTHER THYROID PREPARATIONS; SPECIAL CONSIDERA- TION TO THE DOSAGE OF THE LATTER MUST BE GIVEN. Thyroid preparations may enhance the effects of epinephrine injections, pre- disposing to arrhythmias OR CORONARY INSUFFICIENCY. DRUG WITH- DRAWAL OR CAREFUL OBSERVATION OF PATIENTS RECEIVING SUCH INJECTIONS IS RECOMMENDED, ESPECIALLY BEFOflE ELECTIVE SURGERY. In diabetic patients, increased blood sugar levels may be observed, requiring upward adjustment of antidiabetic drug dosage, and SUBSEQUENT REAJUST- MENT IF DEXTROTHYROXINE IS LATER WITHDRAWN. USE [N WOMEN OF UHILDBEARINa AGE: In women exercising birth con~ trol procedures, the drug should only be administered AFTER WEIGHING POS~ SIBLE RISK TO THE FETUS AGAINST POSSIBLE BENEFITS TO THE MOTHER. TERATOGENIC STUDIES IN TWO ANIMAL SPEOIES HAVE BEEN NEGATIVE. PRECAUTIONS: UNUSUALLY HIGH FBI VALUES ARE COMMON IN TREATED PATIENTS AND ARE NOT EVIDENCE OF HYPERMETABOLISM. IN CHILDREN, USE ONLY WEtEN A SIGNIFICANT CHOLESTEROL LOW- PAGENO="0372" 810 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY ERING EFFECT IS OBSERVED. Withdrawal is indicated if iodism or new cardiac signs or symptoms develop. ADVER$E REACTIONS: For the most part due to metabolism, AND TITUS MORE COMMON IN THE HYPOTHYROID PATIENT, ESPECIALLY THE HYPOTHYROID CARDIAC. Cardiac changes have rarely been precipitated in non-cardiac patients. Angina pectoris (0.2% incidence), arrhythmia (0.5%), MYOCARDIAL ISCHEMIA (<0.1%), CARDIOMEGALY (<0.1%), FATAL AND NON-FATAL myocarcllal infaretions (<0.2%). Insomnia, nervousness, pal- pitations, tremors. WEIGHT LOSS, LID LAG, SWEATING, FLUSHING, HY- PERTHERMIA, HAIR LOSS, CHANGES IN BOWEL HABITS, DIIJRESJS, AND MENSTRUAL IRREGULARITIES MAY ALSO BE RELATED TO THE MILD METABOLIC ACTION. A FEW PATIENTS DEVELOPED ITCHING AND SKIN RASHES, APPARENTLY FROM IOT)ISM. DYSPEPSIA, NAUSEA AND VOMITING, AND CHANGES IN APPETITE OCC(JRRED IN LESS THAN 1%. HEADACHE, CHANGES IN LIBIDO, HOARSENESS, TINNITUS, DIZZINESS, PERIPHERAL EDEMA, MALAISE, TIR1I~DNESS, VISUAL DISTURBANCES, PSYCHIC CHANGES, PARES- THESIA, MUSCLE PAIN, AND BIZARRE COMPLAINTS WERE REPORTED IN LESS THAN 1% OF TREATED PATIENTS. GALLSTONES WERE NEW- LY DISCOVERED IN 13 PATIENTS, AND CHOLESTATIC JAUNDICE IN ONE, ALTHOUGH RELATIONSHIP TO DRUG THERAPY WAS NOT ESTAB- LISHED. IN A TOTAL OF 19 PATIENTS, PRE-EXISTING PERIPHERAL VASCULAR DISEASE, EXOPI1~THALMOS, RETINOPATHY, AND DIS- TURBED SENSORIUM CONTINUED TO WORSEN, CEREBROVASCULAR ACCIDENTS, THROMBOPHLEBITIS, AND G.I. HEMORRHAGES EACH OC- CURRED IN LESS THAN 1% OF PATIENTS, BUT THERE APPEARS TO BE NO RELATIONSHIP TO DEXTROTHYROXINE THERAPY. In the nearly 3,000 patients studied, the withdrawal rate was less than 3%. PHARMACOLOGY: MOST EVIDENCE INDICATES THE MECHANISM OF ACTION IS TO STIMULATE THE LIVER TO INCREASE CATABOLISM OF CHOLESTEROL; SYNTHESIS OF CHOLESTEROL IS NOT INHIBITED, AND ABNORMAL METABOLIC END PRODUCTSDO NOT ACCUMULATE ~N THE BLOOD. DOSAGE RECOMMENDATIONS: Dosage should start at 1.0 or 2.0 mg. daily to be increased monthly in 1.0 or 2.0 mg. increments to a maximum. of 6.0 to 8.0 mg. daily if necessary for control of serumcbolesterol in the adult. In hypothyroid patients, the more conservative dosage schedule should be observed. Pediatric dosage is 0.05 mg./kg. daily, increased monthly in 0.05 mg./kg. increments to 0.1 mg./kg. or 4.0 m.g. daily if necessary for contrul. SUPPLIED: 2.0 mg. and 4.0 mg. scored tablets in prescription bottles of 80. MEAD JoHNsoN LABoRAToRIEs, Evansv~Zle, md., JiAne 30, 1967. DEAR DocToR: The Food and Drug Administration has requested that we call your attention to current medical journal advertisements for Oracon and Ques- tran which the FDA regards as misleading. ORACON® The ad claims that the drug provides ". . . oral contraception with~ effects which closely parallel those of the natural hormonal cycle" and also contains a related slogan implying such effects are "So Close to Nature." The FDA points out that not nearly all effects of oral contraceptives parallel those of the natural hormonal cycle and that some of the effects of these drugs are of profound or undetermined nature. The ad emphasizes the low incidence of certain less serious side effects such as amenorrhea, breakthrough bleeding, weight gain, etc. However, it fails to give adecpiate emphasis to more serious known side effects-or adequate emphasis to the possible occurrence of thrombophiebitis, pulmonary embolism or cerebral vas- cular accident. The FDA points out that the pregnancy rates claimed in the ad were incorrect- ly based on 1065 women instead of only 880., and that the ad improperly features a pregnancy rate of 0.2, per 100 woman-yearS. While available data do not provide a reliable scientific basis for a statement of true pregnancy rates, experience re- ported to us shows that the unadjusted rate for all, women who were given Oracon PAGENO="0373" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY was 2.0 per 100 woman-years. The rate of 0.2 used in the ad included only those patients who insisted that they had adhered to the regimen QUESTRAN® The FDA considers the summary of warning information in the journal adver- tisement for Questran to be inadequate in that it did not contain any information on precautions and warnings. We have attached a revised "Brief Summary," which contains the omitted precautions and warning information in capital letters. We are discontinuing the ads in question, and future advertising will incor- porate the above corrections. The safety and effectiveness of Oracon and Questran are not in question when the drugs are used in accordance with the official pack- age inserts. Sincerely, P. A. WALTER, M.D., Director, Medical Research Department. BRIEF SUMMARY OF WARNING INFORMATION FoR QUESTRAN® (CHOLESTYRAMINE) (NOTE-This revised "Brief Summary," for use in medical journal advertising, contains additional information, in capital letter's, taken from the official pack- age insert.) IndicatioH.-QueStrafl relieves pr!uritus associated with partial biliary ob struction. Contraiadication.-Patieflts with complete biliary obstruction. WARNING-ALWAYS ADMIX QUESTRAN WITH WATER OR OTHER FLUIDS BEFORE INGESTING. TO PREVENT DEFICIENCIES OF VITA- MINS A, D AND K, SUPPLEMENT THE DIET, AND SEE PRECAUTIONS BELOW. UAS~AGE IN PREGNANCY-THE `SAFE USE OF QUESTRAN BY PREG- NANT AND LACTATING WOMEN HAS NOT BEEN ESTABLISHED. PRECAUTION~.-WITH PROLONGED QUESTRAN ADMINISTRATION, GIVE VITAMINS A AND D DAILY. INCREASED BLEEDING TENDENCIES MAY DEVELOP. PROMPT RESPONSE TO PARENTERAL VITAMIN K1 MAY BE ANTICIPATED. ADMINISTER CHLOROTH!IAZIDE, PHENYLBUTAZONE OR WARFARIN ONE HOUR BEFORE QUESTRAN. AS A PRECAUTIONARY MEASURE, ADMINISTER ALL OTHER DRUGS 30 MINUTES TO 1 HOUR BEFORE QUESTRAN. A THEORETICAL POSSIBILITY EXISTS THAT PRO- LONGED USE MAY LEAD Tfl DEVELOPMENT OF HYPERCHOLOMERIC ACIDOSIS. THERE IS NO ESTABLISHED RATIONALE FOR USE OF QUESTRAN IN THE RELIEF OF PRURITUS ASSOCIATED WITH OTHER DISEASE PROCESSES. ADVERSE REACTIONS Gastrointestinal and D ermatological.-Constipation, diarrhea, nausea, gas- trointestinal distress, and vomiting have been reported by about 20% of patients using cholestryamine. Reported less frequently were ABDOMINAL PAIN AND DISTENTION, rash, irritation of the skin, tongue and perianal area. Bleeding-In 1% of patients, increased bleeding tendencies occurred due to hypoprotbrombinemia. Steatorrhea.-Steatorrhea occurred but rarely, and then on doses in excess of 24 grams per day. Cholesterol,-In patients with pruritus associated with partial biliary ob- struction, serum cholesterol levels usually decrease during Questran therapy. (Clinical experience has not established the therapeutic use of Questran to re- duce serum cholesterol.) Bitiary Calcijlcation.-T'wo possible instances have been observed, but a casual relationship has not been established. GEIGY PHARMACEUTICA~LS, DIVISION OF GEIGY CHEMICAL CoRP., Ardsley, N.Y. DEAR Docvon: The Food and Drug Administration has asked us to call your attention to recent journal advertisements for our products (Hygroton® and Regrotoin®) which the FDA considers to be misleading. PAGENO="0374" 812 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY HYGROT'ON ADVERTISEMENT This ad is headlined, "Do your patients shell out too much for a diuretic?". It states that a published report on a new short-acting diuretic supports the claim that "If one considers maximum recommended doses for each product, tablet for tablet Hygroton was clearly superior. Two tablets of IE[ygroton were found to produce almost 40% more natruresis and 20% more weight loss than five tablets of the other diuretic." The FDA points out that the studies were based on small numbers of patients (6 to 13), that the actual differences reported were clinically insignificant, and that the ad's claim for superiority was not supported by the data or by the authors' conclusions. Further, the report was not a direct comparative study of the `two drugs, but rather a comparison of data obtained on the new diuretic with data obtained in Hygroton in a previous study. In addition, the tablet-for-tablet comparison in the ad is not regarded as sound because single tablets of Rygroton and the other diuretic do not contain com- parable therapeutic dosages. REGROTON ADVERTISEMENT This ad displays a single Regrotori tablet In relation to two sets of five tablets representing drug regimens for treating hypertension. The ad states that "in moderate hypertension" Regroton was "better than reserpine + hydralazine + hydrochlorothiazide in 41 of 43 patients and better than reserpine + methyldopa + hyidroc'hlorothiazid,e in 34 of 37 patiecnts". These' numbers, taken from a paper referenced In the ad,, refer specifically to a comparison of average mean blood pressures after two years on Regroton with responses to prior therapy utilizing the other drug combinations. The FDA points out `that `the differences observed in the blood pressure re- sponse to `the various treatments were neither statistically nor clinically sig- nificant. Further, the study was not done on patients `diagnosed as "moderate hy- pertension", and the authors did not `state that the effect of Regroton on the patients' blood pressure was "better". The FDA also considers the summary of prescribing information In each ad *to `be inadequate. Each enclosed "Brief Summary" contains information in capital letters that was no't included in o'ur current ads. We are discontinuing the ads in question and future `advertising will incorporate the revised "Brief Summary". The safety and effectiveness of the produc't's are not in question when used in accordance with the official package inserts. GEIGY PHARMAOETJTICALS. BRIEF StTMMARY HYGROTON®-BRAND OF OIILOETHALIDONE (N0TE.