PAGENO="0001"
COMPETITIVE PROBLEMS IN THE
DRUG INDUSTRY
HEARINGS
BEFORE THE
SUBCOMMITTEE ON MONOPOLY
OF THE
SELECT COMMITTEE ON SMALL BUSINESS
UNITED STATES~ SENATE
NINETY-SECOND CONGRESS
SECOND SESSION
ON
PRESENT STATUS OF COMPETITION IN THE
PHARMACEUTICAL INDUSTRY
PART 22
MAY 9, 10, JUNE 21, AND JULY 19, 1972
GOVERNMENT PROCUREMENT (VOL. 5)
0
Printed for the use of the Select Committee on Small Business
U.S. GOVERNMENT PRINTING OFFICE
80-450 0 WASHINGTON: 1972
O~1[~Y::7~I
For sale by the Superintendent of Documents, U.S. Government Printing Office
Washington, D.C. 20402 - Price $2.50
Stock Number 5270-015~5
PAGENO="0002"
SELECT COMMITTEE ON SMALL BUSINESS
[Created pursuant to S. Res. 58, 81st Cong.]
ALAN BIBLE, Nevada, Chairman
JOHN SPARKMAN, Alabama JACOB K. JAVITS, New York
RUSSELL B. LONG, Louisiana PETER H. DOMINICK, Colorado
HARRISON A. WILLIAMS, JR., New Jersey MARK 0. HATFIELD, Oregon
GAYLORD NELSON, Wisconsin ROBERT DOLE, Kansas
JOSEPH M. MONTOYA, New Mexico EDWARD J. GURNEY, Florida
FRED R. HARRIS, Oklahoma J. GLENN BEALL, JR~, Maryland
THOMAS J. McINTYRE, New Hampshire ROBERT TAFT, JR., Ohio
DAVID H. GAMBRELIa, Georgia LOWELL P. WEICKER, JR., Connecticut
CHESTER H. SMITH, Staff Director and General Counsel
MICHAEL S. GORDON, Minority Counsel
SUBCOMMITTEE ON MONOPOLY
GAYLORD NELSON, Wisconsin, Chairman
ROBERT DOLE, Kansas
ROBERT TAFT, Jm, Ohio
EDWARD J. GURNEY, Florida
JACOB K. JAVITS,* New York
BENJAMIN GORDON, Staff Economist
ELAINE C. DYE, Clerical Assistant
JOHN SPARKMAN, Alabama
RUSSELL B. LONG, Louisiana
THOMAS J. McINTYRE, New Hampshire
ALAN BIBLE,* Nevada
*Ex officio member.
(II)
PAGENO="0003"
CONTENTS
Statement of- Page
Campbell, James F., Assistant Administrator for Program and Man-
agement Services, Agency for International Development; accom-
panied by Leslie Grant, Deputy General Counsel; Seymour Barondes,
Chief, Commodity Eligibility and Price Branch, Office of Controller;
and Raymond (I'orrey, Chief, Industrial Resource Division, Office
of Procurement 8745
Edwards, Dr. Charles C., Commissioner, Food and Drug Administra-
tion; accompanied by Dr. Henry S. Simmons, Director, Bureau of
Drugs; and Peter Barton Hutt, General Counsel 8510
Hayes, Brig. Gen. G. j., Medical Corps, U.S. Army, Principal Deputy
Assistant Secretary of Defense (Health and Environment); ac-
companied by Col. Douglas Lindsey, MC, USA, Director of Medical
Materiel, Defense Personnel Support Center (DPSC) 8589
Seggel, Richard L., Deputy Assistant Secretary for Health Policy
Implementation, Office of the Assistant Secretary for Health and
Scientific Affairs, DREW; accompanied by Albert J. Richter, As-
sociate Commissioner, Medical Services Administration, Social and
Rehabilitation Service; Marion J. Finkel, M.D., Deputy Director,
Bureau of Drugs, Food and Drug Administration; Morris Older,
Deputy Assistant Bureau Director, Division of Provider Reim-
bursement and Accounting Policy, Bureau of Health Insurance, So-
cial Security Administration; Allen J. Brands, Chief Pharmacy Of-
ficer, Public Health Service; and Jonas Rose, Pharmaceutical Con-
sultant, Medical Services Administration, Social and Rehabilitation
Services 8686
Staats, Hon. Elmer B., Comptroller General of the United States; ac-
companied by Gregory J. Ahart, Director, Manpower and Welfare
Division; Dean K. Crowther, Deputy Director; Charles Collins, As-
sistant Director; and Paul Shnitzer, Assistant General CounseL~ 8537
Wells, Dr. Benjamin B., Deputy Chief Medical Director, Veterans'
Administration; accompanied by Dr. Lyndon Lee, Jr., Assistant
Chief Medical Director for Professional Services; Roland Harding,
Chief, Pharmacy Service; Clyde Cook, Deputy Director, Supply
Service; and Philip Warman, Associate General Counsel 8615
EXHIBITS
Letter dated February 29, 1972, from Dr. Robert D. Dripps et al., to Hon.
Paul G. Rogers, Representative, U.S. House of Representatives 8532
Letter dated May 19, 1972, from Dr. Charles C. Edwards, Commissioner,
Food and Drug Administration, Department of Health, Education, and
Welfare, to each of the signatories of the February 29, 1972 letter 8534
"Dear Doctor" letter dated May 19, 1972, from Eli Lilly & Co 8535
Letter dated May 9, 1972, from John D. Heller, Associate Director, Man-
power and Welfare Division, U.S. General Accounting Office, to John D.
Twiname, Administrator, Social and Rehabilitation Service, Depart-
ment of Health, Education, and Welfare 8545
Letter dated July 10, 1972, from Hon. Elmer B. Staats, Comptroller Gen-
eral of the United States, to Senator Gaylord Nelson, chairman, with
accompanying enclosures 8554
Letter dated February 3, 1972, from Hon. Elmer B. Staats, Comptroller
General of the United States, to Senator Gaylord Nelson, chairman, with
accompanying enclosure 8585
(III)
PAGENO="0004"
iv
Page
Discussion of nine questions outlined in Chairman Nelson's May 16, 1972,
letter to the Secretary of Defense 8593
List of drugs by the Department of Defense, from February 28, 1971, to
April 30, 1972, by Federal stock number, deleted: 152, limited standard:
179, total actions: 331 8597
Excerpts of minutes of committee meetings of the Veterans' Administra-
tion Therapeutic Agents and Pharmacy Review Committee 8638
Professional services letter dated June 19, 1972, from Dr. Lyndon Lee, Jr.,
Assistant Chief Medical Director for Professional Services, Veterans'
Administration, to directors of hospitals, domiciliary, outpatient clinics
and regional offices, with accompanying enclosures 8663
A paper entitled "Market Research Summary of Physician's Attitudes
Toward Antibiotics" 8727
List of 16 high-priced drugs ineligible for Agency for International Devel-
opment financing, by generic and brand name 8751
Detail of significant examples of reduced prices under AID's special rules
as compared with prices requested by suppliers or previously financed
by AID 8751
Refund claims asserted by AID against pharmaceutical suppliers, supple-
ment to claims information furnished to Senate Subcommittee on
Monopoly on July 31, 1970, as of May 31, 1970 8752
APPENDIXES
I. Exhibits provided by the Food and Drug Administration:
Prepared statement of Charles C. Edwards, M.D., Commissioner
of Food and Drugs, Public Health Services, Department of
Health, Education, nad Welfare 8753
Drug Bulletins:
The Drug Efficacy Study; Fixed Combination Prescription
Drugs; Oral Hypoglycemic Agents 8769
Methotrexate: Use in Psoriasis; Spectinomycin for Acute
Gonorrhea; Problem With Digoxin; Isoniazid: Labeling
Changes 8775
Diethyistilbestrol Contraindicated in Pregnancy 8781
Hexachlorophene and Newborns 8784
Hexachlorophene in Drugs, Soaps, and Cosmetics; Coronary
Vasodilator Efficacy; FDA to Evaluate O-T-C Drugs;
Nitroglycerin Packaging Affects Potency; Caution Advised
in Use of Irrigating Fluids 8786
Oral Hypoglycemic Drug Labeling; Methadone for Heroin
Addiction; Iodoehlorhydroxyquin and Travelers' Diarrhea;
Imipramine and Alleged Birth Defects; FDA's Use of Out-
side Consultants 8790
Letter dated October 7, 1971, from Neil L. Chayet, Esq., Chayet &
Flash, counsellors at law, to Charles C. Edwards, M.D., Commis-
sioner, Food and Drug Administration 8793
Letter dated June 5, 1972, from Charles C. Edwards, M.D., Commis-
sioner, Food and Drug Administration, to Neil L. Chayet, Esq_ 8796
II. Exhibits provided by the General Accounting Office:
Prepared statement of Hon. Elmer B. Staats, Comptroller General
of the United States 8801
Listing of drugs purchased under the Mississippi medicaid pro-
gram during the period July 1, 1970, to February 19, 1971,
which were classified either as "ineffective" or "possibly effec-
tive" by FDA 8822
Listing of drugs purchased under the Illinois and New Jersey
medicaid programs during July and October 1970 which were
classified as "ineffe~tiv" bc- FDA 8822
Listing of drugs purchased under the Ohio medicaid program dur-
ing the months of January, April, July, and October 1970 which
were classified as "ineffective" by FDA 8823
Letter dated August 11, 1971, from Hon. Elmer B. Staats, Comp-
troller General of the United States, to Senator Gaylord Nelson,
chairman 8824
PAGENO="0005"
V
II. Exhibits provided by the General Accounting Office-Continued Page
Comparison of selected pharmaceutical prices, 1971, prepared by
the Office of Research and Statistics, Social Security Adminis-
tration, Department of Health, Education, and Welfare 8827
Procurements by DPSC and the VA from foreign firms for cal-
endar years 1908 through 1971 8831
III. "A Comparative Evaluation of Marketed Analgesic Drugs," by C. G.
Moertel, M.D., D. L. Ahmann, M.D., W. F. Taylor, Ph. D., and Neal
Schwartau, B.S., from the New England Journal of Medicine, April
13, 1972, pages 813-815 8832
"Dear Doctor" letter dated April 17, 1972, from Eli Lilly & Co 8836
"American Scientists Charge U.S. Medicine Lags, Urge Major
Change in Regulatory Policies-Ask a Review of Impact of Medi-
cine, Research," from the Medical Tribune, April 5, 1972 8837
"Behind Proposal to House Subcommittee-Growing Therapeutic Gap
Worries American Scientists," from the Medical Tribune, April 12,
1972 8839
"For Moderation . . . And a Moratorium," editorials from the Med-
ical Tribune, April 12, 1972 8840
"Dr. Freis, Gilman, and Lasagna Comment-Experts Blame FDA
for New Drug `Standstill,'" from the Medical Tribune, April 19,
1972 8841
"For More Outside Consultants . . . and Affirmative Action," ed-
itorials from the Medical Tribune, April 19, 1972 8843
"Human Resources-Drug Industry Lobby Riding High," by Bruce E.
Thorp, from the National Journal, November 12, 1971, pages 2455-
2457 8844
Public Information-Notice of Proposed Rulemaking of the Food and
Drug Administration, Department of Health, Education, and Wel-
fare, 21 CFR Parts 1, 2, 4, 8, 121, 130, 135, 146, 191, from the Fed-
eral Register, May 5, 1972, volume 37, No. 88, pages 9128-9138 8847
".Darvon and Darvon-N," from The Medical Letter, May 26, 1972,
volume 14, No. 11, pages 37-38 8865
"Use of Drugs Under the Mississippi Medicaid Program," by Alton B.
Cobb, M.D., M.P.H., Donnie P. Wilson, and John M. Abide, Uni-
versity of Mississippi School of Medicine 8866
"Drug Prescribing and Use in an American Community," by P. D.
Stolley, M.D., M.P.H., H. H. Becker, Ph. D., M.P.H., J. D. McEvilla,
Ph. P., L. Lasagna, M.D., M. Gainor, MA., and L. M. Sloane, M.A.,
reprinted from Annals of Internal Medicine, volume 76, No. 4, April
1972 8871
"The Study of Prescribing as a Technic of Examining a Medical Care
System," by Charlotte F. Muller, Ph. D., F.A.P.H.A., reprinted from
American Journal of Public Health, volume 57, No. 12, December
1967 8875
IV. Exhibits provided by the Department of Defense:
Minutes of the Therapeutic Agents Board Meeting and Adverse
Drug Reaction Report, Valley Forge General Hospital, Depart-
ment of the Army, January 18, 1972 8885
Pharmacy Newsletter from Martin Army Hospital, Ft. Benning,
Ga., January 1972, volume XII, No. 1 8891
Formulary of the Wilford Hall U.S. Air Force Medical Center,
Aerospace Medical Division (AFSC), Lackland Air Force Base,
San Antonio, Tex 8893
"How Much Does It Cost ?" by Major George F. Powell, Jr.,
USAF, MSC, from the U.S. Air Force Medical Service Digest,
November 1971, volume XXII, No. 11, pages 20-21 9041
"`How Much Does It Cost' Pamphlet," from the U.S. Air Force
TIG Brief, December 31, 1971, volume XXIII, No. 24, pages
19-20 9043
"How Much Does It Cost Pamphlet," January 1, 1971, through
March 31, 1972, U.S. Air Force Regional Hospital, Carswell
Air Force Base, Tex 9045
Navy Medical Newsletter on professional relationship with rep-
resentatives of pharmaceutical manufacturers, from Command-
ing Officer, U.S. Naval hospital, Camp Pendleton, Calif., to
Chief, Bureau of Medicine and Surgery, published in U.S. Navy
Medical News Letter, April 30, 1965, volume 45, No. 8 9064
PAGENO="0006"
VI
Page
V. "Lack of Authority Limits Consumer Protection: Problems in Identi-
fying and Removing From the Market Products Which Violate the
Law," report to the Congress by the Comptroller General of the
United States, September 14, 1972 9067
HEARING DATES
May 9, 1972:
Morning session 8509
May 10, 1972:
Morning session 8537
June 21, 1972:
Morning session 8589
July 19, 1972:
Morning session 8585
PAGENO="0007"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
(Present Status of Competition in the Pharmaceutical
Industry)
TUESDAY, MAY 9, 1972
U.S. SENATE,
SUBCOMMITTEE ON MONOPOLY OF THE
SELECT COMMITrEE ON SMALL BUSINESS,
Wa~shington, D.C.
The subcommittee met, pursuant to recess, at 10:05 a.m., in room
318, Old Senate Office Building, Senator Gaylord Nelson (chairman of
the subconunittee) presiding.
Present: Senator Nelson.
Also present: Benjamin Gordon, staff economist; and Elaine C.
Dye, clerical assistant.
Senator NELSON. The Subcommittee on Monopoly of the Select Com-
mittee on Small Business is today resuming its hearings on the effi-
ciency, economy, and rationality of the Federal agencies and depart-
ments in the procurement and use of drugs as well as reimbursement
under various programs of the Government.
Our witness today is Dr. Charles C. Edwards, Commissioner of the
Food and Drug Administration, who has been invited to discuss:
1. The steps taken to insure that the recommendations of the panels
of the National Academy of Sciences-National Research Council have
been effectively implemented;
2. The use of New Drug Applications and abbreviated New Drug
Applications prior to marketing both new and "me-too" drugs;
3. How the FDA notifies other Government organizations as well
as private physicians about the effectiveness and adverse reactions of
new drugs;
4. What the FDA is doing to provide information in order to in-
fluence the prescribing habits of physicians from both cost and effec-
tiveness viewpoints;
5. FDA's combination policy; and
6. Advertising policy especially with respect to informing the
physician about the role of particular drugs in the physician's
armamentarjum.
We are very pleased to have you here this morning, Dr. Edwards.
Your statement will be printed in full in the record and you may
present it however you desire.1
1 See Appendix I, p. 8753.
(8509)
PAGENO="0008"
8510 co~nETInvE PROBLEMS TN THE DRUG INDUSTRY
STATEMENT OP DR. CHARLES C. EDWARDS, COMMISSIONER, FOOD
AND DRUG ADMINISTRATION; ACCOMPANIED BY DR. HENRY S.
SIMMONS, DIRECTOR, BUREAU OP DRUGS; AND PETER BARTON
HUTT, GENERAL COUNSEL
Dr. EDWARDS. Thank you, Mr. Chairman.
I would, first of all, like to discuss with the committee today some
of the problems in the drugs and drug use in this country.
First of all, I would like to introduce my colleagues. On my left
is Dr. Henry S. Simmons, Director of our Bureau of Drugs, and
on my right is Peter Barton Hutt, our genera.l counsel.
This morning, as I indicated, we would like to discuss some of
the problems m the drugs and drug use in this country. In addition,
we would like to review for you the findings of the drug efficacy, and
I would like to discuss some of the reasons for the existence of these
problems, and to describe for you the progress we have made over the
past years toward their resolution.
We will also, as requested~ review for you the findings of the drug
efficacy study, the impact it has made on therapeutics in this country
and the present status of our implementation programs.
Before discussing the drug efficacy study and its effects on thera-
peutics, it might be helpful to review with you some general aspects
of drug use and some current problems we see in therapeutics in this
country.
There are currently approximately 35,000 prescription drug prod-
ucts and several hundred thousand OTC drug products on the Amer-
ican market.
Each year a multibillion dollar effort is made to market, promote,
and sell these products. In some OTC products approximately 30
percent of receipt of sales is spent in promotion and in the prescrip-
tion drug area expenditures on promotion approach in magnitude
those on research. Despite the contention that advertising and pro-
motion is educational, most of the drug promotion we see is designed
primarily to sell, to motivate the physician to prescribe, and the con-
sumer to buy.
In part, due to the infiuehce of such promotional efforts, these
drugs are being increasingly prescribed and such use is increasing
rapidly. The American public is currently receiving over 2 billion
prescriptions per year and it is estimated that within 4 to 5 years this
may increase by 50 percent..
In no area is this increase more dramatically evident than in the
case of psychotropic drugs where in 1969 over 1 billion doses of
amphetamines and 21/2 billion doses of barbiturates were used. The
magnitude of other psychoactive drug use is reflected by the fact
that some 5 to 6 billion doses were distributed in 1969, representing
a 65-percent increase in the use of these drugs over a 4-year period.
We have a rapidly growing, frequently troublesome, occasionally
tragic, and to a large extent needless and avoidable problem on our
hands in the misuse of drugs in America.
Senator NELSON. Doctor, just for clarification, when you talk about
the misuse of drugs in America, you are referring to prescription
drugs, are you not?
Dr. EDWARDS. That is correct, and we are, of course-
PAGENO="0009"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8511
Senator NELSON. We all recognize the other problem of narcotics,
but your comments in the above paragraph refers to the misuse of pre-
scription drugs?
Dr. EDWARDS. And primarily, the psychoactive prescription drugs,
but, nevertheless, I think it is across the board.
Senator NELSON. Please proceed.
Dr. EDWARDS. Since most physicians want to serve their patients well
and do what is best for them, it seems reasonable to assume that where
poor therapeutics is being practiced it is at least in part due to poor
communication to the physician of the information he needs to do a
better job.
If the physician had balanced information, honestly pointing out the
limitations and actions of a drug, its beneficial and adverse effects and
when it should or should not be given, he would have the information
necessary to make the most rational therapeutic decisions. Too often,
at present, this needed information is not readily available to him.
Since drugs are being massively prescribed and since there is risk as
well as benefit inherent in their use, it is imperative that the profession
and the public have available the information necessary for their ra-
tional use so that the greatest possible benefit can be attained. Ade-
quate communication of such information, in our judgment, is vital.
A brief review of how physicians currently obtain drug information
will help us understand why some of our current problems came about
aDd what must be done to correct them. The practicing physician is cur-
rently communicated with in six major ways; through detail men, ad-
vertising of the pharmaceutical industry either in journals or through
direct mail, medical journal articles, colleagues, medical meetings, and
the labeling of the drugs he uses.
A number of recent studies suggest that most of the physicians can-
vassed had obtained much of their information about a new drug from
drug manufacturers and their representatives whose interest under-
standably is to make the doctor use it. Other recent studies indicate
that it is very difficult for detail men, who are salaried and sometimes
paid commissions to sell a product, to be sources of truly balanced and
objective information on drugs which the practicing physician needs to
make intelligent therapeutic decisions on his patient's behalf. It must
be stated at this point, however, that a number of firms are engaged in
major efforts to improve detailing with balanced presentations.
Senator NELSON. Doctor, may I interrupt at this point. I would like
to read a brief statement to you; and ask for your comment on it.
The April 13, 1972, issue of the New England Journal of Medicine,
the most distinguished medical journal in this country, carried a sci-
entific report by C. G. Moertel and others that in a double-blind cross-
over study of marketed painkillers given by the oral route, Darvon
in its 65 mg. form, "gave no significant evidence of therapeutic ac-
tivity, and that each of these agents (Darvon and other analgesics) was
significantly inferior to aspirin in analgesic effect." 1
On April 17, 1972, the Eli Lilly Co. sent out a "Dear Doctor" letter-
obviously promotional-to try to counter the findings of the journal's
scientific report. In so doing, the Lilly Co. lifted material out of con-
text and failed to present the physician with sufficient information to
1 See Appendix III, p. 8832.
PAGENO="0010"
8512 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
~enable him to prescribe intelligently. This product brings in at least
$80 million annually to Lilly, and, as stated in the AMA Journal
of August 10, 1970:
"It appea.rs that factors other than intrinsic therapeutic value are
responsible for the commercial success of propoxyphene (Darvon) ."
Lilly's "Dear Doctor" letter quoted from Dr. Moertel's article that
"the therapeutic credentials of propoxyphene-Darvon----must be
classified as very equivocal." The letter leaves out some other very
important information. In the Journal report the quoted sentence is
followed by "In this study, neither (Darvon or Zactane) showed a
significant advantage over placebo, and both were significantly in-
ferior to aspirin. The dubious record of propoxyphene in controlled
clinical trials has recently been reviewed by Miller et al. This is the
eighth publi~/ied study in which propoxyphene has not shown any
superiority over placebo." (Italics added.)
The "Dear Doctor" letter also avoids mention of the main point of
the Moertel article that plain aspirin was by far superior to Darvon
as an analgesic.
Since the Lilly letter brings up the comparative efficacy and side
effects of Darvon and codeine, and also quotes from the NAS/NRC
reports when convenient, it may be a good idea to see what this report
says on this subject:
"Darvon appears to be less potent than codeine; the best available
estimates of the relative potency of the two drugs indicate that dextro-
propoxyphene (Darvon), is approximately one-half to two-thirds as
potent as codeine. The side effects produced by the two drugs are
qualitatively similar."
The consumer is again the loser. Aspirin can be purchased in the
grocery store for as little as 13 cents per 100 tablets. Darvon, a
prescription product, costs $12 to $14 per 100 tablets, or about 100
times the cost of aspirin. Then the cost of Darvon to the consumer in
1970 was about $140 million-in the face of the scientific evidence that
Darvon is significantly inferior to aspirin, and is little more effective
than a placebo.
This is another classic example of the irresponsible promotion of a
questionable, expensive drug when cheaper, more effective products
are available.
I would be glad to have you comment on that in general. I also have
some specific questions.
Dr. EDWARDS. Mr. Chairman, first, we are aware of the article that
appeared in the New England Journal originating from the Mayo
Clinic. We are also aware of the position, or the "Dear Doctor" letter
that was issued by the Lilly Co. and the lack of balance that this par-
ticular communication revealed.
We are currently in the process of doing three things: first of all,
preparing for our drug bulletin, which goes to all practicing physi-
cians in the country. .
We are preparing an article on the analgesics, trying to put this very
difficult subject into proper perspective. In our view, there are very
few things that are more difficult in pharmacology than evaluating the
effectiveness of the analgesics. \Ve do believe Darvon is an effective
analgesic for mild to moderate pain, but no more so than aspirin.
PAGENO="0011"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8513
Senator NELSON. May I interrupt you? You say no more so, although
this study indicates that it is quite a bit less so.
Dr. EDWARDS. The studies vary considerably. There are others that
show that it has an effectiveness that is comparable to that of aspirin.
Dr. Simmons, would you want to say something on that?
Dr. SIMMONS. Mr. Chairman, Darvon is an effective analgesic, but
no more effective than two aspirin tablets. There are some situations
where it would be inferior to aspirin. To go further in the comparison
with codeine, the best available evidence indicates that Darvon is about
two-thirds as potent as codeine, and the 32 mg. of Darvon in general
has been found to be indistinguishable from placebo.
Senator NELSON. This study used 65 mg. tablets, not the 32 mg.
Dr. SIMMONS. Right.
Senator NELSON. I looked at other studies, but they refer to
placebo, that is, Darvon being not much more effective than placebo.
All of them, I think, conclude that aspirin is more effective; isn't that
correct?
Dr. SIMMONS. Many studies do. I am not aware of studies that show
Darvon is superior to aspirin. I think in fairness you have to say that
analgesic studies are difficult to perform and evaluate.
Senator NELSON. The "Dear Doctor" letter went out in response to a
scientific study. Is that a common practice?
Dr. EDWARDS. No.
Senator NELSON. No?
Dr. EDWARDS. It is not a common practice.
Senator NELSON. Did the letter go out in the same form as the ordi-
nary "Dear Doctor" letter that goes out at the FDA's direction to cor-
rect misleading advertising claims?
Dr. EDWARDS. Again, Mr. Chairman, let me say we have not officially
received a copy of the letter. We have gotten it elsewhere. We have seen
the letter, and it is in the general format of a "Dear Doctor" letter that
would have been issued by a company at the request Of the FQod and
Drug Administration.
Senator NELSON. Well, isn't it probable, if not almost inevitable, that
the physician who is used to receiving "Dear Doctor" letters that are
sent at the direction of the FDA, likely to interpret this as a correc-
tion in advertising and, therefore, is an accurate statement of what
Darvon is and its effectiveness?
Dr. EDWARDS. I think that is a fair statement, yes. And as I men-
tioned a little earlier, the "Dear Doctor" letter does not present any
reasonable degree of balance, in our judgment, and as a result we are
taking this action to require that a corrective letter be sent by the com-
pany to physicians. . .
We think it is generally a bad policy, that any time a critical article
comes out in major accredited journals, for a company immediately to
send out a "Dear Doctor" letter. I don't think this is a good practice.
Senator NELSON. Well- .
Dr. EDWARDS. Then the third action, if I might, will be a letter sent
by the Food and Drug Administration stating that the Food and Drug
Administration will not allow the use of unapproved labeling that
deviates from approved labeling in any significant respect.
These three actions we are taking in an attempt to avoid similar
repeats of this particular happening.
PAGENO="0012"
8514 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
Mr. GoRDoN. Does that letter violate the law or any FDA regula-
tions?
Dr. EDWARDS. Mr. Hutt, do you wish to answer that?
Mr. Hurr. I thmk it is clear that the letter does constitute labeling
as defined in our regulations and specifically 21 CFR 1.105 (e) (2). As
to whether it violates our requirements for a supplemental drug appli-
cation, I would simply tell you two of our regulations, 21 CFR 130.9
(a) (3) and 21 CFR 1.106(b) (4) (i) require a supplemental NDA un-
less the labeling involved is the same in language and emphasis as
labeling already approved, and consistent with and not contrary to
such approved labeling. As already indicated, we do regard this as
lacking fair balance and not properly putting forth all the facts. Ac-
cordingly, it would be in violation of those two sections.
Mr. GORDON. Wouldn't it be a good idea to inform the medical
commumty of the labeling, and the relative value of Darvon as an
analgesic?
Dr. EDWARDS. This, of course, gets into the whole subject of rela-
tive effectiveness. As Dr. Simmons and I pointed out, it is extremely
difficult, using the current methodology to fully evaluate the anal~
gesics. Within broad parameters, we think we can very definitely say
that Darvon is no better than aspirin. To get much more accurate
than that with the information that we have at this particular point,
it would be rather difficult.
Senator NEI~soN. In this study codeine appears to be less effective
than aspirin.
Dr. EDWARDS. Again, I think that Dr. Simmons pointed out that
that is very indicative of the problem generally. Codeine is recog-
iiized as one of the better analgesics. It is a very potent analgesic.
Senator NELsoN. You stated that Darvon is less effective than co-
deine-but this study said that codeine was less effective than aspirin,
and Darvon is less effective than aspirin.
Dr. EDWARDS. From this particular study, that statement would be
accurate. As Dr. Simmons pointed out, we do have other studies show-
ing it is the equivalent, and less effective in general, to aspirin.
Dr. Smn~roxs. There is a lot of literature in this area, Mr. Chair-
man. You have to put them all together and come up with the sound-
est judgment you can. I think it would be a mistake to rely on only
one study, and that is one of the difficulties.
Senator NELSON. Do any of the studies say that they are equivalent?
Dr. Sm.[MoNs. Aspirin and Darvon?
Senator NELSON. Do any of the studies assert that they are
equivalent?
Dr. SIMMONs. One of the problems is that there aren't too many
studies that directly compare the two drugs in the same patient. Con-
sidering all the available evidence, we simply come out with the a~-
sessment that says they are about equal. Some good studies suggest
Darvon is a little less effective than aspirin.
Senator NELSON. In this well-controlled study, aspirin is stated to
be superior.
Dr. EDWARDS. Right.
Senator NELSON. And 65 mg. of Darvon is a little better than
placebo.
Dr. EDWARDS. Right.
PAGENO="0013"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8515
Senator NELSON. Are there any studies that say Darvon is superior
to aspirin?
Dr. SIi~n~roNs. No, I don't know of any that show that Darvon is
superior to aspirin.
Senator NELSON. Is it not correct that the studies that, are most
favorable to Darvon say-at the most-that it may be equivalent to
aspirin. Other studies say that it is a little better than placebo.
Dr. SI~mroNs. Right.
Senator NELSON. Let me raise the question about its relationship
to methadone.
Do you think that doctors in the country are aware of the abuse
potential of this drug. Let me read something I know you are familiar
with, from the Maronde Study. This was done at the request of HEW,
and on page 17 of that study which I will submit for the record,
Dr. Maronde says:
"The addicting properties and the potential abuse of diazepam
(Valium), chiordiazepoxide (Librium) and phenobartial have long
been commonly recognized. Until recently, the potential hazards of
propoxyphene (Darvon) have been less widely known, but the prob-
~em of propoxyphene toxicity is now a mattern of concern. In the
Los Angeles area, and perhaps elsewhere, propoxyphene is now being
used by heroin addicts and other drug abusers, who remove the mate-
rial from the capsules, and put it in solution, and inject it intravenously
for its psychopharmacological effects." (Trade names added.)
In addition, in the National Academy of Sciences-National Research
Council report on Darvon which was released in 1969, it is stated that:
"An obvious effort has been made to avoid pointing out that dextro-
propoxyphene (Darvon) is structurally closely related to the narcotic
analgesics methadone and isomethadone, that its general pharmacolo-
gic properties are those of the narcotics as a group, that poisoning
produced by dextropropoxyphene is essentially typical of narcotic
overdose (complicated by convulsions), and should be treated as such,
and that the distinction is dependence-producing properties and abuse
liability between dextropropoxyphene and ~arious other narcotics is
essentially quantitative rather than qualitative. That this effort, un-
fortunately, appears to have been successful, is attested to by the fact
that the majority of house staff and attending physicians who make
liberal use of Darvon assume that its pharmacology is basically simi-
lar, to that of aspirin or phenacetin, rather than to that of the
cotics." (Trade name added.)
Does this concern you?
Dr. Sn\IMoNs. Well, yes it does, Mr. Chairman. An abuse of any
drug certainly concerns us. We are aware of the studies that you have
quoted, showing evidence of some abuse of this drug. We are looking
into that as well as the abuse of some others, and other action may be
necessary in that respect.
Further action may be necessary as to the scheduling. I don't know
how widely the abuse information is known by the practicing practi-
tioner. Darvon is related to methadone and related to the narcotics.
It is labeled as such. Whether that is available to the physician or
transm1tted to them, we have no way of knowing.
Senator NELSON. The labeling is in the package insert?
Dr. SIMMONS. Right.
PAGENO="0014"
8516 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
Senator NELSON. The doctor doesn't even necessarily see the package.
Dr. SIMMONS. No, sir, but he sees the Physicians' Desk Reference,
which is based on the package insert.
Senator NELSON. Well, here is what concerns me: this study indi-
cates that Darvon is being used by drug abusers and nobody knows
how widely it is being used. It is purchased in the marketplace. It
has been placed there as an analgesic. Is there any reason why we
ought to leave it in the marketplace at all when you consider that we
have other analgesics that are at least as good and very likely better,
and when it is so easily subject to abuse, when it can be put in solution
and injected intravenously? Why should we allow it to remain in the
marketplace?
Dr. EDwARDs. It is not quite fair to say it is so easily abi~sed. It is
quite difficult to abuse. Nevertheless, Dr. Simmons said at this time we
don't know the extent of that abuse, and I think we are studying this
along with the whole methadone program. If we find it is a significant
problem, we will have to take certain steps, appropriate steps, to fur-
ther control it, or schedule the drugs.
Senator NELSON. Dr. Maronde further states in the study: "In the
case of multiple prescriptions providing excessive quantities in the
possession of a patient, it is clear that the same four drugs-diazepam
[Valium], chlordiazepoxide [Librium], phenobarbital and propoxy-
phene [Darvon]-flgure most prominently, being involved in 2'7'2 of
the 312 patients concerned in the study."
Why at least, shouldn't it be put on the controlled list?
Dr. EDWARDS. This is under very active study by the agency, along
with Dr. Jaffe's office right now, and in the Bureau of Narcotics.
Senator NELSON. Do you have any idea when you will complete your
evaluation of the problem?
Dr. SIMMONS. As soon as we can, Mr. Chairman. We are mostly tied
up with methadone and the amphetamines. As soon as we bring that
into order, we will move on down to the next one.
Senator NELSON. I should think that this would stay right along
with methadone, since there is a chemical relation.
Dr. SIMMONS. The problem with methadone is of much greater
priority.
Dr. EDWARDS. The amphetamines and the barbiturates also are high
on the priority list. I think this all indicates, Mr. Chairman, the basic
magnitude of the drug problem in this country and, of course, with
the resources that are obviously limited, we have to take the more seri-
ous problems first.
I think we are making significant progress. The Bureau of Drugs is
likely to come forth with some very meaningful new developments in
the amphetamines area.
Senator NEI~soN. Are there any studies at all which could indicate
that Darvon would be the drug of choice as an analgesic in any case
except possibly a case of any allergy or an allergic reaction to aspirin?
Dr. SIMMONS. No; none.
Senator NELSON. There are none?
Dr. EDWARDS. There are none.
Senator NELSON. Shouldn't the doctors be informed that it is not
the drug of choice except in a very limited number of cases, where
the user may be allergic to aspirin?
PAGENO="0015"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8517
Dr. SIMMONS. That is one possible approach to it. I think an equally
balanced approach is to tell the doctor what the facts are, that there
are two choices for mild analgesics, aspirin and Darvon.
Senator NELSON. What is the status of the study on Darvon that
you are now making?
Dr. EDWARDS. The drug efficacy study?
Senator Ni~1r1soN. Yes.
Dr. SIMMONS. It was rated as an effective analgesic. This was, at
5 mg. propoxyphene, usually but not always, shown better and superior
to placebo, and even aspirin.
Senator NELSON. Usually, but not always superior to placebo?
Dr. SIMMONS. Correct. In some studies aspirin is not found superior
to placebo.
Senator NELSON. So they concluded that it met the 1962 statute
for efficacy.
Dr. SIMMoNS. Yes, sir.
Senator NELSON. You may proceed.
Dr. EDWARDS. Approximat~ly $500 million a year are spent in
prescription drug promotion. The large number of drugs marketed,
the conflicting claims that each one is better than the others, the em-
phasis on brand names, the rapid introduction of new products that
are always said to be better than the old ones, extensive detailing and
the sheer bulk of advertisements in the mails, the media and in the
medical journals-all combine to give the doctor and the public a
sense of frustration and confusion.
Other sources of drug information which are made available to
the physician can also be improved. These include the scientific evi-
dence for drug efficacy and the labeling information on the drugs he
uses. Drug labeling is especially important since it sets the legal
limits for drug promotion and advertising.
The final report of the Drug Efficacy Study, page 162, addresses it-
self to an appraisal of both, and here I quote from the report:
"The Drug Efficacy Panels expressed concern and surprise about the
generally poor quality of the evidence of efficacy of the drugs re-
viewed and the poor quality also of the labeling of those drugs."
The panels found that there was little convincing scientific evi-
dence to support many of the cited indications for use of drugs that
are currently in good standing in medical practice and criticized the
labeling of about two-thirds of the drugs they evaluated as failing
in their primary purpose of providing the physician and the pharma-
cist with balanced authoritative and objective guides to prescribing
or dispensing the drugs in question.
Thus, too much of the "communication" currently being beamed
to the physician is either scientifically inadequate, lacks fair balance,
is incomplete, inaccurate, and occasionally misleading. Physicians
are the target of an over $500 million effort to sell them something.
This amountsto an expenditure of approximately $4,000 per physician
per year for drug promotion.
Over 35,000 prescription drug products, most with different trade
names, are clamoring for his attention. How can the physician be ex-
pected to know these drugs or to know that the several hundred anti-
histamines, the many coronary vasodilators, adreno-corticoids, tetra-
cyclines, anticholinergics, and thiazide diuretics, are basically the
PAGENO="0016"
8518 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
same with little or no significant advantage one over the other? After
all, no one manufacturer could reasonably be expected to tell him
this.
This present "communication overkill" of today with its resultant
confusion is exactly what the already overburdened physician does
not need a.nd it certainly does not serve the public.
Senator NELSON. May I interrupt you at this point?
You mentioned the drug efficacy panel's conclusion expressing con-
cern and surprise about the generally poor quality of the evidence
to support the efficacy of the drugs reviewed and the poor quality
also of the labeling of those drugs.
Recently the Medical Tribune has attacked the Food and Drug
Administration and the Kefauver amendment to the Food, Drug and
Cosmetic Act. In articles and editorials the Medical Tribune quoted
"experts" that:
One, "FDA policies since 1962 have brought about a `stifling' of
scientific creativity, escalation of research costs, and a `continuing
decline in the number of new drugs entering the market in this
country.'"
Two, "Drug regulatory policies may be `depriving the practicing
physician of agents beneficial to patient care' ;" and, three, "American
medicine currently faces a `paradox' in which the drug industry's re-
search capacity is getting better, the FDA is working harder, but
there is `decreasing productivity.'"
This is from the Medical Tribune.
The chairman of this particular protesting group is reported by
the Medical Tribune to be Dr. Robert D. Dripps, vice president for
medical affairs, the University of Pennsylvania.
Do you know anything about the background of the i)cipps (Jom-
mittee and will you also comment on the allegations made in these
editorials? The ones that I have quoted from the DrippE committee.
Dr. EDWARrS. Yes, Mr. Chairman.
First of all, let me say the Medical Tribune has been r uiining a
series of articles on the Food and Drug Administration, and, very
frankly, it has continued up until today. So their attacks upon the
Food and Drug Administration are not unexpected, nor uncommon.
As regarding Dr. Dripps and his group, I don't know the origin
of this group. I have heard rumors. I do know Dr. Dripps and his
colleagues have never taken sufficient interest to have communicated
with me or with Dr. Simmons to try to really come to grips with
some of these problems, or at least try to hear the other side of the
problem.
Senator NELSON. Has any one of the signers of the issued statement
reported in the Medical Tribune, contacted the FDA?
Dr. EDWARDS. None.
I am sending each one of the sigiiers, today or tomorrow, a letter
to invite them, if they would be willing to come to the Food and Drug
Administration and discuss the problems as they visualize them. But
I am certain there are people that signed that particular letter that
have very little knowledge of what the Food and Drug Admrnistra-
tion is doing, and how we balance our activities.
Senator NELSON. I didn't see all the rames or all the signers. I
noticed that among the signers were Dr. Modell, a distinguished and
PAGENO="0017"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8519
very reputable scientist, pharmacologist; and Dr. Freis. I have not
seen the actual document. All we have seen is what the Tribune says.
Is it based on any study? Do they document any of their conclusions?
I don't quite understand what they are saying when they assert that
FDA policy since 1962 has brought about a "stifling" of scientific
creativity, escalation of research costs, and a "continuing decline in
the number of new drugs entering the market in this country."
You could endorse all that if you interpreted it correctly. If un-
necessary scientific work and duplication have been stifled by the 1962
act, fine. If costs are escalated in order to improve the safety and
efficacy of the product, that is good. If there has been a decline, a con-
tinuing decline, in new drugs entering the market as a consequence
of higher scientific standards, that is also good.
I wonder if that is the impression that the Dripps Committee is
trying to create! If, however, it is an attack on the requirement that
efficacy be proved, and if they are critical of the distinguished panel
that handled this problem for the National Academy of Sciences-
National Research Council, then, it seems to me, their charges ought
to be documented.
Do you have any notion as to what they are talking about?
Dr. EDWARDS. This is one of the disturbing things. An individual,
Dr. Dripps, in his position, you would have thought that at least he
would have communicated with me in regard to these charges. But
the fact of the matter is about all I have heard is what I have read from
the Medical Tribune.
Senator NELSON. Have you seen any documents on which their claims
may be based?
Dr. SIMMoNs. We have some specific answers .to the allegations.
Dr. EDWARDS. I do have a statement I would like to read at the
appropriate time, that relates to this whole subject. We have recog-
nized that we have some problems in the Food and Drug Administra-
tion, and we recognize there are some issues that need to be looked at
very hard, and we are attempting to do that right now, but again,
going back to the discrepancies, they were never discussed with us.
Senator NELSON. By any of the signers?
Dr. EDWARDS. By any of the signers.
May I read, Mr. Chairman, the short statement that I would like to
have included in the record?
Senator NELSON. Go ahead.
Dr. EDWARDS. If there are problems with the system of the drug
evaluation and drug regulation, then we are most interested, more
interested than anyone, in seeing them corrected for the public interest,
where it is involved.
However, we feel that existing laws and regulations governing these
areas are scientifically sound and can allow necessary research and de-
velopment while still adequately protecting the public. We are ready
to do everything possible to help create a program for drug research
and development', and we encourage it, but I would say for the past 2
years we have worked constantly to bring this about; with the help of
outside consultants, we have reviewed all of our requirements, and in
virtually all instances they have been sound and consistent with sound
science.
We are working to streamline for maximum efficiency. We have
added first-rate scientists to our internal organization. We have built
80-450 O-72-pt. 22-2
PAGENO="0018"
8520 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
and used expert groups and advisory committees. We have some of the
best minds in the country to help us make the wisest decisions possible
in the interest of all of the American people.
There have been some problems in the past, and many of these have
been resolved. N'Iuch progress has been made, and more is in store, and
many countries of the world are adopting our system.
Any agency making the difficult decisions we are called upon to
make-all of it is from the critics, and the critics have never taken the
time to adequately inform themselves about what is going on. They
have been making unfounded charges, and they are often urged on
by those few in the industry who could be better served through a
weak Food and Drug Administration.
We welcome any constructive recommendations, and we want the
American system to be the best in the world.
Senator NELSON. You are asking the signers of the statement for the
basis of their complaints?
Dr. EDWARDS Since we have never received any documentation from
them, we have never communicated with any of them. I am sending
eaeh of them a letter to ask them, or welcome them, if they would be
willing to come in and sit down and let them discuss their problems,
let us discuss our problems with them. And I hope they will accept our
invitation.
Dr. SmrMoNs. Mr. Chairman, we have some of the specific questions
that you have asked the Commissioner to state, in his statement, and
we can go into that at this time if you would like, or go into them
later, about the charges made by the Dripps Committee.
Senator NELSON. Yes, we did give you some questions to respond to.
Do you agree with the Medical Tribune that the decline on the
number of drugs nut on the market is due to FDA policy?
Dr. EDWARDS. I think, without any question, that the decrease in the
number of "new drugs" has been due to FDA policy. This doesn't
mean that this is necessarily bad, as you pointed out a little earlier.
Dr. SIM~roNs. The decline of new drugs is falling worldwide. This
is not a new or unusual phenomenon. It is due to a lot less combination
of drugs being marketed here and overeseas.
As to the charge that research has been stifled, that is somewhat hard
to believe.
If you consider that we have in the Bureau of Drugs approximately
1,500 New Drug Applications. There is a lot of research going on in
this country. There have been a lot of drugs approved in the past few
years, but there is a reduction in new drugs which is a worldwide
phenomenon.
As far as this country being deprived of useful drugs, I think we
can honestly state we know of no instances-or maybe a rare isolated
instance-where this country does not at least have one, and usually
more, of the same kind of drugs on the market that are available
overseas. There is at least one kind of every drug available in this
country that is availab'e overseas. I would say that the statement that
we are depriving the public of useful drugs is unfounded.
- We do have drugs under study in which we found them lacking some-
thing, and they are being marketed overseas. That is the negative aspect
to that whole picture.
PAGENO="0019"
`COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8521
You might be interested to know that one of the members of the
Dripps Committee did come into the Food and Drug Administration
to bring to our attention what he considered a problem with the ap-
proval of a particular drug. We invited him to review the data with us,
and, after reviewing all the data and so forth, he was surprised at the
poor quality of the evidence. He agreed with our judgment that it
could not be approved until the deficiences had been corrected.
Another member of that committee was protesting because he
thought we were going to remove another drug from the market. That
drug actually was not going to be removed from the market. We were
carrying out the efficacy study, and requiring further study, and until it
was proven effective, the drug would be left on the market.
This kind of misinformation is what we face so very, very frequently.
We would like to alleviate this as much as possible.
Mr. GORDON. Dr. Simmons, is the continuing marketing of new drugs
necessarily a boon to the physicians or to the patient?
Dr. SIMMONS. Mr. Gordon, let's put it this way. Any useful drug
should be available to the American people. Now, that doesn't always
mean that the drug is better. We realize that, and maybe the man who
put it into perspective, best of all, was Dr. Modell when he was testify-
ing back in the early days of the Kefauver bill. Let me read specifically
from his statement. He was asked the same question, and he stated
officially, "Occasionally, molecular manipulation does bring about a
significant advance, but usually a far more substantial change is needed
for a real improvement. But simply because a drug is new, it is not
necessarily better than those already available, safer or even just as
good. Often, it is even less effective and sometimes more hazardous
than the parent drug. But they also do harm by their very existence
in the drug market. I take the stand that as a general principle every-
thing that adds to the difficulty in dealing with and understanding
drugs also makes drugs more dangerous. Thus, the excessive number
of needless drugs constitutes a present danger. We can make the use-
ful drugs both less dangerous and more efficient by weeding out the
useless, the ineffective and the duplicates, and by so doing, make it
possible for the physician to learn in depth about the potent drugs he
will prescribe for his patients. We must add only those new drugs that
really add something more than their mere presence."
As an example of that, we have about 100 new tranquilizers under de-
velopment in this country, and at least 22 tranquilizers are on the mar-
ket at present.
Senator NELSON. Twenty-two?
Dr. SIMMONS. Twenty-two; yes, sir.
Senator NELSON. You said you have 22 tranquilizers on the market?
Dr. SIMMONS. Approximately.
Senator NELSON. And about 100 pending NDA's?
Dr. SIMMONS. Under study.
Senator NELSON. Under study. Of that 22, how many are different
compounds?
Dr. SIMMONS. There are a number of different chemicals represented.
Senator NELSON. Under the law, even though they aren't as effec-
tive as those already in use, and even though they might have more
side effects, they still can be marketed as long as they are more effective
than a placebo. Isn't that correct?
PAGENO="0020"
8522 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
You don't have any relative efficacy requirements, do you?
Mr. HUTT. Under the statute, relative efficacy is not to be used in de-
ciding whether the drug is approved or not. Relative safety is to be
used in making that decision. An increase in side effects would defi-
nitely be taken into account in determining whether to allow the prod-
uct to be marketed.
Senator NELSON. How does the statute read on safety., so that you in-
terpret it to mean relative safety when that is a fact?
Mr. H~TT. The statute merely states that the evidence in the New
Drug Application must show safety by all reasonable applicable tests.
We are then required, and have been, since 1938, to then make a judg-
ment balancing the benefits against the risks, to determine whether the
product should be marketed.
If there is an increase in risk and no added benefits, then the Food
and Drug Administration would conclude that it was unsafe for the
indicated purpose.
Senator NELSON. Under that standard, it would seem to me you
couldn't market Darvon.
I think it is clear that a safety question does exist with respect to
that drug-the fact that it is related to methadone and is being used by
drug abusers. It isn't superior by any tests. It is not superior from the
standpoint of efficacy, and handicapped from the standpoint of safety,
so why should Darvon be permitted to stay on the market?
Mr. BlurT. Well, this is a medical point, not a legal issue.
Dr. EDWARDS. I think, Mr. Chairman, one should point out that when
Darvon was first approved by the Food and Drug Administration, the
approvers were not aware of the abuse potential. While we are aware
of the abuse potential, I think it is only fair to point out that we must
also acknowledge the fact that there are side effects to aspirin, as well.
So I think that it is a matter of equating the side effects of one with
the other at this point in time. We have to look at aspirin in that re-
gard also.
Senator NELSON. Well, if I understood Dr. Simmon's answer of a
few minutes ago-maybe I am mistaken-there is no indicated use of
Darvon in the place of aspirin; except in cases where the user might be
allergic, or suffer side effects from aspirin, especially since it is not
more effective than aspirin.
Dr. EDWARDS. That is, to a degree, true. Some people respond to one
product differently than another, and some can take Darvon more
effectively than aspirin. We have tried to point this out on several
occasions-this is the whole problem of an analgesic. There is no ques-
tion in my mind that the practitioner should have a number of anal-
gesics available from which he can choose.
Dr. Smr~IoNs. I didn't mean that they shouldn't have an alterna-
tive to choose from. Some people will respond to one and not to
another.
Senator NELSON. How does a physician know when to prescribe
Darvon unless there has been some specific reaction to the aspirin?
Dr. EDWARDS. Probably by the "trial and error" method. He gives
aspirin and the aspirin isn't effective, and then he has to give another
analgesic, and we have to try another one. It is not a scientific deci-
sion in the normal vast majority of the cases. The pain itself is limit-
ing, anyway, in how the doctor is going to determine that.
PAGENO="0021"
COMPETITIVE PROBLEMS IN THE DREG INDIJSTRY 8523
Senator NELSON. In other words, if you need a mild analgesic, isn't
the drug of choice aspirin, unless there is some reason for selecting
another analgesic?
Dr. EDWARDS. That would be my analysis. I am sure that there ar~
those who would say Darvon is necessary.
Senator NELSON. Oh, good heavens. Wholesale sales amount to $80
million worth or about $140 million in the retail marketplace. Appar-
ently doctors prescribe it day-in and day-out with no indication that
you ought to have Darvon instead of aspirin. I think that is what the
promotion is all about. How they make a decision to prescribe some-
thing that costs the patient 100 times as much as aspirin is another ex-
ample of the power of promotion and advertising.
Is there any reason that you know for routinely prescribing Darvon
as a mild analgesic?
Dr. EDWAR1S. No. I think it is exactly why we are taking these vari-
ous steps to better educate the physician. In this regard, although the
cost of the medication is not the direct responsibility of FDA, never-
theless, we have to take it into consideration.
Mr. GORDON. In the articles which appeared in the Medical Tribune
on April 19 Dr. Edward Freis said: "There are excellent new anti-
hypertensive agents available to clinicians in Europe but not in the
United States. The Bethanidine, for example, can be prescribed for pa-
tients in Great Britain and the Scandinavian countries, but not here."
Dr. Lasagna in the same issue of the Medical Tribune cited the
availability of carbenoxalone "the drug of choice in gastric ulcer man-
agement in Great Britain, and in a recent poll of United Kingdom
experts," Dr. Lasagna said, "this was rated as their therapeutic ma-
neuver number one. If that is so, that means that our patients are
*being deprived of an important drug."
"We have one beta-blocker in the United States," Dr. Lasagna
noted. "There are several in the United Kingdom. And even the one
that we have is not approved for use in high blood pressure or an-
gina, although the evidence suggests that it could be of benefit for
those indications."
I wonder if you could comment on those statements `~
Dr. SUIHONs. Yes, Mr. Gordon. I think that if you exai~iiine care-
fully the charges that have been made, you will find that they are
unfounded. The drug to which Dr. Lasagna referred is available in
England.
Senator NEr~soN. What kind of a drug is it?
Dr. SIMMoNs. It is an ulcer drug that is available in England.
There have been recent reports of a high incidence of side effects from
this drug, including, hypertension and heart failure. For this and
other reasons we and other experts in this country feel further studies
are necessary. We think it warrants carefully conducted trials. No-
body has given us the judgment that this drug should be generally
available for use in this country before these trials are completed.
Senator NELSON. There has been no application submitted to FDA
to market it in this country?
Dr. Smn~roNs. To the best of my knowledge; no. As to the beta-
blocker problem, we have run into adverse effects producd by sev-
eral of t.hese experimental drugs in animal systems. Because of this
and with the advice of our advisory committee, we are limiting studies
PAGENO="0022"
8524 COMPETITIVE PROBLEMS It~ THE DRUG INDUSTRY
with these agents until the questions raised can be resolved. Limited
human trials are continuing.
Our advisory committee has also agreed with our decisi~n not to
approve beta-blockers for use in angina because the evidence pres-
ently available in our files is inadequate to conclude that they are safe
and effective for this use. Further studies are currently underway
in this area.
One of the anti-hypertensive drugs mentioned by Dr. Freis has
been under review by the agency and has not been approved because
of the very poor quality of the data in the submission. In this in-
stance we invited Dr. Freis in to review this data with u~ and he
agreed that the deficiencies in the submission would have to be cor-
rected with better data before approval should be considered.
These and other instances are examples of misinformation or in-
complete information which sometimes is used to criticize the agency
uniustly.
Senator NELSON. What controlled clinical studies were done in Eng-
land or elsewhere in Europe that qualified it for the marketplace
there?
Dr. EDWARDS. We don't know. We don't have that information. We
have been in touch with experts in this field who are familiar with that
data. Then, on the basis of their evaluation, they say it needs fur-
ther trial, and they feel very uncomfortable with the general avail-
ability. There are side effects, and that should produce investigations at
this time.
Senator NELSON. Do you have to prove efficacy to market a drug in
England?
Dr. EDWARDS. I am not completely sure. It is changing now. I be-
lieve that their requirement is only for safety at the present time, but
I am not certain.
Mr. GORDON. Have there been any previous occasions when com-
mittees have been established to attack FDA's regulations, which have
been reported exclusively in the Medical Tribune?
Dr. EDWARDS. Many hundreds of lines have been printed on the
UGDP study.
Senator NELSON. Which?
Dr. EDWARDS. The University Group Diabetic Program study.
Senator NELSON. The tolbutamide study?
Dr. EDWARDS. The tolbutamide study was done by the University
Group. The Medical Tribune has been extremely critical of our posi-
tion in this regard and we have received a petition. Mr. Hutt could
speak better to that point.
Mr. Htrrr. The petition was filed last year, October 7, 1971.
Senator NELSON. Petition filed by whom?
Mr. HUTT. By an attorney representing the Coordinating Committee
of the Committee on the Care of the Diabetic, I believe is the name of
it. It was submitted late last year and supplemented on January 10 of
this year.
The request was for Food and Drug to withdraw its earlier an-
nounced policy with respect to proper and improper labeling of tol-
butamide. The petition is still under consideration. The draft reply
has been formulated and should be sent forward very soon. I would
PAGENO="0023"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8525
request,'Mr. Chairman, to submit a copy of the reply probably within
the next week, when it will be going out, for the record.'
Senator NELSON. What is the current legal status of tolbutamide?
Mr. Htrrr. Itis an approved new drug. The question is whether the
labeling needs clarification in light of the UGDP studies. This is the
controversy in issue at the moment.
Senator NELSON. Has the labeling been changed, or is it just an
issue?
Mr. Hu~n~. We announced a proposed labeling policy and the pe-
tition asked us to delay that until we gave consideration to the infor-
mation that the committee supplied. Our reply will announce the
new labeling that will be required in the future.
Mr. GoIu~oN. I read quite a few medical publications, and I notice
that announcements of the establishment of these committees, as well
as articles attacking the FDA, seem to originate in the Medical Trib-
une. What kind of a publication is the Medical Tribune?
Dr. EDWARDS. Well, again, I don't know whether it is by coinci-
dence or what, or how these committees get the announcement in the
Medical Tribune at the time of the founding. I think that I won't
exactly categorize the Medical Tribune any more than a publication
which I know is given to all practicing physicians free of charge.
Mr. GORDON. How does this publication subsist?
Dr. EDWARDS. I imagine on the advertising, on~ the drug adver-
tising.
Mr. GORDON. Do you know whether it is completely dependent on
drug advertising?
Dr. EDWARDS. No, I wouldn't have any idea as to that.
Senator NELSON. Please continue.
Dr. EDWARDS. Mr. Chairman, excuse me.
Senator NELSON. Go ahead.
Dr. EDWARDS. Mr. Chairman, I would like, with your permission,
to submit for the record beginning at the bottom of my prepared
statement at page 5 over to the second paragraph on page 11. This is
merely an added thought_or thoughts_on this whole problem of
communications and I think it would be sufficient to have it placed
in the record.
Senator NELSON. The whole statement will be printed in the record.
Dr. EDWARDS. I would like though, with your permission, to go
ahead with page 11, which we conclude, with the present status of
drug efficacy study which you have requested.
Senator NELSON. Yes.
Dr. EDWARDS. By July 1 of this year, we will have completed and
published in the Federal Register our evaluation of all 3,000 drugs
which were in the drug efficacy study. During 1971, 142 drugs named
in the Federal Register announcements as "lacking substantial evi-
dence of effectiveness," and 367 "related" drugs were effectively re-
moved from trade channels 64 by recall.
To date 452 ineffective drugs specifically covered by the publica-
tion of 102 final orders in the Federal Register are off the market. This
has resulted in the removal from the market of 1,473 additional related
drugs. Of the 452 ineffective drugs specifically mentioned in the Fed-
1 See Appendix I, p. 8793.
PAGENO="0024"
8526 COMPETITIVE PROBLEMS IN THE DRTJG INDUSTRY
eral Register statements, 338 were fixed combinations, and of the 1,473
related drugs removed from the market, 1,345 were fixed combinations.
Senator NELSON. Are over-the-counter drugs included?.
Dr. EDWARr~S. No. There are a few OTC's but the majority are pre-
scription drugs. There are 422 OTC prescription drugs reviewed by
the National Academy. Although they have been published in the
P ederal Regwter, no action has been taken specifically. They are being
reviewed as part of the over-the-counter drug review.
Senator NELSON. These drugs were reviewed by various classes?
Dr. EDWARDS. These are the over-the-counter drugs that are being
reviewed class-by-class; yes.
In the months ahead, the drug industry will be carrying out, and
the FDA will be assessing, the studies necessary on drugs which cur-
rently lack adequate evidence of efficacy. Drugs for which there is not
adequate evidence of effectiveness will, as required by law, be removed
from the market.
This has already been done on many fixed-dose combinations. In the
months ahead, as the results of this study reach more elements of our
society, there will be a major impact on the public, the medical profeb-
sion, the drug industry, and Government. In the end, much that is good
will come from this study to the ultimate benefit of the medical profes-
sion and the public. The panels of the NAS/NRC have clearly and
objectively pointed out the problem that faces us in the drug area. One
of the great strengths of the study is that it has been a constructive
joint effort of the medical profession and the Federal Government.
Procedures set up by this administration will allow a fair and
equitable resolution of these problems in the months ahead. No pre-
cipitant actions will be taken and whatever actions are taken will be
guided by detailed and fair analysis of adequate scientific data.
A new and high standard has been established for establishing proof
of drug efficacy and for the evaluation of combination drugs through
our new regulations on adequate and well-controlled studies and our
combination drug policy. This alone should be a major factor in im-
proving therapeutics in this country. In time, ineffective drugs and
irrational formulations will be removed from the market.
The effective drugs remaining will be clearly and accurately labeled
so that physicians will have available to them the balanced information
they need for rational drug use. Where possible, this information will
be derived from adequate and well-controlled clinical studies.
To fulfill our obligation to keep physicans fully informed about drug
efficacy, we will require all drug labeling and advertising to disclose
the efficacy ratings of the products involved while required studies are
being done to determine their efficacy. We have also taken appropriate
steps to keep other Federal and State agencies informed of our actions
in the Drug Efficacy Study Implementation.
In the months ahead, a number of drugs will fall by the wayside and
many others will establish the evidence of efficacy required by law: A
massive project such as this cannot be completed without arousing
some emotions. Our policy in this and all matters facing the agency is
clear-
We do have an emotional commitment, a simple one; this is to take the emotion
out of our work. We are not interested in any kind of confrontation, in political
or bureaucratic victories; we are moving very swiftly toward relationships based
not on crusades or rhetoric but on matters of equity and justice and effectiveness.
PAGENO="0025"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8527
With the great deal of critically important work which lies ahead
of this agency in the drug area, we recognize our responsibility to take
all steps necessary to assure the soundness of our scientific judgments
and the efficiency of our operations. To accomplish this, we have taken
the following steps:
1. In the past 2 years, we have not only strengthened our own internal
staff, but we have called upon the expertise of the medical and scien-
tific community to assist us in strengthening our scientific reviews.
2. Today, a total of 260 experts serve on 26 advisory committees, and
another 200 advisers will be added to this total as the over-the-counter
(OTC) expert review panels are organized. In addition, the Bureau of
Drugs expects to add five new advisory groups in the coming fiscal
year. Just this past week, the first meeting of the National Drug Ad-
visory Committee was held in Washington. This newly formed group
is intended to serve as the top policy drug advisory committee to the
Food and Drug Administration.
3. We are taking a number of steps to eliminate the time, cost, and
delay that may affect New Drug Applications. First, we have set up
a Task Force to help detect any faults in our internal procedures; we
have matched this in recent weeks with a major contract to conduct an
extensive study of these same internal FDA procedures.
With industry and with academic help, we are developing guide-
lines of clinical research. These guidelines will, we hope, assist in-
dividual investigators as well as industry to more clearly understand
what FDA expects-and to gain this understanding during the work-
up of a New Drug Application.
We have this year established a pilot plan for joint Industry-FDA
conferences at designated points, points during the investigational
stage of new drugs and again prior to submission of New Drug Ap-
plications. The purpose is to speed the overall process by earlier un-
derstanding, better information, and, hopefully, fewer signal changes
in mid-stream, and also to improve the overall quality of the scien-
tific information generated about a drug.
4. We are planning new strategy for sorting out IND's to differ-
entiate between individual physician research and complex commer-
cial investigations. Both should benefit. We are tightening internal
quality controls through mandatory 90-day review of all working
NIDA's. We are soliciting new ideas from industry, from academia,
from professional societies, and from within FDA through
conferences such as that recently concluded at Airlie House near
Washington.
5. We are asking major FDA Advisory Committees for ideas and
review of criteria for judging efficacy; for example, the ampheta-
mines. We have now completed the assignment of a statistician to
every NDA review team to insure the statistical quality and com-
pleteness of every submission. This has major implications because
it means still another specific check and balance for data quality. We
are taking necessary steps to simplify as much as possible the ap-
proval of "me-too" drugs through the abbreviated NDA procedures.
So, in summing up: We now have 10 years of invaluable experience
under Kefauver-Harris. It is no exaggeration to say that this has
been the most dramatic period of progress in the drug area in FDA's
66-year history. It has been a tough but useful period of on-the-job
PAGENO="0026"
8528 COMPETITIVE PROBLEMS TN THE DRUG INDUSTRY
training for FDA and industry alike. Many problems remain but
much progress has been made toward the goal of better drugs and
better therapeutics for the American people.
Thank you.
Senator NELSON. Thank you, Dr. Edwards.
You obviously feel quite strongly that the FDA had done a very
effective job under the mandate of the 1962 Kefauver Act concerning
efficacy. I would like to read to you an excerpt from an article that
appeared in the National Journal in late 1971, commenting on the
fixed-ratio combination drugs. The National Journal apparently took
the position that the drug industry won the battle in respect to the
combination drugs.
"Fresh from a victory with the administration over the regulation
of combination drugs, the prescription drug industry is ready for
any new challenges the Federal Government may send its way.
"The multi-billion-dollar industry, represented in Washington by
the Pharmaceutical Manufacturers Association, has significantly
strengthened its position with the Food and Drug Administration in
the past year. The FDA backed away last summer from strict new
requirements for combination drugs after the industry protested
vehemently and cultivated extensive support among doctors and
Members of Congress."
Skipping to another paragraph, "The agency was using powers it
had received from the 1962 Drug Amendment to review drug ef-
ficacy. Its proposed guidelines were strict, following the advice of
those academic medical experts who believe that reliance on fixed-
combination drugs is more dangerous than prescribing custom dosages
of each drug to best suit a patient's needs.
"But combination drugs are easier to prescribe, and they are very
popular among doctors. The drug industry relied on this popularity
in soliciting support from practicing doctors, who wrote letters of
protest directly to the FDA and also to Members of Congress, who
then sent inquiries to the agency.
"Besieged by thi~ opposition, the FDA modified its guidelines be-
fore publishing a final version on October 15. Four major changes
were made in deference to opposition from medical and drug interests.
Over-the-counter drugs were removed from the guidelines and handled
separately; suggestions that combination drugs are less desirable
tha.n individual dosages were eliminated; a requirement that the
combination be effective for the duration of dosage was removed; and
a requirement that the combination be advantageous for `most' patients
was changed to require that combinations be `safe and effective for
a significant patient population.'"
"`We won the fight on combination drugs~' said William C. Cray,
PMA's vice president for public relations. `The final guidelines were
quite reasonable.'"
What is your comment on that?
Dr. EDWARDS. I would say, Mr. Chairman, if they won the fight,
I would like to lose more like it. I think we do, in fact, have a combi-
nation policy at t:his particular point that is perfectly acceptable to
Dr. Simmons and his Bureau. There is no question about the fact
that there was considerable interest in this original combination
policy. Some of it was justifiable and some of it wasn't justified.
PAGENO="0027"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8529
l~\That we did, in fact, was to clarify our position. In retrospect, I
should say it was badly in need of clarification. There was a tremen-
dous number of inquiries by practicing physicians, unfortunately,
and others that had received misinformation because of misinforma-
tion that had been provided to them by others.
I think that our record speaks for itself. I doubt if any other ad-
ministration that I know of in the Food and Drug Administration has
ever acted as vigorously as we have in regards to the drug industry. We
have got other things to do, things that I wish we could have acted
more rapidly on, but nevertheless our record shows that we have been
very vigorous, but we certainly_-I think any statements like that are
inaccurate and not founded. I don't think they bothered to look in the
record.
Dr. Sfl~ThrON5. Mr. Chairman, we have a sound combination drug
policy but unfortunately some people still misunderstand it. I suspect
this may be the case with the author of the articles which you just
discussed. I think our policy makes eminent good sense, and a number
of fine scientists of this country helped us develop it.
Our basic position is that since all active drugs have a potential for
harm as well as benefit, no patient should be exposed to or have to pay
for a drug he does not need. Each drug in the combination must con-
tribute to the therapeutic effect. It must make sense to use the drugs
together, that is, the combination should provide rational concurrent
therapy for a significant proportion of the target population. Neither
drug should decrease the safety or effectiveness of the other drugs in
the combination.
Senator NELSON. The requirement is that the producers of the drug
demonstrate by adequate and scientifically controlled investigations
conducted by qualified experts, that each drug in the combination
makes a contribution, and, in effect, that the drugs in combination are
at least additive. Is that correct?
Dr. EDWARDS. That is correct.
Dr. SIMMONS. That is right.
Senator NELSON. And under this policy, the panels selected by
the National Academy of Sciences-National Research Council recom-
mended removal of all fixed combination anti-infectives; is that
correct?
Dr. EDWARDS. No; not all of them. There are still several-Dr.
Simmons?
Dr. SIMMONS. No, they didn't. They spoke most strongly about
penicillin combinations, which had to be removed from the market,
but there is a combination drug for tuberculosis, which we are going to
leave on the market.
Senator NELSON. Is that an anti-infective drug?
Dr. SIMMONS. Yes, sir. In general, they ruled against a fixed com-
bination for a variety of drugs.
Mr. GORDON. I would like to ask you about your "freedom of in-
formation" proposal. I note on page 9135 of the May 5 Federal
Regi$ter the following statement:
(d) Unless otherwise publicly disclosed, no safety and effectiveness data and
information submitted with or incorporated by reference in an NDA file are
available for public disclosure until the Food and Drug Administration with-
draws approval of the NDA or determines that the drug is not a ~ew drug
or may be markete~j pursuant to an abbreviated NDA. All such data and in-
PAGENO="0028"
8530 COMPETITIVE PROBLEMS IN THE DRuG INDUSTRY
formation are available for public disclosure when the Food and Drug Ad-
ministration withdraws approval of the NDA or determines that the drug is
not a new drug or may be marketed pursuant to an abbreviated NDA unless
extraordinary circumstances are shown.
(e) A protocol for a test or study is available for public disclosure unless
an adequate showing is made that it constitutes a trade secret or confidential
information because it is unique, has not previously been disclosed in an author-
ized manner to anyone other than a company employee or a paid consultant,
has been developed at significant cost, and provides a competitive advantage.
Now, isn't it correct that most drugs on the market today are con-
sidered new drugs?
Mr. Hurr. Are you talking about new prescription drugs?
Mr. GORDON. Yes, sir.
Mr. Hurr. I am not certain that that is true.
Dr. SIMMONS. Most are qualified as new drugs.
Mr. GORDON. This characterization is applicable, no matter how
long a drug has been on the market. Is that right?
Dr. Smr~rONs. Well, that is generally true now, but I think it will
be less true in the future.
Mr. Hurr. There is an increasing number, for example, that are
subject to abbreviated New Drug Applications. My understanding
is that today there are only roughly 2,000 to 2,500 active New Drug
Applications and I am uncertain whether that includes abbreviated
New Drug Applications or not.
Mr. GORDON. Do you have any idea how many old drugs there
are on the market?
Dr. STi~ri~roNs. I would-
Mr. GORDON. How many drugs are on the market today that are
considered old drugs?
Mr. Hu'rr. Well, there have been a number that have been marketed
without New Drug Applications. We do not have a list and will not
have one until the Drug Listing Act is enacted, which will provide us
with that information. I have been told there is a substantial number
of prescription drugs marketed without an NDA, that still remain on
the market.
Mr. GORDON. Why are drugs considered new drugs indefinitely?
Mr. Hirrr. Some are not, and some have been subjected to abbrevi-
ated New Drug Applications. If I recall correctly, there have been ap-
proximately 17~500 New Drug Applications since 1938. I am informed
that roughly 15,000 of those are now obsolete or inactive. Either the
drug has become an old drug or has gone off the market completely.
Mr. GoRDoN. Now, what is the justification for keeping data on safety
and efficacy from the public, as provided by those sections in the Fed-
ercd Reai$ter which I read.
Mr. Hm~r. This was probably, Mr. Gordon, the most difficult area
which we had had to face in formulating this proposal. I would first
emphasize that it is a~ proposal. If we receive comment which would
help in changing this in any respect, we will do so.
With regard specifically to this issue, it was our conclusion that the
safety and efficacy developed for a New Drug Application, which may
cost literally millions of dollars, $6 million to $15 million in terms of
economic investment by the company, it represents the type of con-
fidential and trade secret information that Congress requires us to keep
confidential because it does provide a very important competitive ad-
vantage over another corporation that does not have the data.
PAGENO="0029"
OOMPETITJyE PROBLEMS IN THE DRUG INDUSTRY 8531
Under the definitions of the American Law Institute in the Restate-
ment of Torts and the case law, as we analyzed it, this type of data,
and it is a very narrow category, would represent a trade secret because
no competitor in the market can have the same drug approved without
duplicating the data. This is unlike the situation where a drug becomes
an old drug or becomes subject to an abbreviated New Drug Applica-
tion. It is unlike an antibiotic drug which, instead of private licenses,
have public regulations in the form of a monograph so once the drug is
approved anyone can make the drug.
Mr. GORDON. Well, are you going to require proof that they spent $6
million and that it actually did cost the companies this $6 million?
Are you going to require proof of that cost?
Mr. Hnrr. No, we would not. It would make no difference in our cost
whether it cost $6 million or $1 million or $16 million or $200,000.
Mr. GORDON. Doesn't the patent give sufficient protection for 17
years? Then once it expires, why shouldn't that information be avail-
able to the public in order to bring about competition?
Mr. Hurr. Mr. Gordon, we are, of course, limited in what we can
do by the laws passed by the Congress of the United States. Congress
has said in several statutes that trade secrets and commercial infor-
mation may not be released by the Food and Drug Administration.
Since 1955, every Commissioner has raised this issue in hearings be-
fore. Congress, requesting that the Congress investigate the confiden-
tiality of new drug information on safety and effectiveness and to
provide us with guidance that permits us a different interpretation
that I have already set out to you.
Thus far, the Congress has not changed the law or given any new
guidance than is what we have followed since 1938. Therefore, it has
been our conclusion to retain that policy in the way in which it was
set out, somewhat more limited-and I believe it has been somewhat
more limited. It has now been made more precise than it has been
in the past.
For example, in the past, we had across-the-board rules that every-
thing in a New Drug Application is automatically confidential. We
have now substantially withdrawn from that position, to* state that,
for example, the raw data that lies behind public studies will be made
available. The protocols will be made available unless there is a justi-
fication for failing to do so. We have said an assay method may be
available under certain circumstances.
Mr. GORDON. If, as you say, the raw data will be available and the
protocols will be available, what actually will not be available?
Mr. Hurr. Perhaps I should have made it clear that the protocols
will be made available without the result. The raw data will be avail-
able or the study itself, once the study has been published.
Mr. GORDON. Are most of the studies, the results of the studies, in
the NDA concerning safety and efficacy published?
Mr. HnTT. A great many are, and some are not.
Dr. SmIM0N5. What the proposal also spells out is that the sum-
mary and basis for the judgment of safety and effectiveness will be
pre~ared by the drug sponsor and modified appropriately by the
FDA, and ultimately become a public document, so any interested
person, lay or professional, will be able to know why the judgment
was made~
PAGENO="0030"
8532 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
Mr. Hirrr. In short, Mr. Gordon, what we are trying to do is to
make as much information available to the public as we conceivably
can, consistent with the laws of Congress, which they have enacted.
We believe that the Congress has made it clear that the information
is not to be available. rfhe alternatives we have taken is to inform
the public and the medical profession and other interested scientists
the bases for our decisions.
Senator NELSON. I would like to clear up a few points before closing
today. We would like to have in the record whatever basis there may be
for the assertions in the Medical Tribune, and so-called Dripps Com-
mittee assertions about FDA. Perhaps we can conduct some hearings at
a later date on the specific claims made by the Medical Tribune articles,
editorials, and the Dripps Committee, as well as their claims and the
responses to them by the FDA. That is, if you would be willing to come
at a later date.
Dr. EDWARDS. We certainly will be, Mr. Chairman.
(The documents follow:)
UNIVERSITY OF PENNSYLVANIA,
Philadelphia, Pa., February 29, 1972.
Hon. PAUL G. ROGERS,
House of Representatives,
Washington, D.C.
DEAR Mn. RoGERs: We, the undersigned are or have been engaged in medical
practice or medical research and are therefore deeply interested in the advance-
ment of human therapeutics. For this reason, we are increasingly concerned with
the present drug regulatory system and its effect on the practice of medicine and
the development of new drug therapy.
We have concluded that the procedures by which new drugs are evaluated and
approved for use in this country is causing us to fall behind in this important area
of medical science.
We recognize the difficult task which confronts FDA. Many of us have worked
with FDA and have deep appreciation of the efforts being made by its leaders
and staff. At the same time, we have watched the research efforts of the pharma-
ceutical industry over the past few years grow in competence and depth. We are
struck by the paradox of increasing excellence on both sides and decreasing
productivity.
The system of drug regulation, which has evolved as a result of the 1962 Drug
Act and Regulations, exposes the agency to a variety of pressures which make
it difficult for rational decision-making to take place. In a recent speech before
the National Institute of Medicine, FDA Commissioner Edwards put his finger on
the problem: "It's a particularly difficult environment for the Food and Drug
Administration because, in a sense, we're in the middle. We are, on the one hand,
criticized for being `soft' on industry and, on the other called repressive, an enemy
of free enterprise: on every major decision we are accused by some of acting too
fast without sufficient evidence, and by others of acting too slowly and too
timidly to prevent unnecessary harm."
The FDA has long been the subject of study and investigation. In fact, there
have been at least three Executive Branch studies of FDA in the past five years.
The last, ordered by Commissioner Edwards, was a review and evaluation of the
total scientific effort of FDA by an outside committee headed by Dr. Ritts. These
reviews and reports, while critical of many aspects of FDA, have been useful and
heliyful, we are sure. But they have focused primarily on the internal structure
and workings of FDA. As important as it is to improve the efficiency and scien-
tific procedures and capabilities of the agency itself, there still remains the cru-
cial question as to the effect the agency's administration of the 1q62 Drug Act
has had in actual practice on drug research, innovation, and therapy.
New pressures are now forming to add even more regulatory responsibilities to
an already overburdened agency; Moreover, the Administration has proposed
legislation which would consolidate all consumer protection activities of HEW
in a new Consumer Safety Administration of which FDA would be a member;
Senator Magnuson and others are supporting draft legislation which would abol-
ish FDA and set up an entirely new and independent Consumer Safety Agency;
PAGENO="0031"
(COMPETITIVE PROBLEMS LN THE DRUG INDUSTRY 8533
axid Senator Ribicoff stated late last year that he plans to hold hearings on FDA
operations early in this year.
We believe a change in the drug regulatory system is badly needed. The system
too often stifles creativity and escalates costs of research; perpetuates a con-
tInuing decline in the number of new drugs entering the market in this country;
and may be depriving the practicing physician of agents beneficial to patient care.
The reasons for all this are not clear, are undoubtedly complex, and requires thor-
ough investigation and study. The House Interstate and Foreign Commerce Com-
mittee and its Subcommittee on Public Health and Environment, of which you are
Chairman, have appropriate jurisdiction, as we understand it, over the opera-
tions of FDA. Your Subcommittee, it appears to us, would be the proper body
to direct a full-scale review of the effect of the 1962 Drug Act and Regulations on
the practice of medicine and the conduct of academic and industrial drug re-
search.
We believe that this review should be undertaken as promptly as possible, since
the welfare of patients may be at stake. If it would be helpful to you to confer
with us on this subject, we are most willing to do so.
Respectfully,
Robert D. Dripps, M.D. (Chairman), Vice President for medical Af-
fairs, and Chairman, Department of Anesthesiology, University of
trennsylvania; Robert F. Bradley, M.D., Medical Director, Joslin
Clinic, Boston, Mass.; Eguene Braunwald, M.D., Professor and
Chairman, Department of Medicine, University of California
School of Medicine, La Jolla; Julius H. Comroe, Jr., M.D., Profes-
sor of Physiology and Director, Cardiovascular Research Insti-
tute, San Francisco Medical Center; Michael E. DeBakey, M.D.,
President, Baylor College of Medicine, Houston, Texas (Albert
Lasker Award, 1963); James E. Eckenhoff, M.D., Dean, North-
western University Medical School, Chicago, Illinois; Edward D.
Freis, M.D., Professor of Medicine, Georgetown University School
of Medicine, Chief, Cardiovascular Research Laboratories, George-
town University Hospital, and Senior Medical Investigator, Vet-
erans' Administration Hospital, Washington (Albert Lasker
Award, 1971): Alfred Gilman, Ph. D., Chairman, Department of
Pharmacology, Albert Einstein College of Medicine, Bronx, N.Y.;
Nathan S. Kline, M.D., Director of Research, Rockland State Hos-
pital, Orangeburg, N.Y. (Albert Lasker Award 1957, 1964; Louis
Lasagna, M.D., Chairman, Department of Pharmacology and Toxi-
cology, University of Rochester, School of Medicine and Dentistry,
Rochester, N.Y.; Sherman M. Mellinkoff, M.D., Dean, University
of California, School of Medicine, Los Angeles, Calif.; Walter
Modell, M.D., Chairman, Department of Pharmacology, Cornell
University Medical College, New York, and Editor of Clinical
Pharmacology & Therapeutics; John A. Oates, M.D., Professor of
Medicine and Pharmacology, Vanderbilt University, Nashville,
Penn.; Irvine H. Page, M.D., Senior Consultant, Research Divi-
sion, Cleveland Clinic, Editor-in-Chief of Modern Medicine, Past
President of the American Heart Association (Albert Lasker
Award, 1958); E. M. Papper, M.D., Vice President for Medical
Affairs, and Dean, University of Miami School of Medicine, Flor-
ida; Dickinson W. Richards, M.D., Lambert Professor of Medicine
Emeritus, College of Physicians and Surgeons, Columbia Univer-
sity, New York (Nobel Laureate, 1956) : Burtrum C. Schiele,
M.D., Professor of Psychiatry, and Principal Investigator, Clini-
cal Psychopharmacology, University of Minnesota, Minneapolis,
Minn.; George W. Thorn, M.D., Physician-in-Chief, Peter Bent
Brigharil Hospital, Boston, Mass.; and Hersey Professor of the
Theory and Practice of Physics, Harvard Medical School; Robert
W. Wilkins, M.D., Chairman and Director, Division of Medicine,
Boston University Medical Center (Albert Lasker Award, 1958)
William R. Wilson, M.D., Chairman, Department of Clinical Phar-
macology, University of Iowa College of Medicine, Iowa City,
Iowa: Robert I. Wise, M.D., Ph. D., Magee Professor of Medicine,
and Chairman of the Department, Jefferson Medical College, Phil-
adelphia, Pa.; George D. Zuidema, M.D., Professor and Director,
Department of Surgery, the Johns Hopkins University, School of
Medicine, Baltimore, Md.
PAGENO="0032"
8534 COMPETITIVE PROBLEMS TN THE DRUG INDUSTRY
DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE,
FOOD AND DRUG ADMINISTRATION,
Rackville, Md., May 19, 1972.
DEAB -: Congressman Paul G. Rogers has made available to me
the letter of February 29, 1972, signed by you and 21 colleagues calling for a
Congressional review of the Nation's drug regulatory system and therole of the
Food and Drug Administration.
We are not strangers to the Congress and we do not shrink from Congressional
review. The policies and activities of this Administration are based on a deep
and sensitive understanding of our obligations under the laws placed in our
charge and we are properly accountable for our stewardship.
We do question, however, the bases for your recommended review. Some of the
assertions and implications in your letter (repeated and expanded in a follow-up
letter dated March 22, 1972) are particularly disturbing to me-
that "the procedures by which new drugs are evaluated and approved for
use in this country is causing us to fall behind in this important area of
medical science";
that our drug regulatory system deprives physicians of agents beneficial
to patient care and hampers the practice of medicine; and
that the 1962 efficacy requirements have stifled creativity and have per-
petuated a continuing decline in the number of new drugs entering the market.
I am surprised that a committee of distinguished scientists and clinicans could
make such assertions and publicize them through "exclusive interviews" in the
medical press without first communicating with us about their basis in fact.
The publisher of "Medicine Tribune", the circular in which most of the inter-
views have appeared, has commented: "We do not need a new `generation' of
hysterical drug headlines. . . . We need an open and honest exchange of ex-
periences and ideas." I endorse this view and I would like to invite you and your
colleagues to meet with me to discuss your recommendations to the House Com-
mittee on Public Health and Environment, specifically those included in your let-
ters of February 29 and March 22, 1972, addressed to Congressman Rogers. I have
scheduled this meeting in my office, Room 6821, 200 C Street, S.W., Washington,
D.C. at 2:00 p.m., Tuesday, June 6, 1972. I do hope you will attend.
Sincerely yours,
CHARLES C. EDWARDS, M.D.,
Commissioner of Food and Drugs.
Senator NELSON. And then for clarification, Doctor, do I understand
the "Dear Doctor" letter sent out by Lilly on Darvon is a violation of
the law? Is it or is it not a violation of the regulations?
Mr. Hu'rr. It certainly appears to me that it is, Senator.
Senator NELSON. It is not statutory; it is the regulations of the
FDA?
Mr. Hiirr. In my opinion, it does violate the regulations I referred
to earlier.
Senator NELSON. And what kind of action do you take in such a
violation of such regulations?
Mr. Hurr. I believe the Commissioner mentioned three specific
things we intend to do. This matter just recently came to our attention,
I believe only 4 days ago, and this is as far as we have proceeded in
our thinking at this time.
Senator NELSON. Are there any penalties for violating regulations?
Mr. Hurr. Yes, there are. The agency may take whatever legal action
it believes appropriate under the circumstances. All of the penalties
under the act could apply.
Senator NELSON. What kind of penalties are those?
Mr. Hurr. Basically, there are three: the product could be seized,
which is probably inapplicable in this type of situation; an injunction
could be sought in court; or criminal penalties could be requested. Of
course, there are informal sanctions that could also be applied, of the
PAGENO="0033"
OOMP~TITIVE PROBLEMS IN THE DRUG INDUSTRY 8535
type we have already mentioned, namely, a corrective letter or a cor-
rective advertising program, or whatever other informal means of
correcting might be available.
Senator NELSON. Has the Food and Dru~ Administration made any
determination or decision as to what action it will take?
Mr. Hurr. No, sir.
Sentor NELSON. If there were, among other things, a requirement
for another "Dear Doctor" letter-since this one was really written
as a response to a study-does the FDA assert the right to approve the
letter or disapprove it before it is sent?
Mr. Hurr. Yes, we do.
Dr. EDWARDS. Definitely.
Mr. Hurr. We would require that.
Senator NELSON. Then, I take it you would require them to state in
full what the study said, rather than excerpts from it?
Mr. Htrrr. Most certainly.
Senator NELSON. But the decision as to what action you will take
hasn't been made as of yet?
Mr. Hurr. Except a corrective letter will be required.
Senator NELSON. At the minimum.
Mr. HUrT. At the minimum.
(The letter follows:)
ELI LILLY & Co.,
IndAanapolis, md., May 19, 1972.
DEAR DOCTOR: The Food and Drug Administration has requested that we
send you information about Darvon ® (propoxyphene hydrochioride, Lilly) rele-
vant to certain statements in our letter to you of April 17, 1972, which the
FDA regards as misleading.
Our letter referred to a recent article in the New England Journal of Medicine
in which the authors concluded that single doses of aspirin (650 mg.) were
superior in analgesic effectiveness to other drugs tested, including single doses
of Darvon (65 mg.). The study included only single-entity products.
The FDA regards our April 17 letter as lacking in fair balance and states
that our letter suggested that Darvon is more effective than aspirin and at least
equivalent to codeine while producing fewer side-effects. The FDA regards none
of these suggestions as valid.
Additionally, the Government states that our letter gave undue emphasis to
the effectiveness of Darvon in combination with other analgesic drugs and failed
to give adequate emphasis to the limitation of effectiveness of Darvon itself.
Therefore, the FDA requests we inform you as follows:
1. There is no substantial evidence to demonstrate that 65 mg. of Darvon
is more effective than 650 mg. of aspirin (two 5-grain tablets), and the pre-
ponderance of evidence indicates that it may be somewhat less effectiye.
2. The preponderance of evidence indicates that Darvon is somewhat less
potent than codeine. The best available evidence is that Darvon is approxi-
mately two-thirds as potent as codeine. Furthermore, there is no substantial
evidence that, when administered at equianalgesic doses, Darvon produces
a lower incidence of side-effects than codeine.
Sincerely yours,
Er~t LILLY & Co.
Senator NELSON. The hearings will resume tomorrow at 10 o'clock,
and we will hear from Mr. Elmer B. Staats, the Comptroller General.
(Whereupon, at 11: 52, the subcommittee adjourned, to reconvene
at 10 a.m., on Wednesday, May 10, 1972.)
80-450 0-72--pt. 22-3
PAGENO="0034"
PAGENO="0035"
COMPETITIVE PROBLEMS IN THE DRUt~ INDUSTRY
(Present Status of Competition in the Pharmaceutical
Industry)
WEDNESDAY, MAY 10, 1972
U.S. SENATE,
SUBCOMMITTEE ON MONOPOLY OF THE
SELECT COMMITTEE ON SMALL BUSINESS,
Washington, D.C.
The subcommittee met, pursuant to recess, at 10:00 a.m., in room
318, Old Senate Office Building, Senator Gaylord Nelson (chairman of
the subcommittee) presiding.
Present: Senator Nelson.
Also present: Benjamin Gordon, staff economist; and Elaine C. Dye,
clerical assistant.
Senator NELSON. Our witness this morning is Mr. Elmer Staats,
Comptroller General of the tTnited States.
Mr. Staats, the committee is pleased to have you here this morning.
Your statement will be printed in full in the record.1 You may present
it however you desire.
Go ahead, Mr. Staats.
STATEMENT OP HON. ELMER B. ~STAATS, COMPTROLLER GENERAL
OP THE UNITED STATES; ACCOMPANIED BY GREGORY ~1. AHART,
DIRECTOR, MANPOWER AND WELFARE DIVISION; DEAN K.
CROWTHER, DEPUTY DIRECTOR; CHARLES COLLINS, SSISTANT
DIRECTOR; AND PAUL SHNITZER, ASSISTANT GENERAL COUNSEL
Mr. STAATS. I will introduce my colleagues here, Mr. Chairman. I
believe you are acquainted with most if not all of them.
To my immediate left is Mr. Gregory Ahart, Director of our Man-
power and Welfare Division, a new division which we have just re-
cently established, which is, going to be concerned with all aspects of
health programs throughout the Government.
Dean Crowther, to my right, is Deputy Director of that Division.
Mr. Collins, to his right, is Assistant Director of that Division.
Mr. Paul Shnitzer, to my far left here, is Assistant Genera~E Counsel
of the GAO and has followed this area for quite some time.
Mr. Chairman, I have a fairly long statement, but we are dealmg
here in our statement with some seven different topics, so that I do not
1 See Appendix II, p. 8801.
(8537)
PAGENO="0036"
8538 COMPETITIVE PROBLEMS ~N THE DRUG INDUSTRY
know of any better way to proceed than to read the statement. I hope,
particularly in view of the length of it, that you will feel free to in-
terrupt me at any point to ask questions.
Senator NEr~sox. Fine. Go ahead.
Mr. STAATS. We are going to comment today, as I indicated, on
seven different subjects.
1. First, actions taken to assure that only effective and low-cost
equivalent drugs, when available, are procured by the Government
or paid for under Government sponsored medical programs.
2. Information sources used by physicians. in selecting drugs.
3. Use of Goverment specifications in the procurement of drugs.
4. Quality assurance and inspection procedures of Federal agencies.
5. Coordination and cooperation between and among Federal agen-
cies which buy drugs.
6. Procurement of drugs of foreign origin.
7. Policies and practices pertaining to furnishing drugs under the
Medicare and Medicaid programs.
Estimates indicate that direct Federal procurements of prescrip-
tion drugs amounted to about $240 million for fiscal year 1971. Most
of these procurements were made by the Defense Supply Agency,
through the Defense Personnel Support Center, DPSC, and the
Veterans' Administration, VA.
DPSC manages about 1,100 drug items on a centralized basis and
spent about $95.5 million for drugs in fiscal year 1971. The VA
manages about 450 drug items on a centralized basis and procured for
central stock drugs valued at $27.4 million in fiscal year 1971. The
VA also administers Federal Supply Schedule contracts under which
Federal agencies can satisfy their drug requirements by direct pur-
chases from drug manufacturers. Purchases under these contracts by
all Government agencies for fiscal year 1971 amounted to about $64
million. The Public Health Service centrally manages about 600
drug items and spent an estimated $14.2 million for drugs in fiscal
year 1971. About 50 percent of this amount was spent under con-
tractual arrangements made by VA.
A substantial portion of Federal expenditures for prescription drugs
are indirect, consisting principally of the Federal share of the cost
of drugs provided to beneficiaries under the Medicare and Medicaid
programs. The Department of. Health, Education, and Welfare
(HEW) estimates that medicaid expenditures for prescribed drugs
for fiscal year 1971 amounted to about $485 million, of which about
$246 million represented the Federal share and the remaining $239
million the State and local share. Expenditures for prescription drugs
under part A, hospital services, of medicare for fiscal year 1971 were
estimated at $541 million. No information is available on expenditures
under part B, physician services, of Medicare.
Although we have not completed our work with respect to examining
into the effectiveness of administration and management of Federal
programs for procurement a.nd distribution of drugs, it is already clear
that standardized procedures and improved cooperation and coordina-
tion among the Federal procurement agencies currently involved in
(1) procuring and distributing drugs, (2) financing the supply of
drugs to beneficiaries under the Government's social programs, and
PAGENO="0037"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8539
(3) evaluating the effectiveness of drugs, would be beneficial in reduc-
ing costs and providing service.
Mr. GORDON.. Mr. Staats, to what extent is there now coordination
and cooperation in purchasing by agencies of the Federal Govern-
ment?
Mr. STAATS. I believe that is developed a little bit more as we go
through here, but if you like, we can cover that point now. I would
like to suggest that either Mr. Ahart or Mr. Crowther respond to your
question.
Mr. CROwTHER. At this point, there are considerable differences in
the amounts paid for drugs and they vary between agencies. Our re-
view has shown at this point that while in some cases, the Veterans'
Administration pays less for a drug than the military, there are other
cases where the military pays less than Veterans' Administration.
Senator NELSON. You are talking about direct purchases by the Gov-
ernment, not indirect?
