Mr. STEEVES. OEO people.

Mr. CONTE. Would you get us some statistics on that?

On page 14, relative to mail-order operations, will you comment on the extent of such operations? Do you have statistics in addition to those you have attached to your statement? You have one page there. I thought you might be able to provide more.

Dr. APPLE. Mr. Conte, the American Pharmaceutical Association has been fighting this sort of activity for many years, and we have a very extensive file on it. We will be glad to furnish the committee addítional information.

Let me just say, though, to give you a gross picture, it is not extensive in this country today. It is not. On the other hand, we have some new developments where certain Government agencies, for example, have asked the Post Office Department to make it possible for them to mail narcotics morphine and other hard narcotics-which previously were not permitted to be mailed by anybody.

Mr. CONTE. The Post Office has not given them permission, have they?

Mr. STEEVES. Yes. It was the VA, and the VA was doing it. About 6 months after they discovered the VA was mailing it in violation of Post Office laws, both the Post Office and the Bureau of Narcotics changed their rules to make it available only to VA. We do not think this is good, because our people serve these same people.

Mr. CONTE. You say on page 17 that the American Pharmaceutical Association has advocated that "pharmacists discard the 'markup' system of charging for their professional services in favor of an average 'professional fee."

How widely has your suggestion been accepted?

Dr. APPLE. Well, like any other educational process, that takes time. I would say that probably-except for those programs which involve welfare, where the welfare agencies have insisted that they be billed on this basis, and they have that authority-in the remaining segment of the private-pay market, the fee is now being used in about 20 to 25 percent of the cases. Now, this is increasing every day with the pharmacist's understanding of this situation. He has a natural fear of changing from one system to the other on the grounds that, to start with, he is so accustomed to a markup and he has not received any encouragement from any other sources.

For example, the pharmaceutical industry does not encourage the pharmacist to use a fee-does not. Essentially, we are the only organization in the country, and our affiliates, the American Society of Hospital Pharmacists and the American College of Apothecaries and some of the State associations that are affiliated with us, are the only force that is encouraging the pharmacists to do this. And the GAO." Mr. WILLIAMS. May I ask a question?

Mr. CONTE. Yes.

Mr. WILLIAMS. This fee is used not only in their practice as relates to Government-aid programs, but also in their private practice? Dr. APPLE. That is right, sir.

Mr. WILLIAMS. How successful has this proven? It has come to my attention that for the president-elect of your association this professional fee has been a very profitable technique.

Dr. APPLE. Profitable?

Mr. WILLIAMS. He has done very well.

Dr. APPLE. Let me say this: You cannot equate any percentage of markup to a given professional fee. Now, in the process of changing, if you increase your professional fee, you would have the same effect as increasing your average markup, or vice versa. So I assume I do not know if you are talking about Mr. Grider, our president

Mr. WILLIAMS. Mr. Eggleston.

Dr. APPLE. Mr. Eggleston of Iowa, our president-elect, has used the fee for a number of years. He finds it profitable in a different sense of the word, I think. He finds it profitable in that the patients he serves have a great loyalty toward him because they know that if they need a prescription and the drug costs Mr. Eggleston $4 or $3 or $6 or $8 or $15 or $30, he is still going to have the same $2.10, or whatever his fee is out there in Iowa.

Mr. WILLIAMS. This also goes in the other direction though? If it is a 10-cent drug, he charges the same?

Dr. APPLE. This is right. And this is the hard thing the pharmacist has to explain to the public. There is going to come a time when the drug or commodity only costs 25 cents, but if you want the service, you are still going to have to pay the average value for that service.

Now, Mr. Eggleston's attitude was that he was willing to, if people are unhappy about, for example-a classic example would be 100 phenobarbital tablets, which can be purchased for anywhere from 75 cents to $1.50. Many discount operators use them as a loss-leader type of prescription, if you will, and this type of thing. He recognized that, when he went for a fee, he would have to explain this hard proposition to them: You may have been accustomed to paying 75 cents or $1.50 in the past, but now in order for me to give you the prescriptions on the orders that you come up with, where you were formerly paying $18 or $20 for drugs that are down there at $14 or $12, or some closer than that, I have to be paid for each time I perform my professional services and each time I gave you 100 phenobarbital for 75 cents, I was not paid for my services. Just take when he has to deliver that out to the country, as he does out there in Iowa, for 5 or 10 miles; the 75 cents would not even pay the delivery cost.

