drugs as desirable in the public interest. But in the same vein, the FDA asks for scientific proof and reasons to support opinions. While it remains aware of all the literature, including newspaper and magazine articles, the FDA must base its judgment on much stouter material. NON PROPRIETARY OR GENERIC PRESCRIBING OF DRUGS GAO REPORT ON PRESCRIBED DRUG COST FOR WELFARE RECIPIENTS Mr. FOAGARTY. The Comptroller General issues his reports every now and then on what GAO finds in its auditing work. Mr. Flood, this one talks about your great State of Pennsylvania. They made a study of Federal financial participation in the costs of prescribed drugs for welfare recipients in the State of Pennsylvania. Federal financial participation in public assistance programs administered by HEW. They say: A projection of the results of our examination of a random sample of prescription invoices paid by the State of Pennsylvania indicates that savings of from about $722,000 to as much as $1,502,000 could have been realized during fiscal year 1964 through maximum use of less expensive nonproprietary name drugs; the Federal share of such savings would amount to from about $354,000 to as much as $705,000. Are those figures unreasonable? This is the Comptroller's report. Dr. GODDARD. I would not assume they are unreasonable. There are often marked differences in prices between drugs sold underMr. FOGARTY. They state: The State welfare agency informed the Department in a letter dated Mary 24, 1965, that to ask physicians to prescribe generically would subject the public assistance recipients to the possibility of receiving second-class medical treatment. Is that so? Dr. GODDARD. If this is aimed at the question of whether the drugs that are thus prescribed are second class, no. ADMINISTRATION POLICY ON USE OF NONPROPRIETARY DRUGS Mr. FOGARTY. The next paragraph says: By letter dated September 10, 1965, the Assistant Secretary for Administration advised us that the Department of Health, Education, and Welfare did not fully agree with the State's observation. Dr. GODDARD. I am not aware of the background. Mr. CARDWELL. My recollection is that that report was at that point cleared with the Food and Drug Administration. I think it gave a comment to the Assistant Secretary. Mr. FOGARTY. Near the end of the cover letter signed by Acting Comptroller Weitzel, it states: In December 1965, subsequent to commenting on our findings, the Department of HEW issued a directive which enunciates as the Department's policy that nonproprietary or generic name drugs should be used by constituent operating agencies and grantees whenever it is practicable and economical. That is the policy of the administration? Dr. GODDARD. Yes. these proposals. The one I just could not understand was this, on page 18: The State welfare agency informed the Department in a letter dated May 24, 1965, concerning our proposal, that to ask physicians to prescribe generically would subject the public assistance recipients to the possibility of receiving second-class medical treatment. The State indicated that the majority of physicians do not prescribe generically because the newer drugs have been developed since they received their educations and it is unrealistic to expect the physicians to keep up with the newer drugs without relying on the drug companies. If this is anywhere near what is going on, this is a terrible situation, if we have salesmen for drug companies going to the physicians' offices and telling them what kinds of pills and drugs are to be used. That is the inference I get from this. We shall put the entire report in the record. CONTINUING EDUCATION OF PHYSICIANS ON DRUGS Mr. FOGARTY. Do you want to comment on that? Dr. GODDARD. There is a proper place, I believe, for the detail man employed by the pharmaceutical manufacturer to present information to the practicing physician, but in my experience as a practicing physician this was not the only channel or means by which I obtained information on new drugs. The journals, scientific meetings I attended, all were part of the process. As the Commissioner of the Food and Drug Administration, it is my hope that in the years ahead we can provide some way of communication with the practicing physician, also, so that we can assist, along with the medical associations and others involved in physician education, about drugs. I don't believe this should be the only way nor, in fact, do I believe it is the only way they obtain information today. Mr. FOGARTY. This is a terrible indictment, though, if it is true. OVERLAPPING INTEREST OF PHYSICIANS IN PHARMACEUTICAL BUSINESS Mr. DUNCAN. Is there a problem of overlapping interest in the medical practice in the pharmaceutical business? I refer to clinics. and doctors who are proprietors of pharmacies. Dr. GODDARD. This is known to be of concern and I believe the code of ethics speaks to this point. The difficulty one may get into, carrying it by extension, should physicians own stock in pharmaceutical companies? I don't believe an individual logically would be expected to have his prescription writing influenced by possession of stock, but I cannot say that it would not happen. The more difficult problem is the one where a physician may have an ownership or part ownership of a pharmacy in that clinic or in that community, and it is my understanding that this is not construed to be ethical under today's terms of practice. TEXT OF GAO REPORT COMPTROLLER GENERAL OF THE UNITED STATES, Washington, D.C., February 3, 1966. To the President of the Senate and the Speaker of the House of Representatives: Herewith is a report on our review of Federal financial participation in the costs of prescribed drugs for welfare recipients in the State of Pennsylvania. Federal financial participation in public assistance programs is administered by the Welfare Administration, Department of Health, Education, and Welfare. On the basis of our review of expenditures made by the Pennsylvania Department of Public Welfare for prescribed drugs