The first dealt with the accuracy of Senator Anderson's statement that pharmacy and therapeutics committees are extant in the majority of the larger hospitals and that the majority of beneficiaries under H.R. 6675 could expect to be hospitalized in such institutions.

This statement is illustrative of the problem our testimony attempts to emphasize and remedy. It is literally true that about 50 percent of the larger hospitals, those with 100 or more beds, have drug committees that meet once a year or more. In those hospitals, that is, about half of the larger hospitals, the drug committees could broaden the assortment of drugs to be provided under section 1861(t) to give the elderly the same drugs that are available to other patients. This simply means the elderly in larger hospitals would have something on the order of a 50-50 chance of getting all the drugs they deserve.

A much lower percentage of hospitals with fewer than 100 beds have therapeutic committees.

It is important in this connection to recognize that the smaller hospital is not, as some might contend, of minor importance in the Nation's health care. Of the 7.004 hospitals in the United States, a 1964 American Hospital Association survey shows that 4,080 have fewer than 100 beds each. Those smaller hospitals had a total of 6,758,644 admissions in 1963, the AHA survey shows.

We submit that institutions that numerous, offering that many beds, caring for so many millions of illnesses each year, are not to be passed off as unimportant. The most current information we have discovered concerning the availability of pharmacy and therapeutics committees in these smaller institutions is found in a report on a Government-financed study conducted by the American Society of Hospital Pharmacists, published last year. It states: "Among the short-term hospitals with less than 100 beds the percentage having committees decreases sharply from 37 percent in hospitals with 50 to 99 beds to 4 percent in hospitals with less than 25 beds."

Thus it is patently clear that in the vast majority of smaller hospitals, the drugs available under section 1861(t) will be limited to those listed in the cited compendiums since no therapeutic committee exists. In effect, then, thousands of older patients hospitalized in community and rural hospitals near their homes are going to be penalized as regards drugs to be covered, on the grounds they happen to live away from the great metropolitan centers.

Senator Anderson's second comment on which we would offer our further view has to do with restrictions in certain State Blue Cross contracts that are similar in wording to the present section 1861(t). We believe it is true that such restrictions do appear in some Blue Cross contracts; and, especially in light of the facts presented in the first part of this letter, it is reasonable to ask why, if this kind of language is troublesome, few serious objections have been raised to them. We believe the reason lies in the economic, rather than medical, basis for such contract limitations. In presenting bills for payment, hospital contractees under Blue Cross do not normally itemize the drugs dispensed or administered; they merely indicate the pharmacy charges for each payment. Indeed, it is our understanding from conversations with Blue Cross representatives that only when an exceptionally high pharmacy bill is presented, and there is a subsequent inquiry to learn the basis for the bill, does Blue Cross normally learn what drugs are involved in a given case.

Obviously then, Blue Cross is not often in a position to know whether drugs it pays for are restricted to the ones listed in the various compendiums. Bearing in mind that in practice the contract language is intended largely as an economic tool, it is clear the plans do not really care, if the cost is within customary bounds and all other factors remain equal.

We understand further that when Blue Cross does find an uncommonly high pharmacy charge for a given patient, it seeks the advice of the hospital drug committee (if there is one) before refusing to render payment, in order to learn the medical justification for the therapy.

In any event, it is apparent that Blue Cross hospitals regularly administer, and Blue Cross regularly pays for, drugs that are not in the compendiums. We think this fact lends further support to our contention that restrictive language such as is in section 1861 (t) is impractical and will, if Blue Cross is any example, not be observed.

The only other comment I would like to add for the record is to restate the support of the Pharmaceutical Manufacturers Association for the language read by Senator Williams as a substitute for the present wording of section 1861(t).

Mr. Chairman, we know this bill cannot meet every circumstance of every aged patient. But as we have tried to show in our testimony and here, there is no need for it to fail to meet the reasonable needs of many thousands of people, as it now does, for lack of a recognition of the facts of hospital life as they are. We sincerely hope your committee will make a reasonable modification of its language along the lines we have suggested.

We shall, of course, be ready to comment further if that is desired.

Cordially,

AUSTIN SMITH, M.D.

