to people who are interested in research is concerned, I don't think that this is an important point. The fact is that in Germany, for example, where there are no patents at all-except the ones that we grant them

Senator HRUSKA. Would you advocate the abolition of patents here?

Dr. MODELL. No, sir, I haven't suggested it but I am answering your question.

Senator HRUSKA. I am asking if you would advocate it.

Dr. MODELL. No, I am not. I am in favor of this kind of protection. I am completely in favor of it.

I am just answering the question about the patents as an incentive. I don't think that that is the incentive to real research. It is sometimes, but I don't think it is a major incentive.

The answer is that in Germany where there are no patents for a pharmaceutical invention, pharmaceutical inventions go on at quite a rate. For a country of its size it does very, very well indeed.

So that I think the evidence is that that is not what makes men do this sort of thing.

Senator KEFAUVER. Let me see if I get this clear.

The bill, of course, provides that after 3 years of protection under a patent to a qualified applicant, upon payment of a royalty not exceeding 8 percent, the holder of the patent should grant a license to manufacture upon payment of royalty. Do you think that another drug company, feeling that after 3 years it may be able to manufacture and sell a particular drug upon payment of a royalty, might deter that manufacturer from trying to make some little slight modification upon which he could get a patent, and thus

Dr. MODELL. Is your question completed, Senator?

Senator KEFAUVER. I do not know if I have made myself clear.
Dr. MODELL. I think I understand you.

I rather believe that the fact that he couldn't get a patent on a molecular modification, which was just a modification without an improvement, would be more of a deterrent than the fact that he might get some licensing 3 years hence.

Senator KEFAUVER. But my point is that if he felt that he couldn't sell the drug for 17 years, that might be an incentive for him to make some little insignificant modification on which he could get a patent and therefore sell the drug, whereas if this bill were law, knowing that he could manufacture and sell the drug after 3 years on payment of a royalty, that might slow down this business of making these minor insignificant changes in order to get a patent and compete, and release your scientists for some more basic research.

Dr. MODELL. I agree with you in principle, and, as I said before, I don't want to deal with the problems of marketing about which I know little.

Senator KEFAUVER. All right, sir.

Dr. MODELL. Or incentives to the drug industry.

Senator HRUSKA. Of course, Doctor, if the manufacturer, after investing a substantial amount of money in perfecting something that is worthy of a patent, then realizes he has only 3 years in which to get back his investment in large part, because certainly at an 8-percent royalty he is going to be quite inhibited, he will have 3 years then in

which to take all of his detail men from every other drug and push this thing so that he can get his sales up to a point where he will get that money back. Would that not be one of the results of such a provision?

Dr. MODELL. This is the question I tried to answer. The important thing in the industry is establishing a name and getting one's foot in the door. Once a name is established and a new drug is established, the tendency, especially with the use of trademarks rather than generic names, is for physicians to continue to use the first name. So that even though 3 years afterward the drug might be made available to other distributors, I don't think they would get very much of the prime market, because of the 3-year period during which the first manufacturer would have the exclusive right to establish a name.

This is standard procedure. And it is for that reason, for example, that drug houses who, in developing one drug may have developed a whole series of similar drugs will, after a period of time, actually license their own patents to competing drug houses. They are not afraid of that kind of competition once they have established the original name.

Senator HRUSKA. The question is whether a 3-year period is sufficient for that purpose without incurring the same objectionable type of pressure and promotion by detail men which is so stoutly criticized by most of the witnesses who come before us who favor the bill. Dr. MODELL. Sir, important drugs like insulin and penicillin got established overnight. It didn't take a long time or a great deal of promotion. That is the best answer I can give you. The more a drug has to be peddled, the more one begins to wonder why.

Senator HRUSKA. But that is in the case of a truly new drug.

Dr. MODELL. Or the corticosteroids. The real hectic promotion with any of these drugs comes when the modifications begin to compete with each other, not when the original and important discoveries are made.

Senator KEFAUVER. I have seen in some places suggestions that the requirement to give a license to a qualified applicant, upon the payment of 8-percent royalty after 3 years, carried with it the right to use the trade name. That is not the intention and that is not what this bill provides.