for welfare recipients in the State of Pennsylvania, we believe that such expenditures can be reduced through the increased use of less expensive nonproprietary (generic) name drugs, with savings accruing to both the Federal Government and the State of Pennsylvania, without adversely affecting the accomplishment of the objectives of the federally aided public assistance programs. We believe that, to avial itself of these economies, the Department should make further effort to have the States encourage physicians and pharmacists to use more extensively the less expensive nonproprietary name drugs whenever appropriate in lieu of comparable brand name drugs or the more expensive nonproprietary name drugs. A projection of the results of our examination of a random sample of prescription invoices paid by the State of Pennsylvania indicates that savings of from about $722,000 to as much as $1,502,000 could have been realized during fiscal year 1964 through maximum use of less expensive nonproprietary name drugs; the Federal share of such savings would amount to from about $354,000 to as much as $705,000. We proposed to the Secretary of Health, Education, and Welfare that steps be taken to bring about greater emphasis by the State of Pennsylvania aimed at the increased use of nonproprietary drugs in prescriptions for welfare recipients. In commenting on our proposal, the State welfare agency informed the Department in a letter dated May 24, 1965, that to ask physicians to prescribe generically would subject the public assistance recipients to the possibility of receiving second-class medical treatment. By letter dated September 10, 1965, the Assistant Secretary for Administration advised us that the Department of Health, Education, and Welfare did not fully agree with the State's observation. The Assistant Secretary stated the belief that more could be done to reduce the costs of prescribed drugs provided welfare recipients in Pennsylvania. He advised us that, under authority contained in title XIX of the Social Security Act, which was enacted July 30, 1965, requirements would be developed by the Department to increase the use of medical advisory committees by the States in medical care program administration including as a high-priority objective the increased use of nonproprietary drugs in State welfare programs. In the past, the Department has distributed to the States a pamphlet prepared by the Bureau of Family Services, Welfare Administration, and a document issued jointly by the American Public Welfare Association and the American Medical Association, which suggest guidelines that may be used by States and physicians when considering the use of nonproprietary drugs in prescriptions for welfare recipients. However, these publications are not part of the official regulations issued by the Department. The Department uses a manual entitled "Handbook of Public Assistance Administration" as an official means of providing States with guidelines and recommendations for the proper and efficient administration of public assistance programs. In our opinion, the inclusion in the handbook of a provision specifically recommending that States encourage physicians to consider the increased use of nonproprietary name drugs for welfare recipients would be conducive to effecting additional savings in the cost of drugs for welfare recipients. Significant amounts of Federal funds are involved in public assistance payments for prescribed drugs in all States, and the possibility exists that the conditions disclosed in our review in Pennsylvania may also be present in other States. New and expanded legislation that authorizes increased Federal participation in medical care benefits to needy people accentuates the importance of effecting economies in the purchase of prescribed drugs under federally aided public assistance programs. In December 1965, subsequent to commenting on our findings, the Department of Health, Education, and Welfare issued a directive which enunciates as the Department's policy that nonproprietary or generic name drugs should be used both by constituent operating agencies and grantees whenever it is practicable and economical. We are recommending that, in implementing the Department's enunciated policy, the Commissioner, Welfare Administration, issue a policy specifically recommending that State agencies administering federally aided public assistance programs adopt policies and procedures designed to encourage physicians to prescribe, and pharmacists to dispense, for the use of welfare re cipients, less expensive nonproprietary name drugs, whenever practicable, and consistent with the recipients' welfare. We are issuing this report to the Congress to inform it of the possibilities for significant economies in the Federal financial participation in the cost of prescribed drugs for welfare recipients. Copies of this report are being sent to the President of the United States; the Secretary of Health, Education, and Welfare; and the Commissioner of Welfare Department of Health, Education, and Welfare. FRANK H. WEITZEL, Acting Comptroller General of the United States. REPORT ON REVIEW OF FEDERAL FINANCIAL PARTICIPATION IN THE COSTS OF PRESCRIBED DRUGS FOR WELFARE RECIPIENTS IN THE STATE OF PENNSYLVANIA, WELFARE ADMINISTRATION, DEPARTMENT OF HEALTH, EDUCATION, WELFARE INTRODUCTION AND The General Accounting Office has made a review of Federal financial participa tion in expenditures made by the Pennsylvania Department of Public Welfare (PDPW) for prescribed drugs for welfare recipients in the State of Pennsylvania. Federal financial participation in public assistance grant programs is administered by the Welfare Administration, Department of Health, Education, and Welfare (HEW). Our review was made pursuant to the Budget and Accounting Act, 1921 (31 U.S.C. 53), and the Accounting and Auditing Act of 1950 (31 U.S.C. 67). We selected the State of Pennsylvania for review of activities under this program, because of the significant Federal financial