EXHIBIT 42

EFFECTS OF S. 1552* ON THE PUBLIC'S HEALTH

Eli Lilly and Company, a manufacturer of prescription medicines for more than eighty-five years, has traditionally co-operated in practical efforts to raise standards and performance in the pharmaceutical industry. For this reason, Lilly supports a number of the provisions of S. 1552 which we believe are in the public interest.

However, we are convinced that other very important provisions of this bill would not achieve the announced objectives and, in fact, would seriously impede progress in medicine and pharmacy. We believe that these provisions which are not in the public interest should be strongly opposed.

This bill proposes drastic discriminatory legislation. At the same time it attacks fundamental institutions of our free enterprise system and poses a serious threat to all progress that depends in any way upon industrial research and product development.

The proposed legislation attacks the basic premises of the patent system, which is essential to American democracy. In denying patent protection for the fruits of pharmaceutical research, it would greatly

*This bill was introduced by Mr. Kefauver on April 12, 1961, and was referred to the Senate Committee on the Judiciary. An identical bill, H. R. 6245, was introduced by Mr. Celler and was referred to the House Committee on the Judiciary.

reduce the financial ability and incentive to discover and develop new

medicinal agents.

It would substitute administrative edict by government for the collective judgments of practicing physicians in the determination of disease therapy and would narrow down the choice of drugs available to the medical profession.

It would give the federal government life-and-death licensing power over drug companies and would impose costly controls which would accomplish little toward the protection of the public interest. It would delay the availability of new lifesaving drugs.

Our general views and comments on the principal provisions of

S. 1552 follow.

SHERMAN ACT AMENDMENT

The bill would make unlawful per se under the Sherman
Act every contract, combination, or conspiracy whereby
any party undertakes or has undertaken to (1) withdraw
or cause to be withdrawn any pending application for any
patent for any drug, (2) concede priority of invention to
any other applicant for a patent for any drug in connection
with any agreement or understanding to (a) split royalties
between the applicants for such patent, (b) grant more
favorable royalty rates to any other such applicant than to
anyone who was not an applicant for such patent, or (c) to
grant patent licenses only to other applicants for such
patent, or (3) refrain from granting or to induce any other
person to refrain from granting any license under any
patent granted or which may be granted for any drug.

The Sherman Act already proscribes the very conduct described

in the bill if the effect of such conduct is unreasonably to restrain trade

or create a monopoly. We believe that conduct which does not give rise to these effects should not be arbitrarily condemned.

The bill's provision would outlaw a practice which speeds the availability of new and improved medicines to the public. Agreements which resolve patent controversies are desirable and in the public interest This is especially true of patent interference controversies. The interference settlement expedites the issuance of patents, reduces unnecessary work loads in the Patent Office, and frequently removes potential obstacles to commercial production. Agreements with respect to the issuance of future patents, far from being restrictive, assure the availability of important inventions at the earliest date and competition for sales among two or more producers. By prohibiting such agreements without regard to their effect, this provision of the bill would deprive the public of possible benefits; it is also unnecessary because the public interest is already adequately protected by existing law.

In addition, the bill proposes a major departure from the orderly development of the antitrust laws. The Sherman Act and its progeny have historically been couched in general terminology sprung from the basic premises of our free enterprise system. The bill, however, confines itself exclusively to drugs and specific acts by one seeking or holding a

drug patent. By focusing solely on drugs, it necessarily implies that the conduct condemned only in the drug field is legal in other areas of commerce. This would seem to have an obvious deleterious effect upon the enforcement

of the Sherman Act.

PATENTS FOR DRUGS

Without minimizing the impact of the other portions of the bill,

it can be fairly said that the most far-reaching provisons are found in the amendments to the Patent Law. Here again the bill affects only drugs--indeed, only prescription drugs.

Molecular Modifications and Drug Combinations

The bill would preclude the granting of a patent for any
molecular modification of any patented or unpatented drug
or for a combination of two or more drugs unless (a) the
Commissioner of Patents] has determined that the change
from the prior art made by that modification or combination
would not have been obvious to a person having ordinary
skill in the art, and (b) the Secretary of Health, Education,
and Welfare has determined that the therapeutic effect of
such modification is significantly greater than that of the
drug so modified or that the therapeutic effect of such drugs
when taken in combination is significantly greater than the
therapeutic effect of those drugs when taken separately.

It is obvious that terms such as "molecular modification" and

"significantly greater" therapeutic effect are extremely vague, leaving tremendous latitude for interpretation by the Secretary.

Of far greater significance, however, the bill seeks to eviscerate the Patent Law as it affects prescription drugs. It requires the finding of significantly greater the rapeutic effect, which is only one of numerous criteria for measuring progress in the pharmaceutical field. Completely omitted from consideration and apparently irrelevant under the bill are lesser toxicity, lower dosage levels, improved dosage forms, lower costs, greater stability, sustained potency over longer periods of time, and other recognized indicia of useful advances in drug therapy.

We believe that molecular modifications, however defined, should be encouraged, not thwarted. Experience has demonstrated beyond doubt that new compounds chemically similar to existing ones may prove to be medically superior. Under the provisions of the bill, penicillin G might have remained the world's only antibiotic, with none of the tremendous improvements in antibiotic therapy which followed. Likewise, the first sulfa product, toxic sulfanilamide, might long have continued to be the only sulfa therapy at the physician's command.

History is full of examples of lifesaving drugs which represent only slight molecular changes from ineffective substances. The Nobel Prize winner and expert on rheumatoid arthritis, Dr. Philip S. Hench, testifying before the Kefauver Subcommittee last year, said that the