-This revised "Brief Summary," for use in future medical journal ad- vertising, contains additional words and phrases `(printed in capital letters) taken from the official package insert.) Indicatio%s: Hypertension and many types of edema involving retention of salt and water. Contra4ndications: Hypersensitivity and most cases of severe renal or hepatic disease. Warning.-Witb the administration of enteric-coated potassium supplements, WHICH SHOULD BE USED ONLY WHEN ADEQUATE DIETARY SUPPLE- MENTATION IS NOT PRACTICAL, the possibility of small bowel lesions (OB- STRUCTION, HEMORRHAGE, AND PERFORATION) should be kept in mind. SURGERY FOR THESE LESIONS HAS FREQUENTLY BEEN REQUIRED AND DEATHS HAVE OCCURRED. DISCONTINUE ENTERIC-COATED PO- TASSIUM SUPPLEMENTS IMMEDIATELY IF ABDOMINAL PAIN, DISTEN- TION, NAUSEA, VOMITING, OR GASTROINTESTINAL BLEEDING OCCUR. Use with caution in pregnant patients, since the drug may cross the plac'en'tal barrier and adverse reactions which may occur in the adult (thrombocyt'openia, hyperbilirubinemia, altered carbohydrate metabolism, etc.) are potential prob- lems in the newborn. Precautions.-ANTIHYPERTENSIVE THERAPY WITH HYGROTON SHOULD ALWAYS BE INITIATED CAUTIOUSLY in postsympathectomy pa- tients and IN PATIENTS RECEIVING GANGLIONIC BLOCKING AGENTS OR OTHER POTENT ANTIHYPERTENSIVE DRUGS, or curare. Reduce dos- age of concomitant antihypertensive agents by at least one-half. Barbiturates, PAGENO="0375" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 813 narcotics or alcohol may potentiate hypotension. BECAUSE OF THE POSSI- BILITY OF PROGRESSION OF RENAL DAMAGE, PERIODIC DETERMI- NATION OF THE BUN IS INDICATED. Discontinue if the BUN rises or liver dysfunction is aggravated. HEPATIC COMA MAY BE PRECIPITATED. Electrolyte imbalance, SODIUM AND/OR potassium depletion may occur. IF POTASSIUM DEPLETION SHOULD OCCUR DURING THERAPY, HYGRO- TON SHOULD BE DISCONTINUED AND POTASSIUM SUPPLEMENTS GIVEN, PROVIDED THE PATIENT DOES NOT HAVE MARKED OLIGURIA. Take special care in cirrhosis or severe ischemic heart disease and in patients receiving corticosteroids. ACTH, or digitalis. Salt restriction is not recommended. Adverse reactith~s.-Nausea, gastric irritation, vomiting, anorexia, constipation and cramping, dizziness, weakness, restlessness, hyperglycemia, hyperuricemia, headache, muscle cramps, orthostatic hypotension, aplastic anemia, leukopenia, thrombocytopenia, agranulocytosis, impotence, dysuria, transient myopia, skin rashes, urticaria, purpura, necrotizing angiitis, ACUTE GOUT, AND PANCREA- TITIS WHEN epigastric pain or UNEXPLAINED G.I. symtoms DEVELOP af- ter prolonged administration. Other reactions reported with this class of com- pounds include: jaundice, xanthopsia, paresthesia, and photosensitization. Average dosage.--One tablet (100 mg.) with breakfast daily or every other day. Availab~i)lity.-White, single-scored tablets of 100 mg. in bottles of 100 and 1000. BRIEF SUMMARY REGROTON~-CIILORTHALIDONE, 50 MG.; RESE1iPINE U.S.P., 0.25 MG. (NoTE-This revised "Brief Summary," for use in future medical journal ad- vertising, contains additional words and phrases (printed in capital letters) taken from the official package insert.) IRdications.-Hypertension. Uontraindieations.-History of mental depression, hypersensitivity, and most cases of severe renal or hepatic diseases. Warn~ing.-Witb the administration of enteric-coated potassium supplements, WHICH SHOULD BE USED ONLY WHEN ADEQUATE DIETARY SUPPLE- MENTATION IS NOT PRACTICAL, the possibility of small bowel lesions (OB- STRUCTION, HEMORRHAGE, AND PERFORATION) should be kept in mind. SURGERY FOR THESE LESIONS HAS FREQUENTLY BEEN REQUIRED AND DEATHS HAVE OCCURRED. DISCONTINUED COATED POTASSIUM-CONTAINING FORMULATIONS IMMEDIATELY IF ABDOMINAL PAIN, DISTENTION, NAUSEA, VOMITING, OR GASTROINTESTINAL BLEEDING OCCUR. Use cautiously during pregnancy since adverse reactions (thrombocytopenia, hyperbilirubinemia, altered carbohydrate metabolism, etc.) are potential prob- lems in the newborn. Discontinue 2 weeks before general anesthesia, 1 week before electroshock therapy, and if depression or peptic ulcer occurs, Precautions.-ANTIHYPERTENSIVE THERAPY WITH REGROTON SHOULD ALWAYS BE INITIATED CAUTIOUSLY in postsympathectomy pa- tients and IN PATIENTS RECEIVING GANGLIONIC BLOCKING AGENTS, OTHER POTENT ANTIHYPERTENSIVE DRUGS, or curare. Reduce dosage of concomitant antihypertensive agents by at least one-half. BECAUSE OF THE POSSIBILITY OF PROGRESSION OF RENAL DAM- AGE, PERIODIC KIDNEY FUNCTION TESTS ARE INDICATED. Discontinue if the BUN rises or liver dysfunction is aggravated. HEPATIC COMA MAY BE PRECIPITATED. Electrolyte imbalance, SODIUM AND/OR potassium depletion may occur. IF POTASSiUM DEPLETION SHOULD OCCUR DURING THERAPY, REGRO- TON SHOULD BE DISCONTINUED AND POTASSIUM SUPPLEMENTS GIVEN, PROVIDED THE PATIENT DOES NOT HAVE MARKED OLIGURIA. Take particular care in cirrhosis or severe ischemic heart disease and in patients receiving corticosteroids, ACTH, or digitalis. Salt restriction is not recommended. BILIARY COLIC MAY BE PRECIPITATED (IN PATIENTS WITH GALL- STONES) AND BRONCHIAL ASTHMA MAY OCCUR IN SUSCEPTIBLE PATIENTS. Adverse reactioas._The drug is generally well tolerated. The most frequent side effects are nausea, gastric irritation, vomiting, diarrhea, constipation, muscle cramps, headache, dizziness and ACUTE GOUT. Other potential side effects include angina pectoris, anxiety, depression, bradycardia and ectopic cardiac rhythms (especially when used with digitalis), drowsiness, dull sensorium, hy- PAGENO="0376" 814 COMPETITIVE PROBLEMS IN THE DRTJG INDUSTRY perglycemia, hyperuricemla, lassitude, restlessness, transient myopia, impotence or dysuria, orthostatie hypotension which may be potentiated when chiorthali- done is combined with alcohol, barbiturates or narcotics, leukopenia, aplastic ane- mia, skin rashes, THROMBOCYTOPENIA, AGRANULOCYTOSIS, nasal stuffi- ness, increased gastric secretions, nightmare, purpria, urticaria, ecchymosis, weakness, uvetis, optic atrophy and glaucoma, and PRURITUS. ERUPTIONS AND/OR FLUSHING OF THE SKIN, A REVERSIBLE PARALYSIS AGI- TANS-LIKE SYNDROME, INCREASED SUSCEPTIBILITY TO COLDS, DY- SPNEA, weight gain, decreased libido, DRYNESS OF THE MOUTH, deafness, ANOREXIA, AND PANCREATITIS WHEN EPIGASTRIC PAIN OR UNEX- PLAINED G.I. SYMPTOMS DEVELOP AFTER PROLONGED ADMINISTRA- TION. Jaundice, xanthopsia, PARESTHESIA, PHOTOSENSITIZATION and necrotizing angiitis ARE POSSIBLE. Average dosage-One tablet daily with breakfast. AvailabWty.-Pink, single-scored tablets in bottles of 100 and 1000. PFIzER LABORATORIES, DIvIsION, CHAS. PFIZER & Co., INC., New York, N.Y., May 22, 1967. DEAR DOCTOR: The Food and Drug Administration has requested that we call your attention to recent promotional messages for our products (Rondomy- cm, Renese, and Renese-R) which the FDA regards as potentially misleading. RENESE AND RENESE-R The monograph In the 1967 Physicians' De~sk Reference for Renese and Renese-R is considered inadequate in presenting information necessary for their safe and effective use. To provide you with the necessary additional in- formation, we are enclosing a revised monograph for insertion into your PDR. The changes include additional warnings and precautions concerned with elec- trolyte imbalance, hepatic coma, maintenance dosage, and, in the case of Renese-R, the possibility of Parkinsonism and confusion. RONDOMYCIN The FDA has also asked us to call to your attention certain features of our current advertising for the broad spectrum antibiotic, Rondomycin. The ad does not disclose that it is a member of the bacteriostatic tetracycline family and that administration for ten days is especially important in the treatment of Beta-hemolytic streptococcal infections. In referring to the "Protective dose (PD50) tests," the ad did not specify that they were performed in mice utilizing laboratory strains of organisms injected intraperitoneally. While demonstrating the activity of Rondomycin against these test strains, the P~5o tests cannot be extrapolated directly to the clinical situation, in which sensitivity testing is recognized to be important for selection of the most appropriate antibiotic for a specific patient's infection. In addition, the "Brief Summary" of warning information in the above ad, and also in the current journal ad for Renese-R, is considered inadequate. We are modifying the advertisements in question and future advertising will in- clude the requested additional warning information. Sincerely yours, JoHN L. WATTERS, M.D., Medica' Director. ABBOTT LABORATORIES, Nort1~ Chicago, Iii., Apri' 13, 1967. DEAR Docpon: The Food and Drug Administration has asked us to call your attention to a recent advertisement on Enduron® (methyclothiazide) and Endur- onyl® (methyclothiazide and deserpidine). The advertisement, headlined "Thia- zide-potassium problems, doctor?" is regarded by the FDA as misleading. The ad states that the advertised drugs provide "excellent sodium output with less potassium loss than either ehlorothiazide or hydrochiorothiazide." The consensus of expert medical opinion is that there is no significant differ- ence in the amount of potassium loss caused by thiazide agents, including methy- clothiazide (Enduron). PAGENO="0377" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 815 The ad suggests that any physician taking a patient off a thiazide-potassium combination may wish to consider Enduron as alternative therapy. It states that the product will "do an outstanding job for you~ without routine potassium supplementation," and that is has "potassium-sparing characteristics." The FDA believes that these claims could lead to the erroneous conclusion that hypokalemia is less likely to occur, and consequently, that potassium supple- mentation is less often necessary with Enduron than with other thiazides. In point of fact, the need to consider proper potassium supplementation, dietary or otherwise, is no less with Enduron or Enduronyl than with any other thiazide drug. Because the ad's "brief summary" of warning information was considered inadequate, a new one is enclosed. The information capitalized in the attached revised "brief summary" is not present in current ads, but will be incorporated into future ads for these products. ABBOTT LABORATORIEs. Bnim' SUMMARY ENDURON AND ENDURONYL (N0TE.