Mr. CROWTHER. Yes sir, direct purchases. That is the area of great
concern, where there is direct negotiation for contracts for the same
firms for similar products. We were concerned that one agency is
procuring at a higher price than another agency. So we see the need
for cooperation and better coordination in situations of that nature.
Senator NELSON. When you previously appeared we raised the issue
about negotiated contracts and bids and the specifications designed by
the various purchasers. Are you talking about cases in which the Vet-
erans' Administration or Defense Supply Agency or one of the others
negotiates a bid? Is that where you find significant differences, or do
you find it both where it is negotiated and where there is a competitive
bid?
Mr. CROWTHER. In both cases there are differences. We have examples
of negotiated contracts where there are differences in price for similar
products in a quite close timeframe, and we also have competitive
bids-we cannot tie down the same timeframes there-where there
were differences also.
Senator NELSON. Significant differences in competitive contracts?.
Mr. CROWTHER. No, not nearly as significant as under the negoti-
ated contracts.
Senator NELSON. Go ahead.
Mr. STAATS. As of January 19, 1912, the Food and Drug Adminis-
tration (FDA) had published 2,339 reports as to the effectiveness of
drug preparations for the indications claimed in their labeling, and
had reported them in the Federal Register. At that time FDA rec-
ognized that several problems pertaining to drug efficacy remained.
Briefly they concerned:
Conflicting reports relating to several drugs;
Speeding up the progress on followup actions for drugs requiring
evidence to be rated "effective";
Completing compliance activities currently in process pertaining
to "ineffective" drugs;
Completing the review, which FDA expects to publish by June 30,
of the remaining drug study reports; and
Pursuing plans for evaluating the effectiveness of over-the-counter
drugs.
PAGENO="0038"
8540 COMPETITIVE PROBLEMS ~N THE DRUG INDUSTRY
As of November 18, 1971, the Defense Medical Material Review
Board had initiated action to stop further procurement and to elim-
inate from the supply system all items that FDA had then pronounced
"ineffective" or "possibly effective". Also, the surgeons general of the
military departments have emphasized through instructions to med-
ical organizations the DOD policy on such drugs, which became effec-
tive January 21, 1971. This policy provides that for "ineffective"
items subsequently withdrawn from the market, remaining stocks are
to be destroyed or other appropriate action taken to remove them from
the inventory. For items categorized "ineffective" but awaiting final
determination by FDA, further use of remaining stocks is suspended
until the final status is announced. Pharmacy and Therapeutic Agents
Committees are required to question all prescriptions for "possibly
effective" items, but local procurement of such items may be made if no
alternate means of therapy is available.
No "ineffective" drugs have been purchased by DPSC for central
stocks since the pertinent pronouncements in the Federal Register, but
we are aware of a Federal Supply Schedule purchase of one item, Dar-
von (32 milligram), for initial treatment of seriously underweight
geriatric patients. Also, 24 procurements valued at $1.5 million have
been made of "possibly effective" drug items by DPSC for central stock
since the FDA pronouncements. Twenty of these buys, valued at over
$1.4 million, were made before the DOD policy prohibiting further
procurements of "possibly effective" drugs was issued in January 1971.
Following this subcommittee's hearings in 1970, DOD established a
committee to conduct an item by item review of drugs, chemicals, and
biologicals in the Federal Supply Catalog to identify high cost, pos-
sibly effective, or duplicate items, and to initiate action to minimize
the use of high cost drugs where lower price equivalents are available.
Items so identified were to be reviewed by the military services to de-
termine whether they should be deleted from the supply system. As of
January 1972, seven items had been deleted and 57 items had been re-
classified to a status prohibiting further procurements. Included in the
57 items were seven for which lower cost equivalent drugs were avail-
able in the supply system. Based on reported unit costs and demand,
annual savings in excess of $1.1 million will be realized if the deleted
items are not obtained via local purchase. Specific actions to stop local
purchase of such items have not been taken because it would tend to
dictate the drugs physicians can prescribe.
A VA circular of December 4, 1970, transmitted to hospitals and
clinics a listing of "ineffective" drugs and stated that the Executive
Committee on Therapeutic Agents had recommended that VA hospital
therapeutics committees remove these items from their formularies. If
the hospitals and clinics wished to retain any of the drugs they were re-
quired to obtain approval from the executive committee. This has been
done for certain drugs being used for research.
The hospitals were requested to advise fee basis physicians of VA's
policy on these drugs and to attempt to get them to prescribe alterna-
tives. Information on FDA pronouncements made after December 4,
1970, has been sent by the VA headquarters to its hospitals and clinics.
Mr. GORDON. Mr. Staats, how successful has been the attempt to get
physicians to prescribe alternatives? Has there been any analysis of
the bills for drugs?
PAGENO="0039"
OOMP1~TITIVE PROBLEMS IN THE DRUG INDUSTRY 8541
Mr. STAATS. Can you answer that, Mr. Crowther?
Mr. CROWTHER. We do not have any information on a specific analy-
sis of that. We know that the VA requires that in the event a fee-basis
physician prescribes a drug that is to be filled, particularly in a VA
pharmacy, and it is in the ineffective or possibly effective category, then
they are required to question that specific prescription. We know that
the instructions have been issued by VA and there are means to at-
tempt to control requests for such drugs, but we do not know of any
summary report made to determine how well the instructions have been
carried out.
Senator NELSON. We raised the question of the procurement, direct
Government procurement of Darvon with the Defense Supply Agency,
the Veterans' Administration-I think with all of them. Was that one
of the seven items for which lower cost equivalent drugs are available
in the supply system?
Mr. STAATS. I believe that is correct. We included references to it
because it is one of the FDA's listed drugs as "ineffective," but it is still
on the Federal Supply Schedule.
Senator NELSON. No, Darvon is not listed as "ineffective."
Mr. AHART. Darvon is not one of the seven items which were
referenced in the Comptroller General's statement which were
deleted-
Senator NELSON. Was not or was deleted?
Mr. AHART. It was not one of the items deleted.
Mr. GoiwoN. Incidentally, I notice, Mr. Staats, that the 32-milligram
dose of Darvon was being bought for the "initial treatment of seriously
underweight geriatric patients." None of the medical sources I looked
into gave such an indication. How could they be buying it for this
particular purpose? And the National Academy of Sciences said that
the 32-milligram dosage is no more effective than a placebo.
Senator NELSON. That is, as an analgesic!
Mr. GOiuoN. But that is the only indication-as an analgesic.
Senator NELSON. What do you want to say to that, Mr. Staats?
Mr. STAATS. I do not think I am qualified to answer your question.
Senator NELSON. I think we should raise that question when the
appropriate Federal agency comes up who handles the procurement.
I do not expect you to be informed on that.
Mr. STAATS. The VA policy for "possibly effective" drugs is that
consideration should be given to using alternative products having a
higher FDA effectiveness classification. The VA purchased seven "in-
effective" drugs for central stock after FDA pronouncements appeared
in the Federal Regi$ter. Procurement of six of the seven items was
discontinued after the VA policy was issued on December 4, 1970. The
other item was purchased for over 2 years after the FDA pronounce-
ment because it was inadvertently excluded from the list of "ineffec-
tive" drugs issued on December 4, 1970. I believe this is what you
may have had reference to; that is Darvon. The VA Marketing Center
has now been instructed to suspend issuance of all "ineffective" drugs
and to negotiate with manufacturers for return of existing stocks for
credit.
The VA continues to purchase "possibly effective" drugs, apparently
beca~use of its philosophy that it should not take actions that would
unduly restrict the prescribing practices of physicians.
PAGENO="0040"
8542 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
On January 13, 1971, VA hospitals and clinics were advised to en-
sure that every effort be made to treat VA patients with the most
effective therapeutic agents at the most favorable prices. Also, VA
hospital therapeutic committees were requested to continually review
prescribing practices-with due regard to the effectiveness and fluctu-
ating prices of drugs-as patents expire, or competitive market con-
ditions make price advantages available. Also, the hospital therapeutic
committees were advised that the purchase of high-cost drugs c9uld
not be justified when equally effective, but less expensive, items are
available.
HEW has also acted to implement the FDA pronouncements re-
lated to the effectiveness of drugs. The Surgeon General on Decem-
ber 11, 1970, established the policy that the Department would not
spend Federal funds for (1) "ineffective" drugs, except under ap-
proved clinical research projects, or (2) for "possibly effective" drugs,
except under approved clinical research projects or when alternate
means of therapy are not available. On January 19, 1971, the Depart-
ment instructed its agencies that provide direct patient care to stop
the procurement and use of such drugs and to advise contract physi-
cians of the Department's policy.
The December 1970 policy announcement stated that the policy also
applies to Government-financed programs and the Federal Register
of October 16, 1971, contains the proposed regulation for medicare. The
Department planned to furnish medicare carriers and intermediaries
with listings of "ineffective" and "possibly effective" drugs to be ex-
cluded from reimbursement under the medicare program. However we
understand that the Department has recently undertaken a reevalua-
tion of whether to extend the December 1970 policy to the medicare
program.
In January 1971, the Medical Services Administration of the Social
Rehabilitation Service, HEW, notified all Associate Regional Com-
missioners for Medical Services of the departmental policy relating
to purchases of "ineffective" and "possibly effective" drugs. The Medi-
cal Services Administration stated that program regulations were being
amended to implement this policy for medicaid. As of May 1, 1972,
regulations have not been issued to implement the revised Federal
drug policy for medicaid. We have just recently, Mr. Chairman, issued
a further letter to HEW asking them why they have not done so and
to advise us as soon as practicable.
Senator NELSON. On December 11, 1970, Dr. Jesse Steinfeld, Sur-
geon General and Deputy Assistant Secretary for Health and Scien-
tific Affairs, promulgated the departmental policy that Federal funds
will not be expended for purchasing "ineffective" or "possibly effec-
tive" drug products for use in its direct care programs, its contract care
programs under the direct care programs, its Federal grant programs
and the medicare and medicaid programs for inpatients and out-
patients with two minor exceptions. Now, that is one and a half years
ago. Are you saying that the regulations have not even been issued yet
to implement this policy with respect to medicaid?
Mr. STAATS. That is my information, Mr. Chairman. Perhaps Mr.
Ahait or Mr. Crowther would want to elaborate. That is my infor-
mation.
PAGENO="0041"
OOMP~1TITIVE PROBI~~MS IN THE DRUG INDUSTRY 8543
Mr. AIIART. That is correct, Mr. Chairman. The regulations have
not yet been issued to implement the policy with respect to the medi-
caid program. As the Comptroller General mentioned, we issued a
letter just yesterday to the Social Rehabilitation Service, which has
the responsibility for the administration of the program, bringing
this to their attention and bringing to their attention the information
winch we have obtained on the extent of use in certain States of in-
effective or possibly effective drugs under the medicaid program and
suggesting that it take action to implement this policy as quickly as it
can and asking it to advise us as to what it is going to do.
Senator NELSON. Well, do you have any figures in your statement
that indicate the amount of money spent in the past year and a half
since Dr. Steinfeld's announcement of departmental policy, how much
Federal funds have been spent on purchasing "ineffective" drugs under
the program of medicare and medicaid and the amouilts spent on
"possibly effective" drugs?
Mr. STAATS. Mr. Chairman, if you will turn to page 22 of our pre-
pared statement, there is some information that I think bears on the
question that you have raised. This refers to the program in one
State, Mississippi.
Senator NELSON. This is just for the State of Mississippi?
Mr. STAATS. I am sorry, there follows also at the bottom of that
page Illinois and New Jersey; then Ohio on the following page.
I believe we have it just for those four States.
Senator NELSON. Are these just on "ineffective"?
Mr. STAATS. It covers both.
Senator NELSON. On page 23, it appears that-
Mr. STAATS. That covers only ineffective.
Senator NELSON. So that in the State of Ohio, just one State, the
total amount spent was $138,032. In what period is that?
Mr. STAATS. Four months.
Senator NELSON. So in just a 4-month period $138,032 was spent on
ineffective drugs.
Do you have the "possibly effective" information?
Mr. CROWTHER. No, we do not.
Senator NELSON. What percent of that $138,032 is Federal money?
Mr. CROWTHER. Approximately 50 percent.
Senator NELSON. And the other under these programs comes
from-
Mr. CROWTHER. State and local money.
Senator NELSON. So in a 4-month period alone, in one State, the
Federal Government has wasted $70,000 on purchasing drugs that are
classified as ineffective, and the State of Ohio and the local municipali-
ties have spent $70,000 on drugs that are rated as ineffective?
Mr. STAATS. I believe that is correct.
Senator NELSON. Who did this study?
Mr. CROWTHER. GAO.
Senator NELSON. So you have not done it for every State?
Mr. CROWTHER. No, sir; the information is not available in many
States. We were fortunate enough to be able to arrange with the se-
lected States' computer operations to have them run a summary of
particular selected drugs that we knew were "ineffective" and were able
PAGENO="0042"
8544 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
to devise a program wherein these items could be listed. We did that in
Ohio and two other States.
Mississippi has made its own analysis, and has made a listing, which
we had access to also.
Now, we ktve not made such an analysis in any other States.
Senator NELSON. So you have done it only in Mississippi and Ohio?
Is that what you said?
Mr. CROWTUER. No, in Mississippi, Ohio, illinois, and New Jersey.
Senator NELSON. These figures for fllinois and the others on the
bottom of that page, are for just "ineffective" drugs?
Mr. CROWTHER. Yes, sir.
Senator NELSON. And the period is July and October?
Mr. CRow~rHi~n. No, sir; that is a 2-month period.
Senator NELSON. Just for those specific 2 months?
Mr. OROWTHER. Yes, sir.
Senator NELSON. And in illinois, they spent about $90,000 on those
programs; about $45,000 was Federal money, and the rest State or
municipal money? Is that right?
Mr. CROwTUER. Yes, sir.
Senator NELSON. In just a 2-month period?
Mr. CRowTnER. That is correct.
Mr. STAATS. Mr. Chairman, we were not trying to do a national
survey here. What we were really trying to do is test the significance in
selected States to see whether there was a continued use of "ineffective"
drugs. It was after this review that we called this to the attention of the
HEW to see why they have not taken some action.
Senator NELSON. Well, nobody knows whether Ohio is typical, but
that is a 4-month period, almost $140,000. If that is typical for the
year, you are talking about over $400,000 being spent in Ohio alone on
drugs classified as ineffective.They might just as well throw the money
out; they would be better off if they just threw it out on the street. At
least they would not be damaging the patient and they would get rid of
the money faster that way, too.
You wrote a letter to the Secretary of HEW inquiring about the
implementation of this program?
Mr. STAATS. Our letter has gone to Mr. Twiname, who is Adminis-
trator of the Social Rehabilitation Service of HEW.
We will be happy to place the letter in the record if it is useful to
you.
Senator NELSON. I think we ought to have it.
(The information referred to follows:)
PAGENO="0043"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8545
UNITED STATES GENERAL ~CCOUNT1NG OFFICE
WASHINGTON, D.C. 20548
~.ANPCW:.~ AND WELFARE May 9, 1972
)LV~ION
Dear Mr. Twiname:
At the request of the Chairman, Subcommittee on Long-Term Care,
Senate Special Committee on Aging, we obtained information on pre-
scribed drugs provided to recipients of old-age assistance in nurs-
ing homes under the Medicaid program in Illinois, New Jersey, and
Ohio. In response, we issued a report to the Chairman on informa-
tion obtained on the Medicaid drug program in Illinois (B-164O31(3),
dated September 10, 1971) and a consolidated report on all three
States entitled "Drugs provided to elderly persons in nursing homes
under the Medicaid program" (B-l6403l(3), dated January 5, 1972).
These reports have been made public by the Chairman and copies have
been furnished to officials of the Social and Rehabilitation Service
(SRS) and to officials of the Department of Health, Education, and
Welfare (HEW).
This letter report presents our views concerning the need for
SRS to issue instructions to States which would implement the Depart-
ment's policy relating to the payment for purchases of ineffective
and possibly effective drugs under the Medicaid program.
I NTRODUCTI ON
On December 11, 1970, the Surgeon General directed HEW agencies
to establish the necessary procedures within 45 days to implement
departmental policy prohibiting the use of Federal funds for the
purchase of drug products classified as ineffective and possibly
effective by the Food and Drug Administration (FDA). This policy
was applicable to HEW's direct care programs, contract-care pro-
grams under its direct care programs, grant programs, and the Medi-
caid and Medicare programs.
In January 1971, the Medical Services Administration (MSA) of
SRS notified all Associate Regional Commissioners for Medical Ser-
vic~s of the departmental policy relating to purchases of ineffec-
tive and possibly effective drugs. MSA stated that program
regulations were being amended to implement this policy for Medicaid.
The Commissioners were instructed to notify Medicaid State agencies
as soon as possible of the change in Federal policy so that they in
turn could notify hospitals, nursing homes, pharmacies, physicians,
PAGENO="0044"
* 8546 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
dentists, and any other providers of drugs, and begin making the
necessary changes in drug formularies, drug purchasing guides and
drug claims payment processes.
As of May 1, 1972, regulations have not been issued to imple-
ment the revised Federal drug policy for Medicaid.
SU3STAN~IAL FUNDS BEING EXPENDED
UNDER MEDICAID FOR INEFFEOIVE
AND POSSIBLY EFFECTIVE DRUGS
Officials who administer the Medicaid drug programs in Illinois,
New Jersey, and Ohio, furnished us with computer printouts listing
purchases by drug name, number of prescriptions, and amount paid dur-
ing the first month of each quarter of calendar year 1970. We com-
pared this information to FDA's November 1970 listing1" of drugs
classified as ineffective and found the following.
--In Ohio about $196,000 was expended in January, April, July,
and October for about 38,QOO prescriptions for 106 drugs
classified as ineffective.
--In Illinois and New Jersey about $99,000 was expended in July
and October for about 21,000 prescriptions for 16 drugs classi-
fied as ineffective.
Although our identification of purchases of ineffective drugs
was limited to these three States, similar conditions probably exist
in other States. For example, the Mississippi Medicaid Commission--
the single State agency administering the program--reported that in
a study of drug usage from July 1, 1970, to February 19, 1971, about
$89,000 was expended for about 22,000 prescriptions for three drugs
classified as either ineffective (two drugs) and possibly effective
(one drug).
State officials in Illinois, New Jersey, and Ohio informed us
that they would continue to pay for such drugs until HEW notifies
them~that such drugs are no longer eligible under Medicaid. These
officials further informed us that their States were not in a posi-
tion to determine drug efficacy and if they were to declare such
drugs not eligible for Medicaid they would be subject to strong
criticism from pharmaceutical manufacturers.
did not compare this information to FDA's October 1970 listing
of drugs classified as possibly effective; however, as discussed
above, expenditures were made under Mississippi's Medicaid program
for the purchase of drugs classified as possibly effective.
PAGENO="0045"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8547
For'calendar year 1970, Illinois, New Jersey, and Ohio reported
drug expenditures under their Medicaid programs of about $50 million,
of which about $25 million, or 50 percent, represented the Federal
share. These expenditures accounted for about 12 percent of the
total $425 million expended nationwide for drugs under Medicaid for
calendar year 1970.
As discussed above, Ohio expended about $196,000 for ineffective
drugs during January, April, July, and October 1970--an average of
$49,000 a month. If these monthly expenditures for ineffective drugs
were representative of the entire calendar year, then as much as
$588,000 could have been expended in Ohio for these drugs during 1970.
Considering the large amount of expenditures for Medicaid drugs during
197O--$425 million--and the probability that other States are purchas-
ing ineffective and possibly effective drugs under their Medicaid pro-
grams, then nationwide expenditures for such drugs purchased under
Medicaid could be substantial.
RECOMMENDATION TO THE ADMINISTRATOR,
SOCIAL AND REHABILITATION SERVICE
Because of the substantial amounts expended for drugs under the
Medicaid program--and the probability that a significant portion of
these expenditures are being made for ineffective and possibly effec-
tive drugs--we recommend that SRS issue, without further delay, regu-
lations to preclude the purchase of ineffective and possibly effective
drugs under Medicaid.
We shall appreciate receiving your comments and advice as to any
actions taken or planned with respect to our recommendation.
Sincerely yours,
/ Joh . Heller
As ociate Director
Mr. John D. Twiname, Administrator
Social and Rehabilitation Service
Department of Health, Education,
and Welfare
PAGENO="0046"
8548 COMPETITIVE PROBLEMS TN THE DRUG INDTJ~TRY
Senator NELSON. It is incredible to me, with all the talk about un-
balanced budget and wasting of Federal funds, that the Federal
Government and HEW would not implement a policy immediately
on prohibiting reimbursement for "ineffective" drugs. I cannot think
of any greater waste of taxpayers money than that. I cannot under-
stand why it takes them a year and a half to do it.
On that Mississippi study, it is interesting to note that among the
10 leading drugs arranged by total amount paid, five drugs are
specified as "not recommended" or as "irrational mixtures" by the
AMA's "Drug Evaluations 1971." Also, one drug among the 10 has
been classified as "possibly effective" by the Food and Drug Ad-
ministration. The Mississippi study states: "This indicates an overall
negative relationship between popular usage of drugs and the evalu-
ation of their efficiency and safety by the AMA Council on Drugs and
the FDA. It is suggested that this represents a fertile area of profes-
sional education."
Go ahead, Mr. Staats.
Mr. STAATS. Continuing on the bottom of page 8. Since 1966 HEW
has required that Federal funds be expended only for the lowest
priced drugs consistent with acceptable standards of identity, strength,
quality, purity, and effectiveness. Information we have obtained on
the medicaid program in four States-this is what we've been talk-
ing about-shows usage of "ineffective" or "possibly effective" drugs.
For example under the medicaid program we found that in Missis-
sippi during a 7i/2-month period in 1970-71 nearly $90,000 was paid
for two prescription drugs classified by FDA as "ineffective" and one
as "possibly effective". In Ohio, during four months in 1970, about
$138,000 was spent for 43 drugs classified as "ineffective" by FDA
as "possibly effective". In Ohio, during 4 months in 1970, about
$99,000 was spent on prescriptions for 10 randomly selected drugs
classified as "ineffective". See appendix I for a summary of such drugs
paid for in Mississippi, Illinois, Ohio, and New Jersey.'
In the 1971 hearings, the subcommittee expressed interest in the
sources of information considered by physicians in making their
selections of prescription drugs.
Two studies, one by Milton S. Davis, Ph. D. and Lawrence S. Linn,
Ph. D., under a Social Security Administration grant and the other
by a professor of pharmacy and pharmaceutical chemistry, TlTrnver-
sity of California, shows that detail men were the most important
source of information to physicians.
The American Medical Association (AMA) in 1971 published a
manual entitled "AMA Drug Evaluations" to provide physic1ans
with a convenient source of information for the sound use of drugs.
This manual contains an evaluation by the AMA Council on Drugs
regarding the effectiveness of drugs, information on the pharma-
cology and therapeutic indications of drugs, and preparations avail-
able, dosage, and generic and proprietary names.
The manual was distributed free to all members of the AMA-
about 300,000, of which 170,000 are practicing physicians. Large num-
bers have also been purchased by the Government, pharmacists, phy-
sicians in residence and intern training, nurses, and medical students.
In 1972, the AMA began a survey of 2,000 physicians to determine the
extent to which this manual has been used. The AMA hopes to com-
plete the survey in June 1972.
1 See p. 88~2.
PAGENO="0047"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8549
We understand that a second edition of the manualis scheduled for
publication shortly and will include changes designed to make it more
useful including dosage guidelines, ingredients of over-the-counter
drugs, and additional trade name items.
One requirement of an efficient supply system for prescription drugs
is the development of specifications which can be used to encourage
competition and assure controlled quality production of drugs with
the desired thera~peutic effect.
Both DPSC and VA develop specifications for items they intend to
buy competitively. These items account for about 25 percent of all VA
centrally managed drug items and 99 percent of all DPSC centrally
managed drug-items. The remaining items procured centrally by the
agencies are designated for purchase from preselected sole sources.
Data for preparation and development of DPSC specifications is ob-
tained primarily from the manufacturers of drug products.
Although DPSO attempts to purchase virtually all of its drug items
competitively, it has been able to do so for only about 51 percent of its
approximately 1,100 drug items. The remainder, about 535 items, have
been supplied by single sources.
Senator NELSON. What is the explanation for that? Is it because the
specifications are drawn in such a way that, though there may be
several of the same compounds in the market for the same purpose, the
competition is eliminated because of the way the specifications are
drafted?
Mr. STAATS. Well, we cover that a little bit later. I believe it will be
partially answered.
Senator NELSON. All right.
Mr. STAATS. Of these, competitive procurement of 388 is limited by
patents or by FDA regulatory requirements which preclude market-
ing without an approved New Drug Application or antibiotic certi-
fication. The remaining 149 items have no apparent legal or regula-
tory restrictions that would preclude interested firms from submittmg
bids on DPSC requirements. That narrows the field down, as you see.
In 1969 and 1971 DPSC made a widespread effort to develop com-
petition on a large number of drug items but the responses were few
and disappointing.
Basically DPSC's specifications require full compliance with the
product standards and requirements set forth in the ~~`*5* Pharma-
copeia (USP) or National Formulary (NF). But additional require-
ments are often included to provide assurance that items manufactured
will have needed characteristics for such requirements as potency and
purity, from the time of manufacture to use.
Senator NELSON. I do not quite understand that. The U.S. Pharma-
copeia sets a potency standard. The National Formulary sets a potency
standard. Are DPSC's standards more narrow, that is, they allow a
more narrow variation? I do not quite follow that.
It says "But additional requirements are often included to provide
assurance that items manufactured will have needed characteristics
for such requirements as potency and purity, from the time of manu-
facture to use."
Mr. STAATS. We have several examples here, Mr. Chairman, of re-
quirements which are additional to the compendia to provide assurance
that drug items manufactured have the necessary characteristics from
the time of manufacture to use. For example, there are color standards.
PAGENO="0048"
8550 COMPETITIVE PROBLEMS TN THE DRUG INDUSTRY
These aid in detecting deterioration and resolving differences of
opinion over color acceptability.
There is a time limit for solubility of dry powder in a vial. This is to
assure that the powder will go into~ solution within the desired time.
There is a potential hydrogen, or ph, range. This is to assure greater
stability over the shelf life.
The fourth example is consistency test requirements, to be sure that
the item has the proper consistency at the anticipated use and storage
temperature.
There are some other examples of this type that have been given to
us to explain these additional specifications.
Senator NELSON. I would like to get this clear: Is the suggestion here
that drugs that are procured meet DSP standards at the factory or
the manufacturer, but for some reason or another, by the time they are
sent to wherever they will be used, they do not meet DSP standards?
Or are we talking about some additional specifications?
Mr. STAATS. Just the latter, Mr. Chairman. I think if I understand
it correctly, what the TJSP and the NF will do is set the standards
for public use. There are additional requirements which the military
feels that they need for their own special requirements.
Senator NELSON. Are these requirements that the military feel they
need or are these specifications submitted to the procurement agency
by the drug company?
Mr. STAATS. I cannot answer that question.
Mr. CROWTHER. Generally, these are requirements that the military
needs in order to maintain a particular consistency, potency, color,
whatever it is, for a shelf life for a period of time at a particular loca-
tion. Their concern is the point in time that the particular drug will be
used, and it may take quite a length of time, either shipment or storage,
before actual use.
Senator NEI~SON. I just want to be clear about what we are talking
about here. The Defense Department testified on that point about a
year and a half ago.
If you are talking about the question of being sure that it is appro-
priately packaged and protected for handling in Africa or such places
as a jungle, which puts the drug to a different test than in this climate,
that is one item. But I am trying to get at a question which~ we raised
once before. We raised the question in the hearings in January and
February of 1971, and we read at that time a quote from a speech
which was given at the 21st annual meeting of the Defense Supply
Association and was printed in the Review for November-December
1968. The speech is by Col. W. V. Breyfogle, Chief, Division of Medi-
cal Materiel, Defense Personnel Support Center, Defense Supply
Agency, in which he addresses himself to the question you raised in
your remarks here. I would like to read them for the record:
The first problem that has been bothering us for some time is our inability
to procure competitively. The policy of the Department of Defense, as it has
been for many years, is that we will obtain competition on our procurements
to the maximum extent possible. The major problem in our failure to procure
competitively is the nature of the specifications that we are using. It has been
said in the past that our specifications are too restrictive in nature and thereby
restrict competition. There is some validity in the statement. Before you can
understand why we have a problem of procuring competitively, however, you
must understand how items are selected for standardization and stockage in our
DSA depot system. The items that are standardized by the Defense Medical
PAGENO="0049"
OOMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8551
Materiel Board and stocked in the DSA depot system were, for the most part,
developed by industry or independent research organizations for use by the
civilian medical profession and for sale in the marketplace. These items were pre-
sented to the Board for study and the determination was made that they would
be stocked for use in Our system. Therefore, the specifications that are developed
of necessity describe a certain manufacturer's item. Most of the information
used in writing these specifications was furnished by the developer. Therefore,
even if we have a, pardon the expression, generic specification, in many cases it
merely describes the generic equivalent of a brand name.
Now, have you dealt with that question, this specific problem in
evaluating procurements?
Mr. CROWTHER. I think that-
Senator NELSON. I think that is a very damning statement by one
of the Government's own representatives. It disturbs me that we have
developed a pattern here of pretending that we are trying to get com-
petitive bids, pretending that we are doing the best we can, then you
have the procurement agency saying, "But the specs are drawn by the
manufacturer." So they draw them in such a way that even though
there are half a dozen other drugs on the marketplace by qualified
manufacturers, they cannot compete because the specifications were
drawn by somebody else.
Have you looked at that question?
Mr. CROWTIIER. Yes, sir, we have, in the sense that we wanted to
know what goes into the specifications at the time they are drawn,
because the DPSC does draw up specifications for 99 percent of the
items that they procure centrally. Of that group, they attempt to draw
specifications on the generic equivalent of a drug. It is true that they
have to draw heavily upon a manufacturer for information on proto-
cols and similar things. Part of this information can come from USP
and NF when it is available.
But we understand from even the USP and the NF people that
much of the information they have obtained also comes directly from
manufacturers, the problem being that it is the only source of infor-
mation in many cases.
So I think it is right when you say that a significant amount of
the information does come from manufacturers. The military does
make a strong effort to attempt to write specifications where they can
gain competition, and in instances, in order to take care of particular
temperatures, long shelf lives or particular storage locations, they
have to add to the requirements of the basic specifications for those
items.
Senator NEr~soN. I am not talking about special cases in which the
drug may have to be handled in unusual circumstances in different
parts of the world. I am talking about specifications. Are there special
specifications that end up here in the procurement process by the De-
fense Supply Agency which conform to Colonel Breyfogle's asser-
tion. If there are, something ought to be done about that.
He has made this assertion and, it has been published here for a year.
We have heard no refutation. He is or was chief of the . Division of
Medical Material, Defense Personnel Support Center, Defense Sup-
ply Agency. It is a statement that has to be taken very seriously. To
my knowledoe, it has not been refuted.
This method of getting around competitive bidding disturbs me.
Now, we are going to get to that question later. We raised the ques-
80-450 0-72-pt. 22-4
PAGENO="0050"
8552 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
tion a year ago that under sole negotiated contracts the Government
has the right to then go to the manufacturer after the purchase and
examine the cost of production. I understood that the companies you
have gone to have refused, even though it is in the contract, to let
you look at their cost-of-production figures.
Is that correct?
Mr. STAATS. We were going to develop that point a little later.
Senator NELsoN. So they have it coming and going all ways. They
get the specifications drawn up by industry so somebody else can't
compete. Then instead of having a competitive bid, they negotiate a
bid. The Government is not in an arm's length deal becaus ~ the
Government does not know the cost. In the contract, they agree and
understand that the law authorizes the Government to examine their
production figures.
So now, that has apparently never been done. We raised the question
with the GAO a year ago. You now go to the manufacturers, who
have this marvelously, elaborately designed method of protecting them
so they do not get a competitive bid, and you say to them, "Now, under
the law, and in your contract, you have agreed that you will com-
ply with the law and we can look at your production figures"; and the
company says, "Go to hell."
Is that not the status?
Mr. CROWTHER. We have not looked at their cost records.
Senator NELSON. This is shocking to me. I think they ought to be
hauled right into court. But I think you ought to take a further look
at this business and see what kind of funny game they are playing
with their specifications.
Have you tried, for example, taking a case where the Government
agency ends up with a negotiated contract and compare it with the
price paid by a big purchaser like New York City?
In other words, I am referring to a negotiated contract with the
Federal Government, where you suspect that it may be a case where
the specifications have been designed by the manufacturer, and then
take a look to see if New York City does, in fact, have a competitive
bid, and if so, what the difference is in price.
Mr. CROWTHER. No, sir.
Senator NELSON. I think there is a lot of negotiated bidding going
on which is absolutely unnecessary, in which the Government, as the
colonel suggests, is accepting the specifications supplied by the manu-
facturer. And then the drug companies have refused to let the GAO
look at their cost figures, despite the fact that that is what the law
says, despite the fact that that is what is in every contract that they
signed. I suspect that the taxpayers are being cheated, and I think
the drug firms ought to be hauled into court and fast.
Mr. STAATS. Mr. Chairman, if this information is available from
large cities like Chicago or New York, I think it would be worth
pointing out here that they would be buying most likely, today, the
largest quantities in connection with medicaid. They would be making
the procurement, reimbursed to the States. But this is an interesting
idea and we will give it some thought.
I think we are talking at this point in our statement about the matter
of specifications which would result in greater competition. That 1S
really all we are dealing with at this point in our statement.
PAGENO="0051"
C0MPi~TITIVE PROBLEMS IN THE DRUG INDUSTRY 8553
Senator NELSON. I understand. What I am curious about is the ad-
ditional requirements. Expert testimony before this subcommittee in-
dicates that if you meet DSP and NF standards, that is all that is
necessary. That is not to say that you cannot improve on the stand-
ards, but the compendial standards are the best we have at present.
Now if, after that, there are some additional specifications that the
manufacturer slips in here so that as the Colonel says-
Mr. STAATS. I understand.
Senator NELSON (continuing). As the Colonel says, you end up buy-
ing another drug on a negotiated basis, despite the fact that there are
other drugs that meet the TJSP-
Mr. STAATS. We have the same problem, Mr. Chairman, as you are
expressing. We say here in the central paragraph of page 11 that only
about 50 percent of these drug items managed by the DPSC and 60
percent managed by the VA are in the DSP and NF. Then we say the
use of manufacturer's data by DPSC in the development of its specifi-
cations could result in including requirements which are not essential
to producing a comparable product or which do not contribute to its
medical usefulness. That is the point.
Senator NELSON. Please recite the statistics again about those mono-
graphed in the DSP?
Mr. STAATS. Only about 50 percent of the drug items managed cen-
trally by DPSC and 60 percent of those managed centrally by the VA
are monographed in the DSP and NF.
Senator NELSON. The 50 percent that are not monographed to which
you refer-are they prescription drugs?
Mr. CROWTHER. Yes, sir.
Senator NELSON. That is the second point that ought to be looked at.
We have had testimony that everything that is considered medically
useful as a prescription drug is monographed in the DSP or NF. That
might indicate that they should not be buying about half the drugs they
are buying.
Is that not correct?
Mr. STAATS. Yes, if they are a prescription drug for a medically in-
dicated purpose, the DSP or the NF would have them unless they are
new drugs that have not been evaluated yet.
Senator NELSON. That rather astonishes me. Would you give us a list*
of that 50 percent that are not monographed in the DSP or NF?
Mr. CROWTHER. I am sure that we can get information on that, both
from the miltary and the VA, that would give you an indication of
which drugs they are.
Senator NELSON. Would you give that list to us? I cannot imagine
that half the drugs they are using are not even mentioned in the DSP
or NF. Maybe they are spending half their money on placebos.
Would you give us the list so we can pursue it further?
Mr. CROWTHER. Yes, sir.
Mr. STAATS. We will get you whatever we can.
I want to point out in here that DPSC includes in its solicitation
packages a Specification Analysis Sheet for potential suppliers to sub-
mit comments on the specification requirements and those that bidders
claim are unnecessary or unduly restrictive are evaluated by DPSC.
(The subsequent information was received and follows:)
PAGENO="0052"
8554 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
COMPTROLLER GENERAL OF THE liMITED STATES
WASHINGTON. D.C. 20548
B-161~031(2) July 10, 1972
Dear Mr. Chairman:
During testimony before your Subcommittee on May 10, 1972, concerning
the present status of competition in the pharmaceutical industry, you
requested that we furnish for the record a list of the prescription drugs
purchased centrally by the Veterans Administration (VA) and the Defense
Personnel Support Center (DPSC) that are not monographed in the United
States Pharmacopeia (USP) or the National Formulary (NF).
We found that 34 percent of the drug items purchased centrally by
DPSC and 33 percent of those purchased centrally by the VA Marketing
Center are not monographed in the USP or NF. Listings of the drugs which
are centrally purchased by DPSC and VA, and included in the agency supply
catalogs but not monographed in the USP or NF are provided as enclosure 1,
According to Defense Personnel Support Center personnel there are
three primary reasons why they procure non-monographed drugs. These are:
1. NF and USP compendia monographs limited dosage forms as well
as active drug ingredients. Many of the drugs procured by
DPSC are in dosage forms useful to DPSC but are not included
in the monographs. For example, in the case of Acetaminophen
solution, the NF monographs an elixir with a usual dose of a
teaspoon. While this is adequate for older children, frac-
tional teaspoon doses are required for infants, but fractional
doses are not monographed in the NF and this poses a problem.
To provide prescribing physicians with dosage forms for
children, DPSC stocks the solution in a calibrated dropper
bottle which is not monographed even though the solution is
the same substance which is monographed in larger doses.
2. Both compendia are conservative on combination drugs, and
although many irrational combinations have been declared
ineffective by the Food and Drug Administration (FDA) for
good reasons, according to DPSC many combination drugs
continue in medical use for equally good reasons, e.g.,
prenatal vitamin and mineral tablets, belladonna and pheno-
barbital tablets, oral contraceptive mixtures of estrogens
and progestins. Some, such as the combination of chloroquine
and primaquine-used to suppress malaria--may meet a peculiar
military need which would not justify inclusion in the
national compendia.
PAGENO="0053"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8555
3. There is a time delay in getting items included in the compendia
after approval by FDA and adoption by physicians0 An example
is Spectinomycin, recognized by FDA as the drug for gonorrhea
but not monographed in either compendia. Another example is
Ketamine Hydrochloride, an injectible anesthetic.
Also discussed during our testimony was the problem of developing
independent and objective specifications for use in competitively pro-
curing drugs, Additional information regarding DPSC specifications for
prescription drugs, taken from a booklet prepared for the Inter-Agency
Study for Medical and Nonperishable Subsistence Items, is attached for
the information and consideration of your Subcommittee. (See enclosure 2.)
During hearings you quoted an extract from a speech made by
Colonel W, V. Breyfogle in which he stated that most of the information
used in writing the DPSC specifications was furnished by the developers
of the drugs, Colonel Breyfogle was the Chief, Medical Materiel Division,
Directorate of Procurement and Production, DPSC. Colonel Breyfogle is
no longer with the military, Currently, he is the Executive Director of
the Medical-Surgical Manufacturers Association which provides credit
information to members of the association and training courses for dealer
salesmen,
Officials of the USP and NF advised us that they also obtain their
information for monographs initially from drug manufacturers and that
there is no alternative source for such data. It is our understanding
that the initial information used by DPSC in preparing specifications
for drugs is obtained from the drug manufacturers because this is the
only source for the information,
As you are aware, much of the data developed by drug manufacturers
during all phases of research is proprietary and must be respected as
such, including information furnished to FDA in applications for investi-
gational new drugs and for new drug applications,
With respect to variations in prices paid by cities and by the
Federal Government, you mentioned during the hearings that a manufacturer
quoted a price to the City of New York under a competitive procurement
which was one one-hundredth of the price charged to pharmacies. You asked
whether DPSC and VA were buying this drug based on specifications designed
by the manufacturer.
We found that both DPSC and VA are purchasing the drug, Meticorten,
on a competitive bid basis under its generic name, prednisolone. Upon
examination, we learned that since December 31, 1968, no purchases have
PAGENO="0054"
8556 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
been made of this drug from the brand name manufacturer who furnished
the initial data used in preparing the procurement specification. DPSC
and VA have purchased the item at prices ranging from $.387 to $.457 per
100 tablets which was significantly less than the price of $1.20 per 100
offered by the brand name manufacturer to the City of New York.
We trust the information furnished in this letter will serve the
purpose of your request and be of assistance in your further inquiries
into aspects of drug procurement, such as the development of specifications.
Sincerely yours
Comptroller General
of the United States
Enclosures
The Honorable Gaylord Nelson
Chairman, Subcommittee on Monopoly
Select Committee on Small Business
United States Senate
PAGENO="0055"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8557
ENCLOSURE ~j
LIST OF CENTRALLY PURCHASED DRUG ITEMS
IN VAS5 MARCH 1. 1971 SUPPLY CATALOG
WHICH WERE NOT MONOGRAPHED
IN THE U.S.P.1 OR N.F.2
Nunter of
Item name line items3
1. Acétazolamide Capsules 1
2. Acetylcysteine Solution 2
3. Aluminum Hydroxide Gel, Magnesium Hydroxide,
and Simethicone Suspension 1
1~. Aluminum Hydroxide Gel, Magnesium Hydroxide,
and Simethicone Tablets 1
5. Aluminum Hydroxide Gel and Magnesium Hydroxide
Tablets 2
6. Aluminum Hydroxide Gel and Magnesium Trisilicate
Tablets 2
7. Aluminum Hydroxide Gel with Magnesium Hydroxide 1
8. Aluminum Hydroxide Gel with Magnesium Trisilicate 2
9. Aminophylllne, Amobarbital, and Ephedrine
Hydrochloride Capsules 1
10. Antipruritic Liquid 1
11. Antiseborrheic Liquid 1
12. Arglnine Glutamate for Injection 1
13. Azathioprine Tablets 1
1k. Barium Sulfate, Diagnastic 2
15. Benzoin Compound, Concentrate 1
16. Bropheniramine Ibleate, Phenylephrine
Hydrochloride, and Phenylpropanolarnine
Hydrochloride Tablets 1
17. Butalbltal, Aspirin, Caffeine, and Phenacetin
Tablets 1
PAGENO="0056"
8558 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
Number of
I tern name 1 me items
18. Calcium Carbonate and Arninoacetic Acid
Tablets 1
19. Carbozachrorne Salicylate Injection 1
20. Carisoprodol, Caffeine and Phenacetin Tablets
21. Carisoprodol Tablets 2
22. Cephaloridine for Injection
23. Chlordiazepoxide Hydrochloride and Cl idinium
Bromide Capsules 1
24. Chlorphenesin Carbamate Tablets
25. Chlorpheniramine f4eleate Tablets, Modified 2
26. Chlorzoxazone and Acetaminophen Tablets
27. Colistin Sulfate, Hydrocortisone Acetate,
Neomycin Sulfate, Thimerosal and Thonzonium
Bromide Suspension, OTIC
28. Cyclandelate Capsules
29. Cyclandelate Tablets
30. Cyclopentamine Hydrochloride and Isoproterenol
Hydrochloride Solution
31. Danthron and Dioctyl Calcium Sulfosuccinate
Capsules
32. Detergent, Surgical 3
33. Dexbrornpheniramine Maleate and Pseudophedrine
Sulfate Tablets
34. Dioctyl Sodium Sulfosuccinate, Sodium
Carboxyrnethylcel lulose and Casanthranol
Capsules
PAGENO="0057"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8559
Number of
Item name line items
35. Dioctyl Sodium Sulfosuccinate and
Sodium Carboxymethylcellulose Capsules
36. Dipyridamole Tablets 1
37, Disulfiram Tablets 1
38. Dyphylline Tablets 1
39. Emollient Lotion 1
40. Epinephrine Sulfate Ophthalmic Solution
41. Fentanyl Citrate and Droperidol Injection 2
42. Fluocinolone Acetonide Cream 3
43, Furosemide Injection
44. Gentamicin Sulfate Injection 1
45. Griseofulvin Tablets, Modified 1
46. Hematinic Concentrate with Intrinsic
Factor Capsules 1
47. Hemiacidrin Powder 1
48, Hemorrhoidal Suppositories 1
49. Hexachlorophene and Mineral Oil, Lanolated
Water'Dispersible Lotion 1
50. Isoetharine, Phenylephrine Hydrochloride,
and Thenyldiamine Hydrochloride Solution
51. Isoproterenol Hydrochloride and Phen~lephrine
Bitartrate Inhalation 1
52. Isosorbide Dinitrate Tablets 3
53. Lubricant, Surgical 2
PAGENO="0058"
8560 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
Number of
Item name line items
5I~* Meglumine Diatrizoate-Sodium Diatrizoate
Injection 2
55. Meprobarnate and Benactyzine Hydrochloride
Tablets 1
56. Meprobamate and Tridihexethyl Chloride
Tablets 1
57. Meprobamate Capsules 1
58. Methenamine Hippurate Tablets 1
59. Methocarbamol and Aspirin Tablets 1
60. Methoxyphenamine Hydrochloride Tablets 1
61. Methyprylon Capsules 1
62. Mucolytic Detergent Solution 1
63. Neomycin Sulfate, Hydrocortisone, and
Polymyxin B Sulfate Suspension 2
64. Niacin and Mccl izine Tablets 1
65. Nlcotinyl Alcohol Tablets 1
66. Nitrofurantoln Capsules 2
67. NitroglycerIn Capsules 1
68. Nystatin, Gramicidin, Neomycin Sulfate,
and Trlamcinolone Acetonide Cream 1
69. Orphenaclrine Citrate, Aspirin, Caffeine
and Phenacetin Tablets 1
70. Orphenadrine Citrate Tablets 1
71. Oxtriphylline and Glyceryl Guaiacolate
Tablets 1
PAGENO="0059"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8561
Number of
Item name line i tems
72. Pancreatin, Bile Salts, and Pepsin Tablets
73. Papaverine Hydrochloride Capsules 1
74. Pentacrythritol Tetranitrate Tablets 1
75, Pentazocine Hydrochloride Tablets 1
76. Perphenazine and Amitriptyline Hydrochloride
Tablets 2
77. Perphenazine Solution 1
78. Phenacetin, Aspirin, Hyoscyamine, and
Phenobarbital Capsules 1
79. Phenformin Hydrochloride Capsules 1
80. Phenobarbltal, Hyoscyamine Sulfate, Atropine
Sulfate and Hyoscine Hydrobromide Tablets 2
81. Phenobarbital and Belladonna Extract Tablets 1
82. Polymyxin BBacitracin Ointment 1
83. Potassium Aminobenzoate, Ascorbic Acid, and
Potassium Sal icylate Tablets 1
84. Procyclidine Hydrochloride Tablets 1
85. Propoxyphene Hydrochloride, Aspirin, Caffeine,
and Phenacetin Capsules 2
86. Propranolol Hydrochloride Tablets 4
87. Psyllium Hydrophilic Mucilloid with Dextrose
88. Reserpine, Hydralazine Hydrochloride and
Hydrochiorothiazide Tablets 1
PAGENO="0060"
8562 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
Number of
Item name line items
89. Salicylazosulfapyridine
90. Senna Pod Extract
91. Senna Pod Extract Solution
92. Senna Pod Extract Tablets
93. Sodium Aminobenzoate, Sodium Sal icylate
and Ascorbic Acid Tablets
94. Sodium Colistimethate and Dibucaine
Hydrochloride for Injection
95. Sodium Dicloxacillin Monohydrate
Capsules
96. Sodium Phosphate - Sodium Citrate Solution
97. Sodium Phosphate Solution, Diluted
98. Theophylline and Glyceryl Guaiacolate Capsules
99. Therapeutic Formula Vitamin Capsules
100. Thiothixene Capsules 3
101. Tolazoline Hydrochloride Tablets
102. Triasyn B Capsules
103. Triprolidine Hydrochloride and
Pseudoephedrine Hydrochloride Tablets
10~4. Trypsin, Chymotryspin and Ribonuclease
Tablets
105. Trypsin - Chyrnotryspin Tablets
106. Urine Sugar Test Tablets
107. Vitamin B Complex and Ascorbic Acid Capsules
108. Vitamin B Complex and Ascorbic Acid for
Injection
PAGENO="0061"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8563
Number of
Item name line items
109. Whiskey, Straight 1
110. White Pine Syrup Compound
111, Wine, Sherry 1
112. Zinc Bacitracin, Neomycin Sulfate and
Polymyxin B Sulfate Ointment
139
The above listed 139 drug line items represent
33.0 percent of the k2l centrally purchased drug
line items appearing in the VA's supply catalog
as of March 1, 1971.
Legend:
1The United States Pharmacopoeia.._Eighteenth Revision, Official
from September 1, 1970
2The National Formulary..~Thirteen~~ Edition, Official from
September 1, 1970
3Line items are those items for which individual Federal
stock numbers have been assigned because of differences
in dosage, strength, package size, color, or other
product variations
Source: Comparison of the September 1, 1970 Official Compendia with the
VA Federal Supply Catalog for Drugs, Biologicals and Official
Reagents (FSC 6505) dated January 1971 and updated as of
March 1, 1971.
PAGENO="0062"
8564 COMPETITIVE PROBLEMS IN THE DRUG ITNDUSTRY
ENCLOSURE 2
INPORNATION ON THE DEVELOPMENT OF
SPECIFICATIONS FOR PRESCRIPTION DRUGS BY DPSC1
The development of specifications by the Medical Directorate, DPSC,
is a complex function because there are few standards in industry that
can be used for procurement purposes. Further, there is no Government
agency that develops technical data on drug produc'ts which can be used
to develop specifications for competitive procurement. Accordingly, a
significant portion of the technical data for prescription drugs used
by DPSC, the FDA, the National Institutes of Health, and the USP and
NF must initially be obtained from the drug manufacturers.
The data included in DPSC specifications contain information on
purity, safety, effectiveness, and stability standards. In competitive
procurement comprehensive standards must be clearly established to
eliminate misunderstandings; DPSC often finds it necessary to designate
more stringent product standards than those applicable to commerce
because of the possibility of long term storage and transportation
under adverse conditions and the need to assure that the product will
retain its safety and effectiveness until time of use. These needs tend
to be more stringent to meet the many vicissitudes of military usage
rather than civilian usage.
DPSC has learned that quality products cannot regularly be procured
by simply referencing the USP and NP. DPSC has had many experiences
where drug products complying with USP or NP standards, have not been
suitable in actual use.
PAGENO="0063"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8565
Bio-availability involves the release of medication from a dosage
form that can be absorbed within the patient and assert its therapeutic
intent. A growing list of.drugs is being reported in medical litera-
ture which reveals that the same drug manufactured by different companies
using different formulations and manufacturing and quality control
conditions can yield a product that meets all current requirements, but
does not give the anticipated bio-availability characteristics, such as
blood levels and urine concentration. These products include tetra-
cycline tablets, Sodium Heparin Injection, Sodium Warfarin tablets,
Sodium Diphenyl Hydantoin Capsules, "Tedral" type tablets and Oxytetra-
cycline Tablets.
On this subject, Dr. Edwards, Commissioner of the Food and Drug
Administration, has stated that:
"It has become increasingly apparent that drug products
which purport to be equivalent and which may satisfy chemical
and other analytical tests of equivalence, may not be therapeutically
equivalent. We believe the key to the problem lies in what
we refer to as bio-availability. We have found that comparable
bio-availability frequently does not exist for products that
are otherwise, so far as concurrently available methods are
concerned, identical. We are not fully aware of the extent of
this problem, but know that it exists particularly in tablet
or capsule dosage forms. Among other factors, solubility of
the drug substance, the amount of active drug in the dosage
form, the excipients used, and certain aspects of the manufacturing.
processes play a role."
To ensure that such products will give suitable therapeutic responses,
rather than merely comply with applicable laboratory tests, DPSC adds
bio-availability standards to its specifications to assure that the
drug products will yield the desired therapeutic effect.
Military specifications for ophthalmic ointments for over ten years
have included standards for melting range, particle size, and limits
PAGENO="0064"
8566 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
of bacterial contamination and a requirement that there be no pseudomonas.
The USP and NP are now moving toward limiting the level of contamination
in ophthalmic ointments, but there are still no other Government or
industry standards for melting range and particle size even though contami-
nated ointment or ointment containing large crystals can cause additional
damage to the eyes being treated.
Even though discoloration of pharmaceuticals generally is the initial
sign of instability and degradation, neither the FDA nor the compendia
are formally concerned with this problem so long as the products comply
with the USP or NP. The military considers it essential that products
retain their effectiveness until the time of use and accordingly DPSC
has, for over ten years, included color standards in specifications
for injections.
DPSC specifications for certain drug products require individual
tablet assays of the product. The USP and NP are now requiring individual
tablet assays to an increasing extent. DPSC also included requirements
for dissolution rate of tablets and capsules long before this requirement
was considered by the USP and NP. Currently, a concentrated effort is
being made in pharmaceutical investigations to correlate the dissolution
rate with bio-availability.
An important factor of military specifications are the requirements
for accelerated aging tests and packaging and packing to ensure stability
until the time the products are used.
The Medical Directorate of DPSC is a major contributor to the USP
and NP in establishing standards for the country and has a member on the
USP/NF Panel on Therapeutic Equivalency. Following are examples of
PAGENO="0065"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8567
specification requirements developed by DPSC and later adopted by the
USP or NE.
The DPSC specification for Aluminum Hydroxide Gel, USP, has included
a bacterial count requirement since 1953. This requirement was included
in the USP on September 1, 1970.
By March 1963, DPSC specifications for Phenacetin and Phenacetin-
*containing drugs included limits for two contaminants which had been
implicated in causing kidney damage. These requirements were included in
the USP in May 1963 and September 1965.
The DPSC specification for Carbarsone Tablets have included a limit
on arsanilic acid, which causes a toxic reaction, since June 1962.
The NE included this limit effective April 1971.
The DPSC specifications are used by the Veterans Administration and
the Public Health Service with modifications generally limited to
packaging and packing requirements. DPSC also receives requests for its
specifications from States, cities and municipalities, and insurance companies.
An important by-product of DPSC's definitive specification require-
ments is that they furnish potential competitors with highly detailed
standards of purity and quality not available from other sources. DPSC
specifications have aided small business firms in producing and becoming
successful contractors for drug items such as acetaminophen elixir and
tablets; hydrocortisone cream; belladonna alkaloids and phenobarbital
tablets; and lanolated, water dispersible mineral oil.
1
Source: DPSC booklet prepared for the Inter-Agency Study for
Medical and Nonperishable Subsistence Items.
80-450 0 - 72 - pt. 22 - 5
PAGENO="0066"
8568 COMPETITIVE PROBLEMS TN THE DRUG INDUSTRY
Mr. STAATS. We found that it was common for manufacturers to
add requirements to those in the compendia (IJSP and NF) for prod-
ucts they sell to the general public. Comments by manufacturers and
compendia officials and statements in professional publications ex--
plam that the additional requirements are added for controlling manu-
facturers' production processes and to ensure product quality and
uniformity.
The DOD practice of establishing a specification for every drug
item in its central supply system, while commendable -for purposes of
broadening and equalizing the competitive base and assuring the re-
ceipt of acceptable products, results in unnecessary technical and
administrative effort when the policy extends to drugS items which,
because of legal or regulatory restrictions, are obtainable from only
one source.
The VA, after its appearance before your subcommittee in 1970,
began developing specifications for 115 sole source items for which
competition appeared feasible. We were informed on May 1, 1972,
that 36 final specifications had been issued as a result of this effort.
In our last appearance before the subcommittee we reviewed the
quality control activities of FDA, DPSC, and the VA. We have noted
(1) apparent overlap of these activities, (2) the acceptable results
obtained by VA from its minimal inspection efforts supplemented
with the use of FDA's testing services, and (3) that substantial mili-
tary procurements are made each year from Federal Supply Sched-
iiles and local vendors-about $21 million in fiscal year 1970-based
only upon the quality assurance work of the FDA. We suggested in
our statement that consideration should be given to assigning sole
responsibility to FDA for inspecting drug contractor plants and test-
ing products and quality control procedures.
So far as we are aware no action has yet been taken to consider
the advisability and feasibility of centralizing drug inspection along
these lines. The estimates of manpower requirements and administra-
tive costs, including inspection activities, involved in the DOD and
VA procurement systems for drugs are provided in appendix JJ,1
In our previous statement we suggested that closer cooperation
between VA and DPSC could result in substantial savings in the
procurement of drugs. Our subsequent review work confirms that im-
provements can be made.
We found little exchange of requirements data or coordination of
procurements for drugs which are centrally stocked by both organiza-
tions, or those centrally stocked by one system but procured from
either Federal Supply Schedule contracts or from local vendors by the
other system. The VA negotiates several special contracts which ex-
clude military activities and, in some cases, other civilian agencies from
using them. The military uses Federal Supply Schedule contracts for
its requirements for items in these special contracts and pays prices
higher than those in the contracts. The lack of adequate coopera-
tion and coordination has resulted in increased drug costs to the
Government.
The VA has an agreement with DPSC under which it can buy drugs
from DPSC for its central stocks. In fiscal year 1970 purchases from
DPSC were only about $206,000. One drawback to this agreement is
1 See p. 8824.
PAGENO="0067"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8569
the add on of surcharges by DPSC and the VA Marketing Center for
drugs supplied to VA field stations. DPSC charges the VA Marketing
Center its standard price (cost plus 7 percent) plus a 31-/2-percent sur-
charge for packing, handling, and crating costs for medical items
shipped from DPSC depots; a total add on of 101/2 percent. For items
slupped directly from a vendor to the VA depot, DPSC adds a 1-per-
cent surcharge, for administration, to the cost of the items. The VA
Marketing Center adds an 8-percent surcharge on all items bought
from DPSC to recover its operating costs.
VA field stations do not order directly from DPSC because the VA
requisitioning system requires the stations to submit requisitions, other
than for local procurements, via the VA Marketing Center. As a result,
certain drug items are purchased by the field stations from either the
Federal Supply Schedule contractors or local vendors at substantially
higher prices than they could obtain them from DPSC. The flow of
drug items from DPSC depots or manufacturers to VA depots and
then to VA field stations is cumbersome and results in extra handling
and added transportation costs.
Even though the addition of surcharges discourages procurement
from, or through DPSC, we found many cases where ultimate prices
to the VA stations would have been significantly lower than the prices
paid by these stations. For example, if VA field stations had purchased
Aristocort (8-ounce jar) directly from DPSC the cost would have
been $39.85 per jar, with all surcharges, instead of $46.07 paid on the
Federal price list. Total savings for this drug item alone during calen-
dar year 1970 would have amounted to over $4,600. Further, even
with the 8-percent surcharge of the VA Marketing Center a sav-
ings of $3.03 per jar would have been realized.
The military has made no formal arrangements to allow its activi-
ties to purchase from VA depots drug items which are not centrally
managed by DPSC. During the period July 1, 1970, to December 31,
1971, military hospitals purchased about $550,000 of the drug Macro-
clatin from the Federal Supply Schedule at about $275,000 more
than it would have cost to buy from VA at the contract price. This item
has now been approved for inclusion in the DOD central supply system
and a contract has been awarded by DPSC at prices comparable to
those negotiated by the VA. But, until delivery is received under the
DPSC contract, military hospitals will continue to purchase the item
at the higher Federal Supply Schedule price.
Our examination of invoices and sales records for purchases total-
ing about $6.2 million from four manufacturers during a recent 2-year
period showed that the Government incurred excess costs of about
$721,000 because (1) many drugs were purchased by local installations
at prices which ranged as much as 100 percent higher than prices avail-
able to DPSC and VA Marketing Center, (2) prices paid for the same
drugs differed between DSPC and VA Marketing Center, and (3)
there were purchasing weaknesses at VA and DPSC field stations.
Our review of DPSC and VA procurement records for 43 identical
drug items purchased by both agencies within 30 days of each other
during fiscal years 1970 and 1971 showed excess costs of at least
$246,000-split approximately equally between the VA aiid DPSC-
resulted from the differences in prices paid for these items.
PAGENO="0068"
8570 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
From 1964 to 1971 several studies have been made by the Defense
Supply Agency and the General Services Administration, separately
and jomtly, to determine the feasibility of a single agency having Gov-
ernment-wide responsibility for management of various categories of
supplies mcluding medical materials. The studies indicated differences
of opinion on the feasibility of consolidating the procurement and man-
agement of medical items. Decision on this has been deferred pending
the outcome of a current study.
The Office of Management and Budget in January 1972 initiated a
joint study by DOD, the General Services Administration, HEW, and
VA to determine the lowest cost system or combination of systems to
achieve maximum economy in meeting Government-wide needs for
medical material, including drugs.
WTe believe that procurement costs can be reduced significantly by
better cooperation and coordination between the VA and DPSC. How-
ever, the differences in their procurement practices, such as the respec-
tive volumes of procurements of brand name and generic items, use of
specifications, and inspecting and testing requirements, must be recon-
ciled to insure that drugs will be purchased at the lowest possible cost
to the Government.
Studies by HEW covering world drug prices in 1970 and 1971
show that prices charged by manufacturers to druggists in the United
States were generally higher than prices charged to druggists in other
countries for the same drug. Recent comparative data is provided in
appendix III.'
Although drugs of foreign origin are frequently priced lower than
comparable drugs of domestic origin the following factors influence
procurement of the cheaper drugs:
1. FDA's New Drug Application (NDA) requirements. DOD and
VA normally will not procure drugs which require an NDA approval
from firms which do not have them. Foreign firms sometimes do not
have the required NDA approval.
2. Inability of some foreign firms to satisfy American manufactur-
ing standards for such matters as quality control and good house-
keeping.
3. Possible legal action on patent infringements.
4. Implementation of the Buy American Act (41 U.S.C. 10 a-cl).
For evaluating bids or offers of foreign firms for their products
against offers of domestic products, civilian agencies are required by
the Federal Procurement Regulations, which implement the Buy
American Act, to add to foreign bids or offers a price differential
equivalent to 6 percent, inclusive of import duties, or 12 percent, in-
clusive of import duties, if the low domestic bid is a small business or
distressed labor area concern. Military departments generally add a
price differential of 50 percent to bids or offers of foraign products,
exclusive of import duties, for evaluation purposes, when a 6 or 12 per-
cent differential, plus import duties, does not result in a greater evalu-
ated price for the foreign products. This policy, I might add, applies
all across the board in all Defense procurements, not just in this area.
The effect of adding these price differentials can be seen in a procure-
ment of 310,464 units of tetracycline hydrochloride tablets by DPSC
in April 1971. The low foreign bid was 85 cents a unit, excluding duty,
and the. low domestic bid was $1.19 a unit. After an evaluation using
1 See p. 8827.
PAGENO="0069"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8571
the 12 percent factor plus duties, the foreign bid was still low. But, an
evaluation using the 50 percent differential resulted in the domestic
bidder being low and receiving the contract. After considering dis-
count and freight, this procurement cost almost $107,000 more than it
would have from the foreign source.
Because of the above influences neither DPSC nor VA normally
make any special effort to develop foreign sources for their drug re-
quirement even though prices of drugs of foreign origin, as a general
rule, are lower than domestic prices. Efforts to obtain bids from foreign
sources are limited to the actions normally tak~n to obtain bids from
any source, that is, solicitations are sent to the few foreign firms on
the bidders list at the time they are sent to other potential suppliers
and the proposed procurements are announced in the Commerce Busi-
ness Daily. The VA also sends copies of its solicitations for items to
be procured competitively to publishers of a number of marketing
publications.
In November 1971 VA wrote to several Canadian firms inquiring
whether they marketed three specific drug items in the United States.
Four of the eight replies said that the firm did not yet have the neces-
sary NDA approval and the others said that they did not market or
manufacture the items.
Appendix IV shows the drug items procured from foreign firms in
the years 1968 through 1971 by DPSC and VA.'
I would like to turn now to the policies and regulations and prac-
tices which relate to medicaid and medicare.
The current HEW policy for the payment for prescription drugs
under the medicaid program does not require uniform procedures and
practices to be followed by the States. Also, the use of a formulary
is optional, but where one is used standards for quality, safety, and
effectiveness must be set and supervised by professionals. The Social
and Rehabilitation Service is responsible for administering the medic-
aid program.
The formulary system should be broad enough to enable physicians
and pharmacists to select high quality drugs of recognized therapeutic
value for the treatment of any medical situation. Approximately 20
States have attempted to control the cost of drugs in their medicaid
programs through the use of formularies. Attempts have also been
made by the States to limit certain drugs in their formularies to
generic names.
In November 1970 we reported to the Congress that significant sav-
ings could be available to the States and the Federal Government if
physicians were to prescribe lower-priced, chemically equivalent drugs
instead of higher-priced brand name drugs. We pointed out that the
HEW Task Force on Prescription Drugs reported in December 1968
that of the 409 brand name drugs most frequently prescribed for
elderly persons in 1966, chemical equivalents for 63 of these were
available at lower costs. These 63 drugs accounted for about one-
fourth of the prescriptions for the 409 drugs, and the task force com-
puted that prescribing the lower cost chemical equivalents would have
resulted in annual savings of $41.4 million.
The HEW task force reported also that physicians were not always
aware of low-cost, chemically equivalent drugs produced by competing
manufacturers or were reluctant to prescribe such drugs until their
safety and effectiveness had been proven.
1 See p. 8831.
PAGENO="0070"
8572 COMPETITiVE PROBLEMS I~ THE DRUG INDUSTRY
Regulations for part A of medicare set forth two basic requirements
that must bernet in order for a drug or biological to be included as a
covered hospital service. It must (1) represent a cost to the institution
in rendering services to the beneficiary, and (2) either be included, or
approved for inclusion, in the USP, the NF, the U.S. Homeopathic
Pharmacopoeia, or New Drugs or Accepted Dental Remedies (except
for those unfavorably evaluated), or approved by the Pharmacy and
Drug Therapeutics Committee (or equivalent) of the medical staff of
the hospital for use in the hospital. There are no medicare regulations
concerning the use of generic versus brand name drugs.
Payments for drugs under part A are made on the basis of reason-
able cost. Payments are audited by fiscal intermediaries under contract
to the Social Security Administration in accordance with the "prudent
buyer concept." Under this concept, the Government pays the amount
a prudent and cost-conscious buyer would pay for a given item or
service.
Under part B of medicare, coverage of drugs and biologicals is
limited to those drugs and biologists (except for insulin) commonly
furnished in physicians' offices which cannot, as determined by regu-
lations, be self-administered. Thus, a drug or biological is reimburs-
able under part B of medicare only if it is of a type which is normally
not self-administered.
Medicare carriers are responsible for determining whether the serv-
ices in a given case are reasonable and necessary. In making its evalua-
tion, the carrier is expected to take into account accepted standards of
medical practice in its service area. Because accepted standards of
medical practice vary from one area to another, the Social Security
Administration has issued general guidelines leaving it to the carrier
to develop more detailed guidelines which reflect accepted patterns
of care in its service area.
This concludes my statement, Mr. Chairman. I have attached several
appendixes to my statement. If agreeable, I would like to suggest
that these be included as part of our statement.'
Senator NELSON. Has the GAO attempted to make any estimate
of the amount of money wasted by poor purchasing practices? I am
not talking so much about buying drugs they ought not to buy, but
the varying prices that are paid by the different agencies for the same
drug? No attempt has been made to estimate that?
Mr. STAATS. Not on a Governmentwide basis. We have made these
comparisons of the type we have referred to in our statement. On a
Government-wide basis, we do not have anything that we can de-.
scribe as a total amount of money wasted or which could have been
saved if there had been proper coordination and use of VA's facili-
ties by DPSC or vice versa.
Senator NELSON. I would like to pursue the question I raised pre-
viously about the authority of the Government in negotiated con-
tracts to examine the cost figures of the suppliers after the purchase,
which is what I understand to be the law. This applies not before,
but after, the purchase; is that correct?
Again, in January and February hearings of 1971, part 20 of these
hearings, on page 8018, I raised the question with you about this
authority. It was agreed-I do not want to read all this material-
that the General Accounting Office has authority under the present
`See pp. 8822-883i.
PAGENO="0071"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8573
law to examine all negotiated contracts for drugs and medicines, and
to require price and cost information from the suppliers who are sup-
plying these medicines.
Then I raised the question of whether you intended to use the au-
thority in this law. The answer by Mr. Ahart was: "As the Comp-
troller General mentioned, we are continuing our work in examining
drug procurement systems; and as a part of that work, we will be
giving consideration to utilizing the authority which we have under the
provisions of the 1951 act which Mr. Shnitzer mentioned, and actually,
examine the costs of certain of the drug manufacturers. We have not
decided how far we are going to go on this and the final plans are
indefinite. But this will be given consideration as part of this con-
tinuing work, and I am sure some of it will be done."
I commented: "I realize it would be a very complicated matter, but
it would seem to me that all companies ought to be served notice that
the GAO is going to utilize this statute. I think we ought to take a
look at some of these costs. I think it would be a service to the tax-
payer to take a look at that, and I am glad* that you have it under
consideration."
Now, my understanding is that you, in fact, pursuant to authority
under the statute, did go to some manufacturers and seek to get their
production costs respecting drugs they supplied on negotiated con-
tracts. Is that correct?
Mr. STAATS. We have had discussions with some manufacturers with
respect to the costs of their drugs. The main difficulty that we have
encountered is that there are indications that the manufacturers with
whom we have had discussions do not allocate major overhead costs on
a product basis. In other words, it would be impossible to develop from
their internal accounts what their costs are with respect to an indi-~
vidual drug. They just do not keep them this way.
I do not think there would be any problem of looking at their total
costs, at how they allocate these costs with respect to the costs of drugs
sold. That is, I am thinking here about research and development,
with respect to merchandising, marketing, with respect to profes-
sional services, and things of this type. The only problem so far that
has been presented is in connection with inquiries that relate to costs
for an individual drug. And they have just never made allocations of
all overhead costs on this basis. So this is the problem that we have
encountered.
Now, I do not think we would have much difficulty, and as I have
indicated, if we were to approach them in terms of a cost allocation
system, I think it may be possible to develop some comparisons as to
how much goes into advertising, R. & D., and various costs of this type.
We would have to more or less have our own definition as to cost
allocation methods here.
Senator NELSON. So you tell me that these great-
Mr. STAATS. But by individual product, I do not know quite how
you would go about it. We would have to draw, again, our own guide-
lines. We would have to go in and examine every voucher and related
charges and determine their proper allocation.
Now, the other side of this question-
Senator NELSON. Well, I just want to raise a question. That puzzles
me because we have been told so often about the great sophistication
PAGENO="0072"
- 8574 COMPETITIVE PROBLEMS IN THE DRUG INDuSTRY
of methods of accounting, their capacity to decide whether they are
making a profit or not, and on what they are making a profit. Do you
mean to say that the drug companies really do not know whether they
are making money on this drug or that drug, that they are just pour-
I ing out a lot of drugs, and at the end of the year, they are making a
- great profit, but they can just not tell us which one is profitable?
Mr. STAATS. They know what their total business is. They know
what their profit is on pharmaceuticals and other products, I am sure
of that. That is all public knowledge.
The statement has been made that product line cost is a matter of
proprietary information which deeply affects their competitive posi-
tion in the market.
Senator NELSON. Well, let's pursue that point. I understand that if
there is a negotiated contract, the 1951 law authorizes the Government
to examine the supplier's books to determine what are the costs of
production.
Mr. STAATS. No, the truth in negotiation law. You are referring to
87-653, the Truth in Negotiations Act of 1962.
Senator NELSON. Oh, the 1951 is the applicable statute; is it not?
Mr. STAATS. Yes.
* Senator NELSON. Can you tell me exactly what that law authorizes,
what the authority is in that law?
Mr. STAATS. I think at the time the contracts are negotiated today,
the basic law involved is the Truth in Negotiations Act of 1962, which
generally requires in the case of negotiated contracts, that supplier
- furnish the Government contracting officer with all of his known costs:
His labor costs, his equipment costs, his material costs, and things
of this type.
Now, Mr. Shnitzer can tell you why that law does not apply in this
case.
Mr. SHNITZER. Well, the Truth in Negotiations Act-
Senator NELSON. I want to know what law does apply; I do not
care what does not apply.
Mr. SHNITZER. Mr. Chairman, I think we have to go back to the
1951 act, which is the act that you referred to. That act requires that
any contract negotiated under the authority of either the Federal
Property Act or the Armed Services Procurement Act, which would
be the two basic statutes I am talking about, include a provision to the
effect that the GAO shall for a period of 3 years after final payment,
have the right to examine the records, essentially, of the contractor
relating to costs.
Senator NELSON. Now, the GAO has a right to examine the records?
Mr. SHNITZER. The Comptroller General or a duly authorized
representative; yes, sir.
Senator NELSON. All right.
Mr. SHNITZER. The statutory authority says that each contract,
which comes within the ambit of what I am talking about here, shall
include such a provision; and, as a matter of fact, such a provision is
included in the standard boilerplate. As a practical matter, there
would be no contract without such a provision.
Mr. STAATS. But that has nothing to do with access by the con-
tracting officer to information at the time the contract is negotiated.
That is the point I was making a while ago.
PAGENO="0073"
OOMP~TIPIVE PROBLEMS IN THE DRUG INDUSTRY 8575
What Mr. Shnitzer is talking about is after the contracts have been
awarded, after the goods have been delivered, access to records post
facto, you understand.
Senator NELSON. That was my understanding. That is the testimony
that I read from a year ago, that it had to be after the negotiated
contract had been settled; that at that stage, the GAO has the author-
ity under the~ law, and it is agreed as part of the boilerplate in each
contract, to go look at the books of the company to make a determi-
nation of what the cost of production of that drug is.
Is that correct?
Mr. SHNITzER. Yes, sir; directly relevant books, documents, paper,
and records, I think it is.
Senator NELSON. If they tell the GAO that they do not keep product
lines, maybe your accountants can teach them something by going in
and breaking it down and improving their accounting system. Do you
not think that would be worth while?
I think a good accounting system can do it. I just do not believe com-
panies when they say, we are producing seven products, we are selling
$80 million of this and $20 million of this and $10 million of this, the
compounds cost us this amount, our overhead is this amount, it takes
this long to produce this product, and so forth and so on. I do not
believe them. I just think they are lying when they tell you they can-
not give product line costs.
But if they are not, if they are that incompetent, it seems to me that
under the law, the GAO ought to go in and maybe you can help them
become a little more efficient.
I think they are lying to the American public. I think it is as simple
as that.
Mr. STAATS. I think a very important point-
Senator NELSON. Pardon?
Mr. STAATS. I do not see how we can go in and tell the contractor
what kind of accounting system he is going to use.
Senator NELSON. You do not have to. But the law allows you to look
at their costs. I think you can reach a conclusion yourself.
Mr. STAATS. We do have new legislation which will have a bearing
here which has to do with cost accounting standards. I am a Chairman
a separate agency which is called the Cost Accounting Standards
!3oard. This board has been in operation now for about a year. We
I ~ave already promulgated standards, and we will be promulgating
more standards.
Now, these will be relevant to what you are talking about. And I
flunk it will have a significant bearing on your question.
But as of now, I do not know how we can go in and tell any drug
manufacturer that he has to keep his accounts a certain way except
under the cost accounting standard framework.
~enator NELSON. I did not suggest that you tell them how they keep
their accounts. I suggest that you take an example of one of these and
use the law. The law says you are entitled to look at the books. It seems
to me you ought to send the team in and see if you cannot figure out
and make a good judgment as to what the cost is. I do not quite be-
lieve that they cannot tell what they are making money on and what
they are losing money on. I do not believe it.
PAGENO="0074"
8576 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
You know, very frequently, they just drop something out of their
product line because they are losing money. How do they decide if
they are losing money if they cannot decide what they are making
money on? I do not believe it.
But it seems to me we ought to use the law when we are having nego-
tiated contracts time after time. We know that the public is being ex-
ploited on these things. We have a long record here of companies man-
ufacturing in this country and selling their drugs in this country for
five times what they sell it for in Europe. They manufacture it, pack-
age it, ship it to Europe and charge one-fourth as much. Well, if they
do not know what it costs to produce it, how can they decide that they
can sell it for one-fourth as much and still make a profit?
We have any number of cases where they are putting drugs into the
retail marketplace, our 21 volumes are loaded with this type of mate-
rial, where they are charging the pharmacists a high price and then
just look at the bids to New York City, where they will be charging
them 1/20 or 1/100.
We have a case of firms selling to New York City for 1/100 of the
price they charge in the retail market, and they are glad to have the
business. Yet they are outbid by somebody who bids one-third as much
as their 1/100.
Now, I do not know how they can bid to New York City 1/100 of
what they are charging in the retail marketplace if they do not know
which product they are losing money on. It seems to me you ought to
look at their books.
Which company is it that refuses to let you look at its books?
Mr. STAATS. We have not had a formal refusal from any company.
We have not really felt that from the point of view of the major sav-
ings that could be achieved in the drug procurement area-the Gov-
ernment here is, after all, less than a 5 percent customer of the drug
industry directly, when it comes to direct procurement-we have not
felt that this was the most productive way to get at reduction of costs
to the Government in that $240 million area. We think the greater pay-
off is in the area of improving the coordination among the agencies,
improving the procurement management. We have felt for several
years, have testified before the Finance Committee 3 or 4 years ago,
that for the purpose of increasing competition, the generic drug route
is the most profitable aspect of this problem. I would hope that this
committee would-I believe you do-support that. But if you want to
get competition, you have to have common specifications. That is what
we have learned in other areas of Government procurement. You can-
not get competition unless you get common specifications and go out
and get some competition. And you are not gomg to get that until you
move down the generic drug route.
Senator NEI2s0N. I agree with that, but you do have the Government
engaging in negotiated contracts, apparently for drugs that are avail-
able from several sources, excepting that the specifications are de-
signed by a producer in such a way that you eliminate the other com-
petitors. How widespread that is, I do not know.
Mr. STAATS. I am not saying that that is a good idea, but I would
prefer to see us focus on what a total output is from a drug manu-
facturer as to what his costs are in relation to what. it costs the
Government.
PAGENO="0075"
OOMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8577
I do not think, frankly, from what I know about the drug industry,
that we are going to get very far just trying to take a dramatic single
product line and show that that manufacturer has made a lot of money
off it where, in other cases, he may have lost money. I think we should
approach it from the standpoint of tOtal sales to the Government
on negotiated contracts. We might have a better chance of getting
cooperation.
Senator NELSON. How would they know they lost any money? Under
their accounting system they cannot tell you they made any money.
How would they know they lost any?
Mr. STAATS. Well, you can find this out.
Senator NELSON. You and I just do not agree on that. I think that
when we put the provision in a negotiated contract, we should use it.
It was not put in the statute to be honored in the breach. I think we
ought to use it. You say $240 million is involved. Maybe it is not a
large item. I think there are a lot of other items in here that you have
mentioned that ought to be pursued. But I do not see ~why we should
not just take a look at one of those and let's just find out.
Have you done this? Have you taken a product that is procured,
and which is available from several manufacturers under different
brand names-and possibly a generic name-and studied to find out
whether the negotiated price by the Government was substantially
higher than the price that could be gotten from these other companies?
Mr. STAATS. Well, now, I am not sure I understand your question,
but in no case do I know that the Government has paid more than
has been paid by another customer. It has been less.
Senator NELSON. I am not talking about another customer. I am
talking about the situation referred to by Colonel Breyfogle that I
read to you earlier, about the specifications being prepared by a man-
ufacturer so no other supplier can meet them. Of course, if you have a
drug that is patented and there is a sole supplier in the whole United
States, you cannot compare prices. But when there are several sup-
pliers of a particular compound for which the Government has a con-
tract, have you ever tried to find out whether or not it is being sold,
for example, to New York City at a lower price? In other words, if
there are several suppliers, why should you ever negotiate a contract?
Why not bid?
It seems to me we ought to take a look at every negotiated contract
where there are several manufacturers, two or more manufacturers of
the product, and find out why the contract is negotiated. If it is negoti-
ated for the reasons suggested by the colonel, then I think we ought to
put a stop to that.
Mr. STAATS. I am not suggesting that I agree with what you have
read here.
Senator NELSON. Well, he is the procurement officer.
Mr. STAAT5. Well, again I come back, until you can get common
specifications where you can go out for competition, I do not know,
quite honestly, what alternative the Government has except to nego-
tiate contracts.
Senator NELSON. Well, this is the exact point. I am saying that what
Colonel Breyfogle, Chief, Division of Medical Materiel, Defense Per-
sonnel Support Center, Defense Supply Agency, here is saying is that
specifications are being supplied by the manufacturer so that the rest
PAGENO="0076"
8578 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
of the competition is eliminated. That is what you have to ~et at. And
he says that it is because frequently specifications are designed by a
particular manufacturer.
All I am saying is that if a drug meets USP standards or National
Formulary standards, you should investigate the possibility that other
specifications are being infiltrated in here in order to eliminate the
competition?
Now, if it is a question of being able to handle it under adverse
climatic conditions, as in the jungle, that is another problem. I am
not talking about that. I am talking about a negotiated contract for
supplying our forces here in the United States or Europe or VA. When
there are several manufacturers, why should there be a negotiated
contract?
Mr. STAATS. We are in agreement with you on this point, Mr. Chair-
man. That is why we brought it out in our statement and that is why
we said there are dangers here unless these are truly required for the
needs of the military services, such as the climate conditions that you
just referred to.
Senator NELSON. `Well, if this statement of Colonel Breyfogle means
anything, he is addressing himself to a different situation from that.
I do not really understand. We raised this question a year ago. You
thought it was important enough to take a look at it so that you go
and have conferences with the manufacturers. Then the manufacturers
turn you down in informal conferences, at least. And now you are say-
ing that you do not think it is worthwhile doing in the first place. Well,
why bother to confer with them if you did not have it in mind that it
might be worthwhile to find out what their costs were on a negotiated
contract?
Mr. STAATS. `Well, I think we are interested in getting what we can
if it is going to be meaningful. But if it is not going to be meaningful,
if the accounts are not kept in such a way that we can draw any
meaningful conclusions, I do not see that it is anything but a waste
of time.
Senator NELSON. But they just turned you down. They did not let
you look at their books, did they? How do you know whether there
is-
Mr. STAATS. I do not think that would be quite an accurate statement.
Senator NELSON. I am asking you.
Mr. STAATS. It is a good question. But the only problem that we
have encountered-
Senator NELSON. The only what?
Mr. STAATS. The only problem that has been raised in connection
with this is to try to break down the total costs by product line, by
individual drug. I do not think the problem would be as great if you
wanted to take a company's drug sales for, say, the DPSC or the VA.
It is when you try to break it down by product line and make the in-
formation public so that Company X knows exactly what Company
Y's costs are that you have a very serious proprietary data issue. This
is a matter of law also.
Now, maybe you are not suggesting that we ought to make product
line information public. I am not sure what you are suggesting.
Senator NELSON. I do not know what the intent Of Congress was in
passing the law. and I would not want to make an off-the-cuff judg-
PAGENO="0077"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8579
ment of it. But it would seem to me that at the very minimum, GAO
ought to make the determination for itself as to whether or not a
profit is being made and its extent.
There is nothing in the statute, I take it, for any recapture, anyway.
It is just to inform us, inform the Government, whether or not or
what kind of profit is being made. Is it not? Am I correct on that? So
that you can be forewarned for future negotiations, right?
i\lr. STAATS. The purpose of the authority as included in the con-
tn~t is to enable on a postaudit basis to go in to see whether the
charges made against the contract. are fair and reasonable.
Senator NELSON. Right.
Mr. STAATS. Now, if I understand what you are suggesting, it is
that we ought to, in spite of the proprietary data information ques-
tion, make public procurement on individual drug by drug itemiza-
tion. And this is where we have the proprietary data question.
Senator NELSON. Well, I was not making any specific recommenda-
tion as to what ought to be and what ought not to be made public. You
represent the Congress, which represents the American people, who
pay the money. We ought to know when we negotiate. a contract
whether or not we are getting a fair price. That is the purpose, as I
understand it. And if the price is not fair, you ought to negotiate a
better price the next time, or negotiate with somebody else, or get a
competitive bid, or go to Europe, which we have done once in awhile.
Mr. STAATS. Not very much, probably not as much as we should.
Senator NELSON. No, not as much as we should, when in fact, do-
mestic prices are set artificially high. We have several tools, but the
problem that bothers me is we do not seem to use them.
Now, are you saying that if a company is supplying several drugs-
two or three or four or five different drugs-to the Government over
a period of time, you think it is feasible to look at that negotiated
price and then go look at their books?
Mr. STAATS. In terms of the total package, it might.
Senator NELSON. And then make some judgment as to whether or
not you have a fair price? You are saying you can do that?
Mr. STAATS. I think it might be possible.
Senator NELSON. Well, what are the companies-
Mr. STAATS. Mr. Chairman, again, though, I thing we are on your
side in terms of what the objective is here. But I still have the feeling
that we are putting the focus on the wrong thing.
We have been advocating for several years in testimony before this
committee and before the Senate Finance Committee trying to get
common specifications so you can get a broader procurement base. You
cannot get advertised procurement if there is only one supplier. You
have to go sole source.
Senator NELSON. Well, why have only one supplier? One supplier
because of the way the specifications are drawn?
Mr. STAATS. Sure, in many cases.
Senator NELSON. We know we have a hundred cars in the market-
place-
Mr. STAATS. You recognize as we do that in the case of medicare
and medicaid, the physicians and the intermediaries, the ones that.
are involved here, this is much more difficult to do unless the Govern-
ment prescribes the way these drugs are to be procured.
PAGENO="0078"
8580 COMPETITIVE PROBLEMS I~ THE DRUG INDTJSTRY
Senator NELSON. Or establishes a formulary.
Mr. STAATS. One of the reasons we have suggested that the FDA
ought to play a part in this picture is that we think the FDA, as an
independent agency separate from the procurement agencies, could
play an important part in setting these kinds of specifications.
Senator NELSON. I thmk all these things are important. I just think
that, like anything else, some of these are more important than others.
But what, however, does concern me is that we appear to negotiate
too much. What is the total amount of negotiated sales by all Federal
agencies?
Mr. STAATS. A sizable portion of the $240 million figure, in 1971.
Senator NELSON. Is negotiated.
Mr. STAATS. Yes.
Senator NELSON. Now, it seems to me that this may not be the big-
gest item, but if it is almost a quarter billion dollars per year, that
is a billion dollars in 4 years; it seems to me we ought to check to find
out whether we are getting value received. You are saying that you do
not think this is as important as other things. I would not quarrel
with that, but I think it is important to do something about, since ap-
parently we do not do it in drugs. We never have, have we? Have we
ever taken a case in the field of drugs and used that cost statute to
find out whether we are getting a fair bargain?
Mr. STAATS. No. Factually, what you are saying is correct.
Senator NELSON. Then you are saying that you would raise several
problems if you did it by product line, especially if you made the fig-
ures on the product line public. Well, reserving judgment about that-
I do not know what the law is on the subject of making the informa-
tion available-it seems to me we ought to look at some of these things
on product line. But you are saying that you can do it by just looking
at the whole cost of the company.
Well, supposing the company is supplying just one item.
Mr. STAATS. I do not know of any such company.
Senator NELSON. You mean the companies in question are negotiating
on a number of drugs?
Mr. STAATS. Yes, sure.
Senator NELSON. What have the companies said to you? Have you
asked them to look at their cost figures so that you can make a judg-
ment overall?
Mr. STAATS. Not on this basis, no. As I told you in the letter which
I sent to you on January 18, we were pursuing other avenues here to see
whether we could not get a better fix on how we could reduce these
drug costs.
We have not closed any doors in this area, Mr. Chairman. I do not
want to leave the impression with you that we have. But we are pur-
suing all of these avenues. I think we are going to have to explore all
these avenues before we are able to say to you that we have reached a
conclusion.
Senator NELSON. Do you expect to take some action on these nego-
tiated contracts and requests for their production data so you can make
an overall judgment? In other words, they must have some cost data.
How do they know what price to charge for the product?
Mr. STAATS. You have to recognize that again, the Government here
is a very small customer, a very small customer-in most cases, less
than 3 percent, or certainly less than 5 percent. So the companies are
PAGENO="0079"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8581
concerned with the commercial market. This is not without some protec-
tion to the Government. If they have to meet their competition in the
commercial market, which represents 95 percent of the business, and
the Government gets a discount from any other published price, it is
a little hard on the face of it to say that the Government is not getting
good prices.
Senator NELSON. Well, I do not know whether they have been-we
have some figures we could show you from past hearings where gen-
eral hospitals and cities and States around this country were paying
10 and 20 times as much for a drug product as New York City paid.
Somebody was getting cheated. Either the company was losing money
in New York City or overcharging in Illinois or wherever else.
Mr. STAATS. I think your suggestion here that we look for the same
items to see what other large organizations, particularly the public
organizations like New York, are paying for drugs is a very good one.
As far as I know, we have not done this and I think we probably
should.
Senator NELSON. Well, my question is do you intend to implement
the statute which authorizes you to look at cost production figures on
negotiated contracts respecting drugs or not? My understanding from
my conversations and our hearings and your letters to me is that in
fact, you were going to proceed and that when you got started, the
company said, no, we "ain't" going to show you anything.
What did they refuse to show you, then?
Mr. STAATS. You have the transcript there. I do not recall that we
ever said we were going to proceed. I think we said we were consider-
ing what we could get here. And there: have been informal conversa-
tions with several of these companies. But we have neither formally
requested nor formally been turned down on these records to date.
Senator NELSON. Well, informally, were you turned down?
Mr. STAATS. I am nOt sure we can get around some of the problems
which I have indicated.
Senator NELSON. Well, did they informally tell you that they are not
going to let you look at their production cost data?
Mr. STAATS. Well, I do not think as a company matter, I do not be-
lieve it has come up to that level in most of these companies that we
have talked to. We have the matter held in abeyance because of certain
problems which I have referred to earlier.
Senator NELSON. Well, these are negotiated contracts, paid for by
public money under a statute passed by the Congress representing the
public. What matters are you not free tt~ discuss?
Mr. STAATS. I am well aware, Mr. Chairman, that you would like us
to take these cases into court. I think that is what you are asking that
we do.
Senator NELSON. Well, I do not know why you would go into court
when they have neither informally nor formally refused to show
you the data. You must be of the opinion that they are not about to.
Mr. STAATS. I am using your words. You stated a little earlier that
you would take them into court.
Senator NELSON. Well, I have been under the impression, perhaps
incorrectly, that they simply refused to give you the data. You are
saying that they did not formally or informally refuse. Is there some
other way they have refused?
PAGENO="0080"
8582 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
Mr. STAATS. Well, we have never formally asked for it.
Senator NELSON. Well, what did happen? You had these conver-
sations m which you said that in pursuance of this statute, we would
like to find out the cost of production, but nothing happened.
Mr. STAATS. WTell, we have had discussions. I guess that is about
all we can say. We have had discussions. The matter is not foreclosed;
the matter is still under consideration. But I am not prepared to tell
you here today what our final decision is.
Senator NELSON. Well, I was not going to ask you. I am just
curious.
Did they say, so that we avoid any formal or informal problem
here, did they say that you have not asked us, but in the event you
did ask us, our people would probably say ~o, but don't ask us so we
will not be forced to give you that answer. You went to them and
talked about it. I cannot figure out what happened. I was under the
impression that they said: "No, we will not show you our cost figures."
Well, why don't we ask them, then? Maybe they will.
Mr. STAATS. Well, again, there are certain problems here. If we
can deal with the question of costs without it, that is one thing. If we
cannot, that is something else.
Senator NELSON. I do not understand that. If you can deal with
the costs-
Mr. STAATS. Well, we feel that' in terms of priorities, what we
ought to be focusing on are some other things. I really am not quite
sure what your point is. Maybe we are not communicating. Are you
interested in the total negotiated contracts with a company, or are
you interested in some particular drug?
Senator NELSON. Oh, I am not interested in any particular drug. I
am interested in the question of all these negotiated contracts. I am
disturbed when I see Colonel Breyfogle telling about specifications
being set by companies so nobody else can compete. I am concerned
about the taxpayer's dollar, I am interested in the statute that au-
thorizes us to check costs.
Now, I would not attempt to tell you what your priorities should
be. I know that you have all kinds of work assigned to you by the
Congress and you have to make a decision about that. You may have
other priorities that certainly may be greater than this. I cannot
judge that. But we raised it a year ago. You were interested enough
in the idea to come to my office and discuss it and to send me mail.
Mr. STAATS. I think, Mr. Chairman, you will recall that at that
time, I furnished you with a long list of study items that we had
underway, our reviews in this area. And I affirmed that in a letter
to you January 18. We are still underway with these various studies;
they are not all completed. We have given you the best we can today-
our progress report. I am afraid I cannot really respond to your
questions better than that.
Senator NELSON. And you do not wish to tell the committee what
companies you even talked to?
Mr. STAATS. I would prefer not to.
Senator NELSON. Well, as I say, there is no way for me to assign
priorities to the GAO. You know, I do not know what the highest
priorities are. Perhaps we should get back to this agaul.
PAGENO="0081"
OOMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8583
You have not made any final decision on what you might do about
requesting examination of books and so forth?
Mr. STAATS. That is correct.
Senator NELSON. All right. We will hear from you at a later date on
that; is that right?
Mr. STAATS. We will be very happy to keep in touch with you on it,
as we have, I hope. And we are glad to know any thoughts that you
have. But there are many factors, as I say, which have to go into this
decision and we are considering them.
Senator NELSON. Well, at some later date, wl~en you have decided
one way or the other, we will have a hearing on it and you can advise
us what judgments you made and why.