The licensee would have to sell under his own trade name unless the holder of the patent wanted to give him the right to sell under the original trade name, or he could sell, of course, under the generic name if he didn't want to establish his own trade name.

I think at these hearings we have heard also that 8 percent is a very high royalty.

Dr. MODELL. I have no idea.

Senator KEFAUVER. But that is on sales. That is on what the licensee sells. He would have to pay up to 8 percent. The royalties that we have heard about here, as I recall, are either 3 percent or 5 percent. The usual profit on the sale of drugs is about one-half of the investment, so that would be about 15 percent on investment. All right, sir.

Senator HRUSKA. And, of course, if he owned his building, his investment would be big, if he leased, it would be small, so again we go round and round on investment, so I suggest that this is a totally inaccurate index of return on the money.

Senator KEFAUVER. We won't fuss about that.

Senator HRUSKA. Since you brought that up, I thought I should make that point for the record.

Let me ask you, Mr. Chairman, if I get this right: that the licensing after 3 years would not carry with it the trademark, is that correct? Senator KEFAUVER. That is right. The licensee would not be entitled to sell under the trade name of the licensor unless by negotiation he was given that right.

Senator HRUSKA. But the compulsory part of the statute would adhere to the product itself and not its trade name?

Senator KEFAUVER. That is correct.

Senator HRUSKA. So they can waive it if they want. So that if the trade name is X and there is a licensing after 3 years, would there be any provision which would bar the licensee from saying, "This is XX and it is exactly the same as X? We are licensees under this.” Senator KEFAUVER. The trade name is copyrighted. He is protected on his trade name.

Senator HRUSKA. He does not use the trade name. He simply says in his sales X has been a very successful thing and we are not going to call it X. We are going to call it XX. And it is precisely the same as X and he has documents to prove it.

Senator KEFAUVER. There are laws to prevent plagiarizing of trade names or doing the kind of thing you talk about. That comes under the general law.

Senator HRUSKA. That I would like a citation on because I didn't know there was any such.

Senator KEFAUVER. For example, I won't mention the name of the motel but there was the case of a trade name of a motel, where somebody built one so that it looked like the Howard Johnson structure— or whatever it was-and they were enjoined from doing so, so there are protections against trying to mislead people into believing that this is the same trade name.

Senator HRUSKA. Surely, it would be a revelation of the truth. He would simply be telling the people what the fact is; namely, that he is entitled legally to produce and to sell the very same thing that the producer of X is doing; it would be perfectly legal.

Mr. FENSTERWALD. That is correct, he would use the same generic name, but he would have to use a different brand name.

Senator HRUSKA. He would use a different brand name, and he would call it XX instead of X.

Dr. MODELL. May I answer this?

This is what happens right now. There are a great many drugs that are cross-licensed that have different trade names and it is common practice to say X is just exactly the same as XX. It is in practice right now.

Senator HRUSKA. In practice right now?

Dr. MODELL. Right now.

Senator HRUSKA. And this bill would permit it, in your judgment, to continue?

Dr. MODELL. This bill would not change that at all.

Senator HRUSKA. That is the question I asked of the chairman. I got a little different answer. Now we have two answers.

Dr. MODELL. I don't think it would change it at all. It goes on right now.

Senator KEFAUVER. I do not know of a situation where it is advertised.

Dr. MODELL. Oh, it is not done in advertising. That would be against the "better business" practice, but it is done verbally. Senator KEFAUVER. You mean somebody says it orally?

Dr. MODELL. Yes.

Senator KEFAUVER. I suppose those are the detail men you are referring to.

Dr. MODELL. Pharmacists, detail men.

Senator KEFAUVER. It is pretty hard to stop people from saying that.

Dr. MODELL. It goes on.

Senator HRUSKA. Apparently it is the detail man.

Senator KEFAUVER. Anyway, this does not change the law as to a straight infringement.

All right, sir.