-This revised "brief summary" for use in future medical journal adver- tising contains additional phrases and items (printed in capital letters) from the official package insert which remains unchanged.) Indications.-Enduron is used to control edema and mild to MODERATE hy- pertension; also used with other drugs for hypertension. Enduronyl is used in mild to moderately severe hypertension; WHEN USED WITFI ENDURON VL, MORE POTENT AGENTS CAN BE GIVEN AT REDUCED DOSAGE TO MINI- MIZE UNDESIRABLE SIDE EFFECTS. Uontraindications.-Neither Enduron nor Enduronyl should be used in severe renal disease (except nephrosis) or shutdown; in severe hepatic disease or im- pending hepatic coma; in patients sensitive to thiazides. HEPATIC COMA HAS BEEN REPORTED AS A RESULT OF HYPOKALEMIA IN PATIENTS RE- CEIVING THIAZIDES. Enduronyl is contraindicated in patients with severe mental depression and SUICIDAL TENDENCIES, active peptic ulcer, or ulcera- tive colitis. Warnings-Consider possible sensitivity reactions in patients with a history of allergy or asthma. If added potassium intake is indicated, dietary supple- mentation is recommended. Enteric-coated potassium tablets should be reserved for cautious use only when adequate dietary supplementation is not practical because these tablets may induce serious or fatal small bowel lesions CONSIST- ING OF STENOSIS WITH OR WITHOUT ULCERATION. THESE SMALL BOWEL LESIONS HAVE CAUSED OBSTRUCTION, HEMORRHAGE AND PERFORATION FREQUENTLY REQUIRING SURGERY. MEDICATION SHOULD BE DISCONTINUED IMMEDIATELY IF ABDOMINAL PAIN, DIS- TENSION, NAUSEA, VOMITING OR GASTROINTESTINAL BLEEDING OCCURS. Precautions-Use thiazides with caution in severe renal dysfunction, impaired hepatic function, or progressive liver disease. In surgical patients, thiazides may REDUCE the response to vasopressors and INCREASE the response to tubo- curarine. Use thiazid~s with caution in pregnancy (bone marrow depression, thrombocytopenia, or altered carbohydrate metabolism HAVE BEEN RE- PORTED in certain newborn infants). Blood dy~crasias INCLUDING THROM- BOCYTOPENIA WITH PURPURA, AGRANULOCYTOSIS AND APLASTIC ANEMIA; elevations of BUN, serum uric acid, or blood sugar HAVE ALSO BEEN REPORTED. SYMPTOMATIC GOUT MAY BE INDUCED. ANTJHY- PERTENSIVE RESPONSE MAY BE ENHANCED FOLLOWING SYMPATHEC- TOMY. Use Enduronyl with caution in patients with a history of l)ePtiC ulcer, as rauwolfias may increase gastric secretion. Discontinue at the first sign of men- tal depression. Rauwolfia alkaloids may increase hypotensive effects of surgery or anesthesia, and SHOULD BE discontinued two weeks prior. THEY ALSO LOWER THE CONVULSIVE THRESHOLD AND SHORTEN SETZIJRE LATENCY. IN EPILEPSY DOSAGE ADJUSTMENT OF ANTICONVULSANT MEDICATION MAY BE NECESSARY. Alcohol, barbiturates, or narcotics may potentiate action of deserpidine. Adverse reactions,-During intensive or prolonged therapy, GUARD AGAINST HYPOCHLOREMTC ALKALOSIS AND HYPOKALEMIA (especially the latter if patient is on digitalis). ALL PATTENTS SHOULD BE OBSERVED FOR SIGNS OF HYPONATREMIA ("LOW-SALT" SYNDROME). REPORTET) PAGENO="0378" 816 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY TIEEIAZIDE REACTIONS INCLUDE: ANOREXIA, NAUSEA, VOMITING, DIARRHEA, headache, skin rash, dizziness, paresthesia, weakness, photosensi- tivity, jaundice, and pancreatitis. Reported rauwolfia reactions include: nasal stuffiness, nausea, weight gain, diarrhea, aggravation of peptic ulcer, epistaxis, skin eruption, AND REDUCTION OF LIBIDO AND POTENCY EXCESSIVE DROWSINESS, FATIGUE, WEAKNESS, AND NIGHTMARES MAY SIGNAL EARLY SIGNS OF MENTAL DEPRESSION. WALLACE PHARMACEUTICALS, DIVISION OF CARTER-WALLACE, INC., Uranbury, N.J. DEAR DOCTOR: At the request of the Food and Drug Administration, we are calling your attention to one of our recent advertisements captioned, "The pub- lished clinical studies indicate: 3 of 4 non-psychotic depressions respond to `Deprol.'" The FDA considers that this advertising may have been misleading. In the advertisement, we listed 21 studies comprising the total published `De- prol' literature containing data on non-psychotic depressions. While the ad does not reflect the fact, data from these studies were ecocluded in whole or in part if- (a) the diagnosis was not entirely clear; (b) the recommended maximum dose of 6 `fleprol' tablets per day was exceeded; (c) other psychotropic drugs or electroshock were part of therapy. Moderate, marked, excellent, and complete responses were counted as favor- able, while mild, fair, slight, and no responses were counted as unfavorable. Using the above criteria, the final number of patients included was 323 selected from ten of the 21 listed studies. Nine of the ten studies were uncontrolled, and most patients in the ten studies concomitantly received informal or structured psychotherapy. The reported therapeutic results (ranging from 0% in a study with two non-psychotic depressed patients, through 64% in a study with 53 such patients, to 90% in two studies with 38 and 41 such patients respectively) also include, to an undetermined degree, placebo responses and spontaneous remis- sions known to occur in the therapy of neurotic depression. The factors noted above represent problems that exist in working with any literature and are present in some `Miltown' advertisements carrying the theme "one of a series." In order to avoid any misunderstanding, we have discontinued the use of these `Miltown' advertisements as well as the described `Deprol' advertisement. Sincerely, WALLACE PHARMACEUTICALS. ROCHE LABORATORIES, DIVISION or HOFFMANN-LA ROCHE, INC., Nutley, N.J. DEAR DOCTOR: At the request of the Food and Drug Administration, we are extending the "brief summary" of prescribing information for Librium® (chiordlazepoxide 1101) which appears in medical journal advertisements by adding several phrases and items from the unchanged official package circular. The revised "brief summary" for medical journals is attached, Indicating by capitalization the requested added material. Prescribing information in all Lib- rium (chlordiazepoxide 1101) package cireulars, direct mail information and brochures is complete and requires no change. The safety and effectiveness of the product are not in question. In addition, in future medical journal advertisements for Librium (chlor- diazepoxide 1101) In geriatric patients, we are amplifying statements which have appeared concerning possible side effects and initial dosage: The statement that "Side effects in most instances are mild in degree and readily reversible with reduction of dosage," will be extended by the ob- servations made in our package circular which point out that drowsiness, ataxia and confusion have been reported in some patients, particularly the elderly and debilitated, occasionally at lower dosage ranges, and that in a few Instances syncope has been reported. Whereas in geriatrics, the usual daily dosage is 5 rug, two to four times daily, the initial dosage in elderly and debilitated patients should be limited to 10 mg or less per day, adjusting as needed and tolerated. PAGENO="0379" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 817 We hope the additional detail in medical journal advertising clarifies the use of the product in accordance with the enclosed package circular. Sincerely, ROBERT E. DixoN, M.D., Director, Pro fession,aZ Services. BRIEF SuMMARY OF PRESCRIBING INFORMATION FOR LIBRIUM® (CHL0EDIAzEP0xIDE HCL) (Noris.-This revised "brief summary" for use in future medical journal ad- vertising contains additional phrases and items (printed in capital letters) from the official package circular which remains unchanged.) Before prescribing, please consult complete product information, a summary of which follows: Contraindications.-Patients with known hypersensitivity to the drug. Warnings.-Caution patients about possible combined effects with alcohol and other CNS depressants. AS WITH ALL ONS-ACTING DRUGS, CAUTION PA- TIENTS against hazardous occupations requiring complete mental alertness (E.G., OPERATING MACHINERY, DRIVING). THOUGH PHYSICAL AND PSYCHOLOGICAL DEPENDENCE HAVE RARELY BEEN REPORTED ON RECOMMENDED DOSES, use caution in administering to addiction-prone in- dividuals or those who might increase dosage; withdrawal symptoms (including convulsions), following discontinuation of the drug and similar to those seen with barbiturates, have been reported. Use of any drug in pregnancy, lactation, or in women of childbearing age requires that its potential benefits be weighed against its possible hazards. Precautions.