Perhaps the people investigating for you are very knowledgeable
about this whole field of pricing structures and bidding and so forth,
and maybe they are not. If they are not, I think it would be worthwhile
for them to get informed sufficiently so that they can get at the ques-
tion I have been raising. If we are purchasing drugs for use by the
Veterans' Administration, the Department of Defense, and other Gov-
ernment agencies for use in this country, and the companies or the
Government are insisting upon standards higher than USP or NF,
then I would be very suspicious of them. And No. 2, they really ought
to have to justify them so that we are not in the position of being forced
to buy on a noncompetitive basis.
Mr. STAATS. I believe we are in full agreement on this part.
Senator NELSON. If you would pursue that question, then at a later
date, we would have further hearings.
Has the GAO completed its study of the Food and Drug Adminis-
tration?
Mr. STAATS. Have we completed our study of the Food and Drug?
Senator NELSON. Yes.
Mr. STAATS. We have several studies on the Food and Drug Admin-
istration. I do not know which one you have reference to.
Mr. CROWTHER. We just recently completed one on sanitary condi-
tions in food manufacturing plants. We have several others underway.
We have one, for example, dealing with the legal constraints that
FDA is under for performing their efforts, and several others.
Senator NELSON. I have not seen your studies. I understand that the
GAO has found out that the FDA has, in a period of 3 years, been
refused data of various kinds from drug manufacturers 10,000 times,
which included such requests as refusal to allow the FDA entry into
a plant; refusal to supply formula data respecting a drug; refusal to
show production control records; shipping records; refusal to show
complaint files.1
Is that correct?
Mr. CROWTHER. Yes, sir; that is correct. That particular review has
not been completed. It is still underway, but the figure that you quoted
is the number that we have obtained. There have been more than 10,000
refusals for FDA access to various things needed for FDA to exercise
its authority and the items range from refusal of entry to refusal of
access to formulation data, and refusal of other related requests for
specific data.
`See Appendix v, p. 90G7.
80-450 0-72---pt. 22-6
PAGENO="0082"
8584 COMPETITIVE PROBLEMS L~ THE DRTJG INDUSTRY
Senator NELSON. Are these requests which are for information which
is necessary for the Food and Drug Administration to carry out its
assigned responsibilities under the law?
Mr. CROWTHER. Yes, sir, they are and the legal constraints that the
Food and Drug Administration operates under in carrying out its
regulatory authority as between Various product lines is quite different.
Under the law, the Food and Drug Administration is provided with
greater authority for access to information on prescription drugs than
it is for information on over-the-counter drugs. In cases where a firm
manufactures both products, they could be side by side. The Food and
Drug Administration may have complete access to formulation data
on the prescription drug line but does not have the same access author-
ity on over-the-counter type drugs. Consequently, FDA inspectors are
unable to determine whether or not all the ingredients are put in
properly or whether the formula has been followed.
Also, since FDA's authority goes to those items shipped in inter-
state commerce, it is necessary for FDA to have access to records show-
in~ whether or not an item is shipped in interstate commerce. But
quite often, the burden of proof is placed upon the Food and Drug
Administration, rather than to be freely allowed access, to even ship-
ping records.
Senator NELSON. Were there actually 10,000 refusals in 3 years? How
can there be 10,000 in 3 years? That runs about 10 a day.
Mr. STAATS. These would not be that many companies-
Senator NELSON. Are all these 10,000 refusals in areas where the
FDA needs the information but does not in fact have legal authority
to get it?
Mr. CROWTIIER. I would say most of the cases here are in that cate-
gory. Again, we have not completed our work, so I cannot give you a
breakdown on how many are and how many are not in that category,
but probably most of them fall in that category.
Senator NELSON. Most of them fall in the category where the FDA
does not have the legal authority to demand and require production
of the information?
Mr. CROWTHER. That is correct, and this information is needed in
order for FDA to perform its job, but FDA does not have legal au-
thority to get access to the data.
Senator NELSON. You say most of it. Do you have any notion how
much? Were they refused on a large number of cases, a fourth or fifth,
in which they do in fact have legal authority?
Mr. CROWTHER. I just do not have that information.
Senator NELSON. You have not made any evaluation of that?
Mr. CROWTHER. Not yet.
Senator NELSON. We will take that up with the Food and Drug
Administration.
Did you, in checking on procurement, check the question of the total
amount of drug contracts, negotiated or otherwise, received by small
businesses as so classified under the law?
Mr. CROWTHER. Yes, sir; I think these were included in a separate
letter to you on February 3, 1972. Some of that information, if you
would like, we could repeat for the record.
At that time, we provided information on small business purchasers
from the Defense Supply Agency and the Veterans' Administration for
fiscal years 1969, 1970, and 1971.
PAGENO="0083"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8585
Senator NELSON. You sent us a letter on that?
Mr. CROWTHER. Yes, sir.
Senator NELSON. What date?
Mr. CIIOWTHER. It was dated February~3, 1972.
Senator NELSON. All right. If you would leave a copy with us so
we can-
Mr. STAATS. Would you want it in the record at this point?
Senator NELSON. We want to incorporate it in the record.
(The information referred to follows:).
COMPTROLLEB GENERAL OF THE UNITED STATES,
Washington, D.C., February 3, 1972.
B-16403i (2)
Hon. GAYLORD NELSON,
Chairman, Snbcommittee on Monopoly, Select Committee on Small Business,
U.S. Senate.
DLAR MR. CHAIRMAN: This is in response to your request made during our
meeting of August 9, 1971, that we furnish information on the policies and
practices followed in establishing set-asides for small business in Government
procurement of drugs.
To answer your request, we examined the policies, procedures, and criteria used
by the Small Business Administration (SBA), the Veterans Administration
(VA), and-the Defense Supply Agency (DSA) for setting aside procurements of
drugs for small business concerns. Our review was directed to VA and DSA
because they procure most of the drugs bought directly by the Government.
STATUTORY AUTHORITy AND RELATED POLIOIES
The statutory and regulatory authority under which the procurement programs
of SBA are conducted includes:
1. Section 2(a) of the Small Business Act (15 U.S.C. 631) which, in general,.
states that it is the policy of the Congress that the Government shall assist the
interests of small business to preserve free competitive enterprise and to insure
that a fair share of Government procurements is placed with small business
concerns.
2.. Section 8(a) of the act empowers SBA to contract directly with Government
agencies for the purpose of letting subeonstracts to small business firms.
3. Section 15 of the act provides that all or a part of any procurement shall be
set aside for small business when SBA and the contracting agency jointly, deter-
mine that such action would (a) be beneficial to the national productive capacity,
(b) be in the interest of national defense programs, or (c) insure that a fair
share of Government procurements is made from small business.
Unilateral set-asides for small business by the Department of Defense are made
under authority of section 2304(a) (1) of Title 10, United State Code, and imple-
menting regulations set forth in section I, part 7, of the Armed Services Procure-
ment Regulation. Federal civilian executive agencies make unilateral set-asides
in accordance with section 302(c) (1) of the Federal Property and Administra-
tive Services Act of 1949, a's amended [41 U.S.C. 252(c) (1)], and implementing
regulations set forth in Federal Procurement Regulations, primarily subpart 1-1.7.
SBA National Directive 605-i of April 8, 1968, requires that procurements of
$2,500 and more which have not been recommended for set-asides by either a
small business specialist (employee of the contracting agency) or the contracting
officer, or which have been recommended and then withdrawn, shall be screened
by a SBA representative for possible small business set-asides action.
One hundred percent set-asides for small business are to be initiated on all
procurements determined to be within the purview of Section 15 of the Small
Business Act. However, SBA National Directive 605-1 states that one hundred
percent set-asides shall not be initiated if any of the following conditions esists:
"(1) The item is a proprietary item, * * *
"(2) There is the expectation of receiving insufficient small business competi-
tion to provide a reasonable price to the Government.
"(3) The procurement is of a qualified product [item must pass specification
test requirements and be on a list of qualified products prior to the procurement]
unless * * * none of the qualified large firms desire to participate.
PAGENO="0084"
8586 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
"(4) The item is on the Departments Planned Producers List unless * *
none of the large business Planned Emergency Producers desire to participate.
"(5) Item is being purchased for field test purposes following an R&D [Re-
search and Development] contract.
"(6) R&D procurements with small business competition insufficient to pro-
vide * * the best proposal.
"(7) Construction procurements estimated at more than $500,000."
Information obtained at the VA Marketing Center and DSA's Defense Per-
sonnel Support Center, which procure about 70 percent of the drugs bought di-
rectly from suppliers by the Government, follows.
DEFENSE PERSONNEL SUPPORT CENTER PRACTICES
The Defense Personnel Support Center has formalized procedures to imple-
ment the small business procurement requirements for defense activities as set
forth in the Armed Services Procurement Regulation. Also the Center has estab-
lished a position of small business specialist, responsible for planning, imple-
menting, and directing the small business and economic utilination programs.
Each year DSA sets small business goals for the Center by commodity group-
ing. For fiscal year 1971 the Center awarded 17 percent of the procurements in
the medical commodity group-includes, in addition to drugs, many other medi-
cal federal supply classes, such as, surgical dressings, and instruments, dental,
X-ray, hospital, optical, and laboratory instruments and equipment-to small
concerns. ~. goal of 16 percent had been set by the parent organization, DSA.
For fiscal years 1969 and 1970, the Center awarded 20 percent and 18 percent,
respectively, of the medical commodity group procurements to small business, or
slightly less than the goals of 22 percent and 21.5 percent set by DSA.
The purchase of drugs, biologicals, and chemicals by the Center represented
over 50 percent of the total dollar value of procurements within the medical
commodity group for fiscal years 1969 to 1971. Of this, less than 10 percent was
procured from small business and the value of set asides for small business in-
creased from about $336,000 to about $800,000. (See enclosure.) The percentage
of awards to small business in the medical commodity group, other than drugs,
biologicals, and chemicals, was about 30 percent for these years.
A purchase at the Center is initiated by a request prepared by the Division
of Supply Operations. Upon receipt of the request, the contracting officer pre-
pares a form which identifies the item and estimated quantity required and any
known limitations toward making a partial, or total, setaside for small business.
These forms are reviewed by the Center's small business specialist who decides
whether a small business set-aside should be made. These decisions are then
reviewed by a representative of SBA who may appeal decisions not to make
a set-aside, or withdrawals of set-asides to (1) the contracting officer, (2) the
Commander of the Center, or (3) if necessary, the Commander, DSA, through
SBA in Washington, D.C.
VETERANS ADMINISTRATION PRACTICES
Except in the area of contruction services, VA has not issued instructions
to implement the provisions of the Federal Procurement Regulations relating to
small business set-asides. As of August 1971 VA had not designated anyone at
the VA Marketing Center to be responsible for planning and implementing VA's
small business programs.
Until about January 1970 an SBA representative was not assigned to review
the activities of the VA Marketing Center from a small business viewpoint. Thus
until that time set-asides for small business were of necessity initiated by the
contracting officials.
For each of the 3 fiscal years 1969 through 1971, VA purchased over $1 million
worth of drugs and chemicals from small business firms. Most of these procure-
ments resulted, however, from the small business firms meeting price com-
petition under normal procurement practices. Contract awards totaling only
$11.400 in fiscal year 1969 and $15,800 in fiscal year 1970 were attributable to
set-asides for small business. (See enclosure.)
Beginning in fiscal year 1971, VA has actively particpated in a program of
procuring drugs from small business minority group enterprises. Initiated under
section 8(a) of the Small Business Act (see above), this program involves VA
contracting directly with SBA. In turn, SBA subcontracts. with small busi-
PAGENO="0085"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8587
ness minority group enterprises. Under this program suppliers appear to have an
advantage compared with suppliers under regular small business set-asides
because prices negotiated by SBA with minority enterprises do not have to
match the lowestprice as under normal small business transactions. The minor-
ity group enterprise prices need only be considered reasonable. The SBA repre-
sentative at the Defense Personnel Support Center informed us that the Support
Center had not initiated a program for drug procurements under section 8(a) of
the Small Business Act.
For fiscal year 19Th the VA Marketing Center reported purchases from minor-
ity group enterprises of about $299,100. These purchases were reported as other
agency contracts to small business, but not as small business set-asides.
* * * * * * *
During our review we identified the following factors which seem to contribute
to the lack of small business participation in drug procurements compared with
the participation in procurements of other commodities.
The increasing number of drug products for which a new drug application-
which is often costly to obtain-is being required by the Food and Drug
Administration.
The continuous reduction in the number of drug firms in the small business
category due to acquisition by large concerns, or growth into the category of
large business.
The fact that most new drugs are developed and introduced into the market
as proprietary or patented items by large business concerns.
We trust this information will serve the purpose of your request. We have
not obtained written comments from VA on DSA on the matters discussed in this
report.
We plan to make no further distribution of this report unless copies are specifi-
cally requested, and then we `shall make distribution only after your agreement has
been obtained or public announcement has been made by you concerning the
contents of the report.
Sincerely yours,
ELMER B. STAATS,
Comptroller General of the United states.
Enclosure.
SET-ASIDES AND OTHER AWARDS TO SMALL BUSINESS BY DSA AND VA, IN FISCAL YEARS 1969-71 FOR DRUGS,
BIOLOGICALS, AND CHEMICALS
Fiscal year-
--------~
1969 1970 1971
DSA VA DSA VA DSA VA
Set-asides $336, 000 $11, 400 $672, 000 $15, 800 $800, 000
Other awards 1 8,728, 000 1, 783, 800 5, 011, 000 1, 048, 800 6, 640, 000 2 $1, 434, 700
Total (small
business) 9, 064, 000 1,795, 200 5,683, 000 1, 064,600 7,440, 000 1, 434, 700
Total (drugs,
biologicals, and
chemicals) 102, 366, 000 23,427, 100 71, 997, 000 23, 019, 100 95, 066, 000 27, 186, 700
Small business as
percentof total 8.9 7.7 7.9 4.6 7.8 5.3
1 These awards resulted, for the most part, from small business firms meeting price competition under normal procure-
ment procedures.
2 Includes purchases of about $299,100 from small business minority group enterprises. (See above.)
Senator NELSON. Do you have anything you want to add?
Mr. STAATS. No.
Senator NELSON. Thank you very much.
We are adjourned subject to the call of the Chair.
(Whereupon, at 12:20 p.m., the subcommittee was adjourned sub-
ject to the call of the Chair.)
PAGENO="0086"
PAGENO="0087"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
(Present Status of Competition in the Pharmaceutical
Industry)
WEDNESDAY, JUNE 21, 1972
U.S. SENATE,
SUBCOMMITTEE ON MONOPOLY OF THE
SELECT COMMITTEE ON SMALL BUSINESS,
Wa$hington, D.C.
The subcommittee met, pursuant to notice, at 10:05 a.m., in room
4221, New Senate Office Building, Senator Gaylord Nelson (chair-
man of the subcommittee) presiding.
Present: Senator Nelson.
Also present: Benjamin Gordon, staff economist; and Elaine C. Dye,
clerical assistant.
Senator NELSON. Our first witness this morning is Brigadier General
Hayes, Medical Corps, U.S. Army, accompanied by Colonel Lindsey.
The committee welcomes you here this morning, gentlemen. Your
prepared statement will be printed in full in the record. You may
proceed to present it however you wish.
STATEMENT OF BRIG. GEN. G. 1. HAYES, MEDICAL CORPS, U.S.
ARMY, PRINCIPAL DEPUTY ASSISTANT SECRETARY OP DEFENSE
(HEALTH AND ENVIRONMENT); ACCOMPANIED BY COL. DOUG-
LAS LINDSEY, MEDICAL CORPS, U.S. ARMY, DIRECTOR OF MEDI-
CAL MATERIEL, DEFENSE PERSONNEL SUPPORT CENTER (DPSC)
General HAYES. I think I will read the first portion of this Mr.
Chairman, and present the last portion for the record.
Mr. Chairman, it is a pleasure to appear before this subcommittee
to bring you a further report on the procurement of drug products
by the Department of Defense (DOD). You have already introduced
my colleague, Col. Douglas Lindsey, Medical Corps U.S. Army. He is
the Director of Medical Materiel, Defense Personnel Support Center
(DPSC).
It has been a busy year for us. Our central procurement and issue
of drug items has held steady at about $100 million per annum in spite
of decrease in size of the Armed Forces and winding down of Amer-
ican involvement in Vietnam. We have initiated many changes, and
many others are in the mill.
We have again solicited the participation of small business in our
drug procurement program, and we have solicited seriously, specifical-
ly, and with encouragement. Nevertheless, the response has been dis-
heartening. Many of the best small drug producers have been bought
(8589)
PAGENO="0088"
8590 COMPETITIVE PROBLEMS I~ THE DRUG INDUSTRY
up by larger industry. Many of the remainder are already quite busy
enough in production for the trade or under their own label many of
the producers who would like to contract with us simply are unwillin
to make the effort to bring themselves up to the standards require
by DOD.
We are vigorously sounding the foreign market. The problems of
patent, licensure, and New Drug Applications are formidable, but not
insoluble. We hope to be able soon to report two major breakthroughs
in the form of price quotations from foreign sources which will pro-
vide major savings to the American taxpayer, either through procure-
inent of foreign drugs at lower cost, or through pressuring reduction in
certain domestic drug prices.
We have made major savings in the past year by more ~discriminat-
ing application for our requirements for marking and packaging.
We are continuing to revise our specifications to broaden competi-
tion, and we have initiated efforts to give our specification writers a
freer hand in adjusting to potential suppliers by limiting the scope of
prescribed "essential characteristics," or stating performance in func-
tional terms, without compromising quality.
Mr. GORDON. General, could you give some specific examples of that?
General HAYES. Well, one of our-anytime we can increase competi-
tion and lower price by revising a specification, we do so, if we can still
preserve the quality. In at least one instance recently, we accomplished
the same aim by refraining from revising the specification. We pio-
neered a specification requirement which limits the bacterial content
of a cominon antacid preparation. Now, the major brand name supplier
is making and offering a sterile product and has proposed that we
change our specifications to require sterility. We have not done so. We
feel that the the specification is quite adequate as it is. A requirement
for sterility would severely limit potential competition. The changes
we made in our specifications have been strictly as to details which
do not limit quality but tend to limit range or resources-the color,
shape of tablet, type of capsule, characteristics of container, to limit
the insoluble residue in an antacid. When the detail in the specification
is clearly important to the potency and purity, as for instance, the
hardness of a chewable tablet or the color of an injectable solution,
we don't change. The producer makes the change to specifications or
he doesn't compete.
Mr. GORDoN. As I understand it, a particular company came to you
and asked you to include a change in a certain specification which
would really have given it a monopoly; is that it?
Colonel LINDSEY. I do not think it would have given him monopoly,
but it would have limited the range of potential competition. We pio-
neered the requirement to limit the bacterial content of a number of
preparations and we think we are getting a quite satisfactory product
and we see no reason to gold plate it by tightening it up.
Mr. GORDON. On the first page, you talk about soliciting participa-
tion of small business in drug procurement. How did you go about
doing this?
Colonel LINDSEY. We have made two approaches. One is to look at
individual drug items or classes of items and seek out small business
sources.
PAGENO="0089"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8591
The. other incidents, we have examined the list of potential bidders,
past bidders, and have looked at their quality record to see how close
they have come to our standards, and we have specifically solicited a
number of small business concerns that in the past have produced for
us but have not `bid recently, or in the past have been turned down on
a preaward survey, but for a deficiency which is correctable without
major capital investment.
Mr. GORDON. And you say the response has been disheartening?
Colonel LINDSEY. Yes, sir.
Mr. GORDON. Why is that?
Colonel LINDSEY. We only got about 20 percent replies of any sort
from letters that we sent out to specific concerns. We sent back to these
companies a copy of our latest issue of our drug standards booklet, our
equivalent of FDA's good manufacturing practice document. In each
instance, when they see what they have~ to do to meet our standards,
why, they hold back. These are new small business concerns that we are
looking for to add to our active list.
Senator NELSON. On the specification's, I take it the specifications
required to be met are often beyond USP or NF standards, is that
right?
Colonel LINDSEY. Yes, sir. This was mentioned in previous hearings
and as a result, the General Accounting Office spent about a half a
year on a special project, looking at 25 drug items which they selected.
These were items which are monographed in the Compendia, either
TJSP or the National Formulary, which have been limited for some
time to a single supplier and in which our specifications have added
something to the Formulary requirement. They thoroughly justify
the additions which have been made as reasonable and necessary to
insure value received to the Government. We have been a leader in
many of these things and we expect to see many of these specifications
added to later revisions of the Compendia. The things we have added,
Senator, are simple. Color standards for an injectable solution so that
there is no argument over what "light yellow" means in USP, or
"straw colored :" pH limitations ophthalmic ointment, particle limita-
tions on ophthalmic ointments. While the USP says there shall not
be palpable particles, we specify particle size, bacterial limits, and
melting range for an ophthalmic ointment. So we have requirements
both for storage and the body surface for which it was intended.
I have here if you wish a summary of each of the 25 items that GAO
studied, with notations on what the additions were in the specifica-
tions. I would be glad to answer any one of them.
Senator NELSON. Do you have an extra copy for the committee files?
Colonel LINDSEY. I can give you this copy. It is not an extra copy.
The notations are in my handwriting. It is usable.
Senator NELSON. How large a document is it?
Colonel LINDSEY. Twenty-five pages, sir.
Senator NELSON. Are you going to duplicate that?
Colonel LINDSEY. I will leave it with you.
Senator NELSON. If you have an extra copy, we would like to have it.
Colonel LINDSEY. Will do.
Senator NELSON. Did not part of this problem arise-I think we
raised this question last time-from the fact that, in some of the drugs
PAGENO="0090"
8592 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
at least, the specifications drawn were specifications that only one
brand name manufacturer could, in fact, meet. Is that not correct?
Colonel LucnsEY. Sir, I do not think this is the case. When a new
drug hits the market, a new brand, a patented product or a new trade-
mark mixture hits the market and it is the sole item of that type, the
source of the information, both for us in our specifications and for the
Compendia in developing their monographs, is the guide of mixture
for the product itself. So we develop our purpose description, the
specifications from that. But as soon as we find out anything in it that
is not essential to quality and which is restrictive as to source, we
change it. I think our specifications are sound and not restrictive of
anything except insuring that the Government gets what it pays for
with public money.
Senator NELSON. Please proceed.
General }iATT~s. To continue the prepared statement, each of the
services has continued to stress the importance of the pharmacy and
therapeutic drug committees as teaching organizations. A little later, I
have some examples of these for you.
Two additional measures contribute to a concentrated effort to con-
tinue the. education of pharmacists in the optimum management of
drug therapeutics. Articles on pharmacological subjects now appear
regularly in service medical publications. Service pharmacy officers
are revising their role in the patient care team and with increasing
frequency are participating in what has come to be called "clinical
pharmacy." This involves direct first person assistance to ward and
clinic medical officers in selecting from alternative chemotherapeutic
approaches.
These proposals are not radical departures. They simply reflect the
increasing interest of military physicians and military pharmacists in
rational and economical usage of drug products. We have been heart-
ened by the sober deliberative efforts of our therapeutic agents com-
mittees, by the number of our stations which are publishing "How
Much Does It Cost?" data, and by the awareness of our physicians of
drug alternatives and options.. We have seen several examples of
highly touted "new" drugs having marginal, if any, advantage over
older products being sharply limited in use for only special situations.
Senator NELSON. Do you have any specific examples of that?
General HA~i~s. One good example is that of the macrocrystalline
form of Meticorten. In some cases, it appears to have a marginal ad-
vantage over the tablet form, so we carry both in the catalog, but with
a price differential of 250 percent for the macrocrystals, it pays the
hospital to restrict usage to selected patients. Typically, this is only on
the approval of the chief of urology.
Similarly, the use of the newer topical steroids such as triamcinolone
and fluocinolone is controlled by the chief of dermatology. Levodopa is
controlled by the neurologist.
Chiefs of service set restrictions on the use of gentamicin, carbeni-
cillin, antibiotics resistant to staphyllococyl, penicillinase.
Perhaps one of the most significant advantages in the past year has
been the development of a reorganization proposal by DPSC to the
Defense Supply Agency which will integrate the separate procure-
ment function at the Defense Personnel Support Center with the med-
PAGENO="0091"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8593
ical specification, quality assurance, and supply operations functions,
in order to give to the Director of Medical Materiel maximum flexibil-
ity and responsiveness in getting the drug to the customer on time and
with adequate quality but at lowest attainable cost. We are proud of
the fact that the Department of Defense buys the best drugs in the
counry, and at the lowest price-but we intend to do even better.
Mr. GORDON. General, you just spoke about a reorganization pro-
i~osaL Is this anything more than a reorganization proposal at this
time?
General HAYES. At the present time, it is only a proposal which is
being staffed through the DPSC. It will eventually come to the De-
partment of Defense Installations and Logistics. and go through the
normal staffing process.
Senator NELSON. Please proceed.
General HAYES. Mr. Chairman, in your letter of the 16th of May,
you requested certain information regarding the procurement of drugs
by the Department of Defense. This information is attached to my
statement for the record. That completes my statement. My colleague
and I will attempt to answer any questions you may have. I have at-
tached the answers to the statement that I have just completed.
Colonel Lindsey and I will answer any further questions you may
have.
(The attachments referred to follow:)
The following is a discussion of the nine questions outlined in Chairman Nel-
son's May 16, 1972, letter to the Secretary of Defense.
1. The system for identifying high volume local purchase items for central
procurement and the extent of coordination with other agencies.
There has been no change in the system during the past year. Each of the
three military services has a different system for identifying high volume local
purchases. The Navy utilizes an "open purchase high dollar report" whereby all
medical commands report quarterly drugs and other medical items that they
have purchased locally. From these reports the Navy determines requirements
for items to be recommended for entry into the system~ Additionally, any field
activity at any time may submit a recommendation for standardizing an item.
The Army requires the semiannual reporting of cumulative purchases totalling
$2,500 or more from 19 selected stations in the Continental United States,
and DPSC records data on all local purchases from oversea stations. The Air
Force has the most nearly complete system: computer tabulation of local pur-
chases by item and by cost from 102 out of 122 Air Force stations worldwide
accounting for about 91% of the total dollar value of Air Force drug purchases.
Each of the services reports purchases of significant dollar value to the defense
medical materiel board for consideration of standardization and central procure-
ment. We are not aware of any coordination with other agencies prior to the
time of standardization and development of specifications. However, these data
will be made available to any agency which might ask for them.
2. The areas of cooperation and coordination with other agencies in the de-
termination of requirements, specification development and use, procurement,
and interagency requisitioning.
Both VA and HEW report to DPSC semi-annually for budgeting purposes
the anticipated volume of purchases through the DOD system. DPSC is the domi-
nant Federal agency in development of medical specifications; 95% of all Fed-
eral specifications for medical materiel are prepared there. These specifications
are in wide Federal use. Technical coordination among Federal agencies is
effected through the intra-governmental professional advisory council for drugs
and devices (IPADD). The type of interchange of information includes specifica-
tion data, plant inspections, defective or substandard material, and quality con-
~rol experiences. Interagency requisitioning and interagency coordination of
~specific procuremets are limited. We are aware of the need for greater efforts in
hese fields, and we are most willing to work with other agencies.
PAGENO="0092"
8594 COMPETITIVE PROBLEMS IN THE DRIJG INDUSTRY
3. The extent to which drugs not found in the TJSP and NF are procured
and stocked.
As a result of earlier hearings of this subcommittee, the General Accounting
Office has prepared for submission to you a listing of Federal stock number drug
items which are not listed in USP or NF. The list begins with acetaminophen
and ends with zinc sulfate. I am sure you will recognize that the vast majority
of the items listed are "bread and butter" preparations needed in daily
practice.
4. The possible effect on competition if only the drugs monographed in the USP
and NF were purchased.
The effect on competition would be negligible if we limited central procure-
ment to only those drugs monographed in USP and NF. The effect on the tax-
payer would be considerable; it would be necessary to purchase many non-mono-
graphed drugs locally at a steep increase in prices in comparison to those obtain-
able by central procurement. It is simply not possible to give the patient full
benefit of modern medicine if the therapeutic armamentaribm were limited to
monographed items.
Drugs selected for inclusion in the compendia are those which are considered
to be the "best," or "most understood." It does not necessarily follow, however,
that the compendia cover all contingencies, or that a drug not monographed
does not have a wide usefulness founded on entirely rational evaluation.
Supplements to the compendia continually add new drugs, but there is always
a significant lag time, and some drugs which are frankly essential, or are drugs
of "best choice," have not yet been admitted. Many older drugs, of established
efficacy and safety, but decreasing popularity, have been dropped from the com-
1)efldia but still deserve a place in our military formulary.
The compendia refrain, in general, from listing fixed combinations of drugs.
Although many irrational combination preparations have been declared "inef-
fective" or "possibly effective" for good reason, many combinations remain on
the market. There is good cause for a wide range of gastric antacid preparations:
the proper balance between the constipating effect of aluminum compounds, and
the cathartic effect of magnesium compounds, is a fine adjustment which varies
for the individual patient. The same holds for the oral contraceptives, which
are combinations of various estrogens and progestins. Many of these combina-
tions are not included in the compendia.
There is a call, too, for many dosage forms of standard drugs, and not all of
these dosage forms are monographed. For example, the preparation of aceta-
minophen as a concentrated solution in a dropper bottle permits accurate dosage
in small children, while estimation of fractional teaspoon doses of the NF elixir
does not.
The negligible effect on competition of limiting procurement to monographed
items is readily evident on examining the list we have previously submitted of
some 500 drugs which are currently single source items. Over two-thirds of
these drugs are included in 1JSP or NP. In some instances we are buying from
a single source simply because that source has the know-how and efficiency to
meet our standards. Two good examples are aspirin tablets, USP, and alcohol,
USP. Here we have already the ultimate in competition, and limiting procure-
ment to USP/NF will not make the competition any better.
Many other monographed items are single source because of patent or NDA
limitations. Good examples are: sulfasoxizole; methyldopa; spironolactone; di-
azepam; methylphenidate; kanamycin; and methylprednisolone.
The military combination preparation of chloroquine and primaquine for sup-
pression of malaria has not been included in the compendia, and possibly never
will be. Triamcinolone appears in the compendia as a cream, an aerosol, and a
suspension: triamcinolone in a special paste base is widely used by our dentists
but has not yet been monographed.
5. The steps taken to insure that FDA pronouncements on less than effective
drugs are being effectively implemented.
Our policy and procedures on the handling of less than effective drugs have
been reported to you previously and have been published in the record of the
1971 hearings of this subcommittee. We have continued to implement these
policies. During the past 16 months since the last hearings, DPSC has declared
13 FSN's to be "limited standard" (issue until exhaustion), and has deleted
17 FSN's with on-hand assets being held for reimbursement and/or replacement.
PAGENO="0093"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8595
Briefly, if an item is pronounced to be "ineffective," we suspend it from issue
and delete it from the catalog. If an item is pronounced to be "possibly effec-
tive," we issue existing assets until exhausted providing the customer submits
a requisition with advice code 2F indicating that the item is known to be possibly
effective and it is still desired.
6. Discuss the implementation of the Buy American Act and balance of pay-
ments procedures in relation to comparison of foreign and domestic bids.
Under departmental regulations we artifically raise the foreign supplier's
bid price by "evaluating" it to give an edge to the domestic producer. To the
bid price, inclusive of duty and transportation to depot, we add 6% (12% if
the low domestic bidder is a small business or labor surplus area concern).
Then we take the price minus duty, but including transportation and add 50%
to the foreign bid. Whichever of those two calculations result in a higher figure
is the "evaluated" foreign bid. If this "evaluated" price is still lower than the
low domestic bid, the foreign bidder gets the award if the firm is otherwise
qualified.
7. The need for requiring a specification prior to introducing an item into
the supply system where (1) competition is restricted due to a patent, an
NDA,. or form ~3 which relates to antibiotics, and (2) the item is monographed
in the DSP and NF.
When time is of the essence, which is almost always the case in the intro-
duction of a newly-standardized drug item into the system, we buy under
"accelerated procurement procedures" which in effect permit making the initial
procurement by brand name, without specifications. This gives us time to pre-
pare a specification for following procurements. We agree that the preparation
of an exhaustive specification is wasted effort if the items is available only
from one source, but we do not agree that no specification at all is required.
In order to insure that we make only wise expenditures of public monies we
need to specify what it is that the Government intends to buy and expects
to get. A brand name is an advertisement, not a recipe or warranty. We need
to make sure that what we are buying on contract comes up to the quality
of the item which originally led to standardization. To assume that this will
automatically be the case is a naive disregard of some disappointing experi-
ences. Further, we need to develop firm specifictions during the period of re-
stricted procurement, to be ready to go into a competitive market when patents
expire, when we buy around patents under the patent indemnity clause, or
when additional NDA's are approved.
During the course of the past year the General Accounting Office has inten-
sively studied the need for specifications which go beyond USP/NF requirements
for monographed items. They alluded briefly to their findings in the hearings
before this subcommittee on 10 May 1972. ". . . additional requirements are often
included to provide assurance that items manufactured will have needed char-
acteristics for such requirements as potency and purity, from the time of manu-.
facture to use."
I am sure they would be happy to report their findings in greater detail. DPSC
has been the national leader in developing specific drug standards, and many of
their supplementary requirements have been adopted in subsequent revisions
of the official compendia. These added requirements include such specifications
as: pH compatibility with route of intended administration; objective standards
for limits of color loosely described in compendia: particle size, bacterial limits,
and liquefaction of ophthalmic ointments; biological effectiveness of hormone
preparations; and maximum limits for potentially toxic breakdown products.
There is ample testimony to indicate that conformance with the criteria of the
monographs in the compendia is not sufficient alone to guarantee the safety and
efficacy of a drug product.
8. The actions taken to centralize plant inspection and drug testing under one
agency.
The Department of Defense has taken no action to centralize plant inspection
and testing under a single government agency. It has no objection to such cen-
tralization, so long as the agency can and does provide effective inspection and
testing. We do rely on the Food and Drug Administration for the inspection and
certification of antibiotics. However, we have found that inspection of a com-
pany, a plant, or a process at intervals of one to several years is no assurance
whatsoever that the result will be a satisfactory product on a specific procure-
ment. We . cannot risk public funds in the volume we expend without l)osil lye
PAGENO="0094"
8596 COMPETITIVE PROBLEMS Fl'~ THE DRUG INDUSTRY
assurance that we are going to get a thoroughly good product. We have too many
examples of firms who have had initial good performance and then have lapsed
hopelessly in many aspects of systematic pharmaceutical management-large
firms as well as small.
9. The inspection and testing requirements for drugs procured centrally as
compared with the inspecting and testing requirements when drugs are procured
locally or under FSS contracts.
Careful examination of the data available indicate that the problem of local
purchase of drug items is far less than has previously reported to this subcom-
mittee. The General Accounting Office has been unsuccessful in obtaining from
VA the data necessary to substantiate the estimate of $21 million per annum
military purchases of drugs from Federal supply schedules. Sampling data from
Air Force and Army stations, and DPSC data on local purchases for oversea
stations indicate a drug local purchase expenditure service wide of somewhere
between 10% and 15% expressed in dollars. Since local purchase and FSS pro-
curement prices are significantly higher than prices for centrally procured
items this would indicate that 90% or more of all drug dosages are from DPSC
and thus covered by DPSC inspection and testing.
There are a lot of marginal drug products on the market today. Clear evidence
of this is the number, type, and scope of recalls made by the food and drug
administration. A recall protects the public from further harm, but it does not
undo the harm that may have been done. We prefer to buy good products in the
first place, not to replace poor products with others later. It is for this reason
that we maintain an intensive testing and inspection program. It is for this
reason that we generally prefer central procurement over local procurement or
FSS contracts.
Nevertheless we recognize that central procurement is not possible in every
instance for every item. New items constantly enter the system. Until we have
experience from local purchase we do not know whether it is economically justi-
fiable to procure the item centrally or not. When there is a real demand for a
special item, but that demand is sporadic, limited to certain types of activities
or low in total dollar volume the wisest decision may be to authorize local pur-
chase of procurement on Federal supply schedule.
Even when an item is in the system, the taxpayer cannot afford to fund us for
the maintenance of a safety level of drugs which will never run dry. DPSC is
performing at 96% supply availability rate, an achievement of which they are
justifiably proud. But this means that 4% of all requisitions are met with prom-
ise of future delivery, not actual delivery at the moment. The customer may not
be able to wait; he must purchase the standard item from commercial sources,
and pay a premium price.
The working order of priority at defense personnel support center is first to get
the item to the customer; and to get it there on time; then to insure that the item
is of adequate quality; and lastly to buy the item at the lowest possible price.
When we can buy the item centrally at a low price; when we can insure the
quality of the centrally purchased product; and when we can deliver it from
the central distribution system on a timely basis-then we do so. When we can-
not, the alternative is local purchase. Local purchase is the exception, not the
rule. It is an expedient procedure in which we recognize the risk of limited in-
spection and testing.
We have no objection to turning over to FDA our job of inspection and testing,
so long as they do it as thoroughly as we do. The only problem is that it will take
FDA about 3,000 more highly skilled personnel to do the job for the country
that we are doing for the Department of Defense.
Mr. GORDON. On page 4 of your additional statement you say: "Sup-
plements to the Compendia continually add new drugs, but there is al-
ways a significant lag time, and some drugs which are frankly essen-
tial, or are drugs of `best choice' have not yet been admitted."
Can you give us a couple of specific examples to illustrate that pomt?
Colonel LINDSEY. Yes, sir, for example, clyndamycin, spectinomy-
ci Spectinomycin is listed by the Medical Letter as the best drug
of choice for gonorrhea. It is not yet in the Compeiidia.
Mr. GORDON. It is not yet in the lISP.
PAGENO="0095"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8597
Also at the bottom of the same page, you say: "There is good cause
for a wide range of gastric antacid preparations: the proper balance
between the constipating effect of aluminum compounds and the ca-
thartic effect of magnesium compounds is a fine adjustment which
varies for the individual patient."
Since it varies for the individual patient, isn't it a good idea to
avoid the fixed ratio combinations and to vary the doses of the differ-
ent drugs to suit the individual patient? Are you not contradicting a
previous statement you made?
Colonel LINDSEY. Sir, we really have a limited range of antacid
mixtures in our catalog. Your point is well taken on fixed dosage, but
when you start trying to titrate constipation and diarrhea for a pa-
tient that is taking this almost on an over-the-counter basis, you are
spending a lot of effort, I think, that is not worth it.
Mr. GORDON. You state at the bottom of page 6: "During the past
16 months since the last hearings, DPSC has declared 13 FSN's"-what
is that, Federal stock numbers?
Colonel LINDSEY. Stock numbers.
Mr. GORDON (reading). "To be `limited standard' (issue until ex-
haustion), and has deleted 17 FSN's with on-hand assets being held
for reimbursement and/or replacement." Could you name these drugs,
please?
General HAYES. We have a list of drugs here, with stock numbers
and the changes. I will give you an example or two, but I would like
to submit the whole list for the record.
Mr. Gonr~oN. Please.
General HAYES. One is chlorpheniramine maleate; aspirin, caffeine
and phenacetin tablets; doxycycline hyclate capsules; propoxyphene
hydrochloride, aspirin, caffeine and phenacetin; oxethazaine; alumi-
num hydroxide gel, magnesium hydoxide, and magnesium trisilicate
suspension.
This gives you, I think, some of the flavor of what we have accom-
plished. I would like to submit the whole list for the record.
(The list referred to follows:)
DEPARTMENT OF DEFENSE DELETED/LIMITED STANDARD 28 FEBRUARY 1971 THROUGH
30 APRIL 1972
Deleted: 152.
Limited Standard: 179.
Total Actions: 331.
28 FEBRUARY 1971 DMMB MEETING
THE FOLLOWING ITEMS HAVE BEEN DELETED
FSN
6505-147-1720 Tetracaine Ophthalmic Ointment, NF. (Pontocaine)
6505-286-9868 Tyloxapol Solution-Ineffective. (Alevaire)
6505-606-3409 Tyloxapol Solution-Ineffective. (Alevaire)
6505-687-8459 Procaine Penicillin G and Potassium Penicillin G in oil-
Probably. (Lentopen)
6505-890-1913 Dihydrostreptomycin-Polymyxin tablets With activated Attapul-
gite, Aluminum Hydroxide, and Pectin-Ineffective. (Poly
magma)
6505-914--0252 Dihydrostreptomycin-polymyxin tablets with activated Attapul-
gite, Aluminum Hydroxide, and Pectin-Ineffective. (Poly-
magma)
6505-967-8735 Propoxyphene Hydrochloride, Aspirin, caffeine, and Phenacetin
Capsules-Ineffective. (Darvon Compound)
PAGENO="0096"
8598 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
THE FOLLOWING ITEMS HAVE BEEN RECLASSIFIED FROM STANDARD TO LIMITED
STANDARD
F~N
6505-782-647 Undecylenic Acid Ointment, Compound, NF-Possibly. (Desenex)
31 MARCH 1971 DMMB MEIFIING
THE FOLLOWING ITEMS HAVE BEEN DELETED
FSN
6505-116-5520 Diethyltilbestrol Tablets, TJSP. (Stilbestrol)
6505-120-3750 Folic Acid Tablets, USP-5 mg size not recommended, NAS/
NRC.
6505-138-4070 Progesterone Injection. NP. (Proluton)
6505-146-2192 Sulfadiazine Tablets, USP.
6505-153-8707 Benzoin Tincture, Compound, TJSP.
6505-153-8728 Sodium Methiodal Injection, NP.
6505-181-7296 Cetylpyridinium Chloride and Benzocaine Lozenges. (Cepacol
Anesthetic Troches)
6505-181-7428 Benzoëaine, Benzethonium Chloride, Hydroxyquinoline Benzo-
ate, Menthol, and Methylparaben aerosol. (Dermoplast Spray)
6505-181-7497 Bromelains Tablets-Possibly-Never Procured. (Ananase)
6505-181-7517 Acetaminophen, Phenacetin, Phenylpropanolamine Hydrochlo-
ride, and Phenyltoloxamine Citrate Tablets. (Sinubid)
6505-299-9666 Cyclophentolate Hydrochloride Ophthalmic Solution, USP.
(Cyclogel)
6505-404-8096 Estrogens, Conjugated, Tablets, USP. (Premarin)
6505-443-4511 Aluminum Hydroxide Gel, Magnesium Hydroxide, and Magnes-
iuni Trisilicate Suspension. (Gelusil-m)
6505-484-5665 Chlorplieniramine Maleate, Methscopolamine Nitrate, and Phen-
ylephrine Hydrochloride Capsules. (Histaspan-d)
6505-543-7914 Chlorothiazide Tablets, NF. (Diuril)
6505-660-0132 (Jhloramphenicol for Ophthalmic solution, USP. (Ohioromycetin-
Ophthalmic)
6055-687-8436 Endo Broth, Membrane Filter.
6505-926-4846 Endo Broth, Membrane Filter.
6505-951-4759 Trimethobenzamide Hydrochloride Injection. NF-Probably.
(Tigan)
6505-973-7832 Dioctyl Sodium Sulfosuccinate Syrup, NF. (Colace)
THE FOLLOWING ITEMS HAVE BEEN RECLASSIFIED FROM STANDARD TO
LIMITED STANDARD
FSN
6505-063-8323 Phenylbutazone Tablets, USP. (Butazolidin)
6505-063-8323 Phenylbutazone Tablets, USP. (Aralen)
6505-113-9295 (Jhloroquine Phosphate Tablets, USP.
6505-723-5015 Hemorrhoidal Suppositories with Hydrocortisone Acetate.
(Wyanoids-HO)
6505-764--9014 Dipyridamole Tablets. (Persantine)
6505-817-2228 Phenylbutazone Tablets, USP. (Butazolidin)
6505-857-5352 Aspirin, Phenacetin, and Caffeine Tablets, NF.
6505-912-2404 Lincomycin Hydrochloride Capsules, USP. (Lincocin)
6505-913-7907 Propoxyphene Hydrochloride, Aspirin, Caffeine, and Phenaceain
capsules. (Darvon Compound)
0505-926-8879 Oxethazaine, aluminum hydroxide, and Magnesium Hydroxide
Suspension. (Oxaine-M)
0505-935-1016 Thiethylperazine Maleate Injection. (Torecan)
30 APRIL 1971 DMMB MEETING
THE FOLLOWING ITEMS HAVE BEEN DELETED
F~N
0505-110-6647 Boric Acid Ointment.
0505-121-2281 Vitamin-Mineral Tablets.
6505-124-2986 Colistin Sulfate, Hydrocortisone Acetate, Neomycin Sulfate, and
Thonzoniuni Bromide Suspension, Qtic. (Colymyciri)
6505-142-9140 Doxycycline Hyclate Capsules. (Vthramyeiii)
PAGENO="0097"
COMPETITIVE. PROBLEMS IN THE DRUG INDUSTRY 8599
6505-074-4106
6505-105-4750
6505-110-6800
6505-148-8782
6505-160-0495
6505-663-2701
6505-687-8205
6505-823-7980
6505-913-7907
6505-929-0574
6505-228-2765 Glyceryl Guaiacolate Elixir. (3/6, Robitussin) /
0505-299-8500 Dextrose, USP.
6505-584-3280 Promethazine Hydrochloride Injection, USP. (Phenergan)
6505-9~6-2125 Nystatin Lotion. (Mycostatin)
THE FOLLOWING ITEMS HAVE BEEN RECLASSIFIED FROM STANDARD TO.
LIMITED STANDARD
FAS~N
6505-135-2995 Alcohol, USP.
6505-290-6032 Bacitracin, Sterile, USP.
6505-782-2633 Chiorpheniramine Maléate, Aspirin, Caffeine, and Phenyllephrine
Tablets. (Coricidin-D)
31 MAY 1971 DMMB MEETING
THE FOLLOWING ITEMS HAVE BEEN DELETED
FA~N
6505-181-7656 Hydroxypropyl Methycellulose Ophthalmic Solution. (Ultra
Tears)
6505-890-1788 Thiopental Anesthesia Kit. (Pentothal)
THE FOLLOWING ITEMS HAVE BEEN RECLASSIFIED FROM STANDARD TO
LIMITED STANDARD
FS1V
6505-106-1075 AmmonIa Spirit, Aromatic, NP.
6505-108-4965 Atropine Injection.
6505-159-6575 Chlortetracycline Hydrochloride Capsules, NP. (Aureomycin)
6505-299-8052 Tolazoline Hydrochloride Tablets. (Priscoline)
6505-299-8149 Primaquine Phosphate Tablets, USP.
6505-299-8276 Oxytetracycline Tablets. (Terramycin)
6505-616-9068 Glutethimide Tablets, NP. (Doriden)
6505-734-0658 Meglumine Diatrizoate Injection. USP. (Renografin)
6505-770-8345 Nalidixic Acid Tablets. (Negram)
6505-777-8911 Clycopyrrolate and Phenobarbital Tablets, (Robinul-PH)
6505-782--6485 Demeclocycline Hydrochloride Tablets, NP. (Declomycin)
6505-784-4976 Propoxyphene Hydrochloride, Aspirin, Caffeine, and Phenacetin
Capsules. (Darvon Compound)
6505-853-8608 Sodium Cloxacillin Monohydrate Capsules, USP. (Tegopen)
6505-890-2081 Demeclocydine Hydrochloride Tablets, NP. (Declomycin)
6505-935-9818 Chlorpheniramine Maleate, Caramiphen Edisylate, Isopropamide
Iodide, and Phenylpropanolamine Hydrochloride Capsules.
(Tuss-Ornade)
6505-943-4884 Cyclandelate Capsules. (Oyclospasmol)
30 JUNE 1971 DMMB MEETING
THE FOLLOWING ITEMS HAVE BEEN DELETED
Sodium Diatrizoate Solution. (Hypaque)
Alkaline Aromatic Solution Tablets.
Brilliant Cresyl Blue, Analyzed Reagent.
Picric Acid, Analyzed Reagent.
Chioramphenicol Capsules, USP. (Ohloromycetln)
Cliloramphenicol Palmitate Oral Suspension, USP. (Chioromyce-
tin-Oral Suspension)
Cetylpyridinium Chloride Lozenges-Re-Instated. (Capacol)
Citric Acid, USP.
Propoxyphene Hydrochloride, Aspirin, Caffeine, and Phenacetin
Capsules (DarVon Compound)
Chlorpheniramine Maleate, Caramiphen Edisylate, Isopropamide
Iodide, and Phenyipropanolamine Hydrochloride Capsules.
(Tuss-Ornade)
Ampicillin Capsules. (Omnipen, Penbritin)
Cyclandelate Capsules-Possibly. (Cyclospasmol)
6505-935-1148
6505-943-4384
8~50 0-72-pt. 22-7
PAGENO="0098"
8600 COMPETITIVE PROBLEMS TN THE DRUG INDUSTRY
F$N
6505-071-0610
6505-104-9500
6505-147-1010
6505-147-1820
6505-147-1840
6505-435-8475
6505-584-3126
6505-660-1604
6505-754-2804
6505-890-1551
6505-890-1872
6505-890-1901
6505-913-5873
6505-920-2160
6505-926-8874
6505-935-9817
6505-935-0854
F~N
6505-003-8323
6505-104-7990
6505-107-0325
6505-110-7100
6505-113-9295
6505-139-0000
6505-656-1345
6505-734-0658
6505-782-6485
THE FOLLOWING ITEMS HAVE BEEN RECLASSIFIED FROM STANDARD TO LIMITED
STANDARD
Test Strips and Color Chart, Ketone in Urine. (Ketostix)
Alcohol, USP.
Terpin Hydrate, NF.
Tetracaine Hydrochloride, Sterile, DSP. (Pontocaine)
Tetracaine Hydrochloride, Sterile, USP. (Pontocaine)
C-Reactive Protein Control Solution.
Octavitamin Drops.
Antiserum, C-Reactive Protein.
Urease Test Tablets.
Test Strips and Color Chart, Phenylketonuria.
Antigen, Histoplasmin Sensitized Latex.
Test Strips and Color Chart, Urinary Blood, Glucose, Protein,
and pH.
Oxytetracycline Hydrochloride and Polymyxin B Sulfate Oph-
thalmic Ointment. (Terramycin-Polymixin p Oph. Oint.)
Test Kit, Syphilis Detection.
Test Strips and Color Chart, Glucose in TJrine.
Prochiorperazine Maleate and Isopropamide Iodide Capsules-
Possibly. (Combid)
Sodium Nitrite and Sodium Sulfanilate Tablets.
31 JuLY 1971 DMMB MEETING
THE FOLLOWING ITEMS HAVE BEEN DELETED
FBN
6505-074-0993 Magnesia and Alumina Oral Suspension, DSP. (Maalox)
6505-108-5000 Atropine Sulfate, DSP.
6505-113-8990 Chloroform, NF.
6505-126-2037 Chloramphenicol Ophthalmic Solution. (Chioromycetin)
6505-147-1300 Testosterone Propionate Injection. 1JSP. (Oreton)
6505-055-5087 Flavoring, Wild Cherry Compound.
6505-728-2007 Theophylline and Glyceryl Guaiacolate Elixir. (Quibron)
THE FOLLOWING ITEMS HAVE BEEN RECLASSIFIED FROM STANDARD TO LIMITED
STANDARD (AAC V)
FS~N
6505-129-5517
6505-129-5518
6505-687-4417
0505-764-9042
6505-926-9023
6505-920-9025
6505-958-7836
6505-982-7759
Morphine Injection, USP.
Morphine Injection, USP
Atropine Injection.
Neomycin Sulfate, Hydroeortisone, and Polymyxin B Sulfate
Ophthalmic Suspension (Cortisporin).
Dextrose, Calcium Chloride, Magnesium Chloride, Sodium Chlo-
ride, and Sodium Lactate Solution. (Dianeal)
Dextrose, Calcium Chloride, Magnesium Chloride, Sodium Chlo-
ride, and Sodium Lactate Solution. (Dianeal)
Test Kit, Rheumatoid Arthritis Determination. (RA-Test)
Dibucaine Hydrochloride With Dextrose Injection. (Nupercaine)
31 AUGUST 1971 DMi~IB MEETING
THE FOlLOWING ITEMS HAVE BEEN DELETED
Phenylbutazone Tablets, DSP. (Butazolidin)
Alcohol, DSP.
Anise Oil, USP.
Brilliant Green Bile, Dehydrated.
Chloroquine Phosphate Tablets, DSP. (Aralen)
Quinine Sulfate, NP.
Prochlorperazine Maleate Capsules. (Compazine)
Meglumine Diatrizcate Injection, DSP. (Renografin)
Demeclocycline Hydrochloride Tablets, NE. (Declomycin)
PAGENO="0099"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8601
Meclizine and Pyridoxine Solution-Possibly-1972. (BonadQxin)
Oxethazaine Aluminum Hyd±oxide, and Magiiesium Hydroxide
Suspension-Possibly. (Oxaine-M)
Thiethylperazine Maleate Injection. (Torecan).
Furazolidone Tablets. (Furoxone)
Chlorpheniramine Maleate, Caramiphen Edisylate, Isopropamide
Iodide, and Phenylpropanolamine Hydrochloride Capsules.
(Tuss-Ornade)
Medroxyprogesterone Acetate with Ethinyl Estradiol Tablets-
Unsafe-1972. (Provest).
THE SUPPLY STATUS CODE FOR THE FOLLOWING ITEMS HAVE BEEN RECLASS]FIED AS
INDICATED (SSC 1 TO 55C 6)
F~N
6505-116---1890
6505-116-8510
6505-146-2300
6505-299-8123
6505-299-8183
6505-619-8917
6505-753-9580
6505-800-1485
Dextran Injection.
N, N-Dimethyl-p-Phenylenediamine Monohydrochloride, Reagent.
Sodium Sulfadiazine Injection, tSP.
Benzalkonium Chloride Tincture. (Zepharin)
Benzalkonium Chloride Tincture. (Zepharin)
Menadione Tablets, NF.
Nystatin for Oral Suspension, USP. (Mycostatin)
Methylphenidate Hydrochloride for Injection, tSP-Possibly.
(Ritalin)
30 SEPTEMBER 1971 DMMB MEETING
THE FOLLOWING ITEMS HAVE BEEN DELETED
SUPPLY STATUS CODE FOR FOLLOWING ITEMS RECLASSIFIED AS INDICATED
FSN -
From-
To-
6505-142-8730-Cetylpyridium Chloride Sol'n-Re-instated (Cepacol)
6505-263-3362--Phenylephrine hydrochloride injection(Neo-synephrine)
6505-515-1584-Foot Powder Fungicidal-Possibly (Desenex)
6505-530-6469--Zinc Bacitacin, Neo Sulfate and Polymycin Oph Oint-Possibly (Pros-
~orin)
6505-559-6741-Prednisolone Sulfacetamine, Neo Oph Oint-Possibly (Metimyd-
Neomycin)
6505-664-4814-Undecylene Acid Oint-Possibly (Desenex)
6505-781-3111-Isosocoide Dinitrate, 40 mg.-Possibly-1972 (Isordil)
6505-861-0868--Isosocoide Dinitrate, 40 mg.-Possibly-1972
6505-890-1299--Neo Sulfate, Gramicirlin and Polymyxin Ph Sulfate-Possibly (Neosporin).
6505-690-1535-Test Kit, nitrogen determination
6505-890-1902-Cyclopentamine HCI, Metrapyrilene I-lCl & Pyrrobutamine Caps-
Possibly (Co-pyronI)
6505-890-1911--Pyrrobutamine Napthalene Disulfonate Cyclopontamine Hydroxybenzoyl
Benzoate and Methapyrilene Hydroxygen Susp-Possibly (Co-pyronil)
6
1
1
1
1
1
1
1
1
1
1
1
1
6
6
6
6
6
6
6
6
6
6
6
31 OCTOBER 1971 DMMB MEETING
THE FOLLOWING ITEMS WERE DELETED BY SEPTEMBER 1971 IER'S
FSN
6505-110-6652
6505-147-2600
6505-261-7245
6505-656-0497
6505-660-1604~
6505-782-2683
6505-782-6520
Boric Acid Ophthalmic Ointment.
Thiamine Hydrochloride Tablets, tsp.
Benzethonium Chloride Tablets.
Smallpox Vaccine. USP.
Antiserum, C-Reactive Protein.
Sparteine Sulfate Injection. (Tocos Amine)
Sodium Sulfobromophthalein Injection, tSP.
6505-890-2054
6505-926-8879
6505-935-1016
6505-935-4030
6505-935-9818
6505-937-1762
F~N
6505-071-0611
6505-147-1000
6505-153-8865
6505-159-5033
6505-180-6291
6505-550-6120
Serum, Anti-Human, Coombs Test.
Terpin Hydrate, NP.
Kliger Iron Agar.
Glucose Test Solution.
Influenza Virus Vaccine, tsp.
Pumice, NP.
PAGENO="0100"
8602 COMPETITIVE PROBLEMS I~ THE DRDG INDUSTRY
0505-853-8608 Sodium Cloxacillin Capsules, DSP. (Tegopen)
6505-913-5873 Oxytetracycline Hydrochloride and Polymyxin B Sulfate Oph-
thalmic Ointment. (Terramycin)
6505-935-4117 Dexamethasone Sodium Phosphate Injection. (Decadron)
THE SUPPLY STATUS CODE FOR THE FOLLOWING ITEMS HAVE BEEN RECLASSIFIED AS
INDICATED (SSC 1 TO SSC 6)
F$N
6505-111-1235 Calamine Lotion Powder, Phenolated and Mentholated.
6505-181-8098 Cephaloglycin Dihydrate Capsules. (Kafocin)
6505-197-1507 Serum Albumin Test Solution.
6505-420-9584 Tuberculin, Purified Protein Derivative, DSP.
6505-420-9585 Tuberculin, Purified Protein Derivative, DSP.
6505-420-9586 Tuberculin, Purified Protein Derivative, DSP.
6505-420-9587 Tuberculin, Purified Protein Derivative, DSP.
6505-926-9096 Basic Fuchsin, Analyzed Reagent.
NOVEMBER 1971 AcTioNs
THE FOLLOWING ITEMS HAVE BEEN DELETED BY THE DMMB
F~SN
6505-131-0990 Histoplasmin, Tine Test.
6505-141-8802 Chioroquine and Primaquine Phosphates Tablets.
6505-145-0280 Water for Injection, Sterile, DSP.
6505-181-8098 Cephaloglycin Dihydrate Capsules. (Kafocin)
6505-290-6032 Bacitracin, Sterile, DSP.
6505-435-8475 C-Reactive Protein Control Solution.
6505-582-5434 Sodium Fluorescein Applicators.
6505-619-8704 Folic Acid Tablets, DSP-Recommended by NAS/NRO.
6505-619-8917 Menadione Tablets, NP.
6505-764-9042 Neomycin Sulfate, Hydrocortisone, and Polymyxin B Sulfate
Ophthalmic Suspension-Possibly. (Cortisporin)
6505-890-1872 Antigen, Histoplasmin Sensitized Latex.
6505-926-9023 Dextrose, Calcium Chloride, Magnesium Chloride, Sodium
Chloride, and Sodium Lactate Solution.
6505-926-9025 Dextrose, Calcium Chloride, Magnesium Chloride, Sodium
Chloride, and Sodium Lactate Solution.
6505-926-9106 Dyclonine Hydrochloride Solution, DSP. (Dyclone)
6505-931-0646 Methyldopa Tablets, DSP. (Aldomet)
THE SUPPLY STATUS CODE FOR THE FOLLOWING ITEMS HAVE BEEN REVISED AS INDICATED
F~N
6505-225-9222 Meglumine Diatrizoate-Sodium Diatrizoate Injection (Hypaque).
6505-753-5043 Ohloroquine and Primaquine Phoshates Tablets.
6505-754-0001 Polymyxin B Sulfate Solution-Possibly. (Aerosporin)
6505-926-2062 Meglumine Diatrizoate Injection, DSP. (Renografin)
DECEMBER 191 AcTioNs
THE FOLLOWING ITEMS HAVE BEEN DELETE1I) BY THE DMMB
F~N and Nomenclature
6505-784-4976 Propoxyphene Hydrochloride, Aspirin, Caffeine, and Phenacetin,
Capsules. (Darvon Compound)
6505-935-5882 Dichlorvos-Safe. (Task)
THE SUPPLY STATUS CODE FOR THE FOLLOWING ITEMS HAVE BEEN REVISED AS
INDICATED (ALL FROM SSO 1 TO 550 6)
FSN
6505-082-2560 Phosphate Solution.
6505-126-9425 Sodium Mercaptomerin, ~Sterile, DSP. (Thiomerin)
6505-147-1860 Tetracaine Hydrochloride Solution Tablets (Pontocain'~).
6505-153-8774 Hexylresorcinol Pills, NP.
PAGENO="0101"
COMPETITIVE PROBLEMS IN THE DRTJG INDUSTRY 8603
6505-181-7203 Erythromycin Ethylsuccinate Granules for Oral Suspension,
NP. (Erythrocin)
6505-435-0377 Furosemide Injection. (Lasix)
6505-524-0408 Typhoid Vaccine, USP.
6505-753-9516 Dexpanthenol Injection. (Ilopan)
6505-782-6481 Tetracycline Hydrochloride Tablets, NP
6505-890-1383 Methamphetamine Hydrochloride and Phenobarbital Tablets.
(Ambar)
0505-890-1384 Methamphetamine Hydrochloride and Phenobarbital Tablets.
(Ambar)
6505-890-1820 Test Kit, Pregnancy Determination.
6505-913-7905 Ohioroquine and Primaquine Phosphates Tablets. (Aralen and
Primaquine)
6505-914-2198 Dextroamphetamine Sulfate Tablets, USP. (Dexedrine)
6505-926-9018 Homatropine Hydrochloride Ophthalmic Ointment.
6505-935-4021 Sulisobenzone Lotion. Rival)
6505-935-5879 Typhoid Vaccine USP.
6505-935-6580 Sodium Chloride Injection, Modified.
6505-935-6581 Dextrose Injection, Modified.
6505-935-6582 Dextrose Injection, Modified.
6505-935-6583 Dextrose and Sodium Chloride Injection, Modified.
6505-982-4228 Sodium Warfarin Tablets, USP. (Coumadin)
JANUARY 1972 AcTioNs
THE FOLLOWING ITEMS HAVE BEEN DELETED BY THE DMMB
F~N and Nomenclature
0505-159-6575 Chlortetracycline Hydrochloride Capsules, NP. (Aureomycin)
6505-160-2000 Diphtheria Antitoxin, DSP.
0505-724-5088 Carica Papaya Proteclytic Enzymes Tablets-Possibly. (Papase)
6505-753-9580 Nystatin for Oral Suspension, DSP. (Mycostatin)
6505-764-9014 Dipyridamole Tablets-Possibly. (Persantin)
6505-770-8345 Nalidixic Acid Tablets, NP. (Neg Gram)
0505-774-5861 Methadone Hydrochloride Tablets, DSP. (Dolophin)
0505-817-2228 Phenylbutazone Tablets, DSP. (Butazolidone)
6505-861-0868 Isosorbide Dinitrate Tablets-Possibly. (Isordil)
6505-890-1299 Neomycin Sulfate, Gramicidin, and Polymyxin B Sulfate Oph-
thalmic Solution. NP-Possibly. (Neosporin)
6505-890-1551 Test Strips and Color Chart, Phenylketonuria.
6505-926-2160-Test Kit, Syphilis Detection.
6505-926-9096 Basic Fuchsin, Analyzed Reagent.
(3505-957-8005 Methadone Hydrochloride Tablets, DSP. (Dolophin)
THE SUPPLY STATUS CODE FOR THE FOLLOWING ITEMS HAVE BEEN REVISED AS
INDICATED
FSN: 6505-926-9151; from 1 to G-Fungicidal solution. (Vardefam)
FEBRUARY 1972 ACTIONS
THE FOLLOWING ITEMS HAVE BEEN DELETED BY THE DMMB
F~N aind Nomenck~ture
6505-108-3800 L-Asparagine, Analyzed Reagent.
6505-142-8796 Canine Distemper-Hepatitis Vaccine-LeptoSpira Bacterin.
6505-181-7187 Rubella Virus Vaccine, Live.
6505-261-7266 Encephalomyelitis Vaccine (Eastern and Western) Chick-Em-
bryo Origin.
~l505-457-2701 Measles Virus Vaccine, Live, Attenuated, DSP.
6505-660-1599 Anthrax Spore Vaccine, Veterinary.
6505-926-9090 Diphtheria and Tetanus Toxoids and Pertussis Vaccine, Ad-
sorbed, DSP.
6505-926-9091 Tetanus Toxoid, DSP.
6505-926-9104 Tetanus and Diphtheria Toxoids, Adsorbed, DSP.
6505-926-9105 Tetanus Toxoid, Adsorbed, DSP.
PAGENO="0102"
8604 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
THE SUPPLY STATUS CODES FOR THE FOLLOWING ITEMS HAVE BEEN REVISED AS
INDICATED (550 1 TO 550 6)
p-Aminobenzoic Acid, Analyzed Reagent.
Levallorphan Tartrate Injection, DSP. (Lorfan)
Bismuth Sulfite Agar, Dehydrated.
Bromothymol Blue, Analyzed Reagent.
Capryl Alcohol, Analyzed Reagent.
Chromium Trioxide, Analyzed Reagent.
p-Dimethylaminoazobenzene, Analyzed Reagent.
Dulcitol, Analyzed Reagent.
Oil RedO, Reagent.
Dextrose, Calcium Chloride, Magnesium Chloride, Sodium Chlo-
ride, and Sodium Lactate Solution.
Dextrose, Calcium Chloride, Magnesium Chloride, Sodium Chlo-
ride, and Sodium Lactate Solution.
Potassium Ferricyanide, ACS.
Procaine Hydrochloride, Sterile, DSP.
Peptone Glucose Extract Agar, Dehydrated.
Urease Test Broth, Dehydrated.
Lactose Broth, Dehydrated.
Giemsa's Stain.
Neutral Red, Analyzed Reagent.
Oxytetracycline Hydrochloride for Injection, DSP. (Terramycin)
Lactose, Reagent.
Sodium Oxacillin Capsules, DSP. (Prostaphlin)
Potassium Penicillin G Tablets, DSP.
Methenamine Mandelate Tablets, DSP. (Mandelamine)
Trisulfapyrimidines Oral Suspension, DSP.
Procaine Hydrochloride Injection, DSP. (Novocain)
Ohiorpheniramine Maleate Syrup, DSP. (Ohior-Trimeton)
Potassium Penicillin G for Injection, DSP.
Oxytetracycline Suspension. (Terramycin)
Phenmetrazine Hydrocholoride Tablets, NP. (Preludin)
Oxytetracycline Injection, NP. (Terramycin)
Erythromycin Estolate Capsules, NP. (Ilosone)~
Tetracycline Hydrochloride for Injection, DSP.
Demeclocycline Syrup (SSC 2 to SSC 6). (Declomycin)
povidone-lodine Ointment. (Betadyne)
Sodium Sulfacetamide, Phenylephrine Hydrochloride, and Pred-
nisolone Acetate Ophthalmic Suspension. (Prednefrin Forte)
Erythromycin Estolate for Oral Suspension, NP. (Ilosone)
Dextran 40 Injection.
Dextran 40 Injection.
Erythromycin Estolate for Oral Suspension, NP. (Ilosone)
THE FOLLOWING ITEMS HAVE BEEN DELETED BY THE DMMB
FSN and Nomenclature
6505-042-8366 Isosorbide Dinitrate Capsules-Possibly. (Isordil)
0505-082-2560 Phosphate Solution.
6505-116-8510 N,N-Dimethyl-p-Phenylenediamine Monohydrochloride, Reagent.
6505-126-9425 Sodium Mercaptomerin, Sterile, DSP. (Thiomerin)
6505-181-7203 Erythromycin Ethylsuccinate for Oral Suspension, NP. (Ery-
throcin)
Hexachiorophene, Salicylic Acid, and Sulfur Cream. (Pernox)
Rubella ~TjF1JE Vaccine, Ljve.
Primaquine Phosphate, DSP.
Chiorpheniramine Maleate Syrup. (Ohlortrimeton)
Orange Oil, Concentrated.
Propoxyphene Hydrochlori&? Capsules, DSP-L~ne1fective
(Darvon)
Hemorrhoidal Suppositories with Hydrocortisone Acetate-
Possibly. (Wyanoids-HO)
FBN
6505-105-9400
6505-106-4843
6505-110-6340
6505-110-8300
6505-112-4000
6505-114-0000
6505-116-8000
6505-117-0000
6505-131-0100
6505-113-1903
6505-133-1904
6505-136-4000
6505-138-0680
6505-148-9225
6505-149-0205
6505-153-8864
6505-153-9967
6505-153-9976
6505-161-0800
6505-224-8349
6505-226-1202
6505-237-8486
6505-261-7247
6505-299-8599
6505-299-8697
6505-531-7757
6505-664-7117
6505-817-2227
6505-853-6916
6050-854-2497
6505-890-1388
6505-890-1575
6505-890-1763
6505-890-2193
6505-903-9220
6505-935-4128
6505-935-9702
6505-935-9703
6505-982-5557
MARCH 1972 ACTIONS
6505-181-7496
6505-181-7721
6505-299-8149
6505-531-7757
6505-619-8919
*6505-~600-4720
6505-723-5015
PAGENO="0103"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8605
Chloroxazone and Acetaminophen Tablets-Possibly. (Parafon
Forte)
Meglumine Diatrizoate Injection, USP. (Renografin (2))
Demeclocycline Syrup. (Declomycin)
Demeclocycline Hydrochloride Tablets, NP. (Declomycin)
Diphtheria and Tetanus Toxoids, Adsorbed, USP.
Dibucaine Hydrochloride with Dextrose Injection. (Nupercaine)
STATUS CODES FOR THE FOLLOWING ITEMS HAVE BEEN REVISED AS
INDICATED (ssC 1 TO SSC o)
Sodium Diatrizoate for Oral Solution. (Hypaque Sodium, Oral)
Magnesia and Alumina Oral Suspension, USP. (Maalox)
Influenza Virus Vaccine, USP.
Pentaerythritol Tetranitrate Tablets, NP. (Peritrate)
Pentaerytritol Tetranitrate Tablets, Modified. (Peritrate)
Isosorbide Dinitrate Tablets. (Isordil)
Tuberculin, Purified Protein Derivative, USP.
Ampicillin for Oral Suspension, USP. (Omnipen, Penbritin,
Amcil)
Aluminum Hydroxide gel, Magnesium Hydroxide, and Simethi-
cone suspension. (Mylanta)
Potassium Phenoxymethyl Penicillin for Oral solution. (V-
Cillin-K)
Potassium Phenoxymethyl Penicillin for Oral solution. (V-
Oillin-K)
APRIL 1972 ACTIONS
THE FOLLOWING ITEMS HAVE BEEN DELETED BY THE DMMB
FSN and Nomenclature
6505-116--1890 Dextran Injection.
6505-180-5994 Sodium N-Amylethylbarbituvate and Sodium Butabarbital
injection.
6505-947-1882 Blood Chemistry Control Serum, Normal.
6505-947-1883 Blood Chemistry Control Serum, Abnormal.
6505-952-7177 Paraldehyde, USP.
THE SUPPLY STATUS CODE FOR THE FOLLOWING ITEMS HAVE BEEN REVISED AS
INDICATED (sso 1 To SSC s)
F~SN
6505-022-1323
6505-022-1324
6505-063-5570
6505-113-6995
6505-116-9325
6505-116-9670
6505-126-9400
6505-133-9400
6505-141-3725
6505-160-7875
6505-551-8862
6505-559-6695
6505-890-1819
6505-926-9005
6505-935-9822
6505-935-9831
6505-965-2319
6505-965-2435
Chlorpromazine Hydrochloride Capsules. (Thorazine)
Chlorpromazine Hydrochloride Capsules. (Thorazine)
Imipramine Hydrochioride Tablets, USP. (Tofranil)
Chloral Hydrate, USP.
Sodium Diphenylhydration Capsules, USP. (Dilantin)
Dimenhydrinate Tablets, US?. (Dramamine)
Mephobarbital Tablets, NF. (Mebaral)
Phenobarbital, USP.
Sodium Amobarbital Capsulets, USP. (Amytal)
Rabies Vaccine, USP.
Promazine Hydrochloride Tablets, NP. (Sparine)
Sodium Phenobarbital, Sterile, USP.
Trimethobenzamide Hydrochloride and Benzocaine supposi-
tories, NP-Possibly. (Tigan)
Chlorphentermine Hydrochloride Tablets. (Pre-Sate)
Prochlorperazine Maleate Capsules. (Compazine)
Dextroamphetamine Sulfate and Amobarbital Capsules. (Dcx-
amyl)
Trimethobenzamide Hydrochloride Capsules, NP-probably.
(Tigan)
Phenmetrazine Hydrochloride Tablets, Modified. (Preludin)
6505-764-3313
6505-875-7955
6505-890-1763
6505-890-2081
6505-926-9107
6505-982-7759
THE SUPPLY
FSN
6505-064-8731
6505-074-0993
6505-181-8044
6505-597-7341
6505-680-2326
6505-761-1506
6505-782-2676
6505-827-5710
6505-890-2218
6505-935-4129
6505-935-4130
PAGENO="0104"
8606 COMPETITIVE PROBLEMS I~ THE DRUG INDUSTRY
Senator NELSON. In the material you sent us in April, the data
mdicates that some considerable amount is still being spent on drugs
which the AMA Council on Drugs and/or the National Research
Council of the National Academy of Sciences regard as irrational and
not recommended-Ornade and Darvon Compound for example-
Ornade almost a million dollars and Darvon Compound $850,000-
Dimetapp Extendtabs $670,000 and Bendectin almost a half million
dollars-are we correct in that, that either the AMA Council oj~i Drugs
itself or the NAS/NRC regard them as irrational combinati~ii1s ?~Is~
there a reason for using those?
General HAYES. Well, I would like to quote to you from a Jan. 18,
1972 minutes of the Therapeutic Agents Board Meeting. at the
Valley Forge Hospital. I will give this for the recOrd also, but I
will just take this one part.' This is paragraph "h" under para-
graph (6).
"Discussion of Darvon Compound-65 (deleted by depot as a stand-
ard item)-This is one of the biggest volume items in Pharmacy. Plain*
Darvon, 65 mg., does not have the same acceptance with either physi-
cian or patient-preference is approximately 10-1 in favor of D.C.-
65. It was unanimously agreed by Board members to continue stockage
of this items as a non-standard item. Through Department Chiefs,
a physician/patient education program will be initiated with the
aim of reducing requests for this item."
I think that more or less gets at the heart of the problem of a num-
ber of these drugs, that they have been well accepted both by the
physician and by the patients, even though the fundamental state-
ment that you quoted from the AMA and also the Research Council
findings indicate that they do not have a great deal of advantage over
some other substances.
Senator NELSON. We are talking about local procurement, is that
right?
General HAYES. This would be now local procurement, because we
have deleted this item, put it at the limited standard and it's being
deleted out of the system.
Senator NELSON. But that report you were just reading from is from
where?
General HAYES. This is from the Valley Forge General Hospital
at Phoenixville, Pa., and it shows the problem of an individual hos-
pital against this kind of thing and how they are trying to meet it.
They are both stocking while they are trying to educate people to
recognize that there are other ways to get the same result. But as
they state very well, it is a matter of both the patient and physician
education.
Senator NELSON.. This is the same problem over the years with all
the fixed combination anti-infectives, I take it.
General hAYES. Essentially.
Colonel LINDSEY. Sir, there has been a sharp drop in the number
of the fixed combinations that are in our catalog. The last issue of our
catalog was published in October 1971 and since then, through the
change bulletins, about one-third of all the fixed combination prepara-
tions in the catalog have been deleted or gone on limited standard
1 See Appendix IV, p. 8885.
PAGENO="0105"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8607
pending exhaustion. Not one new combination has been added since
October 1971.
General HAYES. Furthermore, in regard to the Darvon, I think if
we look at the overall picture, the usage of Darvon is moving down-
ward. In the 12 months of fiscal 1971, we issued about 70 million doses
9f Darvo~i in various forms. During the 16 months since the last hear-
ing, we only issued 20 million. That is a lot of Darvon still. But you
have to compare that against the 400 billion doses of aspirin in the
same period. And about 95 percent of the time, it would look as if now
the prescribing is aspirin as the drug of choice.
Now, from the viewpoint of price, propoxyphene still is a signifi-
cant amount of money. It cost us almost $600,000. The 400 million
doses of aspirin cost us $800,000. Or if you put it on a cent per dose,
it is 3 cents to two-tenths of a cent per dose.
Senator NELSON. I take it that part of the problem is that patients
do not think you are giving them much of anything if they get aspirin,
whereas if you give them a drug under another name, they feel the
results are better?
General HAYES. Well, that is true. It is rather interesting that peo-
ple do not understand the value of aspirin for a number of things.
I have a hard time getting patients who have minor inflammatory
problems in joints, getting them to understand that the aspirin not
only helps the pain, but it also helps the inflammatory process, which
is not helped by the other analgesics. They are analgesics only. But
aspirin has a specific anti-inflammatory action. It is really superior
to some other things for certain things.
Senator NELSON. I suppose the patients would probably feel they
were getting better treatment if the doctor said we are giving you
some acetylsalicylic acid.
General HAYES. Well, our patients are getting pretty sophisticated,
and I think they would know that is aspirin.
Now, I think another thing, if we are going to be on Darvon a little
bit. The patents run out on it this year and I expect the price will
drop as competition comes into the picture.
Senator NELSON. I take it you are following the NAS/NRC recom-
mendations on "ineffective," "possibly effective" or "probably effec-
tive" drugs?
General HAYES. That has been a matter of official policy since be-
fore the last hearings. I think if you will remember, just shortly be-
fore the last hearings, the recommendations came out and the DOD,
our office in DOD put forth a directive that these recommendations
were to be followed and that those items that were not effective were
to be deleted, either by destruction or other disposal from the sys-
tem, completely; that the effectives were to be monitored if there were
changes in ratings by the Council recommendations, and the possibly
and probably would be monitored again through the Federal Regwter
and changed as advice came through the pages of the Federal Register.
This has been followed very carefully.
Mr. GORDON. The Darvon Compound 65 that is referred to by the
Council on Drugs of the AMA is a combination of Darvon with APC;
that is, with phenacetin, caffeine, and aspirin. But the combination of
Darvon and aspirin alone is not considered irrational according to the
AMA's Drug Evaluations. I just want to clear that up.
PAGENO="0106"
8608 COMPETITIVE PROBLEMS TN THE DRUG INDUSTRY
General }L&yi~s. Well, if we want to get to it, I do not think APC
is a very sensible combination, any way you use it, with or** without
Darvon. It is an irrational combination in my own mind. But Darvon
and aspirm together do give an increased analgesic effect. But again, I
come back to that point that in the other analgesic agents, the anti-
inflammatory capability that aspirin has is missing, by and large.
Mr. GoiwoN. How about Ornade? The DOD spent almost $1 million
on that..
General IIA1Y~s. Fundamentally, Ornade and Dimetapp represent
in the service pretty much what they represent outside the service.
They are a well accepted drug by both the patients and the prescribing
physicians. They are popular.
Colonel LINr~sEY. They are in the top 50.
General }IATfl~5. They are in the top 50 across the country.
Senator NELSON. The AMA's Drug Evaluations describe Ornade
as an irrational mixture. NAS/NRC evaluation is possibly effective.
"The panel is unaware of any evidence that this combination or any
of its components is effective for this indication." It goes on to say
that several carefully controlled studies in which different antihista-
mmes were tried disclosed no alleviation of symptoms or shortening
of the duration of symptoms of colds.
General }iA~ri~s. Well, I think we all agree with that. And it again
is a matter of how you look at it. Some patients do get relief, they feel
at least, with the use of these substances. And I am not talking about
the specifically named drugs now, I am talking about the general
product. The atropine-like aspects of some of the components do help
with the stuffiness. I do not feel competent to say anything against the
reconunendations of the AMA or the Council on that.
Mr. Goiwow. When you drop the ineffectives, the possibly effectives,
the irrational and the unnecessary drugs, including fancy duplicates,
what do you estimate DOD will save in the next fiscal year?
Colonel LmTusEY. We have already dropped the ineffective and pos-
sibly effective. I do not think there is any chance that we are going
to drop the drugs that are listed by AMA as "irrational." Some of
these things are standbys in a man's practice. It is going to take a
generation or two generations of education to do it.
The good example is triprolidine and pseudoephedrine. This is a
bread and butter staple item of the physician in the emergency room
taking care of a sick kid. If we dropped all the irrational combina-
tions and-what was the other category you mentioned?
Mr. Goiwow. The irrational, the unnecessary, the possibly effectives.
Colonel LIwusEy. We have already dropped the ineffective and the
possibly effective. If we dropped the irrational-let's say we dropped
Arfonad and we put the two ingredients down in the emergency room
and the physician had to write two prescriptions and not one and we
had to buy two drugs and not a combination, we would save nothing.
Mr. Goiwow. I am talking about what are you planning to do. Those
that you are planning to drop and have dropped already-what do
you expect to save in the next fiscal year?
General }In~i~s. I do not know how we can project that, Mr. Gordon,
because it is a matter of moving evolution so that we do not, at the
moment, say, well, now, this year we are going to drop drug X. It is
PAGENO="0107"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8609
as the information becomes available and the patterns evolve, then
we decide to drop drug X. And as our success in education on some
of these items that we admit are irrational but are, as Colonel Lindsey
says, bread and butter items in practk~e-as the educational process
cuts down the demand, then we will be in a position to drop it. It is
hard to answer, it is impossible to answer, the question you have asked,
really. It is just that our goal is to eliminate the unessential just as
we have eliminated the ineffective.
Mr. GORDON. All right. Those that you have already dropped, what
kind of savings are you making on that?
Colonel LINDSEY. Relatively little. We drop things that people
switch to other things for. The place where we are going to save money
is in switching from brand name combinations which are limited for
one gimmick or another, to equivalent combinations which are made
readily available, nonpatented, generic drugs. For example, if we
have to have a cold tablet, a mixture of ingredients to make the patient
feel better-quit sneezing, quit sniffling, dry his nose up-if we could
go out and buy that on a generic basis~, I would say on cold tablets
alone, we would save $750,000 per annum.
Now, I mentioned earlier, we have already dropped about a third of
the fixed combination drugs in our catalog since October of last year.
Mr. GoRDoN. How much did you save on that?
Colonel LINDSEY. I do not think we saved anything. People switched
their volume to other drugs.
General HA~ss. Maybe I can give you an idea of the situation as to
how they are going at this by quoting from a Pharmacy Newsletter.
This one is from Martin Army Hospital at Fort Benning, Ga. This is
the January 1972 edition. As you can gather, it is volume 12, No. 1, so
this kind of educational process has been going on for some time.
It says from the Department of Clinics. This is on page 1. I will
number it with a "3" for the record.1
"The Department of Clinics is engaged in a program of reducing
the number and amounts prescribed of drugs subject to abuse or
addiction." This is what they are covering at the moment. "Statistics
generated out of this program reveals aspects of drug utilization
which should be of interest to all personnel. During the year ending
in October 1971, a review of utilization of 10 commonly prescribed
drugs disclosed the following: Amytal, 4,500 units for a value of
$24.30."
I am going to the middle. I am not going to take all 10 of these.
Meprobamate, 8,500 units for $448.80; and at the bottom, Fiorinal,
Librium, and Valium, 287,000 for the first for $2,600-I am rounding
off now when we get up to these numbers; Librium 419,000 units for
$12,000; and Valium, 727,000 units for $28,200. "It should be noted
that the bulk of funds expended on these types of drugs is attributable
to only three drugs, the latter three. These three drugs accounted for
a total of 1,433,000 units at a cost of $42,892. The significance of these
figures can better be evaluated when comparison is made to the other
drugs stocked and used in MEDDAC. A total of 1,100 drug products
are authorized for use in our activities. The cost per line on a monthly
basis of these 1,100 items is $59, while for each one of the aforemen-
tioned three drugs, it is $1,194.
1 See p. 8891.
PAGENO="0108"
8610 COMPETITIVE PROBLEMS I~ THE DRIJG INDUSTRY
"While no attempt was made to determine proper. utilization of
these drugs, physicians and dentists who have studied these figures
have raised the following questions:
"How many of those patients started on Valium or Librium for its
tranquilizing properties could have benefited from the use of pheno-
barbital, a much less expensive product and effective tranquilizer?
"`How many of the patients that were treated with Fiorinal as a
pain reliever could have obtained the same relief from aspirin, APC,
or codeine-all much less expensive and effective pain killers?'"
Now, this is the kind of educational process that is going on all the
time. They are trying to get people to look at rational use of drugs
which will accomplish an end at lower expense. But I can still not
answer your question as to how much money we are going to save. And
I cannot go to the point that we at the DOD level, and I think I can
speak for the three Surgeons General, that their offices would not go
and send a directive to Martin Army Hospital and say, you will not
issue Fiorinal, Librium, or Valium. We cannot go that directive. But
we certainly can educate, and this is going on.
Another example of it is the Air Force. This is from Wilford Hall
Hospital at Lackland, in San Antonio. Their formulary, which as you
see is a handy size, their formulary has listed in it opposite-I opened
it at Dactinomycin-500 mcg, vial, one vial, $1.40. Every item in this
thing has a price opposite it to inform prescribing physicians of what
he is spending of his tax money and also the money that is allotted to
the base for its overall use. Because the money that is overspent in the
pharmacy is not spent for something else that somebody else might
want. There is n limited budget.'
Now, Wilford Hall is not alone in this kind of thing, but I brought
it along as an example of what the services are doing.
Senator NELSON. What hospital is that? Is this their own formulary
developed within the hospital?
General }IA~as. Yes.
Senator NELSON. What educational process has the DOD adopted
from the top here? Have you provided any suggested formulary?
General IIA~ris. No, we have not, and actually, each hospital has its
own formulary, because there are certain differences in the way things
are done in the various services, both the services and the needs, so each
hospital puts its own formulary together. We have not felt it is neces-
sary to put together a DOD formulary because the services are doing
a good jOb in their various installations.
Senator NELSON. Colonel, when you were talking about irrational
combinations, whose definition were you using? For example, the AMA
describes a number of drugs as irrational combinations. The NAS/
NRC described a number as irrational combination, including, if my
memory is correct, all fixed combination anti-infectives, did they not?
Except the tuberculosis drugs. Whose definition are you followmg on
irrational?
Colonel LINDSEY. I was responding to Mr. Gordon's question on
irrational. I used the term once specifically in relation to Arfonad. I
was using in that case the AMA definition.
Senator NELSON. Because the NAS/NRC did not conclude that all
combinations were irrational. I think a number of those they did not
describe as irrational were topica1s~ as well as certain tuberculosis
drugs.
1 See p. 8893.
PAGENO="0109"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8611
Colonel LINDSEY. We have a number of certain types of penicillin
which may not be irrational. Other than the topicals, we have no cOm-
bination of antibiotics.
General HAYES. To carry on a little further to develop the thought
that you had about what are we doing on cost ideas and formularies,
the Air Force has in its Medical Digest which comes out monthly a
continumg program entitled "How Much Does It Cost ? " I will not-
again, I will not read all of this, but I will read a little of it and then
I will put this in for the record and this will be No. 5:
How can we readily identify the comparative costs of similar drugs and how
can this information be made easily accessible to the practicing physician? The
data automation system has many reports that are used to manage our medical
resources, but there is not a simple, convenient way in which the practicing Air
Force physician can identify and compare the relative cost of similar products
of pharmaceuticals.
They go on and develop that a little bit. But then they give the ex-
amples in this and this is only one issue of this, where they, in a table,
compare the costs of appetite control preparations, for instance-dex-
edrine, cost per day, 8 cents; Ambar, 3 cents; Eskatrol, 7 cents; Pre-
ludin, 91
Senator NELSON. Are these prices based upon prices charged the
hospital by your central procurement? These are not local pharmacies?
General HAYES. No, these are the central prices.
Again, I will not burden you with this whole business. But this is
an example of how they are trying to bring to the attention of people
what the prescribing members in terms of dollars and cents as well as
the effectiveness.
There is another management publication that the Air Force has
and this one again emphasizes the "how much does it cost" aspect. The
Air Force can do this a little bit better than the other two services
because they have at the moment a .better system of automation for
data computation. But the other services are doing much the same
kind of thing in the ways that they can do them.
Mr. GoIwON. On page 13 of your additional statement, you. say that
you have no objection to turning over to FDA "our job of inspection
and testing so long as they do it as thoroughly as we do." Then you
estimate that they need 3,000 more highly skilled personnel to do the
job.
Now, I notice from the material that the GAO gave us that you
have approximately 76 people to do that type of work. Why do you
say the FDA would need 3,000 more people to do the same job?
General HAYES. Well, there is one little p~irase in that sentence,
"for the countr~y," that we are doing for the Department of Defense.
Mr. GorwoN. Oh, for the country.
General HAYES. If they did it for us, they would not need 3,000. But
if they are going to take on the whole job the way we do it for the
whole country, they will need 3,000 more people. And that is a guess.
Mr. GORDON. I see. How about doing the job for the Defense Depart-
ment, rather than for the country?
General HAYES. Well, as we say, if. they will do it and do it as well
as we do it, we do not care.
Mr. GORDON. One other point. A study has been made fairly re-
cently by Dr. Paul Stolley of Johns Hopkins, Dr. McEvilla and others
that show that antibiotics and other drugs are being prescribed fre-
1 See p. 9041.
PAGENO="0110"
8612 COMPETITIVE PROBLEMS Th~ THE DRUG INDUSTRY
quently for the common cold. Do you plan to do anything about this?
Have you issued any instructions?
General HAYES. Let me see what I can find. Without finding it, let
me answer yes, as part of the continuing education, in the same types
of publications that I have talked about, either the Navy's, U.S. Navy
Medicine, they call it, the Army's Medical Bulletin, the Air Force's
Medical Service Digest-these aspects are addressed directly, that the
prescribing of antibiotics for nonantibiotic conditions is discouraged.
Again, it is a habit pattern that has developed in the country and it is
gong to take time to get this kind of thinking reversed. But it is being
addressed.
Senator NELSON. An article in the Annals of Internal Medicine,
April of this year, volume 76, No. 4, states that:
It is equally apparent that a large amount of drug prescribing and drug costs
are for a common, benign, and self-limiting illnesses; for example, the uncom-
plicated common cold. The U.S. National Marketing Research Data also indicate
that most physicians-about 95 percent-would issue one or more prescriptions
to a patient diagnosed as having the common cold and almost 60 percent of these
prescriptions will be for antibiotics. Data are not available to determine what
proportion represent bacterial complications of an illness that was originally
viral.
This seems to indicate a vast overprescribing of antibiotics for non-
indicated uses, would it not?
General HAYES. Oh, I would not argue with that at all.
Senator NELSON. Well, if that is common in the profession-they are
saying 95 percent prescribe something and 60 percent prescribe an
antibiotic-have you tackled that specific question?
General HAYES. I have found a reference of the kind I am talking
about. This is the Navy U.S. Navy Medicine, March 1972. In a letter
to the editor discussion back and forth, with a comment from Captain
Fox, the Medical Corps, chairman of the Formulary Review Com-
mittee, and I will just quote one thing: "Antibiotic prescribing in my
own experience is much more rational and restrained now than it was
5 years ago. But there is still a tendency to use an antibiotic when none
is needed or to use a large dose when a small one will do the job."
This is what I mean by continuing exposition of the problem through
the various professional publications of the services.
Senator NELSON. Have you attempted to establish any procedure for
a base line, so to speak, so that you will know 1 year, 2 years, 3 years
from now what changes in the prescribing practices have occurred
within the institutions within the Army?
General HAYES. Well, I think that will come, first, out of the figures
that Colonel Lindsey's shop will develop as the demands are identified.
Also, as I say, the Air Force is keeping good track on the various hos-
pitals, and they can do this well, of what is being used. I think we will
see the trends of our educational efforts as time goes on, and we plan
to keep monitoring this.
Senator NELSON. Do you maintain statistics on an institution-by-in-
stitution basis on what drugs are used and for what purposes?
General HAYES. The Air Force does. The other two services do not.
They are not set up at the present time in their accounting system to
be able to do it. The Air Force, by virtue of the fact of its data proc-
essing, can do it. .
Colonel LINDSEY. Senator, we can retrieve data by hospital or medi-
cal facility of type for all three of the service~. We do not usually do
PAGENO="0111"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8613
this because we have enough other things to do. We do watch the flow
of total service demand. Some of the happenings to these demands when
an item is announced as possibly effective, for example, are very
mteresting.
General Hayes mentioned dextroamphetamine sulfate and Chlortri-
meton and Eskatrol. As soon as we indicated th~t this compound was
possibly effective and delimited standards, the demand dropped by
90 percent and we suddenly wind up with 35 years and 8 months'
supply of this stuff at current consumption rates. This is an example
of where people can and do get to work.
Senator NELSON. That is not considered an excess supply in the mili-
tary, is it?
Colonel LINDSEY. That is a minor item of excess supply.
General HAYES. To give you an example, to answer that question
about being able to monitor and monitoring, this is the Carswell Air
Force Base, Tex., read out in response to the "How much does it cost"
program. It is put together in two ways. One is a gross grouping, car-
diac therapy. Cost quarter ending December 31, 1971, $13,231 and
$15,208 for the quarter ending March 31. The cost differential there,
$2,000 plus.'
But in tranquilizers and antianxiety, which is the next line item that
I see here, the cost in quarter ending December 31, 1971, was $9,448;
for the quarter ending March 31, 1972, it was $7,111, or a minus
$2,337.
