Mr. DINGELL. You said here "the unbelievable State and Federal Government price." How much less would that mean that the Federal and State Governments would be paying on retail items than, let us say, the retail pharmacist in the community? What percentage discount off wholesale or retail would this be? Could you give us an idea of the range of discount or the percentage of price compared to that of a retail pharmacist?

Mr. SKINNER. I don't have access to those figures. They are awfully hard to come by.

Mr. POTVIN. Could you, sir, on information and belief state what you think?

Mr. SKINNER. What I believe?

Mr. POTVIN. What would be the most extreme case, 100 percent, 200 percent, or what?

Mr. SKINNER. I would say using as a hundred percent, the price that the pharmacist would pay, I would say it would fall in the category of some place between 15 percent and 50 percent. That is my belief.

Mr. DINGELL. This would be the retail price in the market?

Mr. SKINNER. This is the price-using 100 percent that the pharmacists would pay.

Mr. DINGELL. In other words, the hospital-the Federal Government--would be able to buy it at about wholesale price. Is that the same?

Mr. SKINNER. No, much less.

Mr. DINGELL. Much less than the full-line wholesaler?

Mr. POTVIN. You are saying the price at wholesale is your cost. Using that as your base index of 100, the cost to the Federal or State Government unit would be roughly 15 percent of that?

Mr. SKINNER. Fifteen on up to, I think I said, 40 or 50 percent. Mr. POTVIN. The ordinary and accepted wholesale markup in your industry is 15 percent; is that correct, sir? That is the figure one hears most often, at least.

Mr. SKINNER. We are getting our discounts sort of confused here. Your question is, what is the discount

Mr. POTVIN. That is to say, the difference between what the wholesaler pays and what he charges you

Mr. SKINNER. It is about 15 percent, that's right.

Mr. DINGELL. Proceed, sir.

Mr. SKINNER. A side effect of this whole process is the generic name specter now facing the pharmaceutical manufacturer. It is easy to see that the greater the difference between brand name and generic name drug prices, the larger is the problem which faces the manufacturer in this area. High brand name drug prices at this dispensing pharmacy level encourage generic name prescribing and dispensing.

It seems improbable that the pharmaceutical manufacturers can work their way out of this tangle without outside assistance, because they are so busily engaged in reacting to each other's discounting practices. The product they have so expertly created and developed through their research and development activities has, when placed on the market, lost its identity as to its monetary worth. At one level of distribution, it may be worth $10, at another level, $5, at another level $2, and so on. I believe that confusion in the pharmaceutical market will continue so long as the monetary worth of the product is in question.

If the pharmaceutical manufacturer will definitely establish the monetary worth of his product and then uniformly stay with it at all levels of distribution, the price of it will level off and, accordingly, will be lowered at the dispensing pharmacy level to the benefit of the paying and consuming public.

I wish this committee great success in its effort to uncover the facts and generate action to correct the existing fallacy in drug pricing and distribution.

Mr. DINGELL. Mr. Skinner, the committee is grateful to you for your help this afternoon.

Mr. Williams?

Mr. WILLIAMS. No questions, thank you.

Mr. DINGELL. Any further questions, Mr. Potvin?

Mr. POTVIN. I would like to ask one, if I may, sir.

Mr. Skinner, the subcommittee has received a copy of a letter circulated by Roche Laboratories under the signature of Robert E. Abrams, director of distribution and institutional sales and development, for a new product called Libritabs, which is approximately or almost identically the same as the Librium capsule. A druggist from the Midwest writes us that these were designed primarily, in his opinion, to greatly increase the company's sales by the simple fact that nearly every drugstore must buy at least one bottle of the size in 10milligram tablets. It is being marketed in 5-, 10-, and 25-milligram sizes.

Many of these bottles will be used for one or two prescriptions, possible 12 to 24 tablets, and the bottles will thereafter sit there useless. They cannot be returned after being opened. The gentleman then continued with his analysis to show that at least 50,000 drugstores would likely have to order the item because it will be prescribed, and this will generate an increase in sales to the company of a minimum of $620,000. Have you stocked Libritabs?

Mr. SKINNER. Yes; we have it in stock.

Mr. POTVIN. Do you have any comment that you would care to make as to this gentleman's characterization of the Roche tactic? The Harris-Kefauver Act requires that an application be filed to issue a new drug but not so to simply issue the same drug in a different form. Do you have any comment that you would care to make in your personal situation concerning this?

