Page images
PDF
EPUB

Mr. DINGELL. Let me ask a question at this point so we can have one other comparison.

How do the prices paid by hospitals compare with the prices paid by wholesalers for drugs?

Mr. BOPP. In most instances they are very similar.

Mr. DINGELL. Very similar?

Mr. BOPP. In most instances you will find that the wholesale list represents the list of the hospital. In other words, they are at different levels of distribution, but generally it is applicable where the hospital list is comparable to the wholesale list-to his cost list.

Mr. PorvIN. Would there not, sir, be one fairly important difference? Is it not a fact that the incentive to wheel and deal in free goods and all the rest with wholesalers is far less than is the case with hospitals? From the basis of your observations and experience, could you express an opinion as to whether, in fact, there are not substantially more special free deals in dealings with hospitals than with wholesalers?

Mr. BOPP. Unequivocally there is more of a tendency for the manufacturer to deal directly with the hospital consultant, purchasing agent, et cetera, than with the wholesaler. You can probably say with certainty that in no instance to my knowledge does the manufacturer attempt to negotiate with the service wholesaler.

Mr. POTVIN. In fact, that is usually considered the stuffier or stogier or, as they say, swinging price area within the industry. Is that not right?

Mr. BOPP. That is exactly correct.

Mr. WILLIAMS. Mr. Bopp, I want you to have the opportunity to point out, that though one of the first requirements of drug diversion is that a druggist get to know the people in the hospital, this was not your purpose in serving, as you do, on a hospital board. Your motive is public service.

Mr. BOPP. To the contrary, this particular appointment is a nonpaying gratuitous appointment and I am certain there are many opportunities that I had to certainly avail myself to these drug products and particularly being a State institution, and I have never contrived drug diversion and I stand here today with clean hands and the fact that I don't do it and I don't feel that the rest should do it. Mr. WILLIAMS. Thank you.

Mr. BOPP. Consequently, the drugs purchased by the hospital clinic from the manufacturer are equally diverted to other competitive channels of retail drug dispensing.

The Louisiana State Pharmaceutical Association is not opposed to hospital clinics dispensing drugs to inpatients or outpatients but certainly opposes unfair market trade practices in selling to hospital clinics at discriminatory prices which tend to lessen competition. The practices aforesaid mentioned are contrary to the best interests of the public and the pharmaceutical profession, undoubtedly many other State and local pharmaceutical groups likewise oppose strongly the trade practices prescribed by pharmaceutical manufacturers. In addition to said ethical considerations the practices of drug manufacturers have some serious antitrust aspects.

These antitrust implications can best be understood in the light of public competitive rules applicable to our economy and industry. A

striking antitrust parallel exists between the case of the pharmaceutical manufacturing representative selling to hospital clinic and dispensing physician exclusively or otherwise at special prices not available to the retail pharmacist thus creating an unfair trade practice for dispensing drugs.

In the final analysis said trade practices shall ultimately exploit the consuming public and secondarily injure and possibly destroy an indispensable function in drug distribution-the community drugstore. Thank you, Mr. Chairman, for this opportunity to present the views of the Louisiana State Pharmaceutical Association, representing druggists in the State of Louisiana, on this extremely important problem that so vitally affects the general public as well as the profession of pharmacy.

If there are any questions at this time I certainly will avail myself. Mr. DINGELL. I think we have asked almost every question we could have as we have gone along.

Mr. Potvin may have some. We will recognize him at this time. Mr. POTVIN. Just one question, Mr. Bopp.

As you opened your remarks, you depicted drug distribution as having three different channels the drugstore, hospital chinic, and dispensing doctors.

In your discussion of prices you have pretty much confined yourself to the interplay between the drugstores and the hospital clinics. Could you briefly sketch out for us the relative level of prices to dispensing doctors?

Mr. BOPP. Yes. You know, it looks as though there has been a pattern among specialty pharmaceutical manufacturers, such as CrookesBarnes and Alcon who manufacture eye preparations for ophthalmologists—it is my understanding that manufacturers specializing in eye preparations such as Smith, Miller & Patch, will have certain types of arrangements with dispensing physicians that will afford them products of the same nature that we purchase, at reduced rates of 15 to 20 percent.