Now, further back they actually go into the line item listing. Again
they give the unit of issue, the unit of cost, the cost per day, cost per tab,
the issues between January and March-well, for each quarter-to the
end of the listing, which ended in March of 1972. They can tell the
numbers of issues and the total annual cost by quarter.
So this monitoring of what is going on can be kept at a very good
level. And this is a pretty small base in one sense.
Senator NELSON. Is that in the Air Force?
General HAYES. This is Carswell Air Force Base.
Senator NELSON. As you may recall, we discussed the question of
rational prescribing in your last appearance about a year and a half
ago. I suggested that it seemed to me that if there was one place in
the practice of medicine where it would be possible to establish the
best kind of program of rational prescribing, it would be in the mili-
tary services. I do not know the complications involved, but I am just
wondering if it would be valuable if each of the hospitals in the mili-
tary maintained records the way the Air Force does so that you would
be able to compare the situations throughout the military in what has
been prescribed and what is done.
General IEIiYEs. Ideally, you are right. But there are practicalities.
The Air Force has the system set up and can do it. The other services
have to do these things manually in most instances. They have spotty
computer capability. But even at that, as I read to you from Martin
Army Hospital down in Fort Benning, they have taken the trouble to
review the utilization in a manner similar-not in as detailed fashion,
but it gives the information in a usable, educational way. So that the
various hospitals are doing this, using the techniques that are appro-
priate to what they can-what they have used and can use. So the
spirit of your suggestion is being followed.
Senator NELSON. Within any hospital I assume you know what they
have procured from you and they also know what they have procured
~ee p. 9045.
PAGENO="0112"
8614 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
locally, do they not? Is it a question of some problem in keeping track
of how many dosages and what form and what amounts?
General }IAYi~s. That is correct.
Senator NELSON. For purposes of billing the institution, isn't it all
broken down as to what they have bought?
General HAYEs. Yes.
Colonel LINDsEY. Senator, looking toward the future, there is a De-
partment of Defense-sponsored operation going on at Wright-Pat-
terson Air Force Base, looking toward hospitals of the future where
we have an adequate computer base, where you can have a ready,
immediate readout of rational drug therapy-not just in terms of the
total hospital, but rational drug therapy in relation to a specific pa-
tient and his diagnosis and other drugs that he is taking-quantities,
doses scheduled, choices of item, interactions and what not: This is the
sort of thing we are working toward in a servicewide system.
Senator NELSON. Do all of the hospitals have a drug and therapeu-
tics committee?'
General }IAYi~s. Yes. To give you an idea of the detail and the con-
cern, I would like to read again from this one from Valley Forge just
a little bit. There is an item on the fact that they bought Griseofulvin
tablets, 500 mg. (Fulvisin Ultrafine). Then they have an explanat.ion.
"This was a one-time purchase for a particular patient who could not
tolerate stocked item." This is how closely they are monitoring in the
therapeutic agents committee.
A little further down, the board recommends disapproval of the
following new drug requests presented. PrednisolOne Sodium Phos-
phate (Infiamase) and their explanation, "Presently stock Prednedrin
which is satisfactory."
Now, this is a professional decision that someone wanted some-
thing, but the Therapeutic Agents Board on a professional basis said,
we have something that will do it ju~t as well, there is no need to buy
something different.
I have only given you some examples from this. I do not want to
burden you.
Mr. GonroN. According to the Comptroller General when he was
here on May 10, during the period of July 1, 1970, to December 31,
1971, the DOD bought Macrodantin through the Federal Supply
Schedule and the Comptroller General stated that you paid $275,000
more than if you had bought it from the Veterans' Administration.
Could you expand on that, please?
Colonel LINDSEY. I do not think I can expand on it other than I can
say that was a grave mistake and I did not know it happened.
Mr. GoiwoN. One other question.
When the FDA Commissioner was here on May 9, he stated that
where poor therapeutics are being practiced, it is at least in part due
to poor communication to the physician of the information he needs
to do a better job. You have told us what you are doing to commurn-
cate more and better information to the doctor. Now, what is the
function of detail men with respect to your installations? Are they
allowed to go in there? What do they do?
General HAYEs. The method of meeting the requirements of the
detail men varies from installation to installation. But a general
answer to your question is that the detail man has to follow a certain
PAGENO="0113"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8615
protocol upon entering one of our medical installations. He may have
to report to the Chief of Professional Services before he details any-
one. He may have to go to the Chief of a Service before he can see mdi-
vidual physicians on that particular service. He may not be allowed in
some installations to move through the hospital, but may have an as-
signed day where he may set up his display in a public area-that is,
public in the sense of the medical-where he can then meet with physi-
cians in the hospital and the nurses and the pharmacists and be open
for discussion and display of his wares.
This is a little bit old, but it was published in the Navy Medical
Newsletter, and I think the spirit of this is again carried out in all of
our installations pretty well.' It is a system that was started at the
Camp Pendleton Navy Hospital of managing the problem of detail
men. They got together some ground rules, and I will read some of
this, but not all of it. I will put the rest of it here for the record:
The method of management: All detail men are required to check in at the
pharmacy before visiting any other area of the hospital. Explicit instructions
are personally outlined by the Chief of Pharmacy Services. The Pharmacy must
be made aware of the items that are to be detailed that day to the staff. In the
case of new products, complete literature must be on file in the Pharmacy before
any detailing is done. This is to provide a ready reference for the staff should
questions arise. Only a very small quantity of samples are left with the physician.
Sampling in quantity is done only in the Pharmacy. This allows the Pharmacy
to establish users rates should the item be requested for stock and permits a
replenishment of samples should the physician wish to extend his clinical evalua-
tion of an item.
I will not go through all of this, but it gives you some idea of the
nature of the approach.
I would say that the detail man, in my own clinical experience, has
served a useful purpose. I would also say that uncontrolled detailing
can .be annoying, in some instances, harmful. I have been fortunate.
The detail men that I have met have all been gentlemen, they have
been most cooperative and helpful.
Senator NELSON. Thank you very much, gentlemen, for your presen-
tation. We appreciate your taking the time to come. If any member
of the committee or staff has any further questions, we will submit
them in writing; I assume you will respond to them.
General HAYES. It has been a pleasure being with you, sir.
Senator NELSON. Our next witness is Dr. Benjamin B. Wells, Dep-
uty Chief Medical Director of the Veterans' Administration.
Dr. Wells, we are pleased to have you with us this morning.
STATEMENT OF DR. BENJAMIN B. WELLS, DEPUTY CHIEF MEDICAL
DIRECTOR, VETERANS' ADMINISTRATION; ACCOMPANIED BY
DR. LYNDON LEE, JR., ASSISTANT CHIEF MEDICAL DIRECTOR
FOR PROFESSIONAL SERVICES; ROLAND HARDING, CHIEF,
PHARMACY SERVICE; CLYDE COOK, DEPUTY DIRECTOR, SUPPLY
SERVICE; AND PHILIP WARMAN, ASSOCIATE GENERAL COUNSEL
Dr. WELLS. May I, before we go ahead, introduce my colleagues
~iere?
Senator NELSON. Yes; if you will, so the reporter will have it ac-
~urately. If any of your colleagues wishes to make a comment at any
r~see p. 9046.
80-450 O-72--pt. 22-8
PAGENO="0114"
8616 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
time, I think he should identify himself so it will be correct in the
record.
Dr. WELLS. Directly at my right is the Assistant Chief Medical
Director for Professional Services. He is also Chairman of our Execu-
tive Therapeutic Agents Committee in central office. Dr. Lyndon Lee.
At my extreme right is the Chief of our Pharmacy Service, Mr.
Roland Harding.
Then at my left is Mr. Clyde Cook, who is the Deputy Director of
our Supply Service and Mr. Phil Warman, our Associate General
Counsel.
Senator NELSON. Your statement will be printed in full in the
record. You may proceed to present it however you desire, and if you
wish to call for any comments from any of your associates, feel free
to do so.
Dr. WELLS. Mr. Chairman, inasmuch as this is a fairly lengthy and
detailed statement, and I think it is responsive in large measure to the
questions that have been forwarded from your office, with your per-
mission, we will put it in the record and speak informally to the
subject.
Senator NELSON. Fine. It will be printed in the record.
Dr. WELLS. Thank you, sir.
In the year since we appeared before you we think we have made a
great deal of progress in the handling of the drug program in the
Veterans' Administration. First off, we have done a great many things
to improve our rational prescribing of drugs in the field and with our
fee-basis physicians. This has been spearheaded in large measure
through the reorganization of our Executive Committee on Thera-
peutic Agents in the central office, the development of considerably
more specific missions for that committee and a great deal more inter-
relation between the committee in the central office and their counter-
part committee at each of the field stations.
We think we have made considerable progress, also, in improving
our methods of supply and purchase and distribution of drugs
throughout the system. In this area, every attempt has been made to
improve the economic situation, to get better kinds of pricing, and at
the same time, to reduce as far as we can the level of those things
which are less than fully effective by current standards.
Additionally, we have had a great deal of educational input into the
system. We have had specific programs under our Department of
Medicine and Surgery, Education Service, geared to their therapeutic
programs with drugs.
We have also initiated a peer review type of mechanism, which I
suspect is really the best kind of education we can use in our hospitals.
We always have used this, but we have built it up around the problem-
oriented record, for example, which really does change the situation
at the hospital considerably relative to any kind of therapy. In the
problem-oriented record, as you may know, the physician is required
to list all things which are a problem to a patient. Then, anything that
comes up later in the way of a diagnostic procedure or therapeutic
procedure is keyed to the numbered list that is on the face sheet of the
chart. This has a great inhibiting effect on the physicians, I may say,
because he must look at the problem list and then orient his therapy
to the problem. It becomes abundantly evident if lie gives drugs, let's
PAGENO="0115"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8617
say, or does anything else in an irrational manner or that cannot be
defended before his colleagues, his peers, on the staff.
We have also continued, as we have in the past, a very careful moni-
toring of our program throughout the agency. As you know, we have a
specific monitoring of all drug purchases at all hospitals with monthly
reports into the central office and a quarterly complete monitoring on
an agencywide basis. So these things, we think, have brought about
considerable improvement.
Then we have taken part in a number Of other educational ventures
which I will leave for later in case you wish to ask about them.
(Prepared statement follows:)
PAGENO="0116"
8618 CO~fl'ETITIvE PROBLEMS IN THE DRUG INDUSTRY
STATEMENT OF DR. BENJAMIN B. WELLS
DEPUTY CHIEF MEDICAL DIRECTOR
BEFORE
THE SUBCOMMITTEE ON MONOPOLY
OF THE
SELECT COMMITTEE ON SMALL BUSINESS
UN1TED STATES SENATE
JUNE 21, 1972
Mr. Chairman and Members of the Cormi~ittee:
We are pleased to appear before this SubcommIttee to discuss the current
policies and practices of the Veterans Administration, Department of Medicine
and Surgery, in reference to the prescribing, dispensing and procurement of
drugs. in Fiscal Year 971, our expenditure for drugs amounted to $64.5 million,
or about 3% of our total cost of medical care. Drugs and pharmaceutical
preparations are, of course, a vital part of the physician's armamentarium
in the care and treatment of veterans. Their proper seleetlon and use is a
critical factor In the quality of medical care provided by this agency. During
the past year, we have devoted a qreat deal of time and effort to the assessment
of our professional and administrative practices that relate to this area.
Policy on Rational Drug Prescribing
Since our last appearance before this Subcommittee, we have thoroughly
re-examined our policy on rational drug prescribing, in the course of this
study, we have considered relevant information from other federal agencies; we
have reviewed the data developed by this Subcommittee; and we have conducted a
complete audit of our manaqement procedures in the drug field using a team of
outside consultants. We have secured the advice of academic pharmacoloqists,
officials of the United States Pharmacopeisl Conference, officials of the
PAGENO="0117"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8619
National Formuiary, representatives of the National Academy of Sciences,
officials of the Food and Drug Administration, and representatives of other
federal agencies that have activities in this area of medical practice. In
addition, we have continued to monitor the current literature In the field of
drug treatment with special reference to observations and techniques used
for the evaluation of therapeutic agents.
On the basis of these studies and observations, we believe that our current
policy is a sound one. We realize, however1 that we must continue and even
intensify our efforts to secure valid information concerning the efficacy
of drugs and to disseminate this information to our physicians, Also, we
must continue to inform and supervise all of our staff personnel in methods
calculated to obtain effective drugs and to assure that these are distributed
and used safely and at minimal cost consistent with the principles of good
medical practice.
Our policy on rational drug use is very simply stated in two parts:
I. Every reasonable effort should be made to treat all VA patients
with the most effective therapeutic agents indIcated, and at the most
favorable price that can be obtained,
2. Since there are differences of opinion on the effectiveness of
many drug products and also valid differences in approach to the
selection of therapeutic regimens, we wil I not rigidly restrict
professional practices by administrative direction.
We believe that the interests of sound medical practice are best served by
efforts to assure that clinicians who treat VA patients have as much valid
PAGENO="0118"
8620 COMPETITIVE PROBLEMS TN THE DRUG INDUSTRY
information available to them, in readily usable form, as they require for the
proper selection of drugs. Much of our effort is aimed at assuring the
availability of this useful information.
Dru~s Classified Less Than Effective and implementation of FDA Pronouncements
in the past 18 months we have taken a number of positive steps to advise
against the use of drugs classified as less than effective and to implement
FDA pronouncements on these druq~. Our initial implementation was through a
Department of Medicine and Surgery Circular 10-70-237 dated December 4, 1970.
This required the removal of ineffective drugs from station formularies and
called for contacts with physicians in each instance where such drugs were
prescribed. The physician was to be notified of the FDA classification, and
he was asked to consider the use of available alternatives. The physician was
informed that if he did not agree to an alternative medication, the drug would
have to be obtained by the patient from a private pharmacy. This policy state-
ment was followed by DM&S Circular 10-70-286 dated December 30, 1970, which
prohibited VA stations from carrying stocks of ineffective drugs in inventory.
DM&S Circular 10-71-16, issued a few days later, prohibited purchase of these
drugs by VA under all conditions and also alerted field station personnel that
changes to or additions to lists of drugs classified by FDA would appear regular
in the Federal Register.
DM&S Professional Services Letter lL-ll-7l-44, dated July 13, 1971, gave
updated listings of FDA classifications of drugs through April 30, 1971. This
Professional Services Letter also re-emphasized VA policy on ineffective drugs.
PAGENO="0119"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8621
It also asked field station Therapeutics Agents and Pharmacy Reviews committees
to carefully screen all drugs approved for use at their stations to assure use
of the most effective products. it emphasized that those drugs rated no higher
than possibly effective should be reviewed and consideration given by the committee
to approving alternative use of similar drugs having a higher effectiveness
classification. It underscored the fact that federal funds should be expended
only to purchase the most effective drug products available for a given condition
and asked that field station committees assure themselves that sound professional
reasons govern their selection. DM&S Circular 0-72-27, dated January 25, 972,
reaffirmed the initial policy and instructed the directors of hospitals and
clinics to take whatever steps were necessary to assure compliance. As a part of
the overall review of rational drug prescribing, the VA Executive Committee on
rherapeutic Agents recommended in April of 1972 that our policy on ineffective
r possibly effective drugs be reinforced by another issuance of the policy.
~`i&S Circular 10-72-92 summarizes our policy that funds will not be expended for
~he purchase of drugs classified by FDA as Ineffectiveor possibly effective with
wo exceptions:
I. Drug products for investigational use, and
2. Possibly effective drug products where no appropriate alternative
means of drug therapy is available.
n May ~25, 1972, we distributed to all VA field stations copies of the current
L.sting of FDA classifications of drug effectiveness. We feel that these
ctions have almost eliminated the procurement of ineffective drugs, even though
)A still permits their manufacture and marketing.
PAGENO="0120"
8622 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
Techniques Employed~to Mnitor Drug Selection Practices
We are currently employing several techniques to monitor drug selection
practices. The Therapeutics Agents and Pharmacy Reviews Committee at each VA
hospital is our primary instrument for this surveillance. Through peer review
of the prescribing practices of our staff physicians, we are assured that the
knowledge and information of those responsible for patient treatment are corn-
bined in determining which drugs should be included in station formularies.
Committee members raise questions as to the safety and effIcacy of specific
drugs and combine their knowiedqe to evaluate and select the best agent;
Education rather than edict is used to achieve rational drug selection in our
system. The minutes of these committee meetings are reported to the Central
Office each month. They reflect many thoughtful decisions on the use or non-
acceptance of therapeutic agents. I am attaching some excerpts from these
minutes as Appendix A.
Our Central Office Pharmacy Service routinely reviews records of drugs
purchased by individual field stations. When these reviews detect unusual usage
patterns or significant-usage of drugs whose effectiveness is not generally
accepted, formal innuiry is made to the field station. Its Therapeutics Aqents
and Pharmacy Reviews Committee is asked to examine the question and to report
its findings. At the same time, our Marketing Center, which purchases the drugs,
conducts a similar kind of review to determine that stations are using the most
economical source of supply. The scone of these reviews is significant. No less
than 114 letters of inquiry were sent to VA field stations within the last two
months.
PAGENO="0121"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8623
Cooperation with Others in Assuring Drug Effectiveness
Our Concern with the quality of drugs has not been limited to our own efforts
nor to the results of the NAS/NRC reviews and subsequent FDA determinations.
As I mentioned earlier, we have been consulting for a number of months with
officials of government, academic institutions and others concerned with
drug efficacy, One of these efforts has involved exploration with officials of
the USP of the possibility of that organization undertaking drug efficacy studies
for VA, using techniques similar to those employed by USP in establishing mono-
graphs for the drugs they list. Such studies would be directed specifically to
ur drug selection problems; they would include analysis of the relative
?fficacy of presumably comparable products. Although we shall continue to seek
information of this type, we are not satisfied that this particular approach
is a feasible one.
n the selection of drug products, we must rely primarily on their chemical
)quivalency as determined by laboratory assay. In the hope of obtain ing a
etter tool for selection, we have explored the póssibi I ity of using bio-
vailability studies, in February of i972, the VA formed an advisory panel to
onsider this approach. This panel consisted of representatives from the
ureau of Drugs, FDA; National Academy of Science/National Research Council;
nited States Pharmacopeial Convention; National Formulary; Office of Medical
aterial, Defense Personnel Support Center; the Chairman of the Department of
harmaceutics, State University of New York at Buffalo; Professor of Bio-
harmaceutics, University of Cincinnati; the Director, Drug Metabolism Division,
niversity of I.nnessee; and key officials of the Veterans Administration,
PAGENO="0122"
8624 COMPETITIVE PROBLEMS IN THE DRUG INDIJSTRY
Department of Medicine and Surgery. The deliberations of this panel to date
have established the fact that the amount of bio-availability data currently
available is quite meager, that there are few acceptable study protocols and
that the cost of such studies will be substantial.
Policy on Selection of Druqs for Central Procurement
in addition to our efforts to assure rational drug prescription, we are
reviewing our drug purchasing practices. This Subcommittee has asked for
information with specific reference to our policy on selecting drugs for central
purchasing. The determination of which drugs will be procured is not a pro-
curement decision, but rather it is a professional decision. The purchasing
agent should not determine which drugs will be used by the physician. It is
the proper function of the purchasinq agenf to buy the drugs prescribed by
physicians as economically and efficiently as possible. it is his further
responsibility to make available to the professional staff information on
prices, relative costs of various drugs and any other product information which
may be useful in the selection of drugs. The determination of the method by
which drugs will be supplied, including the decision on central purchasing, is
based on analysis of the amounts and frequency of use of the drug.
These determinations begin at the station Pharmacy Service where a study Is
made of prescriptions received,and a decision is reached either to order only
a sufficient amount for the Immediate prescription or to stock a quantity in
the pharmacy to fill continuing prescriptions that can be anticipated. At this
point, the pharmacist contacts the prescribing physician if the drug is not one
PAGENO="0123"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8625
that he holds in stock. He informs the physician as to which items are avail-
able in the station forrnuiory and requlariy used, so that the physician can
consider alternatives. The pharmacist places an ordei cr the drug with the
hospital Supply Division, indicatinq whether or not ho unicipates continuinq
use or use at Infrequent intervals. If the druq is prescribed in small amounts
and use is expected to be sporadic, the Supply Division purchases It from the
nearest available source, delivers the entire quantity to the pharmacy and does
not carry any warehouse stocks. if a drug is used in larqe amounts and repeti-
tively prescribed, the hospital Suppiy Division procures it from the most
economical source available to him, either the VA supply depot, a Federal Supply
Schedule or a local distributor.
Each transaction is recorded in a central computer. Once each fiscal quarter,
reports of all transactions are made to each hospital on its own operations, and
a consolidated rep~ni all VA stations is made to the VA Markotinq Center in
Hines, Illinois, and i~, ihe VA Central Office. The GAO has criticized the utility
of this repori because of its shear hulk. As far as we know, this is the only
report of its type made by any federal agency. We are trying to streamline
It and to make it more usefef, Meanwhile, we are mmerhimrn use of Ibis report to
ieterrnine which items should be procured cen iy, which are of sufficient
/olume to obtain quantity discounts by inclusion on Fo~creI Sup~miy Schedules,
md which can heal be obtained by individual purchase at each he:~pital. We
Iso use this repori to monitor field station procuremnenis lo assure their US()
f the most economical source aveilable. From these dutc, plus information on
nticipated proqram chnnqe~, we plan our procurorneni actions.
PAGENO="0124"
8626 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
We have established definite criteria for central procurement and distribution.
The first, and cardinal rule, is that an Item will not be procured centrally
unless the savings through large volume prices wi II more than offset the
overhead costs of maintaining a central procurement system. Many drug Items
do not meet this requIrement. We do not measure the costs of central purchasing
on the basis of purchase price alone. Since the costs of maintaining central
purchase and distribution systems are borne by the taxpayer, we feel that com-
parison of costs on this basis alone Is improper and constitutes unfair competi-
tion with private enterprise, especial ly small business wholesalers and distribut
In the VA, we add to the ourchese price all expenses related to procurement of
the item, including inspections, testing, quality control, freight charges as
well as storaqe and distribution costs. These additional costs are included in
the price of the item charged to users of our central procurement and distri-
bution system, including our VA field stations. This practice Is somewhat
unique to our agency. By statute (Title 38 USC 5011), we add the total cost of
operating the VA Marketing Center and Supply Depots and related Central Office
costs to the purchase once of the Items sold. in this we include the salaries
of all personnel employed In the program, costs of operatIo'~ of the physical
facilities, transportation and costs of all administrative support. The pur-
pose of this statute was to assure a business-type operation, and to make
certain that overhead costs of the central system did not dissipate any savings
real ized in purchase costs. This also assures that we do not maintain govern-
ment programs in competltinn wIth pnvato enterprise. incidental lv, we apply
this technique not only to drugc but to ~ll medical and hospital supplies in
our system.
PAGENO="0125"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8627
Our next most common method of supply is to contract centrally for drugs and
use the contractor's distribution facilities or local distributors to ship
items to the hospitals and clinics where they are to be used. We employ
several methods of doing this. Most commonly, we establish for the VA and
all other civilian agencies Federal Supply Schedules for drugs, or we make
contracts for specified quantItIes of drugs to be delivered at specified
locations on a predetermined schedule.
rhe Federal Supply Schedules are executed by the VA on behalf of all federal
:ivilian agencies by assignment to the VA from the Administrator of General
;ervlces under the provisions of the Federal Properly and Administrative Services
ct of 1949 as amended. In addition, these schedules are available for use by
efense agencies at their option. Federal Supply Schedules are negotiated only
ith firms who will offer a price advantage to federal users over prices charged
n the general competitive market. Products not supplied from our central pur-
hasing and distribution system nor from Federal Supply Schedules are procured
y our hospitals, either through open market, small purchase procedures, or
rough formal procurement solicitations.
Fforts to Expand Competitive~Procurement of Drugs
reported lo this Subcommittee last year that we were attemptIng to expend
e competitive procurement of drug items In our central system. The ectual
mber of drugs that have been revIewed since that time and determined to
available for competitive procurement is l3~. Of these, 62 are either now
ailable in our system or are in advanced stages of the procurement process.
PAGENO="0126"
8628 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
An additional 34 drugs are in the process of specification development prior
to competitive solicitation. Of the remaining 37 Items, bids were solicited
on 23 without improving competition. in the interval, 4 are being deleted
from our list of requirements.
We have examined these actions carefully and can state that the specifications
or purchase descriptions used were not restrictive to the products of any single
manufacturer. It is too early to establish the total potential savings, but we
can identify an annual saving of $939,500 or a net of 27.4% to date. We shall
continue to seek items potentially available for competitive procurement, and
we shall try to develop specifications and tests that will assure us of high
quality products.
Drugs not Found inUSP or NF
We have been questioned about the procurement by VA of drugs not listed in the
USP or NF, and we have been asked to assess the impact on this agency if we
were restricted to drugs listed only by these organizations. First, we must
recognize the fact that a very large number of drug preparations in use by the
medical profession of this country are not listed by either of these bodies.
The listings are confined to drugs that have been evaluated by cooperating
members of the organizations at the specific request of their Committees on
Scope or Revision. Listings are not automatic mnd they are not intended to be
comprehehsive. A drug may he omitted from USP or NF simply hecause it has not
been brought to attention of the organizations.
PAGENO="0127"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8629
We have examined a listing of drugs which wo undorstund was provided to your
Subcommittee and find in the majority of cases thai The drugs either ~re
monographed in the USP or NF under ~holr component inqrwcflents or in a related
dosage form. For example, acotezolarnide is listed in USP XVIII in tablel-form.
VA procures the capsule term. USP generally does not list all dosage forms of
a drug, but this is not an indication thai tho qual ity or efficacy is not
comparable to the dosage form they do list, A ~iuabor of the liquid or tablet
form antacid preparations are not ilatod under their official names. The
individual components which m~kc up ihese preparations stay be listed. For
example, aluminum hydroxide qei a haled in USP XVIII; magnesium hydroxide
is listed in NF XIII, and meqno;luo inculcate i~ listed in USP XVIII. Many
commonly used antacid preparations are compoted of varying combinations of
these ingredients. Similar data can be furnished for other items purchased by
VA which are not listed in tha USP or NF,
We emphasize that failure of a drug or preparation to be listed in the USP
or NF provides no indication that the ogout is unsafe or ineffective. Miong
other things, we mutt rer~ize Thai there is a significant time lag between
initial marketing of a now druq tn~ 1tt~nq by these organizations. if we
were to confine our drug procureseni to lie:te t~tod in these two publicatIons,
we would restrict the ability of our physicians to treot veterans by denying
them the use of many products ead doasqo forms having established values in
practice and delaying their use oc vaiucblo rca: products that are available
to other segments of the popuintion.
PAGENO="0128"
8630 COMPETITIvE PROBLEMS IN THE DRUG INDUSTRY
Dispensing Prescriptions of Fee-Basis Physicians
In its medical care program, the Veterans Administration employs a full time
staff of approximately 5,400 physicians. This staff Is supplemented by use of
approximately 00,000 physicIans who are primarily engaged In the private practIcE
of medicine. We reimburse these physicians or, a fee-for-service basis. These
fee-basis physicians write approxImately 2,870,01)0 prescrIptIons per year for
veteran patients. These prescriptions err usually mci led to VA pharmacies for
filllnq. In addition, fee-basis physici~n~ write about 650,000 prescrIptions tha
are filled In prIvate pharmacies and the bill sent to the VA for payment. Obvi-
ously, we cannot maintain the close reletionship wIth fee-basis physicians that
we have with our full time staff physicians. Private practitioners are inclined
to prescribe the types and brands of druqs that they routinely select for their
non-VA patients rather than those items which may be stocked in VA pharmacies
and warehouses. For~this reason, we frequently fInd it necessary to purchase
items that are not reeulariy stocked by our system. Our hospital pharmacists,
within the limitations of their manpower, regularly contact the fee-basis
physicIans to ask if they will accept the s~bst~tutiOn of a generic equIvalent
when a brand item has 1,051 requested. Fhe pharmacist also provides information
concerninq the effectiveness or rel isbi ) )I~ of a particular product, and, when
indicated, he attempts to persuade the physician to accept items regularly
stocked In lieu of special procurement. For several years, we have used a spot
check procedure on these prescriptions to assure ourselves that veteran patients
are being treated with generally accepted therapeutic agents. Our Executive
Comittee on Therapeutic Aqents has recently proposed an In-depth review of
a predetermined percentage of all fee-has Is prescriptions to more accurately
PAGENO="0129"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8631
determine compliance with policy on rational drug usage.
We have drafted a Professional Services letter which we shall ask our field
stations to distribute to all fee-basis physicians. An attachment to this
letter will be a concise listinq o~ druqs according to their effectiveness
classification. It will also indicate which drugs are listed in the particular
station formu I ary.
~~çperative Efforts in the Procurement Process
The VA has cooperated for many years with other federal agencies in the
procurement of commodities which we and others use in common. In 1961, we
were assigned the responsibility f or procurement of non-perishable subsistence
and drugs In behalf of all federal civilian agencies by the Administrator of
General Services under authority given him In the Federal Property and Admin-
istrative Services Act of 1949. In addition to carrying out this assiqnment,
we have for many years made available to other agencies, at their request,
supplies and equipment available in our system. During Fiscal Year 1971, 18
federal agencies ordered supplies valued at $69,612,372 from VA stocks or from
contracts made by VA. During the same period, the VA purchased supplies valued
at $52,419,131 from other federal aqencies' stocks or contracts. This cooperation
is not confined to the interchanqe of stock sales alone, hut Includes several
instances where this aqency has provided information to other agencies, and
also to private and state bodies for their use In the manaqément of their
procurement.
80-450 0 - 72 - pt.22 - 9
PAGENO="0130"
8632 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
With regard to our central procurement system, our policy is that we will
acquire items from the lowest total cost source available to us. When the
purchase cost plus the administrative costs of buying from another agency are
lower than that which we con obtain by purchase from a contractor, we place
orders on that agency for our requirements.
In the case of drugs, we look to the Defense Personnel Support Center as
a potential source, since they are the only other major purchaser besides VA.
Whenever there is indication that we can obtain our requirements from DPSC at a
lower total cost than available to us by direct procurement, we ask them to
furnish us with the item. For drugs that we buy In substantial volume, we
routinely compare the DPSC price with the anticipated hid prices and Initiate
purchase action only when there is good reason to believe that we will obtain
the item commercially at lower cost. Each year we furnish DPSC the anticipated
annual volume of such drug purchases, identifying those items that we may ask
them to buy for us.
Types of Contracts and Their Availability to Other Federal Agencies
Our policy is to procure drugs by open competitive bidding whenever we can
obtain competition and be assured of a qual ity product. When we know the drug
is manufactured by only one firm, usually because of patent riqhts, we neqotiat
with that firm for the product. We have been criticized for the amount of our
procurement by "brand name." We believe this is p~rtiy due to our policy of
listinq items by brand name rather than by official or qoneric name when we
know there is only one source, either licensed or with an approved Effective
New Drug Application. Obviously, we could develop specifications for drug items
PAGENO="0131"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8633
which are in fact available from a sinqie source and advertise for them
by generic designation. This would not make a meaningful contribution
to the competitive process.
The Federal Supply Schedules for drugs are negotiated with manufacturers or
distributors who offer us a discount over the normal market price. We obtain
pricing data from them on the various categories of customers (wholesalers,
non-profit hospitals, retailers, pharmacies, etc.) and make awards when the
drugs are not available to federal users from other sources at comparable prices.
In addition, we make available to other federal agencies who have drug require-
ments, our cataloq and other publications regarding our central procurement of
druqs. The prices we quote them include all our central system costs and all
overhead. A number of agencies procure drugs from us, and we base our projections
for items to be procured in volume quantities on the record of past years,
supplemented by information from them on anticipated program changes.
A question has been raised as to why VA does not make available some of
its contracts to other federal agencies. I can find no Instance in which
the VA has not made it5 contracts available to other federal users when we
were asked to do so; in fact, the Federal Supply Schedules for druqs are
avaIlable to all federal aqencies. The files of this agency contain records
of many Instances in which we have made our contracts available to other
federal aqencies at their request. As I have already said, there
are no recorded Instances of a refusal to do so. We have refused some
PAGENO="0132"
8634 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
state and local government reauests, since we have no authority to permit them
to use our stocks. We make contracts for our specific use. When these contracts
are competitively advertised, there are general government regulations applicable
to all such procurements against chanqinq the terms, conditions, quantities, etc.
after the bids have been opened. If a contract is negotiated, it is also not
subject to modification to include additional users or quantities without the
agreement of both parties.
Plant Inspections and Drug Testing by One Federal
This Subcommittee has asked about the VA's efforts to centralize plant inspec-
tions and drug testinq in one federal aqency. We can and do use other federal
agencies to provide us with plant Inspection and testing services where avail-
able. This practice is not confined to drugs, but is generally applicable to
all our procurement. Unfortunately, in the area of drug testing, we are
finding it increasingly difficult to obtain needed product testing from the
Food and Drug Administration. Just last month, we authorized the payment of
premium testing costs to FDA to enable them to reduce a backlog of tests for
the VA by the use of overtime services. On May 26, 1972, we received a letter
from FDA stating that the pressures of their regulatory work may require that
their analysts be reassigned from testing VA samples to their own samples.
Thus, they may not be able to guarantee the usual 45 day testing cycle. We
have recently experienced delays of 60 days or more after we have procured a
drug before we can obtain a final test report from FDA. Unless FDA is adequately
staffed to perform this service for us, it is not possible to rely on them
PAGENO="0133"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8635
exclusively, informal contacts with DPSC within the last month disclosed that
they, too, are experiencing a heavy work load and do not have time available
for us. The VA does not have personnel engaged in the chemical assay and
analysis of the type provided by FDA. We must rely on others for the required
laboratory services.
Regarding plant inspection and quality control surveillance, we favor the
assignment of this function to one agency, provided such inspections can be
conducted in a timely and comprehensive manner related to our procurement needs,
and provided sufficient data is made available to us to support our procurement
decisions. Neither condition exists at this moment, We are unable to obtain
information on the results of FDA's inspections beyond the fact that a particular
plant was inspected and that It was not required to suspend production. We
understand from informal discussions with FDA officials that they are examininq
the question as to how much information can be released within their statutes
and requiations. Until a determination is made that would permit release to us
of sufficient information to assure the quality of individual supplier products
and the integrity of our procurement actions, we cannot subscribe to the assign-
ment of responsibility to one agency for piant inspection and quality control
surveillance. When these conditions are met, we shall support such action. We
also rely on data obtained from DPSC on the results of their plant Inspections. We
check with them before schedulinq such inspections, and use their inspection reports
when possible to avoid duplication of effort.
We recommend close coordination and cooperation between lnspectlnq aqencies to
avoid duplication, to assure similarity of standards, and to encourage the
PAGENO="0134"
8636 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
exchange of information. To this end, discussions are currently going on in
the lntra-Governmental Professional Advisory Council for Drugs and Devices. All
agencies engaged In drug manufacturing plant inspections and product testing
are members of this group.
Executive Committee on Therapeutic Agents
In conclusion, I would like to refer once more to our Executive Committee on
Therapeutic Aqents. This is the policy-making body in our agency in all matters
having to do with drug usage. We have restructured this body and restated its
mission through Chief Medical Director's Memorandum 0-72-7, dated March 14, 1972.
Its functions are to:
I. Develop, recommend and disseminate policy and information on
safe, effective and rational use of drugs in VA.
2. Conduct epidemioloqical studies on drug utilization, drug usage and
utilization patterns for field station and Central Office use.
3. Review and act on requests from VA hospitals and clinics for use of
drugs not available in interstate commerce and for which an FDA New Drug
Application has not been effected (investIgational drugs), for clinical
treatment in a specific patient.
4. Evaluate reports of adverse drug reactions and drug interactions
prior to forwarding them to FDA.
5. Review significant actions of Therapeutic Agents and Pharmacy
Reviews committees to determine appropriateness of policies on drug
ucaqe and to identify and recorrvnond needed changes.
6. RevIew and act on Quality improvement Reports submitted by VA
hospitals and clinics which indicate dissatisfaction with the quality
PAGENO="0135"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8637
of drug products, Appropriate information will be coordinated with
concerned officials of FDA, USP and NF.
7. Review proposed marketing and administrative actions on drug items;
recommend appropriate action to Supply ServIce,
8. Perform such other functions as may be assigned.
This committee now has ten subcommittees end each subcommittee as well as
the parent committee Is actively engaged in bringing about needed improvements
in our total drug proqram, Meetings are conducted at least monthly. Most of
the current actions I have described to you today have originated within this
committee, its chairman is the Assistant Chief Medical Director for Professional
Services; and its members include the heads of all programs involved in patient
care, as well as the support services such as Pharmacy Service, Supply Service
and Medical Administrative Service,
In my opinion, the effective functioning of this committee and its counterpart
groups at the field stations will assure the continuation of a sound and rational
policy for drug therapy in the Veterans Administration, At the same time, I
believe that we can and will avoid the bureaucratic tendency to impose an
unwarranted and centralized Judgment upon those who have direct responsibility
for the care and treatment of veteran patients throughout the country.
Mr. Chairman, this concludes my statement, My associates and I will be pleased
to answer questions or provide other data you may require.
PAGENO="0136"
8638 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
THERAPEUTIC AGENTS AM) PHARMACY REVIEWS COMMITTEE
VETERANS ADMINISTRATION HOSPITAL
LOUISVILLE, KENIICKY
RSC lO~l9O
The coomittee met at 1:00pm on March 9, 1972.
A~El~AN~E: Dr. John -Martin, Chairman, Acting Chief of Staff
Dr. .`hil Harbrecht, Chief, Surgery
Dr. Shelby Hicks, Ass't. Chief Psychiatry
I-~iss fl. O'Toole, Chief, Nursing Service
Mr. U. Blakeman, Chief, Supply
Mr. Tom Patterson, Secretary, Chief, Pharmacy
Minutes of the last meeting were approved as distributed.
There was no old business.
~ BUSIN~$S
1. The following drugs and new dosage forms were approved for
permanent stocking:
a. MYLICOt-J (Simethicone) Chewable tablets 40mg. Antiflatulent
drug which can be used with an antacid (GELUSIL liquid or
ALUDROX tablets). Normal dosage is one tablet after meals and
at bedti~e. Relatively inexpensive.
b. CETAMIDE (Sodium Sulfacetamide Ophithalmic Ointment 10% To
be used in place of Sodium Sulamyd ointment because it is a
sterile preparation. -
c. Methylene Blue (65mg.), Copaiba (65mg.) and Santal Oil ~0.O3ml.)
tablets Requested by Urology for occasional usage in patients
to prevent formation of renal calculi and to aid in dissolution
of some types of stones.
d. COLACE (Dioctyl Sodium Sulfosuccinate) capsules 100mg. to
be used in place of SURFAK (Dioctyl Calciuiii Sulfosuccinate)
when present supply is exhausted. Cost is one half as much as
SURFAK. Presence of Sodium ion should not be a problem. Dosage
of the two drugs is similar, one at bedtime should be sufficient.
DOXINATE (Dioctyl Sodium Sulfosuccinate) 5% Solution and DOXIDAN
will continue to be stocked.
e. POLYSAL-Li (Maintenance Electrolyte Solution) with 5% Dextrose -
1000 ml. sterile solution. It will ~ëplace POLYSAL effective
immediately. Each liter of POLYSAL-M contains the following
rnEq. :Sodium (Na)-40; Potassium (K) - 16; Calcium (Ca) 5;
Magnesium (Mg) 3; Chloride (Cl) - 40; Bicarbonate (F~O3) -24.
All wards will please return their stocks of POLYSAL and order
OLYSAL -M if necessary. Cost of the two soIut~ons is abdü~the
same.
PAGENO="0137"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8639
2. The Ccsinittee agreed to continue trial ueage of KLCRVESS or
another form of Potassium Chloride tablets. Cost of the tablets
is quite comparable with the soluticts. Memoranda were read from Dr.
Hoffman and charge nurse on Ward 6B giving their evaluations.. The
only apparent disadvantage is the slow dissàlution rate. Since we
have a 2 or 3 month supply ~ the~ solution, no other dosage form
will be approved until this supply is exhausted. Selected wards
will be notified for further evaluations.
3. The Committee reviewed a request by Dr. Hoffman for a new
investigational drug, Sodium Nitroprusside Injection. The hospital
research committee has approved the protocol for use of the drug.
It will be given by intravenous infusion in occasional instances
of hypertensive crisis when all other methods of control fail.
Pharmacy will compound this prepar~tiori following the master formula
sent to us by the Cleveland Clinics. The Committee agreed that Dr.
Hoffman should submit an IND application to the FDA for permission
to use this drug. The Committee also directed that the drug be
used only under Dr. Hoffmans! direct supervision.
4. The Committee discuses Serum Albumen usage. Although usage decreased
in Februarp, cost for the eight months of this fiscal year amounted
to $20,002. This is about 6% of total Pharmacy budget. It was
recommended that we reissue a memorandum of May 12, 197]. relating to
this subject.
5. The Committee reviewed a publication HANDBOOK OP AN~IMICR~IAL THERAPY
received by the Pharmacy from the publishers of THE MEDICAL LETTER.
It was agreed that this might be a good reference to have available
to the staff. Request will be made for 30 copies to be disbributed
to wards, clinics and members of the Committee. The book reviews and
eva~Li)ates antimicrobial drugs and therapies.
APPROVED~
)~artin,rR.
Acting Chief of Staff
Distribution:
All Physicians
Mirsing Office (30 copies)
Pharmacy (30 copies)
PAGENO="0138"
8640 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
~j / /
INFORMATION
1. Physicians and Nurses are reminded that Pharmacy stocks 2~ the
2 gram vial of UNIPEN. (Nafcillin Sodium). Package literature states
that to reconstitute, add 6.8 ml. of Sterile water for Injection.
Tl~is will provide 8ml. of solution at, a concentration of 250mg.per ml.
2. There has been some confusion in the differences between an elixir,
solution and syrup. An elixir is a hydroalcoholic solution (containing
water and alcohol) such as Elixir Terpin Hydrate and Codeine. A
solution is ~n~.entirely aqueotis::sólutiøn such as Potassium Chloride
solution. A syrup is a solution of sugar in water or other aqueous
liquid, such as R(~ITUSSIN or 2/G Cough syrups.
3. Certain ophthalmic solutions are being dispensed under several trade
names as follows:
Artificial tears - ISOPTO - PLAIN (Alcon Labs.);
TEARISOL (Tilden Yates)
Hyoscirie (Scopolamine) - ISOPTO -HY~CINE 0,25%
Pilocar:iine - PILOMIOTIN (Tilden Yates Labs)
(Pilocarpine ~i)
PV CARPINE (Allergan Labs.)
(Pilocarpine Nitrate)
4. Folic Acid tablets 5mg. is out of stock and according to minutes of
last Therapeutic Committee meeting, is no longer available. This
dosage form has been ordered deleted by FDA. Pharmacy will be
dispensing the 1mg. tablets. Please write medication orders and
p~scriptions accordingly.
PAGENO="0139"
COMPETITIVE PROBLEMS IN THE DRTJG INDUSTRY 8641
~$lO~.19O
M~TINC OP TU~RAP~I71~IC AG~NT~ ~ PMAIMM~Y UVISV CONRITIU
V~ZRAN~ A~INISTRATICIi M~P1TAL
DL~ MO1N~, IOWA'
The Therapeutic Agsnta ~ Pharsacy Review Comnittee met at lsOO p.s.,
Monday * ?`~arsh 20, 1972, in the Direeter's Conference loon. The
following attendeds
Dr. Wiflisa J. lord, Chief of Staff
Dr. D. J. Lulu, Surgical Service
Dr. R, I', O.ob, Nedisal Service
Dr. F. M. Burgeson, Chief, (Xstpstieut Service
Mrs. Catherine Sherp, lursing Service
Mr. K. N. Oeborne, Scrstsry
Mr. V. I. )brris, Tharasoy Service
Ab~entt Mr. H. 0, Conbel, Chief, Supply Division
Approveds
TRAVAST~ OINTM~MT This is used to dissolve necrotic tissue.
Needs 1itt1~ mechanical ciebridesont and is not painfUl to
patient since wound rename noist. This was approved for
a 90day trial parted.
?~ot approvedi
IIPIACTANS 300 ag. capsule This is an anti-syoobasterisl agent
of proven high potency. This was not approved for stocking,
bet a ewsil snount will be obtainal for ese~ewoy see. It will
be diepsased by prescription only.
5heets were passed out shoving this msonth'. continuing foroulaxy
review proposals. A copy is nttaohal to these stnutóe. The Nedical
and Surgical Service representatives will take these baok to their
respective staff castings f~r diaeussian.
PAGENO="0140"
8642 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
A drul czhtbit wae held in Poca 1123 en ~areh 20, 1972, with the
following ooapsnies rsp~..ented$
Vinthrep L~bozstorlas. Zn..
.1, 3. Ie.rt~ ~ 0..
Ay.rst Latories
Merok Sharp aZ~
Stnui Pher *tioals"M3*e Chea.
Att.
/
cos LRegtonal Medical Director (1X3), Y~0
Moepital Director (00)
Chief of Staff (u)
Chief, Medical Service (iu)
Chief, Ssirgiesl Service (112)
Chief, Outpatient Service (170)
Chief, Nursing Service (118
Chief, ~ipp1y Division (1)11
ecu (118A)
Ward 2A 13601
Ward 213 13602
Ward 20 13603
Ward 3A 13605
Ward 33 i3606
Ward 2W i36C~i
Ward 3C 13607
Ward 3W 13608
Ward 110 fl8D)
Ward ~V 13609)
PAGENO="0141"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8643
ANTIThTECTIVES 08:00
REVISIONS TO FORMULARY
DELETIONS:
1. Pasara Na Tab
2. Quinine 3 ~r cap -8
3, Neothaljdjno Granules -
~ Ampicilhin 500 mg amps (3
CARDIOVASCULAR DRUGS 2~+:08:O0
DELETIONS
1. Cedilanid D Injection 2 cc
VASODILATING AGENTS 2~:12:0O
DELETION
1. Peritrate SA 80 mg 13.
ANALGESICS 28:08:00
DELETIONS
1, Butazohidin 100 mg tab - (3
2. Darvon Compound (3
3, Piorinu]. tableta -
tf. Thenaphen with Codeine 30 eg caps `~
5'
6. Sinutab taba _~
ANDIDEPRESSANTS 28:16 :O~+
DELETIONS
1, Aventyl 25 eg caps --Q -~
2. Tofranil 25 mg tabs - P
TRANQUILIZERS 28: 16:08
DELETIONS
1. Cornpazine 5 mg tab - (3
2. Haldol 2 mg tab ~
3. Haldol 1 mg tab *___
~+, Mehharih 10 mg tab-C--7~
5. Mellaril 25 nig tab ~-
6. Mohlaril 50 mg tab -~_-~
7. Nollari]. 100 mg tab-.Q -P
8. Hohlaril 200 rng tab -(!.~
9. Scrax 10 mg cap ~
0. Sorax l~ mg citp-' C~- 1?
1. Serax 30 mg cap.-.- Q. --
2. Sparino 100 mg tab
3. Stelazino 2 mg tab
+, Stelazine 10 rag tab -
15. Taractan 25 rag tab-
16. Taractan 50mg tab-C.-~
17. Tnorazine 50 rag tab
18. Victaril 50 rag cap .-~ -~
19. Vistaril 100 mg cap - c. -~
ADDITIONS
1. Ampjcj11j~ Injection 1 gm
2., ?~6/J/?p6rN + Cock~r~
~;ss p& ~ SB fl~ ~ 3C~t~j
k'~'~
A, ?osa;l/ ~
B. O+C~c-t2 %ICEA/r&c ,fl4~4J7I,7iN(~(
(2. O'(~'frZ ~O,'Za.e1s
~ fl/I ~7~iy~c ~`~`
PAGENO="0142"
8644 COMPETITIVE PROBLEMS IN THE DRTJG INDUSTRY
Chairman
Member
Psychiatry
Member
Member
Member
Member
Member
Member and Recorder
RCS 10-190
MIN1T]~ES OF MEETING - CO~Y2~ITTEE ON THERAPEUTIC AGENTS AND PHARMACY REVIEWS
V. A. Hospital, Memphis, Tennessee 38104
1. The meeting was convened at 1:00 P. H., March 13, 1972, in Room
CE-240.
2. Members (or their representatives) present were:
K. E. Lindsay, M.D.
B. R. Gendel, M.D.
J. Horan, M.D. Service
J. C. Larkin, Jr., M.D.
F. A. Burdick, D.D.S.
J. J. McCaughan, Jr., M.D.
R. F. Kelsey, M.D.
F. N. Meade, R.N.
C. N. May, M.S.
Others attending:
R. S. Wilson, M.S.
Assistant Chief
Pharmacy Service
J. R. Sykes, B.S.Ph. Director, Pharmacy Service
City of Memphis Hospital
R. Hayes, R. N. Nursing Service Trainee
3. DRUGS APPROVED FOR STOCKING:
a. Ampu-Balm, 3 1/2 oz~ - Ami,u-Balm Co.
This ointment contains Benzoin, Methyl Salicylate, Phenol (0.2%)
and Mutton Tallow. It was requested by Dr. Dehne for self-care
of the amputee. It is said to reduce the problem of sweating
stumps.
Cost: Ampu-Balm, 3 1/2 oz $1.50/can
b. knpu-Talc, 12 oz - Ampu-Baim Co.
This is a preparation of talc for use by the amputee on the
stump. It was requested by Dr. Dehne.
Cost: Ampu-Talc, 12 oz $1.00/can
4. DRUGS NOT APPROVED FOR STOCKING:
a. INH Tablets, 300 mg - Panr~y
Dr. Cohen had requested the stocking of INH Tablets, 300 mg. This
PAGENO="0143"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8645
is the commonly used dosage and could provide convenience for
the patient. However, this was not accepted because the 300 mg
tablets would cost 8.5ç per dose as compared to 3.9~ for a 300
mg dose using the 100 mg tablets.
Cost: INH Tablets, 300 mg $ 8.50/100
THU Tablets, 100 mg $ 1.31/100
3. DRUGS DELETED FROM THE FORMULARY:
The following items were deleted from the hospital formulary, and they
will be in stock until present supplies are exhausted.
a. Aventyl Capsules, 10 m~g -. Lill~y
Aventyl Capsules, 10 mg, were deleted as the usage of this strength
has decreased. The pharmacy will continue to stock Aventyl in the
25 mg strength.
Cost: Aventyl Capsules, 10 mg $ 1.91/100
b. Stelazine Tablets, 10 n~g - Smiths Kline and French
Stelazine Tablets, 10 mg, were deleted from the Hospital Formulary.
There has been no usage of this strength tablet in several months.
Future orders for Stelazine, 10 Ing, will be filled using two 5 mg
tablets.
Cost: Stelazine Tablets, 10 mg $ 6.06/100
6. DRUGS APPROVED FOR THERAPEUTIC TRIAL:
None.
7. DRUGS ON WHICH THERAPEUTIC TRIAL HAS EXPIRED:
None.
8. DRUG EXPERIENCE REPORTS:
None.
9. OTHER BUSINESS:
a. Action on the request by Dra. Kitabchi and Solomon for stocking
Meltrol (Phenformin HCl) Tablets, 25 mg, by USV in place of DBI,
25 mg, by Geigy was postponed until the next meeting. This was
done because new contract prices on both of these products will
be available this month. A decision will be made after the new
prices are presented to the Committee.
PAGENO="0144"
8646 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
b. Action on the request to put Triavil 4-25 Tablets on therapeutic
trial was postponed until the next meeting. Dr. Harris will be
invited to the meeting to present his request. It was also noted
that the length of trial was not included on the request.
c. In the future the person requesting a new item for therapeutic
trial will be invited to the meeting to present his reasons for
requesting the new item.
d. The Chief, Pharmacy Service, discuRsed the source of supply of
Acetominophen Tablets, 300 mg. We are presently purchasing Tylenol
at $2.87 per 1000 and can purchase generic acetominophen from the
V. A. Supply Depot for $2.28 per 1000. The present usage is
approximately 50,000 tablets per month. The savings in purchasing
the generic product would be about $360.00 per year. Presently the
V. A. Depot is supplying tablets made by Warner Labs. Joe T. Fisher,
Pharmacy Resident, did comparisons of physical properties of the
Warner Labs tablets and Tylenol Tablets by McNeil. The results
were as follows:
Acetominophen Tablets, 300 mg (Warner Labs)
Cost: $2.28 per 1000
Disintegration Tine: 29.5 seconds
Average Hardness: 7.5 kg/cm2
Average Weight: 430 mg
Tylenol Tablets, 300 mg (McNeil)
Cost: $2.87 per 1000
Disintegration Time: 78.3 s~conds
Average Hardness: 8.5 kg/cm
Average Weight: 475.25 mg
The Committee felt that there were no significant differences in
the two brands of tablets, as to physical properties. ~
deci4~Lth~ harmacy will purchase the generic acetominophen tablets
f~m the Depot an u e em 1osptII.ãi~ problems
occur with the new tablets, they should be reported to Pharmacy
Service.
e. The Committee discussed and approved a request by Chief, Nursing
Service, to allow administration of narcotics by licensed practical
nurses in accordance with Interim Issue 10-71-32 (11/30/71). The
following statement will be included in station policy: Licensed
practical nurses who through instruction and closely supervised
practice have demonstrated competence in administration of medica-
tions may administer selected oral, hypodermic and intramuscular
medication including narcotics.'
PAGENO="0145"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8647
f. A request from the Chief, Nursing Service, for Committee
approvel of a training program and procedure for professional
nurses to insert intracaths in the Intensive Care Unit was dis-
cussed. Dr. Sivadon will assist with the teaching and develop-
ment of the procedure. The program was approved by the Committee.
g. Information compiled by Operating Room and Pharmacy Service
personnel indicate that the medication ~ for each case of
open heart surgery are approximately $88.00. Approximately
one-half of this cost is due to Solu-Medrol. The hospital is
doing approximately 100 open heart surgery operations per year.
h. During the month of February the use of Carbenicillin (Geopen)
has been localized principally on Ward 9 South. The use of this
drug has been mainly on the Hematology Section.
i. A discussion was held concerning a trial period for I. V.
solutions in plastic bags by Baxter Laboratories and vacuum
bottles by Abbott Laboratories. A trial will be started through-
out the entire hospital using plastic bags. All 1000 cc Dextrose
5% in Water units will be supplied in plastic bags instead of
bottles. All other I. V. solutions will continue to be supplied
in bottles. The trial will begin as soon as new stocks can be
received and it will continue for one month.
j. Dr. Griffin submitted a request to extend the usage of Vibratnycin
(Doxycycline) Capsules, 100 mg, for respiratory disease patients.
This drug is presently for use only by Drs. Luton and Jordan for
patients with renal impairment. The use for respiratory disease
patients was approved. Prescriptions for this new use must be
signed by Dr. Griffin. This drug is very expensive.
Cost: Vibramycin Capsules, 100 mg $60.80/lOO
k. Pharmacy inventory is scheduled for Tuesday, May 2, 1972. All
patient appointments should be scheduled around that date.
C LES N. MAY, i*;::?.
Recorder
DISTRIBUTION:
Chief Medical Director (lllF)
All Physicians and Dentists (11)
All Committee Members (11)
Chief, Nursing Service (110)
Chief, Supply Division (134)
80-450 0 - 72 - pt. 22 - 10
PAGENO="0146"
8648 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
V.A. CL2(TT~
~)I1BAM, TEX~5
1larch 22, 1972
PHARMACY A~ID ThE~AP~JTICS C0!I4ITT~, RCS: 10-190
1. The March meeting of the Phareacy and TherapeutiO3 Comittee
was called to order at 3:30 p.ii. with the following ~~bers ~`eeent
Dr. I~. Chick, Chairnin Dr. B. C. Williano, Meriber
Dr. H. B. Griffin, )ternber Dr. Patrick Kelly, Mcmher
Dr. R. )esina, ?k&er Dr. John Durat, lIunber
Dr. J. L. Stevons, )Ieinber John McIin~iu, Secretcry
Dr. h. W. Gc~y1ord, 1I~ber
2. Now drug(s):
a. GAVISCOII TABLETS-Marion. Dr. Sidoti and Dr. iIesin~ requested
this dru~ji~i~loctod patients requiring action other than that of
ordinary ant.~cids. Gaviscon fores a visoous gel-like barrior of
floating tori~ in tho cardia and fundue of the stonach. It is P11~P0!'t0d
to be a specific tro~~thent for heart~rn accompanying hiatal hernia.
Tho Coaittoe approvod the~ stocking of 3,initod qu.ntities of the
drug since it vu not be used as a "routine" antacid.
b. P~1~E?}L~.ZINE 25 ng. ThBLETS and pJ~)~rHAzINz INJ~TION 25 mg/cc.
(Phenorgan-Wyoth). Phenorgan t~ib1sts and the inj octable forms were
requested by Dr. Gaylord. Fhenor3an has many :~ocepted usos. Host
notablo are: (1) As a soditive, (2) in tho ni~n~genent of' allergic
conditions, (3) it' the control of cough, both to diminish the cough
reflex and pro; oto oxpuctor~tion, and (4) in the ra~nagonont of nauseu
end voriiting. Dr. G-tylord expressed tho most interest in Phonergcn's
r.nti-nausoc effect. Coot of tho drug would be .~ factor in proscribing
tho drug for ita :rntihiot~.tifliC offoct. The Cot'rtttt*o agreed to the
stocking of both don..ge forms ~nd placing then In the fornul~ry.
o. SODIIJ?t TYROPANOLTE (Pi1opaquo-~1inthroP). Bilop~que, 750 ng.
capeulos was requested by tho Chairman for use as a roontgenographio
contrast msdiui. in cholocystoCrc.pbY. The drug's radiopiquo motabolitos,
when concentr~tod in the gallbl .dder, :.llow deltnoatlofl of the gall-
blrtddor med posaiblo visu.lizatiori of the extrahopatic ducts. The
Ch~irL1~n nt~tod that ho folt this drug was superior to the ono
proeontly used c~nd that excollont results had been obt~inod with
tho use of a trial supply. Bilopaqii. will be stocked and plz~ced in
the for tulary.
3. Drug(s) doloted: SODIU2I IPODATE 500 ng. CAPSULI~ (Oragrafth
Sodiui~-Cquibb). This drug will be deleted aix' repl~oed with Bilopaquo.
tdl existint~ stocks will oit).or be uaod or returned to the ijanufioturel'
for credit.
PAGENO="0147"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8649
4. An ~nnouno~nt letter fran Mine., Illinois, VA H~irkoting
Contor d:ted March 16, 1972, ~sna reed to the group. Of spuoi~ii
interest ~s tho portion rs1~ting to Robitusein'a deletion fron
doot stock. Tho Corunittoo agroeci to the use of the generic
equivalent of ~iyceryi Ouaiaooi~tte syrup nvaii~blo fran depot.
5. The secr.~~t~~.ry distributed copios of Station haiorc.ndun No.
522-~].l..71 to -~U sorvicc,o concerned. This na~orc~ndun is the
"officir.l" st~.tion drug policy. Manbere we'o askod to review
cort~in portions of the nenorandth cnd suggest possible revisions.
ho suggostione wero forthcouing; so, the nenoral~u~ will be
considered current.
6. For the ~~irposee of inforrr~tjon ar~I roview, the èocrotery rend
selected excerpts from VA Itinuni !Q, Part Vii. These portions
refioct official VA policy re~rding the giv4ng of nedcc~tions
on dischirgo of ptients, propor routing of cdd ant! ~ttonthinco
proscription., LO well cte "housebound."
7. There boin~ no furthe* business, the r.~eotin~ adjourned ~t
4:10 p.ri.
j2h23~4~
N. QiI , M.D. JOifli MeKINZIE
Chajrrjan SocreLrr
PAGENO="0148"
8650 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
VETERANS AD~LLNISTRkTION C~TER
Temple, Texas
MINUTES OF MEETING OF COMMITTEE ON T}~RA.PEUTIC
AG~TS AND PHARNACY REVIEWS
(R~cG 10-190)
March 21, 1972
1. The n~eting of the Corrmittee on Therapeutic Agents and Pharnacy
Reviews was held at 3 00 p.m. with all mexnbe rs or their alternates
present except Chief, Surgical Service end Chief, Pulmonary Disease
Section.
2. Minutes of the February meeting were approved ~dth no corrections.
3. There was a called meeting of the Cbnanittee on March 13, 1972 at
11:00 a.m. with all members or their alternates present. The Committee
approved the forthcoming Professional Services Meniorandi~m on Ad.ministra-
tion of Intravenous Fluids, Medications and Blood by Professional Nurses
arid Nurse Anesthetiste as presented by the Chief of Staff. The Committee
also approved the proposed Policies of A~d.nistratiOn of Blood Transfu-
sion~ aM Intravenous Fluids, as prepared by Nursing Service and presented
by the Chief of Staff. The meeting adjourned at 11:30 a.m.
L~. Drug Recall Procedure draft ~as sent to each insnber before the meeting
and it was approved as corrected by the Coxanittee.
S. The use of Normal Serum Albumin in the hospital was discussed. Since
the last regular meeting, three patients had received a total of 3S-SO ml.
units.
6. The list of vitamins arid vitamin preparations stocked in the Pharmacy
was reviewed. Cyanocobalainin Injection, 100 mcgrn./ml., 10 ml. vials,
Riboflavin Tablets, S mg. and T con Capsules were approved for deletion
from stock arid from the foniiulary listing. ayvi. jection~ 10 mg./ml.,
1 ml. vials and AquaNephyton Injection, 10 mg./nl., 5 ml. vials are both
stocked. There was some discussion as to the need for both since AquaNephytol
c~on be given I.M. or I.V~ A decialon on posffii~le de]~etiQ__k~3~4.te
Injection waa delayed until tKe next meeting so that staff opinion can be
sampled. The value of .t!lopem (dextro p~tothsriyl alcohol) used by Surgical
Service for ileus was discussed since the 1971 AM~ Drug Evaluation states
it is ineffective in thts regard. This wLll also be brought up at the next
meeting after further th~1iberation.
7. C~ORPH~E5~ CARB.4NA 9 - 1JDjohn~: Chiorphenesin Carbamate
Tablets, LiOO i~. ,~were not approvedfor rk~ock~ng. The Committee felt that
the drugs presently stocked could be used effectively as muscle relaxants.
PAGENO="0149"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8651
8. IJ~DBD 1~OI!A i~R~LAJ g~qhed by the Medical Letter was
preeented to the !nernbera for their lirnents. The Committee recommended
that a copy be purchased for each phyeioi~i and dentist if available and
if the cost was rea~onabl., -
9. Infoniiatjon on increased drug expenditure for this quarter was pre-
sented to the Committee The main reascn~ for this increased expenditure
was the use of hyperalimentation solutions and the increased use of inject-
able antibiotics. The Cossnittee recommended that Disodiun Carbenicillin
and Gentaniciri Injec.tables not be used for routine infections but be
reserved for more sErious or possible life-saving conditions.
10. The meeting adjourned at )~00 p.m. /
J~ iL~
TRACY j;i WALLACE, M.D. JACK KIMARD
Chairm~i Recorder
DISTRIBUTIo~r
Regional W~dical Director, Region #2 (lllF)
Department of Medicine and Surgery
VA C6ntral Office
Washington, D.C.
Center Director (00)
Chief of Staff (11)
Chief, Medical Service (111)
Chief, Dental Service (160)
Chief, Psychiatry Service (116)
Chif, Pulmonary Disease Section (llS)
Chief, Surgical Service ~l12)
Asst. Chief, Nursing ServicE (118)
ChiEf, .Pharmacy.Servic(~ ffl9~
Chief, Supply Thvi~ion (l3L~)
All Phynicians and. L)ent~Uts
Supervisory and head Nur~es
PAGENO="0150"
8652 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
TO: Clinic Director (00) March 20, 19(2
FROM: Chief, Pharmacy `rvice (119)
SIJBJ: Meeting of the Therapeutic Agents
and Pharmacy Review Committee.
1. In accordance with VA Manual M-2, Part I, Chapter 3, Change 5, dated
August 14, 1967 the Meeing of the Therapeutic Agents and Pharmacy Reviews
Committee ~ caller] to order by Arthur J Hadler, M.D. - Acting Chairman
on Monday March 20, 1972 at 1:30 PM.
2. Those present were: Arthur J. Hadler, M.D. - Acting Chairmen
Dul.e G. Friend. M D
Isadore .J Karlsherg, M 1)
NAthan WI] Llama, M 1)
Alvin M. Cahan, M.D.
Fr,juees E Cul.len, R N.
Lawrence N Larson. 11 Ph. - Secretary
3. The following information is submitted:
(1) Out of a total of 6,903 Fee-Basis Prescriptions filled
for the 2nd Quarter FY72:
(a) VA Pharmacy Filled 14,318
(b) Hometown Pharmacy Filled 2,585
(c) Percentage Filled by VA Pharmacy approximately 63%
(2) The average cost of an A&A prescription filled for the 3rd
Quarter Fl 72 was $3.143.
14. The Committee reviewed the Clinic's "Prescription Formulary" which
consi5tB of a list of the most active items stocked by the Pharmacy and
indicates the relative cost, dosage form, therapeutic category and code
of each item so that the physician can locoate the Item in the "American
Hospital Formulary ServIYl"should be deBire more detailed information. A
copy of this Formulary will be distributed to all our physicians and denitie
(including fee-basis physicians).
5. Emergency Treatment of Narcotic Intoxication with Itloxone HC1 (Narcan)
indicates that it is an effective Opiotd narcotic antagonist with important
advantages over other narcotic antagonists (Nalline and Lorfan) the most
important being the reversal of narcotic-induced respiratory depression.
Narcan can also counteract the narcotic effects of Pentazocine (TalwIn).
After the establishment of adequate ventilation, na1o~ii~ (about o.8 mg
for an adult) is administered Intravenously. Its maximal effect takes abou
2 to 3 mInutes. The dose can be repeated once or twice at 5 minute interva
NOTE'.: Not subject to narcotic controls. (NARCAN INJECTION 0.i4mg/ml -
PAGENO="0151"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8653
6. The British Medical Journal February 6, 1971, informs that diphenyihydantoin
Intoxication may ~e noted in patients on combined long-term therapy with
diphenyihydantoin - benzodlazeplrie therapy. Increased incIdence of neurological
nigns of diphenythydantoin toxicity were reported after six weeks of combined
therapy with chlordt&zepoxideor diazepam.
7. The following products are now marketed by IJSV Pharmaceutical Corp:
(1) Azolid Tabs 100 mg - USV
(Phenylbutazone)
(2) Azolid-A Caps - USV
(Phenylbutazone - Aluminum Hydroxide-t~gnesium Trisilicate)
(3) Meltrol-25 Tabs - uSV
`(Phenforinin HC1)
(14) Meltrol-50 Caps - USV
(5) Meltrol-l00 Caps - USV
(Timed-Disintegration Caps)
(~) Oxalid Tabs 100 mg - USV
(Oxyphenbutazone)
(7) Premazuine Tabs 10 mg, 25mg, 50 mg - IJSV
(Imipramine HCL)
8. The following Ciba-Geigy products are now marketed by TJSV Pharmaceutical
Corp. under their original name:
(1) Doriden (Glutethimide NP)
(2) Hygroton (Chlorthalidone USP)
(3) Regroton (Chiorthalidone USP - Reserpine USP)
(14) Pertofrane (Desipremine HC1 NF)
9. Experimental work with the hormone medrogestone, administered orally or
parenterally, has given good results in shrinking the diseased prostate makibg
an operation unnecessary, informs Dr. William B. Fair, assistant professor of'
surgery at Stamford Usiversity.
10. DM&S Circular 10-72-27 Purchase of' Ineffective Drugs "was reviewed by the
Committee. This circular informs that necessary measures be ts.ken to see that
no VA Funds are expended for the procurement of (Rating I) Drugs classIfied by
NAS/NBC as "lacking substantial evidene of efficacy", without prior approval
of Central Office.
ii. Riker Labs. Inc. Letter, ~rch 1, 1972, "Current Status of Norfiex Tabs"
was discussed by the Committee. Norflex was rated "possibly effective"
(r~ating 2) by the NAS/NBC. Riker was given a period of time to develop new
and additional data proving the efficacy of this product. This has been done
and at this time Hiker is awaiting a final decision from the FJ~, while
continuing to market and sell this product.
PAGENO="0152"
8654 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
12. At. the September 20, 1971 Meeting of this Committee it was recommended
that the following items rated (2) "Possibly Effective" by the NAsINRC be
used and not reordered with a cut-off date of ~brch 31, 1972:
DRUG CLASSIFICATIQi~ MFR.
1. DEPROL TABS 0200 WALLACE
2. EQUAGESIC TABS 1200 WYETh
3. ESKATROL SPANS. 0200 SKF
14. GANTRISTN OPH. SQL. 0200 ROCHE
5. METHEDRINE TABS 1200 B&W
6. NOBFLEX TABS 0200 BIKER
7. OXAINE-M 1200 WYETH
8. PARAFON FORTE TABS 0200 MCNEIL
9. PERSANTINE TABS 0200 GEIGY
10. PBANTAL TABS 1200 SCHERING
11. BELA TABS 1200 SCHERING
12. ROBAXIN TABS 1200 ROBINS
13. 7ACTIB IN TABS 0200 WYETH
l~4. }`ARAFLEX TABS 1200 MCNEIL
15. SLJLFASIJXJ DINE TABS 1200 MS&D
16. SULFATIIAL1DINE TABS 1200 MS&D
17. NARDIL TABS 0200 W-C
18. THASENTINE- PB 1200 CIBA
In view of the fact that many of these firms have submitted new and
additional data to F1~ and are awaiting a final decision from FI~, the Comxnitt
recommends that the cut-off date be extended to September 30, 1972.
13. Drugs Under Inveetigational Stud,y
(1) Intrathecal Depo-Medrol - Upjohn
(2) F-1400- Eaton
(3) W~14O2O - Warner-Lambert
(14) MK- 130 - Merck Sharp & Dobme
(5) MHS Solution - BOPC
(6) MRS Tabs 10 mg - Lilly
i14. Drugs Under Clinical Evaluation
(1) Camalox Suspension - Borer
(2) Nitro-Bid 6.5 Caps - !.~rion
(3) Kiorvess Effervesent Tabs - Dorsey
15. The Committee reviewed Chapt. 614:00 "Heavy Metal Antagonists" of the
American Hospital Formulary Service. No additions or deletions were recommen
PAGENO="0153"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8655
16. Bl&z3ket Purch*ae Infor~tion for
JAN. FEB.
Number of Working I*ys *1 20
Number of ~s. Rec'd 145 160
Number of Items Req. to Fill Rxs 11414 156
Number of Rxe Filled by Pbarmacy 145 160
Number of Ru Filled by Pirt. Itar~cy 0 0
Number of Bus Written by Fee-Bssis Pbys. 110 124
Number of Line Items Processed by Supply Div 115 3.56
Cost of Drugs Purchased $1,397.88 $2,239.54
17. Every effort is mede to buy direct fr~ the nufacturer when repeat
prescriptions are expected.
i8. The meeting vms adjourned at 2:30 PM.
Chief Plisreac St
PAGENO="0154"
8656 COMPETITIVE PROBLEMS FNT THE DRUG INDUSTRY
Dr. WELLS. Beyond this, my colleagues may want to say some of
the things that they see as specific improvements in their areas.
iDr. Lee, would you have anything from the professional services?
Dr. LEE. Professional services does its monitoring through a cen-
tral committee, which is the Executive Committee on Therapeutk~
Agents with counterparts in the field. We are having direct reports
from theni which are monitored first by the pharmacy committee,
which flags anything that they see in that program and bring it to
our central committee for review. We think that this is a fairly tight
control mechanism. WTe are finding that it is necessarily accepted at
hospital levels, and there is a good rapport and a good exchange.
I think Mr. Harding from the pharmacy service is suffering the
largest demands from this simply because of the volume of paper
which he has to handle through his particular service, but it does give
him a lead in the pharmacy service and also the supply means by
which they can further their support to the clinical program.
Dr. WELLS. Mr. Harding, would you want to add anything from
the standpoint of the pharmacy?
Mr. HARDING. I might add that through all these field station re-
ports, we are able to get real close control of the new drugs that may
be used or any change that may be developing any trends that are
going on throughout the field. This is the greatest advantage we get
from this, being able to monitor and note just what the trends are,
because they vary so much in different regions.
Dr. WELLS. Mr. Cook of the supply service?
Mr. COOK. Since the submission of this data, Senator, we have dis-
continued completely procuring any drugs that are listed as ineffec-
tive. We have virtually eliminated those that are listed as possibly
effective and none may be procured without individual review in each
instance where procurement is required.
Using these same reports that have previously been mentioned, we
also are able to determine to a certain extent the effectiveness of our
own support system in reviewing the times when it is necessary for a
hospital to procure drugs under other than the normal conditions.
Senator NELSON. How many veterans hospitals are there?
Mr. CooK. One hundred and sixty-seven, sir. And additional clinics
beyond those, sir.
Senator NELSON. What percentage of the drugs for those hospitals
is centrally procured by the Veterans' Administration?
Mr. CooK. Approximately 50 percent, sir.
Senator NELSON. Fifty percent?
Mr. CooK. Yes, sir.
Senator NELSON. And the rest is by local prescription from wherever
the hospital is located?
Mr. COOK. Either procured through placing an order against a
Federal Supply Schedule or by direct local procurement in the open
market by the individual hospital or clinic.
Senator NELSON. Well, when you say 50 percent, that is 50 percent
from Veterans' Administration central procurement;, is that right?
Mr. CooK. Yes, sir.
Senator NELSON. And the other 50 breaks down how?
Mr. COOK. About a little over-I am dividing in my head, sir. A
little over 40 percent of the 100 percent. Fifty percent roughly is from
PAGENO="0155"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8657
the central system. Approximately 40 percent of the total is procured
by placing orders against Federal Supply Schedule contracts. The re-
mainder is either purchased in the local market or is a reimbursable
prescription.
Senator NELSON. That is 10 percent of the total?
Mr. CooK. Yes.
Senator NELSON. What other Federal supply areas are you pro-
curing from?
Mr. COOK. Sir, the reference was to Federal Supply Schedules.
These are contracts. The Veterans' Administration is the agency that
makes them for all of the civilian agencies. They may be used by any
agency of Government.
Senator NELSON. What is the total annual expenditure on drugs by
the Veterans' Administration?
Mr. COOK. Roughly $65 million, sir.
Senator NELSON. Six-five?
Mr. CooK. For the VA's own use, yes, sir.
Senator NELSON. That includes this 100 percent that we are talkmg
about?
Mr. CooK. Yes, sir.
Senator NELSON. Is there any reason why all drugs purchased for
Defense and Veterans' Administration should not be centrally pur-
chased for the same agency?
Dr. WELLS. We have addressed ourselves to this problem. It prob-
ably could be done for the entire Federal Government. Thus far, it
has not seemed expedient to do so because the requirements of the mili-
tary, for example, in many instances are quite specific. Where they are
going to use drugs in oversea areas, for example, they have very spe-
cial packaging requirements and so on to take care of the different
geography and weather and so on. Each agency has at least some de-
gree of specificity about its needs.
Senator NELSON. I do not understand how that would necessarily
militate against centrally procuring. Veterans' Administration would
notify the central procuring agency, whatever it may be, that they
need such and such drugs and bids would be let or contracts nego-
tiated. What is the handicap on that?
Mr. CooK. Senator, there have been, to my personal knowledge, a
half dozen studies of this in the Government over a. period of srnne
years. None of them has established conclusively that this would be of
benefit to the VA or, for that matter, to the Government. There is such
a study currently underway under the chairmanship of the Office of
Management and Budget, including participation from the Veterans'
Administration, the Department of Defense, and the Department of
Health, Education, and Welfare, and the General Services Adminis-
tration. The outcome of this study will perhaps be known in fall or
early winter.
Senator NELSON. Thank you.
Does anybody else have anything to add?
Dr. WELLS. That takes care of us.
Senator NELSON. On page 3, about in the middle, it says, "The physi-
cian must be notified of the FDA classification, and he was asked to
consider the use of available alternatives."
How successful was this policy of yours?
PAGENO="0156"
8658 COMPETITIVE PROBLEMS I~ THE DRUG INDUSTRY
Dr. WELLS. In terms of actual quantitative success, I am not sure
that we have-do we, Roland, figures on that as to what extent we
have been able to get physicians to take alternatives? Is that tabulated
in here?
Mr. HARDING. Not yet.
Dr. WELLS. I do not think we have any specific figures that we can
give you on that. We know that it has had some degree of success.
But to give it to you quantitatively, I could not do it.
Dr. LEE. Mr. Chairman, we could not possibly attribute to that
statement alone any quantitative degree, because there have been six
different releases in the last 18 months to our various stations remind-
ing them of these various things and indicating that these restrictions
should be followed.
Mr. GORDON. At the bottom of page 4, you state:
On May 25, 1972, we distributed to all VA field stations copies of the current
iisting of FDA classifications of drug effectiveness. We feel that these actions
have almost eliminated the procurement of ineffective drugs, even though FDA
still permits their manufacture and marketing.
How about under your reimbursement program, where you have fee
physicians? Does this apply to the "possibly effective" drugs also?
Mr. HARDING. Yes. That has practically been closed off to the home-
town program but we do have some fee physicians writing for par-
ticular drugs that are on the ineffective list. We are trying to get this
information out to them. What we have done is draw up a paper, a
professional services letter, which we have forwarded to all of our
field stations with a concise list extracted from this FDA listing and
we have told the field stations they can take this list and send it out
to all their fee physicians, again bringing it to their attention. The fee
physician is still independent. As you know, in the VA, after that
law was changed, we don't have the control of the fee physician we
used to have. Now any veteran can go to any doctor he wishes and
we may not know a particular doctor is going to treat a veteran until
a prescription comes in or a fee comes in to be paid for. At that time,
we hurry and get out a list to him.
If one of our pharmacies receive a prescription written by a~ fee
physician for a drug that has been classified ineffective or possibly
effective, we call the physician, and ask if we can use a drug from
our formulary that has a higher classification from the one he is pre-
scribing. However, if the patient takes the prescription to the local
pharmacy and has it filled and sends the bill to us for payment, we
have to pay for the medication. In the meantime, we notify the physi-
cian of our desire to pay for only the most effective drugs available.
Mr. GORDON. Why can't you issue to the physicians who are under
contract to you and to the pharmacies a list of all the drugs for which
you will reimburse, rather than do it in a negative way. Why can't
you say: "Here is a list of drugs; we will pay for these drugs and no
other ones"?
Mr. HARDING. Sir, we do not even know for sure who this physician
is going to be until we receive the prescription from him.
Dr. Lni. To place this into perspective, may I indicate for present.
consideration, although it is in the record, that there are 100,000 of
these fee basis physicians scattered throughout the country. Hence it is
a question of volume as well as a question of attempt to conimunlcate.1
PAGENO="0157"
COMPETITIVE PROBLEMS IN THE DRuG INDuSTRY 8659
Senator NELSON. A hundred thousand. That is about half the physi-
cians in the country, is it not?
Dr. LEE. Yes, sir; and it is increasing.
Senator NELSON. What is the procedure? The physician writes a pre-
scription, if the patient takes it to a local pharmacy, the pharmacist
then bills the local Veterans' facility-is that the way that works?
Mr. HARDING. That is right, sir, he bills the local VA facility that
has jurisdiction in the region where that patient is located.
Senator NELSON. Would you submit for the record a copy of the
letter which you have sent out?
Dr. LEE. We will be happy to submit for the record a series of these,
and a series of these releases which have gone to our hospitals if you
are interested, sir.
Senator NELSON. We would appreciate having those for the record.
Mr. GORDON. On page 7, about two-thirds of the way down, you say:
It is his further responsibility to make available to the professional staff in.
formation on prices, relative costs of various drugs, and any other product
information which may be useful in the selection of drugs.
Now, this is almost impossible to apply to the hometown program,
is that correct?
Dr. WELLS. It makes it very difficult, because we simply do not have
as much access to the hometown physician or to the fee basis physician
as we do to our own hospital staff. This becomes relatively easy to
control in-house with our full-time staff. But it becomes exceedingly
difficult to handle when we have the fee basis physician; and as Mr.
Harding says, we often do not even know who he is until after the
prescription comes in for payment.
Dr. LEE. Further complications lay, Mr. Chairman, in the fact that
in our affiliation with 93 medical schools, the prescription patterns
usually reflect in the medical school programs the things which are
going on there, and we are subject to the necessities of attempting to
get our people to fit what we think and to have that rationalized with
the practices which are dictated by the medical school and its teaching.
Mr. G0IW0N. Then you really have no control. The only thing you
do, your function, then is merely to pay the bill upon receipt. Isn't
that right?
Dr. WELLS. I would not really say it is quite that bad, because we
have an educational access to them which, again referring to Mr.
Harding's statement, we try to make as much use of as we can. When
this man is identified, we try to let him know what is in the pharmacy
in his area through the formulary and through the access to our pub-
lications on them. So it is an educational process; in some instances
after the fact, admittedly. But nevertheless, I think we will undoubt-
edly see this move along.
Mr. }IIARDING. I might say as a further control, as these prescriptions
come in, we make a very strong effort to change the physician's pre-
scriptions or get him to change to something we have in the formu-
lary. We call him up, or we have our director of outpatient clinic or
the physician call him, explain to him what we have. We send him
a copy of our formulary. We are working this way all the time, but
it takes quite a while to cover this many physicians.
Senator NELSON. Do you have a formulary in all of your 168 hos-
pitals?
PAGENO="0158"
8660 COMPETITIVE PROBLEMS IN THE DRIJG INDUSTRY
Mr. HARDING. Yes.
Senator NELSON. Is it a locally developed formulary?
Mr. HARDING. It is developed locally by the local ~herapeutic agents
and pharmacy reviews committee, with guidance through the execu-
tive therapeutic agents committee, but it is a local formulary at that
particular station.
Senator NELSON. Is there any review of that formulary by the VA
at the national level?
Mr. HARDING. To a certain extent. We work on this all the time.
We receive copies of every local therapeutic agents and pharmacy
reviews meeting; they have meetings once a month, and we receive
copies of every one of their meetings, and in the minutes of the meet-
ing, they tell us what they `want to add or what, they are removrng
from their formulary. This way we have a good idea what the trend
is all the time.
Senator NELSON. I do not Imow whether you covered that or I heard
you correctly. What do you do about drugs that have been determined
by the NAS/NRC as possibly effective?
Mr. HARDING. Our policy is that we will not procure the ineffectives.
The possibly effectives will be procured only if the doctor states that
there is no alternate means of therapy available.
Senator NELSON. Whom does he state that to?
Mr. HARDING. To his local therapeutic committee.
Senator NELSON. So, if they are in the category of possibly effective,
it has to go through that routine before it will be approved, is that it?
Mr. HARDING. Yes.
Mr. GORDON. Are you in a position to estimate the amount of money
you will be saving by dropping the possibly effectives and the
ineffectives?
Dr. WELLS. Strictly speaking, no. We know that when we drop
these, we are going to save the money that goes into that, but the al-
ternate. prescribing will take this up in part. It could possibly cost us
more money. It is exceedingly difficult to make any rational calculation
of that.
Senator NELSON. Well, I would assume that a substantial amount o:f
the drugs that you drop would be the largest sellers in the country
such as the topicals and the fixed combination anti-infectives? Isn't
that right?
Dr. WELLS. Yes; you mean the largest numbers in terms of dollars
that have been dropped out?
Senator NELSON. Yes.
Dr. WELLS. Right.
Senator NELSON. The drugs purchased in place of the fixed combi
nations, in most cases, if not all, are cheaper than the fixed combi
nations, aren't they? For example, tetracycline is cheaper than tetra
cycline combined with novobiocin under the brand name Panalba
Dr. WELLS. No question about it. There are savings to be made with
in drug categories, but when you try to project that to the total ex
penditure of the system, we cannot really come up with an all-ove
savings related to that.
Mr. GoRDoN. The Comptroller General, when he appeared before thi
subcommittee last month, stated that the DOD has specifications fc~
competitive buying for 99 percent of all DPSC centrally managed drii1
PAGENO="0159"
COMPETITIVE PROBJJEM.S IN THE DRUG INDUSTRY 8661
items and that the VA has only for 25 percent. Why this great differ-
ence?
Dr. WELLS. It is simply because they have the practice of writing
specifications for a drug even though there is only one source, a single
source available for supply. It has been our practice not to write speci-
fications unless they were required, unless by having the specification,
we could get into competitive bidding. So it is just a difference in the
mechanics of our practice on it.
We monitor this all the time so that if there is a patent expiring or
a New Drug Application, we can come in over this and watch the
economy of it. But we have not thought it was very meaningful just
to write specifications when you knew there was only a single source
available.
Mr. GORDON. Now, the Comptroller General told us that the VA
administers the Federal Supply Schedule contracts under which Fed-
eral agencies can satisfy drug requirements by direct purchasing from
drug manufacturers. In 1971, FSS purchases amounted t0 about $64
million. A com~parison of the prices paid show that you pay almost
twice as much through the FSS as through direct purchathng. In other
words, you might have been able to save $32 million if you had bought
it all through central purchasing.
Isn't it possible to get drugs more cheaply in some other way than
your present alternative to central purchasing?
Dr. WELLS. As far as the purchase of the Federal Supply Schedules,
this difference would seem to be overstated. There are single instances
when the price differential is considerable, indeed, but it certainly
would not amount to anything like a half of the total purchase. Now,
there may be other elements of this that Mr. Cook would like to
speak to.
Mr. GORDON. In fact, I spoke to Mr. Cook about this question.
Mr. CooK. Yes. The Federal Supply Schedules are made to be used
for a variety of reasons, not just for drugs but for other commodities
as well. One of them is to make drugs available to the small user, per-
haps a health clinic, an employee health clinic in the Federal Govern-
ment or something__who has no medical program of the scope of the
VA or DOD or PHS, for example, so that his occasional need for items
in small quantities can be met by ordering from that source. We only
make these schedules where the price is less than is available to him in
the community. This is one use.
Another is when we find that there is no advantage in price or not
sufficient advantage in price in purchasing this for a central distribu-
tion system. And there are such instances as that, where the price is
approximately the same whether you buy it and use the vendor's dis-
tribution system or whether you use your own.
Mr. GoRDoN. Well, I have some specific examples. For example, on
diazepam, that is Valium, under direct purchasing, it is $18. Under
FSS, it is $36; $33.34, $28.89, $33.44. Sodium cephalothin, which is
Keffin, direct purchasing is $2.10. Under FSS, the Government is
charged $2.70, $3.57 and it goes as high as $3.82.
Then here is Garamycin. $3.62 direct purchasing and $4.80 under
the FSS, $4.41, $4.66 and going as high as $5.76. There is a substantial
difference.
PAGENO="0160"
8662 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
Here is Librium for $13 under direct purchasing. TJnder FSS, it is
$27.72, or $31.50. There is a vast difference. It may not be 850 percent,
but it is more than 50 percent in certain cases.
Mr. CooK. Mr. Gordon, I thjnk the tables from which you are read-
rng, the central purchase prices happen to be our own for our own cen-
tral distribution system.
Mr. GORDON. Yes; this is data supplied by you.
Mr. CooK. Yes, sir. And that is the primary source for our hos-
pitals. There is a variety of reasons why they may have used the Fed-
eral Supply Schedule, some of them not good reasons. But some of
them, when we analyzed the data, showed that time was the essential
factor. They needed something today, so they purchased it through a
local distributor of the Federal Supply Schedule contract. In other
instances, they should not have done so and we are taking steps to
correct that.
Dr. WELLS. This group of purchases, you know, are monitored very
carefully, both throñgh the pharmacy and the supply services. This is
the purpose of our periodically sending them letters and we have sent
a great many of them all the time, asking them why this digression. So
we try to watch this on a day-to-day basis. But it is a big system and
occasionally, something will slip through.
Senator NELSON. Do you keep any comparative statistics on what is
prescribed in each of the 168 hospitals?
Dr. WELr~s. Yes. By trying to see what we have in the way of pre-
scribing patterns at individual hospitals?
Senator NELSON. Yes.
Dr. WEI4I45. As a matter of fact, this is one of the studies that our
central office therapeutics committee has been undertaking for quite
some time. We try to make this comparison and see if it is rational, see
if we can find out when differences lack explanation what goes here,
what is the trouble.
Senator NELSON. When did you start that program?
Dr. WELLs. That particular kind of review has been about a year?
Mr. HARDING. About a year now since we began it.
Senator NELSON. Your objective is to be able to evaluate what the
prescribing practices are within each one of the hospitals under your
jurisdiction?
Mr. HARDING. Yes.
Senator NELSON. And that is a continuous, ongoing study?
Mr. HARDING. That is an ongoing continuous thing, yes.
Senator NELSON. What do you do with the information accumu-
lated?
Mr. HARDING. The more information we get on this, the more we will
he able~to work toward developing some type of control on things that
they are using or may be using in certain areas that we have found out
our physicians have decided are not as important in other areas. So we
are going to disseminate this information to all of the stations through-
out the whole region, throughout the whole United States.
Senator NELSON. Thank you very much, gentlemen. We appreciate
your statement and your taking the time to come here today.
We are recessed subject to call of the Chair.
(Whereupon, at 11 :45 a.m., the subcommittee was adjourned, sub-
ject to the call of the Chair.)
(The letters referred to follow:)
PAGENO="0161"
COMPETITIVE PROBLEMS LN THE DRUG INDUSTRY 8663
VETERANS' ADMINISTR~TION,
DEPARTMENT OF MEDICINE AND SURGERY,
Wa8hington, D.C., Jane 19, 1972.
Professional services letter.
To: Directors of hospitals, domiciliary, outpatient clinics and regional offices with
outpatient clinics and manager, marketing center.
Subject: FDA interim index to evaluations published in Federal Register for
NAS/NRC reviewed drugs.
1. Three copies of Index to Evaluations, Volume II, December 31, 1971, have
been forwarded to you in accordance with DM&S Circular 10-70-237, paragraph
3. Distribution should be made as follows: Chief of Staff or Chairman, Therapeu-
tic Agents and Pharmacy Reviews Committee (1); Chief, Pharmacy Service (1)
and Chief, Supply Service (1).
2. Pages 3-25 of the Index lists drug products classified by Food and Drug
Administration as "Lacking Substantial Evidence of Efficacy" (Category 1). In
accordance with DM&S Circular 10-72-92, VA funds may not be expended for
drugs classified no higher than Category 1, except those for investigational use
for which a protocol has been submitted to and approved by the Executive Com-
mittee on Therapeutic Agents and in accordance with FDA Regulations.
3. Category 2 drugs, classified by Food and Drug Administration as "Possibly
Effective" are listed on pages 26-42 of the Index. In accordance with DM&S Cir-
cular 10-72-92, VA funds should not be expended for drug products in Category 2,
with the following exceptions:
a. Investigational Drugs-Submission of protocol and approval by Executive
Committee on Therapeutic Agents is required~
b. Drug products for which there is no appropriate alternate drug therapy
available in Category 3 or 4, "Probably Effective" or "Effective". (Approval by
the Chief of Staff or local Therapeutic Agents and Pharmacy Reviews Commit-
tee is required.)
4. Drug products in Category 3, classified by Food and Drug Administration
as "Probably Effective" should be used only if, in the opinion of the prescribing
physician, there is no appropriate alternate drug therapy available in Category
4, classified "Effective".
5. The attachment lists all drug products in the three categories, which were
classified less than "Effective" in the Index to Evaluations. This list may be
duplicated locally for distribution to fee-basis physicians. If prescriptions are
to be filled at Veterans Administration expense, drugs prescribed by fee-basis
physicians should be limited to those in the highest catgory which, in the opinion
of the prescribing physician, will meet the treatment needs of the patient.
6. It is our desire to permit physicians as much professional freedom as pos-
sible in the treatment of veteran patients. Attention again is invited, however,
to IL 11-71-44, paragraph 7: "Federal funds should be expended only to pur-
chase the most effective drug product available for a given condition. Thera-
peutic committees must, therefore, assure themselves that sound professional
reasons govern their selection of drugs." -
LYNDON E. LEE, Jr., M.D.
Enclosure.
1. LACKS SUBSTANTIAL EVIDENCE OF EFFICACY
Company Type
Achrocidin Lederle Tab.
Do do Syr.
Achromycin Loz 15 mg do Loz.
Achromycin Sv do Cap.
Achromycin Troches do Trh.
Achromycin/Phenylephhc do Sos Nasal.
Achrostatin V do Pwr.
Do do Cap.
Aclor 5 gr Cole Cap.
Acromicina Sv Lederle - Cap.
Acticort Wilson Labs Sol.
Actilamide Broemmel Mwh.
Do do Sol Nasal.
Actol Massengill Sol.
Afrodrin BW Co Sol Nasal.
Aerodrin do Spy Nasal.
Albamycin Upjohn Din Diag.
Albamycin G U do Tab.
80-450 0-72-pt. 22-11
PAGENO="0162"
8664 COMPETITIVE PROBLEMS TN THE DRUG INDUSTRY
1. LACKS SUBSTANTIAL EVIDENCE OF EFFICACY-Continued
Company Type
Atbamycin T Upjohn Dis Diag.
Do do Cap.
Do do Gre.
Atertonic Merrelt EIx.
Alevaire Breon Sot nh.
Do Winthrop Sot lnh.
Am Plus Improved Roerig Cap.
Ambistryn Squibb Pwr Im.
Amm I Dent Block Tpt.
Do do Tpr.
Ammozyl High Sot Im.
Amrit Amfre Grant Tab.
Anergex Lemmon Sus Im.
