8. The Fond du Lac study: An intensive study of the marketing of five new ethical pharmaceutical products in a single market, resulting in some theory of scientific marketing and service programs for action- a basic marketing study made for the American Medical Association 9. A study of medical advertising and the American physician. The physicians' viewpoint-an opinion survey made for the Ameri- 10. Expenses of AMA councils, bureaus, and related activities, 1950–58. 11. Letter from Dr. Blasingame, American Medical Association, July 24, 12. AMA income by source, 1949-60 (subcommittee chart) - 128 13. Pages of advertising in J.A.M.A., January to March, 1953-61 (sub- 131 14. Advertising expenditures in J.A.M.A., 22 selected drug companies, 132 17. "Why we sometimes ask questions * * *" ad from J.A.M.A., August 536 25. Tenuate ad, J.A.M.A., July 9, 1960, and "Status and Prospect of Drugs for Overeating," Report to the Council on Drugs, Dr. Walter 27. "The Council on Pharmacy and Chemistry-Membership, Activities, Method of Operation, Attainments," Dr. Austin Smith, J.A.M.A., 28. "United States Food and Drug Administration and the Pharmaceutical Industry," by Dr. Joseph Garland, British Medical Journal, May 29. AMÁ resolutions and actions, presented by State medical associations__ 30. Code for Advertising, the Physicians' Council, August 1957---- 31. Further examples of promotional "education," submitted by Dr. 32. Advertisements and accompanying material submitted by Dr. Charles 32A. (1) "Social Processes in Physicians' Adoption of a New Drug,' James Coleman, et al., Journal of Chronic Diseases, January 32A. (2) "Dimensions of Being 'Modern' in Medical Practice," Herbert Menzel, et al., Journal of Chronic Diseases, January 1959.... 33. "The Pharmaceutical Industry," John G. Searle, et al., of the Profes- sional Relations Committee, Pharmaceutical Manufacturers Asso- 34.* The Fond du Lac study: An intensive study of the marketing of five new ethical pharmaceutical products in a single market, resulting in some theory of scientific marketing and service programs for action- A basic marketing study made for the American Medical Association by Ben Gaffin & Associates (full text). 36. Letter from W. B. Reynolds, General Mills, Inc., Minneapolis, Minn., 37. Letter from Noble J. Swearingen, director, Washington Office, Ameri- can Public Health Association, July 14, 1961, enclosing statement 38. "Hazards of Modern Diagnosis and Therapy-The Price We Pay," Dr. David P. Barr, J.A.M.A., December 10, 1955. 39. "The Testing of New Drugs and Other Therapeutic Agents," Dr. 44. "Too Many Drugs," Time magazine, May 26, 1961, relating to article by Dr. Walter Modell in Chemical Pharmacology and Therapeutics. 45. Letter by Dr. Austin Smith, Time magazine, June 16, 1961, com- 52. Report on Norlutin, Council on Drugs of A.M.A., volume 169, No. 11. 53. "The Clinical Value of Drugs: Sources of Evidence," Dr. Mindel C. Sheps, American Journal of Public Health, May 1961.. 54. Notice of proposal to amend labeling requirements, enforcement regu- lations drugs and devices, new drugs; Food and Drug Administra- tion; Federal Register, July 22, 1960. 55. "Chemical structure of Tetracycline, Chlortetracycline, and Oxytetra- cycline," Patent Ownership and Licensing in Antibiotics Industry, Opening statement by Senator Kefauver.. Opening statement by Senator Dirksen.. Comparison of S. 1552 and present law which it would amend (committee "Amendment of Antitrust Laws with Respect to Manufacture and Dis- 1961_ 26 Letter from Dr. Louis Goodman, July 20, 1961.. Page 971 973 976 a statement of the 335 "Anyone for a Symposium?" Dr. Walter Modell, Clinical Pharmacology and Therapeutics, November-December 1960.. "The Placebo Effect in Psychiatric Drug Research," Dr. Armand W. 979 982 992 "Statement on Review of Advertising Copy by Outside Groups," resolution Letter from Dr. Charles May, August 28, 1961, on Council of Drug review 364 187 Letter from Dr. Martin Cherkasky, July 21, 1961, enclosing revised table American Hospital Association, statement to subcommittee, August 8, 1179 American Medical Association, comments of August 21, 1961: On subcommittee charts. On Barclay article and DBI ad. On Equanil and Miltown ads........ On Modell article and Tenuate ad. 135 150 152 160 On AMA advertising policies. 