Mr. DINGELL. If the gentleman will yield; what you are saying is that he has to explain the whole restructuring of his prices and what he has to do is let it be known that the change is generally favoring the individual who has to pay the high price for the pharmaceutical product as opposed to the individual who has to pay the low price and that the other system, based upon a markup, a percentage markupwhich I believe is the standard practice in the industry, correctDr. APPLE. That is correct.

Mr. DINGELL (continuing). Tends to favor the person who buys the low-priced pharmaceutical as opposed to the person who buys the highpriced pharmaceutical.

Dr. APPLE. Well said.

Mr. STEEVES. It is one thing to try to explain the price to a person who has practiced, to say this drug cost me $12 and I am charging you $18 because overall, my 40-percent margin comes out economically. You can make a rational argument out of it, but you can never convince the public of it.

On the other hand, you can explain a $2 fee as an average cost factor and the public can accept it.

Mr. POTVIN. Mr. Chairman.

Dr. Apple, according to your testimony, about what percentage of the total drugs dispensed by community pharmacies are written in the manner that eliminates judgment on the part of the pharmacies?

Dr. APPLE. I would not say it eliminates judgment. There is judgment regardless of the nomenclature system.

Mr. POTVIN. Well, by trade name.

Dr. APPLE. Well, roughly about 90 percent of the drugs are prescribed by trade name, by brand name.

Mr. POTVIN. So the marketing that is done by the manufacturer would necessarily be aimed at the physician rather than the druggist primarily, in 90 percent of the cases. Is that correct?

Dr. APPLE. Yes, the industry, the manufacturer, feels that once he has convinced the prescriber to write for his product, he has completed his assignment, except for making the physical product available at the place where it can be dispensed.

Mr. POTVIN. Your member, of course, has no choice but to do it precisely so. The manufacturer for his purpose uses a breed known as detail man, correct?

Dr. APPLE. Detail man, medical service representatives.

Mr. POTVIN. Detail men call on physicians and explain to them the function and, one supposes, the merits of the particular product. Now, historically, these gentlemen were initially pharmacists, is that not

correct?

Dr. APPLE. Well, historically, I would say that everybody in the pharmaceutical industry was basically a pharmacist or a physician. Physicians started the industry. They were the industry. As the industry grew, pharmacists, among other special activities, were detail men. Mr. POTVIN. At the present time, about what percentage of these detail men are professionals?

Dr. APPLE. Well, there has been a shift over the last-I would say the last 10 or 15 years, there has been a sharp shift in the fact that it has become more and more industry policy not to employ pharmacists

for this work.

Mr. POTVIN. That seems to me a rather central point. What you are saying is that this is not just a result of a shortage of trained pharmacists, but indeed, this is a function of the judgment of the industry that they desire it so?

Dr. APPLE. In my opinion, it is not because there is a lack of pharmacists. I think that basically, the kind of professional activity that goes on is more conducive to an individual who is interested in selling than he is in practicing professionally.

Mr. DINGELL. If the gentleman would yield, what you are saying is that the detail man, so called, has ceased to be a pharmaceutical representative of the manufacturer and has become simply a salesman, Am I correct?

Dr. APPLE. Yes.

Mr. DINGELL. And this really represents manufacturers policy on this point; am I correct? That he has ceased being

78-783-68-vol. 2- -3

Dr. APPLE. The emphasis has shifted toward sales.

Mr. DINGELL. Then he has ceased to be, let us say, an explainer of the value of the drug and has become a pusher of the particular pharmaceutical; am I correct?

Mr. POTVIN. These gentlemen typically are on a commission basis; is that not true?

Dr. APPLE. I am sorry that I cannot explain the economics of that structure. I think, of course, the industry can. It varies from company to company, different policies. Some of it is straight salaries plus bonus plus commission, some of it is all straight salaries, some commission.

Mr. POTVIN. Do you have statistics on the average income of detail men throughout the industry, or should we get that from the manufacturers?

Dr. APPLE. I think we can supply some data, but I know the industry can supply it, too. I think we have some data.

