Mr. FISHER. You mean the discount that I get? Mr. POTVIN. Yes, sir. Mr. FISHER. Well, usually it is a third off the list, and I can get an extra 10 percent. Mr. POTVIN. When you deal with the full-line wholesalers at the present time, what prices do you have to pay? Mr. FISHER. The net prices, the wholesale price. Mr. POTVIN. The wholesale price? Mr. FISHER. Right. Occasionally on one line they may offer you 3 percent, on some lines nothing at all. Mr. POTVIN. Two percent for cash upon occasion? Mr. FISHER. This is routine. Not cash, but within the time limit of payment. Mr. POTVIN. 2-10, net 30? Mr. FISHER. Yes, whatever the terms are for that particular company, but by and large it is the net price. Mr. POTVIN. Has any full-line wholesaler offered you a 10-percent discount? Mr. FISHER. Oh, yes. Mr. POTVIN. And who would that be? Mr. FISHER. Ketchum offered me that. Mr. POTVIN. Now what were the terms and conditions that you would have to meet to avail yourself of that 10-percent discount? Mr. FISHER. $3,000 a month minimum. Mr. POTVIN. In other words, you would have to produce for them $3,000 not of any particular line item. Mr. FISHER. No. Mr. POTVIN. But overall. Mr. FISHER. The overall picture. And pay them every 15 days. Mr. POTVIN. And that would be a change from your present arrangement in which you pay either within 10 if you want the discount or at any rate within 30. Mr. FISHER. That is right. Mr. POTVIN. And did you avail yourself of that offer? Mr. FISHER. No, sir. Mr. POTVIN. Would you mind stating to us your reason for not doing so? Mr. FISHER. Well, my own reasons are very personal reasons. I have been dealing with the short-line jobber for many years. They have been friends of mine for many years. When I was an outside salesman they were good to me. They stocked the mercandise as new items came out, there was no question about stocking them. And I have a feeling that if I and a lot of other people cut them out, they would be out of business. Mr. POTVIN. Down through the years have full-line wholesalers offered a 10 percent or any substantial discount? Mr. FISHER. No; no. This is quite recent, within the last year or so. Mr. POTVIN. Can you tell us from your own observations what conclusions, if any, you have reached as to the cause of this change in policy? Mr. FISHER. The competition I would say of the short-line jobber. Mr. POTVIN. You think that that is what has caused the 10-percent discount by the full-line wholesaler? Mr. FISHER. Yes, if you meet a certain minimum monthly purchase. Mr. DINGELL. I would like to discuss that minimum monthly purchase. You say $3,000 a month. What would your gross volume be in prescription pharmaceuticals that would come to you through either this full-line or this short-line wholesaler? Mr. FISHER. Well, what I buy from the full-line jobber is mostly prescription items. Now I don't buy any of the over-the-counter items, unless my short-line happens to be out of them at the moment, from these people because I would just be throwing away 10 percent. Mr. DINGELL. Does your short-line handle ethical pharmaceuticals? Mr. FISHER. Oh, yes. Mr. DINGELL. And over-the-counter items, too? Mr. FISHER. He has many of the big company lines. Mr. DINGELL. What is your total volume in the area that your fulltime wholesaler would be able to serve you? Is it $3,000 a month? Mr. FISHER. Oh, no; no. My wholesale business runs anywhere between $4,500 and maybe in some months up to $5,000. Mr. DINGELL. That would be your total. Mr. FISHER. Total purchases from wholesalers. Mr. DINGELL. Is that a large flow or a large volume? Mr. FISHER. It is a fair volume, sir, it is a fair volume. There are many stores that don't have that volume. do. Mr. DINGELL. Are there many that have a larger volume? Mr. FISHER. There are some stores that have a larger volume. Mr. DINGELL. Would they be discounters? Mr. FISHER. Sure. They turn over a lot more merchandise than I Mr. DINGELL. Would it be fair to describe yourself as a mediumsized neighborhood drugstore? Mr. FISHER. Yes, I would say so. Mr. DINGELL. What would a large drugstore have in the