162 167 Letter from Winifred Sewell, Sen or Li rarian of Squibb, on discovery DRUG INDUSTRY ANTITRUST ACT WEDNESDAY, JULY 5, 1961 U.S. SENATE, SUBCOMMITTEE ON ANTITRUST AND MONOPOLY Washington, D.C. The subcommittee met, pursuant to notice, at 2:30 p.m., in room 318, Old Senate Office Building, Senator Estes Kefauver presiding. Present: Senators Kefauver (chairman), Carroll, and Dirksen. Also present: Hon. Ken Hechler, U.S. Representative from the Fourth Congressional District of the State of West Virginia; and George P. Larrick, Commissioner, Food and Drug Administration. Bernard Fensterwald, Jr., staff director; Horace L. Flurry, counsel; Peter N. Chumbris, counsel for the minority; Nicholas N. Kittrie, counsel for the minority; Dean W. Wallace, counsel for the minority; Lucile B. Wendt, attorney; Dorothy D. Goodwin, attorney; Dr. John M. Blair, chief economist; Dr. E. Wayles Browne, Jr., economist; Dr. Irene Till, economist; Paul S. Green, editorial director; and Gladys E. Montier, clerk. (Present at this point : Senator Kefauver (chairman), presiding.) Senator KEFAUVER. (presiding). The committee will come to order. Senator Dirksen, the minority leader, will be here shortly. We hope that other members of the committee will come in later this afternoon. We are delighted to have with us as an observer Mr. Larrick, who is head of the Food and Drug Administration, and Congressman Hechler of West Virginia. The members of the Committee of Labor and Public Welfare of the Senate, along with any members of the staff of the appropriate subcommittee, are cordially invited to be present and participate in any of these hearings on our legislative proposal. The bill we have before us is an omnibus bill involving Sherman Act amendments; amendments to the patent laws, which is a judiciary matter; and amendments to the Food and Drug Act, the latter of which comes under the primary jurisdiction of the committee of which Senator Hill is the chairman-Labor and Public Welfare. The amendments to the Food and Drug Act are in this bill primarily because the authors of the bill feel that there would be more competition in the industry if these were within the jurisdiction of this committee. (At this point, Senator Dirksen entered the hearing room.) Senator KEFAUVER. I have a statement which I will direct be printed in the record at this point. In an effort to get to the witnesses as soon as possible, I will read only brief excerpts from it, but the whole statement will be printed. 1 I may say that this statement attempts to summarize briefly the majority report which has been printed and is available, the thinking behind some of the legislative proposals and also the proposals themselves. In opening these hearings on S. 1552—and, incidentally, Congressman Emanuel Celler has filed an identical bill in the House of Representatives, H.R. 6245-the Drug Industry Antitrust Act, I want to make some remarks concerning the majority findings of the Subcommittee on Antitrust and Monopoly based on the extensive investigation of the ethical drug industry and of the ways in which the major provisions of S. 1552 relate to the specific problems disclosed by that investigation. Incidentally, the term "ethical" connotes the fact that these drugs are sold only on a doctor's prescription, in contrast to propietary or "over the counter" drugs. Our examination of this particular industry has embraced 13 volumes of hearings numbering some 8,668 pages of testimony. A vast amount of new knowledge and information concerning this field, which alone among our major industries had never been subjected to a major investigation, has been placed into the record. Witnesses have included representatives of the drug industry, Government officials, eminent medical authorities and others. There is now available a report (S. Rept. 448) in which the majority members of the subcommittee Senators Carroll, Hart, Dodd, and myself-set forth the principal findings which we have reached in this broad-scale investigation. The same document also contains the individual views of Senators Dirksen, Hruska, and Wiley. COSTS AND PROFITS The principal, though not the only, reason for the bill is that ethical drug prices are generally unreasonable and excessive. They are unreasonable whether compared to costs, to profits or to prices in foreign countries. With respect to costs, prednisone and prednisolone, leading drugs used by arthritic sufferers, represent a typical case in point. Under the big drug companies, brand names, such as Meticorten or Meticortelone, these products are sold to druggists for around 18 cents a tablet and the suggested price to consumers is 30 cents a tablet. Yet the cost of production for these tablets, including tableting, bottling and packaging, is no more than 1.5 cents per tablet. An arthritic patient will frequently remain for long periods on a dosage of about 100 of these tablets a month. Thus he pays $30 a month for his medicine, for which his druggest paid around $18 and which cost around $1.50 to produce. As was made abundantly clear throughout the hearings, this does not mean that the difference between 1.5 cents and 18 cents consists entirely of net profits; it also includes selling and distribution costs, taxes and other indirect costs. But the subcommittee has received numerous complaints from physicians, supported by abundant testimony in the record, to the effect that advertising and selling costs are excessive, wasteful, and often misleading. |