-In the elderly and debilitated, and in children over SIX,. limit to smallest effective dosage (INITIALLY 10 MG OR LESS PER DAY) TO PRE- CLUDE ATAXIA OR OVERSEDATION, increasing gradually as needed and tol- ated. NOT RECOMMENDED IN CHILDREN UNDER SIX. THOUGH GEN- ERALLY NOT RECOMMENDED, IF COMBINATION THERAPY WITH OTHER PSYCHOTROPICS SEEMS INDICATED, CAREFULLY CONSIDER INDIVIDUAL PHARMACOLOGIC EFFECTS, PARTICULARLY IN USE OF POTENTIATING DRUGS SUCH AS MAO INHIBITORS AND PHENOTRIA- ZINES. Observe usual precautions in presence of impaired renal or hepatic func- tion, Paradoxical reactions (E.G., EXCITEMENT, STIMULATION AND ACUTE RAGE) have been reported in psychiatric patients and hyperactive aggressive children. Employ usual precautions in treatment of anxiety states With evidence of impending depression; suicidal tendencies MAY BE PRESENT AND PRO- TECTIVE MEASURES NECESSARY. Variable effects on blood coagulation have been reported very rarely in patients receiving the drug and oral anticoagul~nts; causal relationship has not been established clinically. Adverse reactions.-DrowsinesS, ataxia and confusion may occur, especially in the elderly and debilitated. These are reversible in most instances by proper dosage adjustment, but are also occasionally observed at the lower dosage ranges. IN A FEW INSTANCES syncope HAS BEEN REPORTED. Also encountered are isolated instances of skin eruptions, edema, minor menstrual irregularities, nausea and constipation, extrapyramidal symptoms, increased and decreased libido-all infrequent and generally controlled with dosage reductions; changes in EEG patterns (low-voltage fast activity) may appear during and after treat- ment; blood dyscrasias (Including agranulocytosis), jaundice and bepatic dys- function HAVE BEEN REPORTED occasionally, making periodic blood counts and liver-function tests advisable during protracted therapy. T]~ual daily dosage.-Individualize for maximum beneficial effects. Oral- Adults: Mild and moderate anxiety and tension, 5 or 10 mg t.i.d. Or q.i.d.; severe states, 20 or 25 mg t.i.d. or q.i.d. Geriatric patients: 5 mg b.i.d. to q.i.d. (SEE PRECAUTIONS.) Supplied.-Capsules, 5 mg, 10 mg and 25 mg-bottles of 50. ORTHO PHARMACEUTICAL CORP., Raritan, N.J., February 1, 1967. DEAR DOCTOR: The Food and Drug Administration has asked us to call your attention to the fact that a claim in our recent advertising of ORTHO-NOVUM 5Q* may be misleading. En our introduction of this product to the medical profession we featured the PAGENO="0380" 818 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY theme, "The Most Rffe~tive Sequential", based on a comparison of pregnancy rates published in manufacturers' package inserts. The Food and Drug Admin- istration has pointed out that such a comparison is invalid because there has been neither a direct comparative study of the efficacy of the three sequential oral contraceptives in the same population nor individual studies of the three products in population groups shown to be comparable. We are therefore dis- continuing the promotional them.e in question. OBTHO rHAnMACEUTICAL Cone. Senator NELSON. Senator Javits did leave a question with the staff that he wanted me to ask. He asks what is the feasibility of the Public Health Service establish- ing a formulary on a national or a regional basis that would be avail- able for doctors to rely upon. I do not want to assume that he means a voluntary formulary, but that is probably what he does mean. Do you have any comment to make? Dr. GODDARD. I am still a commissioned officer in the Public Health Service, but I would hate to assume the Surgeon General's preroga- tive in trying to answer that question. Senator NELSON. Do you think it would be feasible for anybody to do it? Dr.. GODDARD. I do not see why it would not be, depending on how it is to be implemented. This would be the controlling factor, in my determination. There are many formularies in existence today. Hos- pitals quite commonly have formularies. It simply says to the doctor, when you operate in these confines, these are the drugs that are avail- able; unless you have some good reason that your patient needs some- thing special and beyond our formulary, you will prescribe those listed. Now, if the Senator were referring to. the medicare activities that are currently under review, again this would be more appropriate for t.he Department of Health, Education and Welfare to respond to. But as a physician, I could see where an appropriate formulary could be developed. Senator NELSON. Thank you. Dr. GODDARD. There seems to have been some improvement in phar- maceutical advertising during the past year, but this impression is based upon my own close observation and may well be colored by my hope for improvement. But, Senator Nelson, we are speaking not only about the advertising and promotion of drugs approved since the passage of the Kefauver- Harris amendments in 1962. We are also responsible for watching the promotion of drugs that came into the marketplace between 1938 and 1962, about 3,000 drugs whose claims are now under scrutiny by 27 scientific panels at the National Academy of Sciences. When these scientific groups have studied the drugs they will state the therapeutic uses for which they believe the respective products may properly be offered. This widespread cooperative effort on the part of many of the Nation's medical leaders will furnish benchmarks for judging the promotion of those products that have not had to clear the efficacy review established by the 1962 amendments. In order to further an honest promotional effort, our agency has supported the idea of an up to date, complete, free compendium of drug data for every health professional. This is because we anticipate the need of the medical community--doctors, pharmacists, nurses, medical schools, and hospital and clinical staffs-for a basic source of accurate prescribing information for all drugs in the marketplace. We have taken part in symposia on the matter. PAGENO="0381" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 819 Mr. GORDON. How many civil and criminal cases have been brought against drug firms in the last couple of years for false and misleading advertising? Mr. GOODRICH. Seven or eight. I would have to get the exact figure for you. Mr. GORDON. Are these criminal? Mr. GOODRICH. Some criminal and some seizures. Mr. GORDON. What has beeii the disposition of these? Mr. GOoDRICH. The seizures? I believe there were three of theni. All four of them were settled by consent decree. One of them may not have been finally settled-in any event, we have worked up a con- sent decree with them and it will be the fourth. One of the criminal cases was settled on a plea of nob contendere, and the other three or four are pending on motions to dismiss in that kind of a setting. T)r. GODDARD. We will provide this information, as you will recall, in response to Senator Javits' question as well.1 Mr. GORDON. Which publication has been most prominent in the carrying of false or misleading medical advertising? Dr. GODDARD. We have not made any study of publications. One would have to really carry on a comprehensive analysis of this. I cannot answer that question intelligently, because we have not carried out such a study. Now, of course, you realize that most of these advertisements that we were striking at were carried by many publications. You know, the editors' plight is really a difficult one, because it takes our staff 3 to 4 man-days as a minimum, and usually around 10 man-days, to analyze an ad completely and to provide me with a report. Mr. GORDON. In reading the complaints of the Justice Department, I notice that one name stands out amofig others. That is the Journal of the American Medical Association. Dr. GODDARD. Well, I am told they have the largest paid advertising receipts of any journal published, so that does not really surprise me. But I would not limit it to the JAMA. It is not solely their problem. It is a tough problem for the editor to contend with. We have worked very closely with the Drug Research Board of the National Academy of Sciences, which has also vigorously sup- ported this concept. We have urged the leading trade associations of the drug industry to underwrite the costs of the compendium in the interests of better medical therapy and with the possibility of a more rational approach to the package insert by both industry and Gov- ernment. Senator Nelson, FDA is making every effort to make sure that the claims for a drug and the guidance for its proper usage, will be in the hands of all those who prescribe or compound or otherwise are responsible for drug therapy. Thus far, neither industry nor orga- nized medicine has come forward to undertake such a compendium. We have had to make a start in this direction on our own. This cartridge of microfilm, Senator Nelson, is our beginning ef- fort in the production of a drug labeling compendium for our own agency's use. We are putting into this film record updated package inserts, to make sure that only approved inserts are accompanying the drug products coming off the production line. 1 See pp. 751, 752. PAGENO="0382" 820 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY We ar~ starting with post-1962 drugs. We will be shortly feeding into the system the pre-1962's, as they are corrected to meet the recom- mendations of the scientific panels of the NAS. The 1962 amendments authorized FDA to establish simple, use- ful names for drugs. You have heard testimony pointing out the dif- ficulty the busy physician faces in the area of drug nomenclature- trade names arc simple, short, and easily remembered while generic names are often neither pronounceable nor meaningful. Obviously, it is much easier for the doctor to prescribe by brand name. The United States Adopted Name Council, a nongovernmental group, has studied the problems in this area. Working with the drug industry and in consultation with FDA, the council has made a signif- icant start. Last fall, we proposed regulations to adopt 27 names rec- ommended' by the council as established names. Senator NELSON. Do you have a list of them? Dr. GODDARD. Yes, I shall be happy to provide that. Senator NELSON. I would like to have the record contain that in- formation. (The document referred to follows:) § 138.1 DefinitIons and Interpretations. (a) As used in this Part 138. "act" means the Federal Food, Drug, and Cos- metic Act, sectIons 201-902, 52 Stat. 1040 (21 U.S.C. 321-392), with all amend- ments thereto. (b) The definitions and Interpretations contained in section 201 of the act shall be applicable to such terms when fused in this Part 138. (c) The term "official name" means, with respect to a drug or Ingredient thereof, the name designated In this Part 138 under section 508 of the act as the official name. § 138.2 Drugs; official names. The fol1owin~ are designated official names under section 508 of the act and are "established" names within the meaning of section 502 (e) of the act: Chemical name or description Official name Alkaloid (C4OH5SN4O1O) from Vinca rosea, Linn Vincristine. 