not at the suggested retail price. This of course would bring the cost of advertising to the large retailer down to a minimum. In many instances, observing the full-page and two-page advertising of some supermarkets and drugstore chains in the area, I would venture to say that in many instances the cost of the page would be very, very little because of the cooperative advertising that they have available to them. Mr. POTVIN. Are these promotional allowances, sir, equally available to the individual retailer and the chains?

Mr. GOLDFEDER. On a direct basis?

Mr. POTVIN. On a direct basis.

Mr. GOLDFEDER. Yes, sir.

Mr. POTVIN. However, becoming a direct account involves purchases of a size that would not be appropriate for the operator of a single store. Would they be appropriate for your operation with seven outlets?

Mr. GOLDFEDER. In some instances yes, and in some no.

Mr. POTVIN. In some they are too large?

Mr. GOLDFEDER. Yes.

Mr. POTVIN. And for some with one or two stores would they be appropriate?

Mr. GOLDFEDER. No, they would not. Even if the order at that time would be too large there are also some manufacturers that require that you purchase a number of dollars a year net cost from them in order to qualify as a direct account.

Mr. POTVIN. Do you have any specific amounts that various manufacturers require?

Mr. GOLDFEDER. If my memory serves me, I believe McNeil Laboratories is $2,500.

Mr. POTVIN. What do they manufacture, sir?

Mr. GOLDFEDER. Pharmaceuticals.

Mr. POTVIN. Could you give us the name of one or two more? Mr. GOLDFEDER. Butisol Sodium is one preparation. Butibel, Tylenol-they require I believe $2,500. There are others that also have it, but at the moment I don't have that information.

Mr. POTVIN. Are these promotional allowances equally available if you purchase the same goods through a wholesaler, sir?

Mr. GOLDFEDER. Yes and no.

Mr. POTVIN. Could you elaborate?

Mr. GOLDFEDER. Generally speaking, I would say they are not available to the wholesaler. Now, the wholesaler has certain discounts which the manufacture permits him to give to a retailer. For example, I believe Bristol-Myers is 5 percent on a shelf line. A shelf line could either be a half dozen or a dozen of the particular item. There is a buy book that is available to the retailer for purchases from a wholesaler and if he only wants to buy a quarter dozen he can look in the book and say, if you buy a half dozen, which is a shelf package, then you are entitled to 5-percent discount.

But many of these promotional and display allowances that are available to a direct account are not available through a wholesaler. Mr. POTVIN. Is the cooperative advertising allowance available through just direct buying or both direct buying and wholesale?

Mr. GOLDFEDER. In the past it has been available only to the direct purchasers.

Mr. POTVIN. As to these other items that you have mentioned as being available through wholesalers, they likewise would be available on direct purchase. Is that correct?

Mr. GOLDFEDER. Would you repeat that, please?

Mr. POTVIN. You enumerated this shelf allowance and so on that you could sometimes get through a wholesaler. You could also get that one on a direct account?

Mr. GOLDFEDER. Yes, that and more.

Mr. POTVIN. But there is nothing to offset the newspaper cooperative advertising allowance?

Mr. GOLDFEDER. Not through the wholesaler.

Mr. POTVIN. All right. Thank you.

Mr. GOLDFEDER. Now, I will discuss policies of certain companies. For example, Parke, Davis manufactures and distributes a preparation known as Dilantin Sodium which is used in epilepsy. I requested from the manufacturer's representative, what is the lowest price that I could purchase this preparation for and I was informed if I bought 5,000, five 1,000 bottles, it would cost me $9.30 per 1,000. I requested, supposing I wish to purchase 15 or 20 thousands, which is a rather fastmoving item, particularly, because it is a maintenance drug for those suffering from epilepsy.

I was informed that this is the best price that I could purchase it. for, $9.30 per 1,000. However, I find out that they have two or three different prices.

A veterinarian or a clinic can purchase this product in 25 by 1,000 bottles for a price $7 a thousand, where our best price is $9.30. And to my knowledge, I may be wrong, I don't know any veterinarian in the United States that would use 25,000 capsules of this preparation within a year, 2, perhaps 3 years and even more. And yet, the best price that we can purchase it for is $2.30 higher than what a veterinarian or clinic can purchase it for.

Mr. PorvIN. When you say "clinic," sir, what about clinic pharmacies?

Mr. GOLDFEDER. No, sir; it has to be billed to a clinic, not the pharmacy. If the doctors own a clinic and the pharmacy in the clinic, then, of course, they could purchase it through the clinic.

Mr. POTVIN. So the clinic would purchase the drug, and there would be no distinction shown in the invoicing and billing if it happened to be sold through the clinic pharmacy?

