Mr. DINGELL. Shelf age and things like that. It also might have to do with whether there is contamination in the shipment or package or repackaging. But, fundamentally, meprobamate is still meprobamate. Right? Mr. FORT. You and I agree that meprobamate is meprobamate. Mr. DINGELL. You are talking about manufacturing processes. Mr. FORT. When it gets to the consumer, is the consumer getting it physiologically to act as that amount of meprobamate? Mr. DINGELL. If he is not, we had better have a careful look at the Food and Drug Act on the matter of generics. Your testimony this morning may be moving me to go into those areas. Mr. FORT. That may be one of the greatest services you could contribute to the American people, in my opinion. It is a jungle now. The public is being made to believe that the generic is just as good as everybody writes about and everybody says that it is just as good. But there are about 20 factors that can make an active ingredient of a pill or capsule or liquid vary. The only way we are ever going to do that, and I don't think we are going to do it 100 percent, and that would be by continuous production inspection or batch-by-batch inspection, and it is going to be-it is going to cost a terrific amount of money to do it, but it is worth the money and should be done. If it cannot be done, the plant should be closed and nothing distributed until it is guaranteed by the U.S. Government, so that when you buy it off the shelf, that what is in the bottle is the same thing that the label says is in it. Mr. DINGELL. I agree. The Chair wishes to express the thanks of the committee for your presence this morning. Mr. POTVIN. You previously have been supplied a copy of the standard questionnaire. May we assume that you are willing to supply that material at your earliest convenience? Mr. FORT. Yes. (The information referred to is retained in subcommittee files.) Mr. DINGELL. The subcommittee will stand adjourned until 10 a.m. tomorrow. (Whereupon, at 12:40 p.m., April 4, 1967, the subcommittee recessed, to reconvene on Wednesday, April 5, 1967, at 10 a.m.) SMALL BUSINESS PROBLEMS IN THE DRUG INDUSTRY WEDNESDAY, APRIL 5, 1967 HOUSE OF REPRESENTATIVE, SUBCOMMITTEE ON ACTIVITIES OF REGULATORY AGENCIES Washington, D.C. The subcommittee met, pursuant to recess, at 10 a.m., in room 2359 Rayburn House Office Building, Hon. Silvio O. Conte presiding. Present: Representatives Dingell, Conte, and Broyhill. Also present: Gregg Potvin, subcommittee counsel; Myrtle Ruth Foutch, clerk; and John J. Williams, minority counsel. Mr. CONTE. The Subcommittee on Regulatory and Enforcement Agencies considering small business problems in the drug industry will be called to order. Our first witness before the committee this morning is Harold Goldfeder, Metro Drug Stores, Riverdale, Md. Mr. Goldfeder, please take a seat. You may proceed as you wish. TESTIMONY OF HAROLD GOLDFEDER, METRO DRUG STORE, RIVERDALE, MD. Mr. GOLDFEDER. Members of the committee, my name is Harold M. Goldfeder, I am in the retail drug business in the Washington area. With your permission I would like to give you a little background of myself, speaking generally on this problem, and then get down to specifics. Approximately 20 years ago when a small individual was able to go into business for himself without too large an outlay of money I purchased my first drugstore in Riverdale, Md., on borrowed money and with prayer. I was very successful in that store and since that time I have made many efforts to obtain drugstore locations in shopping centers, and generally speaking I received the stock answer from the developers of the shopping centers, that although they would love to have me as a tenant in the shopping center, unfortunately they must obtain prime leases to take these leases to lending institutions to obtain funds to build their shopping centers, which means that again, generally speaking, the small individual had to take second- or third-rate locations if he had any desire to get into retail drug business. At the present time I operate seven community drugstores in small towns in the Greater Washington area. One of the best examples I have to cite as far as competition from the so-called "big boys"-I pioneered a location in Waldorf, Md., approximately 4 years ago, although I was aware that it was 3 to 5 years premature, I was willing to wait it out because the future looked very promising, and during the past 6 months the business has increased to the extent where it was becoming profitable, although over the 4 years I lost approximately $80,000 in that particular operation. As of February 1 of this year a chain in the local area opened one of their stores in the same shopping center. I would be most happy, if, in executive session or behind closed doors to relate to this committee the pressure, and if I may use word "coercion" that was brought to bear upon me to permit this chain drugstore to put one of their stores into the shopping center. Unfortunately, I might relate to the committee, that for the month of February, when the chain drugstore opened on February 1, for the month of February, my volume in that particular store dropped 40 percent under the corresponding month of 1966. Over the years the small drugstore, the independent drugstore has been a very, very dear friend of the manufacturers. Any product that came on the market, if it was a success, then to a great degree, it was attributable to the promotion and display and the activities on the part of the independent drugstore owner. However, it