9-Aminoacridine, salt with 4-hexylresorcinol Acrisorcin. ~ Ampicillin. heptane-2-carboxylic acid. 2-Aminopurine-6-thiol, hemihydrate Thioguanine. Bis (dimethylthiocarbamol'l) disulfide - Thiram. 2-aec-Butyl-2-methyl-1,3-PropanediOl dicarbamate; or 2-methyl-2-sec-butyl-1,3-pro- Mebutamate. panediol dicarbamate. 1~(p~Chlorobenzoyl)-5-methoXY-2-methY11fldo1e3aCetic acid Indornethacin. 7~Chloro~1,3~dihydro-3-hydroXY-5-PbenYl-2H-1,4-beflZodiaZePifl-2-0fle Oxazepam. 7~Chloro~1,3*dihydro-1-methYl-5-phenYl-2H-1,4-beflZOdiaZePifl-2-Ofle Diozepam. 6~Chloro~3,4-dihYdro-2-methYl-3([(2,2,24rifluor0ethYl) thio]-methyl)-2H-1,2,4-benzo- Polythiazide. thiadiazine-7-sulfonamide 1,1-dioxide. 6~Chloro~3,4~dihydro~3-(5-norbOrnen-2-Yl)-2H-1,2,4-benzothladiazine75Ulfonamide C'yclothiazide. 1,1-dioxide. ~ Rotoxanilne. DihydrohydroxycodemnOne~1-3-(3,4-DihYdroxYPheflY1)2methYlala11ifle Oxycodone. Methyldopa. 1-(2 3.Dihydroxypropyl-3,5-diiOdO-4(1H)PYrid0fle lopydol. 3,5~Diiodo~4(1H)-PyridOne-1-(P,a-DiI11ethYlbeflzYl) camphorate 1:1 salt with 2,2'- lopydone. izninodiethanOl. Tocamphyl. a a~Dimethylphenethylam1ne Phentermine. 5~Ethyl~3~methyl-1-PheflYlhYdafltOin Mephenytoin. ~ Tropicamide. 2~Ethyltbioisonicotina1flide - Ethionamide. ~ Oxynietholone. 6~Hydroxy~~,2,7~trimethYl-5-be11Z0furanacrY1iC acid, ö-lactone Trioxsalen. D-3-Mercaptovaline Penicillamine. ~ Mestranol. 2~Methy1~2~prOPYltrimethYlefl0 butylcarbamate carbamate; or 2-(hydroxymethyl)-2- Tybamate. methylpentylbutylCarbamate carbamate. 2,4,7-Triamino-6 phenyipteridine Triamterene. 5~[(3,5~Xy1yloxy)methYl]~2-OXaZOlidinOne Metaxalone. PAGENO="0383" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 821 Dr. GODDARD. Although this beginning is modest, greater emphasis will be placed on this program in coming years, and additional names, many of which have already been selected by the council, will be adopted by regulation. Along these lines, Senator Nelson, I would make a few more remarks about the continuing education of physi~ cians in this country. Data such as will be. available within FDA on the microfilm are needed throughout the medical community; I have already commented upon our support for compendia containing such information. Medical advertising has been cited before this commit- tee as one of the forms of continuing education of the doctor. I would agree with this appraisal, for-whether good or bad-industry spends some $3,000 per year per doctor on promotion. I have described to you our attempts to assure better medical advertising. We will continue to strengthen our monitoring of such advertising. It has been suggested that further educational activities could take the form of FDA announcements of newly approved drugs to the medical community. This suggestion deserves consideration, but mail- ings~ of this volume are extremely costly and would be impossible without, larger appropriations. We are currently working with Duke TJniversity, the Universities of Wisconsin and Pittsburgh, and others to get specialized drug in- formation to doctors and students in surrounding areas. We will con- tinue to broaden these pr9grams and strengthen them. There is one subject, Senator Nelson, which has not been discussed recently, and one whièh might well benefit from a comprehensive review by a committee of the Congress. Today, as we all know, there is a tremendous shortage of scientific personnel. Research activities all over the country are hampered because of this shortage. Yet, under the policy FDA has followed since 1938, clinical data submitted to FDA by one firm cannot be utilized by a second firm wishing to mar- ket the same compound. It would reduce much duplicative research to place such data in the public domain, available on a specific request, making it usable by all once it is employed to support a new drug approval. This is essentially the procedure presently followed under the food additive and pesticide chemicals provisions' of the Federal Drug and Cosmetics Act. We recognize that such a change raises the questions about the circumstances under which data purchased with private money shall be placed in the public domain. But we also real- ize that the scientific-medical community may, have a valid need to know the detailed scientific basis for approval of a new drug that may be used by millions of people. This is, indeed, a basic policy question that deserves the most careful attention of all concerned, including the Congress. Mr. GORDON. Dr. Goddard, I am a little bothered about these statis- tics on drug recalls. Do you have before you the sheet which we compiled? Dr. GODDARD. Yes. Mr. GORDON. You will notice that the Pfizer Co. sent out 40 million physician samples which were subsequently recalled. Dr. GODDARD. Yes. Mr. GoIuoN. The hazard is stated as serious, and the samples were received by practicing physicians. Is this not probably the most dan- gerous type of recall? Because it is in a doctor's drawer he merely PAGENO="0384" 822 COMPETITIVE PROBLEMS IN THE DRIJG INDUSTRY opens the drawer and gives it to a patient. Could you make any comments about that? Dr. GODDARD. Well, the only comment 1 could make is that we wanted to hìave a bill passed by the Congress that would prohibit the mailing of unsolicited samples to physicians. This is one.complaint I still com- monly get from practicing physicians: Why are the drug companies permitted to send unsolicited samples? Why cannot they be oniy made available upon request? Now, in terms of danger and risk, we thought this was a serious haz- ard and did ask that company to recall it from the physicians. Mr. GoeDoN. What percentage was recovered? Dr. GODDARD. I would have to ask Mr. Barnard. We do not have figures as to. percentage recovered on label mixup. This involved at least two products. Mr. GOrw0N. When I see these small percentages of recovery I won- der what happens to the rest. For example, 570 million tablets of Librax were recalled. This involves a serious hazard and actually caused injury. Yet only 17.9 percent were actually recovered. What happened to the rest of it? Dr. GODDARD. It has been used. Mr. GorwoN. It has been used? Dr. GODDARD. Or it is discarded by the pharmacy or the physician in- volved if he stocks it, upon receipt of the notice. In other words, some pharmacies may have a minimal quantity of~ hand, or some physicians. I used to dispense drugs when I was in practice in a little farm town. I would get a notice like this and it was just easier to dump the doggone stuff away. It was never that expensive. I do not mean Librax, of course. Mr. GORDON. This drug is quite expensive, is it not? Dr. GODDARD. Well, I practiced in the days before we had expensive products. I do not think anybody could account for the difference in these figures. Let us ask Mr. Barnard. Was 570 million tablets the total produced up to that point in time, or that was available in the marketplace? Mr. BARNARD. Those figures reflect the total of the batches that were recalled. In other words, that is the total of the number of dosage units of the particular bath or batches involved in the recall. Dr. GODDARD. Some of those batches may have been made and gone into the distribution system and actually been used by patients before the recall was effective-before the deficiency was known. So, in fact, I would say when you get up to 50 percent of the drug recall, you have a pretty effective recall. Other specific reforms have been suggested to this committee. Con- tinuous inspection has been mentioned, as has the extension of batch certification to all drugs. We are not proposing either of these alter- natives now. However, if the studies on therapeutic equivalency cur- rently underway in the Department do show a few more cases in which supposedly similar products on the market give divergent therapeutic effects, we may need to consider measures for dealing with that situa- tion. One possible solution-and I merely mention it here without tak- ing a position on it-would be to require all makes of a drug on the market to be therapeutically equal, in addition to the present require- PAGENO="0385" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 823 merits of safety and effectiveness. This could be act~omp1ished by au- thorizing FDA, where there may be a lack of therapeutic equivalency, to establish by regulation, requirements to insure production of drugs of uniform effectiveness; a firm would then be required to follow the procedures in the regulation when manufacturing the drug unless it had presented adequate evidence that an alternative procedure would prodr~ce a comparable product and had FDA's approval for use of the alternate method. In conclusion, Senator Nelson, we must recognize that many dif- ficulties still exist in the drug area; however, we do not believe these problems are insurmountable. We will continue to foster meaningful cooperation among the industry, the scientific community, and the' Federal Government to the optimum extent. We will also continue to emphasize the .need for education, not only. for the medical profession but for the general population as well. When necessary, we will impose the full force of our regulatory authority to achieve our objectives. The approval process for drugs, the review of drug efficacy, the regulation of manufacturing quality co~itrols, and the' regulation of prescription drug advertising will be improved and strengthened. Our endeavors in these areas, we believe, will be of significant value in assuring the public of a drug supply of impeccable quality and purity. I can also assure you, Senator Nelson, that every effort will be made to solve the complex and varied questions this committee has broached. We must maintain perfection-and no less-as our goal in this vital, life-sustaining field of science. I will be happy to answer any additional questions you may have. Senator NELSON. 