Dr. KLUMPP. But, Mr. Senator, the principle here, what you are propounding, it seems to me, is that it is all right for the majority but those poor devils who happen to be in these few hospitals or in hos pitals that are not covered by formularies we aren't worried about them. In medicine we are worried about every single patient whether he is in a large hospital, with a large population that has a formulary committee, we are worried about the ones who are in the smaller hospitals that don't have formulary committees just as much. Life is too precious to deal with majority votes.

Senator ANDERSON. Well, I am sure we are all agreeable with that but when you can't get to them and you do have a majority that can be served, why not serve them? Why refuse to serve them? Why recognize the situation? You are the ones bringing out the figure that only one in seven has such a committee. I say the majority of people in hospitals are served by such a committee and I would be happy to see you introduce evidence to contradict that.

Dr. KLUMPP. But we are concerned with the minority as well as the majority.

Senator ANDERSON. Well, I have read some statements from the American Medical Association about the need for health service that would not agree with that conclusion.

You are talking about people who are poor and the American Medical Association has been saying for a long time no such thing exists. The CHAIRMAN. Any further questions?

Senator Dirksen?

Senator DIRKSEN. Mr. Chairman, I would just like to know what the fuss is all about. I am sorry, I was before another committee that I couldn't get here. But for a matter of about 3 years or more the socalled Kefauver committee went into this drug business at great length. I was a member of the committee, and I guess I attended nearly every hearing we ever had. I finally emerged as the whipping boy because I had a few kind things to say about the pharmaceutical industry and they thought I was something of an ogre at the time. There was so much testimony presented that certainly didn't stand up in the light of day, that I thought they ought to have a fair shake in an open forum. I had no timidity about standing up for what I felt was a great industry that has done such a job for the American people. There isn't anything comparable anywhere in the world, and I guess our thanks is that some of these foreign countries swipe your patents today, and some of them had to be indicted for it.

But whatever the record shows, Mr. Smith, I just want to say, after going through 3 years of hearings and then having to go through this so-called monopoly business with respect to Latin America-where we finally got those subpenas quashed and they should be quashed-I just want to salute the drug industry for the great job they have done, and

I don't believe you have ever asked for too much when you have come before any committee where I ever sat.

And I just want to assure you if you have amendatory language for this bill, it is going to receive considered attention when we come up to the markup phase.

Dr. KLUMPP. Thank you very much.

Senator DIRKSEN. That is all, Mr. Chairman.

The CHAIRMAN. Thank you very much, Dr. Smith.

The Chair announces that Mr. Howard W. Habermeyer, Chairman of the Railroad Retirement Board and Mr. Lester P. Schoene, representing the Railway Labor Executives Association, who were scheduled to testify today have submitted written statements in lieu of appearing. Their statements will be placed in the record at this

time.

(The statements referred to follow :)

STATEMENT OF HOWARD W. HABERMEYER, CHAIRMAN, RAILROAD RETIREMENT BOARD

Mr. Chairman and members of the committee, my name is Howard W. Habermeyer, and I am Chairman of the Railroad Retirement Board. I have been associated with the Board since May 11, 1936, and I have been Chairman of the Board since November 26, 1956.

I am filing this statement in behalf of the Board in support of Senator Douglas' amendments No. 178 to H.R. 6675. These amendments would restore to the Railroad Retirement Board the jurisdiction provided for it in H.R. 1 and earlier bills relating to hospital insurance benefits for railroad employees. Unless the amendments are adopted, a social insurance program for railroad employees would be administered, for the first time, as a part of the social security program.

As you know, the Railroad Retirement Board administers an extensive social insurance program for people in the railroad industry. This program began in the middle thirties and in fact its inception antedates the social security program. The railroad retirement, disability, and survivors benefit program are similar to the OASDI program. Railroad service credits provide the basis for benefits and such service credits are, in general, excluded from the operation of the OASDI program. It is important to note that under H.R. 6675, as well as under Senator Douglas' amendments No. 178, the right to hospital insurance benefits of railroad employees, their dependents and survivors, is contingent upon the eligibility of such persons for benefits under the Railroad Retirement Act as determined by the Railroad Retirement Board.