participation in the Pennsylvania prescribed drug program. We directed our efforts primarily to an analysis of the costs of prescribed drugs for welfare recipients, an area which appeared to be in particular need of attention, rather than to a general evaluation of the total medical care activities of the Pennsylvania Department of Public Welfare. Accordingly, the findings included in this report relate only to those aspects of the prescribed drug program in Pennsylvania. The scope of our review is set forth in more detail on page 23 of this report. BACKGROUND Titles I, IV, X, XIV, XVI, and XIX of the Social Security Act, as amended (42 U.S.C. 301-306, 601-606, 1201-1206, 1351-1355, 1381-1385, 1396-1396d), authorize annual appropriations for Federal payments to States to assist them in furnishing financial assistance in the form of direct money payments to recipients of public welfare and to suppliers of medical or remedial care on behalf of recipients, and other services for recipients. Title I authorizes grants for old-age assistance and for medical assistance for the aged (MAA) who do not meet the standards of need for other federally aided public assistance programs but who need assistance to obtain adequate medical care. Title IV authorizes grants for aid and services to needy families with dependent children. Title X authorizes grants for aid to the blind. Title XIV authorizes grants for aid to the permanently and totally disabled. Title XVI authorizes grants for an optional combined plan for aid to the aged, blind, or disabled, or for aid to the aged, blind, or disabled and medical assistance for the aged. Title XIX, which became effective January 1, 1966, authorizes supplemental grants for medical assistance for individuals who are recipients of money payments under a State plan approved under titles I, IV, X, XIV, or XVI. Under the act, the States have the primary responsibility for initiating and administering public assistance programs. The nature and scope of the programs are contained in State plans which, after approval by HEW, are the basis for Federal grants to the States. Plans for State public assistance programs must fulfill certain requirements in order to be approved by the Secretary, HEW. One of these requirements is that the plans must provide such methods of administration as those found by the Secretary to be necessary for proper and efficient operation of the plan. The Federal Government participates with State agencies in monthly average payments per recipient, not exceeding maximum amounts specified in the Social Security Act for each category of assistance with the exceptions of the medical assistance for the aged category and medical assistance which is provided under title XIX, for which no dollar maximums are specified. The average monthly payment is based on expenditures made directly to recipients and to vendors for medical or remedial care for or in behalf of recipients. The Federal expenditure to States for public assistance programs was $2.94 billion in fiscal year 1964. In the State of Pennsylvania, financial assistance is provided directly to welfare recipients for food, shelter, clothing, and incidental medical supplies. In addition, payments for medical care such as prescribed drugs and inpatient hospital services are made directly to vendors by the State welfare agency for all eligible recipients in the State. As of June 1964, there were 392,985 welfare recipients in the State of Pennsylvania receiving assistance under federally aided categories of assistance. The total Federal financial assistance to the State of Pennsylvania for public assistance programs amounted to $128.7 million in fiscal year 1964. As part of its public assistance programs, the State of Pennsylvania makes payments for prescribed drugs for recipients in all federally aided categories of assistance except under the medical assistance for the aged program. The expenditures by the State of Pennsylvania and the Federal share thereof for drugs for welfare recipients in Pennsylvania during fiscal year 1964 are shown as follows: Expenditures for drugs Category of assistance Total Federal share Aid to families with dependent children (AFDC) including children of unemployed parents... Aid to the permanently and totally disabled (APTD). Aid to the blind (AB). Total..... The Secretary of HEW is responsible for administering the public assistance grant programs. He assigned the functions to the Commissioner, Welfare Administration, who, with certain exceptions, redelegated the functions to the Bureau of Family Services (BFS). The field activities of the grant programs are handled by nine regional offices of HEW. In each regional office, the Bureau regional representatives direct the operations of Bureau activities and coordinate relations between HEW and State and local agencies administering the public assistance programs. The HEW New York regional office provides general administrative direction and coordination of the federally aided public assistance programs in the States of New York, Delaware, New Jersey, and Pennsylvania. The principal officials of the Department of Health, Education, and Welfare responsible for administration of the activities discussed in this report follow. Possibilities for reducing Federal expenditures for prescribed drugs for welfare recipients On the basis of our review of expenditures made by PDPW for prescribed drugs for welfare recipients in the State of Pennsylvania, we believe that such expenditures can be reduced through the increased use of less expensive nonproprietary (generic) name drugs, with savings accruing to both the Federal Government and the State of Pennsylvania, without adversely affecting the accomplishment of the objectives of the federally aided public assistance programs. We believe that, to avail itself of these economies, HEW should make further effort to have the States encourage physicians and pharmacists to use more extensively the less expensive nonproprietary name drugs whenever appropriate |