Mr. GOLDFEDER. If it were purchased by a clinic and, of course, if the clinic owned the pharmacy and wished to put the preparation in the pharmacy for them to sell, they would get it at the lower price. Mr. POTVIN. You have clinic pharmacies in your area?

Mr. GOLDFEDER. To my knowledge there is only one that is owned by doctors, and that is in District Heights.

There are pharmacies in clinics, but in most cases they are rented space from the doctors. But there is only one pharmacy in this area in a clinic, unless it has been changed recently, that is owned by the doctors.

Mr. POTVIN. Do you have any personal knowledge of the arrangements between the proprietors who rented the pharmacy space and the doctors as to using clinic drugs for shelf stock?

Mr. GOLDFEDER. No, sir.

There is another preparation which is very popular at the present time and that is oral contraceptives. The best price that this can be purchased from a wholesaler by a retail drugstore owner would be $1.35 per package of 20.

Mr. POTVIN. Could you give us the name of the drug, sir?

Mr. GOLDFEDER. Well, there is Ortho-Novum, by Ortho Co., and Enovid by Searle.

Mr. POTVIN. This price would be equally applicable?

Mr. GOLDFEDER. Generally speaking they are about the same. There are deals available where these can be purchased for less than the $1.35 which the wholesaler charges the retailer, but here again you are talking about quantities. One manufacturer's representative came in to see me and wanted to know if I would purchase this large quantity to get the better price, but for me it is very unfeasible because one manufacturer's product is popular in one area where I have a drugstore and another manufacturer's product is popular in another area. It would be very difficult for me to take advantage of this dif ferentiation in price because it would not move that fast from my shelves.

Mr. POTVIN. These are prescriptions?

Mr. GOLDFEDER. Only purchased on prescription.

Mr. POVTIN. Could you give us the minimum quantity that led you to believe that it was not feasible?

Mr. GOLDFEDER. I believe it was 50 times 6 by 20.

Mr. POTVIN. Could you translate that for me?

Mr. GOLDFEDER. It would be 20 in a package, 6 packages to the carton, and 50 times 6 would be 300 packages.

Mr. POTVIN. 300 times 20?

Mr. GOLDFEDER. Twenty pills. I understand that one of the chains in the area is selling this item on prescription for $1.29 for 20 whereas if an individual had to buy it from the wholesaler it would cost him $1 35.

Mr. CONTE. What do you have to get from the patient or customer? Mr. GOLDFEDER. We figure on between one-third and 40 percent markup, which would be anywhere from $1.90 to $2.10, which is a fair markup in order for an individual to make a fair profit to stay in business.

Many large outlets are taking what we call "hot" items, the most popular items, and selling them at reduced prices.

Another example I might cite is a tranquilizer known as Miltown, made by Wallace Laboratories. If the retailer should qualify to purchase direct, and they do have direct accounts but you have to qualify to purchase direct, he would have to buy a minimum of 6 dozen of Miltown hundreds which is stated right on this sheet, Wallace Laboratories. This is a chainstore pricelist and this is a retail pricelist which means that is what the retailer would have to pay if he purchased it from the wholesaler.

Now, taking Miltown for an example, the 400-milligram hundreds purchased directly would be $5.40. The only thing it states down here, No. 1, of these products that Wallace Laboratories sells, you must buy an order of $250 net. That is your minimum order to qualify for a direct purchase one order must be $250.

Mr. POTVIN. Is there any other qualification required? Do you have to hold a franchise, sir, from Wallace?

Mr. GOLDFEDER. Not a franchise; you sign a contract with them and their contract-as with other manufacturers-says that we will stock all their items and if they come out with a new item we will accept a drop shipment of their new product they came out with and if they come out with an over-the-counter item we will stock and promote it. Mr. POTVIN. You do not mean to imply that they would restrict the number of retail operators in a given area that might carry the line? Mr. GOLDFEDER. No, sir.

Now, in order to qualify to purchase direct as it states down here, minimum quantities, 1 dozen of each item on this page, except Miltown, 400 milligrams in hundreds, you must purchase either 6 or 12 dozen, which means that you would have to buy at least 72 bottles of 100 Miltown, 400-milligram in order to purchase direct, which is a large amount of pills, particularly this item, and they have competition from Equanil and Meprobamate and many other companies are putting out tranquilizers. So for the average small businessman to purchase direct, it means that he would have to buy 72 bottles or 7,200 tablets. If he wishes to buy by the thousands, the minimum shipment is half a dozen, which would mean that he would have to purchase 6,000 of these tablets. Now, the difference in price by buying it from the wholesaler is $6.50 if he bought one bottle of a hundred. If you bought it direct from Wallace Laboratories, again bearing in mind that you have to buy the 6 dozen, it brings the price down to $5.40. If you purchase it in thousands on a direct basis, it brings the price down to $6.12. I am sorry, from the jobber it would bring it down to $6.12 if you bought a bottle of a thousand and it would be $61.20, which is $6.12 a hundred. If you purchase it direct from Wallace Laboratories in thousands it would bring the price down to $5.10 as compared to $6.12 from the wholesaler.

