11. Providing that during the first 3 years of the current 17 year patent grant the patent-holder shall have exclusive rights, but that for the remining 14 years it shall be required to license qualified applicants upon the ayment of a royalty of up to 8 per cent on the licensee's sales. This we beleve is a fair and sound way of permitting competition to limit prices while t the same time assuring a liberal return on investment to patent-owning companies.

12. Providing that any contract, combination or conspiracy restricting applications for drug patents or drug patent licenses violates the Sherman ct anti-trust provisions. By monopolies on patents, manufacturers have hamred free competition among ethical drug companies. One of the characteristics I prices of major drugs in the last decade or so, brought out in the hearings f the Senate Subcommittee, is that they have been the same for many years and re usually identical between different companies.

These last three provisions, we believe, would not interfere with making fair return on capital investment or inhibit initiative in research. The A's claim that such inhibition will occur is disproved by the experience of her countries, as so well documented by the Senate Subcommittee. These pro

sions are essential, in our opinion, to promote true price competition in his peculiarly monopolistic industry in which the physician, as an intermedry between the producer and the buyer, prescribes what ethical drug the buyer ys. Thus as Senator Kefauver has expressed it "the drug industry is unusual that he who buys does not order and he who orders does not buy." The nsumer is completely captive. He must buy the trade named drug the doctor ders, and he cannot or does not know how to shop around for the drug at a mpetitive price.

STATEMENT OF THE PHYSICIANS' COUNCIL

Re: S.1552, 87th Congress
Drug Industry Antitrust Act

Before Committee on the Judiciary
Subcommittee on Antitrust and Monopoly
United States Senate

By

Julius B. Richmond, M.D.

July 21, 1961

Mr. Chairman and Members of the Committee:

I am Dr. Julius B. Richmond of Syracuse, N.Y. I am appearing here to-day

as the President of the Physicians' Council. I am also Professor and Chairman

of the Department of Pediatrics at the College of Medicine of the State University of New York at Syracuse.

In presenting this statement on S.1952, as President of the Physicians' Council, it is appropriate that I describe the origins and activities of the Council. I do this, not alone for historical purposes, but rather because our experiences have considerable relevance for some portions of S.1552, particularly Section 4 Part (7) having to do with the transmission of information concerning drugs by manufacturers, packers or distributors to physicians either directly or indirectly through advertisements or other descriptive matter.

The Physicians' Council is an independent, nonprofit organization of 21 physicians active in medical education and clinical practice who have been attempting to improve the standard of health information disseminated to both. the medical profession and the public. Although the Council arose out of the efforts of pediatricians who were concerned about the unfortunate effects of the dissemination of improper information on child health and the inappropriat

`omotion of drugs on the health of children, we soon found there was concern this connection with the health of the public generally. Our membership, erefore, has been broadened to include other physicians.

As you know, the American Medical Association discontinued the Seal ograms of its Council on Drugs and Pharmacy and its Council on Foods and trition in February 1955. The award of a Seal of Approval to drug and tritional products for display on promotional material and labels had been nsidered to be an important stimulus to desirable practices of companies th respect to methods of selling their products to the profession and the blic. The discontinuance of formal review of material on health (drugs and tritional products) by independent experts left the field open to companies d advertising agencies and individual editors of medical journals to provide dical review of this material,

A significant social problem with which S.1552 endeavors to deal soon came apparent to many physicians, A real hazard to the public health sulted from the absence of independent medical judgment in the field of comotion. Some of these hazards are detailed in a publication entitled, elling Drugs by 'Educating' Physicians."* written by one of our members. early some efforts at correction were called for in the absence of any ganized effort to deal with the problem. The problem was sufficiently rious to move some manufacturers of products used in pediatric care to ovide moral and financial support to a group of pediatricians similarly ncerned to form the National Council on Infant and Child Care in March 1956 his organization later became the Physicians' Council.) Its stated purpose s "to disseminate information relating to care and treatment of infants and

A copy of this publication is attached as Exhibit B

children; to disseminate analyses of material distributed which relates to such care and treatment; and to co-operate with public, private, scientific or medical groups, associations or corporations in fostering and promoting such care and treatment."

The first activity of the Council was the development of Codes to set high standards for the preparation of material for dissemination through the mass media, both promotion and educational, whether intended for the profession or the laity.*

A modification of the AMA Seal Program was devised to offer some form of public recognition to those who adhered to the standards of the Codes, by awarding the privilege of display of the Insigne of the Council on material meeting the standards of the Codes. Submission of material for this purpose was entirely voluntary.

Our concern was only with the accuracy

and appropriateness of information being disseminated.

In addition, for those not wishing to display the Council's Insigne, a consultative service was provided for informal, confidential review of material being prepared for the mass media. The aim was to be helpful and to improve material as far as possible.

There was no fee for these services and anyone could turn to the physician reviewers of the Council for helpful comment without obligation or fear of public criticism only commendation was to be given publicly where

wanted and deserved.

This seemingly attractive arrangement was immediately made use of by

a number of firms and individuals. All of these reported satisfaction with the service and appreciation for the help that was given. But widespread

A copy of these Codes is attached as Exhibit C.

use would have been required to make a significant impact in solving the problem and to build a significant influence of the Council. Some observers among the pharmaceutical manufacturers apparently foresaw a growing influence of the Council and feared a restraining force on unbridled promotion, for as soon as this Insigne Program of the Council began to have appreciable acceptance and material bearing the Insigne attracted attention, an organization of the principal ethical pharmaceutical manufacturers (Medical Directors of the American Drug Manufacturers Association, now part of the Pharmaceutical Manufacturers Association) adopted a resolution in April 1958 calling upon its members to avoid co-operation with the Physicians' Council. They indicated that the industry's own principles and its medical directors could assure high standards in promotional matérial

The concern of the members of the Physicians' Council was sufficiently serious about the misleading aspects of promotional material for us to make every effort to communicate this concern to executives of the firms constituting the Pharmaceutical Manufacturers Association. Accordingly, some of the members of our organization made personal visits to the executives of a number of large pharmaceutical manufacturing concerns. Also, in January, 1959, the Physicians' Council held an all-day conference with a large group of representatives of the major pharmaceutical companies and their advertising agencies to review the objectives and program of the Council. It was apparent that more extensive co-operation with the original program was not forthcoming, nor were any alternative plans suggested by representatives of the industry tá allow a reasonable influence of independent physicians on the quality of medical information being disseminated through the mass media.