Under the law now in effect, there is considerable coordination between the railroad retirement and the social security systems which is implemented in the administration of the two programs. For example, monthly survivor benefits are payable only under one or the other of the two systems based on combined credits. Where the employees has less than 10 years of railroad service credits at his retirement or death, his railroad service credits are treated for benefit purposes as social security credits. Further, under the social security minimum guarantee provision contained in the Railroad Retirement Act, monthly benefits can be not less than 110 percent of the amount, or the additional amount, that would be payable under the Social Security Act if the employee's railroad service had been employment subject to the Social Security Act. Moreover, there is by law a provision for financial interchange between the two systems which assures that the social security system would neither gain nor lose from the separate existence of the railroad retirement system.

Since 1961, when administration supported efforts to obtain a hospital benefits program began, the principal bills to establish the program, except H.R. 6675, have provided for Board jurisdiction over hospital insurance benefits for railroad retirement beneficiaries. Provisions for the Board's jurisdiction of the program as it relates to railroad retirement beneficiaries were included in H.R. 4222 and S. 909 in 1961, in H.R. 3920 and S. 880 in 1963 and in the bill H.R. 11865 as passed by the Senate on September 3, 1964. The bill H.R. 1, introduced in this session, which was succeeded by H.R. 6675, also included such provisions as does

the bill S. 1. Both the present and past administrations have favored jurisdiction of the Board over the hospital benefits program as it relates to railroad people, and the Department of Health, Education, and Welfare has always been fully in accord with this. Just recently, the Department of Health, Education, and Welfare informed me that it has no objection to Senator Douglas' amendment No. 178. As stated by Secretary Celebrezze in his testimony in support of H.R. 3920, 88th Congress, 1st session, and H.R. 11865, 88th Congress, 2d session:

"As in the case of other benefits under the social security system, overall responsibility for administration of the hospital and related benefits would rest with the Secretary of Health, Education, and Welfare. Similar responsibility for railroad retirement annuitants rests with the Railroad Retirement Board. Agreements by hospitals and other providers with the Secretary would be made on behalf of both the Secretary and the Board."

In contemplation of the Board's jurisdiction over the hospital issurance program for railroad employees, there have been discussions between the Board and the Social Security Administration for coordination between these two agencies in the administration of this program. As a consequence, agreements have already been reached which would provide for a close coordination and would effect an efficient administration of the program.

The American Hospital Association at one time objected to having to deal with two agencies. When informed, however, of the agreement between the Board and the Social Security Administration that arrangements with hospitals and other providers of services would be made only by the Social Security Administration but on behalf of both agencies, the hospital association formally declared that it no longer had any objection to the program on this basis.

Senator Douglas' amendments No. 178 expressly require that the Board and Secretary of Health, Education, and Welfare jointly develop procedures to minimize duplications of requests for payments of service and to assign administrative functions between them so as to promote the greatest facility, efficiency, and consistency of administration of the two programs; and the two agencies are in agreement that this can and will be done.

These amendments also expressly provide that agreements entered into by the Secretary with hospitals shall be entered into on behalf of both the Secretary and the Board. Except for identification of the patient as a railroad beneficiary the ordinary hospital or other facility would hardly be aware that the hospital insurance program for railroad employees is administered by the Railroad Re tirement Board.

In view of these circumstances, it is logical and reasonable to restore the provisions for jurisdiction of the Board over the hospital insurance program as it relates to railroad people. It is a firmly established longstanding policy of the Congress for the Board to have jurisdiction over social insurance programs for railroad people and the Board has always administered such programs. There is no justification for a departure now from this policy and principle as to the hospital insurance program for the aged.

