The large chainstores get things like warehouse allowances, extra advertising allowances, free goods, carload allowances, weight allowances, premiums, maybe trips to the Caribbean thrown in with it. Mr. POTVIN. Trips to the Caribbean? Mr. MOORE. Well, that is one of the premiums for buying big quan tity, yes. Mr. POTVIN. Would small independent drugstores receive this type of rather royal treatment? Mr. MOORE. Sure, if they bought enough, but they can't. Mr. POTVIN. In other words, the size of their business precludes them from participation in free trips to the Caribbean and so on? Mr. MOORE. The average druggist could not buy the quantity that would enable him to get these types of promotions. Mr. POTVIN. Let us limit this to your firm. Do you sell in the particular locality that you are talking about here? Do you have customers that purchase from you in this same trade area? Mr. MOORE. Yes. Mr. POTVIN. Do you receive promotional allowances of this type to pass on to your customer? Mr. MOORE. No. Mr. POTVIN. Do you receive $200 a square inch advertising allowances? Mr. PoTvIN. From the same manufacturers that you have been talking about here? Mr. MOORE. No. Mr. PorvIN. Can you give us the names of any of these manufacturers? Mr. MOORE. Which ones now? Mr. PorvIN. That you have been talking about for these last 5 minutes? Mr. MOORE. Well, firms like Squibb, Parke, Davis. Let's say Parke, Davis may have a deal on, let's say Myadec. Mr. POTVIN. What is Myadec? Mr. MOORE. It is a therapeutic vitamin sold by the bottle. I am not sure of the prices paid, but they may have a retail price somewhere in the neighborhood of $7.95 or thereabouts. In States where they have fair trade, it would probably be fair traded at that price. But they always have some sort of deal on it. If you buy six dozen assorted vitamins, you might get 15 percent off, and 20 percent off, and 8 percent off less 15-20-8 percent. The last one I heard was if you bought a thousand bottles of 100, you would get 2,000 bottles of 30 free, same discount, and a color television set. Mr. DINGELL. Who offered this? Mr. MOORE. Parke, Davis. Mr. POTVIN. But you had to buy a thousand bottles? Mr. MOORE. A thousand bottles. Mr. POTVIN. In terms of the drug business, how big do you have to be before you can handle a thousand bottles of a particular manufacturer's vitamins? Mr. MOORE. I can't imagine any retailer, and this deal is only to retailers, that legitimately could use the quantity. The retailer that buys that thousand bottles to get that color television set is going to wind up selling to me or somebody like me or somebody that will sell it to me sooner or later. When they load these guys this way, they are just creating their own Frankensteins. Mr. DINGELL. Could a very large chain of Mr. MOORE. There might be a few retail chains in the country, yes. there might be. Thrifty on the west coast or Dart Drug in Washington could put on a promotion of this sort of thing. But there are very fewI doubt that there are many who buy it-that can legitimately or really use it in the course of their own retail business. There would be very few. Mr. DINGELL. For the information of the committee, if they bought a thousand bottles as you are describing it and it wound up in your hands, what would the price be that they would pay for these thousand bottles and the price you would pay for the thousand bottles? Mr. MOORE. I think it would get down, the direct buyer, it would probably cost them somewhere in the neighborhood of between $2.25 or $2.42 per hundred capsules. Wholesalers are supposed to sell this in the neighborhood of $5. Now, I could not sell it for $5 because my biggest competition on the item would be Parke, Davis. They have so many deals, they would be my chief competition. Mr. POTVIN. Sir, you have testified that just the very largest chains could possibly handle these deals that involve color TV's and trips to the Caribbean and so on. Yet they must be paid for by someone, must not they? Now, would it be fair, in your opinion, to say that part of that payment is made by the customers of the small independent drugstores that can't qualify for that type of treatment? Mr. MOORE. I would say so. I know of a case in New York where Parke, Davis sued a man for selling this product at less than the fair traded price, which is $7.95. Now, the man bought it at $2.42 a hundred. It seems it was illegal in New York to sell it for any less. This guy did not want to sell it for $7.95. He said his conscience would not allow him to sell that item to anybody needing to take this thing at that price. This is not exactly a luxury item. If you are taking the thing, you are taking it because your doctor told you to take it because you need it. Mr. DINGELL. What would you be buying it for and what would you ultimately sell it for? Mr. MOORE. We would sell it in the neighborhood of $3. Mr. MOORE. No, we would probably buy it for $2.42. Mr. DINGELL. You would buy it for what the fellow paid for it? Mr. MOORE. Well, remember, he