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(2) the need for adjustment of professional dispensing fees to compensate for the loss of income to pharmacists under the proposed program.

Accordingly, I would appreciate it if you would submit the attached questions to Secretary Weinberger for his reply. I would also appreciate having these questions and the Secretary's answers included in the record of the hearings. With best wishes. Sincerely,

WILLIAM D. HATHAWAY,

U.S. Senator.

QUESTIONS SUBMITTED BY SENATOR WILLIAM D. HATHAWAY TO SECRETARY WEINBERGER, DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE

(1) In your statement presented to the Monopoly Subcommittee, you said, "We do not underestimate the difficulty that States would have, and indeed pharmacists would have, in arriving at actual acquisition cost in this highly complex market."

What considerations will be made to assure that the pharmacist will not require elaborate accounting procedures in order to arrive at his actual acquisition cost for a drug?

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(2) Also in your statement you "recognize the need for equity in dispensing fees... and "are reviewing those comments (of pharmacists) with care and concern." You state that you nitend to work with the States "within our existing authorities to achieve equitable reimbursement for professional services." Does your Department set guidelines for what is considered to be a "reasonable" fee paid by States for reimbursement of professional pharmacist fees? What do you consider to be your "existing authorities" for professional services?

(3) Is it the position of your Department that expenses for auxiliary services provided by the pharmacist, such as the maintenance of patient records, delivery services, etc., should be included in the pharmacist's dispensing fee?

(4) It is my understanding that the proposed regulations allow warehousing costs to be considered a part of the acquisition cost of a drug. It has been brought to my attention that this provision may favor large volume purchasers and that similar expenses should be allowed for smaller pharmacies or the allowance deleted altogether. What is your response to this suggestion?

QUESTIONS SUBMITTED BY SENATOR THOMAS J. MCINTYRE TO SECRETARY WEINBERGER, DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE

I understand that as of February 15 you had received over 2000 comments on these proposed regulations. It would be most helpful for me if you would summarize briefly the thrust of the comments (ie. of consumers pharmacists, doctors, for and against).

What steps do you anticipate as a follow up to the responses you have received.

Traditionally when the issue of generic drugs is raised, the pharmaceutical industry responds with questions relating to lack of product quality control and restriction of freedom of choice as well as the impact of research and development in this area. Mr. Secretary would you comment on the impact these new regulations will have on these issues I have enumerated.

THE SECRETARY OF HEALTH, EDUCATION, AND WELFARE,
Washington, D.C., June 19, 1975.

Hon. GAYLORD NELSON,
Chairman,

Select Committee on Small Business,
Washington, D.C.

DEAR MR. CHAIRMAN: In response to your letter of June 2, 1975, I am pleased to submit the following answers to questions posed by Senators McIntyre and Hathaway:

(1) In your statement presented to the Monopoly Subcommittee, you said. "We do not underestimate the difficulty that States would have, and indeed

pharmacists would have, in arriving at actual acquisition cost in this highly complex market."

What considerations will be made to assure that the pharmacist will not require elaborate accounting procedures in order to arrive at his actual acquisition cost for a drug?

As I indicated in my statement to the Subcommittee, we are exploring various means of estimating acquisition costs that would reduce or eliminate the need of actual cost determinations by individual pharmacists. If we are able to arrive at an equitable system of cost estimates, this will be reflected in the MAC final order.

(2) Also in your statement you “recognize the need for equity in dispensing fees . . ." and "are reviewing those comments (of pharmacists) with care and concern." You state that you intend to work with the States "within our existing authorities to achieve equitable reimbursement for professional services."

Does your Department set guidelines for what is considered to be a “reasonable" fee paid by States for reimbursement of professional pharmacist fees? What do you consider to be your “existing authorities" for professional services?

The Department has authority for setting upper, but not lower, limits on the reimbursement of professional services. We can and do, however, provide guidelines to the States for the reimbursment of pharmacy costs and these will be updated to conform with the final MAC order. In addition, we are exploring means of assuring that State programs review dispensing fees on a regular basis to assure that they accurately reflect pharmacy operating costs.

(3) Is it the position of your Department that expenses for auxiliary services provided by the pharmacist, such as the maintenance of patient records, delivery services, etc., should be included in the pharmacist's dispensing fee?

Yes. The expenses mentioned are part of overhead and professional services which together with profit make up a pharmacist's dispensing fee.

(4) It is my understanding that the proposed regulations allow warehousing costs to be considered a part of the acquisition cost of a drug. It has been brought to my attention that this provision may favor large volume purchasers and that similar expenses should be allowed for smaller pharmacies or the allowance deleted altogether. What is your response to this suggestion?