Dr. MODELL. Legislation regulating drug nomenclature is most important to those who teach medical students, and, believe me, if preand postgraduate teaching of therapeutics is undermined, the health of our Nation will be threatened. As new advances in drugs are made, and more and more powerful drugs are used, training, knowledge, and skill in their use-hence, basic and postgraduate education-become still more important. In teaching about drugs we must use official names, if only to save time. When there are 10 or 15 or 25 trademarks for a single drug, we might spend most of the time merely rattling them off instead of explaining how the drug works. Besides, no one can remember them. But there are other compelling reasons. To talk of drugs meaningfully the family history, so to speak, of the drug is most important; so is its chemistry. As already mentioned, we have to use prototype teaching to deal with the shifting scene. Help is sorely needed here. Clues to the basic nature of drugs are to be found in good official names, almost never in trademarks. Official names are, therefore, essential to teaching, to meaningful communication, to scientific thinking and, I believe, good practice. Drug names should communicate; not mystify, confuse, or even attract. Physicians should be able to choose, use, and think about drugs clearly, objectively, unemotionally. If it be true that there are "hidden persuaders" in advertising-if our emotions, our prejudices, our ambitions can be tapped by clever admen to make us choose a manufacturer's product-then drugs at least should be protected from Madison Avenue.

Senator KEFAUVER. Dr. Modell, I think we will have about a 5minute recess at this point.

(At this point a short recess was taken, after which the hearing was continued.)

(Present at this point: Senators Kefauver (chairman) presiding, and Hruska.)

Senator KEFAUVER. Will you proceed, Dr. Modell?

Dr. MODELL. Official names are used in all articles published in all the journals of the American Medical Association. It is the terminology of the Council on Drugs of the American Medical Association. The directory of drugs acceptable to the Council on Drugs of the American Medical Association, New and Nonofficial Drugs, also de

scribes drugs under their official or nonproprietary names. It is interesting, indeed, that the Merck Manual, a concise medical encyclopedia published as a service to the medical profession by Merck Sharp & Dohme, uses no trademarks anywhere at all in the entire book; only official names. In the Merck Index, also published as a public service by Merck Sharp & Dohme, there are concise descriptions of about 10,000 different chemicals and drugs. In this truly magnificent reference manual used by authorities over the world, drugs are listed under nonproprietary names unless the actual composition of the material is unknown or in question, in which case the trademark is used. Thus, official names constitute the terminology of a great pharmaceutical manufacturer when, to use its own statement, it undertakes to perform a public "service" without profit. Clearly, trademarks are a device for profit, not for identification of or communication about drugs.

The often-used argument of the pharmaceutical industry that trademarks are an essential part of the American system of branding, or identification with a particular pharmaceutical house so that a good reputation and a good job can be rewarded by loyalty to a particular brand is a spurious one. Trademarks do not indicate the pharmaceutical house at all; only the brand name of the house does this. In addition, a distributor may purchase his basic drug from one manufacturer at one time and from another at another time. But even more important, the trademark does not even guarantee the same distributor. The same trademarks for drugs are currently used by more than one pharmaceutical house, for trademarks can also be licensed. Thus, the trademark of the common anticoagulant, Dicumarol, is used by at least five different pharmaceutical houses. (Its generic name is bishydroxycoumarin.) Here, despite the use of a trade name, the only way of really knowing who is the responsible agent is through the brand name, i.e., the name of the pharmaceutical house.

Most physicians do not associate trademarks with specific pharmaceutical houses. Therefore, far from identifying a drug with a pharmaceutical house, the trademark enables the house to hide his black sheep. If the proposed bill is passed, there will be, I think, fewer drugs and, as a result, we will have fewer black sheep, but it would be still better if all drugs were called by their right names.

I say the well-established custom of using brand names, together with the proper name of a drug, is a fine and acceptable one; it is satisfactory for foods, clothes, and other articles of commerce. Brand names state a simple fact and infer only the reputation of the pharmaceutical house; there are no other implications. When brand names are used, there is no possibility of confusion even though a large number of pharmaceutical houses distribute the same drug. It is an entirely different matter with the trademark which disguises the name of the drug and gives no information at all, not even as the evidence clearly indicates, the distributor.

It is interesting in this connection that when manufacturers sell drugs to wholesalers and when they sell chemicals to chemists, they use the correct names, i.e., for those who want to know what they are buying they use official names. It is also interesting that the chemist who insists on knowing exactly what he gets merely mixes