Now, this is an area that can produce much wheeling and dealing and one's, two's, and three's for one more particularly, this is an area where it is impossible to compete with the dispensing physician because of the fact that in some instances he is buying less than the hospital clinic.

Another area is OB-Gyn specialty products dealing with gynecologists. Ortho I understand sells directly to doctors, both their devices, creams and their tablets. This is another area-where the doctor prescribes, fills, and again may negotiate better prices.

Again, this is statistically undetermined through a mere investigation as I performed before appearing before this committee.

But I can say with certainty that in dispensing-physicians dispensing, the prevalency of discounts and tradeoffs are extremely high and flagrant.

Mr. DINGELL. You say discounts. We understand fully what you mean. When you say tradeoffs, what do you mean?

Mr. BoPP. Particularly a manufacturer's represenative approaching a dispensing physician, will first, in order to get his product across to that doctor, offer him a special discount that is available from merchandise or products that his company makes.

He secondly will go to the point in some instances of offering not the regular normal discounts that are available to doctors, but a step further, in stating that for one bottle of X we will give you three. In some instances this is done out of the bag of the representative. He will come there with his literature, and so forth, and there is an abundance of samples that are promiscuously negotiated and of course this practice has been stopped to a degree by the fact that most sampling must be indicated on the package, but there are other proprietaries and other products that are not so readily identified whereas it would take the product out of commerce.

So through the areas of one for the price of two and through the areas of sampling, this particular practice to the dispensing physician is even more lucrative and probably a lot less costly to the physician

himself.

Mr. DINGELL. Is sampling rather widely engaged in throughout the industry insofar as relations between manufacturers and physicians through the detail men are concerned?

Mr. BOPP. That's correct. It is done, and if sampling is done in the proper way that it is meant to be done, I don't believe that there is a manifested problem that is created. It is only when it is done to encourage a particular product to be used and done as an additive discount that I believe that it is promiscuous.

Mr. DINGELL. Mr. Bopp, you have been a very fine witness and most patient. The committee is most grateful to you. Thank you for your presence.

(The letters referred to by Mr. Bopp follow :)

CIBA PHARMACEUTICAL PRODUCTS, INC.,

Summit, N.J.

(Attention of Sales Department).

NOVEMBER 25, 1960.

GENTLEMEN: According to our records, we applied to your Company for direct account status, February 29, 1959. Upon advisory we were informed at said period that there existed no direct accounts, but at a later date this request should be available.

Gentlemen, after two years subsequent the courtesy of a reply is not yet in receipt of this office.

Competition within a block radius represents a direct account indicating a position of duress through economic circumstances concerning Ciba Products. Yours truly,

EDWARD S. BOPP.

CIBA PHARMACEUTICAL PRODUCTS, INC.,
Atlanta, Ga., November 29, 1960.

Mr. EDWARD S. BOPP,

St. Bernard Drugs,

Arabi, La.

DEAR MR. BOPP: Your recent communication signifying a desire to become a CIBA Distributor has been forwarded to the Atlanta office from our offices in Summit, New Jersey.

While we appreciate your interest in becoming one of our distributors, we wish to advise that due to a study currently being made of our pattern of distribution, a temporary moratorium has been placed on the opening of new distributorships.

Yours very truly,

CECIL R. MOZLEY, Southeastern Region Manager.

APRIL 11, 1963.

CIBA PHARMACEUTICAL PRODUCTS, INC.

Southern Division,

Atlanta, Ga.

(Attention of Mr. Cecil R. Mozley).

DEAR MR. MOZLEY: On February 29, 1959 the St. Bernard Drugs Inc. requested a CIBA Distributorship and was advised of a momentary discontinuance of direct accounts.

On November 29, 1960, a second request was forwarded for direct distributorship and further advised of current marketing studies thereby discontinuing all new distributorship.