1 must leave shortly but first I want to say that the committee appreciates very much your coming here today to present your testimony. It is most helpful to the record that we are accumulating here. As you know, we hope that at some subsequent date you will be available to come back to explore some other aspects of the drug field with us. Dr. GODDARD. Be glad to make myself available at your request. Senator Nrii~soN. As a member of the Department of Health, Edu- cation, and Welfare task force on prescription drugs, are you familiar with Joseph Barrows' proposal? Joseph Barrows is the president of the Drug & Allied Products Guild, a trade association which repre- sents small manufacturers of generics. He proposed that the Govern- ment utilize academic facilities for the preparation of, "complete master formulas," providing detailed instructions and procedures for making and testing all official drugs. Do you have any comment you would like to, make on that? Dr. GODDARD The university community will have an opportunity, I believe, to comment, make their suggestions as we improve our good manufacturing practices. I do not know any high degree of expertise, and this is .a reflection of my own ignorance, frankly, that, exists in the. university community with respect to the technical aspects of the production of drugs. I just do not know of this existing, There is some expertise of this type in the food area, oddly enough We have it at the MIT Institute of Food Technology There is nothing comparable for the training of drug industry personnel, ani this is a need that has been recognized both by us and members ofthe drug. ipdustry. I would be somewhat reluctant to turn that job "over to the uni- 81-280-pt. 2-07---25 PAGENO="0386" 824 COMPETITIVE PROBLEMS IN TI~E DRUG INDUSTRY versity community. I think it is something that the drug industry itself and the FDA could work out with some consultations from the university community. Senator NEi~SoN Well, as you proceed to clinically test the most frequently used drugs, will yQ~.i be doing some, contracting? Dr. .Goun~iw. Oh, yes. I may have misund~r~tood the chairman's question, hut I thought you were talking about the technical aspects of manufacture. If you are talking about the determination of thera- peutic equivalency we will be working with the Public tlealth Service, hopefully the Veterans' Administration. We have opened discussions. with them. We have a contract with the Georgetown tTniversity facil- ity, defining certain drug classes that they are going to e~awlne. `Hopefully other parts of the university community will become involved. Senator NELSON. I talked to Mr. Barrow~ just very briefly at one of th:e hearings. My interpretation of our brief conversation was that he was hoping that some of the distinguished universities could take over some of the testing job that needs to be done. Let me ask you this. Do you inten4, in the clinical testing of these drugs, to follow a proce- dure in which you might contract with teaching hospitals to do dou- ble blind clinical testing? Dr. GODDARD. We will be involved with contracts with teaching hos- pitals. As I indicated, we are negotiating with Veterans' Mministra- tion now. Many of these are teaching hospitals, research centers. We will also be working with the Public Health Service and also hopefully other parts of the academic world. Senator NELSON. How many drugs are you selecting for such testing? Dr. GODDARD. Probably no more than 50 classes, in other words, 50 different products where the drugs are made by more than one manu- facturer, and the number of drugs then will be a function of how many are available in the class. For example, with rauwolfia, there 42 different products in the market in place of straight rauwolfia. Obviously, I think it would be unwise to test all 42 of these. So, we will select some and test them and try to identify critical benchmarks to be tested with respect to the others, either in a laboratory or in animal testing. Senator NELSON. So, you will be doing both chemical testing in the lab and, with a certain number of the drugs that you select, clinical testing as well? Dr. GODDARD. Yes. Senator NELSON. Then, if you can establish some kind of bench- marks, you may require that the other companies meet those bench- marks? Dr. GODDARD. Or we may juSt simply carry out the test on the other products in that particular class and check those benchmarks in ani- mals, let us say, as an example. If we find those acceptable, then we can publish the results and ~say, loolç, doctQr, as far as drugs in this category are concerned, at this time of testing there were no differences. Now,, it could be made as part of the quality control procedure in the GMP's to require that certain animal tests, if these benchmarks are est~bljsh~d, be carried, out ~ ~he manufa~turer~ That is possible. So, we still ~ia~e a ~ay to go on this, PAGENO="0387" COMPETITIVE PROBLEMS IN THE DRUG `INDUSTRY' 825 Senator NELSON. You select the 50 categories? `You' mean- Dr. GODDARD. Fifty different prodt~cts for which the `drug is avail- able from more than one manufacturer. I am not saying we will neces- sarily do all 50 of those. With some of them it does not make sense to do the tests because nobody can prove that they are even effective. Senator NELSON. When you say 50 categories, do you mean 50 cate- gories of diseases? Dr. GODDARD. No. I. mean 50. drugs in the top 200 in terms of moist prescriptions written. There are 50 different drugs at least on this list for which more than one company manufactures the product. Senator NELSON. It might cover just 10 or 15 diseases, is that correct?, Dr. GODDARD. It is hard to tell how, many diseases. We have not analyzed it that way, Senator. Senator NELSON. How long do you estimate will it take, you to carry out the first phase of clinical testing on 50 drugs? Dr. GODDARD. I think we can have the job done in .18, months if we get cracking. Senator NELSON. Well doctor, I think this will be one of the most dramatic contributions to the solution of this dispute about the matter of physicians and hospitals being ,able to trust the drug that they prescribe. Dr. GODDARD. I would agree, Senator. If they cannot trust them, then we are not doing our job. Senator NELSON. If this can be done we will have resolved a major problem in the drug field and the FDA will be entitled to great credit for it. The committee counsel wanted to ask two or three more questions. I have to catch a plane for Denver, and must leave now. Dr. GODDARD. Thank you very `much. Appreciate it. Mr. GORDON. Dr. Goddard,, about how many different private prod- uct names for prescription drugs are there today? Have you any idea? Dr. GODDARD. I have no idea. There are 22,000 drugs in the market- place, I am told, in this country. This is not quite as bad as Germany where there are 58,000. Mr. GORDON. Do you think many physicians know all those names? Dr. GODDARD. I would doubt if any physician knows all those names. Mr. GORDON, .The ingredients in each and~ manufacturer of each? Dr. GODDARD. I would be amazed if anybody did. Mr. GORDON. Some segments of the drug industry have stated that brand name products may differ significantly from generic name prod- ucts in at least two dozen ways. They also say that these differences may seriously affect the patient's response to the drug and that the physician is the oniy person who can determine which product is best for the patient. I believe I am describing their position accurately. Now, for several months we have been trying to pin down these al- leged differences between brand names and generic names. One witness brought in a large number of package inserts-I believe it was Dr. Garb-and showed that no mention of such differences appears on the package insert. In my mind this raises a series of questions. Does the law not require that any important ingredients in a medi. cation be adequately described in the package and insert? Dr. GODDARD. Yes. Mr. GORDON. If there is in fact, a difference in formulation of one brand of drug as compared to another, is not the manufacturer re- quired to announce that difference? PAGENO="0388" 826 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY Dr. GODDARD. No. Mr. GORDON. I am thinking of important differences. Dr. GODDARD. Well, now- Mr. GORDON. Binders, flavoring agents, addith~es, particle size, solu- bility, or any of the factors that make a difference in the therapeutic effect or the efficacy of a drug. Dr. GODDARD. Mr. Barnard, do you want to try to answer this? Mr. BARNARD. The answer is, £~No, insofar as flevors, incipients and things of this sort are concerned. Differences in active ingredients, differences in proportion