way of wholesale requirements? Mr. FISHER. It depends on how much he would buy direct and how much he bought from the wholesalers. Now if he does a volume we will say that is twice as big as mine, he would do a lot more buying direct. Mr. DINGELL. This $3,000 figure that you have alluded to for your full-time wholesaler, that would be for prescription pharmaceuticals? Mr. FISHER. No. On over-the-counter items also. Mr. DINGELL. So it would be both, over the counter and prescription. Mr. FISHER. Right. Mr. POTVIN. These recent increases in minimum order requirements for direct accounts that you testified were too large for you to handle frequently have tended to drive you and other retail pharmacists into even greater reliance on your wholesalers. Mr. FISHER. Oh, yes indeed, of course. Mr. PorvIN. Now you could buy, if you so choose, exclusively from a full-line wholesaler? Mr. FISHER. Right. Mr. POTVIN. But you could not do so from a short-line wholesaler. Mr. FISHER. That is right. He doesn't have all the lines. Mr. POTVIN. First of all, you must, of necessity, deal not with just one full-line wholesaler but with a minimum of two. Mr. FISHER. Yes, because of shorts. Mr. POTVIN. Could you spell that out a bit for us? Mr. FISHER. I mean if Ketchum & Co. on Monday is out of two or three items, I have to have a source of supply. I can't remain out of merchandise, particularly prescription items. Mr. POTVIN. And with any wholesaler, there is always going to be a continuing Mr. FISHER. There are shorts all the time. This is beyond their control. Mr. POTVIN. You almost never get an order that is 100 percent complete? Mr. FISHER. Rarely. Mr. POTVIN. Now to revert, you can, if you so choose, deal exclusively with full-line wholesalers. Mr. FISHER. True. Mr. POTVIN. You would never have to deal with manufacturers or with anyone else. Mr. FISHER. True. They could supply me. Mr. POTVIN. As you say, you could not deal exclusively with the short-liner because there are certain lines that comprise a very important segment of your business that he could not supply. Mr. FISHER. Right. Mr. POTVIN. And this is really a substantial segment. Mr. FISHER. Oh, yes. These are major companies whose items move. Mr. DINGELL. Mr. Williams. Mr. WILLIAMS. No questions, thank you. Mr. DINGELL. Mr. Fisher, we are grateful to you for your presence today and for your very helpful testimony. Mr. FISHER. Thank you, sir. Mr. DINGELL. Counsel has asked that you leave us the Merck Sharp & Dohme catalog to which you referred. We will see to it that upon completion of the use of these items they will be returned to you, sir. Mr. FISHER. Thank you very much. Mr. POTVIN. Will this inconvience you, sir? Mr. FISHER. Oh, no. All of these prices are in the red book or blue book that was referred to previously. Mr. DINGELL. Thank you very much. Mr. FISHER. There is no problem at all. Mr. DINGELL. Thank you very much for your presence this morning. Mr. FISHER. Thank you, sir. Mr. DINGELL. The next witness is Mr. Nathan Shrage. Mr. Shrage, I believe we can best hear you this afternoon if this would not unduly inconvenience you. If it meets with your approval, sir, the subcommittee will convene at 2 o'clock to hear your testimony. Will that be convenient? Mr. SHRAGE. Fine. Mr. DINGELL. Without objection, the subcommittee will stand adjourned until 2 p.m. (Whereupon, at 11:15 a.m., the hearing was recessed, to reconvene at 2 p.m. this same day.) AFTERNOON SESSION Mr. DINGELL. The subcommittee will come to order. This is a continuation of the drug hearings begun earlier by the House Committee on Small Business, Subcommittee No. 5, hearing sundry witnesses from various segments of the drug industry. Our next witness is Mr. Nathan Shrage of the Bennett Pharmacy, 1314 Nelson Avenue, New York, N.Y. Mr. Shrage, the committee is grateful to you for your presence today. I am advised by counsel that you have been served with a subpena by the committee staff and therefore it will be necessary to administer the oath to you. Please raise your right hand. Do you solemnly swear that the testimony you are about to give is the