Consequently, the St. Bernard Drugs Inc. wedges a third request for direct account status due to the surrounding circumstances which are:

1. Competition within a one block radius represents a direct account, indicating a position of duress through economic means regarding CIBA products. 2. Current CIBA distributors have been placed upon direct accounts status since first request by St. Bernard Drugs Inc. on February 29, 1959.

3. St. Bernard Drugs Inc. economic position has been adequately advanced since its origin five years ago to have credit avaliability with your company of which the following references are cited to indicate financial stability, capacity and character which are:

(a) St. Bernard Bank & Trust Co.

(b) Lederle Laboratories.

(c) Parke-Davis Co.

(d) Abbott.

(e) E. R. Squibb.

(f) Upjohn.

With regards, I remain,

Very truly yours,

EDWARD S. Bopp, B.S. Ph., L.L.B.

CIBA PHARMACEUTICAL CO.,
Summit, N.J., April 22, 1963.

Mr. EDWARD S. BOPP,
McBride, Bopp & Perez,

Arabi, La.

DEAR MR. BOPP: We acknowledge receipt of your letter of April 11, 1963, to Mr. Cecil R. Mozley, our Regional Manager in Atlanta, concerning St. Bernard Drugs Inc.

It is correct, as you report, that we had a moratorium on the addition of direct retail accounts.

CIBA bases its program on dual distribution, with a greater share of indirect selling than direct selling. You will appreciate that manufacturers may select the pharmacies to whom they wish to sell direct.

Thank you for bringing to our attention the desire of St. Bernard Drugs Inc. to purchase direct from CIBA.

Sincerely,

JOHN E. HAAS, Trade Relations Manager.

Mr. DINGELL. The subcommittee will stand adjourned until Monday next at 10 a.m. Thank you very much.

(Whereupon, at 5:40 p.m., April 5, 1967, the subcommittee recessed, to reconvene on April 10 at 10 a.m.)

SMALL BUSINESS PROBLEMS IN THE DRUG INDUSTRY

MONDAY, APRIL 10, 1967

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON ACTIVITIES OF REGULATORY AGENCIES

OF THE SELECT COMMITTEE ON SMALL BUSINESS,

Washington, D.C. The subcommittee met, pursuant to recess, at 10:10 a.m., in room 2359, Rayburn House Office Building, Hon. John D. Dingell (chairman of the subcommittee) presiding.

Present: Representatives Dingell, Smith, and Conte.

Also present: Gregg Potvin, subcommittee counsel; Myrtle Ruth Foutch, clerk; and John J. Williams, minority counsel.

Mr. DINGELL. The subcommittee will come to order. This is a continuation of the hearings of Subcommittee No. 5 of the Small Business Committee of the House of Representatives on small business problems in the drug industry.

Our first witness this morning is Mr. J. A. Scully, Jr., 523 Harrison Avenue, West Collingswood, N.J.

Mr. Scully, we are privileged to have you with us this morning and would appreciate any statement you choose to make to the committee.

TESTIMONY OF J. A. SCULLY, JR., WEST COLLINGSWOOD, N.J.

Mr. SCULLY. Mr. Chairman, my name is James A. Scully, Jr. I am a pharmacist, having graduated from the Philadelphia College of Pharmacy in 1966, and appear today in a personal capacity. I am employed at a retail pharmacy in New Jersey. I reside at West Collingswood, N.J., and I am a member of the New Jersey Pharmaceutical Association which is the great spokesman for the retail druggists of our State. I wish to express my appreciation for this opportunity to discuss hospital drug pricing problems.

The information for my statement was obtained from both personal knowledge and through confidential sources which I am not at liberty to disclose. It follows that while there may be some adjustments to be made for specific figures, I have every reason to believe this information can be rapidly verified by independent investigation.

Woodbury, N.J., is a city of around 12,000 people, located about 10 miles from Camden, N.J. In Woodbury, there is the Underwood Hospital which is a 250-bed, private, nonprofit facility. I do not know whether this hospital has any exemption from Federal income

taxation.

Underwood Hospital has an extensive pharmacy operation used to compete directly with seven or eight community drugstores located in

« PreviousContinue »