Antivert Pfizer Labs Tab.
Antizyme WC Tpt.
Aristogesic Lederte Cap.
Airstomin do Cap.
Artamide HC Wampote Cap.
Atropine and Phenobarb Cole Tab.
Aureomycin 15 mg Lederle Trh.
Aureomycin Pharyngets do Trh.
Aureomycin Triple Sutf do Tab.
Azotrex Bristol Labs Cap.
- Do Bristol Syr.
Bacimycin Merrelt Tab.
Biciltimycin Wyeth Pwr Im.
Bicillin-Sulfa do Sos.
Biciltin-Sutfas do Tab.
Bitcain Cole Tab.
Biomydrin Warner Chit Sot Nasal.
Do do Spy Nasal.
Biomydrin F W C Spy Nasal.
Biosulfa 125 m Upjohn Tab.
Biosulfa 250 m do Tab.
Bistrimate 410 mg Smithmitlerpat Tab.
Blutene Cl 100 mg Abbott Tab.
Bradosol Ciba Loz.
Brisk Activated w/Br85 Colgate Tpt.
Bronkometer Breon Aerlnh.
Bronkospray do Sot nh.
Buff Pen G Three Sulfa Nysco Pwr.
Candettes Cough Pfizer Jet.
CerOStrep One Upjohn Pwrlm.
Cer 0 Strep One Half do Pwr rn.
Chyrnar Armour Pharm Sus lm.
Chymar Aqueous 5,000u/m Armour Sot rn.
Chymar L Armour Pharm Pwr Im.
Chymotrypsin Wilson Sot Im.
Chytrypsin 5,000 units Conal Sot Im.
Chytrypsin 5,000 units Conal Sot rn.
Coco-Sutfonarnides Trip Lilly Sus.
Compocillin VK w/Sutfa Abbott Tab.
Compociltin VK Sulfa do Gm.
Comycin Upjohn Cap.
Do do Cap.
Coplexen SKF Liq.
Crernomycin MSD Sus.
Curad Med. Adhesive Kendall Dressing.
Cvp U.S.Vitamin Cap.
Do do Syr.
Cvp with Vitamin K do Syr.
Do do Tab.
Cyclex MSD Tab.
Cytran Upjohn Tab.
Decadron w/Xytocaine MSC Sol.
DecadronjXylocaine Dil MSD Sot.
Declostatin Lederte Pwr.
Do do Cap.
Detfetased Plus T Eastern Srt.
Dexa Pyramine Vitamix Sot Im.
Di Adernit K Squibb Tab.
Daitose Plus Stuart Cap.
Diapec Pfizer Labs Sos.
Dihydrostreptomycin S Phita Lab Sot Im.
Do Pfizer Pwr Im.
Do Squibb Pwr rn.
Do Pure Pwr Im.
Do do Sot rn.
Donnaget with Neomycin Robins Sus.
Drilitol 0.2 pct SKF Sot Nasal.
Do SKF Spy Nasal.
Duo Gyp U.S. Vitamin Cap.
PAGENO="0163"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8665
1. LACKS SUBSTANTIAL EVIDENCE OF EFFICACY-Continued
Company Type
Duo Cvp w/vit K U.S. Vitamin Cap.
Duo Strep Merck Pwr Im.
Duografin Squibb Sol Iv.
Durycin AS Lilly Sus Im.
Durycin F A 400/0.5 do Pwr Im.
Dystrep_ Merck Pwr Im.
Emivan 20 mg USV Tab.
Emivan 60 mg USV Tab.
Equalysen Wyeth Tab.~
Erythrosulfa Upjohn Tab.
Esidrix25/500 Ciba Ect.
Esidrix-K 50/1,000 do Ect.
Eskay's Theranates SKF Sol.
Estrosed Conal Tab.
Ethylene Disulphonate Spicer Ger Sol Im.
Flanithin 325 mg Table Rock Lab Cap.
Flay Pen G w/Tri-Sulfa Vitamix Pwr.
Do do Pwr.
Flavocillin CS Philadelphia Pwr.
Flavoserp Blue Line Cap.
Frenquel 5 mg/cc Merrell Sol Iv.
Frenquel 20 mg do Tab.
Frenquel 100 mg do Tab.
Fulvicin Schering Tab.
Do do Tab.
Gantricillin 100 Roche Tab.
Gantricillin 200 do Tab.
Gantricilljn 300 do Tab.
Gantrisin do Sol Nasal.
Germicidal Det 2.5 Pct Parke Davis Liq.
Geroniazol Phillps-Roxane Sol.
Gluco-Fedrin W Sulzole PD Sus Nasal.
Grifulvin McNeil Tab.
Do do Sus.
Griseofulvin Ayerst Tab.
Do do Tab.
Guanidine lId 0.125 Gm DaviesRoseHoyt Tab.
Hexamethonium Chloride Nysco Tab.
Do Richlyn Tab.
Hormotone T 1,000 lU Carnrick Tab.
Hormotone T 5,000 lli do Tab.
Hydrodiuril KA MSD Tab.
Hydropres KA MSD Tab.
Hydrospray MDS Spy Nasal.
Ilosone Sulfa Lilly Pwr.
Do do Tab.
Ilotycin do Dco.
Ilotycin Gluceptate do Pwr Otic.
Ilotycin Sulfa do Tab.
Ilotycin/Sulfa Pediat do Sus.
Intromycin Dow Rx Pharm Pwr.
Isadoxol Harvey Tab.
Sorboquel w/Noemycin Schering Tab.
K-CilIin Sulfa Mayrand Pwr.
Do do Pwr.
Kaomycin Upjohn Sys.
Kasdenol Guardian Pwr.
Kectil Bristol Labs Sus.
Koagamin Parenteral Chatham Sol.
Koagamin Sb do Sol.
Kolynos Fluoride Whitehall Tpt.
Lavema Winthrop Pwr.
Do do Sol.
Ledercillin Im U/gm Lederle Ont.
Ledercillin 5,000 Units do Trh.
Lutrexin 3,000 Units HWD Tab.
Mannitrau Richlyn Tab.
Maxitate w/Rauwolf Strasenburg Tab.
Medrol with Orthoxine Upjohn Tab.
Menacyl Lakeside Tab.
Mephosal w/Hc Talden-Yates Tab.
Merdystrep MSD Pwrlm.
Mesulfin 250 mg Ayerst Tab.
Metreton Schering Tab.
Micrin ~ Mwh.
Milprem 200, 200 mg Wallace Tab.
Milprem400,400mg do Tab.
Mp Pentabs Martin Phillip Tab.
Mulsopaque 500 Pct Lafayette EmI.
Mycifradin Upjohn Dis Diag.
Mycifradin N 0.5 gm do Tab.
Mycillin Maurry Sus Im.
Myospaz Nr Amer Pharm Tab.
PAGENO="0164"
8666 COMPETITIVE PROBLEMS TN THE DRUG INDUSTRY
1. LACKS SUBSTANTIAL EVIDENCE OF EFFICACY-Continued
Company Type
Mysteclin F Squibb Cap.
Do do Dps.
Do do Syr.
Mysteclin F 125 do Cap.
Mysteclin V do Cap.
Naturetin w/K 5 mg do Tab.
Naturetin wJK 2.5 mg do Tab.
Neo-Cortef Upjohn Spy Nasal.
Do do Sus Nasal.
Do do Sus.
Neo Delta Cortef do Spy Nasal.
Neo Hydeltrasol 1 mg/mI MSD Spy Nasal.
NeoSenrhyterr Massengill Cap.
Neo Syneph Sulzolate Winthrop Sol Nasal.
Neocyclone Central Pharm Tab.
Neomycin Kaolin Pectin Vitamix Sus.
Neomycin Sul Kaol Pec,t Heun Sus.
Neoparbel Central Pharca Tab.
Neopenzine Lilly Pwr.
Neopenzine 150 do Tab.
Neopenzine300 do Tab.
Neuro Centrine Bristol Labs Tab.
Nicozolw/Reserpine Nysco Tab.
Nisulfazole 10 Pct Breon Sus.
Noloc Dumas-Wilson Can.
Novahistine/Penipillifl Dow Rx Pharm Cap.
Octylan Compound Baxter Don Tab.
Onixol Scholl Sol.
Orabiotic White Labs Cgt.
Pabalate-Hc Robins Ect.
Pabicortal Nysco Tab.
Pabirin Ac Dorsey Cap.
Pabirin Ac Buffered do Tab.
Pactal 25 mg WC Tab.
Pactal 50 mg WC Tab.
Panalba Upjohn Cap.
Panalba Half Strength do Cap.
Panalba Km do Dps.
Do do Gm.
Panmycin do Dis Diag.
Paredrine Sulfathiazole SKF Sus Nasal.
Parenzyme 2 mg/gm National Drug Ont.
Parenzyme Aqueous do Pwr Im.
Pellbiotic 250 Pell Tab.
Pen G Pot im U/Gm Biocraft Ont.
Pen G Pot 5m U/Gm do Ont.
Pen G Pot Sm U/Gm Bryant Pharm Ont.
Pen G Pot 500 U/Gm Day Baldwin Ont.
Pen G Pot Im U/Gm do Ont.
Pen G Pot 1,000 U/Gm do Ont.
Pen G Pot 10 m U/Gm Squibb Ont.
Pen G Pot 1,000 U/Gm Lilly Ont.
Pen G Pot 10 M U/Gm do Ont.
Do Squibb Ont.
Pen G Pot 100 M U/Gm Lilly Ont.
Pen G Pot 1,000 U/Gm do Ont.
Pen Strep MSD Pwr Im.
Do MSD Pwr rn
Pen Streptornycin Upjohn Sus rn.
Pen-Vee Sylfas Wyeth Tab.
Do do Pwr.
Pen-Vee Cidin do Cap.
Penicillin G Abbott Pwr lnh.
Penicillin Threesulfa Nysco Tab.
Do do Tab.
Penicillin Tn Sulfa Richlyn Tab.
Do Zenith Tab.
Penicillin w/Triplsulf Supreme Tab.
Penicillin w/3 Sulfas Vitamix Tab.
Do Biocraft Tab.
Penicillin 3 do Pwr.
Penicillin 4 do Pwr.
Penicillin/Strep Sod Pure Pwr Im.
Pentids-Suifas Squibb Pwr.
Do do Tab.
Pentocin Pure Pwr rn.
Pepsodent Lever Mwh.
Perithiazide Sa WC Srt.
Pharycidin Conc Purdue Fred Liq.
Phemerol 1/750 PD Sol.
Phemerol 1/500 PD Tct.
Phermerol Top 3 Pct Parke Davis Sol.
PAGENO="0165"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8667
1. LACKS SUBSTANTIAL EVIDENCE OF EFFICACY-Continued
Company Type
Piptal Ped w/Phenobarb Lakeoide Dpo.
Plimaoin Ciba Tab.
Pmb-200 Ayerst Tab.
Pmb-400 do Tab.
Polaoil Schering Tab.
Polycline w/Triple Sul Bristol Sos.
Polymagma Wyeth Sos.
Do do Tab.
Potass Pen G w/3 Sulfa Phila Tab.
Powdalator.Eo Abbott Pwr Dent.
Prednaman Dome Lab Tab.
Predniscorb Nysco Tab.
Pree~Mt Wallace Tab.
Procaine Pen/Streptomy Rohr Sus Im.
Prodecadroo Respihaler MSD Afr lob.
Quertioe Abbott Tab.
Quiotess-N Lilly Sus.
Raomanoite Compound Nysco Tab.
Raomaenite 50 do Tab.
Rautrax Squibb Tab.
Raotrax-N do Tab.
Raotrax-N Modified do Tab.
Raotrax Improved do Tab.
Rauwiloid and Hexamethon Riker Tab.
Rauwolfia Compound No. 2 Richlyn Tab.
Remanden-250 Mad Tab.
Reserthonium Nysco Tab.
Retrografin Squibb Sol.
Retropaque Winthrop Sol.
Rhinazine Lederle Sol.
Ritooic Ciba Cap.
Robaxisal Robins Tab.
Robaaisal-Ph do Tab.
Roniacol w/Aminophylli Roche Tab.
Ruhexatal Lemmoo Tab.
Rutin Abbott Tab.
Do Parke Davis Tab.
Rutorbin Squibb Tab.
Salcort Delta 1 mg/Tab Massengill Tab.
Sorgynol Ascher Tab.
Seromycin w/ Isoniazid Lilly Cap.
Sigmanycin Pfizer Dps.
Do do Syr.
Do do Cap.
Signomycin Reorig Dps.
Do do Syr.
Do do Cap.
Signemycin37s do Cap.
Siltrobarb Cole Tab.
Sinaxar 200mg Armour Pharm Tab.
Skelaxin 400 mg Robins Tab.
Somacort Wallace Tab.
Spectrocin Squibb Spy Nasal.
Spectrocin-T do Trh.
Steoediol Organon Tab.
Sterisol Warner Lambert Nwh.
Strep~Combiotic Pfizer Pwr Im.
Do do Sualm
Strep-Dicrystin Squibb Pwr Im.
Strep-Diatrycillin A.S do Sus Im.
Streptomagma Wyeth Sos.
Streptomagmaattapolgte do Tab.
Strexate Armour Pharm Tab.
Strycin Squibb Syr.
Sufathiazole w/Tuamine Lilly Sus Nasal.
Solfa-Sugracilln 125 M Upjohn Gui.
Sulfa.Sugracilln 250 M do Gm.
Sulfaguanidioe Lederle Tab.
Sulfathiazole Rowman Pharm Tab.
Sulfathiazole 0.5 Gm Lilly Tab.
Sulfathiazole Vale Tab.
Sulfathiazole Gum White Cgt.
Sulfedex Abbott Sol.
Sulfel Vale Trh.
Sulfonamets National Loz.
Sulfonamides Triplex Lilly Tab.
Super Amm-l-Dent Block Tpt.
Super Anapac with Dmti Rexall Syr.
Syoapoidin Parke Davis Pwr Im.
Syndecon Bristol Tab.
Do do Pwr.
Tace w/Ergonovine Merrell Cap.
PAGENO="0166"
8668 COMPETITIVE PROBLEMS TN THE DRuG INDUSTRY
1. LACKS SUBSTANTIAL EVIDENCE OF EFFICACY-Continued
Company Type
Tam Dorsey Tab.
Do do Sos,
Tao-Ac Roerig Cap.
Taomid do Sus.
Do do Tab.
Tergemist Abbott Sol lob.
Terramycin Pfizer Dco Dent.
Do do Pas.
Terramycin S F Pfizer Labs Cap.
Terrastatin Pfizer Cap.
Do do Pwr.
Tetracydin Roerig Cap.
Tetrastatin do Cap.
Do do Pwr.
Tetrex Triple Sulfa Bristol S~r.
Tetrex-Ap do Syr.
Tetrex-Apcw/Bristamin do Ca
Theoclycinate/Rutin Brayten Ta
Thera-Cillin Approved Tab.
Thiosulfil Ayerst Sol.
Thizordrin Lilly Sol Nasal.
Toldex Dow Tab.
Triaminic Hc 50 mg Dorsey Labs Tab
Triple Hormone Taylor Sus rn.
Trisem-Pen Massengill Tab.
Trisem-Pen Pengpotass do Pwr.
Trisocort SKF Spy Nasal.
Trypsin Wilson Sol rn.
Tyrolaris MSD Mwh.
V-Cillin K Sulfa Lilly Pwr.
V-Cillin K Sulfas do Tab.
V-Cillin Sulfa do Pwr.
Do do Tab.
V-Kor do Tab.
Visciodol Fougera Sus.
Wolfinex Westerfield Tab.
Wybiotic Wyeth Trh.
Wycillin S M 400 do Sus Im.
Wycillin S M 600 do Sus Im.
2. POSSIBLY EFFECTIVE
Company Type
Achromycin Lederle Pwr.
Achromycin Ear Sol do Pwr Otic.
Achromycin w/Hc do Ont Opth.
Acr-Allantomide Nation~il Dot.
Adrenosem Salicylate Massengill Tab.
Do do Sal nj.
Do do Syr.
Adrestat Organon Cap.
Adrestat-F 130 mg/cc do Sol Im.
Aerosporin BW Sol Otic.
Allantomide National Ont.
AludroxSA Wyeth Tab.
Do do Sus.
Alulotion Sulfathiazle do Lot.
Alvinine Wampole Shp.
Amm. Cl 0.9 Pct Water Baxter, Don Sol.
Amphedroxyn Hcl Lilly Tab.
Analexin Mallinckrodt Syr.
Do do Tab.
Analexin-AF do Tab.
Analexin-400 do Cap.
Ananase Rorer Ect.
Antistine Ciba Sol Opth.
Appetrol Wallace Tab.
Appetrol Sr do Scr.
Arlidin USV Tab.
Aureomycin Davis Geck Dre.
Do Lederle Pwr Otic.
Aureomycin Packing Davis Geck Dre.
Aureomycin Strip do Dre.
Aureomycin Surgical Lederle Pwr.
Avazyme Wampole Ed.
Bacimycin Merrell Ont
PAGENO="0167"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8669
2. POSSIBLY EFFECTIVE-Continued
Company Type
Bacitracin 2,500 U Lilly Sot.
Bacitracio-Neomycio Biocraft Dot.
Bacitracio-Polymyxio do Dot
Do Kasco Dnt.
Do do Dot.
Bacitracio-Polymyxio-B Pfizer Dot
Do Day-Baldwin Dot.
Balarseo Endo Tab.
Bamadex Lederle Src.
Do do Tab.
Barbicaioe Cutter Sol.
Beoacioe Parke Davis Tab.
Beoadryl do Crm.
Beooquio Elder Dot.
Do do Lot
Beoulone Merrell Sus.
Betadioe Purdue Shp.
Bike Aoti-Fuogal Kendall Asp.
Bike Foot and Body Pwr do Pwr.
Bio Dyoe Sperti Dot.
Biomydrio Waroer CMI Sol Dptb.
Biozyme-Hc Armour Dot.
Biphetamioe Straseoburg Cap.
Do do Cap.
Do do Cap.
Biphetamioe-T 10 mg do Src.
Bipbetamioe-T 6.25 mg do Src.
Bismakaolio Vale Sus.
Blue Jay Corn Plaster Kendall Dressing.
Boroate Wyeth Lot.
Brandeofels Scalp and Hair Braedelfels Sol.
Braodeofels Scalp and Hair Braodeofels Sol.
Do do Sol.
Breck Banish Cream Breck Shp.
Breck Banish Liquid do Shp.
Bristamin Bristol Lot.
Buclamase 10 mg Rystan Tab.
Ca Disod Versenate Riker Tab.
Caladryl Parke Davis Lot.
Do do Crm.
Caldesene Straseoburgh Dot.
Do do Pwr.
Caligesic Msd Dot.
Caodettes Pfizer Loz.
Capla Wallace Tab.
Carbrital Parke Davis Fix.
Do do Cap.
Carbrital 3/2 Strength do Ca
Cartrax 10 Roerig Ta -
Cartrax20 do Tab.
Cerosal Kahleoberg Dot.
Chloromycetio Parke Davis Pwr Dpth.
Do do Sol Dtic.
Chlorosalicylate Dot Kremers Urban Dot.
Choline Dihydrogeo Cit Lilly Tab.
Chymar 10,000 Units Armour Pharm Tab.
Chymolase Warreo Teed Ect.
Chymoral Armour Ect.
Co-Pyrooil Lilly Cap.
Do do Sus.
Co-Pyrooil Pediatric do Cap.
Combid SKF Src.
Correctol Pharmaco Tab.
Carticloroo Scheriog Sus.
Cortisporio BW Sus Dpth.
Cremosuxidioe MSD Sus.
Curad Med Baodage Kendall Co Dressiog.
Cyclamycio Wyeth Sos.
Do do Cap.
Cyclospasmol yes Cap.
Do do Tab.
Cytolov 7,000 Uoits Armour Pharm Ca
D-D--E Tilden-Yates Ta
Dactil-Db Lakeside Tab.
Daritrao Pfizer Tab.
Darvo-Trao Lilly Cap.
Doaoer Riker Tab.
Declomycio Lederle Dot.
Decupryl Tildeo Yates Sol.
Do do Crm.
Delfeta-Sed Eastern Resear Srt.
Delfetamine do Srt.
Deprol Wallace Tab.
PAGENO="0168"
8670 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
2. POSSIBLY EFFECTIVE-Continued
Company Type
Dermaval Vale Crm.
Desenex Strasenburgh Pwer.
Oo do Oat
Deooxya Abbott Tab.
Dexserpine 5 Nusco Tab.
Oihydria Broemmel Sal Opth.
Diagaex Blue Squibb Kit.
Oiapareae Breoa Oat.
Diapareae Diaper Rinse do Tab.
Oiothaae Merrell Ont.
Dormisoa Scheriag Cap.
Do do Cap.
Driaalfa Squibb Tab.
Du-Oria Ascher Tab.
Dycloae 00w Crm.
Emivaa USV Sal IV.
Eaaraxl0 Roerig Tab.
Eaarax 5 do Tab.
Eazactia Ayerot Pwr.
00 do Asp.
Do do Crm.
Eazo-Cal Tildea Yates Crm.
Equagesic Wyeth Tab.
Equaaitrate 10 do Tab.
Equanitrate 20 do Tab.
Erythrocia Abbott Oat
Eskatrol SKF Src.
Etamoalotmg/cc PD Sal.
Eteraa27 Revlon Crm.
Feaarol 100 mg Winthrop Tab.
Feaaral200mg do Tab.
Fling Kendall Pwr.
Florinef-S Squibb Oat Opth.
Do do SuoOpth.
Fuogacetia Harvey Pwr.
Do do Sal.
Do do Oat
Gantrioio Roche Sal Otic.
Glutavene Tildea Yateo Sal IV.
Glutavene-K do Sal IV.
Gravidox Lederle Sal laj.
Haugaoe Madland Ect.
HcAcetate w/Neomycio Biocraft Oat Opth.
Do do OatOpth.
Do Day Baldwin Oat Opth.
Hexathricia Aerospra Lincoln Aop.
Hista-Clopane Lilly Cap.
Hiotacalma Rexall Crm.
Histadyl Lilly Crm.
Do do OotOpth.
Histadyl and Ephed 2 do Cap.
Histadyl and Ephed 1 do Cap.
Histamiae Phosphate do Sal.
Humacort PD Oat.
Hydrocartisoae/Neomycio Day Baldwin Oat.
Hyrocaia Amer Pharm Crm.
Ilotyclo Lilly Oat.
Imadyl Unction Roche Lab Oat.
lafrarub Analgesic Whitehall Lab Crm.
loaamia Strasenburgh Src.
Isodine Isodine Shp.
lsodioe Athlete's Foot do Pwr.
Do do Sal.
lsopto P H N 0.5 percent Alcoa Sun Opth.
Isapto P H N 1.5 percent do Sun Opth.
Keralac Salem Sal.
Kryl Tab Ayerot Tab.
Lactated PotassicSalt Don Baxter Sal nj.
Lauroa 150 mglcc Endo Labs Sun Im.
Lauron5omg/cc do Suslm.
Lembrose Wyeth. Oat.
Lenetran Lakeside Tab.
Levanil 300 mg Upjohn Tab.
Lidosporin BW Sal Otic.
Listica Armour Pharm Tab.
Malglyo Braytea Sal.
Do do Tab.
Masse Ortho Crm.
Matromycin 100 mg Pfizer Cap.
Matromycin 250 mg do Cap.
Medral Upjohn Src.
Do do Src.
Meeimtde Abbott Sal IV
Melexine Upjohn Tab.
PAGENO="0169"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8671
2. POSSIBLY EFFECTIVE-Continued
Company Type
Meqnine Ives Tab.
Meratran 1 mg Merrell Tab.
Meratran 2.5 mg do Tab.
Methamphetamine Hcl, R High Tab.
Methedrine 0W Tab.
Metimyd w/Neomycin Schering Ont Opth.
Metreton do Sus Opth.
Do do Sp Nasal.
Mikedimide Panray Sol IV.
Miller-Drine Smp Tab.
Milpath 200 Wallace Tab.
Milpath 400 do ... Tab.
Miltrate do Tab.
Modumate Abbott Sol IV.
Monichol lves Sol.
Morumide Massengill Ont.
Mucilose-Super Winthrop Pwr.
Murel Aherst Tab.
00 do Sol.
Murel S A do Tab.
Murel w/Phenobarbital do Tab.
Do do Srt.
Mycitracin Upjohn Ont Opth.
NTZ Winthrop Sol Nasal.
Naprylate Strgsemburgh Ont.
Nardri WC Tab.
NDK Dentifrice NDK ~Sol Dent.
Neo-Deltef Upjohn Sol Opth.
Neo.Mantle Dome Crm.
Do do Lot
Neo-Poylcin Dow Sol Opth.
Do do Ont Opth.
Neo-Polycin HC Pitman-Moore Ont Opth.
Neo-Synephrine Thenfad Winthrop Sol Nasal.
Neo-Vagisol Dorsey Sup Vag.
Neom cm Sulfate Kasco Ont Opth.
Do do Ont Opth.
Do do OntOpth.
Neosone Unjehn Ont Dpth.
Neosporin OW Sol Opth.
Do BW Ont Opth.
Do do Sup Vag.
Neothalidine Gm.
Nescuta / Philips Roxane Ont.
Neutrapen Riker Pw.
Niamid 100 mg Pfizer Labs Tab.
Niamid 25 mg do Tab.
Nitralox Doresey Tab.
Nerfiex Riker Tab.
Nerfiex nj. 60 mg/2cc do Sol.
Norodin - Endo Tab.
Numorphan 2 mg do Sup.
Numorphan 5 mg do Sup.
Obetrol-lO Obetrol Tab.
Obetrol-20 do Tab.
Oleandomycmn 200 mg Roerig Pwr IM.
Oleandomycmn 500 mg do Pwr.
Onycho-Phytex Wynlit Sol.
Op-Hydrmn Broemmel Sus Opth.
Op-Isophrmn do Sol Opth.
Do do Sol Opth.
Op-Predrim do Sol Opth.
Opthocort Parke Davis Ont Opth.
Orenzyme National Drug Ezt.
Otamylon Winthrop Sol Otic.
Otodyne White Sol Dtic.
Otomide do Sol Otic.
Oxaine 10 mg/S cc Wyeth Sus.
Oxaine M 10 mg/Scc do Sus.
Oxsoralen Elder Cap.
Do do Lot
P-A-D Upjohn Tab.
Panparnit Geigy Tab.
Pantho-F 0.2 Pct USV Crm.
Pantho-F 1 Pct USV Crm.
Papase WC Tab.
Paraflex McNeil Tab.
Parafon do Tab.
Parafon Forte do Tab.
Parafon w/Prednisolnne do Tab.
Parafon with Codeine do Tab.
Pathibamate-200 Lederle Tab.
Patbibamate-400...... - do Tab.
Paveril Phosphate Lilly Pwr.
PAGENO="0170"
8672 COMPETITIVE PROBLEMS TN THE DRUG INDUSTRY
2. POSSIBLY EFFECTIVE-Continued
Company Type
Do Lilly Tab.
Do do Tab.
Pentaserp!ne Nysco Tab.
Pentaserpine 20 do Tab.
Pentoxylon Riker Tab.
Perazil BW Crm.
Persantine 25 mg Geigy Tab.
Phenergan Wyeth Crim.
Phytex Wynlit Lb.
Pontalin 500 mg Winthrop Tab.
Do do Tab.
Potaba 0.5 bm Glenwood Cap.
Do do Tab.
Potaba 100 bm/Bulk do Pwr.
Potaba 2.0 gm/Packet do Pwr.
Pranone Schering Tab.
Prantal do Tab.
Do do Crm.
Do do Srt.
Prantal with Phenobarb do Tab.
Predmycin Opth Sal Allergan Sal Opth.
Predmycin p do Sus Opth.
Prednefrjn do Sos Opth.
Prednefrin Forte do Sos Opth.
Prednefrin-S 0.2 pct do Sol Opth.
Prednicidin Opth Sus Tilden Yates Sus Opth.
Prefrin-A Allergan Sal Opth.
Prelu-Vite Geigy Cap.
Pro-Banthine w/Daital Deane Tab.
Procaine Hcl Baxter Don Sol IV.
Do do -- -- - Sol IV.
Do do Sal IV.
Procaine Hcl 0.1 Pct Travenol Sol IV.
Progestoral Organon Tab.
Propion Wyeth Sal Opth.
Protamide Sherman Sal Im.
Protef Rectal Supp Upjohn Sup.
Proternol Key Pharcal Srt.
Pyribenzamine Ciba Crm.
Do do Oat.
Do do Crm.
Qed Winarick Crm.
Quiactin 400 mg Merrell Tab.
Quotane SKF Lot.
Do SKF Ont.
R-Gene Cutter Sal IV.
Reflexol Cough Loz Isodine Loz.
Reflexol Forte Loz do Loz.
Rela 350 mg Schening Tab.
Resdan Whitehall Shp.
Resion National Drug Sus.
Resoet Westerfield Tab.
Rhulicream Lederle Crm.
Rhulitol do Sol.
Ritalin Ciba Sol.
Robaxin 500 mg Robins Teb.
Robaxin 100 mg/mI do Sal.
Robaxin-750 750 mg do Tab.
Rolicton Searle Tab.
Roniacol Roche Srt.
Do do EIx.
Do do Tab.
Rubiguent Ives Lab Crm.
Sanoma 350 mg Pfizer Tab
Scopalamine 7.5 mg Richlyn Src.
Sebb Max Factor Lot.
Sedulon Roche Syr.
Selsunef Abbott Oat.
Singoserp Ciba Tab.
Soma 250 mg Wallace Cap.
Soma 350 mg do Tab.
Soma Compaund do Tab.
Somaw/Codeine do Tab.
Sópronol Wyeth Pwr.
Do do Sal.
Do do Oat.
Sorboquel White Tab.
Soropon Purdue Sol.
Spartase Wyeth Tab.
Spectrocin Squibb Oat Opth.
Spórostacin Ortho Sal.
Sporostacin Lotion do Lot.
Stratrol Alcon SolOpth.
PAGENO="0171"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8673
2. POSSIBLY EFFECTIVE-Continued
- Company Type
Sterosan Geigy Ont.
Do do Crm.
Strascogesic Strasenburgh Tab.
Striatran MSD Tab.
Strontolac_ Wyeth Ca
Suavitil MSD Ta
Sulamyd Schering Tab.
Sulfadlazine Lilly Ont.
Sulfallantoin Schylkill Pwr.
Sulfamylon Hcl Winthrop Sot.
.Sutfamylon/Streptomycin do Sot.
Sulfasuxidine Bulk MSD Pwr.
Sulfasuxidine 0.5 gm MSD Tab.
Sulfathalidine MSD Tab.
Sulfathiazole Abbott Crm.
Do Durst Crm.
Sulfo-Van Westerfield Ont.
Surfacaine Lilly Afr.
Do do Crm.
Do do Ont.
Surfacaine Compound do Crm.
Surfadil do Crm.
Surfadil Lotion do Let.
Suvren Ayerst Tab.
Do do Tab.
Synalgos lves Cap.
Synalgos DC do Cap.
Tao 100 mg/cc Roering Dps.
Tao 125 mg do Cap.
Tao 125 mg/5cc do Sus.
Tao 250 mg do Cap.
Teles 2.5 percent Torch Sus.
Tenuate Dospan Merrell Srt.
Terramycin Pfizer Pwr.
Do do Pwr lnh
Thatmyd Schering Tab.
Thephorin Roche Lot.
Do do Ont.
Theratuss Squibb Tab.
Do do Tab.
Thora-Dex No. 1 SKF Tab.
Thora-Dex No. 2 SKF Tab.
Thylox Shulton Pwr.
Do do Ont.
Tigacol Roche Cap.
Timofax BW Ont.
Do BW Pwr.
Tolseram 0.5 gm tab Squibb Tab.
Tolseram 16 m/5cc do Sus.
Tolserol do Elx.
Tolserol 0.5 gm do Tab.
Tolserol 0 5 5cc do Sot.
Tolserol w/Codeine do Tab.
Trancogesic Winthorp Tab.
Trancopal 100 mg do Tab.
Trancopal 200 mg do Tab.
Trancoprin do Tab.
Trasentine.Phenobarbit Ciba Tab.
Trepidone Lederle Tab.
Trexinest Hynson Tab.
Triburon Roche Ont.
Do do Crm.
Tridal Lakeside Tab.
Tronolen Abbott Lot.
Tronothane do Jet.
Do do Crm.
Trydecyl SMP Crm.
Trypp USV Pwr Nasal.
Ultimycin Walker Crm.
Ultra Fern. Beauty Oil Rubenstein Liq.
Untra Feminine: do Crm.
Ultran Lilly Ca
Ultran 200 mgTab do Ta
Valenol Vale Pwr.
Vasocort SKF Spy Nasal.
Vicks Vaposteam Vick Chem Liq Inh.
Wilzyme Wilson Ect.
Wyanoids Hc Wyeth Sup.
Xylocaine 2.5 percent Astra Ont.
Zactane Wyeth Tab.
Zactirin do Tab.
Ziradryl Parke Davis Lot.
Do do Crm.
Zirnox Bristol Lot.
PAGENO="0172"
8674 COMPET~~IVE PROBLEMS TN THE DRTJG INDUSTRY
3. PROBABLY EFFECTIVE
Company Type
Abbocillin 800 m Abbott Pwr rn.
Do do Pwr rn.
Actidil BW Tab.
Do do Syr.
Adhesive Ease Durst Liq.
Adroyd 2.5mg/Tab Parke Davis Tab.
Adroyd 5.0mg/Tab do Tab.
Adroyd 10.0 mg/Tab do Tab.
Aerosporin BW Tab.
Allecur Roerig Tab.
Anadrol Syntex Tab.
Artane Lederle Src.
Bacitracin 10,000U Upjohn Pwr.
Bacitracin 50,000U do Pwr.
Do Pfizer Pwr lm.
Do Phila Labs Pwr.
Do do Pwr Irn.
Bicillin All-Purpose Wyeth Pwr rn.
Bicillin C-R do Sus lm.
Bicillin C-R 600 do Sus lm.
Bicillin P-A-B do Sus lrn.
Bipencillin 2/3 Specia Pure Pwr lm.
Bipenicillin 500 do Pwr lm.
Carnoprim Parke Davis Ctb.
Capsebon Pitrnan Moore Shp.
Chloromycetin Parke-Davis Crrn.
Clistin McNeil Tab.
Do do Fix.
Clistin R~-A do Srt.
Colymycin S Pediatric WC Pwr.
Crystifor Squibb Pwr lrn.
Crystifor 400 do Pwr lm.
Deca-Durabolin Organon Sol lm.
Decapryn 12.5 mg Merrell Tab.
Decapryn 25 mg do Tab.
Depo-Penicillin Fort Upjohn Sus lm.
Do do Sus Im.
Dianabol 5 mg Ciba Tab.
Dianabol 2.5 rng do Tab.
Dirnetane Robins Tab.
Do do Srt.
do Tab.
Direct Sky Blue Wyeth Sol.
Disomer White Srt.
Do do Tab.
Do do Srt.
Do do Syr.
Diurnal.Penicillin for Upjohn Pwr lrn.
Dormin Dormin Cap.
DornavaclO,000 Units MSD Pwr.
Durabolin 25 mg/cc Organon Sol Im.
Durabolin-50 50 mg/cc do Sol rn.
Duratillin FA Lilly Pwr Im.
Do do Pwr im.
Duracillin Fortified do Pwr rn.
Eskaserp SKF Src.
Do SKF Src.
Forhistal Ciba Dps.
Do do Syr.
Do do Tab.
Do do Srt.
Halodrin Upjohn Tab.
Harmonyl Abbott Tab.
Do do Tab.
Hispril SKF Src.
Histadyl Lilly Cap.
Do: do Cap.
Do do Syr.
Hydantal Sandoz Tab.
Lentopen 400 AP Wyeth Sus rn.
Methasyrilene Hcl Blue Line Tab.
Methyl Androstenediol Maurry Sus tm
Do do Sus tm
Mycifradin 0.5 gm Upjohn Pwr Im.
Mycifradin 5 gm do Pow.
Mycifradin 10 gm do Pow.
Neomycin SuIf 0.5 gm Squibb Pwr Irn.
Do Pure Pwr rn.
Neomycin Sulf 5 gm do Pwr.
Neomycin Sulfate Phila Labs Pwr.
Do do Rwr.
Do Phils Labs Pwr.
Neotopanol Cook-Waite Sol.
PAGENO="0173"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8675
3. PROBABLY EFFECTIVE-Continued
Company Type
Nilevar Searle Tab.
Nilevar 25 mg/mI do Sot rn.
Nilevar 8.3 mg/cc do Dps.
Ox cel Cotton Parke Davis Dressing.
Ox cel Fob Cone do Dressing.
Dx cot Gauze do Dressing.
Parodrine Tab Tab.
Parnate Tab.
Pathibon Lederle Src.
Pen Produral Pwr.
Percorten 2 mg Ciba Tab.
Percorten 5 mg do Tab.
Penn Endo Syr.
Polygyl Schieffelin Sot.
Polyrnixin Sulfate Pfizer Sot.
Polymixin B Sulfate do Ont.
Povan Parke Davis Tab.
Pronapen Pfizen Pwr rn.
Pro Pen G/Pot Pen G Pure Sus Irn.
Do Philadelphia Sos Im.
Reactrol Purdue Fred Tab.
Rescinnamine Nysco Src.
Do do Src.
Reserpine do Src.
Do do Src.
Do do Src.
Do Richlyn Src.
Sernikon let Massengill Tab.
Solusponge Cone Panra Dressing.
Solusponge Strip do Dressing.
Sotradecol Philadelphia Sol IV.
Do do Sol IV.
Stenediol 25 mg/cc Organon Sus Im.
Stenediol 50 mg/cc do Sus Im.
Supertah H-C Purdue Fred Ont.
Surgicel U Dressing.
Synophylate Central Sot IV.
Taractan Roche Tab.
Do do Sol Im.
Do do Tab.
Do do Tab.
Do do_.,... Tab.
Tarcortin Reed Carnrick Crm.
Thephorin Roche Tab.
Do do Syr.
Tigan Cap 250 rng RocheLab Cap.
Tigan Cap 100 mg do Cap.
Tigan Sol do Sol Irn.
Tigan Supp do Sup.
Tral Abbott Srt.
Do do Art.
Trib Vaginal Crrn Roche Lab Crrn Vag.
Trib Vaginal Supp do Sup Vag.
Iirecholine MSD Tab.
Do do Tab.
Do do Tab.
Verrnizine Chicago Pharrn Syr.
Vosol Warnpole Sol Otic.
Vosol Nc do Sot Otic.
Winsteroid Winthrop Tab.
Winstrol do Tab.
Wyamine Wyeth Elx.
Do do Tab.
Do do Tab.
Wycillin Fortified do Pwr rn.
Do do Pwrlrn.
VETERANS' ADMINISTRATION,
OFFICE OF THE CHIEF MEDICAL DIRECTOR,
DEPARTMENT OF MEDICINE AND SURGERY,
Washington, D.C., March 14, 1972.
Memorandum No. 10-72-7.
Subject: Executive Committee on therapeutic agents.
1. The purpose of this memorandum is to restate the functions of this Com-
mittee and designate its membership.
2. The Executive Committee on Therapeutic Agents will:
a. Develop, recommend and disseminate policy and information on safe, effec-
tive and rational use of drugs in VA.
PAGENO="0174"
8676 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
b. Conduct epidemiological studies on drug utilization, drug usage and utiliza-
tion patterns for Field Station and Central Office use.
c. Review and act on requests from VA hospitals and clinics for use of drugs
not available in interstate commerce and for which an FDA New Drug Applica-
tion has not been effected (investigational drugs), for clinical treatment in a
specific patient.
d. Evaluate reports of Adverse Drug Reactions and Drug Interactions prior
to forwarding them to FDA. (Veterans Administration reports are combined with
reports from all hospitals, Government and non-government, sending such infor-
mation to FDA and resulting compilation prepared by FDA is furnished to all
VA hospitals and clinics.)
e. Review significant actions of Therapeutic Agents and Pharmacy Reviews
Committees to determine appropriateness of policies on drug usage and to iden-
tify and recommend needed changes.
f. Review and act on Quality Improvement Reports submitted by VA hospitals
and clinics which indicate dissatisfaction with the quality of drug products.
Appropriate information will be coordinated with concerned officials of FDA,
USP and NF.
g. Review proposed marketing and administrative actions on drug items; rec-
ommend appropriate action to Supply Service.
h. Perform such other functions as may be assigned.
3. The Committee is composed of the following:
ACMD for professional services, chairman .( 11).
Deputy for dentistry, member (16A).
Special assistant to ACM*D for research and education in medicine, member
(15B).
Director, medical administration service, member (136).
Director, supply service, member (134).
Director, nursing service, member (111B).
Director, medical service, member (112B).
Director, surgical service, member (112C).
Director, pathology and allied sciences service, member (112D).
Director, psychiatry, neurology and Psychology service, member (112F).
Director, alcohol and drug dependence service, member (1121).
Director, ambulatory care service, member (112K).
Director, pharmacy service, secretary, member (hiP).
Each member will designate an alternate to serve in his absence if necessary.
Other Service Directors and specialists will be invited to participate in meetings
as required.
4. The Committee will meet quarterly, and at other times as necessary at
the call of the Chairman.
5. The Committee will establish procedures for performing the assigned func-
tions and may authorize the Secretary to coordinate actions not requiring atten-
tion by the Committee as a whole.z
6. DM&S Memorandum No. 10-65-23 is rescinded.
M. J. Muss~, M.D.,
Chief Medical Director.
PROJECTED EXECUTIVE COMMITTEE ON THERAPEIT1IC AGENTS M~riwGs
FOURTE QUARTER FISCAL YEAR 1972, ROOM 817
April 10, 1972-10:00-11:00 a.m.: (1) Agenda attached.
April 20, 1972-1:00-2:00 p.m. (Room 817) : (1) Report of April 10, 1972
Meeting-Dr. Lee. (2) Report of Subcommittee on Ambulatory Care (Fee-Basis)
Program-Dr. Haber. (3) Manual deviation for authorizing prescriptions for
certain medical supplies for issuance to eligible beneficiaries-Dr. Francke.
(4) New Business.
May 17, 1972-10 :00-11 :00 a.m. (Room 937) : (1) Report of April 18, 1972
Meeting-Dr. Lee. (2) Report of Subcommittee on Bureau of Biologics Stand-
ards (Report on PPD-Tuberculin and other recent developments) -Dr. Wil-
liams. (3) Report of Subcommittee on Surveillance of Field Stations and their
Committees on Therapeutic Agents and Pharmacy Reviews-Mr. Harding. (4)
New Business.
June 13, 1972-9 :00-10:00 a.m. (Room 937) : (1) Report on May 23, 1972
Meeting-Dr. Lee. (2) Report of Subcommittee on Use of Investigational Drugs,
PAGENO="0175"
OOMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8677
BNDD Schedule I items and other investigational drug usage-Dr. Bailar. (3)
Bureau of Narcotics and Dangerous Drugs Controlled Drug Procedures-Update
Circular 10-70--90-Dr. Francke. (4) Protocol for dispensing Methadone and
other drug abuse items-Dr. Kaim-Dr. Francke. (5) New Business.
June 27, 1972-10:00-11 :00 am. (Room 937) : (1) Report of June 13, 1972
Meeting-Dr. Lee. (2) Report of Subcommittee on Regionalization-Mr. Boehm.
(3) Report of Subcommittee on a National Drug Index (Formulary Service)-
Dr. Francke. (4) New Business.
SUBCOMMITTEES
April 10, 1972: (1) Efficacy of Coronary Vasodilators With Policy for Con-
tinued Usage-Dr. Rosenberg.
April 20, 1972: (2) Ambulatory Care (Fee-Basis) Program-Dr. Haber, Dr.
Klein, Dr. Stage, Miss Quandt and Mr. Murphree.
May 17, 1972: (3) Bureau of Biologics Standards-Dr. Williams and Staff-
Dr. Matthews. Report on PPD-Tuberculin and Other Recent Developments.
May 17, 1972: (4) Field Station Committees on Therapeutic Agents and Phar-
macy Reviews Surveillance-Mr. Harding.
June 13, 1972: (5) Use of Investigational Drugs, BNDD Schedule I Items,
etc.-Dr. Pittman, Dr. Matthews and Dr. Bailar.
June 13, 1972: (6) Drug Dependence Service-Dr. Kaim and Dr. Francke.
June 27, 1972: (7) Regionalization As It Effects Distribution Of Drugs-Mr.
Boehm and RMD. (8) National Drug Index-Formulary Service-Dr. Francke,
Mr. Whitworth, Mr. Harding. (9) Automation of Pharmacy Service-Mr. Linder
and Mr. Shaughnessy. (10) Adverse Drug Reports-Mr. Harding, Dr. Christian-
son, Dr. Green.
VETERANS' ADMINISTRATION,
DEPARTMENT 01? MEDICINE AND SURGERY,
Washington, D.C., May 4, 1972.
Circular No. 10-72-92.
Subject: Policy for prescribing drugs classified no higher than "possibly effective."
To: Directors of hospitals, domiciliary, outpatient clinics and regional offices
with outpatient clinics.
1. It is the policy of the VA that funds will not be expended for purchasing
drugs classified by the FooI and Drug Administration as "ineffective" or "possibly
effective" with the following exceptions: (a) VA funds may be expended to pur-
chase "ineffective" and "possibly effective" drug products for investigational use
in veteran patients. (b) VA funds may be used to purchase "possibly effective"
drug products when no appropriate alternate means of drug therapy is available.
2. We want to emphasize our desire to make every effort to treat all VA
patients with the most effective therapeutic agents at the most favorable prices
available.
BENJAMIN B. WELLS, M.D.,
Deputy Chief Medica' Director.
Circular expires May 3, 1973.
U.S. GOVERNMENT,
Apri' 19, 172.
Memorandum, VA marketing center.
To :~ Chief, drugs and chemicals (134L).
Through: Director, supply service (134).
From: Chairman, executive committee on therapeutic agents (11).
Subject: Depot stocking of possibly effective drug items.
1. The Executive Committee on Thereapeutic Agents has prepared the follow-
ing suggested policy statement. "VA funds may be used to purchase `possibly
effective' drug products when no appropriate alternate means of drug therapy
is available."
2. An effort is being made to encourage all physicians, both Staff and Fee-
Basis, to prescribe the "most effective" drug product available to treat veteran
patients.
3. In view of the above statements, Marketing Center has been alerted to hold
down procurement of any of the drug products classified as "possibly effective
This does not mean to discontinue procurement of the item completelY.
PAGENO="0176"
8678 COMPETITIVE PROBLEMS IiN~ THE DRUG INDUSTRY
4. The ECTA would like for Marketing Center to set up the following
procedure:
a. Flag each "possibly effective" drug product.
b. Do not reorder until stock level nears the minimum quantity (1 and 2
months).
c. Notify the ECTA in Central Office of amount on hand and the latest usage
experience from field station orders.
d. The ECTA will decide if the item should be deleted or the minimum re-
quirements reordered. Normal replenishment of depot inventories will not ex-
ceed a current four month requirement based on the last six months demands by
field stations.
e. All orders on these items will contain the following justification: "This
`possibly effective' drug item is being purchased by Marketing Center because of
the economy involved in Central procurement and due to the fact there is not
an appropriate alternate drug item available."
f. When the volume requirements of any of these items falls below the eco-
nomic advantage level, the item will be discontinued from depot stock.
LYNDON E. Lss, Jr., M.D.
TRADE NAME V~nsus GENERIC NAME PRESCRThING
Prescribing drug products by their trade names is one method by which physi-
cians outside of hospitals attempt to control the quality of medication for their
patient. Such control is necessary for several reasons. For example, a recent re-
port by FDA's National Center for Drug Analysis indicated that 47 percent of the
batches of digoxin tested did not meet the standards of the USP even though all
of them were labeled as being of DSP quality. In the case of digoxin, a large per-
centage of physicians assure that their patients will not receive a substandard
product by writing a trade name for it. So it is with Dilantin, Gantrisin, Chloro-
mycetin, tetracycline and a host of other drug products. Writing prescriptions by
trade name has become a standard of medical practice because in an uncontrolled
situation outside of the hospital, it is the one way in which the physician can
exercise some control over the quality of the drug product.
If we are going to encourage physicians to prescribe using nonproprietary or
generic names, we must offer them some assurance about the quality of the drug
product. Telling them that the product is labeled DSP and all DSP products are
equivalent is no good; they won't buy that statement because they have good
reason to believe otherwise. In an article entitled "Generic Equivalence and In-
equivalence of Oral Products" Wagner has summarized the work to January
1971 on bioavailability studies on drug products.
Several controlled studies in man have shown significant and even large differ-
ences in bioavailability of active drug principle between drug products that are
chemically equivalent. These are a few of the many examples:
1. All sixteen generic products of OXYTETRACYOLINE showed serum levels
significantly lower than the original product and 7 had levels below the minimum
therapeutic concentration (Brice, G.W. and Hammer, H.F. : JAMA 208 :1189-119O,
1969);
2. Similar tests by Blair using sixteen lots of OXYTETRACYCLINE from
eleven different manufacturers gave almost identical results (Blair, et al: JAMA
215:251-254 (Jan. 11) 1971);
3. Two different formulations of TOLBUTAMIDE, chemically identical but
slightly different in excipient formulation, were found to be clearly not equivalent
~s measured by availability of the drug to the patient. (Varley, A.B.: JAMA 206:
1745-1748 (Nov. 18) 1968);
4. Twelve TETRACYCLINE products demonstrated peak blood levels of 1
mcg/ml to 2 meg/mi, a difference of 100 percent (Banes, D: Therapeutic Equiva-
lence of Drugs-FDA Viewpoint, APhA Aced. Sal., Nov. 17-20, 1968)
5. Wide variations were noted in the availability of PHENYLBUTAZONE in
vivo and in vitro when 23 different brands were studied (Searl R.D. and Perna-
rowski, M: Can Med. Assoc. J. 96: 1513-20, 1967)
6. Tests on four CHLORAMPHENICOL products including the original,
showed blood levels of the three competing brands to be only one-quarter to
one-half that of the original (Glazko, et al: Clin. Pharmacol. Therap., 9: 472-
483 1968);
7. Wide differences in absorption rates of DIPHENYLHYDANTOIN when
the original brand and two generic~products were tested (Martin, et al: Phar-
macologist 10 167, 1968; also JAMA ~04: 23-24 (Aug. 26) 1968)
PAGENO="0177"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8679
8. Granules of P-AMINOSALICYLIC acid were Shown to be less than 50
percent available when compared with the pure drug and compressed tablets
of the sodium and calcium salt (Middleton, et al: J. Can Pharm. &~i., 3: 97-101,
1968)
9. The absorption of ASPIRIN was shown to be significantly different in tests
between the seven leading brands (Levy G.: J. Pharm. Sci., 50: 388-392, 1961)
10. RIBOFLAVIN'S bioavailabfflty was found to be directly related to tablet
disintegration time, and there were large differences between several formula-
tions (Morrison, et al: J. Amer. Pharm. Assoc. dci. Ed., 48: 634-647, 1959).
There have been several other studies involving drugs such as ephedrine, war-
fan dicoumarol and others, showing similar results of wide variations in
availability of the drug at the physiological level. In a total of twenty-four
scientifically controlled studies in man, eighteen (75 percent) show definite dis-
crepancies with therapeutic implications and an additional four have equivocal
results. Thus, 91 percent of controlled studies in which the microbiological,
chemical and physical tests meet established standards demonstrate physiologic
inequivalency.
B. CLINICAL REPORTS
The clinical evidence of physiological inequivalency is likewise compelling.
There have been reports of clinical observations where two or more products
containing the same drug in the same dosage form did not result in equal thera-
~utic results. For example:
1. Campagna relates an incident where his patient was maintained on a' stand-
ard dose of PREDNI5ONE. When the patient was admitted to the hospital for
another matter he received a different brand of prednisone resulting in an exac-
erbation of the original condition and hence an extended hospital stay. When
the patient was returned to `the original brand of prednisone, the condition was
again brought under control; (Campagna, ct al: J. Pharm. &~i. 52: 605-606.
1963)
2. In another example, reported in the Canculian Medical Association Journal,
a patient requested his physician permit the pharmacist to dispense a cheaper
brand of TOLBTJTAMIDE. The patient's diabetes promptly became uncontrolla-
ble, the FBS shot up to 287 mg percent, and whole tablets were recovered in the
stool; (Carminetsky, S.: Can. Med. Assoc. J. 88: 950, 1963; also Carter, A. K.
Can. Med. Assoc. J. 88: 98, 1963);
3. Catz and cowon1~ers have published reports of THYROID tablets that meet
U.S.P. specifications but were ineffective clinically according to FBI determina-
tions . (Catz, et at : New Engl. J. Med. 266: 136-37, 1962, et seq.);
4. Several epileptic patients who had been stabilized on DILANTIN dosage
suddenly showed signs of toxic overdosage. The cause was directly traceable to
a change in the inert filler in the capsule from calcium sulfate to loctose which
resulted in an increase in absorption of the active ingredient (Rail, L.: Med. J.
Australia 2: 339 (Aug. 10) 1968, et seq)
These reports, both scientific and clinical, are no cause to indict all drug\
products. But it does seem abundantly clear that clinical equivalency, or bio-
availability or whatever identification it has, is of significant practical impor-
tance to the physician and to the pharmacist and, ultimately of course, to the
patient.
Some people claim that this small number of examples out of the thousands
of drugs available are, in themselves, a measure of the relative insignificance of
the problem. The implication is that weshould accept that a certain small per-
centage of our drugs will be ineffective and prescribe all drugs by their official
name. Others, however, point out that we really don't know the magnitude of the
problem because too few studies have been done. To assume that there is no
problem without studying its magnitude, is not rational. It is within this dichot-
omy of opinion that physicians continue to prescribe by trade names in order
to assure themselves that their patients will obtain effective drug products. We
cannot ask them to change their practice unless we are prepared to assure them
by other means `that the quality of the medication their patient receives is
satisfactory.
This matter cannot be dismissed lightly by saying that all USP drugs are
equivalent and that the physician has only to prescribe by the USP name and
thus great savings will be made. There are too many prestigious organizations
deeply concerned about the question of bioavailability. The interest of the Di-
`vision of Medical Sciences of the NAS/NRC in the problem of bioavailability
testing tends to support `the current practice of physicians to prescribe by trade
80-450 O-72-pt. 22-12
PAGENO="0178"
8680 COMPETP~IVE PROBLEMS TN THE DRIJG INDUSTRY
names. Efforts by the USP and the NFto incorporate bioavailability parameters
into their official compendia implies that physicians prescribing by trade names
in an uncontrolled situation may have a justifiable point.
At a Conference on Bloavailability of Drugs sponsored by the USP and the
Drug Research Board of NAS/NRC on November 22 and 23, 1971 (quote from
papers).
At a meeting of the Drug Research Board held March 10, 1972, the position of
the FDA and the USP on bioavailability testing was set forth as follows (quote
from paper when available).
The Veterans Administration, with its large network of clinical facilities, has
under study a plan to develop a medication quality assurance program for drug
products to treat veteran patients.
A program leading to the assurance of the bioavailability and quality of drug
products administered and dispensed in VA installations was discussed at a
meeting held in VACO under the Chairmanship of the ACMD for Professional
Services, Dr. Lyndon E. Lee, Jr., with Dr. Benjamin B. Wells, Deputy Chief
Medical Director present. This program could be the most comprehensive of its
type in the world and its results may have a far-reaching impact on improving
the bloavailability and efficacy of drug products. It could be of immeasurable
value to the VA in obtaining the permission of fee-basis physicians to dispense
the brand of drug commonly available in VA hospitals and thus reduce costs.
The VA Drug Quality Assurance program would be based on a plan to monitor
the blood or urine level of drugs in selected volunteers or patients. The plan will
concentrate initially on the 100 most frequently prescribed drugs purchased
competitively. These drugs, together with those which are available from only
one source of supply, represent over 90 per cent of the dollar value of drugs
purchased by the Veterans Administration.
Present at the meeting were Dr. T. 0. Vitti representing the Food and Drug
Administration. Dr. Daniel Azarnoff of the National Academy of Sciences-
National Research Council, Dr. William M. Heller of the U.S. Pharmacopeial
Convention, Incorporated, and Dr. John Bergen of the National Formulary.
Others attending included Mr. Max Feinberg of Defense Personnel Support
Center, Dr. Paul L. Haber, Deputy for Clinical Services, Dr. Edward Dunner,
Special Assistant to ACiD for Research and Education in Medicine, Mr. Donald
P. Whitworth, Director, Supply Service, Dr. Donald E. Francke, Acting Director
of Pharmacy Service and Mr. Roland F. Harding, Deputy Director of Pharmacy
Service. Also three experts in the field of biopharmaceutics and pharmacokinetics,
Professors Milo Gibaldi of the State University of New York at Buffalo, W. A.
Ritschel of the University of Cincinnati and Marvin Meyer of the University of
Tennessee, attended.
There was agreement that a medication quality assurance program is desirable
and that the VA, because of its clinical facilities, is an ideal organization to
conduct it. At the next meeting scheduled for March 9th, the group will appoint
a Scientific Advisory Panel to recommend drug products to which priority should
be given, to develop protocols for studies, and to identify related areas of scientific
research related to drugs.
According to this plan, the bloavailability of drug products will be measured by
examining blood levels and/or urinary excretion levels in volunteers or patients.
Drug products of the same dosage form and purchased competitively will be se-
lected as follows: (1) The three products with the lowest unit price on the most
recent bid obtained by VA or other government procurement agency (2) The
product VA is now using and (3) The innovator's product. (Some of these may
be the same). Dissolution tests will be done on all products, where applicable.
Other or additional in vitro tests will be done when appropriate, such as friability
testing, determination, of particle size and particle size ranges, viscosity, etc. The
products would then be compared using carefully controlled clinical studies in
which plasma levels and/or urinary excretion of unchanged drug would be meas-
ured at several sampling times after administration of equivalent single doses on
a body weight basis or by other parameters. The samples would be analyzed by
specific methods and the data subjected to statistical analysis. The objective
would be to determine the comparative biological availability of the products
tests ~f all three of the `owest prieed products and the product VA is currently
using showed unfavorable comparison with the original product, then similar
tests would be performed on the three drug products which ranked 4th to 6th in
price from the bottom of the bid list. If, on the other hand, one or more of the
PAGENO="0179"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8681
lowest priced products showed greatest bioavailability, the lowest priced product
would be selected for use.
While this plan sounds simple, it is in fact, quite complex. While methods are
flOw available to determine the bioavailability of some drug products, develop-
ment of others would take time and talent; development of methods for a few
drugs may be impossible. But there is no other acceptable way to gauge the
quality of most drug products other than by measuring the release of the active
drug from the dosage form and its absorption and distribution into the blood
stream. Methodology for such studies is of recent development.
When this plan is implemented, it will be supportive of this Committee's effort
to achieve quality drug products at the lowest price. Great emphasis will be placed
in testing the quality of the lowest priced drugs and the product meeting the bio-
availability standard and at the same time was lowest in cost would be the one
of choice.
We believe, however, that it is essential to monitor the quality of each batch of
drug product by bioavailability studies for the same reason that VA now has
FDA assay each of its items purchased competitively. To do otherwise would
offer no assurance to the physician regarding the quality of the drug. The drug is
now labeled as meeting DSP standards but that provides no assurance to him;
neither would a statement added by the manufacturer that this product meets
bioavailability standards. In the absence of a proper monitoring system, no one
can be assured.
You may well ask: Why is the VA thinking of doing this? Isn't this job the
responsibility of the FDA? Our answer is that no one is now doing it, yet there is
a great and growing demand to lower the price of drugs. The state of Tennessee,
through its colleges of medicine and pharmacy is prepared to put up matching
funds in order to make VA's program available to its citizens. The college of
pharmacy has responsibility for the purchase of quality drugs at the lowest price
for the State of Tennessee.
PROFESSIONAL SERVICES LETTER,
May 20, 1972.
To: Director of VA hospitals, domiciliary, VA outpatient clinics and directors of
regional offices with outpatient clinics.
Subject: Recent information on effectiveness of drugs used as coronary
vasodilators.
1. Recent research has established that the use of nitrates administered orally
for the prophylaxis of angina is a questionable practice. The drugs have been
found to be destroyed by an enzyme secreted into the small intestine by the liver.
The enzyme is recognized to be glutathione organic nitrate reductase.
2. The use of sublingual nitroglycerin tablets is, therefore, the theory of choice
for the management of anginal pain. The Medical Service recommends that this
method be used whenever practical.
3. It would also be noted that nitroglycerin tends to lose potency when it is
stored in plastic containers which are not sealed against the atmosphere. There-
fore, it is recommended that all nitroglycerin supplies should be stored in tightly
capped glass containers.
LYNDON E. LEE, Jr., M.D.,
ACMD for Professional Services.
VETERANS' ADMINISTRATION,
OFFICE OF THE ADMINISTRATOR OF VETERANS' ATFAmS,
Washington, D.C., Februa~ry 17, 1972.
Hon. GAYLORD NELSON,
Chairman, Monopoly Subcommittee, Select Committee on Small Business, U.S.
Senate, Wash%ngton, D.C.
DEAR MR. CHAIRMAN: I am pleased to furnish information for Fiscal Year
1971 to update material furnished you in 1970 as requested in your letter of Jan-
uary 5, 1972. Our hospital at San Juan and Outpatient Clinics at Manila and
Honolulu are not included in the data furnished. Also, this report excludes our
Los Angeles Extended Care Hospital because an emergency major patient relo-
cation required full time of the staff at that station.
PAGENO="0180"
8682 COMPETITIVE PROBLEMS ~N THE DRUG INDUSTRY
The enclosures are identified corresponding to your request number.
1. Total dollar volume of drug expenditures for FY 1971 by major thera-
peutic categories as identified in American Hospital Formularly (See enclosure).
(a) (Potal drug expenditures: $70,569,820. (1) Purchases for Veterans Adminis-
tration: $57,952,296. (2) Purchases for other government agencies: $12,617,524.
2. Total dollar volume of centralized purchases (these expenditures are in-
cluded in item 1): $39,829,329.
3. Total dollar purchases of drugs made by VA Hospitals locally for FY 1971:
(a) Purchases from Federal Supply Schedules: $24,392,406. (b) Local suppliers
(i.e., wholesalers, drug warehouses, and retail pharmacists: $6,291,097. (c) Pre-
scriptions filled by independent retail pharmacists for which reimbursement was
made by VA: $3,152,981.
4. The leading 50 centrally purchased drugs for VA, showing prices paid,
amount bought, names of sellers, unsuccessful bidders (See enclosure).
5. Local purchases of these same 50 items showing item, quantity bought,
unit, price paid per unit, name of seller, showing purchases from Federal Supply
Schedules or wholesaler or local pharmacy. These items were purchased at the
hospitals to meet an immediate requirement (See enclosure).
0. Total dollar volume of the 50 leading centrally purchased drugs is $16,741,618.
Of this quantity only $1,230,432 could have been purchased competitively. The
balance of these items are sole source or items not manufactured by small busi-
ness. The amount of purchases going to small business was $189,281. This
amounts to 15.4% of the competitive purchases going to the following small busi-
ness firms:
Halsey Drug Co., Brooklyn, N.Y., tetracycline capsules (250 mg,
lOOs) $44, 254. 00
Milan Pharmaceuticals, Morgantown, W. Va., tetracycline cap-
sules, (250 mg, lOOs) 87, 497. 00
Clifford Chemical, Newark, N.J., quinidine sulfate tablets, USP,
(200 rng, lOOs) 57, 530. 00
7. During FY 1971 the Chief Medical Director has taken the following actions
to eliminate the purchase of unsafe or less than effective drugs, the combination
drugs reviewed by the National Academy of Sciences/National Research Council,
and expensive brand name products when cheaper and equally effective lower
priced drugs are available.
(a) DM&S Circular 10-70-237, December 4, 1970, Subject: "Implementation
of NAS/NRC Drug Efficacy Studies Information" was published to prescribe
removal from the hospital formulary and eliminate purchase of drugs lacking
substantial evidenèe of effectiveness or having an unfavorable benefit to risk
ratio. Additionally, DM&S Circular 10-71-3, January 13, 1971, Subject: "Rational
Drug Use" was published reemphasizing selection of drugs for rational use and
providing more specific information to non-VA physicians concerning drugs avail-
able in VA pharmacies. These directives were followed up with DM&S Cir-
cular 10-71-16, January 20, 1971, alerting hospitals to be aware of the addi-
tion of individual items published in the Federal Register. The FDA's Index to
the Federal Register decisions for NAS/NRC reviewed drugs was transmitted
to our field stations July 13, 1971, by Professional Services Letter IL 11-71-44 to-
gether with all Supplements through April 30, 1971. Our Executive Committee
on Therapeutic Agents has been studying these drugs for a more positive con-
clusion as to their efficacy in accordance with the time frame published in the
Federal Register.
(b) Single source, sole source and generic listings are available to field sta-
tions for use by the prescribing physician. These drugs, depending on demand, are
made available in the VA centralized distribution system at the lowest possible
cost, or put in a Federal Supply Schedule contract.
8. List of drugs removed from VA's purchasing program during FY 1971.
All stations were instructed to remove unsafe or ineffective drugs from their
formulary, therefore, precluding purchase of these items. Many of these items
were not in their formulary. Of those drugs listed as ineffective 186 were not
stocked in the VA system. Items listed were removed from formularies by one
or more stations (See enclosure).
9. The general principles of the Federal Procurement Regulations are followed
in evaluating the reasonableness of prices offered under negotiated or adver-
tised procurements. Prices offered are evaluated against published commercial
price lists, institutional catalogs, price lists applicable to indefinite quantity
PAGENO="0181"
OOMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8683
term contracts, prices published in the 1971 Blue Book and any other available
resource that has pricing data on the items being procured. Also considered are
price trends to adjust quantities both upward and downward resulting from
variation in demand histories, new wage contracts, transportation cost, and other
factors bearing on normal manufacturing costs.
10. Each year the VA coordinates with the Defense Department the anticipated
annual volume of our drug purchases, emphasizing those categories we potentially
may ask them to buy for us. Whenever there is indication that we can obtain our
requirements from DoD at a lower total cost than available to us by direct
procurement, we ask DoD to furnish us with the item. All those drugs which we
buy in significant dollar volume, we routinely compare DoD prices before initiat-
ing procurement action and initiate actual purchase only when there is reason
to believe that we will obtain the item at lower cost. In addition we make avail-
able to other federal agencies who have requirements for drugs, our catalog and
other publications regarding the availability of drug items from our central
purchasing system. Also, we make available to those agencies the total cost of
the item which includes our costs for administrative overhead. A number of
agencies procure drugs from us and we base our projections for items to be
procured in volume quantities on the record of past history supplemented by
information from them on known program changes. We use the same system in
developing projected requirements for items contracted for by this agency under
Federal Supply Schedules, which are available for use by all federal agencies.
Agencies having unusual volume requirements for items appearing on those
Federal Supply Schedules are required by the Federal Property Management
Regulations and instructions in the Federal Supply Schedules to identify those
volume requirements to the VA. The Veterans Administration is the assigned
procurement agency under the Federal Property and Administrative Services
Act for procurement and distribution of drugs, biologicals, chemicals and reagents
required by all Federal civilian agencies.
11. The therapeutic category report reflects a larger total figure than the source
report because some stations included whole blood in the category report. The
whole blood source is from a VA decentralized contract with the American Bed
Cross.
Sincerely,
DoNAIn E. JoHNsoN, Admin,istrator.
Enclosures (omitted).
PAGENO="0182"
PAGENO="0183"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
(Present Status of Competition in the Pharmaceutical
Industry)
WEDNESDAY, JULY 19, 1972
tT.S. SENATE,
SUBCOMMITTEE ON MONOPOLY OF THE
SELECT COMMirPEE ON SMALL BUSINESS,
Washington, DLI.
The subcommittee met, pursuant to notice, at 10:05 a.m., in room
4221, New Senate Office Building, Senator Gaylor Nelson (chairman
of the subcommittee) presiding.
Present: Senator Nelson.
Also present: Benjamin Gordon, staff economist; and Elaine C. Dye,
clerical assistant.
Senator NELSON. The hearing of the subcommittee will open.
This is a continuation of the hearings of the Small Business Com-
mittee's Subcommittee on Monopoly on Drug Procurement Policies
of Federal Agencies.
This hearing was to have been held on June 20, but was postponed
at that time because the OEO bill was on the floor of the Senate, and I
was responsible for managing it. So, I apologize for any inconvenience
caused by having to change the date.
Our first witness is Mr. Richard Seggel, Deputy Assistant Secretary
for Health Policy Implementation.
Mr. Seggel, you are accompanied by your associates. Perhaps it
would be helpful if you identified each of them for the purposes of
the record, so the reporter will have their names, and if at any time
any of them wishes to comment on any aspect, I would hope he would
identify himself so that the reporter would have the right name.
Your statement will be printed in full in the record.
You may proceed to present it any way you desire. If you wish to
elaborate on it at any time, or ask for any comments by any of your
associates, feel free to do so.
(8685)
PAGENO="0184"
8686 COMPETITIVE PROBLEMS I~ THE DRUG INDUSTRY
STATEMENT OF RICHARD L. SEGGEL, DEPUTY ASSISTANT SECRE-
TARY FOR HEALTH POLICY IMPLEMENTATION, OFFICE OP THE
ASSISTANT SECRETARY FOR HEALTH AND SCIENTIFIC AFFAIRS,
DHEW; ACCOMPANIED BY ALBERT 1. RICHTER, ASSOCIATE COM-
MISSIONER, MEDICAL SERVICES ADMINISTRATION, SOCIAL AND
REHABILITATION SERVICE; MARION ~. FINKEL, M.D., DEPUTY
DIRECTOR, BUREAU OP DRUGS, FOOD AND DRUG ADMINISTRA-
TION; MORRIS OLDER, DEPUTY ASSISTANT BUREAU DIRECTOR,
DIVISION OF PROVIDER REIMBURSEMENT AND ACCOUNTING
POLICY, BUREAU OF HEALTH INSURANCE, SOCIAL SECURITY AD-
MINISTRATION; ALLEN L BRANDS, CHIEF PHARMACY OFFICER,
PUBLIC HEALTH SERVICE; AND JONAS ROSE, PHARMACEUTICAL
CONSULTANT, MEDICAL SERVICES ADMINISTRATION, SOCIAL
AND REHABILITATION SERVICES
Mr. SEGGEL. Thank you very much, Senator Nelson.
First of all, I would like to introduce my colleagues who represent
the agencies having primary concern with this subject in HEW.
On my left is Dr. 1~vIarion Finkel, Deputy Director of the Bureau
of Drugs, Food and Drug Administration.
And on her left is Mr. Albert J. Richter, Associate Commissioner,
Medical Services Administration, Social and Rehabilitation Service.
And on his left, Morris Older, Deputy Assistant Bureau Director,
Bureau of Provider Reimbursement and Accounting Policy, Bureau
of Health Insurance, Social Security Administration.
And, on my right is Mr. Allen J. Brands, Pharmacy Liaison Officer,
Office of the Administrator, Health Services and Mental Health
Administration.
And I ask them, as you suggested, Mr. Chairmaii, to comment as
they wish on some of the points, because they are the experts in this
area.
I am here to present the general policy position of the Department
in response to your request, Mr. Chairman. And we are most pleased
to be here to do this.
In order to effect economies in drug purchasing, it is the Depart-
ment's policy that drugs shall be purchased at the lowest possible
cost consistent with acceptable standards of identity, strength, purity,
safety, and effectiveness, with due regard for the welfare of the patient
and the professional judgment of the prescriber. Reimbursement pro-
gram policies seek similar ends.
In the course of my testimony I will describe further in detail this
general policy, relate the steps undertaken to demonstrate methods
for improving rational use of drugs, and summarize the efforts of the
Department in advancing practitioner education and information in
this area.
The first subject I would like to discuss is the drug efficacy policy.
The overriding Federal policy is to remove ineffective drugs from
the market. As you know FDA has this responsibility and has received
great assistance from the Drug Efficacy Study of the National
Academy of Sciences-National Research Council. The Drug Efficacy
PAGENO="0185"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8687
Study has led to a continuing series of actions and policy determina-
tions. The following will illustrate FDA actions imjacting on drug
usage.
First, the NAS/NRC study clearly reflected the existence of a num-
ber of irrational, fixed combination drug products. To effectuate a
more rational approach to drug usage, the FDA, after consulting
widely with professional groups, has established guidelines for such
products. A large number of widely prescribed antibiotic combinations
were removed from the market after a major legal contest through
the courts.
Incidentally, Mr. Chairman, that number I am advised is about
120 systemic antibiotic combinations, and irrational drug products
continue to be removed as the individual items are evaluated.
Senator NELSON. These weren't all different entities?
Dr. FINKEL. No, they weren't all different entities; they largely
include penicillin and streptomycin combinations.
Mr. SEGGEL. Irrational drug products continue to be removed as the
individual items are evaluated.
Senator NELSON. May I ask a further question on that?
Mr. SEGGEL. Yes, sir.
Senator NELSON. Does your department have a list of those 120
drugs?
Dr. FINKEL. Yes; it does.
Senator NELSON. And does the department know what the total an-
nual sales of those fixed combinations and anti-infectives were?
Dr. FINKEL. I think we probably don't, because for some of them
we haven't received records and reports on for quite a while.
Senator NELSON. Do you happen to know whether the Food and
Drug Administration has the amount of the total sales of those drugs?
Dr. FINKEL. I don't think so. Our figures relate to amount of drug
distributed but we can certainly attempt to extrapolate sales figures
from that information as well as obtain hard sale data on the most
popular of the drugs.
Senator NELSON. Could you submit for the record the figures you do
have on the total sale of the fixed combinations and anti-infectives.
Mr. SEGGEL. Yes, sir.
Senator NELSON. Thank you.
(The subsequent information was received and follows:)
FDA does not have accurate sales data for all the 120 systemic antibiotic com-
binations which have been removed from the market. However, for 51 of these
120 combinations, data are available which show an approximate whole value of
$17,200,000 as of the year prior to their removal from the market.
Mr. SEGGEL. The second category which I would like to mention is
labeling. The labeling of a large number of drugs is being updated to
delete indications evaluated as ineffective. A requirement became effec-
hive on May 15, 1972, which requires package inserts and advertise-
ments to reflect indications evaluated as "probably" or "possibly" ef-
fective while clinical evidence is being sought to establish whether the
rug is effective. This is to inform the prescriber of the best avail-
ble scientific evaluation of these drugs.
Three, the abbreviated New Drug Application concept has simpli-
ed the procedures for manufacturers to obtain approvals to market
ertain new drugs. This procedure is designed to establish a mecha-
PAGENO="0186"
8688 COMPETITIVE PROBLEMS ~N THE DRUG INDUSTRY
nism for marketing new drugs for which only limited data, for ex-
ample, bioavailability data are necessary to establish their safety and
effectiveness. It will at the same time have the ancillary effect of pro-
viding a means by which competitive drugs can be marketed. This may
have an advantageous effect on drug prices and will make available
to the prescriber a wider selection of generic drugs.
I wish to emphasize that when a drug is classified and listed as "in-
effective," it has been classified as "ineffective" for each indication.
Mr. GoiwoN. May I ask a question at this point?
Mr. SEGGEL. Yes.
Mr. Goiu~oN. How many of these abbreviated NDA's have been ap-
proved up to now?
Dr. FINKEL. I will have to supply the figure for the record. But
there have been over a hundred.
(The subsequent information was received and follows:)
There have been 267 abbreviated NDA's approved as of July 31, 1972.
Mr. SEGGEL. I would like to turn to policy implementation in pro-
curement and reimbursement programs.
A notice was published in the Federal Register on October 8; 1971,
stating that it is the policy of the Department that Federal funds will
not be expended for purchasing drug products classified as "ineffec-
tive" and "possibly effective" for use in its direct care programs with
two exceptions: (1) Funds may be expended to purchase "ineffective"
and "possibly effective" drug products for use in approved clinical re-
search projects, and (2) Federal funds may be expended to purchase a
"possibly effective" drug product when no alternative means of therapy
with drug products in the "probably effective" or "effective" classifi-
cation are available.
Senator NEL~SON. Where would the ineffective drugs be purchased
since they are supposed to have been removed from the market?
Mr. SEGGEL. That would be true of some. While they are in a transi-
tion status, presumably they would still be available.
Mr. Brands may wish to comment on it.
Mr. BRANDS. That is true. Before the final order is published in the
Federal Register there is usually a 30-day period before the final order
is published. During that time ineffective drugs would not be pur-
chased unless it was for an approved research project to obtain addi-
tional evidence of effectiveness.
Mr. Gol~noN. Are you saying also that there are right now many in-
effective drugs on the market?
Mr. BRANDS. No.
Dr. FINKEL. There are only about 60 prescription ineffective drugs
that are still on the market. Of those, most of them are in the final
stages before they will be removed. Some of them have been reformu-
lated to remove an ineffective ingredient, and are going to be repub-
lished as possibly effective. Some are undergoing litigation.
Mr. GoRuoN. Is the public aware that they may be using ineffective
drugs?
Dr. FINKEL. Yes. As of May 15 the firms were required to put a box
on the package insert which gives the NAS/NRC ratings, and those
which are ineffective must say that they have been considered ineffec-
tive by the NAS/NRC and the FDA.
PAGENO="0187"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8689
Senator NELSON. And these are not anti-infectives?
Dr. FINKEL. There are about 14 anti-infective combinations that
are in their final stages to be removed from the market. But the rest
are not anti-infectives.
Mr. BRANDS. Mr. Chairman, let me try to clarify this. Drugs that
have been removed from the market, and Dr. Finkel can correct me,
could be considered investigational drugs, and a company could re-
institute their investigation of them.
Mr. GORDON. But they would have to get an IND, an Investigational
New Drug exemption?
Mr. BRANDS. Yes, sir.
Dr. FINKEL. If I might amplify my previous remarks. There are,
in addition to the 60, a number of drugs whose ratings have not yet
been published, and we have reason to think that some of those will
be considered ineffective. They are under re-review by the National
Academy of Sciences. But of the ones that have been published, there
are 60 remaining.
Mr. GoRDON. How many are unpublished yet?
Dr. FINKEL. Not too many. There might be a hundred or a little
over, something like that. That is out of the 4,000 drugs.
Mr. GORDoN. If they are ineff~ctive, why are they being re-reviewed?
Dr. FINKEL. Well, these were drugs-we don't know that they were
all ineffective, but this was a batch of drugs that was called "effec-
tive, but" by the National Academy of Sciences. They usually were
combinations. And they were sent back to the Academy. They then
called many of them ineffective, but they requested to see them once
more to be sure that they really meant that they were ineffeótive. And
they should be on their way back to us very shortly.
Mr. SEGGEL. With respect to our direct care program, this policy
that has just been mentioned is implemented through the hospital or
clinic pharmacy, through therapeutics committees, and through re-
views of formularies and the addition of drugs to formularies by head-
quarters staff. The contract outpatient prescriptions are reviewed for
compliance.
Lists of drugs classified as to effectiveness published by the Food
md Drug Administration are sent to each direct care facility and to
~ach grantee. In addition, these lists are sent to the deans of each mcdi-
cal school and pharmacy school, the medical and pharmacy associa-
~ions, State health departments, and State welfare deprtments. There
Ls also a mailing list of individuals and State and other health pro-
~rams that have requested lists of the drug classification. In all, about
~,000 lists are mailed.
The Department issues advance notices to the direct care programs
Lnd the officials in other Federal agencies of drugs that have been
~lassified as "ineffective" or "possibly effective" prior to publication
.n the Federal Register.
The Social Security Administration published in the Federal Regis-
er on October 16, 1971, a notice of Proposed Rule Making wherein
rugs classified by the Food and Drug Administration as "ineffective"
r "possibly effective" were defined as not medically "reasonable and
ecessary" and hence not eligible for reimbursement under the pro-
ram. This proposal would provide an exception that a "possibly effec-
ye" drug may be reimbursed if there is no alternative means of
PAGENO="0188"
8690 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
therapy. Extensive comments are currently being reviewed. In sim-
ilar fashion, the Social and Rehabilitation Service has under develop-
ment proposed regulations prohibiting the use of grant funds under
the medicaid and vocational rehabilitation programs for the pay-
ment of drugs classified as "ineffective" or "possible effective." A latent
problem is assuring effective administration of this policy on a pa-
tient-by-patient and claim-by-claim basis.
The Social Security Administration instructed its intermediaries
in April 1970 to assure reasonableness of drug cost reimbursements by
a comparison of prices paid by each provider with prices at which the
drugs are available in the provider's areas for a random sampling of
charges.
Title XIX of the Social Security Act states that the State plan for
medical assistance must assure that payments for drugs are not in
excess of reasonable charges consistent with efficiency, economy, and
quality of care. Some 20 States have developed formularies which list
eligible drugs and the maximum amounts that will be paid for such
drugs. The regulations on reasonable charges for drugs require a State
plan under title XIX to include a description of the reasonable charge
policy and the methods to be used in the State's medical assistance
plan. They require the State agency to take whatever measures are
necessary to assure the appropriate audits of records. In addition to
the State audits, Department audit teams and General Accounting
Office audit teams have reviewed State programs to determine the
reasonableness of reimbursements.
Senator NELSON. When were these formularies developed? Do you
know during what period of time these formularies were developed by
the 20 States?
Mr. RICHTER. Since the beginning, perhaps in January 1966. I don't
know when most of them were put into effect.
Senator NELSON. Does the Department have copies of the formu-
lanes that these States have designed?
Mr. RICHTER. I believe we can get them, I think we have some of
them in our files.
Senator NELSON. Has the Department made any evaluation of the
quality of these formularies?
Mr. RICHTER. May I ask our drug man to comment on that.
Mr. Rose, did you hear the question the Senator asked?
Mr. ROSE. What is the question, please.
Senator NELSON. My question was: Has the Department made any
evaluation of the quality of the formularies that have been developed
by the 20 States that have adopted formularies since 1966?
Mr. RosE. The States have various methods of assuring quality for
the drugs under formularies. One State in particular has requested all
the manufacturers to submit an application before the drugs can be
included in their formulary. That State is Pennsylvania. They have~
to submit their compliance with the FDA's manufacturing procedures
et cetera. Since drugs is an optional service, formularies and generi
drugs are also optional, but where either is employed, they must b
under the supervision of professional personnel, in assuring the qual-
ity and safety of drugs.
At the Federal level, of course, it is the responsibility of the FD
to assure that drugs are safe and effective; and each State has its ow
PAGENO="0189"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8691
responsibility for seeing that the drugs included in formularies are
effective and safe.
Senator NELSON. As you know, there are all kinds of ways to design
a formulary. My question was: Has the Department made any evalua-
tion of the quality of the formularies adopted by the 20 various States?
Anything can be called a formulary. You can put all the drugs on the
marketplace on there if you wanted to, I suppose.
Mr. ROSE. That is true. Formularies serve the purposes of different
States. Some were limited to only the items that were paid for and
determined by the formulary committee. And other States in effect
listed all drugs available, and they just had code numbers and unit
prices which expedited the handling, not necessarily the assurance
that the drugs are of the required quality.
Senator NELSON. Thank you.
I suppose I could ask this question at just about any point. On
December 11, 1970, 11/2 years ago, the Surgeon General, Jesse Stein-
feld, issued a memorandum to all components of the Department of
Health, Education, and Welfare that: "It is the policy of the Depart-
ment that Federal funds will not be expended for purchasing drug
products classified `ineffective,' or `possibly effective' by the Food and
Drug Administration for use in its direct care programs, its contract
care programs under the direct care progams, its Federal grant pro-
grams, and the medicare and medicaid programs for inpatients and
outpatients with two exceptions."
In addition, on the same day the Surgeon General directed HEW
agencies to establish the necessary procedures within 45 days to imple-
ment departmental policy prohibiting the use of Federal funds for the
purchase of drug products classified as "ineffective" and "possibly
effective" by the Food and Drug Administration.
On January 1971 the Medical Services Administration notified all
Associate Regional Commissioners for Medical Services of the De-
partmental policy relating to purchases of "ineffective" and "possibly
effective" drugs. The Medical Services Administration stated that the
program regulations were being amended to implement this policy for
medicaid.
On May 10, 1972, almost 11/2 years later, the Comptroller General of
the United States reported that regulations have not been issued to
implement the revised Federal drug policy for medicaid.
I will ask that the memorandum from Jesse Steinfeld dated De-
cember 11, 1970, be printed at this point in the record, and that a letter
from the General Accounting Office signed by Mr. John D. Heller,
Associate Director, written to Mr. John D. Twiname, Administrator,
Social and Rehabilitation Service, Department of Health, Education,
and Welfare be printed in full at this point in the record.
(The information referred to follows:)
PAGENO="0190"
8692 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
[Memorandum]
DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE,
PUBLIC HEALTH SERVICE,
Washington, DXL, December 11, 1970.
Subject: Drug Products Declared as "Ineffective" and "Possibly Effective" by
the Food and Drug Administration.
To: All Department Agencies.
1. The National Academy of Sciences/National Research Counqil, after a
review of the clinical data of drug products approved by the FDA between
1938 and 1962, has classified some drug products "ineffective" and some, "pos-
sibly effective". Notices concerning these drugs are published in the Federal
Register by the FDA after a review and concurrence with the NAS/NRC
findings. -
The criteria for classifying the drug products and the definitions of the
four categories of effectiveness are in paragraph three below.
2. It is the policy of the Department that Federal funds will not be ex-
pended for purchasing drug products classified "ineffective", or "possibly effêc-
tive" by the Food and Drug Administration for use in its direct care programs,
its contract care programs under the direct care programs, its Federal grant
programs and the Medicare and Medicaid programs for inpatients and out-
patients with the following two exceptions:
a. Federal funds may be expended to purchase "ineffective" and "pos-
sibly effective" drug products for use in the pursuit of approved clinical
research projects.
b. Federal funds may be expended to purchase a "possibly effective" drug
product when no alternate means of therapy with drug products in the
"probably effective" or "effective" classification is available.
3. In arriving at its decision in determining the effectiveness of a drug prod-
uct the judgements of the NAS/NRC Panel were based on the following
criteria:
a. Factual information that is freely available in the scientific literature.
b. Factual information that is available from the FDA, from the manu-
facturer or other sources, or
c. On the experience and informed judgement of the members of the
Panels.
Definitions of the four categories of effectiveness are as follows:
a. Category A-Effective. For the presented indication, the drug is
effective on the basis of the criteria stated above.
b. Category B-Probably Effective. For the indication presented, effec-
tiveness of the drug is pi~obable on the basis of the criteria stated above,
but additional evidence is required before it can be assigned to Category A.
The recommendation to the FDA could be for further research or for mod-
ification of claims or both.
PAGENO="0191"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8693
c. Category C-Possibly Effective. In relation to the indication in question,
there is little evidence of effectiveness under any of the criteria stated above.
The possibility that additional supporting evidence might be developed should
not be ruled out, however. The recommendations to the FDA could be that
unless it is informed that studies are being initiated promptly with the
object of developing substantial evidence of effectiveness, the indication
in question should be considered inappropriate.
d. Category D-Ineffectjve. In relation to the indication in question, the
Panel concludes that there is no acceptable evidence under any of the
criteria sta.ted. above to support a claim of effectiveness. If there is clear
evidence of ineffectiveness, the Panel should cite it. The recommendations
to the FDA could be that no useful purpose is served by continuing to
make this product available for the indication in question, and the imme-
diate administrative action would appear to be justified. The number of
completely worthless drugs is probably not large, and these are probably
concentrated primarily among certain drug groups. The major use of this
category, therefore, would probably be in relation to ancillary indications
claimed for a larger number of basically useful drugs.
The indications referred to in these definitions corresponds with the reference)
that is made in the law to "the effect the drug purports or is represented
to have under the conditions of use prescribed, recommended or suggested in
the proposed labeling". This is to say that the indications are the claims that
are cited in the labeling of a given drug.
4. The drug products listed as "ineffective" have been classified as "ineffec-
tive" for all indications. The drug products listed as "possibly effective" have
been classified as either "ineffective" or "possibly effective" for each indication.
5. Lists of the drug products that have been declared "ineffective" and "p05-
sibly effective" are attached.
6. This policy is to be effective immediately for the direct purchasing of
drugs by PHS hospitals and clinics.
7. Those agencies and programs that reimburse community hospitals, ex-
tended care facilities, nursing homes and community pharmacies for drugs and
health services are requested to establish the necessary procedure to imple-
ment this policy within 45 days.
8. The Office of the Pharmacy Liaison Representative, Public Health Service
has responsibility for distributing information on these drugs to the Agencies.
Each Agency will be advised by telephone of drug products classified as "in-
effective" or "possibly effective" prior to publication in the Federal Register,
and a list of such drug products will be forwarded to each Agency monthly
following publication in the Federal Register.
JESSE L. STEINFELD, M.D.
Surgeon General,
Deputy Assistant Secretary for Health and Scientific Affairs.
Enclosures.
Addressees: Commissioner, Office of Education; Administrator, Environ-
mental Health Service; Commissioner, Food and Drug Administration; Admin-
istrator, Health Services and Mental Health Administration; Director, Na-
tional Institutes of Health; Administrator, Social and Rehabilitation Service;
Commissioner, Social Security Administration.
PAGENO="0192"
8694 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
DEPART1~NT OF HEALTH, EDUCATION, AND WELFARE
FJBLIC HEALTH SERVICE
OFFICE OF PHARMaCY LIAISON REPRESENTATIVE
S600 Fishers Lane
~Rockvifle, Maryland 208S2
October 7, 1970
POSSIBLY EFFECTIVE DRUGS
The following drugs have been evaluated by the National Academy of
Sciences/National Research Council, Drug Efficacy Study Group. The
Food and Drug Administration finds that there is little evidence of
effectiveness as defined in the Federal Food, Drug and Cosmetic Act.
Accordingly on the date shown these drugs were published in the Federal
Register and so classified by FDA. The announcement is intended to
apply also to similar drug products marketed by the same or other firms.
Each drug listed has been judged as possibly effective or possibly
effective for some, and ineffective for the remaining indications claimed.
No drug on the list has been judged effective or probably effective for
any indication claimed.
NAME OF DRUG COMPANY NAME DATE
Achroinycifl Surgical Powder Lederle Laboratories 9-23-70
ACR - Allantornide Ointment National Drug Company 9-25-70
Adrenosem Salicylate Syrup S. E. Massengill Co. 1-10-70
Adrenosem Salicylate Tablets S. E. Nassengill Co. 1-10-70
Adrenosen Salicylate Solution S. E. Massengill Co. 1-10-70
Adrestat F Solution Organon, Inc. 1-10-70
Allantomide Ointment National Drug Company 9-25-70
Alulotion Sulfathiazole Wyeth Laboratories 9-25-70
Alvinine Shampoo Wampole Laboratories 10-2-69
Airnnonium Chloride 0.9% in Don Baxter 8-26-70
Distilled Water
Ainphedroxyn Hydrochloride Eli Lilly & Co. 8-8-70
This is a republication of the original list of October 7, 1970, to
include the dates published in the Federal Register and a rewording of
the opening paragraphs for clarification.
PAGENO="0193"
COMPETITIVE PROBLEMS IN THE DRuG INDUSTRY
Appetrol Tablets
Appetrol S. R.
Aureomycin Strip Dressing
Aureoznycin Dressing
Aurecxiycin Sterilized Packing
Aureomycin for Ear Sol~rtion
Aureoinycin Surgical Powder
Bacitracin Solvets
Bamadex Sequels
Banadex Tablets
Betadine Shampoo
Biphetarnine "7k" Capsules
Biphetamine "]~" Capsules
Bipbetaznine - T "20" Capsules
Brandenfels Scalp & Hair
Appilcation & Massage
Capla Tablets
Cerosal Ointment
Choline Dihydrogen Citrate
Tablets
Cremosuxidine Suspension
Cyclamycin Capsules
Cyclaznycin Oral Suspension
Darvo-Tran
Deaner Tablets . -.
Delfetamine Stedytabs
Delfeta-Sed Ste&ytabs
Wallace Pharmaceutical
Wallace Pharmaceutical
Davis & Geck Division
Lederle Laboratories
Lederle Laboratories
Lederle Laboratories
Lederle Laboratories
Eli Lilly & Co.
Lederle Laboratories
Lederle Laboratories
The Purdue Frederick Co.
Strasenburgh Laboratories
Strasenburgh Laboratories
Strasenburgh Laboratories
Carl Brandenfels
Wallace Pharmaceuticals
Kahlenberg Laboratories
Eli Lilly & Co.
Merck, Sharpe & Dohme
Wyeth Laboratories
Wyeth Laboratories
Eli Lilly & Co.
Riker Laboratories
Eastern Research Labs., Inc.
Eastern Research Labs., Inc.
8695
8-8-70
8-8-70
9-23-70
9-23-70
9-23-70
9-23-70
9-23-70
9-23-70
8-8-70
8-8-70
10-2-69
8-8-70
8-8-70
8-8-70
9-25-70
1~~l0-70
8-26-70
1-10-70
7-22-70
2-12-70
2-12-70
5-13-70
5-15-70
8-8-70
8-8-70
80-450 0 - 72 - pt.22 - 13
PAGENO="0194"
IN THE DRUG INDUSTRY
8696 COMPETITIVE PROBLEMS
Deprol Tablets Wallace Laboratories
Deso~rn Tablets
Des o~rn Gradumet
Desoxyn Elixir
Dexserpine "5" Tablets
D-O-E Tablets
Dorrnison Capsules
Drina]Ia Tablets
Du-oria Tablets
Emivan Parenteral
Enzo-Cal Topical Cream
Equagesic Tablets
Eskatrol Spansule
Fenarol Tablets
Gantrisin Ear Solution
Gravidox Parenteral
Humacort Ointment
lonamin "15" Capsules
lonamin "30" Capsules
Keralac Nail Lacquer
Lactated Potassic Saline
Injection
Lenetran Tablets
Levanil Tablets
* Lidocaine Ointnsnt (Xylocaine~.