truth, the whole truth and nothing but the truth, so help you God? Mr. SHRAGE. I do. Mr. DINGELL. Very well, Mr. Shrage, please take a seat and proceed with your testimony. The Chair will recognize counsel, Mr. Potvin. Mr. POTVIN. Mr. Chairman. Mr. Shrage, it is not my intention to question you in detail at this time, but could you, to open your testimony, briefly tell the subcommittee about your business, what has been happening to it in recent years, and what some of the factors involved are, particularly those that you feel may have contributed to any lack of business which have experienced. TESTIMONY OF NATHAN SHRAGE, BENNETT PHARMACY, NEW YORK, N.Y. you Mr. SHRAGE. I am located 1314 Nelson Avenue in the Bronx. It has become within the last year and a half a very depressed area, and frankly I have become a nervous wreck due to the conditions, the pressures all around, the declining neighborhood, not being able to give the wholesalers the necessary business they drop me, and losing prescription business because they may be out of an item or so and I can't have two wholesalers to give it to somebody else. It is really a terrible situation, with stealing going on, and it is nerve-racking all around. Mr. POTVIN. Your neighborhood is undergoing what sociologists might term a descending transition? Mr. SHRAGE. That is correct. Mr. POTVIN. From a middle-income neighborhood to a lower income neighborhood? Mr. SHRAGE. That is right. Mr. POTVIN. And this has, of course, been reflected in a smaller volume of business for you? Mr. SHRAGE. A terrible drop. Mr. POTVIN. Now, sir, could you tell us where you obtain the goods that you sell? First of all, do you have direct accounts with any manufacturers? Mr. SHRAGE. I still have a few, with Upjohn & Co., Parke Davis & Co., and Pfizer & Co. Most of them have dropped me. Mr. POTVIN. Could you name some of the firms that have dropped and tell us during what period of time this occurred? you Mr. SHRAGE. Well, about a year and a half or so ago Lederle, and since January E. R. Squibb & Co. has dropped me. Mr. POTVIN. And how long had you been with the Squibb firm? Mr. SHRAGE. As a direct account. Mr. POTVIN. And how long with Lederle, sir? Mr. SHRAGE. About the same time I would say. Mr. POTVIN. What was the reason for your being dropped? Mr. POTVIN. Had they increased the minimum size of an order that they would fill? Mr. SHRAGE. Yes. Formerly it was any amount you would be able to send them. Now, they have raised it to $25. I still held and tried to do as best I could and order $25. All of a sudden Squibb let me know, "We are sorry we can't do any business with you, you haven't hit us with $750 worth of business during the year and you are out." I have to pay at least 10 percent extra through my wholesaler not being able to get it from E. R. Squibb & Son. I am just choked that way. Mr. POTVIN. You heard the testimony of Mr. Fisher this morning? Mr. SHRAGE. He gave you wonderful testimony, and honest, too. Mr. POTVIN. You heard his testimony to the effect that general manufacturers' minimum requirements either on an annual volume or size of individual orders basis have increased during the last year or so? Mr. SHRAGE. That is correct. Mr. POTVIN. Has this also been your experience? Mr. SHRAGE. That is correct. Mr. POTVIN. Did you also hear him testify that there has been a or less simultaneous increase in prices of many, many commodities? more Mr. SHRAGE. Definitely. Mr. POTVIN. Could you tell us how many price increases you know about that have occurred during the last 6 months? Mr. SHRAGE. Dozens upon dozens. I would say at least over 100 items that I have gotten. Mr. POTVIN. And these are primarily prescription pharmaceuticals that you are referring to? Mr. SHRAGE. That is correct. Mr. POTVIN. So that these increases in the minimum requirements for maintaining a direct account have made you increasingly reliant upon wholesalers for your source of supply? Mr. SHRAGE. That is correct. Mr. POTVIN. What wholesalers do you deal with, sir? Mr. SHRAGE. Right now I deal with McKesson & Robbins and M. Sobol, which is a short-line. |