Mr. SKINNER. I believe if I am not mistaken Roche put this new tablet on the market with the idea it was another dosage form that was needed because some people are unable to swallow capsules and it is a smaller tablet-I have seen it-it is considerably smaller and probably would be easier to ingest.

However, I am inclined to believe that possibly the letter from the pharmacist that you referred to does have some merit, and this type of thing is bothersome to the pharmacist on Main Street of America where he feels that he is obliged to buy a product because he wants to keep his stock up, but on the other hand, is the product really necessary on the market today?

Mr. POTVIN. Mr. Skinner, you have received a copy of a list of certain drugs oral contraceptives, diuretics, muscle relaxants and analgesics, antibiotics, antidiabetic agents, and systemic sedatives. Is that correct, sir?

Mr. SKINNER. Yes; I have it here.

Mr. POTVIN. We have asked you four questions: Do you stock the drug? What is your source or alternate sources of supply? What is your cost per unit in the quantity most frequently purchased and, in making this computation, would you please allow for all discounts, promotional allowances, or other direct or indirect reductions in cost and list all such discounts or allowances on your 10 most recent purchases of the item? And lastly, what is your price per unit in the quantity most frequently sold?

Would you, upon return to your store be willing to supply the subcommittee with the information requested here?

Mr. SKINNER. I will be happy to, sir.

(The information is retained in subcommittee files.)

Mr. POTVIN. In pursuit of the point you just made, I direct your attention to the section labeled "Antibiotics" on the second sheet. The third item from the bottom, "Pentids," is manufactured by Squibb, and the generic name is penicillin G. What is the cost per hundred at retail of Pentids, sir? Is it approximately $16?

Mr. SKINNER. I was going to say $15. It is in that area, yes.

Mr. POTVIN. Manufactured by major drug houses are a number of competing penicillins.

Mr. SKINNER. Yes.

Mr. POTVIN. Can you give me the lowest price of any of the brandnamed items that would be functionally identical or nearly so?

Mr. SKINNER. Yes; I believe around in the area of $1.50 to $2.
Mr. POTVIN. One-tenth or slightly less, perhaps?

Mr. SKINNER. Yes.

Mr. POTVIN. If you receive a prescription saying Pentids you are ethically obligated-ethically you have no choice to fill it with that identical product?

Mr. SKINNER. Yes.

Mr. POTVIN. If your customer asks why are you so high or why are you so expensive, there is not much you could do about it, is there?

Mr. SKINNER. This is the very reason, Mr. Potvin, that I am happy to appear before this committee, because as a community pharmacist who faces each day these patients who are ill, coming in with prescriptions to be filled, we are constantly trying to defend or give reasons why this medication is so high priced to them. This takes a lot of our effort and we don't feel that we are getting too far with it, but to us, in the community pharmacy, there is just an awful lot of complaint today about the cost of drugs.

Take the item, the second one from the top there, if you please under antibiotics, Sumycin. That is generically known as tetracycline and there are many on the market, as you know. As I recall looking in my Squibb catalog last week I noticed that the price of that in the Squibb catalog is $14.95 a hundred. Last week in Indiana the Squibb Co. was offering to community pharmacists the same drug, Sumycin, 250 milligrams, incidentally, to the pharmacists, if he bought 300 of them at $14.95 per hundred, he would be given 300 free.

Now, when I was talking in the article here about the worth of a pharmaceutical, this is what I pretty much had in mind. What is the worth of this product, Sumycin, 250 milligrams? Is it worth 15 cents

a capsule or is it worth 712 cents? Last week if I filled a prescription for that I would have to fill it on the basis of a cost of 15 cents a capsule. Had I bought the product that Squibb offered with three free with three, then it would have cost me 712 cents. If the Squibb Co. should decide to take the free goods away from me it then costs 15 cents a capsule. Again, this is difficult to explain to our customer in the pharmacy today. It is real difficult to explain. What makes these prices go up and down like this? It is rather it is kind of out of our hands.

Mr. POTVIN. Does the Squibb detail man call on you, sir?
Mr. SKINNER. Yes.

Mr. POTVIN. Has he ever attempted to explain this to you?
Mr. SKINNER. He was to be in my store today.

Mr. POTVIN. Maybe we can arrange to have him receive word of your testimony, sir.

Mr. DINGELL. Mr. Williams?

