Senator NELSON. To the best of my memory, we have not had any witness who said that doctors should be allowed to prescribe only by generic name. We have had some distinguished pharmacologists and doctors who have said that it is much better medical practice to prescribe by generic name, and then if the doctor wishes, to name the brand he wants-whether it is prednisone, Schering, or prednisone, Lilly, or predisone, Wolins, or predisone something else. It is a much better way to practice medicine. But our witneses did not testify that the doctor ought to be deprived of his right to name the company where the generic name drug is manufactured.

Mr. STETLER. That is my recollection.

In a true generic prescription, the physician delegates to a pharmacist or nurse the selection of the manufacturing source for the product prescribed.

Senator NELSON. The suggestion that generic prescribing delegates to the nurse is new to me.

Mr. STETLER. In some situations, in some areas, the nurses have some authority that would extend into the prescription drug field. This is obviously not to the degree with nurses as it is with pharmacists. The predominant situation would be that delegation of authority goes to the pharmacist.

Senator NELSON. I have never heard of this kind of responsibility being given to a nurse. That is why I raised the question. Are you referring perhaps to a situation in which a nurse may be practicing in a hospital which has a formulary?

Mr. STETLER. No, I am not trying to make a big point of this. I am not thinking of a nurse in the situation, where the hospital has a formulary. That would normally be the decision of the hospital pharmacist.

Senator NELSON. You agree that whenever a hospital establishes a formulary, you do deprive, for all practical purposes, the doctor's right to prescribe entirely as he sees fit.

Now, in all formulary situations that I am aware of, the formulary committee and the hospital administration says, "Well, if the doctor really wants to prescribe this brand name, he can come to us, and he may be authorized to do so." But as a matter of practice, what you have done is agreed by an evaluation of the drugs through the formulary committee that this will be the formulary for the hospital, and maybe 99 percent or more of the prescriptions written by the doctors are written according to that formulary, and it is only the rare exception, when a doctor says "I want to prescribe this brand name.' Isn't that correct?

Mr. STETLER. That is true.

Of course, with respect to a formulary-the word covers a large area. There are all types of formularies, even at the hospital level. I think the important thing to remember in connection with the formulary is that most of them operate at the local or the hospital level, and the decision is as to the drugs included on the formulary is made by a therapeutics committee, probably consisting of the doctors who practice on that staff, and the administrator, and the hospital pharmacist, that you have got a pretty good formulary in terms of the practices of the men that are going to be governed by it.

81-280-68-pt. 4-14

But the one thing you mentioned which is important is that escape valve that permits the doctor to go outside of the formulary if he decides to do so. I think that is the ultimate saving feature.

Senator NELSON. I take it you agree that the formulary system, if it is a good formulary, is a sound method of establishing the drugs to be prescribed in a hospital; do you not?

Mr. STETLER. We have not opposed it. I think the formulary system has been effective in many of the larger hospitals, particularly where they have people with particular competence that can serve on these therapeutic committees, it has been used as sort of an inventory control in some situations to reduce the cost to the hospital.

Now, that is not necessarily bad, if it is tied in with the sound medical decisions or drug decisions that go into the ultimate listing of the drug products. But we have not taken a position in opposition to hospital or local formularies.

Senator NELSON. What is your view with regard to the adoption of hospital formularies by practicing physicians or by smaller hospitals? In other words, you have a hospital in New York or Los Angeles that has a large number of patients, and all the specialties of medicine practicing there. The formulary is developed by the specialists in all aspects of medicine, along with the pharmacists, and then published for that hospital.

What is your view of a smaller hospital without those facilities adopting this formulary, or of a private practicing physician adopting a formulary to use in his own practice?

Mr. STETLER. I think the test really is, and the one that would govern our reaction to your question-if the doctor decides it for himself, that is, if it results from his independent professional decision, it is agreeable. As far as the decision by even a small hospital is concerned, if it really represents the wishes of the doctors that are going to be governed by it, there is no objection to it. If it is something that is foisted on them by the administration, or somebody that cannot speak for the medical judgment within that hospital, then it is probably wrong.