has a color television set and a 2percent cash discount. Mr. DINGELL. He gets a color television set out of the deal; you would buy it for approximately what he paid for it, you would sell it for $3? Mr. MOORE. Yes, $3, $3.25; maybe less, depending on what Mr. PorvIN. Another matter that we had testimony concerning sales to institutions. The remark was made by several witnesses that there SOL was just an inordinate amount of-I believe the phrase he used was erwheeling and dealing" in respect to this type of sale. Are you familiar with this type of sale and could you give us any comments you care to concerning the absence or presence of "wheeling and dealing"? the Mr. MOORE. Well, wheeling and dealing can apply to anybody that is out to get some business, somebody that is out to get a large volume of business and is using some other method, unorthodox method, to get this. It may be a salesman giving away a lot of free goods to buy the business, samples to buy the business. Mr. POTVIN. Could you give us any specifics on misuse or overuse of free goods or discounts or-in other words, transactions that you feel are questionable in one respect or another? Mr. MOORE. There are any number. I could go on for a week. But let's say there is merchandise that is sold to dispensing doctors that finds its way back into regular trade channels, which make the price of both the wholesaler and retailer look silly. There are things like getting a call from a wholesaler in upstate New York saying that he has a representative of the Pfizer Co. there and they have a drive on a broad spectrum antibiotic and they want to sell 500 bottles. This is at a time when the price to the wholesaler was normally $24.48. Mr. POTVIN. Would that be tetracycline? Mr. MOORE. It would be tetracycline. This is when the wholesale price was $30.60 and the cost to the wholesaler is $24.48. This fellow calls me up and he has the representative of Pfizer there and if I buy 500 bottles, it comes out to $17 or $17.50 a bottle, a pretty good price. I said I can't understand it, I buy from Pfizer, but they won't sell me that stuff. In other words, Pfizer is a company I buy from, but they will only sell me certain items, not others. I said fine, I would take it since I could not buy from Pfizer at that price. He said, well, I would have to send money in advance. I just don't like sending money in advance. He said, I have to send them the money in advance. I said why? He said, well, he only has a $300 line of credit with Pfizer, they won't give him the credit. It always has puzzled me why I buy from Pfizer and my credit is good but they won't sell it to me, but they will go to a man in Buffalo and have him sell it to me from there. I think the answer is they can then go back to the NWDA and say, we don't sell Moore these products. Mr. POTVIN. In other words, this offer was made according to the telephone conversation in the actual presence of a Pfizer salesman? Mr. MOORE. No, it was much higher than a salesman. Mr. POTVIN. A Pfizer official, we would say? Are you at liberty to say how high? An official of the company would be a fair description? Mr. MOORE. Yes, sir. Mr. DINGELL. I am curious to see why this phone call was made? Mr. MOORE. Well, I daresay that the sales in the Buffalo area were off and the people in that section of the country needed some sales and I use quantities, so that they would get it to me. Mr. DINGELL. What are you saying is actually, Pfizer was trying to use you as an outlet to get the sales up in that particular area. Is that what you are saying to us? Mr. MOORE. Let's say that particular official of Pfizer wanted to use me in that manner. Mr. DINGELL. There is an interesting question that comes up on this business. One of the things in the pricing structure of the companies again is the fact that they divide their areas up into-rather, they divide the company up into sales areas, am I correct? Mr. MOORE. According to NWDA charts, they do. Mr. DINGELL. What happens is that every one of these areas has sort of a bulk allowance that goes to the salesman, that is apportioned, they cut it up periodically. Am I correct? Mr. MOORE. I am not sure this is so. I know that lately, this has been used as an excuse by certain manufacturers to stop selling to me. Mr. DINGELL. To stop so-called diverters. When sales go outside of that particular marketing area, what happens is that that marketing area profits at the expense of other marketing areas. Am I correct? Mr. MOORE. That may or may not be. I don't think it does. Let's say if I sell outside of Connecticut, I am positive that there are people from other States that are shipping merchandise into Connecticut and I think this thing fairly equals itself off. But now they have an excuse, they don't dare come around these days and say, we won't sell you cause you are cutting the price or selling outside your territory. All they want you to do is give them the name and address and how much and what you sell to each customer that you