ture and humidity was controlled, and they could, therefore, supply the tobacco needs of the drugstore.

This type of thing has tended to change as the practice of retail pharmacy has changed. Today I know of very few wholesalers that could fill the so-called full requirements of retail pharmacists. I know none of our people, for example, that carry magazines or pocketbooks or anything of this kind. I know of very few of our members that are in the tobacco business any longer, so that there no longer really is, in the historical context of the phrase, such a thing as a full-line wholesaler.

There have been many short-line wholesalers that have cropped up over the years that now fill specialized needs within the retail firm, and I think this may be a little bit of the confusion in the industry as to how this term is used.

Mr. POTVIN. Mr. Ford, we had a witness some months ago, Mr. Jack Mandell of the firm of M. Sobol, Inc., New York, who applied or attempted to apply for membership in NWDA. In furtherance of this purpose he entered into a rather lengthy correspondence with your predecessor, Mr. Harry A. Kimbriel.

Mr. Mandell, in a letter dated September 19 asked the following question. He said:

I would appreciate a clarification as to exactly what NWDA's interpretation of a "full service wholesale druggist" is.

Mr. Kimbriel's reply in pertinent part by letter dated September 20 states:

In answer to your last question "What is a full service wholesale druggist." It is one who carries complete representative lines of all reputable brand name drug, cosmetic, and toiletry products, gives delivery service, sales support his service and extends credit.

Now calling your attention exclusively to the drug portion, I take it we are in agreement that I am now talking about just ethical pharmaceuticals.

Mr. FORD. All right.

Mr. POTVIN. Is it not a fact, sir, that to have what Mr. Kimbriel has called a complete representative line of all reputable brand names, there are a number of substantial manufacturers that would necessarily have to be included in your line? Is that not correct, sir?

Mr. FORD. I think you could go even further. I think that under that kind of language, there would be no wholesaler in the country that is a full-line wholesaler.

Mr. POTVIN. Just a moment. This is the criteria extended by your association to an applicant, and yet you tell me that no one could qualify under this criteria.

Mr. FORD. I don't believe they could, sir. I think that is a misstatement of fact, the sentence that you are reading to me there.

Mr. DINGELL. It seems rather curious that a letter requesting certain information dealing with the bylaws, and certain rather critical portions thereof would elicit what apparently is a misleading response. Mr. FORD. I would agree with you, sir. I do think that, however, is a misleading answer. The only explanation that I could offer to you is that NWDA for many years did have in its bylaws a requirement that wholesalers be full line, and full service.

Mr. DINGELL. Has that been repealed by positive action?

Mr. FORD. Yes, sir; that was changed by action of our membership, I believe in about 1963.

Mr. WILLIAMS. If I may.

Mr. DINGELL. Yes.

Mr. WILLIAMS. By "full service" do you mean the wholesaler may carry but one prescription drug?

Mr. FORD. Yes. This was removed from our bylaws, the reference to full line, and we now refer to our members only with the phrase "full service."

Mr. WILLIAMS. Thank you.

Mr. POTVIN. It would not be possible to be either full line or full service. I agree with you. We have some kind of a semantic, if you will excuse the phrase, hangup here.

Mr. FORD. Right. What I had started to say earlier along this line when I said I don't think anybody would qualify under that language there of carrying a full line or I believe all brand or representative brand names

Mr. DINGELL. The language if you please, Mr. Ford, says "one who carries complete representative lines."

Mr. FORD. Yes.

Mr. DINGELL. "Of all reputable brand name drug, cosmetic, and toiletry products."

Mr. FORD. I don't believe any of our members at the present time would meet those precise definitions here. We have, I believe, the Red Book or the Blue Book, the latest count of products that they carry in the prescription drug field somewhere around 170,000, and yet as I said a moment ago, I don't think that any NWDA wholesaler is carrying probably a range of 20,000 to 30,000, which would include many nondrug items.

Mr. DINGELL. Is this term defined; that is, what constitutes a full service wholesaler or a full service wholesale druggist?

Mr. FORD. I don't believe it is.

Mr. DINGELL. Anywhere in your articles of the association?
Mr. FORD. I don't believe it is, sir.