Mr. WILLIAMS. One other quote from the letter to which Mr. Potvin referred. Mr. DuBe states, "The bottles then becoming useless; they cannot be returned after being opened." It was my understanding that drugs frequently can be returned to the manufacturer if they are not satisfactory to the druggist. Can you comment on that?

Mr. SKINNER. The return policy of pharmaceutical manufacturers varies from one to the other. You couldn't categorically say they don't take it back or that they do take it back. But each one of the companies has its own return goods policy and he will spell it out to each of his customers.

Mr. WILLIAMS. Is there an overall policy by each company or is it an overall policy for each drug? Does the policy vary from product to product?

Mr. SKINNER. No, I would say it varies from manufacturer to manufacturer.

Mr. WILLIAMS. Thank you.

Mr. DINGELL. Is it fairly uniform among all products manufactured by a particular manufacturer or would it vary between antibiotics and tranquilizers?

Mr. SKINNER. A manufacturer establishes a policy and stands by it for the whole line.

Mr. DINGELL. You indicate some concern over the problems of generic names. Does one manufacturer who puts out, let us say, a tradename product also manufacture a competitive brand-name product? Mr. SKINNER. If he does, he doesn't tell us about it.

Mr. DINGELL. In other words, a manufacturer does not market a brand-name substance to compete with a generic-named product of the same kind which would serve the same purpose?

Mr. SKINNER. I can't cite any incidents in which I know this to be a

case.

Mr. DINGELL. Thank you very much.

Mr. WILLIAMS. I have one other question. I would like to pursue this matter a little further. Roche Laboratories apparently do not take back products. Are their prices cheaper than the ones that do accept a return? Is the policy reflected in the price the manufacturer charges? Mr. SKINNER. I have no information on that whatsoever. I wouldn't know what that would be it would seem possible that it might. doesn't it?

Mr. WILLIAMS. It should. Thank you, Mr. Chairman. Mr. DINGELL. Thank you very much for your very helpful testimony. The next witness before the committee will be Mr. Morris E. Blatman, executive secretary, Philadelphia Association of Retail Druggists. The Chair is happy to welcome you for whatever statement you wish to make today. Do you have anybody with you whom you would like to have at the table?

Mr. BLATMAN. No, sir.

Mr. DINGELL. If you will give the reporter your full name and address, you may proceed.

TESTIMONY OF MORRIS E. BLATMAN, EXECUTIVE SECRETARY, PHILADELPHIA ASSOCIATION OF RETAIL DRUGGISTS

Mr. BLATMAN. Mr. Chairman, I am Morris E. Blatman, of Philadelphia, Pa.

I am a graduate of the Philadelphia College of Pharmacy and Science with a B.S. degree in chemistry-1936-and a B.S. degree in pharmacy-1941. I am a registered pharmacist in the Commonwealth of Pennsylvania. I operated several pharmacies in Philadelphia together with my wife, also a registered pharmacist, from 1939 to 1950. Since then, at various times I have been an employee pharmacist; also merchandising manager for Philadelphia Wholesale Drug Co. from 1956 to 1961. From January of 1961 until the present time, I have been executive secretary of the Philadelphia Association of Retail Druggists.

This association, founded in 1898, is devoted to the well-being of the pharmacists in Philadelphia County and is a service organization for its members and the community. We buy no merchandise, sell no merchandise, and our latest financial report indicates that almost 90 percent of our income is derived from the dues of our members.

At the present time 80 percent of the pharmacy owners in Philadelphia are dues-paying members of the association. With this brief personal background, let me state that it is our belief that over the many years that we have been in existence we feel confident that we are fully aware of the problems that have confronted the pharmacist in the past; that confront him in the present, but the clouded picture of the future is something else.

As an association, we have various insurance programs including hospitalization, life insurance, health and accident, and so forth. We have also sponsored a Pharmacists' Federal Credit Union since 1949 with current assets of over $50,000. We also publish a bulletin circulated to 2,500 pharmacies in the Delaware Valley. We own our own building and have an office staff of three persons and a pharmacist service representative who spends his time visiting pharmacies every day.

We are firm believers and practitioners in the philosophy of free enterprise and the independent businessman whether he be pharmacist, jeweler, florist, hardware merchant, or shoemaker. The pharmacist, like the others, contributes much to the community he serves. Unfortunately, in many cases the pace of modern business has left him far behind the mainstream of the business life of the community and he could in the future become a rarity.