of active ingredients, yes." Dr. GODDARD. Let me point out, though, that this is a very complex issue again. Mr. GORDON. How about solubility, practicle size? Dr. GODDARD. Any time a manufacturer changes, let us say, the in- cipients in~ his formula, if it is an NDA drug, he may be required by us to do clinical testing to demonstrate that this product is now the same and is indeed clinically effective and safe. And in fact, we have required firms to do this in changes in the antibiotic field, as I recall. I know one manufacturer of an oral contraceptive that would like to change the size of its pill by increasing the amount of excipient but will not, does not want to, because it would require additional clinical testing. So, I hesitate to give you an unqualified categorical answer. Mr. GORDON. Well, what kind of answer can you give, then? Dr. GODDARD. Under certain circumstances, yes, and under others, no. Aiid I would like to submit a statement for the record, to clarify that inconsequential answer. Mr. GORDON. Will you, please? (The information referred to, subsequently received, follows:) STATEMENT OF THE FOOD AND DRUG ADMINISTRATION REGARDING REQUIREMENTS DUE To CHANGE IN FORMULATION OF PROCESSING In the case of a new drug covered by an effective New Drug Application, any significant change In manufacturing process or formulation would require the submission to FDA of a supplement to the existing NDA. So-called minor changes, such as a change In flavoring material, would require notification to FDA but the change could be made without awaiting FDA approval of an NDA supplement. Insofar as "announcing" any changes, the firm Is not required by law to notify the medical profession or anyone else, either through label changes or package inserts, of changes other than changes in quantity or nature of active ingredients. In other words, tetracycline syrup 100 milligrams is tetracycline syrup 100 milli- grams regardless of whether It is chocolate, strawberry, or vanilla. There is, however, an exception in the case of injectables where all ingredients are gen- orally required to be declared whether active or not. Thus, in the case of an injectable, a change in even a minor ingredient would have to be communicated in the drug's labeling. However, changes in manufacturing practices which might unwittingly alter absorption or other significant characteristics are not required to be communicated to the user, be he lay or professional. Mr. GORDON. Can a manufacturer or his detail men legally make advertising claims for the alleged superiority of his product over similar products if such statements do not appear in the package in- sert and are not approved by the FDA? Dr. GODDARD. No, they cannot. They can make claims only if they are app ro'~red by us; if such claims are dem onstrable scientifi tally and appear in the final printed labeling. PAGENO="0389" COMPETITIVE PROBLEMS IN TEE DRUG INDUSTRY 827 Mr. GORDON. A previous witness, Dr. Fitelson, who did the labora- tory testing for the Medical Letter, testified that there was more than an 800 percent difference in price between two brands of prednisone both made by large companies. Deltra, made by Merck, Sharp & Dohme, sold for $2.20 per 100 tablets, while Meticorten made by Scher- ing sold for $17.90 per 100 tablets. Both, of course, are prednisone. Do you know any reason why the Merck, Sharp & Dohme product may be inferior or less reliable? Dr. GODDARD. No. Mr. GORDON. Do you know of any reason why the Schering product should be better? Dr. GODDARD. No. Mr. GORDON. Apparently doctors are prescribing the Schering prod- uct even though they could save their patients large sums of money by prescribing the Merck or the Upjohn brand. Could you tell us why a doctor would prescribe something that costs more than eight times as much when he could just as easily prescribe an equally effective and pure product made by a reliable firm at one-eighth the price? Dr. GODDARD. This is pure supposition on my part and I hesitate to engage in it, but having practiced medicine, I can tell you that we rarely get the price information on drugs. I got it because I was pur- chasing them and dispensing them direct. And so price was of concern to me as a practicing physician. But when you are writing pre- scriptions for the patient you are often not aware of what the pharmacy markup is, what the pharmacist pays for the drug. This information is not generally put in the hands of the physician and he prescribes on the basis of his belief in what drug will do the job. Mr. GORDON. Do you think that the physician prescribes Meticorten because of the pressure of advertising and the promotional activities of the drug companies? Dr. GODDARD. Well, let me answer that in somewhat different words. I would say the advertising engaged in on all products obviously has some impact or the firm would not spend the money they do on ad- vertising and drug promotion. I am not saying that is wrong. I am simply observing that this is, in my belief, how these products gain a place. First of all, some of them come into the marketplace ahead of others, then aggressive promotion does establish them in the physi- cian's mind. As Senator Javits pointed out, some of the names are un- pronounceable and so a physician writes Meticorten or brand name. It is much easier. That name gets hammered at them in advertising and promotion of all kinds. It is not unexpected, then, that they write for that product. I would be surprised if they did not. Mr. GoRnoN. So actually, you have given us two reasons why they prescribe a drug which is eight times more expensive even though it is not any better than another: One, they do not know the prices; two, promotion and advertising. Dr. GODDARD. These are assumptions on my part. There may be other reasons that I am not aware of. Mr. GoiwoN. Now, the compendium, of course, that you were dis- cussing with Senator Nelson would include prices, too? Dr. GODDARD. It could include prices, yes. Mr. Goiwow. Now, along the same line, we have been told by some witnesses that there are drugs on the market which are subjected to a greater degree of the governmental surveillance than most drugs. PAGENO="0390" 828 COMPETITIVE PROBLEMS IN THE DRUG. INDUSTRY This concerns batch testing of insulin and antibiotics. Can you explain to us what the inspection or testing consists of with regard to these drugs? At what point are they tested? Dr. GODDARD. On insulin and antibiotics? Mr. GoRDoN. Antibiotics. Dr. GODDARD. On both these products the manufacturer receives approval from us after inspection of his facility, detailed discussion of the protocol that will be followed in the manufacture of the drug, and examination of samples that are submitted. Now, the manufac- turer submits his own samples and sends them to the Food and' Drug Administration laboratories where they are checked. We then carry out an analysis. We charge the manufacturer a fee for this service. This fee is carried through a revolving fund and I think the cost of it is `something like $3 million a year total, or less than a mill per dose of the drug involved. Mr. GoRDoN. So in effect, then, there are some drugs on the market, the batch tested drugs, in which the physician can have a higher degree of confidence because of Government supervision and inspection, is that correct? Dr. GODDARD. Yes, from this point of view of the existing system, yes. Mr. GORDON. Could you give us an estimate of the percentage of prescriptions which are'written for these drugs? Dr. GODDARD. I would like to provide that for the record, if I might. Mr. GORDON. About how much would it cost to extend this to all drugs? Dr. GODDARD. If I may, I would like to submit that in a fairly de- tailed fashion for the record, and give you the assumptions used in computing the estimated cost. The estimate that we have for batch certification of all drugs, as I recall, was around $90 million per year. Mr. GORDON. Per year? Dr. GODDARD. Yes. (The information referred to, subsequently received, follows:) STATEMENT OF THE FOOD AND DRUG ADMINISTRATION REGARDING TOTAL NUMBER OF PRESCRIPTIONS WRITTEN FOR ANTIBIOTICS AND INSULIN The FDA keeps no detailed records reflecting numbers of prescriptions filled for certain drugs. We do have access to information of this nature supplied in an independent report by the R. A. Goslin Company, Dedham, Massachusetts, the "National Prescription Audit." The National Prescription Audit is compiled by this company through 24 audits a year of each of 210 representative pharmacies throughout the country. These pharmacies have been selected because of a better than average prescrip- tion volume and because their prescriptions represent a wide cross-section of different prescribers. From the study of these pharmacies an estimate of the total is projected. For the year 1966, the following figures have been given for antibiotics and insulin: Total Total of all drug number prescriptions writen in written category Antibiotics 127,603, 000 12 percent. lnsulin~ 832, 000 Less than 0.05 percent. These flgtires represent both new prescriptions and refilled prescriptiOns. PAGENO="0391" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 829 STATEMENT OF THE FOOD AND Dnuo ADMINISTRATION REGABDING COST OF BATCH OERTIFIOATION OF ALT4 Dnuos Assumptions: (a) The number of batches of drugs started in a day in a medium a13d large plants does not vary greatly with the size of the plant. The size of the batch will vary greatly with the size of the plant. Starting as many as 10 batches in one day would be unusual. Tue figure, 5 batches, started in one day is more probable. For small plants (less than 20 employees), the figure one batch started per day may be used. (b) 1500 manufacturers of Rx drugs. (c) Batch certification cost $90. (d) Working days per annum-250. Estimates Number of firms Batches per day Batches Large (12 