Senator NELSON. Well, would you agree or disagree that it is a very sound and beneficial approach to use a formulary system and make it available from distinguished hospitals, and to encourage doctors to use a formulary that has been developed by the great variety of special expertise that a hospital has?

Mr. STETLER. I think that depends on the local situation. If, in the opinion of the doctors that are governed by it, it does not impede their practice, or thwart their individual decisions with respect to drug therapy, then it is a fine, valid procedure. If it impinges on any of those things, then it is probably not good.

That means it is going to be difficult to transplant a formulary that happens to work at one particular hospital to every other hospital situation around the country.

Senator NELSON. I wasn't suggesting the question compulsion. I was simply suggesting that because there are 7,000 different drugs and 21,000 brands of these 7,000 drugs, it is really hardly possible for a practicing physician to be aware of the best selection to be made unless he is in a very narrow specialty, and only uses a handful of drugs. My question is whether it would be a good educational device, good

for the practice of medicine, and good for the patient. Should not the use of the formulary system be encouraged-not compelled-but encouraged? Would you not solve a lot of problems if the physicians practicing in New York City or Chicago or any place else had available to them a formulary developed by a dístinguished group of clinical specialists in all aspects of medicine, so that they could use such a formulary in their daily practice? And, would it not be beneficial to the patient?

Mr. STETLER. Just commenting on that, I really think the fallacy that exists is the impression that a doctor, any doctor in practice any place ever gets close to 7,000 drugs.

Senator NELSON. I have not suggested that.

Mr. STETLER. No-I am just commenting on that. Because the need to solve all these problems for a doctor in terms of how many drugs he must be conversant with is not as big as some would indicate. I have a hunch that most doctors in their practice probably routinely use no more than 25 or 50 drugs.

I think it would be a good exercise for some hospitals to just keep track of all the prescriptions written by their medical staff in a year, and see how many drug products are involved.

I think you could devise a formulary after that that would not be very restrictive, and would probably accommodate the great bulk of the needs or the prescribing habits of the doctors that operate on that staff. And it would not approach anything like 7,000 products, even for a hospital.

I am not in disagreement. I am not saying formularies are bad. I think when they are devised and administered, taking into consideration the needs, the wishes of the doctors, and it can be done without really leaning on them-then I think it can serve a good purpose for all-for the hospital, and for the doctor, and for the public.

Senator NELSON. One of the problems, as you are aware- Vour association and the industry people raise it very frequently is the reliability of drugs, the problem that perhaps some of the generic drugs do not meet USP standards.

Since a private practicing physician does not have the facilities to do the testing, and cannot always have the consultation of distinguished specialists, there may very well be a tendency for him to stick to a drug priced far higher than it ought to be, when in the hospital formulary they are using the same drug at a fraction of the cost. And from a patient's viewpoint, in terms of cost, the doctor is charging this patient much more than the patient ought to be charged. The doctor may not be aware of the alternative drugs, or he may be concerned about prescribing one that he does not know, whereas the hospital may be using generic or trade-name drugs that are much cheaper. This is one part of the question I am getting at.

Mr. STETLER. I am going to get into that in a little bit.

There is no question in our minds there are valid and serious differences between drug products, and just because they have the same generic name, you cannot equate that with therapeutic effectiveness. That is a little bit of a side issue. But it is certainly germane to the point.

I would also say I am sure there are individual and I hope rare situations where a price disparity might be handled by a knowledge

able formulary committee to the advantage of the patient and the doctor. But nobody should get so enthusiastic about price that they override the medical judgments of a doctor because he happens to practice in a hospital that has a formulary.

I do not think you are suggesting that. And that is all I am trying to say. That is the element that ultimately has to be preserved.

Senator NELSON. This dispute about therapeutic equivalency and clinical effectiveness, and so forth, keeps being raised all the time. The reason I raise it here is, if we had a formulary, I doubt if there would be very many doctors, if any, in the United States who would prescribe a prednisone that cost $17.90 to the pharmacist, which would be about $27.28 to the consumer, depending on the fee, when an equivalent drug is available at $2, or $1, or even at as little as 75 cents. This is what bothers me.

The Medical Letter, on the basis of chemical tests and opinions of a distinguished group of authorities consulted around the United States, flatly asserted that the 22 prednisones they tested are equivalent.