Mr. POTVIN. May we also get data on the average income of trade pharmacists' activity in the profession and in the community pharmacy?

Dr. APPLE. All right.

Mr. DINGELL. Would you yield to me for questioning?

The detail man, does he go to the doctor or does he go to the pharmacist or does he go to both?

Dr. APPLE. Again, there has been a significant change, in my opinion, where the detail man today spends more time attempting to visit physicians. I say attempting, because he is not always successful in seeing the physician.

Mr. DINGELL. How would he get a fee or a commission for visiting a doctor? Does he get so much per head on visiting a doctor or does he get it on sales to doctors? Normally, doctors do not sell or dispense prescriptions, although this practice is increasing throughout the industry. How does he get a commission for visiting a doctor?

Dr. APPLE. Well, I think the medical service representative, the detail man-again, it depends on the policy of the company involvedhe is given so many calls to make. How successful he is is a measure of his success.

Mr. DINGELL. Do you mean getting in to see the doctor or peddling prescriptions to doctors, or what? I am trying to find out what service he provides to a doctor, if any.

Dr. APPLE. Well, basically, he is attempting to acquaint the doctor, the prescriber, with the merits of the product offered by his company; that is his function.

Mr. DINGELL. This is a function for a salesman and not a function for a registered pharmacist to make, correct, or for a doctor of medicine or for a researcher in the field of chemistry?

Dr. APPLE. Well, I would say a salesman is going to use a different approach. At least, I would expect him to.

Mr. DINGELL. His experience and his ability to dispense facts would be somewhat diminished from the other categories of persons I mentioned, would it not?

Dr. APPLE. He is going to have a self-built-in bias that any good salesman should have and that is to see that his company's products

are sold.

Mr. POTVIN. This, of course, would be part of the cost of marketing the drug, would it not? This has to be paid for.

Dr. APPLE. It has to be paid for.

Mr. POTVIN. And this is part of the cost that would be borne solely and exclusively by that sector of the market represented by the pharmacists; not Government and not hospitals, and so on.

Dr. APPLE. That is true, because detail men are not involved in the price sales, in the incremental price sales, so to speak. Those are handled at other levels.

Mr. POTVIN. So, in essence, your industry is paying the salaries of detail men because they have to use the product of Roche or Lilly or whoever in filling it?

Dr. APPLE. I think more important than our members paying it, it is the public that is paying it.

Mr. PorvIN. And, indirectly, of course, the consumer has to foot

that bill.

Now, when you have talked about the cost, you say that the Government in all of its programs ought to be willing to pay its fair share of the costs, on page 13 and again on page 6. You say that unless we accept the concept that the patients who pay for their own pharmaceutical services must also totally bear the burden of subsidizing patients who are Government beneficiaries the marketing practice of selling governmental incremental cost is discriminatory. One would have to concede that some of this cost might, from a certain perspective, be less than wholly necessary, is that not true? There is at least some question as to the necessity of-well, one example has come to our attention, the giving of golf balls with gold monograms or, indeed, the entire name of the physician to physicians. Do you feel that this is the kind of cost that Government should pay part of for its programs?

Dr. APPLE. Well, we have attempted to get the idea across here that Government ought to pay its fair share of reasonable costs. Now

Mr. POTVIN. I imagine that privately, at least, you would have some comments on feelings of your members for helping to pay for goldplated golf balls. This is involuntary on your part, too, I take it? Dr. APPLE. Yes.

Mr. POTVIN. Now, there has been a certain amount of talk about this best-selling drug at $17.90, somewhat reminiscent of the veiled allusion to the high-priced spread on television. Would you, sir, be so good as to identify by name and generic designation and manufacturer the drug to which you are referring?

Dr. APPLE. Well, we were talking about prednisone as I indicated in my statement here. That testimony was taken by a Senate subcommittee a couple of weeks ago.

Mr. POTVIN. Prednisone manufactured by whom?

Dr. APPLE. By a series of companies. The original patent holder was Schering.

Mr. POTVIN. And their trade name is?

Mr. STEEVES, Meticorten.

Mr. POTVIN. And their price is?

Dr. APPLE. $17.90.

Mr. PorvIN. Per hundred?