have. I just don't think it is good business to tell anybody the names and addresses of all my customers. I don't see what business it is of the manufacturer. I am licensed to buy this merchandise. I have never failed to discount an invoice. I buy in good quantity, I don't see what their concern is. be Some of them have tried to say, we have to know this because of the drug-abuse laws. I am licensed under the drug-abuse laws. Mr. DINGELL. Do you file your reports under the drug-abuse laws as required by the Federal statute? Mr. MOORE. We do everything that is necessary and proper to maintain State and Federal licensees, permits, et cetera. This is just subterfuge to fix prices and territories. Mr. POTVIN. Do you have any other examples of this wheeling and dealing sort of thing involving institutional sales? Mr. MOORE. Well, I have already said that the prices are lower to city, State, county, private hospitals, convalescent homes, dispensing doctors, and any number of things which I have already named as most of the ones who get special prices. There are probably others. Mr. WILLIAMS. Are you saying that merchandise is available from hospitals and other organizations? Mr. MOORE. Not very much. There is a certain amount of it, but I would not say that it is routinely available in regular commercial channels. Mr. WILLIAMS. This is not a readily available source of supply for you? Mr. MOORE. Years ago, there used to be more, but it is not readily available now. I don't know-there is a certain amount, but it is an infinitesimal percentage. Mr. WILLIAMS. This is not a substantial or reliable source of supply for you? Mr. MOORE. Of course, there may be doctors that own hospitals, there may be doctors that own clinics that are getting these prices. There may be doctors that own drugstores. You get five doctors in a group and they call themselves a clinic, they get a clinic price. They may be selling goods in a drugstore at very greatly reduced prices in competition with the retail pharmacies. There is something available to everybody I can think of to get a good price on their merchandise except the average corner pharmacist. He is the one who is being made to look like the price gouger and it is not so. There are just darned few rich retail druggists. Mr. POTVIN. Do you have an explanation, Mr. Moore, for the apparent anomoly that prices are very low in some areas-Government procurements, institutional sales, and so on--and I mean low to a degree that cannot be explained by quantity discounts or other cost justifiable means, and yet they seem to be quite high and quite stable in the area which erves the community pharmacist? Mr. MOORE. I think that where there is competition, prices come down. There there is no competition, prices don't come down. Mr. POTVIN. Are you saying, sir, then that as concerns the community pharmacist, manufacturers do not engage in price competition with each other? Mr. MOORE. Very rarely. In areas I have heard stuff about incremental costs, and so forth and so on, and incremental costs for selling merchandise for export. I personally think that is a lot of hogwash. I think prices are lower to hospitals, I think prices are lower for export, I think prices are lower in city and county, State governments because there is competition in those areas. I think they make a profit when they take something like prednisone and instead of $170, they go down to $4, or whatever it is, I think they are making a profit on that price. They consider it plus business. I think they are selling merchandise for whatever the traffic will bear, they are getting as much as they can for what they can. I do not see why prices should be lower for export than things brought here. I don't know that any foreigner's money is better than mine or Mr. Average Consumer's. I do know there is competition. I do know there are pharmaceutical industries in these countries that are quite well developed and American manufacturers have to meet them. They don't have to meet them here. Otherwise, you could not take common generic products that cost just a few pennies and keep the price at $22.60 a thousand, which has been as long as I have been in business, which is 20 years. It seems to me the economic pressure on prices is always downward, but this thing is still $22.60. It has been that way for over 20 years. Mr. POTVIN. Have you had experience with tie-in sales in the industry, sir? Mr. MOORE. Yes, I have. In order to buy-let's say that certain manufacturers merchandise that I buy, and I am not at liberty to mention the name because I am involved in a suit-in order to get the desirable part of their line, I have to take automatic shipments of merchandise which I don't want. Now, they say they will take it back. But in the meantime, I have to pay the bill, I have to tie up my money, tie up my warehouse space. I have to take the stuff whether I want it or not. Mr. DINGELL. Automatic shipments of what, for example? Mr. MOORE. Toiletries. Mr. DINGELL. Are these dead items? |