Ointment) 2.5% Inc.
Listica Tablets Arn~ur Pharmaceutical Co.
Megirriide Abbott Laboratories
* The percent was omitted from the orignal listing.
Abbott Laboratories
Abbott Laboratories
Abbott Laboratories
Nysco Labs., Inc.
Tilden-Yates Laboratories
Schering Corp.
E. R. Squibb & Sons., Inc.
B. F. Ascher & Co.
U.S.V. Pharmaceutical Corp.
CrooI~es-Barnes Labs., Inc.
Wyeth Laboratories
Smith, Kline & French
Winthrop Laboratories
Roche Laboratories
Lederle Laboratories
Parke, Davis & Co.
Strasenburgh Laboratories
Stras enburgh Laboratories
Salem Pharmacal
Don Baxter
5-13-70
8-8-70
8-8-70
8-8-70
8-8-70
8-8-70
8-26-70
8-8-70
8-8-70
L~-l0-70
L~-l0-70
1-10-70
8-8-70
6-25-70
9-25-70
5-13-70
9-23-70
8-8-70
8-8-70
8-26-70
8-26-70
Lakeside Laboratories 6-25-70
The Upjohn Co. 6-25-70
~&etro Pharmaceutical Products 9-3-70
6-25-70
l-10-7d
PAGENO="0195"
Meonine Tablets Ives Laboratories
Meratran Tablets William S. Merrell & Co.
Methed.rine Tablets Burroughts-Wellcome & Co.
Metreton Nasal Spray Schering Corporation
Miller-t~rine Tablets Smith, Miller & Patch
Mikedimide Tablets Panray Corp.
Monichol Ives Laboratories
Moruinide Ointment The S.E. Massengill Co.
Nardil Tablets Warner-Chilcott Labs.
Neothalidine Granules Merck Co.
Neutrapen I~icker Labs.
Niamid Tablets Pfizer Laboratories
Norodin Tablets Endo Laboratories
Norflex Tablets Ricker Laboratories
Norflex Injectable Ricker Laboratories
Numorphan-Hydrochloride Rectal Endo Laboratories
Suppositories
Obetrol - 10 Obetrol Pharmaceutical
Obetrol - 20 Obetrol Pharmaceutical
Onycho-Ph3rtex Solution Wynlit Pharmaceutical
Otamylon Ear Drops Winthrop Laboratories
* Op-Hydrin Ophthalmic Suspension Broemmel Pharmaceutical
Otodyne Otic-Solution White Laboratories
Otomide Otic Solution White Laboratories
P-A-D Tablets The Upjohn Company
Parafon w/Codeine McNeil Laboratories
Parafon w/Prednisolone McNeil Laboratories
* Changed to show the correct manufacturer.
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8697
1-10-70
5-15-70
8-8-70
9-17-70
8-8-70
1-10-70
1-10-70
9-25-70
5-15-70
5-13-70
8-26-70
5-15-70
8-8-70
6-25-70
~-25-7O
8-26-70
8-8-70
8-8-70
6-23-70
9-25-70
9-17-70
9-17-70
9-25-70
1-10-70
9-11-69
9-11-69
PAGENO="0196"
8698 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
Paraflex Tablets 250 zig
Phytex Liquid
Potaba Capsules
Potaba Tablets
Potaha Envils
Prelu-Vite Capsules
Prednefrin 0.12° Ophthalmi.c
Suspension
Prednefrin Forte 1% Ophthalmic
Suspens ion
Prednefrin-S 0.2~ Ophthalmic
Solution
Propion Ophthalmic Solution
Proternol Tablets
Quiactine
Racemic I)esoxyephedrine Iiydro-
Chloride
Rela
Resion Suspension
Pobaxin Tablets 500 mg
Rohaxin Injection 100 mg/ml
Rhulitol Solution
Sanoma
Selsunef
Soboquel -
Soina
Soma Compound w/Codeine
Allergan Pharmaceutical 9-17-70
Allergan Pharmaceutical 9-17-70
Wyeth Laboratories, Inc. 9-17-70
Key Pharmaceutical, Inc.
The William S. Merrell
Co.
High Chemical Co. 8-8-70
McNeil Laboratories
Wynlit Pharmaceutical
Glenwood Labs., Inc.
Glenwood Labs., Inc.
Glenwood Labs., Inc.
Geigy Chemical Corp.
Allergan Pharmaceutical
9-11-69
6-23-70
8-28-70
8-28-70
8-28-70
8-8-70
9-17-70
8-27-70
6-25-70
Ointment
Tablets
Schering Corp.
The National Drug Co.
FL. R. Robins Co.
11. R. Robins Co.
Lederle Laboratories
Charles Pfizer ~ Co.
Abbott Laboratories
White Laboratories, Inc.
Wallace Pharmaceutical
Wallace Pharmaceutical
9-1-70
7-22-70
6-25-70
6-25-70
4-10-70
9-1-70
7 -30-70
7 -22-70
9-1-70
9-1-70
PAGENO="0197"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8699
Soma Compound
Soropon Pediatric Solution
Spartase
Sporostacin Solution
Sulfallantoin Ointment 2%
Suavitil Tablets
Sulamyd Tablets
Sulfallantoin Powder 2%
SuiFathiazide Cream 5%
Sulfathiazole Cream 5%
Sulfamylon Hydrochloride
Solution 5%
Sulfamvlon Hydrochloride
w/Streptomycin Sulfate
Sulfadiazine Ointment
Surfacaine Aerosol
Strascogesic Tablets
Sterosan Cream ~ ~)intment
Straitran Tablets
Suvren Tablets
Synalgos Capsules
Synalgos-DC Capsules
TAO Pediatric Drops
TAO Ready-Mixed-Oral
Suspens ion
TAO Cansules
Teles Suspension
Tenuate Dospan Tablets
Wallace Pharmaceutical
Wallace Pharmaceutical
Wyeth Laboratories
Ortho Pharmaceutical
S. F. I)urst F1 Co.
Merck, Sharpe ~ Dohme
Schering Corp.
Merck, Sharpe ~ Dohme
Abbott Laboratories
S. F. Thirst ~ Co.
Winthrop Laboratories
9-1-70
9-25 -70
1-10-70
8 -26-70
9-25 -70
6-25 -70
7-9-70
9-25 -70
9-25 -70
9-25-70
9-25 -70
Winthrop Laboratories 9-25-70
Eli Lilly F~ Co.
Eli Lilly ~ Co.
Strasenhurgh Labs.
(~eigy Chemical Corp.
Merck, Sharpe F1 Dohme
Ayerest Labs.
Ives Laboratories
Ives Laboratories
J. B. Roerig F1 Co.
J. B. Roerig F1 Co.
J. B . Roerig ~ Co.
Torch Laboratories
The William Merrell
9-25-70
7-2-70
1-10-70
8 -26-70
6-25-70
9-1-70
1-10-70
1-10-70
2-12-70
2-12-70
2-12-70
7 -30-70
F1 Co.8-8-70
PAGENO="0198"
8700 COMPETITIVE PROBLEMS IN TUE DRUG INDUSTRY
Thora-Dex Tablets
Tolserol Tablets
Tolserol Elixi±
Tolserol Injection
Tolseram Tablets
Tolseram Suspension
Tranco-gesic Tablets
Trancopol Caplets
Trancoprin Tablets
Trepidone Tablets
Triburon Cream
Triburon Ointment
Ultran
Zactane Tablets
Zirnox Topical Lotion
Zactirin Tablets
Smith, Kline F~ French
B. T~, Squibb ~ Sons,
B. R. Squibb ~ Sons,
B. R. Squibb ~ Sons,
E. R. Squibb ~ Sons,
B. R. Squibb ~ Sons,
Winthrop Laboratories
Winthrop Laboratories
Winthrop Laboratories
Lederle Laboratories
Roche Laboratories
Roche Laboratories
Eli Lilly ~ Co.
Wyeth Laboratories
Bristol Laboratories
Wyeth Laboratories
5-13-70
Inc.6-25-70
Inc.6-25-70
Inc.6-25-70
Inc.6-25-70
Inc.6-25-70
6-25-70
6-25-70
6-25-70
6-25-70
8-26-70
8-26-70
5-13-70
1-10-70
4-10-70
1-10-70
PAGENO="0199"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8701
Food an& Drug Administration
Bureau of Drugs
5600 Fishers Lane
Rockville, Maryland 20852 November I, 1970
This list represents those drug products which the Food and Drug Administration has
decided, after evaluations by the National Academy of Sciences-National Research
Council Drug Efficacy Study Group, lack substantial evidence of effectiveness*, or
that an unfavorable benefit to risk ratio exists. Accordingly, on the dates shown,
FDA published in the Federal Register announcements of intention to initiate pro-
ceedings to withdraw approval of the new drug applications or to repeal the anti-
biotic regulations. These announcements are intended to apply also to similar drug
products marketed by the same or other firms.
Some of the products have been removed from the market; others are the subjects of
actions contesting our findings. In other cases the appliannts are submitting data
in an attempt to establish efficacy, or making changes to render the product accbptable.
NAME OF DRUG COMPANY DATE
Achrocidin Compound Syrup Lederle Laboratories 9112/69
Achrocidin Compound Tablets Lederle Laboratories 9/12/69
Achromycin Pharyngets Lederle Laboratories 9/19/70
Achromycin SV Capsules Lederle Laboratories `4/2169
Achromycin Troches Lederle Laboratories 9/19/70
Achromycin with Phenylephrine .
~UC1 and SC . Lederle Laboratories 12/24/68
Achrostatin V Capsules Lederle Laboratories 4/2/69
Acbrostatin V for Oral Suspension Lederle Laboratories 412769
Aclor Capsules Cole Pharmacal Co , Inc 9/12/69
Acticort Wilson Laboratories 9/25/70
A~alamid~ Nos~ Drops~ T7T Broexmnel Ph~rmaceuticàls ** 11/6/68.
Actilamlde Oral Gargle Broemmel Pharmaceuticals 11/6/68
Actilamide Throat Spray Broeinmel Pharmaceuticals 11/6/68
Actol Solution The S.E. Massengill Co. 5/16/70
*As ned in the Federal Food, Drug and Cosmetic Act
PAGENO="0200"
8702 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
NAME OF DRUG
Adrestat
Aerodrin Nasal Solution & Spray
Albarnycin G.U.~ Tablets
Albaxnycin-T Capsules
Albamycin-T Flavored Granules
for Suspension
Alertonic
Alevaire (Tyloxapol Q.125 percent)
Allergosil (Ethylene Disulphonate)
Solution for Injection -
Axnrn-I-Dent Toothpaste
Ansi-I-Dent Tooth Powder
Aninozyl
The Upjohn Company
The Wm. S. Merrell Co.
Winthrop Products, Inc.
Spicer-Gerhart Co.
Block Drug Co.
Block Drug Co.
High Chemical Co.
do~fPANY
Organon, Inc.
Burroughs Wellcome & Co.
The Upjohn Company
The Upjohn Company
DATE
7/10/68
8/21/70
12/24/68
12/24/68
12/24/68
9/12/ 69
7/17/68
9/12/69
7/21/70
7/21/70
11/22/68
Am Plus Improved Capsules J. B. Roerig & Co. 9/12/69
Amril Tablets . V V -Amfre-Grant Inc. 9/27169
Analexin 400 Capsules . Mallinckrodt Chemical Works 11/21/69
Analexin Syrup J~~~Mai1inckrodt Chemical Works 11/21/69
Analexin. Tabl~ts ... . . Mallinckrodt Chemical Works 11/21/69
Ana1exiri-~ Tablets. Mallinckrodt Chemical Works ll/2]j69
Anérgex (Poison Oak Ext~ràét - . . * ~.
for lnjecUon) ~ V * Le~on :Pha~aca1 Co. . 9/5168
Antivert Tablets ~has. Vpfi~ &Co~, Inc~ 3/27/70 V
`Antizyme Toothpaste Lambert Pharnacal Co. 7/21/70
V.Artamide_HC Capsules . Wampole Laboratories 3128/70
Aristogesic Steriod - Analgesic V
C~sipound Cap. Lederle Laboratories 3/28/70
PAGENO="0201"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8703
3/27/70
9/19/70
4/2/69
9/19/70
4/2/69
4/2/69
7/2/70
8/4/70
4/2/69
4/2/69
4/2/69
9/12/69
Warner-Chilcott Laboratories 8/21/70
Warne~r-Chilcott Laboratories 8/21/70
* ~The Upjohn Company **. 4/2/69
Th& Upjdhn company * ~. 4/2/69.
Smith, Miller, & Patch, inc.. 8/25/70.
* Abbott Labor~atoxies;. .~. *3Il1/68
Ciba Pharmaceutical Co. * 3/28/70
Colgate-Palmolive Co. 7/21/70
Dorsey Laboratories 3/28/70
COMPANY
Lederle Laboratories
DATE.
8/29/ 70
Cole Pharmacal Co., Inc.
Lederle Laboratories
Lederle Laboratories
Lederle Laboratories
Bristol Laboratories
Bristol Laboratories
Walker Laboratories
The Purdue Frederick Co.
Wyeth Laboratories, Inc.
Wyeth Laboratories, Inc.
Wyeth Laboratories, Inc.
Cole Pharmacal Co.
NAME OF DRUG
Aristomin Capsules
Atropine and Phenobarbital
Tablets
Aureomycin Pharyngets
Aureomycin Triple Sulfas Tablets
Aureomycin Troches
Azotrex Capsules
Azotrex Syrup
Bacimycin Tabs.
Betadine Mouthwash/Gargle
Bicillimycin All Purpose Injection
Bicillin-Sulfa Susp.
Bicillin-Sulfas Tablets (oral)
Bilcain Tablets
Biomydrin Antibiotic Nasal
Spray, Solution, Drops
Biomydrin-F Nasal Spray
Biosulf a 125M Tablets
Biosulfa 25014. Tablets
Bistrimate. Tabs. . .
B1t~tene (Toloniuni. Chloride)
Bradosol Jzenges *
Brisk. Activated Toothpaste
Pabirin AC Buffered Tablets
PAGENO="0202"
8704 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
NAME OF DRUG _______
Cepacol Mouthwash/Gargle
Cepacol Throat Lozenges
Cer-O-Strep-One
Cer-O-Strep-One-Half
Chlortetracylline Hydrochloride
Dental Cones
COMPANY
Wm. S. Merrell Co.
Win. S. Merrell Company
The Upjohn Company
The Upjohn Company
DATE
8/4/70
9/12/69
4/2/69
4/2/69
Lederle Laboratories 9/16/69
9116/69
6/25/70
6/25/70
6/25/70
6/25/70
6/25/70
Chlortetracycline Hydrochloride
Dental Paste Lederle Laboratories
Chymar Aqueous Injection Armour Pharmaceutical Co.
Chymar Injection in Oil - Armour Pharmaceutical Co.
Chymar-L Powder - Armour Pharmaceutical Co.
Chymotrypsin Injection Chicago Pharmacal Div.
Chymotrypsin Injection Wilson Laboratories
Coco-Sulfonamides Triplex
Suspension Eli Lilly & Company
Colgate Chlorophyll Toothpaste
w/Gardol - Colgate-Palmolive Co.
Colgate Dental Cream ---~~:~
w/Gardol . . Colgate-Palmolive Co.
Canpocillin VK w/Sulf as
Filmtab Tablets * Abbott Laboratories
Cc~npoci1lin VK ~/S~xlf-ás..
Granules for Oral Suspension .. .~ Abbott Laboratories
Comycin.Capsules * : The Upjohn Company
Comycin Half-Strength Capsules The Upjohn Company
Curad Medicated Adhesive Bandage . The Kendall Company
C.V.P. w/Vitamin K. USV Pharmaceutical Corp.
* 9/11/69
7/21/70
:7/21/70
* 4/2/69
4/2/69
4/2/69
4/2/6
11/6/68
7/10/68
PAGENO="0203"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8705
NAME OF DRUG
Cyclex Tablets
Cytran Tablets
Dactil-OB
Decadron Phosphate w/Xylocaine
Injection
Decadron Phosphate w/Xylocaine
Injection, Dilute
Declostatin Capsules
Declostatin for Oral Suspension
Declostatin 300 Tablets
Delfeta-sed Plus T. Stedytabs
(S.R. Tablets)
Dexa-Pyramine Inj ection
Di-Ademil-K Tablets
Diapec Oral Suspension
COMPANY DATE
Merck Sharp & Dohme
Upjohn Conpany
Lakeside Laboratories
Merck, Sharp & Dohme * 9/23/70
Merck, Sharp &~Dohine
Lederle Laboratories
Lederle Laboratories
Lederle Laboratories
Eastern Research
Laboratories, Inc.
Vitamix Pharmaceutical Inc.
E. R. Squibb & Sons
Charles Pfizer & Co.
(International)
2/6/70
10/15/70
7/10/68
7/11/68
9/23/70
4/2/69
4/2/69
4/2/69
9/17/68
10/15/70
9/5.169
4/2/60
6/2517.0
2/6/10
2/6/70
2/~/7O
Dihydrostrep tomycin-chlorte tra- -
cycline-chloramphenicol--bacitracin...
Dental Cement . . .. ~0skar Schaefer~In~.
Dihydrostreptomycin with
~tréptomycin Sulfate Powder * ~erck & Co, Inc.
Dihydrostreptomycin Sulfate
Powder (1 gin/vial) * Chas. Pfizer & Co., Inc.
DihydrostreptQmycin Sulfate . . ..
Powder (1 gin. & 5gm/vial) Pure Laboratories, Inc.
Dihydrostreptomycin Sulfate
Powder (5 gm/vial) E. R. Squibb & Sons, inc. 2/6/70
Dihydrostreptomycin Sulfate
Powder (1 gm/vial).
E. R. Squibb & Sons, Inc. 2/6/70
PAGENO="0204"
8706 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
NAME OF PRODUCT _______
Dihydrostreptomycin with
Streptomycin Sulfate Powder
Dihydrbstreptomycin Sulfate
Powder & Solution
Dihydrostreptomycin Sulfate
Powder & Solution (500 mg./cc.)
Dihydrostreptomycin Sulfate
Solution (0.5 gm/cc)
Donnagel w/Neonycin Liquid
Drilitol Solution & Drilitol
Spraypak
Duo C.V.P. w/Vitamin K
Duograf in Inj ection
Durycin A.S. (Aqueous Suspension)
Durycin F.A. for Aqueous Injection
Emivan Tablets
Equalysen Tablets
COMPANY
E. R. Squibb & Sons, Inc.
Merck & Co., Inc.
Philadelphia Labs., Inc.
Pure Laboratories, Inc.
A. H. Robins Co.
Smith, Kline & French Labs.
U.S. Vitamin *Corp.
E. R. Squibb & Sons, Inc.
Eli Lilly & Co.
Eli Lilly & Co.
U.S. Vitamin Pharmaceuticals
Wyeth Laboratories
DATE
2/6/70
2/6/70
2/6/70
2/6/70
7/2/70
8/21/70
7/10/68
2/6/70
4/2/69
4/2/69
4/10/70
10/15/70
9/27/69
~/~27/69
9/27/69
Erythrocin Sterate Sulfas
Film Tabs Abbott Laboratories
Erythrocin Ethyl Succinate . .
Suif as Chewable Tablets * Abbot~ Labo.ra~ories
Erythrocin Ethyl Succinate
Sulf as Granules . -. *~ Abbott. LaboratOries
Erythromycin Sulfate-polymyxin .
`B Sulfate-pramoxine-Hydrochloride.
Otic Solution * * . * . .. Abboto~ies
Erythrosulf a Tablets The Upjohn Company
Eskay's Theranates - Smith, Kline & French
9726/69
4/2/69
9/25/70
PAGENO="0205"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8707
Germicidal Detergent, Liquid
Geroniazol Injection
Gluco-Fedrin w/Sulfathiazole
Suspension (Nasal) Parke, Davis & Company 9/9/69
Guanidine Hydrochloride Tablets Rose-Hoyt Pharmaceutical 3/27/70
Hornatone T Tablets G W Carnrick Co 8/29/70
Hydrodiuril-Ka Tablets Merck Sharp &DoFime * 9/5/69.
Hydro~res-Ka Tablets . Merçk.Sharp;.& Dohm~ . ~ .9/5169.
Ilosone Sulf a for 0~alSuspens~on EliLilly &~Compány 4/2/69.
Ilosône Sulfa ~fablets ElI Lilly &: Company ... 4/2/69.
Ilotycin Gluceotate Dental Cones Eli Lilly & Conpany 2/21/69
Ilotycin Ethyl Carbonate-Sulfa
Pediatric for Oral Suspension Eli Lilly & Company 4/2/69
Ilotycin Gluceptate Otic
w/Polymyxin B & Benzocaine Eli Lilly & Company 12/18/68
NAME OF DRUG
Esidrix-K Tablets
Estrosed Tablets
Fianithin Capsules
(giutamic acid hydrochloride)
Flavocillin-CS Powder
Flavoserp Tablets
Frenquel I.V. Injection
Frenquel Tablets 20 mg.
Frenquel Tablets 100 mg.
Gantricillin Tablets, 100,
200, 300
Gantrisin Nasal Solution
COMPANY
Ciba Pharmaceutical Co.
Conal Pharmaceuticals, Inc.
Table Rock Labs., Inc.
Philadelphia Laboratories
The Blue Line Chemical Co.
The Wm. S. Nerrell Co.
The Wm. S. Merrell Co.
The Wa. S. Merrell Co.
DATE
9/5/69
2/6/70'
9/12/69
4/2/69
7/10/68
4/2/69
4/2/69
4/2/69
Hoffman-La Roche, Inc. 4/2/69
Roche Laboratories 919/69
Parke, Davis & Company 9/12/69
Philips Roxane Laboratories 8/26/69
PAGENO="0206"
8708 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
NAME OF DRUG
Ilotycin Sulfa (79) Tablets
Intromycin Powder
Isodine Gargle & Mouthwash
Kaomycin Suspension
Kasdenol Mouthwash & Gargle
K-Cillin Sulfa Powder for Syrup
Kectil Suspension
Koagamin Parenteral Hemostat
Kolynos Fluoride Toothpaste
Ledercillin Troches
Lutrexin Tablets
(lututrin 3,000 units)
Mannitrau Tablets
Maxitate w/Rauwolfia Compound
Tablets
Medrol w/Orthoxine Tabs.
Menacyl Tablets
COMPANY
Eli Lilly & Company
P1 tman-Moore
Isodine Pharmacal
The Upjohn Company
Kasdenol Corp.
Biocraft Laboratories, Inc.
Bristol Laboratories
Chatham Pharmaceuticals, Inc.
Whitehall Laboratories, Inc.
Lederle Laboratories
Hynson, Westcott & Dunning,
Incorporated
Richlyn Laboratories, Inc.
DATE
4/2/69
5/16/70
8/4/70
7/2/70
8/4/70
4/2/69
7/2/70
3/29/69
7/21/70
9/19/70
5/24/68
7/3/70
7/10/68
8/29/70
2/11/70
Strasenburgh Laboratories
The Upjohn Company
Lakeside Laboratories, Inc.
- Mephosal w/Hydrocbrtisone Tablets .Crpokes-~a~nes Laboratories, .
Incorporated . *3/28/70
* Mesulf in Tablets * Ayé~st Laboratories, Inc. .9/27/69
Metre~on Tabs.. *... . .*.* Sth~ring Corporation~ * 8/29/70
* Micrin Oral Antiseptic * Johnson & Johnson * .8/4/70
Milprem-200 and Milprem-400 Wallace Labpr~tories, ** 8/26/7Ô
Mulsopaque Injection Lafayette Pharmacal, ~nc. 2/11/70
Mycifradin N. Tab. The Upjohn Company 7/2/70
PAGENO="0207"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8709
NAME OF DRUG
COMPANY
DATE
Mycillin Suspension
Maurry Biological Co., Inc.
4/2/69
Nyospaz Tablets
*
North American Pharmacal,
Inc.
9/27/69
Mysteclin F Capsules
E. R. Squibb & Sons, Inc.
12/24/68
Mysteclin F 125 Capsules
E. R. Squibb & Sons, Inc.
12/24/68
Mysteclin F Pediatric Drops
E. R. Squibb & Sons, Inc.
12/24/68
Mysteclin F Syrup
E. R. Squibb & Sons, Inc.
* 12/24/68
Mysteclin V Capsules
E. R. Squibb & Sons, Inc.
4/2/69
Nasal Spray Neo-Hydeltrasol
Merck Sharp & Dohme *
8/21/70
Nasal Suspension Hydrospray
Merck Sharp & Dohme
8/21/70
Naturetin c/K Tablets
E. R. Squibb & Sons, Inc.
9/5/69
Neo-Cortef 1.5% Nasal Spray
The Upjohn Company
8/21/70
Neo-Cortef 0.5% Nasal Spray
The. Upjohn Company
8/21/70
Neo-Cortef Sterile Inj. Susp.
The Upjohn Company
8/28/70
Neocyclone Tablets
The Central Pharmacal Co.
3/28/70
Neo-Delta Cortef 0.1% Nasal
Spray T~he Upjohn Company 8/21/70
Neomycin Sulfate-Kaolin-Pectin . .
Oral Suspension E W H~un Company 7/2/7O~
Neomycin Sulfate, Kaolin
*Pectin Suspension Vitamin Pharmaceuticals Inc..7/2/70
* I~eoparbe1 Tablets * C~nttal Pharmacal Co~ ** * .10/2.4/70
Neopenzine Suspension **~ Eli Lilly& COmpany 4/2/69
Neopenzine (150) Tablets Eli Lilly & Company 4/2/69
Neopenzine (300) Tablets Eli Lilly & Company 4/2/69
Neo-Semhyten Capsules The S.E. Massengill Co. 7/10/68
Neo-Synephrine-Sulfathiazolate
Nose Drops Winthrop Laboratories 7/9/68
PAGENO="0208"
8710 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
NAME OF DRUG :
Neuro-Centrine Tab
Bristol Laboratories
DATE
9/27/69
Nicozol w/Reserpine Tablets
Nysco Laboratories *
8/26/69
Nisulfazone Suspension
Breon Laboratories, Inc.
8/28/70
Novahistine w/Penicillin Capsules
Pitman-Moore
9/12/69
Onixol Solution (topical)
Scholl Manufacturing Co.
Inc.6/7/69
Orabiotic Chewing Gum Troches
White Laboratories, Inc.
9/19/70
Pabalate-HC Tablets
A. H. Robins Co., Inc.
3/28/70
Pabicortal Tablets -
Nysco Laboratories
- 3/28/70
Pabirin AC Tablets
Dorsey Laboratories
3/28/70
Pacatal Injection 25 mg/cc
Warner-Chilcott Labs.
5/28/70
Pacatal 25, 50,100 mg. Tabs.
Warner-Chilcott Labs.
11/29/69
Panalba Capsules -
The Upjohn Company
12/24/68
Panalba Half-Strength Capsules
The Upjohn Company
12/24/68
Panalba KM Drops
The. Upjohn Company
12/24/68
Panalba KM Granules
Paredrine-Sulfáthiazole Susp.
The Upjohn Company 12/24/68
Smith, Kline & French Labs. 9/9/69
Parenzyipe Aqueous for Injection. N~tional Drt~ Co~p~ny 6/25/70
Parenzyme Ointment Nat~ona1 Drug Company Ed25/70
Piptal w/Phenobarbital. . . . -
Pediatric Drops - : Lakeside LabbratQries 9/27/6~
Fell Bibtic 250 Tablets * Richlyn Laboratorie~ 4/2/69.
Penicillin-dihydrostreptonycin- . *
bacitracin Dental Paste Biotic Drug Co., Inc. 6/25/70
Penicillin-dihydrostreptomycin
Dental Cones Strong Cobb Arner, Inc. 6/25/70
PAGENO="0209"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8711
NAME OF DRUG COMPANY DATE
Penicillin G Potassium
w/Three Sulf as Buffered
Powder for Syrup Nysco Laboratories 4/2/69
Penicillin G w/Triple
Sulfonamides, Flavored . Vitamix Pharmaceuticals,Inc. 4/2/69
Penicillin Streptomycin
Readimixed Sterile Aqueous
Suspension Upjohn Co. 4/2/69
Penicillin-Streptomycin
Bacitracin Dental Paste Procol-Sol Chemical Co. 6/25/70
Penicillin w/Sulfonamides
Powder for Solution Biocraft Laboratories, Inc. 4/2/69
Penicillin Three Sulfonamide
Tablets "100" Nysco Laboratories, Inc. 4/2/69
Penicillin Three Sulfonamide
Tablets "300" Nysco Laboratorienc. 4/2/69
Penicillin w/Triple Sulfas Tabs. Biocraft Laboratories, Inc. 4/2/69
Penicillin w/Triple Sulf as
No. 1, No. 2 and No. 3 Tablets Ric.hlyn Laboratories, Inc. 4/2/69
Penicillin w/Triple Sulfas Tabs. Supreme Pharmaceutical Co. 4/2/69
Penicillin C w/Triple .. -
*~Sulfas Tabs. . .* Vitaiutx Phármaceuticals,Inc. 4/2/69
Penicillin. w/T.riple Sulfqna~nides .. ~. ... . ~.: . . .
:(100,PO0 ur~its~ Tablets Zenith Laboratorfeè, Inc. 4/2/69
Penicillin w/Trip]~e. Sulfonamides . . ~. . . -
(200,000 unjts) TabLe.ts . * Zenith LaboratEories,~ Inc. 4/2/69~
Penicillin w/Triple Sulfonamides . .
(250,000 units) Tablets Zenith Laboratories, Inc. 4/2/69
Penicillin w/Triple Sulfonamides
(300,000 units) Tablets Zenith Laboratories, Inc. 4/2/69
Pen Strep Powder for Injection
(4:1; 4:1/2) Merck & Company, Inc. 4/2/69
Pentid Sulfas for Syrup E. R. Squibb & Sons 4/2/69
80-450 0 - 72 - pt.22 - 14
PAGENO="0210"
8712 COMPETITIvE PROBLEMS IN THE DRUG INDUSTRY
Polanil Tabs
.Polycycline SuspensIon
vtTriple Sulfonamides
Polymagma Oral Sus~ension
*Polymagma Tablets *
Potassium Penitillin C.
v/Triple Sulfonamides Tablets
Powdalator ES
Prednaman Tabs
Presniscord Tablets
- Schering Corporation 8/29/70
.B~js.to1 Laboratories, Infl. 4/2/~9.
Wyeth Laboratories, Inc. * 7/2/70
Wyeth LaboratorieS~ Inc. 7/2/70
Philadelphia Laboratories,
Incorporated * 4/2i~9..
Abbott Laboratories 12/9/69
Dome Laboratories 8/29/ 70
Nysco Laboratories, Inc. 3/28/70
NAME OF DRUG
Pentid Sulfas 400 for Syrup
E. R. Squibb & Sons
4/2/69
Pentids-Sulfas Tablets
E. R. Squibb & Sons
4/2/69
Pentocin
Pure Laboratories, Inc.
4/2/69
~Pèn-Vee Cidin Capsules
Wyeth Laboratories, Inc.
9/12/69
Pen-Vee Sulfas Suspension
Wyeth Laboratories, Inc.
4/2/69
Pen-Vee Sulfas Tablets
Wyeth Laboratories, Inc.
4/2/69
Pepsodent Antiseptic Mouthwash
Lever Brothers
8/4/70
Perithiazide SA Tab1et~s
Warner-Chilcott Laboratories
8/29/70
Pharycidin Concentrate
Purdue Frederick
10/7/70
Pheinerol Solution
(benzethoniua chlordie) 1:750
Parke, Davis & Company
9/12/69
Phemerol Tincture
(benzethonium chlorIde) 1:500 -
Parke, Davis & Company
9/12/69
Phemerol Topical
Parke, Davis & Company
9/12/69
Plimasin Tablets
Ciab Pharmaceutical.
10/15/70
PHB-200 & PMB-400 Tabs
Ayerst Laboratories
8/26/70
PAGENO="0211"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8713
NAME OF DRUG
Pree MT Tablets
Procaine Penicillin in
Streptornycin Sulfate Solution
Protamide Injection
Quercetin Tablets
Quintess-N Suspension
Raurnannite-50 Tablets
Rautrax Improved Tablets
Rautrax N Modified Tablets
Rautrax N Tablets
Rautrax Tablets
Rauwiloid and Hexamethonjum
Tablets
Rauwolfia Serpentina-Mannitol.
Hexanitrate-Rutin Tablets
Rauwolfja Serpentina-Mannitol
Ilexanitrate-Rut in-Veratrum
Viride Tablets
-J~enanden-25O
Robaxisal-PH Tablets
Roniacol w/Aminophylline
Tablets
COMPANY
Wallace Pharmaceuticals
Roehr Products Co., Inc.
Sherman Laboratories
Abbott Laboratories
Eli Lilly & Co
Nysco Laboratories, Inc.
E. R. Squibb & Sons, Inc.
E. R. Squibb & Sons, Inc.
E. R. Squibb & Sons, Inc.
E. R. Squibb & Sons, Inc.
DATE
2/6/70
4/2/69
7/17/70
7/10/68
7/2/70
7/10/68
9/5/69
9/5/69
9/5/69
9/51 69
Riker Laboratories 10/15/70
Best Pharmaceuticals 7/10/68
Robin Pharmaca]. Co. 7/10/68
Merck.Sharp .& Dobxne . 711/70.
Reserthoniun~ Tablets .~.Nysco Laboratoi~ies .. 10/1~/7Q~
Ret~ografin Solution E. R. Squibb & Sons, Inc. 1/14/70
1~etropaque. Sølution * Winthrop Laboratories ~/14/70
-Rhinazine (nasal solution) Le.derle Laboratories 9/9/69
Ritonic Capsules Ciba Pharmaceutical Co. 9/12/69
Robaxisal A. H. Robins Co., Inc. 2/11/70
A. H. Robins Co., Inc. 2/11/70
Roche Laboratories
9/17/70
PAGENO="0212"
8714 CoMPETITIvE PROBLEMS IN THE DRUG INDUSTRY
NAME OF DRUG COMPANY DATE
Ruhexatal w/Reserpine Leinraon Pharrnacal Co. 7/10/68
Rusyntal Central Pharisacal Co. 10/7/70
-RutIn Tablets Abbott Labu.:~ tories 7/10/68
Rutin Tablets The Maltine Company 7/10/68
Rutin Tablets Parke, Davis & Co. 1/23/68
Rutorbin Tablets . E. R. Squibb & Sons, Inc. 1/23/68
Salcort-Delta Tablets The S. E. Massengill Co. 3/28/70
Sergynol Tablets B. F. Ascher & Co., Inc. 2/6/70
Seromycin w/Isoniazid Eli Lilly & Co. 9/18/69
Signenycin Capsules "250" J. B. Roerig & Co. 4/2/69
Signaxnycin Capsules "250" Chas. Pfizer & Co. 4/2/69
Signemycin Capsules "375" J. B. Roerig & Co. 4/2/69
Signamycin Capsules "375" -- Chas. Pfizer & Co. 4/2/69
Signetnycin Pediatric Drops J~ B. Roerig & Co. .4/2/69
Signemycin Pediatric Drops Chas. Pfizer & Co. 4/2/69
Signentycin Syrup -- J B Roerig & Co 4/2/69
Signetnycin Syrup . .. .Ch~g. Pfizet&.Co.. 412169
Slltrobarb Tablet .. . Cole Pharinacal Co., Inc. . ~/27/7O
Sinaxar T~blets Armour Pharinaceu~ical Co.. ~/27/~9
Skelaxin Tablets . . .* A. H~ RoblnsCo., Inc. .216/70:.
Soinacort Wallace Pharm. . 5/7/70
Sorboquel w/Neotnycifl Tabs~ White Laboratories, Inc. 7/2/70
Spectrocin Nasal Spray E. R. Squibb & Sons, Inc. 8/21/70
PAGENO="0213"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8715
NAME OF DRUG
Spectrocin-T Troches
Stenediol Sublinqual Tabs.
Sterisol
Strep-Combiotic Aqueous
Suspension (inultidose)
Strep-Conbiotic for Aqueous
Suspension (single dose)
Strep-Combiotic Isoject
Aqueous Suspension
Strep-Dicrysticin
Strep-Dicrys tic in-800
S trep-Dicrys ticin Fortis
Strep-Dicrysticin Fortis-800
Strep-Djstrycjllin_A,S.
Sterile Suspension
Streptomagina Liquid
Streptornagna Tab.
COMPANY
E. It. Squibb & Sons, Inc.
Organon, Inc.
Warner-Lambert Pharrn. Co.
DATE
9/19/70
2/11/70
8/4/70
Chas. Pfizer 6 Co. Inc. 4/2/69
Chas. Pfizer & Co. Inc. 4/2/69
Chas.
Pfizer & Co., Inc.
4/2/69
E. R.
Squibb & Sons, Inc.
4/2/69
E. R.
Squibb & Sons, Inc.
4/2/69
E. R.
Squibb & Sons, Inc.
4/2/69
E. R.
Squibb & Sons, Inc.
4/2/69
E. R.
Squibb & Sons, Inc.
4/2/69
Wyeth
Laboratories, Inc.
712/70
Wyeth
$treptomycin_Bipenicilljn
Injection * . *l'ure.Laboratorfes, Inc. 4/2/69
Strexate Tablets Armour Pharmaceutical Co 9/27/69
Strycin Syrp ,:~** E.. R. Squibb & Sons, Inc. 7/2/70
Sulfaguan~~j~5 Tablets . . .
-(0.5 gram) -- ~ .Lederle Laboratories 6/7/69
Su]çfa_Sugracillin 125M * - : * -
Granules . The Upjohn Company 4/2/69
~ 250M ~..
Fortified Granules
Sulfathiazole Gum Tablet
Sulfathiazole Tablet (0.5 grain)
The Upjohn Company
White Laboratories, Inc.
Bowman, Mell & Co..
* 4/2/69
11/6/68
9/11/69
PAGENO="0214"
8716 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
NAME OF DRUG _______
Sulfathiazole Tablet (0.5 gram)
SulfathiazOle Tablet (0.5 gram)
SulfathiazOle w/Tuamine Sulfate
SuspensionS
Sulfedex Nasal Solution
Sulfel Tablet
Sulfonaiflets w/Topic4ine
L~zenges ..
Super Axnm-I~-Dent
Super Anapac Cough Syrup
Syndecon for Oral Solution
Syndecon Tablets
cc with Ergonovine Capsules
Tam Oral Suspension
Tam Tablets
Tao-AC Capsules
Taotnid Oral Suspension
Taonid Tablets
Tenserine Tablets
Tergemist (Inhalant)
Terramycin Dental Cones
Terratnycin Dental Paste
Terramycin S.F. Capsules
Terrastatin Capsules
Terrastatin for Oral Suspension
Vale Chemical Co. Inc.
9/11/69
Eli Lilly & ~o.
9/11/69
Eli Lilly & Co..
9/9/69
Abbott Laboratories .*
9/9/69
*
The Vale Chenical Co., Inc.
11/6/68
* * National.Prug Co.
Block Drug Co.; ThC.
9/6/68
* 7/21/70
Rexall Drug & Chemical Co.
7/10/68
Bristol Laboratories
9/12/69
Bristol Laboratories
9/12/69
William S. Nerrell Co.
10/24/70
Dorsey Laboratories
9/12/69
Dorsey Laboratories
9/12/69
J. B. Roerig & Co.
9/12/69
3. B. Roerig & Co.
9/5/69
J. B. Roerig & Co.
9/5/69
Abbott Laboratories
7/10/ 68
Abbott Laboratories
7/17/68
Chas. Pfizer & Co., Inc.
2/21/69
Chas. Pfizer & Co., Inc.
2/21/69
Chas. Pfizer & Co., Inc.
4/2/69
Chas. Pfizer & Co., Inc.
4/2/69
PAGENO="0215"
COMPETITIVE PROBLEMS IN THE DRUG INDuSTRY 8717
NAME OF DRUG _______
Tetracydin Capsules
Tetrastatin Capsules
Tetrastatin for Oral Suspension
Tetrex-AP Syrup
Tetrex APC w/Bristamin Capsules
Tetrex Syrup v/Triple Sulfonamides
Theoglycinate w/Rutin &
Phenobarbital Tablets
Thizodrin Solution, ~nasal)
Toldex Tabs.
Trexinest Tablets
Triaminic HC Tabs
Triple Hormone Suspension
Trisem-Pen Powder
Trisern-Pen Tablets
- Trisocort Spraypak :
.Trypsit~ Injection
Tyrolaris Mouthwash
Urethane Tablets `
Urobjotjc Capsules, 100, 250
V-CilljnK Sulfa Pediatric
for Oral Suspension
V-Cillin K Sulfa Tablets
V-Cijijn Sulfa Pediatric
for Oral Suspension
V-Cillin Sulfa Tablets
V-Kor
Visciodol
Wybiotic.
Wycillin SM Injection 4ôö. -.
Wycillin SM Injection .600
COMPANY
J. B. Roerig & Co.
Chas. Pfizer & Co., Inc.
Chas. Pfizer & Co., Inc.
Bristol Laboratories, Inc.
Bristol Laboratories, Inc.
Bristol Laboratories, Inc.
Brayton Pharmaceutical Co.
Eli Lilly & Co.
Pitinan-Moore
Hynsen, Westcott & Dunning
Dorsey Laboratories
Taylor Pharmaceutical Co.
The S. E. Massengill Co.
The S. E. Massengill Co.
*Sm1~h, Kline & French Labs.
Wilson Laboratories .
Merèk & Co.
EliLilly& Co. .. *
Pfizer. & Co.
Eli Lilly & Company
Eli Lilly & Company
DATE
9/12/69
4/2/69
4/2/69
9/12/69
9/12/69
4/2/69
7/10/68
9/9/69
8/29/70
5/24/68
8/29/70
8/29/70
4/2/69
4/2/69
8/21/70
6/25/70
8/4/70
8/21/70'
6/30/70
4/2/69
4/2/69
Eli Lilly & Company 4/2/69
Eli Lilly & Company
Eli Lilly & Company
E. Fougera
Wyeth Laboratories, Inc.
Wyeth' Laboratories1 ln~.
Wyeth Labora~ories, Inc.
4/2/69
9/12/69
2/11/70
.9/19/70
4/2/~9.
PAGENO="0216"
8718 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
\
UNTZD STATFSS G::~A3 0003NTO(O 073C3
S / \VASrHNGTON, ~.C. 203~C
May 9, 1972
Dear Mr. Twiname:
At the request of the Chairman, Subcommittee on Long-Te:a Caa,
der.~e Special Committee on Aging, we obtained information 0;
scribed drugs provided to recipients of old-age assietance in nurs-
ing homes, under the Medicaid program in Illinois, New Jersey, ,nd
Ohio. In response, we issued a report to the Chairrtan on in~:ina-
tioa obtained on the Medicaid drug program in Illinois (3-164031(3),
dated September 10, 1971) and a consolidated report on all thrae
Sta~ss entitled "Drugs provided to elderly persons in nursir~ ;omes
under the Medicaid program" (3-164031(3), dated January 5, 1972).
Three reports have been made public by the Chairman and copies Dave
near; furnished to officials of the Social and Rehabilitation Service
(SRS) and to officials of the Department of Health, Education, and
Welfare (HEW).
This letter report presents our views concerning the need for
935 to issue instructions to States which would implement the Depart-
rent's policy relating to the payment for purchases of ineffective
and possibly effective drugs under the Medicaid program.
lD'DODUCTION
On December Il, 1970, the Surgeon General directed HEW agencies
to establish the necessary procedures within 45 days to implement
departmental policy prohibiting the use of Federal funds for the
purchase of drug products classified as ineffective and possibly
effective by the Food and Drug Administration (FDA) This policy
was applicable to HEW's direct care programs, contract-care pro-
grams under its direct care programs, grant programs, and the Medi-
caid and Medicare programs.
Th January 1971, the Medical Services Administration (NSA) of
SRS notified all Associate Regional Commissioners for Medical Ser-
vices of the departmental policy relating to purchases of ineiTfoc-
aive and possibly effective drugs. NSA stated that program
regulitions were being amended to implement this policy for l.'sl~c~i(.
the Cce;aissioners were instructed to notify Medic~1d State ~g;ncis
as soon as possible of the change in Federal policy so that they in
turn could notify hospitals, nursing homes, pharmacies, physicians,
PAGENO="0217"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8719
i s Ls, and any other p rev ide rs of d rugs, and heg in maIn i og the
n'~essnrv cIinn~es in drug foreularies, drug purchasing guides and
d C in ims payee nL proce S SOS
As of Nay 1, 1972, regulations have not been issued to 1mph-
meaL the revised Federal drug policy for Medicaid.
ST J;,\YTIAL FUNDS BEING EXPENDED
UT~ Ti NADICAID FOR INEFFECTIVE
A. TOSS I ITLY EFFECTIVE DRUGS
Officials who administer the Medicaid drug programs in Illinois,
Nes Jersey, and Ohio, furnished us with computer printouts listing
purchases by drug name, number of prescriptions, and amount paid dur-
ing the first month of each quarter of calendar year 1970. We com-
pared this information to FDA's November 1970 listing!" of drugs
classified as ineffective and found the following.
--In Ohio about $196,000 was expended in January, April, July,
and October for about 38,000 prescriptions for 106 drugs
classified as ineffective.
--In Illinois and New Jersey about $99,000 was expended in July
and October for about 21,000 prescriptions for 16 drugs classi-
fied as ineffective.
Although our identification of purchases of ineffective drugs
was limited to these three Slates, similar conditions probably exist
in oLher States. For example, the Mississippi Medicaid Commission--
the single State agency administering the program--reported that in
a study of drug usage from July 1, 1970, to February 19, 1971, about
$89,000 was expended for about 22,000 prescriptions for three drugs
classified as either ineffective (two drugs) and possibly effective
(ond drug).
State officials in Illinois, New Jersey, and Ohio informed us
that they would continue to pay for such drugs until HEW notifies
then that such drugs are no longer eligible under Medicaid. These
officials further informed us that their~ States were not in a posi-
tion to determine drug efficacy and if they were to declare such
drugs not eligible for Medicaid they would be subject to strong
criticism from pharmaceutical manufacturers.
did not compare this infor~tion to FDA's October 1970 listing
of drugs classified as possibly effective; however, as discussed
anove, expenditures were made under Mississippi's Medicaid program
for the purchase of drugs classified as possibly effective.
PAGENO="0218"
8720 COMPETITIVE PROBLEMS IN THE DRuG INDUSTRY
For calendar year 1970, Illinois, New Jersey, and Ohio repoiLed
drug expenditures under their Medicaid programs of about $50 million,
of which about $25 million, or 50 percent, represented the Federal
sh~iro. These expenditures accounted for about 12 percent of Lhe
total $425 million expended nationwide for drugs under Medicaid for
calendar year 1970.
As discussed above, Ohio expended about $196,000 for ineffecLive
drugs during January, April, July, and October 1970--an average or
$49,000 a month. If these monthly expenditures for ineffective drugs
were representative of the entire calendar year, then as muc~ as
$588,000 could have been expended in Ohio for these drugs during 1970.
Considering the large amount of expenditures for Medicaid drugs during
l97O--$425 million--and the probability that other States are purchas-
ing ineffective and possibly effective drugs under their Medicaid pro-
grams, then nationwide expenditures for such drugs purchased under
Medicaid could be substantial.
RECOMMENDATION TO THE ADMINISTRATOR,
SOCIAL AND REHABILITATION SERVICE
Because of the substantial amounts expended for drugs under the
ID -~iid program--and the probability that a significant portion of
t expenditures are being made for ineffective and possibly effec-
t. drugs--we recommend that SRS issue, without further delay, regu-
lations to preclude the purchase of ineffective and possibly effective
drugs under Medicaid.
We shall appreciate receiving your comments and advice as to any
actions taken or planned with respect to our recommendation.
Sincerely yours,
John . Heller
Associate Director
Mr. John D. Twiname, Administrator
Social and Rehabilitation Service
Department of Health, Education,
and Welfare
PAGENO="0219"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRy 8721
Senator NELSON. In the letter dated May 9, 1972, Mr. Heller, the As-
sociate Director of the GAO states: "As of May 1, 1972, regulations
have not been issued to implement the revised Federal drug policy for
medicaid."
Do you have any comment to make on that?
Mr. SEGGEL. Yes, sir. As I mentioned, for medicare we have issued a
notice of rulemaking, and are evaluating comments on that notice. With
regard to medicaid, SRS has actually developed a similar notice of
rulemaking. But we have, at the Department level, been studying this
with particular reference to how we would administer it, how we would
actually get enforcement of that through the reimbursement mech-
anism.
It is a very complicated thing. We have no way, obviously, of con-
trolling what the doctor prescribes except by means of our regulatory
process of taking things off the market, or by our educational process
of informing him of the classification. And we have no way through
the fiscal mechanism of determining exactly what drugs are prescribed
to what patients. We don't know quite how we would deal with that
kind of thing, except with some kind of post audit that we might make
on a sample basis. And that would be somewhat less than effective en-
forcement, doing it by post audit.
And also we are concerned about the question of whether, if the
doctor prescribed a drug that we wouldn't pay for, the burden would
fall on the patient rather than on the Federal Government.
We are emphasizing the twin strategies, I would say, of our regu-
latory process of vigorous enforcement through regulation ami our
regulatory process of vigorous enforcement through regulation and
our education process.
In the meantime, we are trying to study ways and means by which
we could actually get some enforcement of this if we decide to go for-
ward with it.
We have comments, as I have mentioned, on the SSA proposal.
Mr. GoiwoN. Comments from whom?
Mr. SEGGEL. From manufacturers and others.
Mr. GoiwoN. They don'twant you to do this at all, do they?
Mr. SEGGEL. That is right in many cases. As I understand it, some
of them point out the inconsistency of, on the one hand, being given the
opportunity to provide further evidence on the efficacy of their prod-
ucts, yet, on the other hand, Federal funds to purchase those drugs are
turned off before that evidence is provided. I think that is one of the
main concerns. However, we are committed to this policy of trying to
~ut out the national support for these drugs. Certainly, as Dr. Finkel
as indicated, as we get them off the market. The question of reim-
ursement becomes moot in any event.
The "possibly effectives" are a little bit tougher problem. There,
ow we would audit, for example, the question of a doctor prescribing
drug which he says is the appropriate therapy for that patient I
on't know. At any rate, I want to say that we have this under study
rying to determine how we could enforce it through the reimburse-
ent machinery.
Mr. GORDON. This "possibly effective" business disturbs me. I have
ad the Food, Drug and Cosmetic Act, and I don't see any refer-
ce to "possibly effective" at all. Any drug that is on the market is
PAGENO="0220"
8722 COMPETTTIVE PROBLEMS ~N THE DRUG INDUSTRY
supposed to be effective. In fact, there is supposed to be substantial
evidence of efficacy in addition to safety. How do we get to this "pos-
sibly effective" and "probably effective" business anyhow at this
point?
Dr. FINKEL. Well, we feel, and the National Academy of Sciences
felt, that there was some evidence of efficacy, and that is why they
have used that classification of "possibly" and "probably". And we
want to give the patients the benefit of the doubt and see whether effi-
cacy can in fact be established. When those drugs came on the market
the methods for studying them were unsophisticated. And some of
them may indeed be effective. In fact, we have raised some, "possibly
effectives" to "effective." And we feel that the drug should be studied
according to present day methods before we make the final decision.
Mr. GORDON. How long are you going to study them? You gave
the "possibly effectives" 6 months. It is many years for some of them
and they are still on the market.
Dr. FINKEL. We recognize that 6 months-or even a year, for the
"probably" effectives-is insufficient to develop and perform clinical
trials and analyze them. So that we have allowed extensions for a
good number of drugs where the firms have been interested in doing
the studies. For many of the "possibly effectives" drugs-a number
of firms have simply decided that there was no commercial interest,
and have removed the drugs from the market.
Senator NELSON. Let me ask some questions just to refresh my
memory.
We have had some testimony on this in the past, and it is vague
in my mind.
The Kefauver amendment, which was passed in 1962, provided that,
in addition to safety, substantial proof of efficacy had to be presented
to maintain the drug in the marketplace. Was it, then, in 1966 when
the implementation began under Dr. Goddard?
Dr. FINKEL. Yes.
Senator NELSON. And when did the drug companies get notice that
the National Academy of Sciences was following the procedure of
classifying drugs as effective, ineffective, possibly effective, and prob-
ably effective? How long had they had notice that these classifications
were going to be used, and that they would have a certain amount of
time to produce adequately controlled studies to qualify their drug
as an effective drug to remain in the marketplace, do you recall?
Dr. FINKEL. I don't recall exactly when those, actually five, differ-
ent classifications were announced. But the first publications of the
Federal Register began to appear about 1969.
Senator NELSON. The first classifications by the NAS/NRC?
Dr. FINKEL. Right.
And it was then that it was announced in public, in print, anyway,
that the firms would be given that amount of time to perform studies.
Senator NELSON. Let me see. If the drug is described as ineffective, it
must be removed from the marketplace in what period?
Dr. FINKEL. Well, the firms are given 30 days to respond to the an
nouncement of inefficiency and produce some evidence.
Now, some of them have, and it had to be reviewed. There were
few, though, that were given some extensions of time to perform clini
cal trials while the drug remained on the market.
PAGENO="0221"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8723
Senator NELSON. Give me the time span allowed by the FDA for each
one of these classifications, I have forgotten what they were. The
ineffectives were given 30 days, as I recall.
And possibly effective is the next category.
Dr. FINKEL. Possibly effective was given 6 months, and probably
effective was given 1 year.
Senator NELSON. And what was the description of the standards they
had to meet to satisfy the requirements for adequately and scientifically
controlled studies to support the claim of efficacy? What was the lan-
guage used?
Dr. FINKEL. In May of 1970 we published a policy statement. which
defined adequately and well controlled studies. And those were the
principles that the firms were to follow.
Senator NELSON. You don't recall when the NAS/NRC first pro-
posed the categories of ineffective, possibly effective and probably
effective?
Dr. FINKEL. I believe it was the FDA that devised that, the then
Commissioner at that time.
Senator NELSON. Was it the FDA that suggested these classifica-
tions to be followed by the NAS/NRC?
Dr. FINKEL. Yes, sir.
Senator NELSON. When was that, do you know?
Dr. FINKEL. I am afraid I don't know.
Senator NELSON. What I am trying to get at is, how many years,
how much time, have the drug companies had notice that adequate and
well-controlled studies would have to be submitted to support claims of
efficacy? Is it 3,4, or 5 years since they knew?
Dr. FINKEL. Well, they knew in 1962 that all drugs on the market
would have to be shown to be effective. However, they didn't know
the ratings for their particular drugs until the publications, or shortly
before each publication appeared in the Federal Register.
Senator NELSON. Did they know they would have to prove by some
standard that the drug was efficacious?
Dr. FINKEL. Yes.
Senator NELSON. And now it has been 10 years since the drug com-
panies have had notice that they were going to have to come forward
with adequate and well-controlled scientific studies to prove the effi-
~acy of their drug, isn't that correct?
Dr. FINKEL. Yes.
Mr. BRANDS. May I add a statement, Mr. Chairman.
Senator NELSON. Yes.
Mr. BRANDS. In the publication "Drug Efficacy Study," on July 9,
1966, the Commissioner of Food and Drug published an order in the
~ederal Register requiring each holder of an NDA approved between
1938 and 1962 to submit to FDA specified information on each drug
that the manufacturer wished to retain on the market. So, you might
ay that in July 1966 was the first official notice they had that the study
as going to take place.
Senator NELSON. I am looking at a publication, "Federal Food, Drug
nd Cosmetic Act as Amended May 1966," in which it says: "As used
this subsection and subsection (e), the term `substantial evidence'
eans evidence consisting of adequate and well-controlled investiga-
PAGENO="0222"
8724 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
tions, including clinical investigations, by experts qualified by scien-
tific training and experience to evaluate the effectiveness of the drug
involved on the basis of which it could fairly and responsibly be con-
cluded by such experts that the drug would have the effect it purports
or is represented to have under the conditions of use prescribed, recom-
mended or suggested in the labeling or proposed labeling thereof."
So, that definition of the standard was published in 1962. Counsel
advises me that this was part of the Kefauver Act of 1962. So it has
been 10 years since they knew what the standard would be. And it
seems peculiar to me that they are still fussing around about producing
evidence of effectiveness of the drug when they have had 10 years
notice that that is what they had to do.
Dr. FINKEL. Well, the definition of "substantial evidence" really was
not defined until May of 1970. What I meant was that there is a differ-
ence of opinion as to the definition of what constitutes substantial evi-
dence and how it is to be obtained.
Senator NELSoN. And how clear a notice can you have that you have
to produce scientific evidence of effectiveness? The law says it in con-
siderably more detail. The point is that the drug companies know what
that means, and they know that they have got a drug in the market-
place, and they have to prove that it does what it claims it does, and if
they can't prove that this does what they claim it does, then it is not to
be permitted to be marketed under the Kefauver amendment.
Do you think there is any misunderstanding by the drug company
that they had to prove that the drug effectively attacks the target orga-
nism that they claim it attacks, or the physical situation that they claim
that it relieves? There isn't any doubt about that, is there?
Dr. FINIu~I~. I don't think so. But I think in some cases there has been
a difference of opinion as to what constitutes substantial evidence.
Senator NELSON. I can only conclude that they have filibustered for
10 `years, and the Government has been far too lenient in permitting
them to continue to maintain less than effective drugs in the market-
place.
Ten years is an awfully long time. And the drug should not have
been on the market in the first place if they couldn't prove that they
do what they claim they do. And if 10 years later you are still arguing
about "possibly effective" and "ineffective" and "probably effective"
drugs, it is disgraceful, I think.
Mr. SEGGEL. Mr. Chairman, may I make a comment on that?
Senator NELSON. Yes.
Mr. SEGGEL. I am not familiar with all the past history you men~
tioned, but I will say this, that the Department is moving in aggres-
sively now. The Food and Drug Administration is being greatly
strengthened to carry out its regulatory function and has received
large increase in its budget. For a long time FDA didn't have th
resources to do all that was necessary. What we are now doing i
moving into the specific processes by which the requirement of tha
act can be carried forward effectively.
Mr. GoiwoN. The chairman previously referred to the memo tha
was sent out by the Surgeon General on December 11, 1970, to a
agencies of the Department of Health, Education, and Welfare.
PAGENO="0223"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8725
Now, are you saying that nothing has been done to carry out those
policies?
Mr. SEGGEL. I am saying that the two agencies involved, SRS and
SSA, have come forward with notices of rulemaking. In one case it
was published last fall and we have received comments on that. The
other one was recently submitted by the agency and is being reviewed
in the Department, We want to be sure, before we go forward with
the regulations, that they can be effectively administered and not
just express another pious statement of policy. At this point there are
complex questions of how we can do it with the resources available,
how we can possibly get into the prescription of individual drugs
through the mechanisms of these huge programs. And, particularly,
we want to avoid anything which would put the burden back on the
patient, if indeed the doctor goes ahead and prescribes a drug fOr
which we have said the Federal Government would not provide
reimbursement.
Senator NELSON. Perhaps you are familiar with a study made of
the use of the drugs under the Mississippi medicaid program, done
by Alton B. Cobb, M.D., and others. Dr. Alton B. Cobb is director of
the Mississippi Medicaid Commission. They found, among other
things, that the top ranking drug by amount spent was Indocin in
25 milligram capsules. The top ranking drug by number of prescrip-
tions was Darvon Compound 65, which is described as irrational by
the Drug Evaluations of the AMA's Council on Drugs. On page 5
of the study we find:
It is interesting to note that among the ten leading drugs ranged by total
amount paid, five drugs are specified as "not recommended" or as "irrational
mixtures" by the AMA Drug Evaluations 1871. Also, one drug among the ten
has been classified as "possibly ineffective" by the Food and Drug Administration.
This indicates an overall negative relationship between popular usage of drugs
and the evaluation of their efficiency and safety by the AMA Council on Drugs
and the FDA. It is suggested that this represents a fertile area for professional
education.
That study indicates that top-selling drugs were irrational com-
binations or only "possibly effective." I wonder how widespread that
is in Medicaid programs throughout the country!
Mr. SEGGEL. It is a largely decentralized program. It undoubtedly
varies from State to State.
I would like to reiterate the point that I have made, however, that
the way we are trying to attack this problem basically is through the
process of education and information, as well as through the process of
taking drugs off the market through the Food and Drug Administra-
tion's regulatory machinery.
I would point out that earlier I mentioned that the Food and Drug
Administration now requires package inserts and advertisements to
reflect efficacy evaluations, while clinical evidence is being sought to
Lestablish whether the drug is or is not effective for each indication.
In other words, the physicians should know what the story is in
this process.
I Senator NELSON. But I would suppose that fo~ most prescriptions
Iwritten, the physician doesn't see the package insert, which is in the
Ihandsof the pharmacist.
PAGENO="0224"
8726 COMPETITIVE PROBLEMS IN TEE DRUG INDUSTRY
Mr. SEou~x~. I don't know about that. But `I know that we have addi-
tional means of getting information to the physician. FDA-I think
Dr. Edwards, the Commissioner of Food and Drug, mentioned it in
his testimony-has launched a broad set of endeavors to get the mes-
sage to the physicians as well as to the patients; I mentioned sOme of
these later on in my prepared statement.
Senator NELSON. You know perhaps much better than I the difficulty
of getting the educational information out when you have to compete
with the "educational information," in quotes, coming from the drug
companies.
But' here is a paper entitled "Market Research Summary' of Physi-
cians' Attitudes Toward Antibiotics,'~ a study that was done in behalf
of the Lilly Co., and which I shall insert in the record. I will just read
part of it to you to give you some idea of what your competition is in
the field of education. This was sent to detail men to advise them how
to deal' with some of these problems. This particular drug under sec-
tion IV says,,"Determinants affecting choice of Ilosone." That is what
they' are `sending to their detail men.
The physicians' study reveals that flosone is not differentiated from other
erythromycins by most physicians. It shares the dominant image characteristic
of all erythromycins in regard to main uses, safety, efficacy, and spectrum. There
is -only a minority awareness and belief in Ilosone's advantages of absorption,
blood ievels, and acid stability. In terms of market impact, however, this lack of
brand differentiation is counterbalanced by an even smaller minority awareness
and concern about Ilosone's associations with liver toxicity. Among the rela-
tively small group of physicians with awareness of flosone's liver toxicity side
effects, there are two basic reactions:
Users rationalize flosoüe's side effects in various ways, and generally attach
little significance to it.
For' a small but potentially influential group of nonusers, past users, or cau-
tious occasional users, this concern is a serious deterrent. Even more detrimental,
this group may be spreading negative word-of-month far beyond its numerical
size.
Ilosone is favored by regular users mainly because of their loyalty to Lilly and
their perception of absorption advantages (patient-proof, reliable, etc.). About
one in ten physicians in the groups saw Ilosone as superior because of faster,
higher, or longer-lasting blood levels and better absorption. Among those who
use it, fear of side effects reinforced expectations of therapeutic potency.
Physician attitudes regarding Ilosone, as outlined, suggest certain marketing
implications which are summarized below:
(A) Ilosone Is not substantially differentiated from other erythromycifls. Thus,
Lilly can promote Ilosone as an erythromycifl which conveys safety. However,
there exists a responsibility to adequately inform those physicians who are un-
aware of the infrequent side effects. A delicate balance is required so as not to
raise unnecessarY concern among those physicians who are not generally con-
cerned about the jaundice problem.
(B) The relatively low overt concern regarding flosone's side effects may be
taken as evidence for a positive attitude regarding the detailing of this product
by the sales force.
(C) Selective detailing may be required to avoid the discussion of Ilosone
with any physician who is aware of and concerned about liver toxicity side
effects. Where there is any awareness of Ilosone's liver toxicity associations, the
known availability of a "safe alternative like Erythrocin" is competitively
decisive.
(D) By not attempting to further differentiate Ilosone from other erythromy-
ems, Lilly may capitalize on its strong reputation in the antibiotic field to in-
crease Ilosone'Use as total erythromycifl use increases.
I will ask that the whole memorandum be printed in the record.
PAGENO="0225"
*COMPEPITIVE PROBLEMS IN THE DRtrG INDUSTRY 8727
(The memorandum referred to follows:)
MABKET RESEARCH SUMMARY OF PHYSICIANS' ATTITUDES TOWARD ANTIBI0TIC6
The objectives of this study were to explore physicians' attitudes toward anti-
biotic drugs and the determinants which influence selection among antibiotic
brands with special attention to V-cillin K and Ilosone. At our request, National
Analysts of Philadelphia conducted 24 group-depth interviews in eight cities
throughout the United States. In each city, separate groups of GP's, internists,
and pediatricians were interviewed. Average* group size ranged between 10
and 12 physicians. While a qualitative study of this sort may not be statistically
projectable, the major findings are confirmed by market data and our current
general understanding of the market.
From the study, it is possible to make a logical ordering of the decision-making
processes experienced by physicians in choosing and using antibiotic drugs. Such
a model of the physician "decision tree" permits the study to be organized in five
major areas as follows: 1) determinants of treatment (Should an antibiotic be
used?), 2) determinants of therapeutic route (Should it be IM or oral?), 3)
determinants of antibiotic choice (Which generic group of antibiotics is indi-
cated?), 4) determinants affecting choice of V-cillin K, and 5) determinants
affecting choice of Ilosone.
Since physicians' thinking and behavior may not always be logical, many of
the determinants may interact simultaneously or there may be a "short cir-
cuiting" in which physicians may move directly to a brand choice without pausing
first to consider which group is appropriate. Such action reflects the formation of
individual ideas about antibiotic therapy over a long time period or at some point
in the past. As a result antibiotic use decisions may be largely automatic and un-
conscious for many physicians.
I. DETERMINANTS OF TREATMENT
(A) The study indicates that physicians feel pressured to treat with antibiotics
even when they are not convinced that the illness is bacterial in nature and they
frequently do prescribe antibiotics in illnesses that they suspect are viral in
origin.
(B) Factors influencing the initial decision to treat or not to treat with an
antibiotic generally fall into characteristics related to the nature of the illness,
those related to the patients, and those related to the physician. Characteristics
related to illness include severity of illness, degree of pain, magnitude of visible
signs of tissue change, viral or bacterial diagnosis and the duration o~ illness.
(C) Characteristics related to the patient which determine antibiotic use in-
clude such factors- as predisposition to serious infections, presumed vulnerability
to the illness, patient expectations or demands for antibiotic therapy and the
socio-economic class or degree of "medical sophistication" of the patient.
(D) Characteristics related to the~ doctor which may determine antibiotic
treatment are personality type and professional focus. Here the study identified
two different personality types with regard to their professional approach in
coping with an Infection-these may be.called "problem solv~'s" and the human-
1st or healer." The relatively small group of physicians is "problem solving" in
that they see themselves as practicing scientists depending upon cultures, tests,
rigorous evaluation of objective data. Of the three groups considered in this study,
the problem solving type of doctor was found more often aii~ong intermsta
secondly among pediatricians, and least among GP's. The other and larger group
of physicians may be classified as more humanistic than scientifl~, more con-
cerned with the well-being of the total patient than the specific form and locus
of infection alone. They use antibiotics to assure patients of the doctor's active
role in genuine concern, to maintain confidence in morale, and bolster patient
cooperation.
Other characteristics related to. the physicians which determine antibiotic uae
are classified as professional sophistication and security, nature of the doctor-
patient relationship (degree of authoritarianism), the satisfactions of giving
medication (using antibiotics rather than palliatives), fear or risks of treatment
(side-effects, malpractice, and censure by colleagues), apprehension about the
consequences of no treatment, time and place of examination and initial treat-
ment, and fear of developing resistant organisms if antibiotics are given (ex-
pressed by only a few physicians).
80-450 0-72-pt. 22-15
PAGENO="0226"
8728 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
IT. DETERMINANTS OF THERAPEUTIC ROUTE-INTRAMUSCULAR VERSUS ORAL
(A) Once the physician concludes that antibiotic therapy is indicated, he must
next decide what therapeutic route is desirable for this particular case before he
can move on to the choice of a particular antibiotic drug. The main factors influ-
encing preference for the IM or oral route are shown below:
Ii~trarnuseular.-Rapidity of action; potency; higher therapeutic blood levels;
avoids oral or gastric intolerance; duration of action and independence from
patient cooperation in taking medication; better control over patient; and more
efficient for very high dosage.
Oral.-Safety; multiple convenience advantages; portability, self-administra-
tion, versatility, time; net cost-saving fees for office visits reduces therapy costs;
and avoids pain of injection.
III. DETERMINANTS OF ANTIBIOTIC CHOICE
The study revealed seventeen major determinants of antibiotic choice. Sum-
mary discussion will focus upon the three determinants which appear to be prob-
ably the most important in selecting the antibiotic of choice.
(A) Perceived efficacy is the prime consideration when dealing with severe ills
or when the most potent drugs available are relatively safe. Efficacy includes
anticipated effectiveness or "image of effectiveness" and perceived performance
or "apparent" clinical response. Positive results produce loyalty, negative results
are a major incentive for trying other antibiotics. The "test" may not be scientific.
If the patient gets better, the antibiotic prescribed gets the credit; if the patient
gets worse, the drug is blamed.
For respiratory and ear infections, penicillin is seen as highest in effectiveness;
second place is shared by both the erythromycins and tetracyclines.
(B) Diagnostic indications include clinical evaluation of the pathogen and cul-
ture and sensitivity tests (which may be particularly attractive to the "problem
solver").
(C) Safety is one of the major considerations in choice of an antibiotic. Its
importance rises when the condition treated is not severe; when almost equally
effective drugs are available which differ mainly in relative safety; or when
treating patients vuhierable to side effects of a particular group of drugs.
Penicillin is seen as one of the most dangerous of all antibiotics in I.M. form
(anaphylactic dangers), but is also perceived as one of the safest drugs for the
non-allergic individual because of freedom from toxicity in large doses.
Erythromycin is seen as replacing tetracyclines because of its image as one
of the safest of modern antibiotics.
Tetracycline is seen as having danger to children and pregnant women and is
sometimes generalized as being dangerous to all patients. Pediatricians, in par-
ticular, may avoid its use. Most frequent side effects are browning and staining
of teeth, interference with bone formation, and photosensitivity reactions.
Of the several remaining determinants, it is particularly interesting to note
the importance of the detailman in the antibiotic field because the characteristics
of this field include: 1) a vast number of drugs available, 2) the opportunity to
play an influential role in sub-classes of antibiotics where no differences between
brands are perceived by the physician, 3) contradictory competitive claims
which increase the burden of choice by the physician and may increase his reli-
ance upon the detailman whom he trusts, and 4) the importance of product
knowledge in a field where the possible fatal consequences of prescribing or
failing to prescribe are clearly seen by the physician. Most of the physicians in
the groups valued visits from their detailman and felt he provided a helpful
service, particularly by helping the physician maintain high comparative prod-
uct visibility, actionable memory, and therapeutic suitability for the specific
antibiotic brands promoted.
The availability of antibiotic drug samples helps influence the prescription
practices of physicians even when samples are not being used to make an eco-
nomic contribution to patient therapy. For the doctor, samples are seen as pro-
viding an immediate three-dimensional reference library of drugs, dosages, bot-
tie sizes, colors, etc.. as well as enabling him to assist his patients and also en-
gage in "trial and error" therapy.
PAGENO="0227"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8729
IV. DETERMINANTS AFFECTING CHOICE OF ILOSONE
The physicians' study reveals that Ilosone is not differentiated from other
erythromycins by most physicians. It shares the dominant image characteristic
of all erythromycjns in regard to main uses, safety, efficacy, and spectrum:
There is only a minority awareness and belief in Ilosone's advantages of absorp-
tion, blood levels, and acid stability. In terms of market impact, however, this
lack of brand differentiation is counterbalanced by an even smaller minority
awareness and concern about Ilosone's associations with liver toxicity. Among
the relatively small group of physicians with awareness of Ilosone's liver tox-
icity side effects, there are two basic reactions :
Users rationalize Ilosone's side effects in various ways, and generally attach
little significance to it.
For a small but potentially influential group of non-users, past users, or cau-
tious occasional users, this concern is a serious deterrent. Even more detrimental,
this group may be spreading negative word-of-mouth far beyond its numerical
size.
Ilosone is favored by regular users mainly because of their loyalty to Lilly and
their perception of absorption advantages ("patient-proof," reliable, etc.). About
one in ten physicians in the groups saw Ilosone as superior because of faster,
higher, or longer-lasting blood levels and better absorption. Among those who
use it, fear of side effects reinforced expectations of therapeutic potency,
Physician attitudes regarding Ilosone, as outlined, suggest certain marketing
implications which are summarized below:
(A) Ilosone is not substantially differentiated from other erythromycins. Thus,
Lilly can promote Ilosone as an erythromycin which conveys safety. However,
there exists a responsibility to adequately inform those physicians who are un-
aware of the infrequent side effects. A delicate balance is required so as not to
raise unnecessary concern among those physicians who are not generally con-
cerned about the jaundice problem.
(B) The relatively low overt concern regarding Ilosone's side effects may be
taken as evidence for a positive attitude regarding the detailing of this product
by the sales force.
(C) Selective detailing may be required to avoid the discussion of Ilosone
with any physician who is aware of and concerned about liver toxicity side ef-
fects. Where there is any awareness of Ilosone's liver toxicity a~sociations, the
known availability of a "safe alternative like Erythromycin" is competitively
decisive.
(D) By not attempting to further differentiate Ilosone from other erythromy-
ems, Lilly may capitalize on its strong reputation in the antibiotic field to in-
crease Ilosone use as total erythromycin use increases. We should also continue
our efforts to position Ilosone as an effective alternative to penicillin for the
penicillin-sensitive and as an alternative to tetracylines because of freedom
from teeth and bone side effects.
In contrast to the above marketing implications, we recognize the possibility
of an alternative strategy which would further attempt to differentiate Ilosone
from oher erythromycin brands. In light of this research study and its descrip-
tion of the current market in which we operate, we would anticipate the need
for clinical data that effectively demonstrate, in the mind of the physician, su-
periority of Ilosone over other erythromycin brands. It may be that the effort,
resources, and time necessary to establish a broad and believable series of clinical
data would not yield significantly greater results than efforts aimed at a
strategy of non-differentiation as outlined above. Thus, prior to any major
strategic decisions, further economic analysis may be required to determine the
potential gains versus risks of both marketing strategies.
v. DETERMINANTS AFFECTING CHOICE OF v-CILLIN K
V-Cillin K is positioned in the antibiotic field as one of the improved, modern
oral penicillins about halfway between "old" penicillin G and the newer syn-
thetic penicillins. Physicians perceive superior absorption and acid stabiilty
for V-Cillin K compared to other penicillins, and particularly in relation to
penicillin G. V-Cillin K is seen as a safer alternative than penicillin I.M., and a
PAGENO="0228"
8730 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
more effective alternative than oral penicillin G. Except for extrinsic factors such
as detail men or company loyalty, V-Cillin K does not seem to be differentiated
from or preferred over other penicillin V's and VK's. While V-Cillin K is per-
ceived as being more expensive than penicillin G, it is considered a slightly less
expensive penicillin than the new synthetics.
V-Cillin K's most favorable perception of efficacy by favorers was character-
ized as being "almost like an injection of penicillin-rapid action in 15 to 30
minutes." Most physicians were latently aware of its superior absorption claim,
but acted as if this were either not believed or not clinically significant. Even
users had difficulty com~prehending how V-Cillin K works and how it really is
better.
The above characteristics of V-Cillin K attitudes tend to confirm our previous
thinking and indicate to us that we have been following the correct course of
marketing action which has contributed to the higher V-Cillin sales iciel. Specific
marketing implications are summarized below:
(A) We should continue the strategy which translates higher blood levels
into clinical advantages, stressing superior therapeutic response, and suggesting
some kind of inevitable functional sequence by which superior acid stability
leads to better absorption, which leads to higher blood levels, which produces
greater antibacterial activity.
(B) We should continue to position V-Cillin K as a potent alternative to
penicillin I.M. which is relatively free of risk of anaphylaxis.
(C) Lilly's name and its associations with integrity and antibiotic reliability
should continue to be used as major advantages in reinforcing the believability
and acceptability of the V-Cillin K product claims.
Senator NELSON. Then on February 15, 1972, marketing letter No.
17~ This was sent to the detail men:
Gentlemen:
Re: Mail promotion of Ilosone.
During the month of February, two letters will be sent to each of your key
and important G.P.'s, osteopaths, and pediatricians.
The first mailing will stress bid. therapy, the double-strength dosage forms,
and the advantages of Ilosone over other erythromycins. A sample request card
will be included. These reply cards will be forwarded to you so that you can
deliver the samples.
The second mailing will stress the advantages of a twice-a-day regimen and
again mention our new dosage forms and the unique features of Ilosone. A
business reply card will be included, offering a lossproof key chain (see attach-
ment). The number engraved on each key chain is permanently recorded in
Indianapolis. These service items will be forwarded to you for personal presen-
tation to the requesting physician.
We hope this mailing program will help identify or reconfirm earlier identif-
cation of physicians in your territory who have an interest in Ilosone and,
therefore, represent potential for target detailing efforts.
Very truly yours,
Ei~i LILLY AND COMPANY.
And the attachment is a key chain.
I ask you, do you think you can compete with that "educational"
program?
Mr. SEGGEL. I think the answer is, we are going to try.
Senator NELSON. I think the whole educational effort is almost a
disaster in the face of detailing and in the face of promotion that is
being done by the drug companies. I don't see much success, other than
the fact that we are forceably removing drugs from the marketplace.
That is one way to keep doctors from prescribing ineffective drugs.
But with respect to promotion of drugs for improper use, I really
don't think this country is making much headway, do you?
PAGENO="0229"
COMPETITIVE PROBLEMS IN THE DRTJG INDUSTRY 8731
Mr. SEGGEL. Our efforts are increasing-again, I emphasize that I
am talking of the very recent past. Aria I think it is too early to say
how successful we will be, but-
Senator NELSON. I have another study done this year by Dr. Paul
Stolley of Johns Hopkins in which 95 percent of the physicians in the
sample prescribed some drugs for the common cold. As I recall it, 60
percent of them were prescribing antibiotics, which are not indicated
for this purpose. This study, entitled: "Drug Prescribing and Use in
an American Community," by Paul D. Stolley, M.D., Marshall Becker,
Ph. D., Louis Lasagna, M.D., and others, appeared in the Annals of
Internal Medicine, April 1972. Included is the following paragraph:
It is equally apparent that a large amount of drug prescribing and drug costs
are for common, benign, and self-limiting illnesses (for example, the uncompli-
cated common cold). United States national marketing research data also indi-
cate that most physicians (about 95 percent) will issue one or more prescriptions
to a patient whom they diagnose as having the "common cold," and almost 60
percent of these prescriptions will be for antibiotics.
I should read the last sentence:
Data are not available to determine what proportion represent bacterial com-
plications of an illness that was originally viral.
But that would appear to be misprescribing for a substantial per-
centage of those cases for the common cold, would it not?
Mr. SEGGEL. It would sound like it. But I am not a physician myself.
Dr. Finkel?
Dr. FINKEL. I don't think that there is any question that antibiotics
are misused when used for treatment of viral infections.
Mr. BRANDS. Mr. Chairman, may I add to Dr. Stolley's study. In
one paper, "The Relationship Between Physician Characteristics and
Prescribing Appropriateness," I think his finding in this study is
something that can be used by the universities and by the Federal
Government in the education as well as the continuing education of
physicians. His study will be most useful for future actions in influenc-
ing a physician in rational drug prescribing. He listed some character-
istics in this paper. If you do not have it, I will be glad to submit it.
Senator NELSON. What is the title of that?
Mr. BRANDS. "The Relationship Between Physician Characteristics
and Prescribing Appropriateness."
Senator NELSON. We have it.
Mr. GORDON. There is another study that was done by Charlotte
Muller which appeared in the American Journal of Public Health,
December 1967, in which she refers to Dr. Furstenberg's study of:
A one percent sample of over 100,000 prescriptions written by 159 physicians
rendering care under the public welfare medical care program in Baltimore,
Maryland. He found that 55 percent were for proprietary preparations and iden-
tilled the actions as pointless waste of the program's money since less expensive
official preparations listed in the official sources were quite suitable.
I ask that the study be put into the record.
Senator NELSON. What is the total amount of Federal money and
State money spent on drugs in the medicaid program?
Mr. SEGGEL. It is around a half a billion dollars.
Senator NELSON. That is Federal and State, or just Federal?
PAGENO="0230"
8732 COMPETITIVE PROBLEMS i~ THE DRUG INDUSTRY
Mr. BRANDS. This is both.
Senator NELSON. That is 50-50, is it?
Mr. RICHTER. It is about 55 percent Federal overall.
Senator NELsON. So the total amount spent on drugs under the
medicaid program is about $400,000 annually?
Mr. RICHTER. $500 million.
Senator NELSON. $500 million annually?
Mr. RICHTER. Yes.
Senator NELSON. How much is spent on drugs and medication?
S Mr. SEGGEL. We have the figures here.
Senator NELSON. And what is the cost share on medicare?
Mr. BRANDS. On medicare hospitalization it is $541 million. Medic-
- aid, which includes both inpatient and outpatient care, is $485,400.
Senator NELSON. How much of that total bill is Federal appropria-
tions?
Mr. BRANDS. All of medicare and about 55 percent of medicaid is
Federal money. Thus, the total bill would be between $750 million and
$800 million.
Senator NELSON. Annually?
Mr. BRANDS. Annually, yes, sir.
Senator NELSON. Has that cost been rising in the past 3 years? What
is the change? What was spent when the program started?
Mr. BRANDS. I don't have those figures.
Mr. RICHTER. I have some figures here on medicaid.
Mr. GORDON. I have the figures that you gave to us. Federal contribu-
tions to medicare was $541 million, and then for medicaid, $485
million.
Senator NELSON. That is the figure you just gave us.
Mr. GORDON. So between the States and Federal Government, it is
one and a half billion, is that correct?
Senator NELSON. Are these figures that you gave of medicare $541
million, and medicaid, $485 million, both the Federal and State con-
tribution?
Mr. Bt~~s. Yes, sir. -
Senator NELSON. And the Federal contribution you said was around
$755 million?
Mr. BRANDS. Fifty-five percent of the total of medicaid.
Mr. SEGGEL. I made a rapid calculation, and it would come out to
over $700 million Federal total for medicare and medicaid.
Senator NELSON. And the total expenditure for medicare and medic-
aid are something over a billion dollars. a billion one hundred million?
Mr. SEGGEL.~ That is right. About 45 percent of the medicaid is State.
Mr. GORDON. This is confusing. That $485 million for medicaid that
you have here is the Federal contribution, is it not?
Mr. RICHTER. That is the total.
Mr. GoRDoN. Federal and State?
Mr. SEGGEL. We can review the figures, Mr. Chairman, and submit
them for the record.
Senator NELSON. Let's be sure the record is correct.
Mr. SEGGEL. Yes, sir.
Senator NELSON. It is Mr. Gordon's thought that the total was a
billion and a half or thereabouts.
PAGENO="0231"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8733
Mr. GoiwoN. I have a table here, XXV, estimated Federal, State
and local government expenditures for prescription drugs under
DHEW sponsored health care programs. And I have $1.487 billion.
Senator NELSON. That is the figure shown on the chart. I think we
had better get it straightened out for the record in any event.
Mr. SEGGEL. I may just have the Federal portion here. I am not sure;
I will have to check that.
Mr. BRANDS. Mr. Chairman, 55 percent or $480 million is the Federal
portion, the 55 percent.
Mr. GorwoN. So for both Federal and State it comes to about $1.5
billion, is that correct?
Mr. BRANDS. That is right.
Senator NELSON. GO ahead now that we have that straight for the
record.
Mr. SEGGEL. I would now like to discuss our direct purchasing pol-
icies and procedures. All centralized drug purchasing is by generic
name with specifications for the finished drug product. Drugs in the
direct care programs are purchased by generic name to obtain the
lowest cost consistent with no sacrifice in quality when the product is
produced by more than one manufacturer.
The Medical Supply Service Center at Perry Point, Md., is a man-
datory source of supply for the Department's direct care programs.
It generally does not purchase or stock a drug product unless there
is a saving for the ultimate user of that drug product, as compared to
purchasing it from the Veterans' Administration Depot, under the
Federal supply schedule contracts or in the open market. However,
it is also a service center as the name implies. As you are aware, most
drug products are not dispensed to the patient in the quantities avail-
able commercially. They have to be counted or measured by the phar-
macist in the sizes necessary for the length of treatment of the patient's
condition. This counting and measuring are time consuming at the
local hospital and clinic. One of the services provided at the center
isprepackaging drug products in various sizes for the hospitals and
clinics. This is done by machines. This service saves considerable man-
hours at the health fa~ilities.
Mr. Chairman, with your permission, I would like to skip the de-
tail, unless you wish to go into it, concerning how we handle competi-
tive bidding.
Senator NELSON. That is all right.
Mr. SEGGEL. This will be in the record.
The Department policy in the bidding process when the cost is esti-
mated at $5,000 or over is to advertise in the Commerce Business Daily,
giving details of the product on which a bid is requested. A closing
date is listed in the advertisement. When bids are received, they are
opened on a specific date at a specific time. The lowest bidder is
awarded the contract unless there is reason to believe his product will
not meet specifications. If there is a tie bid and one of the bidders
with the tie bid is a small manufacturer, the small manufacturer will
be awarded the contract.
When the cost of a drug product being considered for bid is between
$2,500 and $5,000, bids are mailed to manufacturers that have re-
quested to be placed on the bidding list and to others that manufacture
PAGENO="0232"
8734 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
the product. The bid is awarded in the same manner as described
above.
Forpurchasing a quantity of drug products for which the estimated
dollar value is less than $2,500, quotations are solicited from various
manufacturers. The manufacturers selected for quotations are those
which have previously bid or quoted on the same or similar products.
In order to ensure economy, the lowest bid or quotation received is
compared with the current market price and the price schedules of
the Veterans' Administration, the Defense Personnel Supply Center
and the Federal supply schedule before the purchase is made.
The procedures and policies of the Department for c~entralized pur-
chasing are in accordance with the overall Federal policies of the Gen-
eral Services Administration.
The Department has mandatory sources of supply in order to co-
ordinate its direct procurement of drug products with other Govern-
ment agencies. These mandatory sources in order of priority are:
(1) HSMHA Medical Supply Service Center: (2) Veterans' Ad-
ministration; and (3) Federal supply schedule.
The Medical Supply Service Center also purchases drugs from the
Defense Personnel Supply Center for central stocking and distribu-
tion to the Department's hospitals and clinics. The center requests
usage information on individual drug products which are consolidated
for centralized purchasing considerations. Immunizing agents are pur-
chased by the Veterans' Administration for the Department's Center
for Disease Control, and the Defense Personnel Supply Center pur-
chases drugs for the Division of Emergency Health Services. The De-
partment's Medical Supply Service Center supplies drugs to other
Government agencies such as the State Department, Peace Corps,
Justice Department, Job Corps, and the District of Columbia.
Grantees of the Department have been permitted to purchase drug
products from General Services Administration sources of supply.
However, the General Services Administration published a proposal in
the Federal Register on June 1, to revise the current policy and pro-
hibit the use of the General Services Administration and other Fed-
eral sources of supply by recipients of Federal grants. Comments will
be received up to July 31, 1972.
DHEW OUTLAYS FOR DRUGS
I would like to briefly review expenditure data on DHEW direct
drug purchases and reimbursements to community pharmacists for
drug products in the Department's direct care programs and the reim-
bursement for drug products to hospitals and community pharmacists
under the medicare and medicaid programs. The program operated
under the National Immunization Act for providing certain immurnz-
ing agents to the States and the purchases of the Division of Emer-
gency Health Services for stockpiling drugs for national or other
emergency use are included in the cost figures as direct purchases. Some
grant programs, such as under section 314(e) of the Public Health
Services Act and the Community Mental Health Centers Act, provide
grants as a lump sum for the total operation and the cost of the drug
component is not broken out separately. As a result, the drug costs in
these programs are not included in the figures.
PAGENO="0233"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8735
The cost of drugs for hospitalized patients under each of the reim-
bursement programs was estimated on a percentage basis of the total
hospitalization cost. The cost of drugs for outpatients under the medic-
aid program is the Federal share of the total cost which averages at
about 55 percent nationally.
With the qualifications noted above, the Department expended an
estimated $1,046,420,000 for drug products in direct purchasing and
reimbursements in fiscal year 1971. Over 1 billion of this amount repre-
sents estimates for drug reimbursed through medicaid and medicare.
The Department expended $14,067,000 for the direct purchase of
drugs. Of this amount, $5,058,000 was expended for vaccines for dis-
tribution to the States. These vaccines were purchased for the Depart-
ment by the Veterans' Administration. $1,146,000 were spent for drugs
for the emergency stockpile, and purchased by the Defense Personnel
Support Center.
We cannot provide estimates of the dollar value of drugs purchased
by specific therapeutic categories for medicare, medicaid, the grant
programs of 314(e) and community mental health, and the reimburse-
ments for the direct care programs for hospitalized patients. For the
other Department programs, a large part of the nearly $4 million out-
lay for oral contraceptives includes $3,687,000 for the Department's
family planning program. Outlays for biologicals were $5.3 million,
and for anti-infectives were $2.1 million. No other category exceeded
$1 million.
Drugs worth $1,038,000 were purchased centrally by the Medical
Service Supply Center of Health Services and Mental Administra-
tion, including $350,000 through bids and quotations $657,000 from the
Defense Personnel Support Center and a small amount from the
Veterans' Administration Depot. The Medical Service Supply Center
not only purchases centrally for the Department's programs but it
purchases drugs and medical supplies for other Federal departments
and agencies. In fiscal year 1971, the Medical Service Supply Center
had sales of these drugs and other medical supplies of $2,467,000. Of
this amount, $1,597,000 in drugs and medical supplies were supplied
to programs within the Department and $870,185 were supplied to
other Federal agencies and the District of Columbia. This service to
other agencies is provided in the act which established the Medical
Service Supply Center.
The total dollar volume of the 50 leading centrally purchased drug
products was $345,754. This dollar volume includes only those drugs
purchased from manufacturers and does not include any drugs pur-
chased from the Defense Personnel Supply Center. The 50 leading
centrally purchased drugs were purchased from 32 manufacturers of
which 16 were small manufacturers. Thirty-nine drug products were
purchased from small manufacturers at a cost of $173,206.
The routine reports generated under the medicare and medicaid
programs do not contain information as to the specific drug products
or their dollar volume of expenditures for either hospitalized patients
or ambulatory patients. However, both programs are planning and
studying methods by which such data may be obtained. With the
magnitude of the health programs under medicare and medicaid a
system to routinely gather this data would of necessity have to be
computerized.
PAGENO="0234"
8736 COMPETITIVE PROBLEMS IN TUE DRUG INDUSTRY
I would like to skip some more that we were just talking about and
the portion concernmg disbursements and move on to "Continuing
Research Efforts" on page 14 of our prepared statement.
Senator NELSON. Your figures under the title "Outlay for Drugs,"
they are correct, are they not?
Mr. SEGGEL. I take it they are. And you have them in tabular form,
~ m the Secretary's response to your letter back in the late
winter or early spring. And so I will proceed with. the section on "Con-
tmuing Research Efforts."
As you know, we have been supporting several projects aimed at
improving the provision of effective and more rational prescribing of
drugs. As a prime example, the National Center for Health Services
Research and Development has a contract with the San Joaquin
Foundation for Medical Care to obtain data which will be used in
determining the specifications for a model drug utilization review
program. Information presently being obtained by the foundation
provides, at predetermined intervals, four profiles of drug use as fol-
lows: Drug profile of all drugs prescribed; the patient profiles of drug
use; the prescribing profile of physicians; the dispensing profiles of
drug use. Information to be obtained in the contract will describe drug
prescribing and use practices in nursing homes and extended care fa-
cilities, the activities of the drug utilization review committee, the
internal control process, and a retrospective analysis of drug use data
to determine the incidence of potential interactions between drugs.
The San Joaquin Foundation for Medical Care Services, review and
pays the claims for the care provided for about 45,000 title XIX
medicaid patients in four counties in California.
The information obtained through the contract will serve to improve
the efficiency of the existing program of reviewing the dispensing and
use of prescription drugs at the foundation. The contract is scheduled
to be completed at the end of 1972.
And this will be used, if it turns out as we anticipate as more or less
a model in terms of demonstrating what can be done throughout the
medical community, and the health care community.
Now, to the subject of practitioner education and information.
The Department also supports practitioner education and provides
practitioners with information which can improve their choice and use
of drug therapy. Public Law 92-157, which is the new Health-Man-
power Act, has a special project section part of which deals with the
training of physicians and pharmacists in clinical pharmacology. The
program is administered by the Bureau of Health Manpower Educa-
tion and has a current budget for all special projects activity of $53
million.
One purpose of the special projects program is to place increased
emphasis on clinical pharmacology for physicians. The bureau has 34
proposals from medical schools for improved programs in clinical
pharmacology. The authority for providing capitation grants to medi-
cal and pharmacy schools includes a requirement for the teaching of
clinical pharma~cology in the universities.