percent, over 100 employees) Medium (19 percent, 20 to 99 employees) Small (69 percent, 1 to 19 employees) TotaL 180 285 1, 035 8 5 1 - 1,440 1, 425 1 035 3,900 On the basis of 250 working days per annum, the number of batches started in a year is 975,000. Cost of batch certification at $90 ea. equals $88,000,000. Mr. GORDON. Have there ever been occasions when detail men have made claims to doctors which the FDA has subsequently found out were false and misleading? If so, could you furnish us with a list of some representative examples? Dr. GODDARD. I do not know of any examples of that klnd. First of all, we have no way of monitoring what the detail man tells the physician. I think the physician does that himself and that is why we think the drug advertising controls that we exert are important. Further, that is why I think a good compendium is important, it sort of puts a fence around what can be said about a drug. And a proper kind of fence, too. I do not think we should unduly restrict firms but rather proper scientific restrictions should be imposed. Now, we cannot monitor what detail men say. I know of one in- stance-a physician brought to our attention a telegram that was being-had been sent to him and his conferees in that area urging the doctors to prescribe on that day a given product which was enter- ing the marketplace. The company did not even know when we checked with them that their salesman in that area had done this. I think the companies are anxious to have their 6 minutes of a doctor's time used well, without getting involved in things that are questionable, and excessive claims are questionable. They tell me this, and I have no reason to doubt it. But, we have no way of knowing how often this occurs and no other examples of it having occurred. Mr. GORDON. Well, since you cannot monitor what the detail man says, a large part of the advertising cannot be supervised by the FDA, is that not correct? Dr. GODD4RD. That is true, except in the sense that I mentioned before: the )ournal advertising, the printed advertising that goes out in the form of labeling, direct mail pieces, and other forms that are produced, do place certain constraints around the detail man. And the com~pendium would put another constraint around him as well, JN~ow, beyond that I see no practical way of carrying this any further, nor do I necessarily think it has to be done in any other fashion. PAGENO="0392" 830 COMPEPrrIvE PROBLEMS IN THE DRUG INDUSTRY Mr. GORDON. Dr. Goddard, I have no further questions, but Senator Hatfield would like to have some of his questions answered for the record. I shall submit them to you. Dr. GODDARD. Be happy to do so. Mr. GORDON. Fine. I think that will be all. Dr. GODDARD. Thank you. Mr. GoRDoN. Thank you very much. (The information referred to, subsequently received, follows:) RESPONSE BY FDA TO SEN4TOR HATFIEu~'s QUESTIONS 1. Dr. Goddard, we have heard a great deal about generic and therapeutic equivalency. I notice when you appeared before a Subcommittee of the House Interstate and Foreign Commerce Committee some months ago that you agreed that comparing generic and brand name drugs was like comparing a Model-T Ford to a Cadillac. Is this still your view? Dr. Goddard never stated agreement to this comparison. Prior to a question from Congressman Nelson, the Congressman himself made the above mentioned comparison. Dr. Goddard noted his agreement with the Congressman's question, which followed the earlier comparison statement. So that there will be no misunderstanding, the text of this exchange, found on pp. 230-31, "Agency Hearings" before the Committee on Interstate and For- eign Commerce, House of Representatives, March 1, 1967, is as follows: Mr. NELSON. It has come to my attention that, for example, to compare drugs by generic niame would be like coinpai~ing a model T to a Cadillac and that the effectiveness of drugs with similar generic names may not be exactly the same. Then when you get into the prescription of a drug, is it true or is It not true that there may be a variation as to the effectiveness of drugs of the same generic name .ignoring the trade or brand name? Dr. GODDAJID. Yes; this is unfortunately true. I say unfortunately, be- cause it means we are not performing our functions as well as we have to. We view our goal as being one where the physician can prescribe any drug that is In the marketplace on any basis he wishes, using brand names or generic names, and be assured that those drugs are all effective and they are all safe. Now, this is not the case today; there is this variation. The Defense Supply Agency in its procurement program for drugs has clearly demonstrated differences between different manufactures' drug brands and we have also seen some of this. So we do have a considerable task to undertake and this is one of the reasons, of course that we are trying to set up the National Drug Testing Center. Of course, other methods as well must b~ used, but it is clear that the differences do exist with as many drugs as we have in the marketplace. 2. LegIslation Is pending in the Senate which would limit the present ability of a doctor to prescribe drugs to beneficiaries under the Social Security Act. As a physician, do ~~ou believe such limitations are proper? Should they be accom- plished by Government fiat? We have reviewed the legislation referred to and support in principal the ob- jectives of paying drug costs under medicare. However, the subject is filled with tremendous complexities, and~ Is presently being reviewed in depth by the Sec- retary of HEW's Task Force on Prescription Drugs of which I am a member. I have seen many hospital formularies which are adequate and accepted by the physicians practicing within the limits of that formula~y system. We shall have to defer consideration of such measures until the enti~e subject has been ade- quately studied and a report submitted by the Task Force. 3. If two drugs meet TJ.S.P. or N.F. standards, are they therapeutically equivalent? See pages 1325-6 of the transcript; page 9 of Dr. GOddard's prepared State- mOnt. 4. In June, Senator Sparkman of this Committee Introduced into the record of this hearing some material which cast serious doubt on the validity of the so-called "drug potency study" conducted by the Food and Drug Administra- tion in 1966. a. Were the analyses of drugs conducted In your central laboratory or in the field? Are you equipped with technical parson(nel and facilities in your field offices to conduct intricate tests of this type? PAGENO="0393" COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 831 The analysis was carried out In both the district labs and Washington head- quarters lab. All these labs are equipped and staffed to handle very sophisti-~ cated scientific analyses. b. You have stated during the past few months that you have some doubts or question about the sampling technique used in this survey, or the way in which the study was conducted. Would you please explain. You would not want to project the results of this test to the nation's en- tire drug supply? Yet on at least one occasion you did say that the study showed that "one out of every 14 products in our nation's drug supply was violative on the basis of potency alone." I gather you would not make that statement today based on the 1966 test. See the prepared statement submitted for the record "Market and Manufac- turers Survey-Potent Drugs-1966" and Dr. Goddard's summary of same, pages 1321 and following of the transcript. c. It has been stated that some companies have complained about the results of the tests and that on re-testing you have found errors. How many times has this occurred? Have you notified the companies? Have you cor- rected the results of the study and republished the new figures? See prepared statement submitted for the record, "Market and Manufacturers Survey-Potent Drugs-1966," and Dr. Goddard's summary of the statement, pages 1321 and following of the transcript. d. I understand that the samples used in the survey have been destroyed by FDA. Isn't this unusual, particularly when serious questions were being raised by the industry re the results? The samples were retained or destroyed in accord with standard procedures used by FDA. Samples on which no legal actions are recommended are routinely destroyed usually 30 days after analysis. e. I am told that the companies keep identical samples and that the tests could be reconstructed. Would FDA be willing to work with company sc:ien- tists in this effort? Would you permit an independent laboratory to do the testing? Some companies collect duplicate samples at the time of FDA's collection. Some companies retain a portion of one batch as "reserve" samples. There are varia- tions within batches of drugs and variations can be caused by conditions under which samples are stored and handled after leaving the manufacturer. We do not believe the tests can be reconstructed in those instances where the FDA sample was disposed of. We have discussed the analyses of the survey samples with company scientists on several occasions. We do not believe there are any benefits to be obtained through an independent laboratory analysis. f. It seems to me you would want the tests validated, or the results set aside, if the survey is questionable or was improperly conducted, as you have stated (inferred). As it is now, the study is continually being referred to as proof that there is no difference In drugs regardless of the identification of the manufacturer or their source. This, in my opinion, should not be permitted to continue. Dr. Goddard states on page 1322 of the transcript: "Now, the other original findings I still say, are correct. We stand behind those as long as it is understood that this is not a representative sample of the marketplace." (Whereupon, at 3:10 p.m., the hearing was concluded.) C PAGENO="0394"