One of the chains in the area sent out a bulletin to their pharmacists and they are getting $6 a hundred on a prescription from the consumer, and yet you see that the lowest price, if an independent drugstore operator purchased this from a wholesaler, the lowest price he could get it for would be $6.12.

Mr. POVTIN. Can you identify that chain, sir?

Mr. GOLDFEDER. Peoples Drug Stores.

Mr. POVTIN. Sir, the subcommittee has received considerable testimony with respect to one of the competitors of Miltown-the Equanil brand of Meprobamate-that retailers are unable to buy it in containers larger than 50 pills, thereby imposing unnecessary expense on druggists and their customers.

Can you tell us whether this has been your experience?

Mr. GOLDFEDER. Yes; they at one time made bottles of 500, which were available to hospitals and clinics, but I understand that they have discontinued that and the largest quantities available from Wyeth Laboratories of Equanil are bottles of 50. If you purchase a $50 order from Wyeth Laboratories, the cost of the 50 Equanil is $2.90. If you purchase it from a wholesaler the cost is $3.25 and this chain again recommends that their pharmacists charge $6 for a hundred on a prescription for Equanil where, if the individual purchases from a wholesaler it would cost him $6.50 or if he purchased direct from Wyeth it would cost him $5.80, two bottles of 50.

Mr. CONTE. Again, what price do you have to get per hundred for a prescription of Miltown?

Mr. GOLDFEDER. I would say a fair price would be $4.95 to $5.25, depending on the overhead of the drugstore.

Mr. CONTE. You said that it cost you

Mr. GOLDFEDER. $3.25.

Mr. CONTE. I thought you said that a hundred would be $5.40. Mr. GOLDFEDER. We are talking about

Mr. CONTE. Miltown.

Mr. GOLDFEDER (continuing). I thought you were referring to Equanil. I was talking about 50 of Equanil which is the only size package it comes in.

Mr. CONTE. I am referring to Miltown. You gave us some prices here: the chainstore could buy a hundred for $5.40, and it would be $6.50 to you.

Mr. GOLDFEDER. $6.50 if I bought a hundred from the wholesaler.
Mr. CONTE. $5.40 is what the chain is paying direct.

Now, what would you have to charge if you paid $6.50?
Mr. GOLDFEDER. At $6.50 I would have to get at least $10.
Mr. CONTE. Did you say they are selling them for $6?

Mr. GOLDFEDER. They are selling it for $6, their recommended price to their pharmacists to charge the patient on a prescription.

Mr. CONTE. Their markup percentage is not as high as yours, how

ever.

Mr. GOLDFEDER. That is correct, but they are selecting an item which is very, very popular and in great demand. Now, many customers do not know the average medication they are getting when the doctor writes a prescription. However, they do know if they are obtaining Librium or Miltown or Equanil or a reducing pill, and these are "football" items that many chains will get a lower price on.

In other words, there is no uniformity.

The average drugstore will have a uniform price. He is satisfied with a percent markup and regardless of what the item is and regardless of what the cost. However, many outlets will use these popular items as "football" items in order to create the image that they are very cheap on many items.

Mr. CONTE. I am interested in seeing the small individual druggist obtain these items at the same price as the large chains, but by the same token I am also interested in seeing that the customer gets the best break he can.

Mr. GOLDFEDER. I assure you, sir, in the long run if you take a customer's prescriptions over a period of 1 year and break down his costs, as to what he is paying compared to what the retailer is paying, I am sure you would find that it would pretty well equal itself out.

In other words, if I would charge you $6 for a hundred Miltown I would have to overcharge either your wife or your cousin or neighbor or someone else on some other item in the drugstore in order to maintain my level of gross profit.

Mr. CONTE. I notice that they are getting about a 20-percent markup and you are getting a 40-percent markup.

Mr. GOLDFEDER. I would say it is even less than 20 percent. Here again they are playing with a "football" item, a very popular item. Mr. POTVIN. Do you have other items that your retail price would be equal to or perhaps lower than Peoples?

Mr. GOLDFEDER. It is very difficult to obtain their price lists, but we have had occasion where we have obtained a copy of a prescription