Mr. POTVIN. Mr. Ford, let's not use either of these phrases. Let's just say, "Doing an adequate job for your customers in the areas served by your member." He could not give them, he could not fill all the needs of those retail druggists who were his customers, if he did not have, as an example, such lines as Eli Lilly & Co., Mead Johnson Laboratories, Warner-Chilcott, Ciba, Sandoz, is this not true?

Mr. FORD. I would accept that, certainly, sir.

Mr. POTVIN. And yet it appears that there is a circularity here in that while you cannot be full service or whatever the appropriate phrase is without these lines, yet when you apply for these lines, as an independent wholesaler, you are told, "We give these lines only to fullline or full-service wholesalers, and since you are not one, you can't have these lines."

This is somewhat documented in our record of prior sessions. Does it not strike you that there is a circularity there, sir?

Mr. FORD. Well, it strikes me, sir, and I don't mean this unkindly, as being a very generalized statement. I have never heard of this myself of somebody saying that you can't have this because you are not a full service wholesaler. If you have some specific instances here, if I have

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any knowledge I will certainly be glad to try and shed my light on them if any.

Mr. POTVIN. Are you familiar with the term "short line wholesaler"? Mr. FORD. Yes, sir.

Mr. POTVIN. What does that mean as you understand it?

Mr. FORD. Short line wholesaler means that this is an individual firm that basically is dealing in prescription medicines, if you are talking in the pharmaceutical field here, that these people would not be carrying the toiletries and cosmetics, would not be carrying the sundries, the patents and proprietaries.

Mr. DINGELL. Would you yield at that point? Would a short line wholesaler be eligible under article 3 of the articles of association of NWDA?

Mr. FORD. We have several short line members as members of the association, sir.

Mr. DINGELL. Then are you telling us that the requirements for membership don't mean what they appear to say, or that they do, or that you waive them in certain circumstances?

Mr. FORD. No, sir; not at all. What I am saying is that our requirement for membership spells out full service wholesalers, and that this is a different situation from what you gentlemen, I believe, are talking about here with respect to the line, the merchandise that members

carry.

There is a distinction at least there certainly is as far as we are concerned, between full line and full service. These are two different subject areas.

Mr. POTVIN. Yet, by a letter bearing the signature of your predecessor, and the mark and name of your association, dated just a year ago, it states that, "To be eligible one must carry complete representative lines of all reputable brand name drugs, cosmetic, and toiletry products" and this, of course, is subsequent to the change in your bylaws that you told us about.

Mr. FORD. And again I will have to merely say, sir, that I think that was a misstatement. I don't believe that that was an accurate statement.

Mr. POTVIN. And if Mr. Sobol were to reapply for membership, might he reasonably anticipate that he would get an answer different than the one heretofore given him as to those details?

Mr. FORD. If I were to answer it, he would get a different answer, sir: yes, sir.

Mr. DINGELL. Let me ask you a question here, Mr. Ford, and I don't wish to get in the way of counsel, and he is a very able counsel, but what are the advantages? Let's say I am a wholesaler. What are the advantages to me of belonging to NWDA? What do I get for my membership fee and my annual dues?

Mr. FORD. I think here, sir, I would say that we could go back and take a look at the bylaws and the objectives of the association, the type of thing that we are in existence for and hopefully the type of thing that we are providing for our members.

We start out, No. 1, on this business of developing mutual acquaintance and respect among our members. This we hope we do or hope we are successful in accomplishing. We have referred here, I have and counsel has as well, to our annual meetings. NWDA has for a number

of years conducted what you would think of as a convention or an annual meeting. As a matter of fact, the one coming up this fall will be our 93d.

There are, in my opinion, a great many benefits to be gained by the association and knowledge that people gain of one another when they have an opportunity to associate.

Mr. DINGELL. Does my membership in NWDA give me better access to certain lines of merchandise?

Mr. FORD. To the best of my knowledge it would not, sir.

Mr. DINGELL. It would not. Is there any understanding that the NWDA has with manufacturers as to whether or not the membership would receive access to certain lines or not receive access to those same lines?

Mr. FORD. I can answer that one definitely too. To the best of my knowledge, sir, the question of who a manufacturer sees fit to sign up as a distributor of his products is purely an individual business judg ment which each individual manufacturer makes on his own.