Really it would be a shocker to me-and more of a shocker to some poor person who is on social security-if he found that he pays $25 or $26 for a hundred prednisone tablets when therapeutically effective tablets are available according to the Medical Letter, at $2 a hundred. This is what shocks me.

Now, if there were a formulary-I doubt whether there is a physician in America who would be using Meticorten at $17.90, when they can get Merck's at $2.20.

Mr. STETLER. A comment on that, Senator.

As you know, from previous testimony that was presented, the feeling does exist, and I share it, that doctors should be permitted to make the decision on the drug. But-I am sure this is not an appealing statistic to one of our members, Schering-but, nevertheless, their share of the market on prednisone has gone from a hundred percent down to 5, so absent the formulary-they apparently have decided on their own to either write for a generic product or for another brand. So the free forces of our economy, and the knowledge of doctors about not just medicine, but economics, have in a large extent taken care of the prednisone differential.

As far as the Medical Letter is concerned, they have not said that based on their testing, they have found therapeutic equivalency between the products they looked at.

One other thing. There are probably 75 or a hundred manufacturers of prednisone, and if a doctor were to write generically, neither he nor the patient would know whether they are getting one of the products from the 21 who they found chemical equivalency for, or the other 50 that nobody has bothered to look at all.

But the Medical Letter does not talk in terms of therapeutic equivalency.

Senator NELSON. What they do is just to reach a flat conclusion, which is just as good.

"The great price spread-purchased from different pharmaceutical companies suggested the desirability of prescribing by generic name, and specifying that the prescription be filled with low-priced prednisone tablets." They just flatly reach the conclusion that they are equivalent.

Mr. STETLER. They have reached a very broad conclusion, if they have made it based on the testing they did.

Senator NELSON. I suppose what is proper to say about it is that if there is any evidence they are wrong about it, the evidence ought to be presented.

Mr. STETLER. Well, that is what we are prepared to do.

Senator NELSON. But if you have a formulary, you would not be paying $17.90. I am not picking on any particular company. I think I can find a case like this in almost every company manufacturing trade names.

Mr. STETLER. I doubt that.

But in any event, as I say, in 95 percent of the cases it has been taken care of, because they only have 5 percent of the market.

Senator NELSON. There is another company charging $17.88. Mr. STETLER. They are not charging $17.88. You remember when Schering testified the average price they reported to the committee was considerably less than that. There is a disparity, however.

Senator NELSON. We also referred to the Red Book and used the Red Book figure. When Schering testified they said that subsequent to the last publication they had reduced the price. Well, it doesn't matter. It is off a dollar or two.

We took this from the Medical Letter, and the Medical Letter was June 2, 1967.

Mr. STETLER. Are you interested in some comment on that particular thing?

Senator NELSON. We would be glad to have it. I was thinking of prednisone where the manufacturer said the price we list is not the price charged to the pharmacist. They said there was another Red Book coming out.

Mr. STETLER. I wondered if you wanted any discussion of any length on the study done by the Medical Letter on prednisone.

Senator NELSON. Yes; go ahead.

Mr. STETLER. Could I ask Dr. Quinnell to comment on that?

Senator NELSON. The time is now 12:20. Why don't we hold that question and resume with it after lunch.

Senator JAVITS. Mr. Chairman, I would like to ask a couple of questions before lunch, if we could lay prednisone aside momentarily. May I ask you this, Mr. Stetler.

Would you agree that what the problem here is, is that there is some kind of a cabalistic mystery about what a doctor writes in a prescription. Hence, it is not as though the patient went down to a department store and shopped competitively with a supermarket or the drugstore, a large drugstore, where he might buy notions and other things that he knows about. But if Dr. A says this particular kind of a producthe is scared to death to take any other.

The question that I would like to ask you is this:

Isn't it really the duty of the industry to put competition on a basis on which it exists in most other elements of American businesswhere the consumer can buy any brand of product that he wishes to? He doesn't have to buy percale sheets, other than Burlington, if he doesn't want to. But he can, because he knows that percale sheets are percale sheets, and they are made with a certain kind of denier, and a