If we are able to arrive at a system of estimated cost, this would represent cost at the point of dispensing and the warehousing allowance would be unnecessary and therefore deleted from the regulation.

Sincerely,

CASPAR W. WEINBERGER,

Secretary.

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Recently your local representative Patrick T. Kelley called on me to enlist
my personal support for your company's opposition to the proposed HEW MAC
regulations. Mr. Kelley explained that Ayerst had selected 200 of their
key representatives each of whom is to solicit letters of opposition from
five pharmacists. He also explained that you would personally present the
1000 letters to Secretary Weinberger as evidence of the opinion of the
nation's pharmacists.

I am aware that yours is not the only company seeking to organize pharmacist opposition to the MAC regulations. I think this tactic should be effective because obviously sales representatives have within their means the incentives needed to persuade individual pharmacists to support the campaign.

In response to Mr. Kelley's request, I am pleased to provide you with this
letter. I am sure that you will want to include it with the letters you
present to Secretary Weinberger.

As Mr. Kelley will confirm, I spent better than an hour listening to his presentation. Fortunately, I made my own analysis of the HEW MAC policy against which I was able to evaluate the Ayerst arguments. I want you to know that having done my own thinking on the subject, I have no intention of lending my support to the industry's opposition. As far as this practicing pharmacist is concerned, HEW is moving in exactly the right direction. Further, I would regard it as a professional tragedy if pharmacists once again bailed out the industry to the detriment of the public and their own profession.

Sincerely,

William F. Appel, R.Ph.

KFA:pm

cc: Secretary Weinberger, Senator Kennedy, Senator Nelson
Senator Mondale, Senator Humphrey

From U.S. News and World Report, October 21, 19747

Recently, the future of your health was debated.

You won.

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The question:
Can

you as

sume that prescription medicines of the same kind,

but made by dif

ferent manufacturers, are equally effective?

And if they are, shouldn't you always use a lower-priced medicine? A tempting argument. If true. So tempting that it has been suggested that the government adopt the idea.

This suggestion is based on the assumption that all, or nearly all formulations of a given drug are interchangeable. Even if made by different people, with different levels of expertise, following different procedures.

The Office of Technology Assessment, U.S. Congress, got the job of testing the argument and the suggestion.

The first statement in the findings of the OTA's final report was crystal clear: "Current standards and regulatory practices do not assure bioequivalence for drug products."* In other words, the "same" medicines made by different companies aren't always comparable. Member companies of the Pharmaceutical Manufacturers Association support tougher regulations that would require all manufacturers to prove the reliability of their products.

What's in the findings for you? A better chance that medicines covered under government programs won't be arbitrarily reimbursed on the basis of price alone.

A better chance that the source of your prescription medicines will continue to be determined by your doctor and pharmacist. Without government interference.

The Pharmaceutical Manufacturers Association.
"There's more you ought to know about the O.T.A. Report.

For a summary, write the Pharmaceutical Manufacturers Association. Dept. US-410,
1155 Fifteenth St., N.W., Washington, DC 20005.

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I am replying to your letter of March 3 requesting my comments on the interoffice memoranda dated October 31, 1974 and October 4, 1974 of Abbott Laboratories on the subject of bioavailability studies conducted by the Upjohn Company.

I have reviewed these memoranda and have studied the Upjohn Company reports to which they relate. Without going into a detailed or item-by-item response, it is my opinion that the criticisms and objections made in the Abbott memoranda are all accurate and valid.

This is not to say, however, that the Upjohn studies were necessarily improper or completely without merit. Specifically, a major

if not the major · objection on the part of the Abbott staff was the fact that the Upjohn studies did not compare the bioavailability of "chemical equivalents" but rather compared the bioavailability of drug products from three pharmaceutical manufacturers containing distinctively different drug entities. Moreover, they were distinctly different dosage forms and contained different amounts of the active drug moiety.

Such studies may serve some useful purpose in assessing the fundamental effectiveness or safety of one drug entity compared to another. However, when and if such studies are used in an effort to assess bioequivalency, this is entirely improper. Not only does it violate the accepted definition of the term, but it is highly deceptive and unethical. Consequently, use of such studies by the Upjohn Company either to claim or even imply relative superiority of their product is reprehensible and deserving of the critical comments made by the Abbott staff. On the other hand, in fairness to the Upjohn Company, it should be pointed out that at least they have made scientific and technical information pertaining to their products publicly

2215 CONSTITUTION AVENUE, N.W.. WASHINGTON, D.C. 20037 • (202) 628-4410

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