Mr. DINGELL. Do you know of any manufacturer that ties into the availability of drugs to wholesalers and whether they would accept them to handle the line, the fact that the individual in question might or might not be a member of NWDA?

Mr. FORD. I do not. Let me say I can give you a further elaboration on that, but I want to give you a positive and definite answer, which I have just done. I think if you will examine the distribution patterns or practices that the manufacturers in this industry use, you will find them literally covering the entire lot here from one end of the spectrum to the other.

May I continue here for just a moment?

Mr. DINGELL. Certainly.

Mr. FORD. We would like to think that we could encourage more manufacturers to distribute exclusively through wholesalers, which of course would be on one end of this spectrum, and there are a number of manufacturers who do distribute their products exclusively through wholesale druggists.

On the other end of this spectrum, we have very major manufacturers in the pharmaceutical field who sell as little of their merchandise as possible through wholesalers, and sell as much of it on a direct basis as they possibly can, and in between you have got a vast number of manufacturers that practice what you referred to earlier, sir, as dual distribution. They are using the facilities of wholesalers and direct selling both.

We would view one of our objectives as a trade association, and we hope legitimately, to try and persuade more and more manufacturers to use wholesalers for a heavier part of their distribution needs. We think we can justify this economically, but obviously, we aren't successful in selling this completely.

Mr. DINGELL. Let's take a situation where I would apply for membership in NWDA. Would I have to be a member of a regional organization to be a member of NWDA?

Mr. FORD. No, sir; you would not.

Mr. DINGELL. What applications and membership papers would I have to file?

Mr. FORD. You would simply have to file a membership application form which we use for that purpose with active and associate members. Mr. DINGELL. Could we have a copy of that, please?

Mr. FORD. Yes, sir.

Mr. DINGELL. Now what qualifications would I have to establish besides this? In other words, what would I have to do besides this? Would I have to demonstrate the number of lines of merchandise that I handle?

Mr. FORD. No, sir.1

Mr. DINGELL. I would not.

Mr. FORD. No.1

Mr. DINGELL. Would I have to have endorsements from the membership?

Mr. FORD. You would require two sponsors from present membership.

Mr. DINGELL. These would be members in good standing?

Mr. FORD. Correct.

Mr. DINGELL. Would they be any of the several classes of wholesalers that belong to NWDA?

Mr. FORD. We only have one class of wholesalers that belong to NWDA.

Mr. DINGELL. You have associates.

Mr. FORD. Yes, our sponsorship for active members, which are the wholesaler members, must come from wholesalers.

Mr. DINGELL. They must come from wholesalers.

Mr. FORD. Right.

Mr. DINGELL. In other words, an active member must be sponsored by an active member.

Mr. FORD. Correct, sir.

Mr. DINGELL. Or a wholesaler by a wholesaler. And if I am not able to get the two wholesalers to sponsor me, then where am I?

Mr. FORD. I would say you are in difficulty in terms of filing an application.

Mr. DINGELL. Now do you know of any manufacturers that impose a requirement on their potential wholesalers that they be members of NWDA?

Mr. FORD. I am not aware of any, sir.

Mr. DINGELL. Do you have a blackballing procedure like you would in a lodge whereby the members could simply drop a black ball in? Mr. FORD. No, sir; our vote on membership is an open voice vote at the annual meeting itself.

Mr. DINGELL. It is an open voice vote.
Mr. FORD. Yes, sir.

1 A letter from Mr. Ford dated Oct. 30, 1967, states:

*** In reviewing the transcript I find there is one area in which I inadvertently was incorrect in my response. On page 747 Chairman Dingell had asked whether our application form required the applicant to demonstrate the number of lines of merchandise carried (see lines 10 and 11). My answer on lines 12 and 14 was 'No.' While assembling the material that you had requested from us, we noted that the back page of our active membership application form does contain the statement 'give the number of manufacturers' lines nor mally stocked by your firm.' While this does not request information on any given manu facturers, it could be interpreted as Mr. Dingell's inquiry indicated-as a demonstration of the number of lines of merchandise carried by the applicant firm.

"In reviewing this situation I find that we failed to revise our application form for active membership following the amendment of our bylaws in 1963 when the full line' require ment was deleted. In any event, to the best of my knowledge, no applicant for membership has been denied admission on the basis of an answer given to this item. We intend to delete or modify this item of our application form."