Pharmacists in these clinical programs are working closely with
physicians on drug therapy and advising them on adverse reactions,
drug interactions, and alternate drug therapy.
PAGENO="0235"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8737
In addition to the lists sent to some 6,000 agencies and interested
parties, which I have previously mentioned, the Food and Drug Ad-
ministration publishes periodically the FDA Drug Bulletin to pro-
vide timely information to physicians on actions, uses and labeling
of drug products. The latest issue dated May 1972 contained the
final labeling approval for oral hypoglycemic drugs, methadone
for heroin addiction, and others. These bulletins provide to the extent
possible unbiased scientific information to assist the physician in his
drug therapy. About 600,000 copies of each issue of the Drug Bulletin
are mailed to physicians, pharmacists, dentists, third and fourth year
medical students, State and national medic~il and pharmacy associa-
tions and medical and pharmacy journals.
The pharmacists in the Department's hospitals publish newsletters
containing information on drug use and costs on drugs in a particular
category for distribution to physicians and nurses. Many pharmacists
in hospitals throughout the country publish periodically information
on the use of drugs in the treatment of disease for distribution to
physicians.
The Food and Drug Administration on May 4, 1972, proposed de-
tailed plans to clarify and formalize the agency's policy on public dis-
closure of information. FDA is a major depository of original, scien-
tific, and technical information relating to drugs, foods, and other
products.
The Food and Drug Administration files contained vast amounts of
scientific data which have been developed over the years to prove
safety and effectiveness for a variety of drugs and other products.
Much of these data can help eliminate duplication of costly scientific
research if it is more widely known and applied. However, there are
valid reasons why some of the vast technical information in our files
should remain confidential. It is not our intention to make public any
data from any manufacturer that would give competitors an unfair
advantage or reduce incentives for future research.
Mr. GORDON. What do you mean by unfair competition, unfair ad-
vantage? How do you determine whether competition is fair or unfair?
Mr. SEGGEL. Well, the point is that we don't want to give away any
trade secrets, I guess that is the general term used, and thus vitiate
the advantage that a given company gains from its own research and
development.
Mr. GORDON. That is covered by the law anyhow and it would in-
clude the processes and the methods of manufacture.
Mr. SEGGEL. Yes.
Mr. GoRDoN. But you talk about giving an unfair advantage to
competitors.
Dr. FINKEL. The clinical trials themselves are frequently rather
sophisticated, and were developed under a contract with consultants,
so that firms frequently feel that the clinical protocols which they have
developed are confidential information.
Mr. GORDON. Generally, the firms have a patent, which gives them
a 17-year monopoly. Is this going to give them a perpetual monopoly?
Dr. FINKEL. I believe after the drug is approved for marketing
that the clinical data on the basis of which the drug was approved will
be made public, also the preclinical data, unless the firms can show
PAGENO="0236"
8738 COMPETITIVE PROBLEMS IN THE DRUG INDTJSTRY
good cause as to why this information should be considered
confidential.
Mr. GoIuoN. And what do you consider "good cause"?
Dr. FINi~L. Well, I really can't answer that immediately other
than one of the examples I just cited. Our proposal is now awaiting
comment and has not yet been finalized.
Senator NELSON. This question has been raised here before.
To put it in its sharpest focus, take the case of a drug on which
there was a patent, and the patent has expired. Is it the position, then,
of HEW that the information on manufacturing processes, and so
forth, is still to be kept unavailable from the public or the
manufacturers?
Dr. FINKEL. Yes, the manufacturing processes are still considered
confidential, but any other firm wanting to market that drug would
be required to submit only an abbreviated New Drug Application to
establish bioavailability with the marketed drug, except that certain
cases would require a full application.
Senator NELSON. Does that get at the problem, similar to the chlor-
amphenicol case? Chlorampheniccvl was marketed by the Parke, Davis
Co. under the trade name of Chioromycetin for quite some time. When
the patent expired, three other chioramphenicols came into the mar-
ketplace, and then Parke, Davis did some studies on its own chlor-
amphenicol as well as the others in the marketplace, and demonstrated
that the blood level achievement of the three products was different.
Their charts showed that the blood level of the Chloromycetin achieved
a much higher level very quickly, whereas the blood level of the other
three or four products, whichever it was, I have forgotten, didn't
achieve as high a level but extended apparently over a longer period.
The FDA then decided that they wouldn't permit the marketing of
the others unless they achieved the same blood levels. They did not do
any studies, and as far as I know nobody did, that demonstrated that
that blood level achievement of Chloromycetin was more effective in
the treatment of disease for which it was used than the others, but for
purposes of consistency in the use of the drug, I suppose, they wanted
them to be the same.
As I said, we had testimony in which the FDA said that there were
no studies to prove that one was more effective against the target or-
ganism than the other. But let us suppose it was a significant tactor.
Once the patent has run out, since the Congress, the public, has given
the company 17 years to protect them and make a profit on the research,
shouldn't all information, then, be available to all manufacturing
firms respecting this drug, especially since this involves the health of
the public?
Dr. FINKEL. Since that episode and another one with tetracychnes
which was uncovered by the Pfizer firm, we have required bioavail-
ability studies for all antibiotics, so that they are all required to con-
form to an acceptable level.
Senator NELSON. Are you requiring that the originator of the drug
in its application submit bioavailability studies?
Dr. FINKEL. Yes.
Senator NELSON. And is that public information?
PAGENO="0237"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8739
Dr. FINKEL. It will become-usually it is a matter of public infor-
mati6n, because it is included in the package insert as to what the
blood levels are and when they are reached. So, that anybody can
duplicate the products pharmaceutically. .
Senator NELSON. You say this is an administrative ruling?
Dr. FINKEL. This has become the accepted mode of writing a pack-
age insert for antibiotics, after we developed a class label for some
ftntibiotics. For example, all tetracyclines have the same package
insert, all penicillins, all erythromycins. As a part of the description
of the product and its action, the blood levels achieved with these
drugs are included.
Senator NELSON. When did that start?~
Dr. FINKEL. When we started to publish the efficacy ratings for the
antibiotics, we would publish a class label at the same time.
Mr. GORDON. Do you have a requirement to include the dosage re-
sponse curve-in other words, at what point is it effective, or do you
just have a blood level produced by the drug?
How high a blood level do you need in order to make it effective?
Dr. FINKEL. First of all, the original antibiotics have all had clini-
cal trials to establish whether the blood levels being achieved are in
fact clinically effective. But in addition, by doing in vitro studies with
the antibiotic disks with the organism that is cultured, one can tell
how sensitive organisms are to the antibiotic and approximately what
concentration of antibiotic is required to kill the organism in the
human. So it is a little bit easier to study antibiotics than it is other
things.
Mr. SEGGEL. Although we have indicated that there are certain data
we have not made public, it is however our intention to require that
each manufacturer justify any request for confidentiality of informa-
tion given FDA-past, present, or future. This proposal will result
in a far greater amount of information being made public, and should
be of great value to formulary committees.
Examples of information which would generally be made public
under this proposal include:
Correspondence or summaries of discussions with company officials,
Members of Congress, or the public; internal operating manuals; in-
formal enforcement actions; and all completed reports of FDA testing
and research.
Information which will generally be retained as confidential in-
cludes:
Manufacturing methods, formulas, trade secrets, commercial and
financial information; active investigatory files compiled for law en-
forcement purposes; internal FDA correspondence; and FDA cor-
respondence with other Government agencies.
Mr. Chairman, we are pleased to have been afforded the opportunity
to appear before your committee to describe the Department's current
policies and efforts to obtain greater economies and health benefits
from prescription drug outlays.
The completes my general statement, and I would be glad to answer
any further questions you may have.
Senator NELSON. I guess we have raised this question peripherally
at least. But just for the record, let me repeat it.
PAGENO="0238"
8740 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
In preparation for these hearings, on January 6 of this year I asked
the Department of Health, Education and Welfare for data on drug
expenditures. The following information was requested:
(1) A list of the 50 most prescribed drugs under medicare, and (sep-
arately) medicaid programs for the latest fiscal year available, pref-
erably 1971.
(2) Total expenditures by the Department of Health, Education,
and Welfare under the medicare, and (separately) the medicaid, pro-
grams for each of these drugs for that year.
(3) The prices paid by HEW for each of these drugs in medicare
and medicaid programs during that year.
On April 7 the Department answered these three questions as
follows:
The Department is unable to provide a list of the 50 most prescribed drugs
under the medicare and medicaid programs, the total expenditures and the prices
paid for these drugs. The reporting systems do not provide for a compilation of
the frequency or the total amounts of drug usage and prices paid by individual
drug products.
Now, these products are costing the Federal Government and the
State and local governments approximately $1.5 billion a year.
Don't you think we ought to know what the money is being spent
on, and whether the situation is as it is in the State of Mississippi,
where it would appear that a substantial percentage of the expendi-
tures are for ineffective drugs, or drugs like Darvon Compound 65,
which was rated as an irrational combination, or unnecessary drugs?
Don't you have to do individual studies of this kind by State?
Why can't it be done in the medicare program? Aren't all those
drugs dispensed in an institutional situation in medicare?
Mr. SEGGEL. Yes, that is right.
Senator NELSON. All of them; is that right?
Mr. SEGGEL. Those are the only ones that are reimbursable in medi-
care.
Mr. OLDER. Under the medicare program, cost reports, the cost by
departments rather than the individual items in that department.
For example, we have costs for the pharmacy department in the
hospital, but we don't have the individual costs of the drugs that were
dispensed. We have program validation teams that review some of
those costs, and they review them from the point of view, at least at
present, of whether the costs were reasonable, and whether the pro-
prietors of the hospital had used prudent buying procedures in pur-
chasing these drugs.
Senator NELSON. But you do not know what money was spent on
what particular drug products?
Mr. OLDER. No.
Senator NELSON. So you don't know how much money is being spent
on ineffective, unnecessary, unacceptable, or excessively expensive
drugs; is that. correct?
Mr. OLDER. At this time we don't. We do know the costs of the De-
partment. And we do know that when we find these costs are out of
line, the review teams will compare the costs of certain specific drugs
to see how the costs compare with what they could have been pur-
chased for, either at the wholesale level or at the retail level, but we
do not know the amount spent for each specific drug.
PAGENO="0239"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8741
Senator NELSON. How do you expect to find out whether ornot sub-
stantial amounts of money are being wasted on unnecessarily expensive
drugs or irrational combinations or something else?
Mr. OLDER. We will follow the publication of the ineffective or the
possibly effective drugs, and rule those out, andthey will be excluded
from reimbursement. For a drug that is ineffective, for example, there
will be no reimbursement.
Senator NELSON. How will you do that when you don't know what
the drug money is being spent on?
Mr. OLDER. This will be performed by our intermediaries who re-
view the reports and the data supplied by the hospital. They will have
to be informed, as they will be, of the drugs that are ineffective, and
they will have to review the records to make sure that these are not
part of the drugs that are being paid for.
Mr. SEGGEL. Mr. Chairman, this goes to the point I was making be-
fore about the difficulty of administering a regulation prohibiting the
purchase of "possibly effective" and "ineffective" drugs through the
reimbursement machinery. It is just that at this point in time we don't
have a system by which you can zero in on the individual drugs or to
make any kind of analysis that is meaningful across the board in terms
of totals. But it is something that we are studying.
It would obviously involve extensive computerization, I assume, to
get into that kind of data. This is a huge program covering the whole
health care system of the country.
Senator NELSON. That is the pressing problem. As more and more of
the taxpayer's money is being spent in this field, there is going to be an
increase in demand that the money be spent on the most effective drugs
in the most economical way. I don't know of any way you can control
that unless you establish some procedures. What about the question of
establishing a formulary in the medicare program? Medicaid might be
more difficult. But why don't you, at least in medicare programs, estab-
lish a formulary and purchase from the formularies? Every good hos-
pital in the country has a formulary, and if the practice is well followed
in the hospital, the doctor who wants to prescribe something that isn't
on the formulary has to justify it.
Why couldn't you do that in the medicare program, other than the
standard answer that we get all the time, that the local doctors won't
like it?
Mr. SEGGEL. I think we can certainly consider that. And at this point
I would assume that under medicare we would, under such a plan, have
to relate to every hospital and require as a condition of reimbursement
the establishment of such a formulary. And then the question would be
whether we would police that, so to speak, or exercise surveillance over
it.
Your question before on medicaid went to that point. And what I
would like to do is to say that we hope to get these drugs off the mar-
ket-that is, the "ineffectives." The "possibly effectives" will either go
off or go up in the scale; it is a self-liquidating proposition.
Beyond that, to get into the question of what is good for an individ-
ual patient, I am not sure how much the Federal Government should
get into it and through what methods.
Senator NELSON. It isn't only the question, really of ineffective drugs;
the question is the one of expense. There is a tremendous difference be-
PAGENO="0240"
8742 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
tween the cost of the same compounds marketed under different names.
What do you do about that? Is the taxpayer going to pay $20 a hundred
for a tablet because the doctor prescribes it by a brand name although
it may be available at a dollar under a different name, brand or
genenc?
Mr. SEGGEL. As Mr. Older indicated, they are attempting through
their intermediaries to exercise controls on those costs. And there are
studies going on as to ways and means by which we can improve the
process.
Do you want to add to that, Mr. Older?
Mr. OI1DER. No, except that I would like to say that, as you indicated,
a good hospital has a formulary. There is certainly no difference in the
kind of drugs that are prescribed for medicare patients or for other
patients. We have a specific requirement in the medicare law that we
are not to interfere with the practice of medicine. And we would have
difficulty certainly in saying to a doctor that he should not have pre-
scribed any particular drug or medicine. But this can be said by com-
mittees in the hospital where the doctor gets the criticism or the sug-
gestiOns from his peers.
Senator NELSON. Well, when the Defense Supply Agency purchases
drugs it asks for a bid under a generic name. And all you have to do is
look at the difference between what the Defense Supply Agency will
pay for a product and what the same company is selling to the retail
pharmacist for 50 times or 100 times as much as Defense Supply
Agency pays.
In one case they are in a competitive bid situation, and in the other
place they are being prescribed by brand name. Perhaps you may be
worried about the charge that you would be interfering with the prac-
tice of medicine. But don't forget that you are interfering with the
taxpayer by permitting the use of a very expensive product when its
equivalent is in the marketplace, and there is no doubt about its equiv-
alency, aren't you?
Mr. OLDER. I think our only attack there is our prudent buyer con-
cept; would a prudent buyer pay $20 for it when he could buy it for a
dollar? And that is something that our intermediaries consider in in-
quiring about costs in the hospital.
Senator NELSON. Are you taking specific drugs and checking the
costs in this way?
Mr. OLDER. Yes, in certain cases. In our regional offices we have
program validation teams that go in and see how the intermediary is
doing and how the hospitals that they service are doing in implement-
ing medicare rules. And part of this study is to see, for example, what
the cost of a pharmacy department is. And in checking that we will
take certain drugs and compare the costs paid by the hospital against
the costs that they could have paid as a prudent buyer.
Now, it could be as a by-product of that question as to whether gen-
eric drugs should have been purchased instead of name brands. We
don't have a requirement, however, that says specifically that you have
to buy generic drugs.
Senator NELSON. No, I don't think anybody is suggesting that. But
you should look at the bids that are made to New York City, the De-
fense Supply Agency, the State of Illinois, and the State of California,
and identify the bidders.
PAGENO="0241"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8743
I have referred to the case of prednisone a number of times because
the "Medical Letter" reviewed it. A brand name company offered it
to New York City at $1.20 a hundred but lost the bid to a company that
bid 45 cents a hundred. The same company that bid the $1.20 a hun-
dred to New York City was selling to the pharmacist across the street
at $17.90 a hundred on the same day by brand name.
It was being prescribed by brand name because the doctor was used
to that name. And so you have that cOmpany charging the druggist
$17.90 a hundred, with the patient paying $30 to $35 a hundred, while
that same company is offering to sell in open competition the same
drug, the same brand name, not at $17.90 a hundred, but at $1.20 a
hundred. The question is, should the taxpayers be paying $17.90 a
hundred, when the same firm is trying to sell it at $1.20 at competitive
bids to the city of New York? This is the kind of problem we are going
to confront constantly as we start expanding our expenditure of public
moneys in this field. A billion and a half dollars is a lot of money for
drugs. And that.is just the beginning, it won't be long before we will*
be spending $3 billion in medical care programs paid for by the Fed-
eral Government.
But the taxpayer isn't going to stand for the idea of spending four,
five, and 10 times as much for a drug than the equivalent which is
available to the Defense Supply Agency on competitive bid, just be-
cause a brand name identification moves the doctor to write that pre-
scription in that way.
I don't think the taxpayer is going to stand for that very long. It
raises a big problem. I don't see that it is easy to answer. But it is
going to have to be an&wered at somestage.
With respect to Darvon, all the testimony-unrefuted-is that it is
not a drug of choice. It is a mild analgesic. The Defense Department
was spending about $4.5 million when it could have bought aspirin
for less than $180,000, at a saving of over $4 million. What had de-
veloped was that at the military hospitals this drug was being widely
prescribed routinely, although everybody agreed that it wasn't the
drug of choice.
Well, should the taxpayer be paying more than $4 million extra
just because it is preferred by a physician using public moneys at a
military hospital contrary to the unanimous opinion of the clinical
experts on this drug? That is the question.
So then when you say to the Defense Department, well, certainly in
a military situation you can establish a formulary, they are very wor-
ried about that, because that makes the physician mad at the local
level. If you can't have a rational system of prescribing drugs in the
military services, if you can't do it there you can't do it any place else.
I don't have any more questions.
Mr. GORDON. Why can't you issue a formulary, a list of drugs, with
respect to Medicaid, and state that we will reimburse for these drugs,
and none other? W hat is wrong with that?
Mr. SEGGEL. Mr. Richter?
Mr. RICHTER. We, of course, don't have such a requirement now.
Mr. GoRDoN. In a way you have that requirement, because that mem-
orandum issued by the Surgeon General states that we are not going
to reimburse for certain types of drugs.
80-450 0-72-pt. 22-16
PAGENO="0242"
8744 COMPETITIVE PROBLEMS IN TUE DRUG INDUSTRY
Now, that is a negative way of putting it. Why not put it in a posi-
tive way, we will reimburse for these drugs and none other?
Mr. SFAGEL. I think it is a matter of the way you administer that
program, to what extent the Federal Government will lay down those
kinds of requirements. As I say, we are putting our bets on the regula-
tory process, and the process of continuing education, if you want to
call it that, when you are getting to the practitioners as well as the.
people at large. And we hope to get a lot of mileage out of that, al-
though the Senator is somewhat skeptical.
Mr. GoRDoN. Perhaps you can do it by buying on a central basis,
that is, you order drugs by direct purchase. You don't even have to
touch the drugs at all. You order it from the company, the company
ships directly to the drug stores, and the Government pays the drug
firm. The drug store dispenses the drug. The Government receives the
bill from the druggist for his services.
Mr. SEGGEL. It would obviously involve some additional administra-
tive machinery. I believe there is a study going on on that.
Mr. BRANDS. This particular method was discussed. I don't think
that it has gone much further than the discussion stage. I think you
would run into problems with this because your community practi-
tioner would have to keep separate stock. If he had Government stock
on hand for his medicaid patients or medicare patients, and then he
had stock for his private patients, there would be a lot of confusion
because of switching back and forth. In addition, it would be terribly
hard on the practitioner. What the savings would be, I do not know.
But I think that it would be most difficult for all concerned to admin-
ister by central purchasing and distribution.
Mr. GORDON. Yes, but it is also difficult to be spending one and a half
billion dollars on drugs when we don't even know what we are spend-
ing for and what we are paying for it.
Mr. BRANDS. I agree with you. But I think a study like the San
Joaquin study may develop a method whereby we can keep our finger
on what is going on better than we can right now. I think that we are
looking for waste and methods to improve the system and keep track
of what is going on.
Senator NELSON. Just so there wouldn't be any misunderstanding, I
don't claim to have the answer, and suggest that if you have the an-
swer we would be glad to take it. I simply say that it is becoming a
very serious problem as to which we have to find some sensible, reason-
able answer.
If every institution at least had a good formulary that was scien-
tifically designed, and an internal program of enforcement of that
formulary, basically your problem would be solved, and it is handled
at the local level. As you know, lots of institutions do have that kind
of a system, and more of them are developing it. And from an insti-
tutional standpoint perhaps that problem will be resolved at some
stage at least in general hospitals. I don't know how you do it. in, say,
in nursing homes, where you don't have the same critical collection of
scientific expertise to develop the formulary.
Thank you very much.
You will submit those statistics on the drugs?
Dr. FINKEL. Yes.
PAGENO="0243"
COMPETITIVE PROBLEMS LN THE DRuG INDuSTRY 8745
Senator NELSON. Our next witness is Mr. James Campbell, Assistant
Administrator for Program and Management Services, Agency for
International Development.
Mr. Campbell, the committee welcomes you today. You have some
associates with you.
Mr. CAMPBELL. Yes.
Senator NELSON. Would you identify your associates for the reporter
so that we will have the record straight.
STATEMENT OF JAMES P. CAMPBELL, ASSISTANT ADMINISTRATOR
FOR PROGRAM AND MANAGEMENT SERVICES, AGENCY FOR
INTERNATIONAL DEVELOPMENT; ACCOMPANIED BY LESLIE
GRANT, DEPUTY GENERAL COUNSEL; SEYMOUR BARONDES,
CHIEF, COMMODITY ELIGIBILITY AND PRICE BRANCH, OFFICE
OF CONTROLLER; AND RAYMOND TORREY, CHIEF, INDUSTRIAL
RESOURCE DIVISION, OFFICE OF PROCUREMENT
Mr. CAMPBELL. Yes, sir.
I have with me Mr. Leslie Grant, Deputy General Counsel, Mr.
Seymour Barondes, Chief of the Commodity Eligibility and Price
Branch, Office of our Controller; and Mr. Raymond Torrey, Chief,
Industrial Resource Division, Office of Procurement.
Senator NELSON. Your statement will be printed in full in the record.
You may present it as you desire.
Mr. CAMPBELL. Thank you, Mr. Chairman.
Senator NELSON. The Agency appeared before in 1970, about a year
and a half ago.
Mr. CAMPBELL. Yes, sir.
Thank you, Mr. Chairman. We welcome this opportunity to discuss
the AID pharmaceutical program.
Dr. Hannah, the Administrator of AID, has asked me to testify on
his behalf. About a year and a half ago I took over the responsibilities
formerly held by Governor Lane Dwinell, who previously appeared
before your committee on the same subject.
In our appearance before this committee in August 1970 we de-
scribed, in general terms, the regulations governing the procurement
and pricing of commodities financed under the various programs ad-
ministered by the Agency, with particular reference to pharmaceu-
ticals. As a result of the discussion at that hearing and our recogni-
tion of the peculiar characteristics of the pharmaceutical industry, the
Agency promulgated, on December 31, 1970, special, more stringent
restrictions that pharmaceutical suppliers must meet for their prod-
ucts to be eligible for All) financing.
At a hearing before the committee in February 1971, we described,
in some detail, these new standards. We stated our policy aim to you,
at that hearing as follows:
Formulation of the new standards with their more stringent criteria enables
us to continue to finance pharmaceuticals with some assurance that the interests
of all parties in procuring essential and suitable items at reasonable costs are
safeguarded.
We believe that the experience since December 31, 1970, has ful-
filled our expectations, and hopefully yours. AID has continued to
PAGENO="0244"
8746 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
make funds available to developing countries for financing private
sector purchases of vitally needed, safe, and efficacious bulk pharma-
ceuticals at prices which in general compare favorably with prices
paid by buyers in sales not financed by AID.
I should like to recapitulate briefly the four special pricing stand-
ards that pharmaceuticals must meet to qualify for AID financing.
Prices paid to U.S. suppliers are limited to the lowest price resulting
from any of the following:
(1) the world market prices plus 10 percent;
(2) the lowest price at which the generic product is available from
the United States;
(3) the lower price at which another product can be obtained whEn
experts indicate the lower priced product to be substantially equiv-
alent; and
(4) the lowest price charged in any export sale by the supplier for
the same product. Under this latter standard a supplier may exclude
the lowest priced 5 percent of his sales volume in his calculation of his
lowest price.
On April 5, 1971, rule (4) was modified to make it inapplicable to
sales by a supplier of a nonpatented item to a buyer not affiliated with
the seller. This change was made so that suppliers could sell nonpat-
ented items at world market prices despite the fact they may have
made more than 5 percent of their sales of the item to affiliates at
prices below world market prices.
Under Section 604(f) of the Foreign Assistance Act of 1961, as
amended, AID is required to approve each proposed transaction in
writing as eligible for AID financing. This is the mechanism by which
we have enforced the new standards on a preaudit basis. In our judg-
ment these price standards have proved effective. As you know, under
rule (3), the Agency made 16 high-priced drugs ineligible for fl-
nancing. None of these drugs have been financed since December 31,
1970. We are also on the alert to see whether additional drugs should
be added to the list of 16.
Mr. GoiwoN. Would you name those drugs, please?
Mr. CAMP~ELL. I have a list of them which I will be very happy to
give to you. I can submit it to you now.
Senator NELSON. It will be submitted for the record.'
Mr. CAMPBELL. Rule (1) which relates to world market prices on
which you have asked us to comment, has been effective. Suppliers
have reduced their prices to meet the requirements of this rule. Where
they have refused to do so, it has been our policy not to make AID
funds available.
Mr. GoiwoN. Can you give some examples of that?
Mr. CAMPBELL. Yes, sir.
Senator NELSON. You have compared the prices?
Mr. CAMPBELL. I have prepared a list of examples for you of price
reductions achieved under the new rules and I would like to make that
part of the record.
Senator NELSON. And that shows the prices that they were charging
prior to the new rules, and the prices since?
`See pp. 8751-8752.
PAGENO="0245"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8747
Mr. CAMPBELL. Yes, sir, the prices previously financed or requested
and the prices approved under the special rules, two columns.
Senator NELSON. Thank you. That will be admitted in the record at
the appropriate place.
Mr. CAMPBELL. Most pharmaceutical suppliers have cooperated with
AID in adjusting their prices to comply with restrictions imposed by
the special rules. In a number of instances, suppliers have submitted
applications for approval of AID financing for transactions involv-
ing prices higher than permitted by the rules. When these applications
have been disapproved, suppliers have submitted amended applications
with prices which met our requirements.
Senator NELSON. Do you have examples of that?
Mr. CAMPBELL. Yes. They are included, in the examples that we have
just submitted.
The Agency has accomplished savings of about $100,000 in these
transactions. Much of the savings accomplished, however, cannot be
measured because most suppliers, cognizant of our rules have sub-
mitted transactions for AID approval which in the first instance met
our price standards.
rllhe total FAS value of AID-financed pharmaceuticals in our com-~
mercial import program in calendar year 1971, was $8.8 million. Of
this amount, $4.2 million were for drugs going to Pakistan, $1.9 mil-
lion for India, $1 million to Africa, and ~1.7 million for drugs going
to all other countries. As a consequence of the hostilities between India
and Pakistan, all AID commodity financing was suspended for these
two countries as of December 6, 1971. This has brought commercial
imports of pharmaceuticals under the AID program, at the present
time, to a virtual halt. In addition to the financing of unfinished phar-
maceuticals in the commercial import program, AID also provides
funds for family planning projects and for our missions or importing
governments who receive their requirements under formal bidding or
through procurement by the Department of Defense or GSA.
In 1971, we financed a wide range of pharmaceuticals with partic-
ular emphasis on anti-infectives, vitamins and serums, toxoids and
vaccines. The items which we financed within these categories are gen-
erally items in which U.S. suppliers are known to be competitive in
world markets. Vitamins are a good example of our strong competitive
position in world markets.
A number of large pharmaceutical manufacturers have dropped out
of the AID program because of the special restrictive rules. These are
companies whose major activity in the AID program was in the sale
of one or more of the high-priced 16 drugs no longer eligible. None of
these companies indicated a willingness to reduce the prices of these
high priced drugs to a level that would be acceptable to AID.
Mr. GolmoN. Can you tell us more about some of these companies
that did not indicate a willingness to reduce the prices and they
dropped out of the program? Could you give us a list of them for the
record?
Mr. CAMPBELL. We can either name them now or submit the list.
There are very few.
Mr. GORDON. Go ahead.
PAGENO="0246"
8748 COMPETITIVE PROBLEMS IN THE DRTJG INDUSTRI
Mr. BARONDES. Bristol Myers is one company that has dropped out,
and Squibb is another. Schering Corp. is another. Abbott Laboratories
has virtually dropped out. Merck and Co. has dropped out except for
vaccines. One or two others have also dropped out.
Mr. Goi~oN. Thank you.
Mr. CAMPBELL. Pharmaceutical suppliers are still subject to the
general pricing rules applicable to all AID financed commodity ex-
ports. Basically, these rules provide that a U.S. supplier may not
charge more than the prevailing market price in comparable export
sales from the United States nor may he charge more than the price
he generally charges in his own comparable export sales from the
United States. Where we determine that a supplier has violated these
rules, it is our customary procedure to secure refund of the over-
charges from the supplier.
We previously submitted to the committee details on refunds re-
ceived by AID. In addition to the $2,000,059 that had been refunded
as of July 31, 1970, 12 pharmaceutical companies have since that time
paid or agreed to pay refunds totaling $950,357.39. Two claims total-
ling $117,914.47 have been referred to the Department of Justice for
collection since July 31, 1970.
Senator NELSON. When you say "where we determined that a sup-
plier has violated these rules," you mean siDce the new rules were in-
stituted, you are thiking about cases of violation since then?
Mr. CAMPBELL. No, sir; I have reference to the general rule that we
have, not the new rules that apply specifically to pharmaceuticals.
Senator NELSON. What is the general rule?
Mr. CAMPB~ELL. This is the rule that a U.S. supplier may not charge
more than the prevailing market price in comparable export sales from
the United States, or may charge more than the price he generally
charges in his own comparable export sales from the United States.
Senator NELSON. But that rule wasn't in effect a year and a half ago
when you testified, was it?
Mr. CAMPBELL. Yes; it was, it had been in effect, sir. This is a gen-
eral rule for procurement by AID. It has been in effect for many years.
Senator NELSON. I thought the figures that we had at that time-I
don't have them before me-indicated a large number of cases where
they were charging much more than the world market prices.
Mr. CAMPBELL. Mr. Barondes?
Mr. BARONDES. Under the new rules where we hold suppliers to ap-
proximately the world market price there should not be any claims, be-
cause transactions will not be approved for AID financing if proposed
prices are higher than world market prices. So, we won't have any
claims under the new rules. But most of these claims represent trans-
actions that took place under the old rule where pharmaceutical sup-
pliers charged even higher prices than those allowed under the more
lenient rules that are generally applicable.
Senator NELSON. These are refunds to whom?
Mr. BARONDES. The refunds are payable to AID.
Senator NELSON. Are those AID expenditures, or were these foreign
government expenditures?
Mr. BARONDES. They are AID disbursements under loans made to
these various countries. Generally when the refunds are received by
AID, the money is made available again to those countries who put
up the local currency to bring in these pharmaceuticals;
PAGENO="0247"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8749
Mr. CAMPBELL. In other words, the money is eventually returned to
the country to make a purchase.
Mr. GORDON. How many cases of overcharge did you have last year?
You don't have to tell us now. You can submit it for the record,
giving the names of the firms.
Mr. BARONDES. We did submit, I think, last time a list of all com-
panies against whom we had claims where we either collected, or we
had not yet collected.
Mr. CAMPBELL. We have a list here that we can submit for the
record-it is complete-of the overcharges.
The list of claims previously referred to the Department of Justice
is already in the record. Two claims totaling $343,821.83 are unpaid.
Discussions between AID and the two suppliers involved are con-
tinuing.
Since pharmaceutical prices charged by AID suppliers must meet
both the pricing criteria applicable to all AID financed commodities
and the more restrictive criteria of the special pharmaceutical rules
which are applied on a preaudit basis, we anticipate that no further
refund claims will be required in this product area.
In making our determinations as to the appropriate prices for phar-
maceuticals under the current standards we utilize all sources of
information available to us. A prime source of information is the
pharmaceutical industry itself. Other sources of information' are price
lists of foreign suppliers, actual export sales from the United States
and other countries in which AID restrictions limiting the source of
supply do not apply.
No other U.S. Government agency has a concern comparable to
that of AID with export prices of unfinished drugs. Price information
from other agencies usually does `not reflect commercial export prices
of drugs and is therefore not particularly helpful to AID. AID has
cooperated with other agencies seeking export price information, par-
ticularly HEW. We believe that AID financed prices compare favor-
ably with prices in purchases by other agencies.
You also have asked that we describe the actions taken in regard
to pronouncements by the FDA and other medical experts on the lack
of merit on many drugs.
AID does not finance drugs which the U.S. Food and Drug Admin-
istration has found to be either unsafe or ineffective.
In February 1971, we discussed the FDA's authority to approve
drugs on the basis of both safety and effectiveness. In exercising this
authority, FDA has established four classifications for the drugs it
evaluated: -
(1) Drugs classified as "effective" are those which are supported by
substantial evidence of effectiveness;
(2) Drugs classified as "probably effective" are those which are
supported by some evidence but additional evidence is required before
they can legally be classified as "effective";
(3) Drugs classified as "possibly effective" are those which are sup-
ported by little evidence of effec1~iveness; and finally,
(4) Drugs classified as "ineffective" are those drugs which lack
acceptable evidence of effectiveness.
Under AID policy, pharmaceuticals in finished dosage form are nor-
mally eligible for financing only for use in specific projects in the AID
receiving. countries. Only unfinished pharmaceuticals, or ingredients,
PAGENO="0248"
8750 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
are normally eligible as commercial imports financed with AID pro-
gram funds. This requires that we apply the FDA rulings in two dif-
ferent situations:
First, as they apply to drugs in finished dosage forms, and second,
as they apply to ingredients which we finance as commercial imports
for processing into finished products after their receipt by the importer
in the receiving country.
With respect to the finished products purchased by or for other gov-
ernments for specific projects, all "ineffective" drugs are ineligible for
AID financing including any new drugs added to the "ineffective" list
by FDA.
The application of FDA rulings to the eligibility of ingredients is
complicated by the fact that FDA reviews finished products only. This
means that the lists of finished products must be examined to deter-
mine how they affect the ingredients which AID finances. Since a great
many finished products consist of more than one active ingredient, we
reviewed the FDA lists to identify the ingredients which were found
unacceptable by FDA in any finished dosage form or combination.
These ingredients have been added to our list of products which are
ineligible as commercial imports. This precaution assures us that drug
ingredients found ineffective in any finished product are ineligible for
AID financing in either finished or unfinished form.
Because manufacturers of drugs classified as "possibly effective" are
given a 6-month period in which to make them acceptable to FDA as
"effective" or have them classified "ineffective" by the FDA, we do not
make them ineligible until FDA has reached a final decision on them.
We provide current lists of "possibly effective" drugs to our missions,
and through them, to the importing governments for their use in select-
ing products best suited to their needs. In the commercial sector, AID
has not financed items on the "possibly effective" list.
Mr. Chairman, this concludes my prepared statement. If you have
any further questions on AID financing of pharmaceuticals, my associ-
ates and I will endeavor to answer them.
Senator NELsoN. Can you explain that figure you gave earlier of
saving $100,000 on page 4, "The Agency has accomplished savings of
about $100,000 in these transactions," what do you mean by these
transactions?
Mr. BARONDES. These are those transactions where the drug manu-
facturer has come in with a specific price, and we have rejected that
price as being in excess of that permitted under the guidelines. They
have then come in with a new application at an acceptable price. So
there are these few transactions where we can actually measure the
precise dollar savings. And that comes to a hundred thousand. We
think more often than not the manufacturers, knowing that their
prices have to be in line with the new standards, have come in with
acceptable prices.
Senator NELSON. So, your savings are much greater than that.
Mr. BARONDES. Oh, yes.
Senator NELSON. Have you made any computation as to what sav-
ings have been based upon the new practices vis-a-vis previous years
when much higher prices were being paid?
Mr. BARONDES. Well, we would estimate that that hundred thousand
could be at least tripled to get a more realistic figure. In addition to
that, of course, there are the 16 expensive drugs financed in previous
PAGENO="0249"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8751
years that have now been made ineligible. In previous years we paid
about a million dollars a year for these drugs.
To the extent that we don't finance those expensive drugs at all and
the countries can buy either cheaper drugs or something else which
may be of greater value vis-a-vis the price paid, you could say the mil-
lion dollars is also a saving. So, we estimate overall about $1.3 to $1.5
million in savings, which is fairly substantial percentage of a rather
small program.
Senator NELSON. Is this an annual saving you are talking about?
Mr. BARONDES. This would be an annual savings, yes.
Senator NELSON. Thank you very much, gentlemen. We appreciate
your taking the time to come here.
Mr. CAMPBELL. Thank you very much, sir.
(The information follows:)
sixteen high-priced drugs ineligible for A.I.D. financing
DETAIL OF SIGNIFICANT EXAMPLES OF REDUCED PRICES UNDER AID'S SPECIAL RULES AS COMPARED WITH
PRICES REQUESTED BY SUPPLIERS OR PREVIOUSLY FINANCED BY AID
Supplier and product
Prices previously
financed or re-
quested per kilo
Prices approved
under special
rules per kilo
Wyeth Labs:
Bicillin All-Purpose
Indochlorohydroxyquinolone
White Cross Labs: Phenacetin
U.S.V. Pharmaceuitcals: Inositol NF
$160. 00
23. 10
2.58
$39.90
10. 00
1.60
Sandoz.Wander:
13.55
11.45
Pheniramine Maleate
Phenobarbitol
A. H. Robins: Methocarbamol
40. 80
9.50
30. 00
7.92
American Cyanamid: Ethambutol
Eli Lilly: Erythromycin Estolate
Lakeside Labs:
24.22
100.00
150. 00
14.00
88.00
110. 00
Mepenzolate (Cantil)
Pipenzolate BrOmide
S. B. Penick: Neomycin Sulfate
Abbott Labs: Erythromycin Ethylsuccimate
E. R.Squibb: Nystatin
Cyanamid: Acetazolamide
Warner Lambert: Methenamine Mandelate
Upjohn: Sulfamethizole
Cyanamid: Sulfamethoxypyridine
Schering: Chlorpheniramine Maleate
350. 00
1, 130. 00
35. 00
253. 00
`51.00
53. 00
4. 09-
17.05
35. 25
285. 00
700.00
32.75
178.50
`33.00
17.00
2.93
2 12.00
19. 78
Cyanamid:
Tridihexethyl ChlOride
Trihexyphenidyl
100.00
480. 00
1,700.00
232.40
130. 00
303.00
`Per BOU.
2 Price fipanced by another company.
Generic name
Chiortetracycline.
Doxycycline.
Methacycline HOL.
Demethylchlortetracycljne.
Rolitetracycline.
Oxytetracycline.
Chlorcyclizine.
Cyproheptadjne HCL.
Dexchlorphenjramjne Maleate.
Triameinolone.
Dexamethasone.
Paramethasone.
Betamethasone.
Methyiprednisolone.
Propoxyphene.
Ethoheptazine.
Brand name
Aureomycin.
Vibramycin.
Rondomycin.
Ledermycin, Declomycin.
Bristacin, Syntetrin, Velacycline.
Terramycin.
Histantine.
Periactin.
Polaramine.
Aristocort, Ledercort, Kenacort.
Decadron.
Halcirone.
Celestone, Valisone.
Medaprin, Medrol.
Darvon.
Zactane, Zantirin, Equagesic.
PAGENO="0250"
8752 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
REFUND CLAIMS ASSERTED BY A.LD. AGAINST PHARMACEUTICAL SUPPLIERS
SUPPLEMENT TO CLAIMS INFORMATION FURNISHED TO SENATE SUBCOMMITTEE ON
MONOPOLY ON JULY 31, 1970-AS OF MAY 31, 1970
TABLE 1.-CLAIMS ON WHICH REFUNDS HAVE BEEN RECEIVED
Amount of
Supplier Date of claim overcharge
1 Settlement provides for deferred payment of $71,977.42 portion of this amount during 1972.
2 Refund agreed to.
TABLE 11.-CLAIMS REFERRED TO THE DEPARTMENT OF JUSTICE
Amount of
Date of claim overcharge
Supplier
Amfre-Grant, Inc Apr. 5, 1971 $94, 507. 21
E.Tosse&Co Mar.9,1970 23,407.26
Total (2 companies) 117, 914. 47
TABLE IL-CURRENT CLAIMS UNPAID AS OF JUNE 20, 1972
Amount of
Date of alaim overcharge
Supplier
American Cyanamid Co Dec 8, 1971 $125, 248. 96
Wyeth Laboratories July 1, 1970 218, 572. 87
Total (2 companies) 343. 821. 83
Alcon Laboratories June 9, 1970 $2, 355. 36
American Hoechst Sept. 28, 1970 33, 598. 15
F & S International Ltd Apr. 21, 1970 40, 000.00
Eli Lilly Apr. 22, 1971 221, 366. 39
(Mar. 24, 1971 63,688.80
Merck & Co., Inc May 20, 1970 59, 535.00
~May 20, 1970 9, 336. 00
(Mar. 24, 1971 112,878.00
Merck, Sharp & Dohme (IA.) May 20, 1970 179, 654. 09
tMay2O, 1970 23,769.00
fJune 1, 1971 1,050.00
ar e- avis lApr. 5, 1971 17,740.37
E. R. Squibb & Sons Dec. 17, 1971 47,413.21
Upjohn Inter American Apr. 20, 1971 1108,665.70
U.S.V. Pharmaceutical Co Apr. 1, 1971 855.00
Bristol~Meyers Apr. 6, 1972 2 28, 452. 32
Total (12 companies) (16 claims) 950, 357. 39
(Whereupon, at 12:15 p.m., the committee adjourned, subject to
call of the Chair.)
PAGENO="0251"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8753
APPENDIXES
APPENDIX I
EXHIBITS PROVIDED BY THE FOOD AND DRUG ADMINISTRATION
STATEMENT
BY
CHARLES C. EDWARDS, M.D.
CONMISSIONER OF FOOD AND DRUGS
PUBLIC HEALTH SERVICE
DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE
BEFORE
THE
SUBCOMMITTEE ON MONOPOLY
SENATE SELECT COMMITTEE ON SMALL BUSINESS
MAY 9, 1972
PAGENO="0252"
8754 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
Mr. Chairman and Members of the Subcommittee:
We appreciate the opportunity to discuss with this Committee today
some of the problems in drugs and drug use in this country, to discuss
some of the reasons for the existence of these problems, and to
describe for you the progress we have made over the past two years
toward their resolution. We will also, as requested, review for you
the findings of the Drug Efficacy Study, the impact it has made on
therapeutics in this country and the present status of our implementation
programs.
Before discussing the Drug Efficacy Study and its effects on therapeutics,
it might be helpful to review with you some general aspects of drug
use and some current problems we see in therapeutics in this country.
There are currently approximately 35,000 prescription drug products
and several hundred thousand OTC drug products on the American market
Each year a multibillion dollar effort is made to market, promote,
and sell these products. In some OTC products approximately 30 percent
of receipt of sales is spent in promotion and in the prescription drug
area expenditures on promotion approach in magnitude those on research.
Despite the contention that advertising and promotion is educational,
most of the drug promotion we see is designed primarily to sell, to
motivate the physician to prescribe and the consumer to buy.
PAGENO="0253"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8755
In part, due to the influences of such promotional efforts these drugs
are being increasingly prescribed and such useis increasing rapidly. The
American public is currently receiving over two billion prescriptions
per year and it is estimated that within four to five years this may
increase by 50 percent to three billion prescriptions per year. In
no area is this increase more dramatically evident than in the case of
psychotropic drugs where in 1969 over one billion doses of amphetamines
and two and one-half billion doses of barbiturates were used. The
magnitude of other psychoactive drug use is reflected by the fact that
some five to six billion doses were distributed in 1969 representing
a 65 percent increase in the use of these drugs over a four year period.
We have a rapidly growing, frequently troublesome, occas4onailv
tragic, and to a large extent needless and avoidable problem on our
hands in the misuse of drugs in America.
Since most physicians want to serve their patients well and do what is
best for them it seems reasonable to assume that where poor therapeutics
is being practiced it is at least in part due to poor communication to
the physician of the information he needs to do a better job.
If the physician had balanced information, honestly pointing out the
limitations and actions of a drug, its beneficial and adverse effects and
when it should or should not be given, he would have the information
necessary to make the most rational therapeutic decisions. Too often at
present, this needed information is not readily available to him.
PAGENO="0254"
8756 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
Since drugs are being massively prescribed and since there is risk as
well as benefit inherent in their use it is imperative that the
profession and the public have available the information necessary
for their rational use so that the greatest possible benefit can be
attained. Adequate communication of such information is vital.
A brief review of how physicians currently obtain drug information will
help us understand why some of our current problems came about and what
must be done to correct them. The practicing physician is currently
communicated with in six major ways: Through detail men, advertising
of the pharmaceutical industry either in journals or through direct mail,
medical journal articles, colleagues, medical meetings and the labeling
of the drugs he uses.
A number of recent studies suggest that most of the physicians canvassed
had obtained much of their information about a new drug from drug
manufacturers and their representatives whose interest understandablY is
to make the doctor use it. Other recent studies indicate that it is
very difficult for detail men, who are salaried and sometimes paid
commissions to sell a product, to be sources of truly balanced and
objective information on drugs which the practicing physician needs to
make intelligent therapeutic decisions on his patients'behalf. It must
be stated at this point however that a number of firms are engaged in
major efforts to improve detailing with balanced presentations.
PAGENO="0255"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8757
Approximately $500 million a year are spent in prescription
drug promotion. The large number of drugs marketed, the conflicting
claims that each one is better than the others, the emphasis on
brand names, the rapid introduction of new products that are always
said to be better than the old ones, extensive detailing and the
sheer bulk of advertisements in the mails, the media and in the medical
journals - - all combine to give the doctor and the public a sense of
frustration and confusion.
Other sources of drug information which are made available to the
physician can also be improved. These include the scientific
evidence for drug efficacy and the labeling information on the drugs
he uses. Drug labeling is especially important since it sets the
legal limits for drug promotion and advertising. The final report
of the Drug Efficacy Study addresses itself to an appraisal of both
and here I quote from the report. `The Drug Efficacy Panels expressed
concern and surprise about the generally poor quality of the evidence
of efficacy of the drugs reviewed and the poor quality also of the
labeling of those drugs." The panels found that there was little
convincing scientific evidence to support many of the cited indications
for use of drugs that are currently in good standing in medical practice
and criticized the labeling of about two-thirds of the drugs they
evaluated as failing in their primary purpose of providing the physician
and the pharmacist with balanced authoritative and ~ctivedes
or dispensing the drugs in question.
PAGENO="0256"
8758 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
~hus, too much of the "communication" currently being beamed to the
physician is either scientifically inadequate, lacks fair balance,
is incomplete, inaccurate, and occasionally misleading. Physicians
are the target of an over $500 million effort to sell them something.
This amounts to an expenditure of approximately $4,000/physician/Year
for drug promotion. Over 35,000 prescription drug products, most with
different trade names are clamoring for his attention. How can the
physician be expected to know these drugs or to know that the several hundred
antihistamines, the many coronary vasodilators, adreno-corticoids,
tetracyclines, anticholinergics, and thiazide diuretics, are basically
the same with little or no significant advantage one over the other.
After all no one manufacturer could reasonably be expected to tell him
this. This present "communication overkill" of today with its
resultant confusion is exactly what the already overburdened physician
does not need and it certainly does not serve the public.
What can be done to improve this situation? Before the situation can
be remedied, a number of preliminary steps must be completed:
1. The physician must be made aware of the extent of present
problems which exist both in therapeutics and in the
communications he receives. S
PAGENO="0257"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8759
With the publication of the FDA Drug Bulletin, beginning in
July 1971, the Food and Drug Administration launched a new
and, we believe, an effective means~ of communicating a
variety of types of drug information to over 600,000 physicians,
dentists and other health professionals. The Bulletin is
being mailed to physicians on a periodic and continuing basis.
The Bulletin is being used to explain certain policies, to
announce our approval of new drugs for marketing as well as
our approval of new uses of previously marketed drugs, to
relate the questionable effectiveness or ineffectiveness of
drug~ to caution about newly recognized hazards of "old"
drugs, or to warn against subpotency of drugs. We are
submitting a copy of each Bulletin for the record. Of
course, we will be pleased to answer any questions concerning
them.
2. More understanding is needed of the problems inherent in drug
evaluation. Summaries of the information on which a judgment
was made by this agency to approve a drug for marketing should
be available and used by physicians. As you know, the Bureau
of Drugs is the world's largest repository of original drug
information. The communication of this information to the
medical profession can help improve therapeutics and also
help eliminate wasteful duplication of costly scientific
research. Our recent proposal on Freedom of Information will
80-450 0 - 72 - pt.22 - 17
PAGENO="0258"
8760 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
help bring about needed access to the information in our files
without taking unfair advantage of manufacturers or reducing
incentives for future research.
3. We must study much more thoroughly how a physician
can be reached and assisted to use drug information in order to
build the most effective communication system beamed to him. We
have a number of studies underway which will help us delineate
this process.
4. We need to establish and make available to the physician a
source of objective, balanced, accurate, nonpromotional timely
information which is regularly and continually available to him
and designed especially with the interests of himself and his
patient in mind. This must include any new information which
becomes available on newly discovered, beneficial, or adverse
effects from marketed drugs. To meet this need, we are now
developing plans for a National Drug Experience Reporting System
which will provide information on adverse reactions observed by
physicians, on the epidemiology of drug usage, on intoxications
and drug abuse, and on interactions observed during the intensive
monitoring of selective groups of in-patients and out-patients.
This approach will permit more careful monitoring of new drugs
during the post-marketing phase, pronote identification of rare
PAGENO="0259"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8761
adverse effects more rapidly, and should encourage more careful
drug use by physicians and patients. It will also place FDA
in a position to provide a valuable consultative service to
physicians and other agencies of the Federal Government.
We are also calling on industry to join in our efforts to
gather and make available this kind of information to the
practicIng medical community.
In the meantime, a number of other steps are being taken:
1. Ineffective drugs and formulations which cannot be rationally
used are being removed from the market or reformulated. Only
those drugs for which scientifically adequate evidence of
efficacy is available will remain.
2. Labeling is being improved and those drugs remaining will be
labeled simply but accurately with a fair balance of information.
In a recent speech to the Pharmaceutical Manufacturers
Association, I stated that ideally, the package insert should
tell the physician in the fewest possible well organized words
what the most knowledgeable expert, if consulted, would tell
him about that drug--When, ~ and How to use it and What result
he may reasonably expect. This information will reflect fair
balance from the scientific point of view, not the commercial
and not the regulatory. Let me be more specific; it is wrong
PAGENO="0260"
8762 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
to allow material in the package insert merely for the
purpose of promotion rather than information. It is equally
wrong to delete essential facts sinply because they provide a
basis for promotion. It is wrong to overstate the efficacy
of a drug or to be so vague and general about documented
indications for its use as to encourage improper use. It is
equally wrong to make it read as though a rarely reported side
effect is common.
I firmly believe that the sole purpose of package literature
is to inform the physician. It is, therefore, my hope that
we will be able to effect widespread revision of package
literature, well organized, easily read and understood, with
essential information in fair balance for the physician.
3. where appropriate, class labeling will be employed for like
drugs to avoid confusion on the part of the physician. This can
be of significant aid to him in sorting out the thousands
of drugs available on the market. Many of the antihistamines,
anticholinergics, diuretics, antibiotics, analgesics, and
corticosteroids could fall into such class labeling and some
are already so labeled.
PAGENO="0261"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8763
4. We are hoping the medical literature will be improved with
less duplication of previously published material and with
more reports of adequate and well-controlled clinical trials
which have been carefully assessed by editorial boards before
publication.
5. We are working to get true balance or full disclosure in all
medical advertising so that this $500 million effort becomes
primarily educational, and accurately and fully presents a
drug's advantages and disadvantages.
6. Detailing, as a part of advertising, will also have to achieve
true balance and full disclosure. It is realized that this
will be difficult to achieve and to monitor but it must be done.
7. Finally, we are working to make the general public more
knowledgeable and active in the area of drugs. They should be
more adequately informed of the hazards as well as benefits
inherent in drug use. The fully informed citizen would be unlikely
to accept Chioromycetin for a cold or some other powerful and
potentially hazardous agent for a minor complaint. Likewise,
an adequately informed populace would be less likely to press a
physician for drug therapy when his professional judgment led
him to recommend against it.
PAGENO="0262"
8764 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
In summary, the problems that currently exist are not the fault of
any one group. Correction of the problems will require the combined
efforts of all involved -- the Federal Government, the professional
community, industry, and the public.
I would like to conclude with a report of the present status of the
Drug Efficacy Study. Before doing so, as Commissioner I would like to
publically commend the dedicated professional staff of the Bureau of
Drugs who have worked so diligently to implement this very important
study.
By July 1 of this year, we will have completed and published in the
Federal Register our evaluation of all 3,000 drugs which were in the Drug
Efficacy Study. During 1971, 142 drugs named in Federal Register
announcements as "lacking substantial evidence of effectiveness," and
367 "related" drugs were effectively removed from trade channels,
64 by recall. To date, 452 ineffective drugs specifically covered by the
publication of 102 final orders in the Federal Register are off the market.
This has resulted in the removal from the market of 1473 additional related
drugs. Of the 452 ineffective drugs specifically mentioned in the
Federal Register statements, 338 were fixed combinations, and of the
1473 related drugs removed from the market, 1345 were fixed combinations.
In the months ahead, the drug industry will be carrying out, and the
FDA will be assessing, the studies necessary on drugs which currently lack
adequate evidence of efficacy. Drugs which are unable to provide adequate
evidence of effectiveness will, as required by law, be removed from the
PAGENO="0263"
COMPETITIVE PROBLEMS IN THE DRTJG INDUSTRY 8765
market. This has already been done on many fixed-dose combinations.
In the months ahead, as the results of this study reach more elements of
our society, there will be a major impact on the public, the medical
profession, the drug industry, and Government. In the end, much that is
good will come from this study to the ultimate benefit of the medical
profession and the public. The panels of the NAS-NRC have clearly and
objectively pointed out the problem that faces us in the drug area. One
of the great strengths of the study is that it has been a constructive.
joint effort of the medical profession and the Federal Government.
Procedures set up by this administration will allow a fair and equitable
resolution of these problems in the months ahead. No precipitant actions
will be taken and* whatever actions are taken will be guided by detailed
and fair analysis of adequate scientific data.
A new and high standard has been established for establishing prOof of drug
efficacy and for the evaluation of combination drugs through our new
regulations on adequate and well-controlled studies and our combination
drug policy. This alone should be a major factor in improving therapeutics
in this Country. In time, ineffective drugs and irrational formulations
will be removed from the market.
The effective drugs remaining will be clearly and accurately labeled
so that physicians will have available to them the balanced information
they need for rational drug use. Where possible, this information will
be derived from adequate and well-controlled clinical studies.
PAGENO="0264"
8766 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
To fulfill our obligation to keep physicians fully informed about drug
efficacy, we will require all drug labeling and advertising to disclose
the efficacy ratings of the products involved while required studies are
being done to determine their efficacy. We have also taken appropriate
steps to keep other Federal and State agencies informed of our actions in
the Drug Efficacy Study Implementation.
In the months ahead, a number of drugs will fall by the wayside and
many others will establish the evidence of efficacy required by law. A
massive project such as this cannot be completed without arousing some
emotions. Our policy in this and all matters facing the agency is clear,
"We do have an emotional commitment, a simple one; this is to take the
emotion out of our work. We are not interested in any kind of confrontation,
in political or bureaucratic victories; we are moving very swiftly toward
relationships based not on crusades or rhetoric but on matters of equity
and justice and effectiveness."
With the great deal of critically important work which lies ahead of this
agency in the drug area, we recognize our responsibility to take all steps
necessary to assure the soundness of our scientific judgments ond the
efficiency of our operations. To accomplish this, we have taken the
following steps:
1. In the past two years, we have not only strengthened our own
internal staff, but we have called upon the expertise of the
medical and scientific coiranunity to assist us in strengthening
our scientific reviews.
PAGENO="0265"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8767
2. Today, a total of 260 experts serve on 26 Advisory Committees, and
another 200 advisors will be added to~ this total as the over-the-
counter (OTC) expert review panels are organized. In addition,
the Bureau of Drugs expects to add five new advisory groups in the
coming fiscal year. Just this past week, the first meeting of the
National Drug Advisory Committee was held in Washington. This
newly-formed group is intended to serve as the top policy drug
advisory committee to the Food and Drug Administration.
3. We are taking a number of steps to eliminate the time, cost, and
delay that may affect New Drug Applications. First, we have set
up a Task Force to help detect any faults in our internal
procedures; we have matched this in recent weeks with a major
contract to conduct an extensive study Of these same internal
FDA procedures. With industry and with academic hem, we are
developing guidelines for clinical research. These guidelines
will, we hope, assist individual investigators as well as industry
to more clearly understand what FDA expects -- and to gain this
understanding during the workup of a NewDrug Application. We have
this year established a pilot plan for joint Industry-FDA conferences
at designated points, points during the investigational stage of
new drugs and again prior to submission of New Drug Applications.
The purpose is to speed the overall process by earlier understanding,
better information, and, hopefully, fewersignal changes in mid-stream,
and also to improve thu overall quality of the scientific information
generated about a drug.
PAGENO="0266"
8768 COMPETITIVE PROBLEMS IN THE DRTJG INDuSTRY
4. We are planning new strategy for sorting out INDs to differentiate
between individual physician research and complex commercial
investigations. Both should benefit. We are tightening internal
quality controls through mandatory 90-day review of all working NDAs.
We are soliciting new ideas from industry, from academia, from
professional societies and from within FDA through conferences such
as that recently concluded at Airlie House near Washington.
5. We are asking major FDA Advisory Committees for ideas and review of
criteria for judging efficacy; for example, the amphetamines. We
have now completed the assignment of a statistician to every NDA
review team to insure the statistical quality and completeness of
every submission. This has major implications because it means still
another specific check and balance for data quality. We are
taking necessary steps to simplify as much as possible the
approval of `me-too' drugs through the Abbreviated NDA procedures.
Let us sum up:. We now have 10 years of invaluable experience under
Kefauver-Harris. It is no exaggeration to say that this has been the
most dramatic period of progress in the drug area in FDA's 66-year
history. It has been a tough but useful period of on-the-job training
for FDA and industry alike. Many problems remain but much progress has
been made toward the goal of better drugs and better therapeutics for
the American people.
PAGENO="0267"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8769
DRUG BULLETIN
THE DRUG EFFICACY STUDY
FIXED COMBINATION
PRESCRIPTION DRUGS
ORAL HYPOGLYCEMIC AGENTS
PAGENO="0268"
8770 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
çP~
Os. ~
.~s.
~ ~
~ \91~
PAGENO="0269"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
THE DRUG EFFICACY STUDY
8771
Within the next 90 days, prescription labeling
and promotional material on about 80% of cur-
rently prescribed drugs will display a rating of
the drugs' efficacy for certain of the claimed
md cations.
The action is being taken by FDA in the belief
that the prescribing physician must know the
scientific status of a given drug's efficacy in
order to exercise the best possible clinical
judgment in choosing drugs for patients.
This section attempts to explain the aims and
procedures of the National Academy of Sci-
ences' Drug Efficacy Study (DESI) which led to
this development.
BACKGROUND
The DESI program stems directly from require-
ments of the Federal Food, Drug, and Cosmetic
Act. Beginning in 1938, this law required pre-
clearance of new drugs by FDA for safety. The
Drug Amendments of 1962 (Kefauver-Harris) re-
quired that effectiveness as well as safety of drugs
be established prior to marketing. The amendment
provided that this proof of efficacy be in the
form of "substantial evidence." This evidence was
defined by the Congress as ". . - adequate and
well-controlled investigations, including clinical
investigations, by experts qualified by scientific
training and experience to evaluate the effective-
ness of the drug involved, on the basis of which it
could fairly and responsibly be concluded by
such experts that the drug will have the effect it
purports or is represented to have"
Therefore, since 1962, the FDA has reviewed all
new drug applications for both safety and effec-
tiveness. But the 1962 amendments also required
that all drugs marketed between 1938 and 1962
and tested only for safety, now be evaluated for
effectiveness as well.
Some 4,000 drug products fell into this category
and efficacy evaluation for all of them obviously
posed an enormous task.
To accomplish this task within a reasonable time,
FDA went to the National Academy of Science
for assistance. The Academy assembled 30 panels
with some 200 medical and scientific specialists
described in its 1969 report as "predominantly
physicians with academic affiliations for the
obvious reason that these best met the legal
qualification of `experts qualified by scientific
training and experience to evaluate the effec-
tiveness of the drug(s) involved.'"
The National Research Council - research arm of
the National Academy of Sciences - developed
guidelines for the study. In the course of its work,
NRC consulted manufacturers, professional and
scientific organizations and other interested
parties.
The 30 study panels of the Academy considered
information gathered from all these sources, in-
cluding FDA files and the scientific literature. On
the basis of this information, panel members were
able to make informed judgments.
The panels classified each of approximately 16,000
therapeutic claims for the more than 4,000 drug
formulations into the following categories:
Effective: substantial evidence of effectiveness;
Probably effective: additional evidence required
to rate the drug "effective";
Possibly effective: while additional evidence for
an "effective" rating might be forthcoming, as it
stands there is little evidence of effectiveness, and
in the absence of substantial evidence, the claim
is considered inappropriate;
Ineffective: lack of substantial evidence of
efficacy;
Ineffective as a fixed combination: even though
one or more of the components might be effec-
tive if used alone, not acceptable in fixed dosage
combination for reasons of safety or because of
lack of evidence of contribution of each compon-
ent to claimed effect;
PAGENO="0270"
8772 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
Effective but: with an appropriate qualification.
This difficult group is under reconsideration by
NAS/NRC and FDA.
Each drug received a rating. FDA was given the
first rating report in October 1967; the last re-
port in May 1969.
SIGNIFICANCE TO THE PHYSICIAN
The Efficacy Study revealed that about 60% of all
therapeutic claims reviewed lacked adequate evi-
dence of efficacy under the law. Overall, the NAS
experts reported a "deplorable situation" in the
generally poor quality of labeling and of evidence
submitted in support of efficacy claims.
Many efficacy presentations submitted by manu-
facturers consisted of reports of uncontrolled ob-
servations and testimonial-type endorsements.
There was a "conspicuous" lack of substantial
evidence based on well-controlled investigations
by experienced investigators.
The panels specifically criticized the labeling of
about two-thirds of the drugs they evaluated.
They found too many package inserts to be
"poorly organized, repetitive, out-of-date, evasive
and promotionally oriented." The majority were
found to fail in their purpose of providing the
physician and the pharmacist with authoritative
and objective guides to prescribing or dispensing
the drugs in question. This point takes on added
significance because official labeling sets the
boundaries for pern-''sible advertising and other
promotion.
ThE FDA RESPONSE
In each case, the FDA's conclusions, based on the
NAS/NRC recommendations, are published in the
Federal Register, a daily official journal of the
Federal Government. As soon as~the FDA judg-
ment is published, manufacturer's of drugs with
claims rated less than effective have several
options open to them short of product with-
drawal. They may choose:
- to eliminate or modify questionable claims, or
- to reformulate the product.
When the choice is to develop additional data, the
manufacturers have six months for "possibly
effective" claims and twelve months for "prob-
ably effective" claims. During these periods,
manufacturers may request extension of time
based on development of a satisfactory protocol
for study of disputed claims. The drug may re-
main on the market in the interim if there are no
questions of safety. FDA is well aware that the
studies will take time and will not insist on un-
reasonable time limits in any case.
Overall, the Agency is determined to better meet
the need to reach practicing physicians and other
professionals with all pertinent information on
what is being proposed and accomplished under
the Drug Efficacy program. Furthermore, the
law requires that the labeling of prescription
drugs bear full disclosure of all material facts to
the prescribing physician. On the basis of this
double incentive, FDA is issuing regulations re-
quiring that all labeling and all promotional mate-
rial carry a prominently placed "box" characteriz-
ing the claims for any given drug which have been
judged "probably" or "possibly" effective.
FDA recognizes that drugs of questioned efficacy
will be available by prescription while evidence of
effectiveness is still incomplete. Such a status
will be temporary, and drugs in this category
either will become "effective" as soon as appro-
priate evidence permits, or removed from the
market if this evidence is not forthcoming.
CONCLUSION
The Drug Efficacy Study has been the most
thorough review ever attempted of drugs available
to the physician, When the study is fully imple-
mented, the physician should be able to pre-
scribe any marketed drug secure in the knowl-
edge that its efficacy has been judged on the
basis of acceptable scientific evidence.
- to develop necessary scientific data to sub-
stantiate current claims;
PAGENO="0271"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8773
FiXED COMBINATION
PRESCRIPTION DRUGS
The Drug Efficacy Study focused attention on
questions of efficacy peculiar to combination drug
products. In its 1969 Final Report to the FDA
Commissioner, the National Academy of Science
stated:
"It is a basic principle of medical practice
that more than one drug should be admin-
istered for the treatment of a given condi-
tion only if the physician is persuaded that
there is substantial reason to believe that
each drug will make a positive contribution
to the effect he seeks. Risks of adverse drug
reasons should not be multiplied unless
there be overriding benefit. Moreover, each
drug should be given at the dose level that
may be expected to make its optimal con-
tribution to the total effect, taking into ac-
count the status of the individual patient
and any synergistic or antagonistic effects
that one drug may be known to have on the
safety or efficacy of the other.
"On these grounds, multiple therapy using
fixed dose ratios determined by the manu-
facturer and not by the physician is, in
general, poor practice."
This general opinion of combination drugs is
shared by other expert bodies. The Council on
Drugs of the American Medical Association in a
letter accompanying the recent first edition of
AMA Drug Evaluations says:
SULFONYLUREAS
Following review of the findings of the Uni-
versity Group Diabetes Program (UGDP) on
tolbutamide by FDA and several professional
groups, FDA published last year* recommenda-
tions on the use of oral agents in the treatment
* FDA current Drug Information. October 1970.
"The effects of drugs are intrinsically so
complex that it is generally advisable to
administer multiple agents separately in
order that the dosage and frequency of ad-
ministration of the individual drugs may be
varied in accordance with a patient's re-
quirements. Therefore, most fixed-ratio com-
binations listed are not recommended. This
reflects a long-standing policy of the Coun-
cil."
FDACOMBINATION POLICY
The FDA is not opposed to combination drug
products; it recognizes that many are safe and
effective and provide important advantages to
patient and physician.
For a combination to be approved under the law
there must be substantial evidence that each ac-
tive component contributes to the claimed effect
of the product, a requirement since 1962. If this
requirement is satisfied, two or more drugs may
be combined in a single dosage form when, in
good medical practice, they would be given
concurrently and when putting them together in
the same product in no way detracts from their
safety and efficacy. Such a combination product
should provide appropriate dosage for a signif-
icant patient population that can be defined in
the labeling. A special case of this general rule
is the addition of an ingredient that enhances
the safety or effectiveness of the principal
active component or minimizes its abuse poten-
tial.
ORAL HYPOGLYCEMIC AGENTS
of diabetes mellitus. The INDICATIONS AND
WARNINGS section of the labeling of all sulfonyl-
ureas is how changed to read as follows:
IN DI CATI ONS:
"Diet and reduction of excess weight are the
PAGENO="0272"
8774 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
foundation of therapy of diabetes mellitus and
when the disease is adequately controlled by
these measures, no other therapy is indicated.
(Name of Drug) is
indicated in the treatment of adult-onset, non-
ketotic diabetes mellitus which cannot be ade-
quately controlled by diet and reduction of ex-
cess weight alone and when, in the judgment of
the physician, insulin treatment is not feasible."
WARN I NGS:
(Name of Drug) has
been shown to lower excess sugar in the blood
when administered in appropriate dosage to selec-
ted diabetic patients; this finding constitutes the
basis of its use in such patients. Because the adult-
onset, non-ketotic diabetes population is the only
group in which adequate studies have shown the
utility of the drug in the management of the con-
dition, the use of (Name of Drug) should be
limited to these patients as described in the mdi-
cati~ns section above.
"Twelve university medical clinics comprising the
University Group Diabetes Program conducted a
long-term prospective study designed to evaluate
the efficacy of hypoglycemic drugs in the preven-
tion of vascular complications in adult patients
with recently diagnosed non-insulin dependent
diabetes.
"All patients received diet instructions and, in
addition, were randomly assigned to different
treatment schedules (fixed dosages of tolbuta-
mide, fixed dosage of insulin, variable dosage of
insulin, or placebo). At the end of an eight-year
period, the death rates from cardiovascular
disease were 12.7% or 26 out of 204 patients in
the tolbutamide group, and 4.9% or 10 out of
205 patients in the placebo group, whereas the
cardiovascular death rates in the two insulin
groups were similar to the rate in the placebo
group. The reasons for the higher cardiovascular
mortality in the tolbutamide group are not clear.
These studies provided no evidence that the com-
bination of diet and tolbutamide in the fixed
dosage, as used for these mild non-insulin depend-
ent diabetics, was more effective than diet alone
in prolonging life. The findings suggested that
tolbutamide and diet may be less effective, at
least insofar as cardiovascular mortality is con-
cerned, than diet.alone or than diet and in~ulin.
"Although the UGDP study considered only one
sulfonylurea, tolbutamide, drugs of this class are
sufficiently alike in effects that the physician
should be aware of the above results when pre-
scribing any of them."
Full information of all labeling changes is now
being sent to physicians directly from the manu-
facturers. Physicians are urged to familiarize
themselves as soon as possible with the new
labeling.
PH EN FORM IN
As of May 1971, the University Group Diabetes
Program (UGDP) discontinued the use of
phenformin in their study because of increased
mortality in the phenformin-treated group.
The FDA is currently reviewing this data in con-
junction with other expert groups. Physicians
will be informed of any necessary changes in
phenformin labeling when this review is com-
plete. In the interim, physicians should be aware
of this development in following the current
labeling for this drug.
PAGENO="0273"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8775
1971
DRUG BULLETIN
METHOTREXATE:
USE IN PSORIASIS
SPECTINOMyCIN FOR
ACUTE GONORRHEA
PROBLEM WITH DIGOXIN
ISONIAZID: LABELING CHANGES
FDA APPROVES BONE CEMENTS . FAT LABELING * ADVERSE DRUG REACTION REPORTING
N
80-450 0 - 72 - pt. 22 - 18
PAGENO="0274"
8776 COMPETITIVE PROBLF~MS IN THE DRUG INDUSTRY
M ETHOTR EXATE:
ITS USE IN PSORIASIS
Psoriasis has for ages challenged the
ph ysician's therapeutic resources. A recurrent
disease, it is characterized by exacerbations and
remissions which sometimes are difficult to control
with conventional therapies.
Some cases of psoriasis which are severe,
disabling and resistant to conventional therapy
have been effectively treated with the
anti-metabolite drug, Methotrexate.
The Food and Drug Administration and the
FDA's Advisory Committee on Dermatology have
reviewed a series of clinical investigations and
based on the recommendations of the Advisory
Committee, the FDA has concluded that
Methotrexate is safe and effective for the
treatment of certain cases of psoriasis.
The FDA-approved directions for use in these
cases will soon be available from the manufacturer,
Lederle Labs., and should be reviewed carefully
before the drug is used in the treatment of
psoriasis.
The labeling of Methotrexate restricts its use
in psoriasis to severe, disabling, proven cases
recalcitrant to more conservative treatment and
makes the following recommendations:
- screening of patients by all appropriate
parameters to exclude administration of
Methotrexate to pregnant women and to
patients with preexisting renal, hepatic, or
hematopoietic disease;
- screening of patients to disclose any
preexisting infections that might be activated
by use of an immunosuppressive agent; and
- ensuring the availability of facilities for
close medical and laboratory supervision of
patients receiving the drug for psoriasis.
Supervision should include CBC, urinalysis,
serum creatinine, liver function studies, end liver
biopsy, if indicated.
Methotrexate should be used only by
physicians who are thoroughly familiar with the
severe adverse effects, including deaths, associated
with the use of anti-metabolite drugs. Deaths that
have occurred during Methotrexate treatment for
psoriasis usually have been preceded by signs and
symptoms of bone marrow aplasia (e.g.,
hemorrhagic enteritis). Patients should be fully
informed of the risks involved and closely
monitored. The drug should be discontinued
promptly in the event of developing renal or
hepatic toxicity.
Methotrexate has been marketed for 18 years
as an important representative of anti-neoplastic
chemotherapy. Use of an anti-neoplastic drug for
treatment of an incurable dermatologic condition
must be carefully weighed by the physician after
consideration of the risks and benefit to his
patient.
Methotrexate should be used only when
other, less toxic drugs have failed to bring
improvement to patients disabled with severe
psoriasis. Please note that the drug is to be
dispensed to patients by physicians only.
SPECTINOMYCIN FOR ACUTE
GONORRHEA
FDA recently approved spectinomycin* for
marketing. The drug is indicated only in the
treatment of acute gonorrheal urethritis, proctitis,
and cervicitis, when due to susceptible strains of
Neisseria gonorrhoeae. This antibiotic, a product of
Streptomyces spectabiis, is active against most
strains of N. gonorrhoeae in a minimum inhibitory
concentration varying between 7.5 and 20
mcg./ml. Cross resistance of N. gonorrhoeae
between spectinomycin and penicillin has not been
demonstrated.
Because of its high degree of efficacy and the
long-term experience with penicillin, it is still
considered the drug of choice for gonorrhea unless
the organism is not sensitive to penicillin or the
patient is allergic to penicillin. In addition,
penicillin should be used when syphilis, suspected
or confirmed, is concurrent with gonorrhea.
Spectinomycin has no activity against syphilis. It
should not be administered to children or during
pregnancy.
Spectinomycin is administered only by
intramuscular injection. It is rapidly absorbed. The
antibiotic is not significantly bound to plasma
protein. Spectinomycin can be administered safely
to patients who are hypersensitive to penicillin.
For further details, including dosage, consult
the package insert.
"Trobicin". The Upjshn Company.
FDA DRUG BULLETIN/October 1971/
PAGENO="0275"
In a recent monitoring program on digoxin
tablets, the FDA's National Center for Drug
Analysis reported that 47% of the batches
investigated did not comply with the requirements
of the USP monograph, chiefly because of failure
in the content uniformity test. In one of the worst
examples, NCDA found digoxin tablets containing
twice the declared quantity of active ingredients.
The same bottle contained tablets with 60-70% of
the declared quantity. The manufacturers agreed to
recall the violative lots. A follow-up program on
digoxin tablets is underway, and the Bureau of
Drugs is monitoring production to assure content
uniformity of individual tablets.
On the basis of the digoxin findings, and
other studies of diverse pharmaceutical products
containing high potency drug substances in
relatively low concentrations, FDA has concluded
that direct tests for content uniformity are
essential. Testing of bulk formulation material has
proved unreliable as a measure of uniform content
in individual dosage units. When such procedure is
used, it is still possible for many of the tablets
punched from the formulation mass to fall far
outside permissible potency limits.
The significance of this finding to the
prescribing physician is obvious: If a previously
well-digitalized patient displays signs of under or
over-digitalization, the problem may be with the
drug rather than with the patient. Certainly, this
possibility should be borne in mind when such
signs appear.
The Food and Drug Administration is
working to eliminate the problem of variable
potency and its Bureau of Drugs has undertaken
extensive investigations. In establishing the
National Center for Drug Analysis, the Bureau has
significantly expanded its capacity for gauging the
quality of drug control in general, As a result of
the Center's marked success in developing
sutomated methods of analysis and applying them
`Adapted from a paper delivered at the Mid-Year Meeting of the
National Association of Pharmaceutical Manufacturers, Pebruary
14. 1971. at Washington, D.C., by Daniel Banes, Ph.D., Director,
Office of Pharmaceutical Research and Testing, Bureau of Drugs,
PDA.
In 1970 following the discovery of active
tuberculosis in several employees on Capitol Hill in
Washington, D.C., a large number of individual
employees were placed on isoniazid for
prophylactic purposes. Several developed jaundice.
There were two deaths from hepatitis. This
precipitated new consideration of the hepatic side
effects of isoniazid. An intensive review of
isoniazid followed. Involved in this review were the
National Center for Disease Control, the FDA's
Advisory Committee on Anti-Infective Agents, the
American Thoracic Society, and the National
Tuberculosis and Respiratory Disease Association.
Available evidence could not support a
conclusion that the two Capitol Hill deaths were
caused by, isoniazid. However, it did become
evident that reports of hypersensitivity reactions
such as hepatic dysfunction were more frequent
than had been generally recognized.
As a result of the review of isoniazid, changes
have been made in the package insert. These
changes have the support of the agencies
identified above.
FDA urges your attention to the new
"Warnings"statement in the package insert. It is
evident that careful and periodic monitoring of the
patient is advisable to permit earlier identification
of the signs and symptoms of liver toxicity. At the
first sign of hypersensitivity, including hepatitis, all
drugs should be stopped. If isoniazid is
reinstituted, it should be in small and gradually
increasing doses to determine whether the
manifestations . are drug-induced. Preventive
treatment for tuberculosis should be deferred in
individuals with acute hepatic disease.
The package insert should be consulted for
further guidance. A Guest Editorial, "Isoniazid and
the Liver," follows.
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8777
DRUG QUALITY CONTROL: to individual units of dosage forms, NCDA is now
PROBLEM V'IITH DIGOXIN1 able to focus attention on problem situations
involving deviations from content uniformity
requirements.
ISONIAZID:
LABELING CHANGES
2/October 1971/PDA DRUG BULLETIN
PAGENO="0276"
8778 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
GUEST EDITORIAL
1SONIAZ1D AND THE LiVER
The discovery in 1951 of the
antimycobacterial property of isonicotinic acid
hydrazide (isoniazid, 1NH, 1NA) introduced into
the therapeutic armamentarium one of the most
effective tools ever known for the control of an
in fectious disease. in addition to efficacy it
possessed the features of low toxicity, cost, and
ease of oral administration with concomitant
patient acceptance.
In the ensuing years the therapeutic value of
isoniazid in the treatment of active tuberculosis has
been proven abundantly in world-wide clinical use.
Soon after its introduction, studies suggested
the t it also possessed prophylactic potential.
Extensive trials have clearly established that it is
very effective in preventing tuberculosis infection
from becoming active disease. In high risk groups
morbidity has been consistently reduced by
50-75% over an extended period of years. As a
result its prophylactic administration has become
widespread. Its paucity of untoward reactions has
been considered one of its outstanding advantages.
In the past few years, there has appeared to
be an increasing number of instances of
isoniazid-associated liver dysfunction.
Recently an Ad Hoc Committee on Isoniazid
and Liver Disease, appointed by the U.S.P. H.S.
Center for Disease Control to study data on
isoniazid-associated liver disease and to advise on
its future use as preventive treatment against
tuberculosis, presented its report.
In brief, the committee concluded that liver
disease can occur in patients receiving isoniazid but
that the risk is very small-varying from 0 to 10
cases per 1,000 patients per year. The committee
felt that no changes are warrented in the present
use of the drug in treating active tuberculosis; and
that the present program of isoniazid preventive
treatment and the guidelines for selection of
recipients should not be modified at this time.
However, the report did recommend that a/I
preventive therapy candidates and recipients
should be carefully screened and monitored at
monthly intervals to detect incipient liver
dysfunction. The report detailed the surveillance
procedures.
In reaching a judgment as to whether or not
to place a patient on preventive therapy the
physician must weigh the risk of possible hepatic
damage-the order of this has been mentioned
above-against ?he risk of the development of
active disease. The latter varies considerably in
various high risk groups. In household contacts it is
about 1 in 30 during the first year after discovery
of the index case; there is a similar risk in recent
converters of any age; and in persons with
previously known, but now inactive tuberculosis
who have nor had adequate chemotherapy, the
annual risk is about 1 in 75. One must also
consider that while the risk of liver damage is
present only during the year of preventive therapy,
the ilsk of developing active tuberculosis in the
absence of chemoprophylaxis remains a lifetime
matter with hazard not only to the individual but
to his family and close contacts-and thus to the
óommunity-health and cost-wise.
Isoniazid remains a powerful and very
effective antituberculosis agent which merits
continued therapeutic and prophylactic use even
though liver dysfunction can be associated with its
use. The individual and the community advantages
of its use overbalance the rare possible untowaro
reactions.
Gordon M. Meade, M.D.
Formerly Medical Director,
American Thoracic Society
FDA DRUG eULLETIN/october 1971
PAGENO="0277"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8779
FDA APPROVES BONE
CEMENTS
The Food and Drug Administration
announces approval of New Drug Applications for
Methyl, Methacrylate* for cementing in place total
hip replacement prostheses.
This approval makes available a significant
new therapy for disabled patients. *A significant
number of such patients can now be at least
partially rehabilitated through judicious use of this
new material in orthopedic surgery.
The drug will be available for restricted use as
specified in the package insert. (The manufacturer
will mail each orthopedic surgeon a copy of this
insert.)
The Food and Drug Administration wishes to
express its appreciation to the American Academy
of Orthopaedic Surgeons for help and cooperation
during the approval process. Special appreciation
also is due the orthopedic surgeons who served on
the FDA's Ad Hoc Advisory Committee. Further,
the FDA wishes to compliment the Academy on its
current program to develop training courses in 23
centers to assist orthopedic surgeons in the proper
use of this new drug.
`Surgical Simplex P Bone Cement and Surgical Simplex P
Radiopaque Bone Cement, Howmedica
FAT LABELING
FDA is taking major initiatives to improve
nutritional labeling of food products. Some of
these efforts are of particular interest to
physicians.
Of most interest, perhaps, are proposed
changes in fat labeling. FDA has proposed
regulations requiring product labels to give the
name, source, and amount of fat content, and, on
some foods, the amount and kind of fatty acids
present. Under this proposal, such uninformative
labeling as "shortening" or "vegetable oil" would
be stopped.
FDA is proposing the fat labeling regulations
to provide information to interested consumers
and their physicians. The Agency is not
recommending changes in dietary habits; neither
is it taking sides in any medical discussion.
A related step by FDA is designed to make it
possible for buyers to determine from the label
the nutritional value of the food he is buying.
Several types of labels are being tested to
measure effectiveness from the consumer's
point-of-view. From these tests should come
necessary information to evaluate consumer
understanding, acceptance, and use of nutrient
labeling.
ADVERSE DRUG REACTION
REPORTING
The development and use of increasingly
potent drugs has been accompanied by a
significant incidence of adverse reactions. Recent
reports indicate that as many as 5 percent of
admissions to hospital medical services involve
drug reactions and 15 percent of hospitalized
patients suffer an adverse reaãtion during their
stay.1
The Food and Drug Administration is taking
steps to improve its adverse reaction surveillance
and information programs. An initial move will be
the appointment of an expert advisory committee
to guide agency plans for improved methods of
information gathering and dissemination to the
medical profession.
The FDA also needs help from practicing
physicians through voluntary reporting of adverse
drug reactions. To aid participating physicians, a
short reporting form has been prepared and
pretested successfull,' at a* number of major
medical meetings, including a recent AMA
meeting (Please see proposed form accompanying
this Bulletin. When ready, a supply of forms will
be mailed to practicing physicians.)
All physicians are urged to help; all
physicians will share the results. But only insofar
as the, individual physician shows interest and
participates will these results be meaningful. All
information will be held in confidence. Later
4/October 1971/FDA DRUG BULLETIN
PAGENO="0278"
8780 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
issues of the FDA Drug Bulletin will include tttational Academy of Sciences: Report of the International
progress reports on the Agency's drug reaction conference on Adverse Reactions Reporting Systems. Washington
surveillance program. . ., p
DRUG EXPERIENCE REPCRT Foen Approved
(IN CONFIDENCE) 0MB Na. XXXXXXX
LATENT INITIALS (Optioeiot) DATE OF REACTION ONSET
..USPECTED REACTIONISI
SUSPECTED DRUGISI: TRADE/GENERIC NAME nc~otar.r'~ nan,.. Ifpos.Ibt.)
ISORDER OR REASON FOR USE OF DRUGISI (Oplfonat) ROUTE TOTAL DAILY DATES OF ADMINISTRATION
DOSE
LIttER DRUGS TAKEN CONCOMITANTLY
LOMMENTS (Option~t)
HYSICIANS NAME. ADDRESS. AND ZIP CODE
PAGENO="0279"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8781
NOVEMBER 1971
DRUG BULLETIN
DIETHYLSTILB ESTROL
CONTRAINDICATED
IN PREGNANCY
PAGENO="0280"
8782 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
DRUG'S USE LINKED TO
ADENOCARCINOMA IN
THE OFFSPRING
We wish to bring to the attention of all
physicians, hospitals, and medical personnel an
important possible toxic effect of diethylstilbestrol
reported for the first time in April 1971 by Herbst,
et a11. From their studies the authors concluded
that maternal ingestion of diethylstilbestrol during
pregnancy appears to increase the `risk of vaginal
adenocarcinoma developing years later in the
offspring exposed. The authors studied eight cases
of adenocarcinoma of the vagina in patients born
between 1946 and 1951. The malignancies were
identified and treated between 1966 and 1969. In
seven of the eight cases, there was a history of
maternal use of diethylstilbestrol. Because this
type of malignancy in young girls had rarely been
reported previously, the authors conducted a
retrospective investigation in an attempt to find
factors that may be associated with such
malignancy in this age group. Four matched
controls were established for each patient and the
data obtained were subjected to statistical analysis.
A statistically significant relationship was observed
for three variables: diethylstilbestrol given during
pregnancy (p=.0000l), bleeding in that pregnancy
(p=less than .05) and prior pregnancy loss (p=less
than .01). It is obvious that the most significant of
the variables is the administration of
diethylsti Ibestrol during pregnancy.
Since publication of this study, five additional
cases of this malignancy associated with the
maternal use of diethylstilbestrol have been
reported by Greenwald, et al2. Dr. Herbst, in a
recent communication to FDA, has reported an
additional 15 cases associated with use of this drug,
bringing the total number of known cases to 27. It
must be emphasized that this type of
epidemiologic study defines only an association
and not necessarily a cause-and-effect relationship.
Further studies are underway to clarify the
significance of these findings.
ln the meantime, the FDA is initiating the
following precautionary actions:
1. All manufacturers of DES or closely related
congeners (dienestrol, hexestrol, benzestrol,
promethestrol) are being notified that
appropriate changes will be required in the
labeling for such drugs. This change will
consist in the listing of pregnancy as a
contraindication to the use of
diethylstilbestrol and the other
above-mentioned compounds.
2. All other estrogens will be required to have
the following WARNING in their
labeling: "A statistically significant
association has been reported between
maternal ingestion during pregnancy of
diethylstilbestrol and the occurrence of
vaginal carcinoma developing years later in
the offspring. Whether such an association is
applicable to all estrogens is not known at this
time. In any event, estrogens are not indicated
for use during pregnancy."
3. Epidemiological studies are being initiated to
determine the true incidence of this disease in
young women, the number at risk, the
characteristics of patient populations with
this malignancy, and the probability of a
cause-and-.effect relationship.
Both FDA and the medical profession face a
responsibility to help determine whether this
reported association constitutes a cause-and-effect
relationship. We ask that all physicians consider
appropriate steps to assist FDA case-finding and to
protect any patients who might be at risk.
It may be possible to trace the offspring of those
mothers who received DES during pregnancy. All
physicians should be especially alert for young
women whose mothers may have received
hormonal therapy during pregnancy, particularly
those young women who may be experiencing
irregular vaginal bleeding. The association should
be a routine consideration for physicians whose
practice includes young women.
This is a previously unsuspected health problem.
Further information is essential to the FDA and to
the medical profession. We ask your help in
reporting any cases you encounter for entry in a
case registry.
1. Herbst, et al - Adenscarcinoma s( the Vagina - New England 2. Greenwald, et al - Vaginal cancar After Maternal Treatment with
Josrnal of Medicine - Volume 284, Number te (April 22. 1971). 5ynthetic Estrogens - New England Journal of Medicine, Volume
285, Number 7, (August 12. 1971).
PAGENO="0281"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8783
FDA will take every possible step to insure that reporting form is printed in this bulletin. FDA will
you are kept abreast of new information as soon as forward a supply of forms to each practicing
it can be gathered and analyzed. physician as soon as they are printed. Facsimile
For your convenience, an adverse reaction forms are acceptable.
DRUG EXPERIENCE REPORT Form Approved
(IN CONFIDENCE) 0MB No. XXXXXXX
lENT INITIALS (Optier,eI) DATE OF REACTION ONSET
PECTED REACTION(S)
`ECTED DRUG(S); TRADE/GENERIC NAME (Merofoolororo come, ifpo~oibIe)
RDER OR REASON FOR USE OF DRUG(S) (Oplioool) 1ROUTE TOTAL DAILY DATES OF ADMINISTRATION
DOSE
;R DRUGS TAKEN CONCOMITANTLY
tENTS (Optioeel)
ICIAN'S NAME. ADDRESS, AND ZIP CODE
OPOSED FORM
PAGENO="0282"
8784 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
DECEMBER 1971
flRUG BULLETIN
HEXACHLOROPHENE
AND
NEWBORNS
PAGENO="0283"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8785
HEXACHLOROpHENE
AND NEWBORNS
A number of recent studies have raised serious
questions concerning the toxicity of
hexachlorophene preparations used for total body
bathing of newborn infants. A summary of three
such studies follows:
1. Fifty newborn infants, bathed daily with a
3% h exach lorophene product, showed
hexachlorophene blood levels of .009 to
.646 micrograms/mI. on the day of hospital
discharge. No obvious toxic symptoms
were noted in the newborns. (Curley, A., et
al. Lancet, Aug. 7, 1971.)
2. Rats fed hexachlorophene to achieve mean
hexachlorophene blood levels of 1.21
micrograms/mI. showed brain changes
characterized by cerebral edema limited to
the white matter, and cystic spaces of the
brain believed produced by fluid
accumulation. (Gaines, TB., Kimbrough,
R.D. Paper read at the 10th annual meeting
of the Society of Toxicology, Washington,
D. C., March 7-11, 1971. See also
Kimbrough & Gaines, Arch. Environ.
Health 23:114-118, Aug. 1971.)
3. Newborn monkeys washed daily with 3%
hexachlorophene for 90 days showed mean
hexachlorophene plasma levels of 2.3
micrograms/mi. When they were sacrificed,
the white matter of the brain, particularly
the cerebellum, brain stem and all parts of
the cord, showed lesions consisting of
cystic spaces like those described above.
(Studies submitted by Winthrop Labora-~
tories to FDA on November 18, 1971.)
These studies challenge the safety of
hexachlorophene bathing of infants, a practice
Nhich has been widely advocated as effective
prophylaxis against nursery epidemics of
itaphylococcal skin infections. A critical review of
the studies on which this claim is based indicates
that whereas there is no doubt that
lexachlorophene bathing decreases skin
:olonization of gram-positive organisms, there is a
ack of substantial evidence that hexachlorophene
vashings by themselves prevent staphylococcal
Jisease or show antibacterial activity against
lram-negative organisms. Hospitals are known to
operate nurseries safely without the use of this
product.
The FDA has been in close contact with the
Committee on Fetus and Newborn of the
American Academy of Pediatrics regarding these
findings. In light of these findings and since other
methods of control of infection are available, we
have jointly concluded that the use of
hexachlorophene for total body bathing of infants
in hospital nurseries or at home is not
recommended. In its place the committee
recommends the following procedures:
"At present we recommend dry skin care,
washing with plain soap and water or tap
water alone for skin care of the newborn
infants. It should be emphasized that the
most important factor in the transmission of
infection from infant to infant is hand
contact. This can be minimized by scrupulous
hand washing before entering the nursery as
well as just before and just after handling each
infant. Either an iodophor preparation or 3%
hexachlorophene emulsion is recommended."
The labeling of 3% hexachlorophene products is
being amended to advise against their use for total
body bathing.
The effectiveness of 3% hexachlorophene for
other uses has been studied by the Food and Drug
Administration and the National Academy of
Sciences. On December 8, 1971, FDA published
NAS Drug Efficacy Study evaluations rating such
products effective for use as bacteriostatic skin
cleanser (including surgical scrub). They are rated
possibly effectivev for use in the treatment of
impetigo in newborns and of other staphylococcal
skin infections, and in the treatment of cradle cap
and in helping to clear acne. They are found to be
lacking in substantial evidence of effectiveness for
use in the relief of pruritus ani, for the broad claim
as a vaginal douche, in the treatment of chronic
eczema, in irrigating or cleansing wounds and
burns, and as an "aid to personal hygiene".
Further studies will be necessary to determine
the ultimate usefulness of hexachlorophene
preparations.
`A rating of possibly effecsive means than there is little evidence of
effectiveness for the tiven indication. Substantial evidence of the
effectiveness of drugs is required by law. The responsibility for
substantial evidenca of effectiveness of a drug rests with the
manufacturer.
PAGENO="0284"
8786 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
_______________________________ FEBRUARY 1972
untie BULLETIN
PAGENO="0285"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8787
HEXACHLOROPHENE IN DRUGS,
SOAPS, AND COSMETICS
H exachlorophene is widely used as an
antibacterial component in a large number of
products such as lotions, ointments, powders,
soaps, shampoos and deodorants. It is used in such
products because of its bacteriostatic action against
gram-positive organisms, especially staphylococcus
strains. It offers no protection against
gram-negative infections, and its antibacterial
activity depends on repeated use.