seems of recent times that many drug manufacturers are abandoning their good friends of past years and in many cases, not even saying, "Thank you for your past favors," and it seems that they may be playing "footsy" with some of the large retail outlets now that many of their products have become consumer-accepted. To cite a couple of examples, there is a product known as Sucrets which is a throat lozenge. To my knowledge this product has never been promoted or advertised to the public by Merck Sharp & Dohme, until recently. Here again, through the efforts of the corner drugstore, the small drugstore operator, Sucrets has become consumer-accepted. However, apparently Merck Sharp & Dohme who wishes to still maintain the image of an ethical drug manufacturer, in order not to disturb that image, formed a subsidiary known as Quinton Co. and through this subsidiary Sucrets and other products can be purchased by any retailers to be sold in any outlet whatsoever. Another product known as Nupercainal ointment, and here again, in my own observations and opinions, this product was promoted, displayed, and became consumer-accepted through the efforts of the independent drugstore. Ciba Pharmaceuticals, the manufacturer and distributor of Nupercainal, in order to still mantain, in my opinion, its image as an ethical drug manufacturer, formed a subsidiary, Madison Laboratories, and now sell Nupercainal and similar products through their subsidiary, and as far as the general public is concerned, Ciba Laboratories or Ciba Pharmaceuticals is still a very ethical house. Another item which I am sure is familiar to all of you, at least you have heard about it-is a preparation known as Metrecal, for reducing, which is manufactured and distributed by Mead Johnson, and here again, to a great degree, the acceptance by the consumer, despite the fact that Metrecal was advertised to the consumer, it was through the efforts of the small drugstore that Metrecal became consumer accepted and became a popular item, in cooperation with the advertising Mead Johnson did. To my knowledge Mead Johnson never did sell direct to any retailer, however, in order for them to maintain this image of an ethical operation they formed Dalton Laboratories or Dalton Co. which now sells Metrecal direct and other items to any outlet that is eligible to purchase. Unfortunately, the quantities re quired to purchase direct make it very difficult for a small businessman to be able to buy this particular item on a direct basis and therefore he is forced to purchase his Metrecal through a wholesaler as he has done in past years. Mr. POTVIN. Mr. Goldfeder, could you give us the amount of the minimum order? Mr. GOLDFEDER. Unfortunately, I don't have it. Mr. POTVIN. Would it be on the order of a $1.000, $100? Mr. GOLDFEDER. I would have to take a guess at approximately 25 cases. Mr. POTVIN. What would be the cost of a case, roughly? Mr. GOLDFEDER. I could not tell you in all honesty the cost, but it would be the quantity that would be required, because the turnoverfirst of all they make so many flavors and in order to purchase direct you would have to have all flavors and perhaps a small businessman would be forced to take a larger area of his stockroom, which in many cases is too small, in order to warehouse this particular item and then again you have a situation where two or three flavors become very popular and the retailer would sell these out first and more or less be stuck with the unpopular flavors and then if he wanted to purchase direct it would mean he would have to purchase larger quantities of these two, three, four very popular flavors. So financially it would be unfeasible for the quantities required for an independent drugstore owner to purchase direct Metrecal. Mr. POTVIN. May we assume that the minimal cost differences to the retailer would be the 15 percent wholesale markup? Mr. GOLDFEDER. That's correct Mr. POTVIN. And I presume there would be further quantity discounts available? Mr. GOLDFEDER. I would presume so. Mr. POTVIN. Thank you, sir. Mr. GOLDFEDER. These are three examples of what is happening to some drug manufacturers who are now abandoning the retail drugstore owners who helped promote and put their items across as far as consumer acceptance is concerned. There is another area which is covered by advertising, display, and promotion allowances. Some manufacturers will say to a direct account, we will allow you 5 percent of your purchases for advertising. They may say to the retailer we will permit you to charge us at a national rate for advertising purposes. The national rate for a local newspaper, if my memory serves me right is $1.10 a line. However, certain chains in the area with the thousands of lines they use during the course of the year under contract perhaps might bring their price down to 48 cents a line compared to what they are being paid, $1.10 per line. Other manufacturers will tell you that they will allow you 5 percent advertising on your purchases, however, you must give us proof of advertising and we will only pay you your local contract rate. Another means of charging is, a manufacturer will tell a direct account that we will permit you to-here again I use the example of 5 percent for advertising-and all you have to do is run a one-line ad in a newspaper and this will qualify you to obtain your 5 percent advertising allowance. Some manufacturers also insist that if you do run this advertising the product must be advertised at a reduced price and 78-783 0-67-vol. I-8 |