Senator Douglas' amendments No. 178 restoring jurisdiction in the Railroad Retirement Board for the hospital insurance program for railroad employees would, according to actuarial estimates, cost the railroad retirement system about $6,700.000 a year. This would result from the fact that railroad employers and employees would be paying the cost for the hospital insurance benefits on the present railroad retirement tax base of roughly $5,400 a year instead of on a tax base equivalent to the newly proposed social security tax base of $5,600 a year beginning in 1966 and $6,600 beginning with 1971. This loss, however, will be eliminated as soon as the railroad retirement tax base is increased to an amount equivalent to the newly proposed social security tax base. There is ample reason to believe that this loss would only be temporary because, except for a single relatively short period in the early 1950's the railroad retirement tax base has always equaled or exceeded the social security tax base. Therefore, as soon as the railroad retirement tax base is increased to the equivalent of the social security tax base (as will most likely be the case) there would no longer be any loss to the railroad retirement system by reason of the jurisdiction in the Railroad Retirement Board over the hospital insurance program as it relates to railroad employees.

I hope, therefore, that the committee will act favorably on Senator Douglas' amendments No. 178.

STATEMENT OF LESTER P. SCHOENE, ATTORNEY, REPRESENTING THE RAILWAY LABOR EXECUTIVES' ASSOCIATION, IN FAVOR OF SENATOR DOUGLAS' AMENDMENTS No. 178 TO H.R. 6675

Mr. Chairman and members of the committee, my name is Lester P. Schoene. I am a lawyer engaged in the general practice of law with offices at 1625 K Street NW., Washington, D.C. This statement is presented on behalf of and as counsel for the Railway Labor Executives Association, whom I have represented in these matters for more than 20 years.

The Railway Labor Executives Association consists of the chief executives of some 22 labor organizations. These organizations constitute substantially all the standard labor organizations in the country. The following is a list of the organizations whose chief executives are affiliated with the association: American Railways Supervisors' Association. American Train Dispatchers' Association. Brotherhood of Locomotive Firemen & Enginemen. Brotherhood of Maintenance-of-Way Employees. Brotherhood of Railroad Signalmen. Brotherhood of Railroad Trainmen.

Brotherhood of Railway Carmen of America.

Brotherhood of Railway & Steamship Clerks, Freight Handlers, Express & Station Employees.

Brotherhood of Sleeping Car Porters.

Hotel & Restaurant Employees & Bartenders International Union.

International Brotherhood of Boilermakers, Iron Ship Builders, Blacksmiths, Forgers & Helpers.

International Brotherhood of Electrical Workers.

International Brotherhood of Firemen & Oilers.

International Organization Masters, Mates & Pilots of America.

National Marine Engineers' Beneficial Association.
Order of Railway Conductors & Brakemen.
Railroad Yardmasters of America.

Railway Employees' Department, AFL-CIO.

Seafarers' International Union of North America.
Sheet Metal Workers' International Association.
Switchmen's Union of North America.

Transportation-Communication Employees' Union.

It will be noted that this list includes the Railway Employees' Department, AFL-CIO, which is, itself, a federation of the shop craft organizations.

Collectively, these organizations represent the great bulk of organized railroad employees in the country.

Our association has for many years maintained a standing committee on railroad retirement and railroad unemployment insurance matters, and this committee makes recommendations, from time to time, to the association for legislative actions with regard to the railroad retirement and railroad unemployment insurance systems. Pursuant to this practice, this standing committee had recommended to the association, some time before 1961, that the association join forces with other groups in the country to sponsor the enactment by the Congress of a program of hospital and medical insurance benefits for elderly or retired employees with the understanding that the Railroad Retirement Board would administer such a program, insofar as it relates to railroad employees. The association has adopted the committee's recommendation and, pursuant thereto, has sponsored jointly with other groups the bill containing the hospital and medical insurance program now under consideration by your committee.

The Railroad Retirement Board, which administers the Railroad Retirement Act and the Railroad Unemployment Insurance Act for the benefit of railroad employees, their dependents, and survivors, has advised the association that representatives of the Board and of the Department of Health, Education, and Welfare agreed that the bill for hospital and medical insurance benefits would contain provisions for the administration of such benefits for railroad employees by the Railroad Retirement Board. I, myself, in the capacity of counsel for the association, cooperated with the counsel of the Railroad Retirement Board in the drafting of such provisions, which were incorporated in the bills, H.R. 4222 and S. 909, both introduced February 13, 1961.

During the hearings before the Ways and Means Committee of the House on the bill, the Secretary of Health, Education, and Welfare (Mr. Ribicoff) stated the following in regard to such provisions:

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