Hexachlorophene is readily absorbed into the
blood stream from normal skin, including that of
newborns, and especially from abraded and burned
skin. The toxicity of hexachlorophene appears to
be related to its concentration in the blood,, and
this concentration increases with the amount of
exposure to hexachlorophene. The margin of
safety between toxic and nontoxic blood levels in
humans and animals appears to be narrow.
In a recent study, baby monkeys developed
brain edema when bathed daily for 90 days with
3% hexachlorophene Misuse of hexachlorophene
products in humans such as application on burn
surfaces or use in vaginal packs, has resulted in
central nervous system toxicity and death.
Daily human use of lower concentrations of
hexachlorophene in deodorant soaps or hand
scrubs, which may produce chronic blood levels of
approximately 1.5 mcg/ml, is not known to
produce toxicity, even after long-term use.
In the past two decades there has been a rapidly
expanding use of hexachlorophene. To protect
consumers from any potential hazard resulting
from such increased exposure to hexachlorophene,
FDA has proposed new action to limit its inclusion
n drugs and related products. The Agency also has
~cted to ensure that in the future all antibacterial
gents intended for chronic daily use have been
dequately evaluated for safety and efficacy. A
ummary of FDA proposed action follows:
1. Hexachlorophene may not be used in
cosmetic products, except as a preservative
in levels up to 0.1%, and then only when
other suitable preservatives are not available.
2. When hexachlorophene is a component of
drugs which have approved new drug
applications, the drug label must read
"Caution: Contains Hexachlorophene. For
external washing only. Rinse thoroughly."
The hexachlorophene level may not exceed
.75%.
3. Drugs containing hexachlorophene in levels
over .75% must bear the prescription label.
4. A panel of experts is being consulted to
determine the safety, efficacy and
appropriate labeling of all over-the-counter
drugs - such as bar soaps - offered for
routine, daily use as antibacterial agents.
The proposed action in no way restricts
physician.directed use of hexachlorophene
products, including the use of 3%
hexachlorophene as a surgical or disinfectant
scrub. The action does, however, reflect FDA
concern that there should be medical
justification for the addition of antibacterial
agents to readily available consumer products.
The new proposals cited above supplement an
FDA warning against total body bathing of infants
and adults with products containing HCP in 2%
and 3% concentrations (see FDA Drug Bulletin
dated December 1971).
Comments on the FDA proposals should be sent
prior to March 7, 1972, to the Hearing Clerk,
Department of HEW, Room 6-88, 5600 Fishers
Lane, Rockville, Maryland 20852.
CORONARy VASODILATOR
EFFICACY
Long-acting coronary "vasodilators,"
widely-prescribed in the management of angina
pectoris, will require extensive study as a result of
a National Academy of Sciences/National Research
Council report questioning the quality of evidence
on the drugs' effectiveness.
The NAS/NRC panel, after evaluating all
available evidence about the drugs, concluded:
* lsosorbide dinitrate tablets, when
administered by the sublingual route, are
"probably" effective for the treatment of
attacks of angina pectbris and for prophylaxis
in situations likely to provoke such attacks.
* The same drug, isosorbide dinitrate tablets, is
only "possibly" effective for the same
indications when administered orally
(swallowed).
PAGENO="0286"
8788 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
* Extended action or conventional oral dosage
forms of pentaeryth ritol tetranitrate,
trolnitrate phosphate, and mannitol
hexanitrate - alone or in combination with
other drugs - are "possibly" effective for the
treatment or prevention of anginal attacks.
* Sustained action nitroglycerin tablets are
"possibly" effective for the treatment or
prevention of anginal attacks.
At this point, it is well to restate what these
NAS/NRC ratings mean. Probably effective
signifies that for a particular indication, the
available evidence indicates that a drug probably
accomplishes its proposed effect, but that
additional evidence is required before the drug can
be deemed "effective" beyond reasonable doubt.
Possibly effective signifies that little evidence of
effectiveness for the given indication has been
obtained. The possibility that adequate supporting
evidence might be developed should not be ruled
out, however.
FDA recognizes that these drugs are widely
regarded by physicians as safe and useful in the
management of angina pectoris in some patients. It
also recognizes the difficulty of designing and
executing controlled clinical studies for
anti-anginal drugs. For these reasons, the Agency
will allow manufacturers sufficient time to
complete the required studies and the drugs will
continue to be marketed during that time. FDA
will keep physicians informed as the studies
develop.
On the basis of the NAS/NRC panel's
conclusion, physicians may wish to reevaluate the
role of long.acting coronary vasodilators for their
patient.
NITROGLYCERIN PACKAGING
AFFECTS POTENCY
A recent FDA assay survey of nitroglycerin
tablets suggests that improper packaging has a
crucial bearing on the drug's stability and potency.
The assay involved nitroglycerin tablets stored in
a pen-shaped plastic container provided by
pharmacies as a convenient means of carrying
several days' supply. Dispensers containing the
drugs were left standing at room temperature for
1-, 2., and 3~day periods.
The nitroglycerin was found to have decreased
to about 50%, 30% and 20% of initial potency
after being left in the dispensers for these periods.
FDA has requested recall of the dispensers.
The assay led FDA to conclude that
unexplained patterns of therapeutic response by
patients to nitroglycerin therapy may be caused by
the manner in which the drug is packaged.
Physicians should consider this possibility when
evaluating patient response to the drug.
To avoid rapid loss of potency, nitroglycerin
should be kept at all times in tightly-sealed glass
vials. Physicians and pharmacists may wish to tell
patients this when prescribing and dispensing the
drug.
CAUTION ADVISED IN USE OF
iRRIGATiNG FLUIDS
Recent bacteriologic sampling programs of
commercially produced irrigating solutions with
screw cap closures have revealed microbial
contamination of the glass thread area and the cap
components in some of the lots tested.
Occasionally, the fluids themselves have been
found to be contaminated. No human health
problems have been reported.
The FDA is now working with th
manufacturers of these products to develop
closure system which can be used for such fluith
and which will be free of this potential problem
Physicians and hospital personnel will be kep
advised.
In addition to usual aseptic technique, th~
following precautions are recommended wher
using such solutions with screw top closures:
* Do not use intravenously;
* Do not strike bottle caps to open; discard i
not opened easily;
* Do not replace caps;
* Use solutions immediately on openinl
Discard unused portion.
FDA TO EVALUATE O-T-C DRI.
PAGENO="0287"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8789
S. DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE
Public Health Service
FOOD AND DRUG ADMINISTRATION
5600 Fishers Lane
Rockville, Maryland 20852
OFFICIAL BUSINESS
FDA DRUG BULLETIN
I U.S.MAIL I
L~J
FIRST CLASS
News and Reports of Interest to
Practicing Physicians and Allied
Health Professionals, Issued by
the Food and Drug Administra-
tion, Department of Health,
Education, and Welfare. Com-
ments are invited. All corre-
spondence should be addressed
to the Assistant to the Director
for Medical Communications,
Bureau of Drugs, BD-40, Food
and Drug Administration,
5600 Fishers Lane, Rockville,
Maryland 20852
FDA TO EVALUATE O-T-C DRUGS
The F ood a nd D rug Administration has
mbarked U~Ofl a major scientific and regulatory
irogram designed to assure that all
iver-the-counter drugs are safe, effective, and
ccurately labeled for the relief of minor illnesses
nd discomfort.
Responsibility for evaluating the
ver-the-counter drug products on a class-by-class
asis will rest with expert panels, to be appointed
y FDA. Each panel will consist of physicians with
extensive knowledge of the drugs involved. A
National Drug Advisory Board, chaired by Food
and Drug Commissioner Charles C. Edwards, M.D.,
will supervise the evaluation.
The basic scientific undertaking will take two to
three years to complete. Meanwhile, FDA is
continuing implementation of the National
Academy of Sciences review of efficacy of
prescription drugs (see Drug Bulletin, July 1971).
The aim of both programs is to assure physicians
and the public of the safety, efficacy and accurate
labeling of all marketed drugs.
POSTAGE AND FEES PAID
U.S. DEPARTMENT OFH.E.W.
IMPORTANT PRESCRIBING INFORMATION
FROM CHARLES C. EDWARDS, M.D.,
COMMISSIONER OF FOOD AND DRUGS
DRUG BULLETIN
February 1972
PAGENO="0288"
8790 COMPETITIVE PROBLEMS IN THE DRuG INDUSTRY
May 1972
DRUG BULLETIN
ORAL HYPOGLYCEMIC
DRUG LABELING.
METHADONE
FOR HEROIN ADDICTiON
IODOCHLORHYDROXyQUIN
AND TRAVELERS DIARRHEA
IMIPRAMINE AND ALLEGED BIRTH DEFECTS
FDA S USE OF OUTSIDE CONSUL~TANTS
PAGENO="0289"
COMPETITIVE PROBLEMS IN THE DRTJG INDUSTRY
FINAL LABELING APPROVED FOR
ORAL HYPOGLYCEMIC DRV~S
FDA'S USE OF OUTSIDE CONSULTANTS
8791
All fourof the Food and Drug Administration
decisions described in this Drug Bulletin were made
only after the Agency consulted experts outside
the Federal Government
The use of non-Government experts as
consultants on major medical judgments reflects
FDA `s commitment to base important regulatory
decisions on the best available scientific evidence.
Fourteen advisory committees made up of 112
medical experts meet regularly with FDA `s medical
staff in the Bureau of Drugs to discuss important
issues. Additional committees are now being
formed. The overall direction of the Agency's
regulation of prescription and over-the-counter
drugs is influenced by a National Drug Advisory
Council.
These committees supplement FDA's medical
capabilities. FDA believes that the use of outside
consultants, combined with the expertise of FDA `s
own physicians, leads to sound and well-balanced
medical regulatory actions.
Group Diabetes Program (UGDP) study.
The long-term UGDP study provided the basis
for the labeling. That study suggested that the use
of the sulfonylurea drug tolbutamide and the
biguanide drug phenformin were associated with a
greater incidence of cardiovascular mortality than
diet alone, or than insulin plus diet.
Although the specific sulfonylurea drug studied
by UGDP was tolbutamide (Orinase), the
conclusions apply equally to all sulfonylureas -
Diabinese, Dymelor, Orinase and Tolinase -
becauseof their close chemical relationship. Of the
biguanides, only DBI-TD was studied by UGDP,
but the conclusions apply to DBI and Meltrol as
well.
Further studies are being undertaken to shed
additional light on the role of sulfonylureas and
phenformin in the management of diabetes
mel litus.
The "indications" section of the labeling
approved recently by FDA for all oral
hypoglycemic drugs says:
The most recent labeling for the sulfonylurea
drugs and for phenformin, approved by the Food
and Drug Administration, provides that these drugs
are indicated in the treatment of adult-onset,
non-ketotic diabetes mellitus only when the
condition cannot be controlled adequately by diet
and reduction of excess weight alone.
The labeling includes a SPECIAL WARNING
which says:
Diet and reduction of excess weight are the
foundations of initial therapy of diabetes
mellitus. When the disease is adequately
controlled by these measures, no
hypoglycemic drug therapy is indicated.
Because of the apparent increased
cardiovascular hazard associated with oral
hypoglycemic agents, they are indicated in
adult-onset, non-ketotic diabetes mellitus
only when the condition cannot be
adequately controlled by diet and reduction
of excess weight alone, and when, in the
judgment of the physician, insulin cannot be
employed because of patient unwillingness,
poor adherefice to injection regimen, physical
disabilities such as poor vision and unsteady
hands, insulin allergy, employment
requirements, and other similar factors.
This labeling and therapeutic regimen for
diabetes mellitus are consistent with the
therapeutic recommendations of the American
Diabetes Association and the Council on Drugs of
the American Medical Association, with which
FDA consulted on the evaluation of the University
Oral hypoglycemic drugs are indicated in the
treatment of adult-onset, non-ketotic diabetes
mellitus only when the condition cannot be
controlled adequately by diet and reduction
of excess weight alone.
Because of the increased cardiovascular
hazard which appears to be associated with
oral hypoglycemic agents, the drugs should be
used only after full consideration of the
special warning.
80-450 0 - 72 - pt.22 - 19
PAGENO="0290"
8792 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
METHADONE FOR
HEROIN ADDICTION
FDA plans to sanction increased use of
methadone as a substitute for heroin. Maintenance
treatment of patients 18 years and older with oral
dosage forms of methadone will be available at
about 450 Drug Addiction Centers throughout the
United States. Each Center is being inspected by
health officials and is subject to FDA approval.
To control illicit traffic in methadone, the drug
will be available only in approved Centers and
hospital pharmacies. Accu rate record-keeping for
the drug will be required. These restrictions do not
prohibit use of methadone in the treatment of
severe pain or for detoxification of addicts in
hospitals.
Methadone taken by mouth prevents heroin
withdrawal symptoms and, in general, controls the
intense desire or need for heroin. Addicts who stay
on methadone maintenance programs are often
able to return to a normal life pattern.
FDA's decision was made after consultation with
the National Institute of Mental Health and the
Justice Department's Bureau of Narcotics and
Dangerous Drugs, and was endorsed by The Special
Action Office for Drug Abuse Prevention of the
White House. FDA also had the advice and opinion
of many other groups, such as the AMA's Council
on Mental Health. The consensus is that current
evidence on the safety and effectiveness of
meth~done is sufficient to permit its use for
narcotic addiction in adults.
0 DO CH LO R HYD RO XYQU IN
AND TRAVELERS' DIARRHEA
The Food and Drug Administration recommends
that iodochlorhydroxyquin (Entero.Vioform) not
be given to prevent "travelers' diarrhea."
FDA's conclusion is based on recent findings in
Japan, Australia and Sweden implicating
iodochlorhydroxyquin as the cause of a frequently
severe neurologic complex, subacute myleo-optic
neuropathy (SMON). Evidence is not yet available
to confirm this association, but it appears that
too.long-continued dosing with
iodochlorhydroxyquin may be a major factor in
SM ON.
There is no acceptable evidence that other
hal ogenated hydroxyquinolines, chiniofon and
diiodohydroxyquinoline (Diodoquin), are effective
in the treatment or prevention of "travelers'
diarrhea."
Travelers to areas where hygiene and sanitation
are poor may be able to prevent diarrhea by eating
only recently peeled or thoroughly cooked foods,
and by drinking only boiled or bottled water,
bottled carbonated soft drinks, beer or wine. Tap
water used for brushing teeth or for ice in drinks
may be a source of infection. The cause of the
diarrhea is uncertain.
Most tropical disease specialists believe
iodochlorhydroxyquin is ineffective for "travelers'
diarrhea." Labeling of the product cites only
intestinal amebiasis as an indication.
IMIPRAMINE AND ALLEGED BIRTH DEFECTS
Recent alarm about possible implication of
imipramine (Tofranil), an anti-depressant drug, in
birth defects (amelia and phocomelia) appears to
be without firm foundation. A report of an
association between imipramine given pregnant
mothers and congenital deformities in their
offspring came from Australia in early March.
The Australian Department of Health recently
informed FDA that it regards as inconclusive the
data on which the report was based. In addition,
the Department of Health and Social Security in
London told FDA that during the eight years the
British Committee on Safety of Drugs has been in
operation, only one report of congenital
abnormality of a limb associated with imipramine
has been received. Amelia and phocomelis
occasionally occur without known association with
drugs.
FDA-approved imipramine labeling in use sinc
1965 contains the following warning: "Safe use o
imipramine during pregnancy and lactation has no
been established; therefore, in administering thE
drug to pregnant patients, nursing mothers, o
women of childbearing potential, the potentia
benefits must be weighed against the possiblE
hazards. Animal reproduction studies have yieldec
inconclusive results. There have been clinica
reports of congenital malformation associated witi
the use of this drug, but a causal relationship ha
not been confirmed."
PAGENO="0291"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8793
CHAYET & FLASH,
Boston, Mass., October 7, 1971.
COMMISSIONER OF FooD AND DRUGS,
Department of Health, Education, and Welfare,
Washington, D.C.
DEAi~ SIR: I am herewith transmitting a petition relative to the Food and Drug
Administration's actions based on the agency's acceptance of and extrapolations
from the conclusions of the University Group Diabetes Program.
I would appreciate a prompt reply to this petition and would hope that in any
case, one could be received within 30 days.
I anticipate that the petition will be printed in the Federal Register in the
usual course. Kindly address your reply to me at the above address.
Very truly yours,
NEIL L. CHAYET.
PETITION OF COORDINATING COMMITTEE OF THE COMMITTEE ON THE CARE OF THE
DIAlarric TO COMMISSIONER OF FOOD AND DRUGS
(From the office of Neil L. Chayet, Esq., Chayet & Flash, 15 Court Square,
Boston, Mass.)
COMMISSIONER OF FOOD AND DRUGS,
Department of Health, Education, and Welfare,
Washington, D.C.
DEAR Sm: This petition is submitted with respect to (1) the issuance of
recommendations contained in the October, 1970 FDA Current Drug Information
Bulletin entitled, "Diabetes Prescribing Information" and (2) the recommended
changing of the INDICATIONS AND WARNINGS section of the labelling of
all sulfonylureas as stated in the June 23, 1971, FDA Drug Bulletin.
Attached hereto, in quintuplicate and constituting a part of this petition are
the following:
A. The FDA Current Drug Information, October, 1970 (marked
Appendix A).
B. Relevant excerpts from FDA Drug Bulletin dated June 23, 1971
(marked Appendix B).
C. Written communications of Robert F. Bradley, M.D. and the Committee
on the Care of the Diabetic to the FDA. (marked Appendix C).
D. A statement of the grounds upon which your petitioner relies for the
action requested herein (marked Appendix D).
The recommendations which are the subject of this petition have been made by
the Food and Drug Administration (FDA) as a result of the report of the
University Group Diabetes Program (UGDP). This report has been the subject
of intense controversy since its conclusions were made known both because of
the unprofessional manner in which the conclusions originally became known,
in the lay press, as* well as the irreparable flaws of its methodology, and the
major inconsistencies in the conclusions. The report, which suggested that
tolbutamide is no more effective than diet alone in the treatment of mild adult-
onset diabetes, is insupportable in the light of impartial scientific inquiry, and
the Food and Drug Administration, by embracing its conclusions, has intruded
into the practice of medicine, placing the physician who continues to prescribe
tolbutamide for the treatment of maturity-onset diabetes in jeopardy and caus-
ing great concern on the part of more than a million diabetics and their physicians
who have regularly used this drug.
This petition is grounded in three fundamental principles:
1. Regardless of the validity of the UGDP study, it is the contention of
your petitioners that the Food and Drug Administration's legal mandate is
solely the regulation of drurs as to safety and efficacy and not the control
of medical or scientific practices; furthermore, the FDA should not engage
in the establishment of an official governmental policy in respect to the
practice of science or medicine. We believe this to be as true for the treatment
of diabetes as it would be in relation to such procedures as cardiac surgery
or kidney and heart transplants.
PAGENO="0292"
8794 COMPETITIVE PROBLEMS 11N THE DRuG INDUSTRY
2. The government should particularly refrain from taking a partisan
position and establishing a "government line" in an area of medicine and
science in which extensive controversy and debate exists among qualified
scientists and/or physicians. In the present situation such a position has
been taken despite the absence of corroborating studies which have repro-
duced the UGDP findings, an essential criteria in the establishment of scien-
tific principles. Even if the UGDP study were beyond reproach, which the
statement marked "Appendix D" will show it is not, the FDA should not
adopt the singular position of one group if contradicting positions are advo-
cated by other qualified scientists and physicians. With respect to the UGDP
findings, strong controverting data and extensive comment, disagreement
and experience among a large body of extremely well qualified scientists
exists and is a matter of scientific record. Furthermore, in this situation the
FDA has ruptured its own rule of fair balance in failing to present the other
side of the issue in its mailings and statements, even as it has itself taken
sides in the issue.
3. The single study upon which the FDA bases its action has been criti-
cized on professional, scientific, clinical, statistical, and other grounds.
Furthermore, FDA action did not properly reflect the criticisms and recom-
mendations of its own medical advisory panel on the subject. In effect, de-
spite repeated requests for over a period of a year from many different
sources, the basic data of the study remain unavailable to the scientific
community and the recent report on phenformin' presents an inadequate
~imount of protocol material to enable adequate scientific evaluation. The
6/23/1971 FDA Current Information Bulletin nevertheless made the general
statement that "although this study considered only one sulfonylurea, tol-
butamicle, it raises serious questions as to the ultimate place of all anti-
diabetic agents in the treatment of diabetes mellitus."
This petition for a reversal and clarification of the FDA's positions as stated
above is thus grounded not only on the basis of the fundamental principle of
the separation of science and state, but also on the fact that legitimate scientific
controversy exists and the UGDP study has been controverted by a large and
leading body of specialists in the field as being more than just erroneous. In
point of fact, the FDT has sought in this situation to regulate therapy on the
basis of an experiment which is based on faulty methodology, which has disre-
garded many essential recommendations related to the true therapeutic applica-
tion of the agents under study, and in doing so has extrapolated without valid
statistical basis, thus flying directly in the face of the caveat of the authors of
the UGDP study themselves, to wit:
"It should be noted that any conclusion reached in this study pertains only
to the type of patient studied and to the specific hypoglycemic agents and dosage
schedules used. Extrapolation of findings obtained in the UGDP to other dosage
schedules of the same drug or to other chemically related hypoglycemic agents
not included in this study must be made on a judgmental and nonstatistical
basis."
In addition, it was recently reported that Dr. Christian R. Klimt, the statisti-
cal coordinator of the [JGDP study, stated that a similar trial of diabetic oral
agents, which he will be conducting in Yugoslavia under FDA auspices, will
employ a flexible dosage regimen and be confined to a symptomatic diabetic popu-
lation. ~ The use of fixed dosage and asymptomatic patients are two of the serious
~limiting factors in the UGDP study (see Appendix D). This action by the
statistical coordinator indicates the merit of the most serious criticism which has
been levelled at the TJGDP report.
It has also been reported that the protocol in regard to the double blind tech-
nique may not have been followed in every partcipating clinic for all patients
(see Appendix D, Part 2).
Lastly, it should be noted that the conclusions of the study have been specifi-
cally rejected by the Canadian Food and Drug Directorate, the Canadian Dia-
betes Association, the British Committee on Drug Safety, the British Diabetes
1 "Effects of hypoglycemic agents on vascular complications in patients with adult-onset
diabetes," JAMA August 9, 1971.
2 "University droup Diabetes Program," Diabetes 19, Supp. 2, 1970.
3 Trade News, August 23, 1971.
PAGENO="0293"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8795
Association, the German Ministry of Health, the German Diabetic Society, and
the Swedish government.
Failure to grant petitioner's requests will result in a continuance and aggrava-
tion of damage which has already been perpetrated by the dissemination of these
recommendations already made and the suggested labelling changes. As a result
of actions taken by the Food and Drug Administration, an undetermined num-
ber of patients stopped taking medication on their own or were taken off the
medication by their alarmed physicians and subsequently became symptomatic.
Failure to grant these requests will cause further irreparable harm to more
than a million patients, particularly to their relationship with their physicians
and to their personal psychic stability so essential in a disease such as diabetes.
Failure to grant the request will perpetuate the unjustified damage done to a
large number of physicians and research scientists in the field of diabetes with
respect to their standing in the public view as well as in the medical and scien-
tific communities.
The Food and Drug Administration has taken a partisan position in an area
of valid and continuing medical and scientific discussion and debate. This is a
serious error both in principle and in fact. The Food and Drug Administration
identification with a controversial study which has been subject to extensive
criticism is particularly unfortunate.
It must clearly be recognized that the government has no role as a partisan in
valid continuing scientific controversy.
Your petitioners, in reliance on the statement contained in Appendix D of this
petition, respectfully request that the following steps be taken immediately:
(1) That the recommendations contained in the October 1970 Food and Drug
Administration Current Drug Information Bulletin, entitled "Diabetes Prescrib-
ing Information" be immediately rescinded and that notice of such rescission
be distributed in exactly the same manner as the Bulletin was distributed.
(2) That the recommendations which would change the Indications and Warn-
ings section of the labelling of all sulfonylureas as stated in the June 23, 1971
Food and Drug Administration Drug Bulletin be rescinded and that notice of
same be distributed in exactly the same manner as the Bulletin was distributed.
(3) That the Food and Drug Administration use its best efforts to restore the
confidence of patients in their physicians who use tolbutamide and the sufonyl-
ureas generally.
(4) That pending corroboratory studies the Food and Drug Administration
refrain from making any further recommendations related to hypoglycemic
substances based on the University Group Diabetes Program and that any actions
related to the UGDP studies avoid debatable extrapolations and clearly indicate
the study's deficiencies and the controversial nature of its implications. And
that any references be made in the context of fair balance as above stated.
(5) That the Food and Drug Administration repudiate all other recom-
mendations, statements, mailings or communications of any kind which have
been distributed to the medical and scientific communities, to the lay press, or
to the general public based on the UGDP study and that the Food and Drug
Administration use its best efforts to widely disseminate such repudiation.
(0) That the Food and Drug Administration make available to your petition-
ers and other qualified researchers the baseline data of the University Group
Diabetes Program; such baseline data shall include the total patient record of
each patient included in the study.
(7) That in accord with its policy ~f fair balance, the Food and Drug Admin-
istration disseminate with equal effort, emphasis and frequency, the results of
all other studies reported by qualified researchers as well as clinical opinions of
outstanding diabetologists which disagree with or controvert UGDP study and
the conclusions extrapolated therefrom.
(8) That your petitioners be provided with full and complete answers to the
following questions:
(a) By virtue of what statute, regulation, rule, or other legal authority
does the Food and Drug Administration establish therapeutic regimens by
stating preferences-i.e., first, diet; second, insulin and third, oral agents-
in its Bulletins marked Appendix A and Appendix B of this petition?
(b) Why did the Food and Drug Administration ignore the views of the
majority of its own Advisory Committee on Diabetes, a committee that was
composed of four diabetologists, two biostatisticians and a biochemist? That
majority was not willing to accept the conclusions of the UGDP report.
PAGENO="0294"
8796 COMPETITIVE PROBLEMS l~N THE DRUG INDUSTRY
(9) That any other relief be granted that the Food and Drug Administra-
tion may deem meet and proper to fulfill the spirit and letter of this petition.
Respectfully submitted.
ROBERT F. BRADLEY, M.D.,
Medical Director, ,Ioslin Clinic, Boston, Mass.
HENRY DOLGER, M.D.,
Professor of Clinical Medicine, Mount Sinai School of Medicine, City Uni-
versity of New York, New York, N.Y.
PETER H. F0R5HAM, M.D.,
Chief of Endocrinology, Prof essor, Department of Medicine, University of
California Medical Center, San Francisco, Calif.
HOLBROOKE S. SELTZER, M.D.,
Chief of Endocrinology, Professor of Internal Medicine, Veterans' A4min-
istration Hospital, University of Tewas, Southwestern Medical School,
Dallas, Tee.
NEIL L. CHAYET, Esq.,
Attorney for the Committee.
(Note.-AppendixeS supplied by the FDA were too voluminous to be incorpo-
rated in this volume, and were retained in Committee files.)
DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE,
PUBLIC HEALTH SERVICE,
FOOD AND DRUG ADMINISTRATION,
Rockv'ille, Md., June 5, 1972.
NEIL L. CHAYET, Esq.,
Chayet c~ Flash,
Boston, Mass.
DEAR MR. CHAYET: This is in response to your petition filed on behalf of
the Coordinating Committee of the Committee on the Care of the Diabetic,
requesting the Food and Drug Administration to rescind its decision to require
new labeling for oral hypoglycemic agents. We have considered both the sub-
mission filed on October 7, 1971, and the additional material filed on January
10, 1972.
We have considered your petition in two parts. The petition first questions
the legal authority of the Food and Drug Administration to require the labeling
in question on the ground that this regulates the practice of medicines. This
aspect of the petition is considered in Part I below. The petition then questions
the scientific reliability of the UGDP Study and argues that it is not adequate
support for the proposed labeling. This aspect of the petition is considered in
Part II below, as supported by Appendix A and its attachments.
I. THE LEGAL ISSUES
Your petition contends that, because FDA's legal authority extends solely
to the regulation of the safety and effectiveness of drugs, and not to the con-
trol of medical or scientific practices, the Agency may not legally require the
Use of labeling for oral hypoglycemic agents which limits their recommended
use to selected cases under specified circumstances. You also argue that such
labeling would violate the statute by failing to state that there is a large body
of opinion contrary to this proposed labeling. Each of these arguments is con-
sidered separately below.
A. The legal status of the package insert. Your first argument, that FDA Is
without legal authority to require the labeling in question, misconceives the
scope of the Federal Food, Drug, and Cosmetic Act, as intended by the Congress.
Section 502(a) of the Act states that a drug is misbranded if its labeling
Is false or misleading in any particular. Section 201(n) of the Act further
states that, in considering whether labeling is misleading, the Food and Drug
Administration must take into account the extent to which the labeling fails
to reveal facts material in the light of other representations or material in
the labeling, with respect to consequences which may result from the use of
the article to which the labeling relates under the conditions of use contained
in the labeling or that are customary or usual. Both of these provisions were
included In the statute as enacted by Congress in 1938.
PAGENO="0295"
COMPETITIVE PROBLEMS IN TIlE DRUG INDUSTRY 8797
During 1938-1962, Section 505 of the Act also required submission to FDA
of a new drug application (NDA) which FDA could permit to become effective
if the safety of the drug was demonstrated. In 1962, Congress amended this
law to require explicit FDA approval of both safety and effectiveness for
every new drug. Section 505(d), as added to the statute in 1962, provides three
relevant bases for refusing to approve an NDA: insufficient information to
determine whether the drug is safe for use under the conditions set out in
the proposed labeling, a lack of substantial evidence that the drug will have
the effect it purports to have under the proposed labeling, or that based on a
fair evaluation of all material facts the labeling is false or misleading in any
particular.
It is true that, throughout the debate leading to enactment of the 1938 Act,
there were repeated statements that Congress did not intend the Food and Drug
Administration to interfere with medical practice, and references to the under-
standing that the bill did not purport to regulate the practice of medicine. Con-
gress recognized a patient's right to seek civil damages to the courts for mal-
practice, and declined to provide legislative restrictions upon the medical profes-
sion. The legislative history of the 1962 Amendments confirms this Congressional
intent. The legislative debate indicates that Congress did not intend to regulate
the practice of medicine as between the physician and the patient.
It is equally clear, however, that Congress did intend that FDA determine
those drugs for which there exists substantial evidence of safety and effective-
ness and which thus will be available for prescribing by the medical profession,
and what information constitutes truthful and accurate full disclosure about
the drugs to permit the physician to prescribe them safely and effectively. As
the law now stands, therefore, the Food and Drug Administration is charged with
the statutory responsibility for judging the conditions under which a drug may
safely and effectively be used and for approving labeling that fully conveys this
information to the physician. The physician is then charged with the professional
responsibility for exercising his judgment in prescribing the available drugs in
the light of the information contained in their labeling.
The basic question, therefore, is whether there is adequate scientific basis for
the labeling with which your petition is concerned. If there is such a basis, there
is no question but that FDA has the legal authority, and indeed is obligated by
law, to require the labeling of all oral hypoglycemic agents to be changed to re-
flect that information. It similarly follows that, if the labeling must be so
changed, FDA is obligated under the Act to inform physicians and the public,
through such media as the FDA Drug Bulletins, about this important change in
labeling.
You express concern that the failure of a physician to follow a package insert
may render him liable for malpractice. The package insert is not intended either
to preclude the physician from using his best judgment in the interest of the
patient or to impose liability if he does not follow the package insert. Although
package inserts, along with medical texts and expert opinion, may constitute
evidence of the proper practice of medicine, they are not controlling on this issue.
The Food and Drug Administration recognizes that the physician must retain
his professional judgment in prescribing drugs in the best interest of the individ-
ual patient and that a rigid rule cannot be imposed for all situations. A physician
should also recognize, however, that the package insert represents a summary of
all information on the conditions under which the drug has been shown to be
safe and effective by adequate scientific data submitted to the Food and Drug
Administration.
We are concerned that you and others misconceive the legal responsibilities
of FDA, the status of the package insert, and the responsibilities of a physician
when he concludes not to follow the conditions of use approved by the Food and
Drug Administration through the package insert. We hope that the above expla-
nation clarifies the situation from the legal standpoint.
B. Fair balance.-Your second legal argument is that, assuming that the sci-
entific evidence on the use of oral hypoglycemic agents is equally divided, or at
least that there is substantial scientific evidence and opinion on both sides of the
issue, FDA should require the labeling to reflect both positions in order to achieve
fair balance.
When the Federal Food, Drug, and Cosmetic Act was enacted in 1938, evalua-
tion of drug safety and effectiveness was relatively unsophisticated as compared
with today. It was largely the opinion of individual physicians who had tried
PAGENO="0296"
8798 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
the drug on patients that determined whether the product would be considered
safe and effective. Congress therefore included in the 1938 Act a provision under
Section 201(n) which provided that differences of opinion with respect to the
effectivepess of a drug could be handled by stating both sides of the issue in
labeling.
Since 1938, enormous progress has been made in the methodology for evaluat-
ing both the safety and the effectiveness of a therapeutic agent. Congress there-
fore concluded in 1962 that unsubstantiated expert opinion could no longer suffice
to establish the effectiveness of drugs, and that in the future controlled clinical
studies would be required. The concept of using the package insert to debate the
proper medical use of a drug was thus replaced by a requirement that the drug
be proved safe and effective by the most rigorous scientific standards available.
Congress has delegated to the Food and Drug Administration the legal duty of
determining whether substantial evidence exists to prove the safety and effective-
ness of drugs. While these determinations often involve close questions, they are
questions that are required by law to be resolved definitively, and they cannot be
avoided. Because of the importance of the issues involved, we often consult
outside experts, advisory committees, and professional organizations. In the vast
majority of instances, including this one, the decisions on safety, effectiveness,
and labeling comport with the weight of medical and s~ientific opinion.
It must be recognized that there is probably no statement in any package insert
for any drug on which at least one, and perhaps more, individuals could not be
found to raise questions that they believe important and significant, backed up
by at least some kind of literature reference or opinion. The Food and Drug
Administration is required, however, to determine the conditions of use under
which the drug has been proved safe and effective by substantial evidence. This
requires the Food and Drug Administration to act as an independent arbiter on
medical issues, and means that inevitably its decisions will not meet with unani-
moüs scientific agreement.
Unless this is done, the welter of conflicting and confusing statements that
would be found in package inserts would overwhelm the practicing physician
and create chaos for the public. It is not the function of the package insert to
present all sides of an issue. This is properly done in textbooks and journal
articles, and in scientific discussion. The function of the package insert is to set
out, in relatively concise terms, a summary of the conditions for use, based
upon the best scientific evidence presented to the Food and Drug Administration
about the drug. Except perhaps in rare instances where there is substantial evi-
dence on both sides of an issue, therefore, it is inappropriate to utilize the pack-
age insert to present all aspects of the evidence relating to safety and effective-
ness, o~' Otherwise to debate medical questions.
We do believe in testing the validity of our determinations through the normal
process of scientific debate and peer review, as well as through the statutory
appeal processes. Where we are shown to be in error, we have not been slow
to correct that error.
It would be the rare situation where there is substantial evidence that both
proves and disproves the safety or effectiveness of a drug, and thus justifies
equal consideration in labeling. Certainly, that is not the situation involved here.
In virtually all cases, including this one, analysis of the available data and
information leads to a reasonably reliable determination one way or the other. It
is therefore our opinion that there is no basis for requiring or permitting the
labeling of oral hypogycemic agents to present a variety of view-pointn on the
safety and effectiveness of these drugs, since to do so would abdicate the legal
responsibility of the Food and Drug Administration and result in highly confus-
ing and misleading labeling.
II. THE MEDICAL I55UES
Your petition questions the scientific reliability of the UGDP Study on a
number of grounds, the argues that it is not adequate support for concluding
that, in the treatment of diabetes, diet alone should first be used, and then insulin,
and then the oral hypoglycemic agents. We have carefully reconsidered this matter
in the light of the arguments contained in your petition. Our position on the
validity of the UGDP Study, on the weight that should be given to that and
other studies, and on the labeling that will be required as a result of the avail-
able scientific evidence relating to safety and effectiveness of diabetic treatment
methods, is set out in full below.
PAGENO="0297"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8799
A. The scientific reliability of the TJGDP Study.-Appendix D of your petition
challenges the statistical methodology of the UGDP Study. Other highly quali-
fied experts have defended the UGDP methods and analysis. Their explanations,
findings and conclusions are set forth in detail in Appendix A to this response.
Doubtless there are weaknesses in the UGDP Study, as there are in most
complex clinical studies. A number of criticisms have been directed at the design
and methodology of the Study; these are described and addressed in Appendix A.
Despite the merit of some of these and perhaps other criticisms, the UGDP Study
presents the best medical evidence available at this time on the cardiovascular
hazards of oral hypoglycemic drugs.
Your petition presents only one side of the medical literature on the TJGDP
Study. We have attached to Appendix A additional articles and editorials which
strongly support the reliability of the UGDP Study and reject the conclusion that
it should not be given serious consideration. The AMA Council on Drugs has
stated:
"Although some flaws exist in the UGDP study it clearly demonstrates that
every effort should be made by the physician to control the symptomatic maturity-
onset diabetic with diet alone. Should this fail, treatment with insulin oral
hypoglycemic agents should be undertaken. If oral hypoglycemic agents are se-
lected for therapy, the results of the UGDP study should be kept in mind. There-
fore, the consideration of treatment with oral hypoglycemic agents should be
secondary to the use of insulin."
/ / The Ad Hoc Editorial and Advisory Committee on the American Diabetes Asso-
/ ciation has similarly concluded that:
"In adult onset diabetes with hyperglycemia and glycosuria, symptomatic or
not, and in the absence of a ketosis a trial with an appropriate diet should come
first. If this does not establish satisfactory control insulin is to be preferred to
other therapeutic agents because it is more uniformly effective in controlling hy-
/perglycemia and the UGDP study indicated that it may be safer."
Your petition states that the results of the UGDP Study are not available
and therefore not subject to the usual critcial review. We have been assured
that the UGDP personnel will honor any reasonable request for data and infor-
iflation.
Finally, you state that FDA acted against the advice of its own advisory
committee in accepting the results of the UGDP Study. A review of the minutes
of the ad hoc committee convened to discuss this subject in May 1970 indicates
that this was not the situation. A copy of those minutes is also attached to Appen-
dix A.
In short, we see no basis for ignoring the findings of the UGDP Study. They
must be given very serious consideration by the Food and Drug Administra-
tion and the medical profession.
B. The weight accorded to the UGDP and other studies.-There now exists sub-
stantial evidence of the safety and effectiveness of three different treatment
methods for adult-onset diabetes: (1) diet and reduction of excess weight, (2)
diet plus insulin, or (3) diet plus oral agents.
From the standpoint of safety, there is overwhelming evidence that diet and
reduction of excess weight is preferable to any form of drug therapy. It is well
known that drugs have side effects, and that insulin and the oral hypoglycemic
drugs clearly produce side effects not attributable to diet alone.
Where diet alone is not adequate to control diabetes, a choice must then be
madebetween insulin and the oral agents. Although the UGDP Study constitutes
strong evidence that insulin is safer than the oral agents, because of a lower inci-
dence of cardiovascular death, it cannot yet be said that this has been proven
conclusively.
Your petition appended reports by Keen et al., and Paasikivi, presumably to
indicate no cardiovascular danger from prolonged tolbutamide therapy. Careful
review of these reports reveals that they cannot be considered comparable to the
TJGDP Study, and thus that they are insufficient evidence to negate the findings
of the UGDP Study. (A discussion of these studies may be found on pp.19 and 19a
of Appendix A.) Nor are we aware of any other existing data that justify rejec-
tion of the findings of the TJGDP Study.
C. The product labeling required to reflect the available evidence on the safety
and effectiveness of diabetic treatment methods.-.As a result of our analysis of
the available data, we are requiring product labeling to reflect the following
information.
Indications: Oral hypoglycemic drugs are indicated in the tre~1tment of
adult-onset, non-ketotic diabetes mellitus only when the condition cannot be
controlled adequately by diet and reduction of excess weight alone.
PAGENO="0298"
8800 COMPETITIVE PROBLEMS IN THE DRLrG INDUSTRY
Because of the increased cardiovascular hazard which appears to be associ-
ated with oral hypoglycemic agents, the drugs should be used only after full
consideration of the special warning.
Special warning: Diet and reduction of excess weight are the foundations
of initial therapy of diabetes mellitus. When the disease is adequately con-
trolled by these measures, no hypoglycemic drug therapy is indicated.
Because of the apparent increased cardiovascular hazard associated with
oral hypoglycemic agents, they are indicated in adult-onset, non-ketotic dia-
betes mellitus only when the condition cannot be adequately controlled by diet
and reduction of excess weight alone, and when, in the judgment of the phy-
sician, insulin cannot be employed because of patient unwillingness, poor
adherence to injection regimen, physical disabilities such as poor vision and
unsteady hands, insulin allergy, employment requirements, and other similar
factors.
Since the association of tolbutamide and phenformin with increased cardiovas-
cular hazard is shown by strong evidence although not yet conclusive proof, it
must be reflected in labeling by a warning which clearly states that insulin should
be used in preference to oral agents where that is feasible, because of benefit-risk
considerations.
This new evidence of an increased risk is placed in a Special Warning section,
explicitly cross-referenced by a statement in the Indications section because spe-
cial labeling is required to correct the current erroneous impressions of many
physicians accustomed to using these drugs according to their former labeling.
A copy of the new labeling for the oral agents is attached as Appendix B.
ifi. CONCLUSIONS
Your petition has been extremely helpful in prompting us to evaluate and
articulate our position on the labeling of drugs.
Because of the importance of the issues that you raised and that are discussed
in this response, we are taking the liberty of sending a copy of this response and
the attachments to all of the individuals who signed the petition or wrote to me
indicating their support for it.
Finally, I again wish to thank you and all the others who participated in the
petition. We welcome critical review of all of our actions. It is not just the right,
but indeed the responsibility of physicians and all other citizens to petition us
whenever they believe that inadequate or incorrect action has been taken, or that
action which should be taken has not been undertaken. In this way, we can be
helped to do a better job.
Sincerely yours,
CHABLES C. EDWARDS, M.D.,
Cornmi88iofler 01 Food and Drugs.
(NoTE.-Attachments supplied by the FDA were too voluminous to be incorpo-
rated in this volume, and were retained in Committee files.)
PAGENO="0299"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8801
APPENDIX II
UNITED STATES GENERAL ACCOUNTING OFFICE
Washington, D.C. 20548
For release on delivery
expected at 10 am. EDT
Wednesday, May 10, 1972
STATEMENT OF
ELMER B. STAATS, COMPTROLLER GENERAL OF THE UNITED STATES
BEFORE THE
MONOPOLY SUBCONMI TTEE
SELECT COMMITTEE ON SMALL BUSINESS
UNITED STATES SENATE
on
DIRECT AND INDIRECT EXPENDITURES
BY FEDERAL AGENCIES FOR PRESCRIPTION DRUGS
We are pleased to be here today to discuss our work re-
lated to procurement and reimbursement for prescription
drugs by the Federal Government and related matters.
Among the matters we will comment on are:
---Actions taken to assure that only effective and low
cost equivalent drugs, when available, are procured
by the Government or paid for under Government spon-
sored medical programs.
-- Information sources used by physicians in selecting
drugs.
--Use of Government specifications in the procurement
of drugs.
- - Quality assurance and inspection procedures of Fed-
eral agencies.
PAGENO="0300"
8802 COMPETITIVE PROBLEMS IN THE DRIJG INDUSTRY
--Coordination and cooperation between Federal agencies
which buy drugs.
--Procurement of drugs of foreign origin.
--Policies and practices pertaining to furnishing drugs
under the Medicare and Medicaid programs.
Estimates indicate that direct Federal procurements of
prescription drugs amounted to about $240 million for fiscal
year 1971. Most of these procurements were made by the De-
fense Supply Agency, through the Defense Personnel Support
Center (DPSC), and the Veterans Administration (VA).
DPSC manages about 1,100 drug items on a centralized
basis and spent about $95.5 million for drugs in fiscal year
1971. The VA manages about 450 drug items on a centralized
basis and procured for central stock drugs valued at
$27.4 million in fiscal year 1971. The VA also administers
Federal Supply Schedule contracts under which Federal agen-
cies can satisfy their drug requirements by direct purchases
from drug manufacturers. Purchases under these contracts by
all Government agencies for fiscal year 1971 amounted to
about $64 million. The Public Health Service centrally man-
ages about 600 drug items and spent an estimated $14.2 mil-
lion for drugs in fiscal year 1971. About 50 percent of
this amount was spent under contractual arrangements made
by VA.
A substantial portion of Federal expenditures for pre-
scription drugs are indirect, consisting principally of the
Federal share of the cost of drugs provided to beneficiaries
under the Medicare and Medicaid programs. The Department of
Health, Education, and Welfare (HEW) estimates that Medicaid ex-
penditures for prescribed drugs for fiscal year 1971 amounted
PAGENO="0301"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8803
to about $435 million, of which about $246 million represented
the Federal share and the remaining $239 million the State
and local share. Expenditures for prescription drugs under
part A (hospital services) of Medicare for fiscal year 1971
were estimated at $541 million. No information is available
on expenditures under part B (physician services) of Medicare.
Although we have not completed our work with respect to
examining into the effectiveness of administration and man-
agement of Federal programs for procurement and distribution
of drugs, it is already clear that standardized procedures and
improved cooperation and coordination among the Federal pro-
curement agencies currently involved in (1) procuring and
distributing drugs, (2) financing the supply of drugs to
beneficiaries under the Government's social programs, and
(3) evaluating the effectiveness of drugs, would be benefi-
cial in reducing costs and providing service.
PAGENO="0302"
8804 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
ACTIONS TAKEN BY FEDERAL AGENCIES TO
ASSURE THAT ONLY EFFECTIVE DRUGS ARE
PROCURED AND THAT FEDERAL PROGRAMS
MINIMIZE USE OF HIGH COST DRUGS
As of January 19, 1972, the Food and Drug Administra-
tion (FDA) had published 2,339 reports as to the effective-
ness of drug preparations for the indications claimed in
their labeling, and had reported them in the Federal Regis-
ter. At that time FDA recognized that several problems per-
taining to drug efficacy remained. Briefly they concerned:
--Conflicting reports relating to several drugs;
--Speeding up the progress on follow-up actions for
drugs requiring evidence to be rated "effective";
--Completing compliance activities currently in process
pertaining to "ineffective" drugs;
--Completing the review, which FDA expects to publish
by June 30, of the remaining drug study reports; and
--Pursuing plans for evaluating the effectiveness of
over- the-counter drugs.
Actions taken by~h~
Department of Defense
As of November 18, 1971, the Defense Medical Material
Review Board had initiated action to stop further procure-
ment and to eliminate from the supply system all items that\
FDA had then pronounced "ineffective" or "possibly effec-
tive". Also, the Surgeons General of the military depart-
ments have emphasized through instructions to medical
PAGENO="0303"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8805
organizations the DOD policy on such drugs, which becamo ef-
fect:ive January 21, 1971. This policy provides that for `inef-
fective" items subsequently withdrawn from the market, re-
maining stocks are to be destroyed or other appropriate ac-
tion taken to remove them from the inventory. For items
categorized "ineffective" but awaiting final determination
by FDA, further use of remaining stocks is suspended until
the final status is announced. Pharmacy and Therapeutic
Agents Committees are required to question all prescrip-
tions for "possibly effective" items, but local procurement
of such items may be made if no alternative means of therapy
is available.
No "ineffective" drugs have been purchased by DPSC for
central stocks since the pertinent pronouncements in the
Federal Register, but we are aware of a Federal Supply
Schedule purchase of one item, Darvon (32 milligram), for
initial treatment of seriously underweight geriatric pa-
tients. Also, 24 procurements valued at $1.5 million have
been made of "possibly effective" drug items by DPSC for
central stock since the FDA pronouncements. Twenty of these
buys, valued at over $1.4 million, were made before the DOD
policy prohibiting further procurements of "possibly effec-
tive" drugs was issued in January 1971.
Following this Subcommittee's hearings in 1970, DOD es-
tablished a committee to conduct an item by item review of
drugs, chemicals, and biologicals in the Federal Supply Cat-
alog to identify high cost, possibly ineffective, or dupli-
cate items, and to initiate action to minimize the use of
high cost drugs where lower price equivalents are available.
PAGENO="0304"
8806 COMPETITIVE PROBLEMS IN TUE DRUG INDUSTRY
Items so identified were to be reviewed by the military ser-
vices to determine whether they should be deleted from the
supply system. As of January 1972, seven items had been de-
leted arid 57 items had been reclassified to a status prohib-
iting further procurements. Included in the 57 items were
seven for which lower cost equivalent drugs were available in
the supply system. Based on reported unit costs and demand,
annual savings in excess of $1.1 million will be realized if
the deleted items are not obtained via local purchase. Spe-
cific actions to stop local purchase of such items have not
been taken because it would tend to dictate the drugs physi-
cians can prescribe.
Actions taken by the Veterans Administration
A VA circular of December 4, 1970, transmitted to hos-
pitals and clinics a listing of "ineffective" drugs and
stated that the Executive Committee on Therapeutic Agents
had recommended that VA hospital therapeutics committees
remove these items from their fonnularies. If the hospi-
tals and clinics wished to retain any of the drugs they
were required to obtain approval from the Executive Commit-
tee. This has been done for certain drugs being used for
research.
The hospitals were requested to advise fee basis phy-
sicians of VA's policy on these drugs and to attempt to get
them to prescribe alternatives. Information on FDA pro-
nouncements made after December 4, 1970, has been sent by
the VA headquarters to its hospitals and clinics.
The VA policy for "possibly effective" drugs is that
consideration should be given to using alternative products
having a higher FDA effectiveness classification. The VA
purchased seven "ineffective' drugs for central stock after
PAGENO="0305"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8807
FDA pronouncements appeared in the Federal Register. Pro-
curement of six of the seven items was discontinued after
the VA policy was issued on December 4, 1970. The other
item was purchased for over 2 years after the FDA pronounce-
ment because it was inadvertently excluded from the list of
"ineffective" drugs issued on December 4, 1970. The VA Mar-
keting Center has now been instructed to suspend issuance
of all "ineffective" drugs and to negotiate with manufac-
turers for return of existing stocks for credit.
The VA continues to purchase "possibly effective"
drugs, apparently because of its philosophy that it should
not take actions that would unduly restrict the prescribing
practices of physicians.
On January 13, 1971, VA hospitals and clinics were, ad-
vised to ensure that every effort be made to treat VA pa-
tients with the most effective therapeutic agents at the
most favorable prices. Also, VA hospital therapeutic com-
mittees were requested to continually review prescribing
practices--with due regard to the effectiveness and fluctu-
ating prices of drugs--as patents expire, or competitive
market conditions make price advantages available. Also,
the hospital therapeutic committees were advised that the
purchase of high cost drugs could not be justified when
equally effective, but less expensive, items are available.
Actions taken by the D~partment of Health,
Education, and Welfare
HEW has also acted to implement the FDA procurements
related to the effectiveness of drugs. The Surgeon General
on December 11, 1970, established the policy that the De-
partment would not spend Federal funds for (1) "ineffec-
tive" drugs, except under approved clinical research
projects, or (2) for "possibly effective" drugs, except un-
der approved clinical research projects or when alternate
0-450 0 - 72 - pt. 22 - 20
PAGENO="0306"
8808 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
means of therapy are not available. On January 19, 1971,
the Department instructed its agencies that provide direct
patient care to stop the procurement and use of such drugs
and to advise contract physicians of the Department's pol-
icy.
The December 1970 policy announcement stated that the
policy also applies to Government financed programs and the
Federal Register of October 16, 1971, contains the proposed
regulation for Medicare. The Department planned to furnish
Medicare carriers and intermediaries with listings of "in-
effective" and "possibly effective" drugs to be excluded
from reimbursement under the Medicare program. However we
understand that the Department has recently undertaken a
reevaluation of whether to extend the December 1970 policy to
Government financed programs.
In January 1971, the Medical Services Administration
of the Social Rehabilitation Service, HEW, notified all As-
sociate Regional Commissioners for Medical Services of the
departmental policy relating to purchases of "ineffective"
and "possibly effective" drugs. The Medical Services Ad-
ministration stated that program regulations were being
amended to implement this policy for Medicaid. As of
May 1, 1972, regulations have not been issued to implement
the revised Federal drug policy for Medicaid.
Since 1966 HEW has required that Federal funds be ex-
pended only for the lowest priced drugs consistent with ac-
ceptable standards of identity, strength, quality, purity,
and effectiveness. Information we have obtained on the
Medicaid program in four states shows usage of "ineffective"
PAGENO="0307"
COMPETITIVE P~ROBLEMS IN THE DRUG INDUSTRY 8809
or "possibly effective" drugs. For example under the Medic-
aid program we found that in Mississippi during a 7-1/2 month
period in 1970-71 nearly $90,000 was paid for two prescrip-
tion drugs classified by FDA as "ineffective" and one as
"possibly effective"~ In Ohio, during 4 months in 1970,
about $138,000 was spent for 43 drugs classified as "ineffec-
tive" by FDA and in Illinois and New Jersey during 2 months
in 1970 about $99,000 was spent on prescriptions for 10 ran-
domly selected drugs classified by FDA as "ineffective".
See Appendix I for a summary of such drugs paid for in
Mississippi, Illinois, Ohio, and New Jersey.
INFORMATION SOURCES USED BY
PHYSICIANS INS~ECTING DRUGS
In the 1971 hearings, the Subcommittee expressed inter-
est in the sources of information considered by physicians
in making their selections of prescription drugs.
Two studies, one by Milton S. Davis, Ph.D. and Lawrence
S. Linn, Ph.D., under a Social Security Administration grant
and the other by a Professor of Pharmacy and Pharmaceutical
Chemistry, University of California, shows that detail men
were the most important source of information to physicians.
The American Medical Association (AMA) in 1971 published
a manual entitled "AMA Drug Evaluations" to provide physi-
cians with a convenient source of information for the sound
use of drugs. This manual contains an evaluation by the AMA
Council on Drugs regarding the effectiveness of drugs, in-
formation on the pharmacology and therapeutic indications of
drugs, and preparations available, dosage, and generic and
proprietary names.
PAGENO="0308"
8810 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
The manual was distributed free to all members of the
A!~1A~-about 300,000, of which 170,000 are practicing physi-
cians. Large numbers have also been purchased by the Gov-
ernment, pharmacists, physicians in residence and intern
training, nurses, and medical students. In 1972, the AMA
began a survey of 2,000 physicians to determine the extent
to which this manual has been used. The AMA hopes to com-
plete the survey in June 1972.
We understand that a second edition of the manual is
scheduled for publication shortly and will include changes
designed to make it more useful including dosage guidelines,
ingredients of over-the-counter drugs, and additional trade
name items.
GOVERNMENT SPECIFICATIONS FOR DRUGS
One requirement of an efficient supply system for pre-
scription drugs is the development of specifications which
can be used to encourage competition and assure controlled
quality production of drugs with the desired therapeutic
effect.
Both DPSC and VA develop specifications for items they
intend to buy competitively. These items account for about
25 percent of all VA centrally managed drug items and 99 per.
cent of all DPSC centrally managed drug items. The remain-
ing items procured centrally by the agencies are designated
for purchase from preselected sole sources. Data for prep-
aration and development of DPSC specifications is obtained
primarily from the manufacturers of drug products.
Although DPSC attempts to purchase virtually all of its
drug items competitively, it has been able to do so for only
about 51 percent of its approximately 1,100 drug items. The
PAGENO="0309"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8811
remainder, about 535 items, have been supplied by single
sources. Of these, competitive procurement of 386 is limited
by patents or by FDA regulatory requirements which preclude
marketing without an approved new drug application or anti-
biotic certification. The remaining 149 items have no ap-
parent legal or regulatory restrictions that would preclude
interested firms from submitting bids on DPSC requirements0
In 1969 and 1971 DPSC made a widespread effort to de-
velop competition on a large number of drug items but the
responses were few and disappointing.
Basically DPSC's specifications require full compli-
ance with the product standards and requirements set forth
in the United States Pharmacopeia (usP) or National Formu-
lary (NF). But additional requirements are often included
to provide assurance that items manufactured will have
needed characteristics for such requirements as potency
and purity, from the time of manufacture to use. Only
about 50 percent of the drug items managed centrally by
DPSC and 65 percent of those managed centrally by VA are
monographed in the USP and NF.
The use of manufacturers' data by DPSC in the develop-
ment of its specifications could result in including require-
ments which are not essential to producing a comparable
product or which do not contribute to its medical useful-
ness. However, DPSC includes in its solicitation packages
a Specification Analysis Sheet for potential suppliers to
submit comments on the specification requirements and those
that bidders claim are unnecessary or unduly restrictive
~re evaluated by DPSC.
PAGENO="0310"
8812 COMPETITIVE PROBLEMS IN THE DRTJG INDUSTRY
We found that it was common for manufacturers to add
requirements to those in the compendia (USP and NF) for
products they sell to the general public. Comments by man-
ufacturers and compendia officials and statements in profes-
sional publications explain that the additional requirements
are added for controlling manufacturerst production processe
and to ensure product quality and uniformity.
The DoD practice of establishing a specification for
every drug item in its central supply system, while commend-
able for purposes of broadening and equalizing the competi-
tive base and assuring the receipt of acceptable products,
results in unnecessary technical and administrative effort
when the policy extends to drug items which, because of le-
gal or regulatory restrictions, are obtainable from only on~
source.
The VA, after its appearance before your Subcommittee
in 1970, began developing specifications for 115 sole sourc~
items for which competition appeared feasible. We were in-
formed on May 1, 1972, that 36 final specifications had beei
issued as a result of this effort.
~4~ITY ASSURAN~
In our last appearance before the Subcommittee we
reviewed the quality control activities of FDA, DPSC, and
the VA. We have noted (1) apparent overlap of these activi
ties, (2) the acceptable results obtained by VA from its
minimal inspection efforts supplemented with the use of FDA
testing services, and (3) that substantial military procure
ments are made each year from Federal Supply Schedules and
local vendors--about $21 million in fiscal year 1970--based
PAGENO="0311"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8813
only upon the quality assurance work of the FDA. We suggested
in our statement that consideration should be given to assign-
ing sole responsibility to FDA for inspecting drug contractor
plants and testing products and quality control procedures.
So far as we are aware no action has yet been taken to
consider the advisability and feasibility of centralizing
drug inspection along these lines. The estimates of manpower
requirements and administration costs, including inspection
activities, involved in the DoD and VA procurement systems
for drugs are provided in Appendix II.
COOPERATION AND COORDINATION AMONG AGEN
CIES MAKING DIRECT PROCUREMENT OF DRUGS
In our previous statement we suggested that closer
cooperation between VA and DPSC could result in substan-
tial savings in the procurement of drugs. Our subsequent
review work confirms that improvements can be made.
We found little exchange of requirements data or coor-
dination of procurements for drugs which are centrally stocked
by both organizations, or those centrally stocked by one
system but procured from either Federal Supply Schedule con-
tracts or from local vendors by the other system. The VA
negotiates several special contracts which exclude military
activities and, in some cases, other civilian agencies from
using them. The military uses Federal Supply Schedule con-
tracts for its requirements for items in these special con-
tracts and pays prices higher than those in the contracts.
The lack of adequate cooperation and coordination has resulted
in increased drug costs to the Government.
PAGENO="0312"
8814 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
The VA has an agreement with DPSC under which it can
buy drugs from DPSC for its central stocks. In fiscal year
1970 purchases from DPSC were only about $206,000. One draw-
back to this agreement is the add-on of surcharges by DPSC
and the VA Marketing Center for drugs supplied to VA field
stations. DPSC charges the VA Marketing Center its standard
price (cost plus 7 percent) plus a 3-1/2 percent surcharge
for packing, handling, and crating costs for medical items
shipped from DPSC depots; a total add-on of 10-1/2 percent.
For items shipped directly from a vendor to the VA depot,
DPSC adds a one percent surcharge, for administration, to
the cost of the items. The VA Marketing Center adds an
8 percent surcharge on all items bought from DPSC to recover
its operating costs.
VA field stations do not order directly from DPSC be-
cause the VA requisitioning system requires the stations to
submit requisitions, other than for local procurements, via
the VA Marketing Center. As a result, certain drug items
are purchased by the field stations from either the Federal
Supply Schedule contractors or local vendors at substan-
tially hig~ier prices than they could obtain, them from DPSC.
The flow of drug items from DPSC depots or manufacturers to
VA depots and then to VA field stations is cumbersome and
results in extra handling and added transportation costs.
Even though the addition of surcharges discourages pro-
cureinent from, or through DPSC, we found many cases where
ultimate prices to the VA stations would have been signifi-
cantly lower than the prices paid by these stations. For
example, if VA field stations had purchased Aristocort
PAGENO="0313"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8815
(8 ounce jar) directly from DPSC the cost would have been
$39.85 per jar, with all surcharges, instead of $46.07 paid
on the Federal price list. Total savings for this drug item
alone during calendar year 1970 would have amounted to over
$4,600. Further, even with the 8 percent surcharge of the
VA Marketing Center a savings of $3.03 per jar would have
been realized.
The military has made no formal arrangements to allow
its activities to purchase from VA depots drug items which
are not centrally managed by DPSC. During the period July 1,
l970,to December 31, 1971, military hospitals purchased
about $550,000 of the drug Macrodantj.n from the Federal
Supply Schedule at about $275,000 more than it would have
cost to buy from VA at the contract price. This item has
now been approved for inclusion in the DOD central supply
system and a contract has been awarded by DPSC at prices
comparable to those negotiated by the VA. But, until de-
livery is received under the DPSC contract, military hos-
pitals will continue to purchase the item at the higher
Federal Supply Schedule price.
Our examination of invoices and sales records for pur-
chases totaling about $6.2 million from four manufacturers
during a recent two-year period showed that the Government
incurred excess costs of about $721,000 because (1) many
drugs were purchased by local installations at prices which
ranged as much as 100 percent higher than prices available
to DPSC and VA Marketing Center, (2) prices paid for the
same drugs differed between DPSC and VA Marketing Center,
and (3) there were purchasing weaknesses at VA and DPSC
field stations.
PAGENO="0314"
8816 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
Our reviaw of DPSC and VA procurement records for 43
identical drug items purchased by both agencies within
30 days of each other during fiscal years 1970 and 1971
showed excess costs of at least $246,000--split approxi-
mately equally between the VA and DPSC--resulted from the
differences in prices paid for these items.
From 1964 to 1971 several studies have been made by
the Defense Supply Agency and the General Services Adniin-
istration, separately and jointly, to determine the feasi-
bility of a single agency having Government-wide responsi-
bility for management of various categories of supplies in-
cluding medical materials. The studies indicated differ-
ences of opinion on the feasibility of consolidating the
procurement and management of medical items. Decision on
this has been deferred pending the outcome of a current
study.
The Office of Management and Budget in January 1972
initiated a joint study by DOD, the General Services Adminis
tration, HEW, and VA to determine the lowest cost system or
combination of systems to achieve maximum economy in meeting
Government-wide needs for medical material, including drugs.
We believe that procurement costs can be reduced sig-~
nificantly by better cooperation and coordination between
the VA and DPSC. However, the differences in their pro-
curement practices, such as the respective volumes of pro-
curements of brand-name and generic items, use of specifica-
tions, and inspecting and testing requirements, must be
reconciled to ensure that drugs will be purchased at the
lowest possible cost to the Government.
PAGENO="0315"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8817
~QCUREMENT OF DRUGS OF
~REIGN ORIGIN
Studies by HEW covering world drug prices in 1970 and
1971 show that prices charged by manufacturers to druggists
in the United States were generally higher than prices charged
to druggists in other countries for the same drug. Recent
comparative data is provided in Appendix III.
Although drugs of foreign origin are frequently priced
lower than comparable drugs of domestic origin the following
factors influence procurement of the cheaper drugs:
1. FDA's New Drug Application (NDA) requirements, DoD
and VA normally will not procure drugs which require an NDA
approval from firms which do not have them, Foreign firms
sometimes do not have the required NDA approval.
2. Inability of some foreign firms to satisfy American-
manufacturing standards for such matters as quality control
and good housekeeping.
3, Possible legal action on patent infringements.
4, Implementation of the Buy American Act (41 U.S.C.
10 a-d),
For evaluating bids or offers of foreign firms for their
products against offers of domestic products, civilian agen-
cies are required by the Federal Procurement Regulations,
which implement the Buy American Act, to add to the foreign
bids or offers a price differential equivalent to 6 percent,
inclusive of import duties, or 12 percent, inclusive of im-
port duties, if the low domestic bid is a small business or
distressed labor area concern, Military departments generally
add a price differential of 50 percent to bids or offers of
foreign products, exclusive of import duties, for evaluation
PAGENO="0316"
8818 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
purposes, when a 6 or 12 percent differential, plus import
duties, does not result in a greater evaluated price for the
foreign products.
Ihe effect of adding these price differentials can be
see~i in a procurement of 310,464 units of tetracycline
hydrochloride tablets by DPSC in April 1971. The low f or-
eign bid was $ .85 a unit, excluding duty, and the low domes-
tic bid was $1.19 a unit. After an evaluation using the
12 percent factor plus duties, the foreign bid was still
low. But, an evaluation using the 50 percent differential
resulted in the domestic bidder being low and receiving the
contract. After considering discount and freight, this pro-
curement cost almost $107,000 more than it would have from
the foreign source.
Because of the above influences neither DPSC nor VA
normally make any special effort to develop foreign sources
for their drug requirements even though prices of drugs of
foreign origin, as a general rule, are lower than domestic
prices. Efforts to obtain bids from foreign sources are
limited to the actions normally taken to obtain bids from
any source, that is, solicitations are sent to the few for-
eign firms on the bidders list at the time they are sent to
other potential suppliers and the proposed procurements are
announced in the Commerce Business Daily. The VA also senth
copies of its solicitations for items to be procured compet-
itively to publishers of a number of marketing publications.
In November 1971 VA wrote to several Canadian firms in-
quiring whether they marketed three specific drug items in
the United States. Four of the eight replies said that the
PAGENO="0317"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8819
firm did not yet have the necessary~ NDA approval and the
others said that they did not market or manufacture the
items.
Appendix IV shows the drug items procured from foreign
firms in the years 1968 through 1971 by DPSC and VA.
POLICIES, REGULATIONS, AND PRACTICES PERTAINING
TO FURNISHING DRUGS UNDER THE MEDICAID AND
MEDICARE PROGRAM.
Medicaid
The current HEW policy for the payment for prescription
drugs under the Medicaid program does not require uniform
procedures and practices to be followed by the States. Also,
the use of a formulary is optional, but where one is used
standards for quality, safety, and effectiveness must be set
and supervised by professionals. The Social and Rehabilita-
tion Service is responsible for administering the Medicaid
program.
The formulary system should be broad enough to enable
physicians and pharmacists to select high quality drugs of
recognized therapeutic value for the treatment of any medi-
cal situation. Approximately 20 States have attempted to
control the cost of drugs in their Medicaid programs through
the use of formularies. Attempts have also been made by the
States to limit certain drugs in their formularies to
generic names.
In November 1970 we reported to the Congress that
significant savings could be available to the States and the
Federal Government if physicians were to prescribe lower-
priced, chemically equivalent drugs instead of higher-priced
PAGENO="0318"
8820 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
brand-name drugs. We pointed out that the HEW Task Force on
Prescription Drugs reported in December 1968 that of the
409 br~id-name drugs most frequently prescribed for elderly
persons in 1966, chemical equivalents for 63 of these were
available at lower costs. These 63 drugs accounted for
about one-fourth of the prescriptions for the 409 drugs,
and the task force computed that prescribing the lower cost
chemical equivalents would have resulted in annual savings
of $41.4 million.
The HEW task force reported also that physicians were
not always aware of low-cost, chemically equivalent drugs
produced by competing manufacturers or were reluctant to
prescribe such drugs until their safety and effectiveness
had been proven.
Medicare
Regulations for part A of Medicare set forth two basic
requirements that must be met in order for a drug or biologi
cal to be included as a covered hospital service. It must
(1) represent a cost to the institution in rendering servicE
to the benef.iciary, and (2) either be included, or approved
for inclusion, in the US?, the NF, the U.S. Homeopathic
Pharmacopoeia, or New Drugs or Accepted Dental Remedies (ex.
cept for those unfavorably evaluated), or approved by the
pharmacy and drug therapeutics committee (or equivalent) of
the medical staff of the hospital for use in the hospital.
There are no Medicare regulations concerning the use of
generic versus brand-name drugs.
PAGENO="0319"
COMPETITIVE PROBLEM'S IN THE DRUG INDUSTRY 8821
Payments for drugs under part A are made on the basis
of reasonable cost. Pay~nents are audited by fiscal inter-
mediaries under contract to the Social Security Administra-
tion in accordance with the "prudent buyer concept". Under
this concept the Government pays the amount a prudent and
cost_conscious buyer would pay for a given item or service.
Under part B of Medicare, coverage of drugs and biolog-
icals is limited to those drugs and biologicals (except for
insulin) commonly furnished in physicians' offices which
caimot, as determined by regulations, be self-administered.
Thus, a drug or biological is reimbursable under part B of
Medicare only if it is of a type which is normally not self-
administered.
Medicare carriers are responsible for determining
whether the services in a given case are reasonable and nec-
essary. In making its evaluation, the carrier is expected
to take into account accepted standards of medical practice
in its service area. Because accepted standards of medical
practice vary from one area to another, the Social Security
Administration has issued general guidelines leaving it to
the carrier to develop more detailed guidelines which re-
flect accepted patterns of care in its service area.
Mr. Chairman, this concludes my statement. I shall be
happy to answer any questions that you or other members of
the Subcommittee may have.
PAGENO="0320"
8822 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
APPENDIX I
LISTING OF DRUGS PURCHASED UNDER THE MISSISSIPPI MEDICAID
PROGRAM DURING THE PERIOD 7-1-70 - 2- 19-71
WHICH WERE CLASSIFIED EITHER AS
"INEFFECTIVE" OR "POSSIBLY EFFECTIVE" BY FDA
LISTING OF DRUGS PURCHASED UNDER THE ILLINOIS AND NEW JERSEY
MEDICAID PROGRAMS DURING JULY AND OCTOBER 1970 WHICH WERE
CLASSIFIED AS "INEFFECTIVE" BY FDA
Date of
Number
FDA
of
Classifi-
classi-
prescrip-
Amount
Drug
name
cation
fication
tions
Antivert
Tablets
Ineffective
3-27-70
13,952
$52,425
Equagesic
Rautrax-N
Tablets
Tablets
Possibly ef-
fective
Ineffective
1-10-70
9- 5-69
4,305
3,372
20,541
15,938
21,629
$88,904
Date of
FDA
classi-
fication
9-12-69
4-. 2-69
3-27-70
12-24-68
2-11-70
9- 5-69
9- 5-69
12-24-68
9- 5-69
12-24-68
Drug~ name
Alertonic
Terrainycin SF capsules
Antivert tablets
Mysteclin F capsules
Robaxisal tablets
Rautrax-N tablets
Rautrax tablets
Panalba capsules
Esidrix-K tablets
Panalba-KN drops
Total
Illinois
Prescrip-
tions Amount
New Jersey -
Prescrip-
tions Amount
Total
Prescrip-
tions
Amount
6,070
3,421
4,039
2,272
1,346
804
203
86
138
25
$26,021
18,521
17,891
11,858
7,372
4,722
1,314
688
518
115
637
656
851
358
-
-
20
-
$ 2,271
3,571
3,120
1,309
-
-
117
-
-
6,707
4,077
4,890
2,630
1,346
804
223
86
138
25
$28,292
22,092
21,011
13,167
7,372
4,722
1,431
688
518
115
~~Q4
$~$~Q~q
~Q9~
$~_,_~p~
PAGENO="0321"
COMPETITIVE PROBLEM~S IN THE DRUG INDUSTRY 8823
APPENDIX I
LISTING OF DRUGS PURCHASED1 UNDER THE OHIO MEDICAID
PROGRA}1 DURING THE MONTHS OF JANUARY, APRIL, JULY, AND
OCTOBER 1970 WHICH WERE CLASSIFIED AS INEFFECTIVE BY FDA
Date of FDA Ohio
name classification Prescriptions Amount
Alertonic 9-12-69 10,009 $ 40,707
Terramycin SF Capsules 4- 2-69 2,675 17,090
Achrocidin Tablets 9-12-69 2,278 14,253
Hydropres KA Tabs 9- 5-69 2,272 12,808
Rautrax N Tablets 9- 5-69 980 7,494
Panalba Capsules 12-24-68 942 7,271
Declostatin 300 Tabs 4- 2-69 648 5,642
V-cilljn Sulfa Pediatric 4- 2-69 1,316 5,183
Azotrex Caps 4- 2-69 445 3,158
Achrocidin Syrup 9-12-69 518 2,941
Ritonic Capsules 9-12-69 552 2,919
Mysteclin F Syrup 12-24-68 557 2,206
Signemycin Caps "375" 4- 2-69 144 1,426
Declostatin Caps 4- 2-69 204 1,369
Esidrix K Tablets 9- 5-69 360 1,286
Terrastatin Caps 4- 2-69 145 1,260
Tetrex APC w/Bristajnin 9-12-69 232 1,171
Rautrax Tablets 9- 5-69 177 1,130
Rutorbin Tablets 1-27-68 165 1,110
CVP w/Vitamin K 1-23-68 182 842
Tetrex A? Syrup 9-12-69 188 806
Frenquel Tabs 100 mg. 4- 2-69 65 801
Hydrodiuril KA Tabs 9- 5-69 * 211 701
Duo CV? w/Vjtamin K 1-23-68 82 526
Ruhexatal w/Reserpine 7-10-68 78 467
Achrostatin V Caps 4- 2-69 98 454
Frenquel Tabs 20 mg. 4- 2-69 62 411
Tetracydin Caps 9-12-69 93 359
Mesulfjn Tablets 9-27-69 41 289
Rautrax N Modified Tablets 9- 5-69 70 287
TAO - AC Capsules 9-12-69 52 275
Pentid Sulfas "400" for
Syrup 4- 2-69 65 219
Panalba Half STG Caps 12-24-68 41 177
Ilosone Sulfa Tabs 4- 2-69 35 152
Paredrine - SulfaThizole 9- 9-69 90 152
Luti-exin Tabs 5-24-68 16 131
Piptal Ped w/Phenobarb 9-27-69 49 103
Wycillin Sm Inj 600 4- 2-69 15 95
V-cillin K Sulfa Tabs 4- 2-69 22 84
V-Kor 9-12-69 34 84
Neopenzine 150 Tabs 4- 2-69 18 67 -
Mysteclin F 12-24-68 34 64
Comycin Capsules 4- 2-69 -~ 8 62
Total 26~ 268 $l~,c~
1Purchases of $50.00 or more.
80-450 0 - 72 - pt.22 - 21
PAGENO="0322"
8824 COMPETITIVE PROBLEMS IT~ THE DRUG INDUSTRY
APPENDIX II
COMPTROLLER GENERAL OF THE UNITED STATES
WASHINGTON. D.C. 20548
AUG 11 1971
Dear Mr. Chairman:
During testimony before your Subcommittee on January 19, 1971,
concerning competitive problems in the drug industry and spscifically
the present status of competition in the pharmaceutical industry, you
reques ted that we obtain information on the number of personnel and
cost of purchasing drugs at the `.eterans Administration and at the
Defense Supply Agency.
8y letters dated January 26 and 29, 1971, we asked the Adminis..
trator of Veterans Affairs and the Director of Defense Supply agency
to furnish estimates of manpower requirements and administrative
costs involved in the operation of their procurement systems for
drugs. The information furnished is summarised below.
Veterans Administration
Drug Procurement Activities
Costs and Personnel
Fiscal Year 1970
Ave rage
Number of Annual
Activ~y Q~ra~jons Included in ActivL~ Personnel Cost.
Marketing Center Contracting (including Federal 13 $l60,~hl6
Supply Schedule), procurement,
and control of stock.
Depot Operations Warehousing, distribution, 61 572,380
accounting, and cataloging
Miscellaneous Transportation, testing, 13 574,4't
inspection, etc.
Total 87 $t~307,~01 7
PAGENO="0323"
COMPETITIVE PROBLEMS ll~ THE DRUG INDUSTRY 8825
APPENDIX II
Defense Supply Agency
Costa and Manpower for Providing
Drug $~upport
Pt~cal Year 1971
Personnel
Activity 9ionolncludedinActi~~ ~~ivalonts ~
Defense Por~onne1 Procurement (excluding contract -
Support Cantor administration) 50 $ 6l9~00O
Materiel ri~anageraent (item supply
studies and accountability pro.
curenent requests, requirements
detcrmineUons, tnd requisition
prceseing) 32 368,000
Technical support (cot&~loging0
specification development and
roviofOne quality assurance,
laboratory analyses, and co-
ordination with other Government
agencies and professional
activities) 44 640,000
Dofense Contract Preaward surveys, postaward
Administration planning, contract adrainistra~
Services tion, quality control and
product inspection 32 438,000
Storage t~arehousing and distribution 3~689,00O
Total
Meithor agency ceparately identifiec and accumulates coats related
to all elements of their drug procurement systems. Accordingly, certain
assumptions were made by each agency for the purpose of allocating costs
to the above operations. The agencies' replies specify their assumptions
and allocation methods used, It should be noted al~o that the estimated
PAGENO="0324"
8826 COMPETITIVE PROBLEMS I~ THE DRUG INDUSTRY
APPENDIX II
B-]J46857
costs shown do not include costs incurred at the user activity level.
Copies of the agencies' responses are enclosed.
We trust this inforaation will serve the purpose of your request.
Sincerely yours,
(SIG~) ELMER B. STAA~
Co~sptroltor General
of the United States
Enclosures
The Honorable Gaylord Nelson
Q~air~n, Subc~ittee on Ptnopoly
Select Co~ittee on Ssall Bueineoa
United ~tete&~ &enate
PAGENO="0325"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8827
APPENDIX III
Comparison of Selected Pharmaceutical Prices
______________(Bottles of 100)
2!E~
Australia
New Zealand
India
- 19711/
Prcpo.typhene HCL
(65mg.)
Antjbj on cs:
Ampicillin (250 rag.)
~lemethy1ch1orretr-
cycline FCL
(150mg.)
Erythrocrycin (25Omg.
Oxyletracycline HCL
(250mg.)
Potasrium phenoxy-
methyl pencillin
(250mg.)
Tetracycline HCL
(250mg.)
~~ideprassant:
Araltriptyline DCL
(25mg.)
Antidiabetic:
Tolbutami,j~ (500mg)
Antihistamine:
fliphenhydraminc
(50 tag.)
~tara'-m1 Cs:
ChlZ~r~azepoxjde DCL
$ 7.02
Darvon
Li~lly
22.75 AWP
Polvcil Un
Bristol
19.79 AW?
Dec lomycin
Lederie
26.12 AN?
Erythroc!n
Abbott
20.48 AN?
Terramycin
Pfizer
8.95
V. Chum K
Lilly
5.27
Achromycin-v
Lederle
8.55
Elavjl
Merck
8,70
Orinase
Upjohn
2.92 AWP
Benadryl
Park-Davis
7.02 AWP
Libri um
Roche
$. 3.24
Doloxene
Lilly
12.29
Penbri tin
Beechan
9.53
Ledermycin
Lederle
11.832/
Erythrocin
Abbott
6.99Y
Terramyci n*
Pfizer
6.135-I
Pencillin
Knoll
6.
Achromyci ra-
Lederle
2.95
Tryptanol
Merck
3.26
Ras ti non
Hoechst
1,7221'
Benadryl
Park-Davis
4.01
Libriura
Roche
2.5011/
Official Price
10. 0612.1
Official Price
4.16
Official Price
13.60
Official Price
3.76
Official Price
3.18
Official Price
4.16
Official Price
2.82"
Official Price
3.19
Official Price
15/
1.55
Official Price
2.O61~~'
Official Price
4.75
Dolcxer,e
Lilly
26.8122/
Ampi ciii in
CI PLA
12.32
Demethychior-
tetrcycl me
Tablets PVT LTD
15.80
Erythroci n
Abbott
7.82
Terraraycin
Pf I zcr
3 * 08
Pencillin V
Tablets PVT LTD
7.56
Achromycin-V
Leder le
1.93
Rastinon
Hoechst
25/
* 80-
Benadryl
Park-Davis
"6/
1 * 9 ~
Librium
Roche
/ Prepared by the Office of Research and Statistics, Social Security
Administration, Department of Health, Education, and Welfare.
PAGENO="0326"
8828 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
APPENDIX III
Comparison of Selected Pharmaceutical Prices 1971 Contd,
Product
USA
Australia
New Zcaland
India
Chiorpromazinc IICL
(50mg.)
Diazepam (5mg.)
Z~eprobarnate (400mg.)
--~---Prochlorperazine
malcate (10mg.)
Trif1uoperazin~ HCL
(5r~g.)
Cardi ovascu) `r:
Digoxir. (.25mg.)
Oral Contrace~tivc:
Ethynoc~ia1 diacetate
with~ tses tranol
(1mg. 6x21)
Sedative:
Glutethimide
(250mg.)
Sul fonai.ii_Jo:
Sulfisoxazole
(500mg.)
4.40
Thorazine
SKF
7.90
Valium
Roche
7.06
Equanil
Wyeth
7.86
Compazine
SRF
9.75
Stelazinc
SKF
1.03
Lanoxin
B-W
* 8.10
Ovulen 21
Searle
3.00
Boriden
Ciba
2 * 94
Gantrisi n
Roche
$ 2.03111
Official Price
* 2,5lW
Official Price
2.21
Official Price
2.871V
Official Price
3,99~2/
Official Price
.56~1J~
Official Pric~
3,97111
Official Price
1.40
Official Price
$ 2.38
Largactil
Nay &
Baker
3.45
Valium
Roche
4.47
Equani 1
Wyeth
4. 76~
Stematil
Nay &
Baker
4.54
S tela zinc
S}~F
.74
Lanoxin
B-W
4,5~i
Ovulen 21
Searle
2.26
Doriden
Ciba
3.00191
Gantrisin
Roche
$ 1.7C2~L/
Largactil
Nay & Ba.~er
2.20
Caimpose
Ranbaxy
2,372.91
Equanil
Wyeth
2,102.91
Stemetil
Nay & Baker
3.72
Eskazine
S1~F
.98
Lanoxin
B-V
4. 32~-~2"
Ovulen 21
Searle
2.68
Doriden
Ciba
1. 22~i
Cantrisin
Roche
See Littached ~hect for footnotes
PAGENO="0327"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8829
APPENDIX III
1/ CaJceL-ttcd frco the direct saic price N~rch 15, 1971.
2/ Converted fron prSce of :4~35 per 50 tab1et~,
3/ Convc~ted fr.xi ~hoiesa1e price of 14.89 per 150, 250 mg~ tablets.
4/ Converted from wholesale price of 8.81 per 150, 250mg.1 t~b1ets,
5/ Converted from wholesale price of 7.72 per 150, 250 mg. tablets.
6/ Converted from wholesale price of 8.81 per 150, 250mg. tablets.
7/ Converted from wholesale price of .72 per 50, 50 mg.
8/ Converted from wholesale price of .50 per 25, 5 mg.
9/ Converted from wholesale price of 1.90 Spar 3x21.
10/ Converted from wholesale price of .90 per 40, 500 rag.
hf Converted from official price of 10.44 per 500.
1~2/ Converted from official price of 42.11 per 500.
13/ Converted from officicl price of 11.80 per 500.
1~/ Converted from official price of 13.35 per 500.
15/ Converted from official price of .65 per 50.
16/ Converted from official price of 8.61 per 500.
17/ Converted from official price of .85 per 50.
18/ Converted from official price of 10.54 per 500.
19/ Converted from official pri~e of 3.00 per 250, 5 rag.
20/ Converted from official price of 1.67 per 50.
21/ Converted from official price of 4.65 per 1000.
22/ Converted from official price of 1.66 per 3x21
23/ Converted from official price of 27.75 per 16.
PAGENO="0328"
8830 COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY
APPENDIX III
F~ot,ictc~ : con.d.
2~/ Crnrrte.~ frets off~ci~1 price of
25/ Convcrtcd from official price of
26/ Conv~rtcd from official price of
27/ Conv~rtod frea o~ficia1 price of
2~f Converted frcm official price of
29/ Converted from official price of
30/ Converted from official price of
31/ Convorled from official price of
2.16 per 4.
6.43 per 50.
1.41 per 10.
1.27 per 10.
42.25 per 250.
.75 per .10, 5mg.
5.14 for 1 cycle.
3.74 per 20.
Sources:
USA--frug Topics Reodbook, 1971, Topics Publishing Co., lao., Nov York.
Australia--Suggested Prices of Prescription Proprietaries for Dispensing,
issued by the Federal Council of the Pharmacy Guild of Australia,
August i6, 1971.
Ne~i Zealand--Nov Zealand Department of Health, Prescription Pricing Schedule,
August 1, 1971.
India--Indian Fnarmaceutical Guide, 1971.
PAGENO="0329"
COMPETITIVE PROBLEMS IN THE DRUG INDUSTRY 8831
APPENDIX IV
PROCUREMENTS BY DPSC AND THE VA
FROM FOREIGN FIRMS FOR CALENDAR YEARS
1968 THROUGH 1971
Total
amount
Calendar spent
year DPSC VA (rounded)
1968 Tetracycline Hydrochlo- Meprobamate
ride lab. Tab. $3,002,000
}1eprobamate Tab.
Nitrofurantoin Tab. (two
sizes)
Tetracycline Syrup
1969 Tetracycline Hydrochlo.
ride Tab. Meprobamate 1,263,000
Meprobaznate Tab.
Nitrofurantoin Tab.
1970 Tetracycline Hydrochlo-
ride Tab. None 633,000
1971 Tetracycline Hydrochlo-
ride Tab. None 854,000
Meprobamate Tab.
PAGENO="0330"
APPENDIX III
[From the New England Journal of Medicine, April 13, 1972, pages 813-815.]
A COMPABATIVE EvALuATIoN OF MARKETED ANALGESIC DRUGS
(By C. G. Moertel, M.D., D. L. Ahmann, M.D., W. F. Taylor, Ph. D., and
Neal Schwartau, B.S.t)
Abstract in a double-blind crossover study of marketed drugs given by the oral
route to relieve pain, aspirin (650 mg) was superior to all agents tested. Mefen-
arnie acid (250 mg), pentazocifle (50 mg), acetaminophen (650 mg), phenacetin
(650 rng), acetarninophen (650 mg), phenacetin (650 rng) and codeine (65
mg) also showed a significant advantage over a placebo. Propoxyphene (65
mg), ethoheptazine (75 mg) and prornazine (25 mg) gave no significant evidence
of therapeutic activity; and each of these agents was significantly inferior to
aspirin in analgesic effect. Pentazocine (50 mg) produced sufficient gastro-
intestinal and central-nervous-system side effects to make this agent of dubious
value for ambulatory patients. All other drugs tested in this single dose study
did not produce significantly greater side effects than a placebo.
One of the most vital services rendered by the physician is that of relieving
pain. Tinder the usual clinical circumstances, he attempts to provide this anal-
gesia by medication administered orally, choosing from the multitude of prescrip-
tion and over-the-counter preparations that line the pharmacists' shelves. Al-
though promotional material abounds, scientific evidence of effectiveness for
many marketed analgesics is scarce and frequently equivocal. Controlled com-
parisons of their effectiveness have been conspicuously rare. The purpose of
this communication is to report a study comparing in a randomized, double-
blind manner the therapeutic effectiveness of marketed analgesics given in pure
form by the oral route of administration in the dosages usually prescribed.
METHOD
All 57 patients chosen for study had definite pain problems resulting from un-
resectable cancer. All were ambulatory, and all could reliably tolerate oral
medication. They did not have appreciable systemic symptoms related to their
tumors, and they were not receiving any antitumor treatment (e.g., chemo-
therapy or radiation therapy) that could confuse observation of analgesic side
effects. The pain that the patients experienced was assumed to be related to
intra-abdominal, retroperitoneal, pelvic or osseous malignant tumors. The pain
was considered clinically to be mild or moderate in degree. Patients were not ac-
cepted for the study if they had previously been on a schedule of narcotic drugs
that was judged capable of producing any degree of physiologic dependence.
Particularly, subjects were chosen who in our opinion were intelligent, depend-
able observers. They were informed that they were participating in a randomized
type of study. Patients were not allowed any other analgesics, narcotics, seda-
tives, stimulants, antiemetics, antidepressants or tranquilizers during the study.
All doses of analgesics and placebo were prepared in identical opaque blue
gelatin capsules dispensed in sealed plastic cups identified only by code num-
ber. tJSP lactose was employed as placebo and also as a filler for all study drugs.
Each patient was given a single dose of each of the study drugs and placebo in
1 From the Division of Gastroenterology and Internal Medicine, the Division of Clinical
Oncology and Internal Medicine, the Department of Medical Statistics Epidemiology and
Population Genetics, Mayo Clinic and Mayo Foundation, and the Division of Pharmacy and
Central Supply, Rochester Methodist Hospital (address reprint requests to Dr. Moertel at
the Division of Gastroenterology and Internal Medicine, Mayo Clinic Rochester, Minn.
55901). Supported In part by a grant (3 P01 CA1O731-O1S1), from the ~National Institutes
of Health.
(8832)
PAGENO="0331"
COMPETITIVE PROBLEMS LN THE DRUG INDUSTRY 8833
randomized sequences according to the latin-square method. One drug was di-
rectily followed by another, and there was not a planned-placebo or no-treatment
interval between active drugs. Each patient received only one test sequence of
each of the study drugs. The oral form of pentazocine was not available to us
when our investigation was initiated; this was added to the study after the ini-
tial 27 patients (three latin square) had been entered.
Patients were instructed to take the planned single dose whenever `definite
pain was present but no more often than every six hours. The intervals between
doses were therefore variable, depending on the requirement of the patient for
analgesia, but none were shorter than six hours. There was a corresponding
variability in the total period required for each patient study. With each dose,
patients were asked to record the time of administration, the time when the on-
set of definite relief of pain was noted, and the time when pain returned; they
were also asked to record the estimated maximum degree of pain relief on a
percentage basis. Specific inquiry was made regarding the following side effects:
stomach upset, nausea, vomiting, sleepiness, dizziness, impaired thinking and
excitement. Patients were also asked to volunteer any additional side effects
that they experienced. This information was recorded on a separate form for
each drug dose.
It should be emphasized that these observations were recorded by the patient
and not by medical observers. It should also be emphasized that this was a study
only of single-dose administration and not of chronic administration.
RESULTS
To avoid aiiy possible statistical distortion and to make full use of data, anal-
gesic effects were evaluated by three methods of analysis.
`The first method used the proportion of patients treated with each analgesic
agent and placebo who claimed greater than 50 per cent relief of pain at any
time during six hours after drug administration. This approach seemed to be
the best in selection of patients who obtained a truly useful therapeutic effect.
The results (Fig. 1) showed that 650 mg of aspirin quite clearly led the pack.
Both aspirin and mefenamic acid showed a significant advantage over placebo.
In addition, aspirin was significantly superior (p less than 0.05) to ethohepta-
zine, promazine, codeine and propoxyphene. None of the other drug differences
were at statistically significant levels.
The second means of analysis (Table 1) employed the mean percentage of
analgesia claimed by patients with each study drug and placebo. This method
~allows a relative crediting of all degrees of analgesic effect from very minor to
complete relief of pain. Again, aspirin leads, but pentazocine, acetaminophen,
phenacetin, mefenamic acid, and codeine all show a significant advantage over the
placebo. Propoxyphene, ethoheptazine and promazine remain significantly in-
ferior to aspirin.
The third method of analysis (Table 2), perhaps most important from a com-
parative standpoint, employed the relative ranking method of analgesic effect as-
signed by each patient to each of the test drugs-i.e., the drug to which an indi-
vidual patient attributed the greatest percentage relief of pain was given the
rank of one, and that with the lowest percentage a rank of 10. The figures re-
corded in Table 2 are the sums of ranks accorded to each drug by the 57 patients.
Still, aspirin is the leader, showing a highly significant superiority over the
placebo as well as over propoxyphene, ethoheptazine and promazine.
PAGENO="0332"
8834 COMPETITIVE PROBLEMS IN THE DRuG INDUSTRY
Aspirin 650 ~
> Superior to
Mefenamic Acid 250 ~ Placebo
Pentazocine* 50 ~
Acetarninophen 650 ~
Phenacetin 650 ~
Propoxyphene 65 ~
Codeine 65 ~
Prooiazine 25 ~ Inferior to Aspirn
P< 05
£thohcptazine 75 ~
Placebo J
0 20 40 60
% OF 57 PATIENTS ACHIEVING ~ 50% RELIEF
Results for çentazocine in 30 patk~nts.
FIGTJRE 1.-Relative Therapeutic Effect of Oral Analgesics According to Percent-
age of Patients Achieving Significant (More than 50 per Cent) Relief of Pain
(Analysis by Student-Newman-Keuls Method (2)).
TABLE 1.-RELATIVE THERAPEUTIC EFFECT OF ORAL ANALGESICS ACCORDING TO MEAN PERCENTAGE OF
RELIEF OF PAIN ACHIEVED IN 57 PATIENTS
Analgesic agent Dose (mg.) Relief of pain (percent)
Aspirin 650 62
Pentazocine5 50 54
Acetaminophen 650 50 Significantly superior to placebo
Phenacetin 650 48 (p