The four charts reproduced here summarize the results of my survey. As could be expected most of the firms give discounts of 10% to 20% to tax supported institutions over and beyond the discounts given to any other cate gory. In cases where bids are given for large purchases, the discounts un doubtedly are still greater.

CHART 1.—Individually owned community pharmacies compared with chains with their own warehouse facilities

CHART 2.—Individually owned community pharmacies compared with chains and

wholesalers

Useful replies
Wholesalers receive best discount_.

36

25

Chains and Wholesalers receive same discount which is better than discount to individually owned community pharmacies.

All three receive same discount---.

CHART 3.-Individually owned community pharmacies compared with physicians in private practice

Useful replies

Pharmacies receive best discount_.

Physicians receive best discount_
Both receive same discount____

21

2739

Separate physician price list mentioned in reply but specific discount not revealed

2

CHART 4.-Physicians in private practice compared with physicians in group practice (clinics) or proprietary hospitals

Useful replies

Clinics and proprietary hospitals receive best discount_
Both get same discount---

25

11

14

Let us consider for a few moments the unfortunate results of the distributional policies of some of the pharmaceutical manufacturers. I have a copy here of a letter dated May 7, 1965 from a California pharmacist to Armour Phar maceutical Company complaining that the pharmacist had purchased directly from Armour 100 5 cc vials of Acthar Gel 40 USP units at a cost of $2.06 per vial considering the value of the free goods included in the deal. One week later his wholesaler offered him the same item in 10's at $1.80 per vial. To make matters even worse for this pharmacist, on the same day one of his physician customers to whom he had intended to sell the product brought to his attention a pamphlet from a physician supply house offering the same item in single vial quantities at $1.35 per vial. The Red Book price for this item is $4.50 per vial. In the July 6, 1965 issue of the "Voice of the Pharmacist" an instance is reported in which a Michigan pharmacist paid to his wholesaler $17.50 for 100 tablets of a well known brand of prednisone while the bid price to a nearby hospital was $4.05 per 100 tablets.

The president of one of the state pharmaceutical associations recently pub licly admitted that he was purchasing some of his drug inventory from hospital sources and that he would continue to do so until the manufacturers stopped discriminating against him. Pharmacists have been warned by eminent legal authority that it is just as illegal for them to purchase as it is for the hospital to sell inventory purchased by the hospital at a special price. The Executive Director of the A.Ph.A. in an address to the National Wholesale Druggists Association at the 1964 convention urged the attorneys who take this viewpoint to test their legal theories in the court room. I notice that a year has passed and not a single manufacturer, or the associations who employ legal counsel advocating this viewpoint, have instituted a suit. It seems to me that if the manufacturers are really serious about wanting to eliminate this matter of hospital drug

diversion, they could effectively accomplish this end by using the authority that they alone possess to remove the discriminatory aspects of their price structures. For each instance of a violation of ethical and legal standards cited here, each of you in this room can probably cite another from your own observations. The practice is so widespreadand has, over the years, become so integrated into the scheme of things as to cause one to wonder if it is really worthwhile to resist. How can a pharmacist stand up to industry and expect to be heard? And even if heard, how can he hope, by his efforts, to accomplish even a measure of change? He can, and I think he most assuredly will rise to the occasion.

To a large share of the industry the community pharmacist still represents the most profitable of the several categories of accounts. If companies had to live on hospital sales with the big discounts resulting from competitive bidding, sales to dispensing physicians, nursing home sales with the generic principle and other factors considered, their stockholders would demand to know what has happened to the profits. The pharmacist knows that industry is big, big business. But does industry realize that if its practices place the pharmacist in an impossible position with the public the pharmacist may react in a manner that very well may not be in the best interests of the industry? If differential pricing on the part of some manufacturers continues to harass the pharmacist to a point where he can no longer defend his position to the general public, it is conceivable that, by so doing, the industry will have forced the pharmacist to start looking at generic name pharmaceutical products in a different light. Who is in a better position than the community pharmacist to consult with the physician about all of the available pharmaceutical products on the market? Is there anyone better qualified than the community pharmacist to recommend to and advise the prescribing physician on these matters? I am certain that it is reasonable to assume that the community physician favorably considers the recommendations of the community pharmacist as to product selection with the best interests of the patient in mind. A recent study published as a lead article in the January 18, 1965 issue of American Druggist substantiates this viewpoint. A growing number of pharmacists are implementing the professional fee method of prescription pricing. This group realizes that the cost of the product is not the predominant factor in selecting the drug to be dispensed where the prescriber has left the choice of product to the judgment of the dispensing pharmacist. The pharmacist thinks only in terms of what is in the best interests of the patient and all other factors become secondary in importance. Industry might very well study these factors and learn that the pharmacist of today must be recognized for what he is an educated and trained consultant who by the very nature of his chosen profession is readily available to both the physician and his patient. He is always there on the spot at that critical moment in the history of a pharmaceutical product-when it is finally placed in the hands of the patient.

The pharmacist is being asked to cooperate with industry in many ways, such as:

1. Permitting the automatic shipment of new products to the pharmacy. 2. Dispensing appropriate trade name products when the physician prescribes generically.

3. Stocking, promoting, and aggressively selling O.T.C. products marketed by the pharmaceutical industry in ever increasing numbers.

4. Detailing the physician on the products of the manufacturer.

Cooperation can only come about in an atmosphere of mutual trust and respect. It would seem that a re-evaluation of attitudes, principles, and policies is in order. Whether or not it is true, pharmacists feel that many members of the pharmaceutical industry are not giving them and their profession proper respect and recognition.

In closing I wish to emphasize that all the community pharmacist asks is that he be treated honestly and impartially. He wants to have the opportunity to buy his product at a price which is consistently fair so that he can perform his function of supplying medications to his patrons at a reasonable price consistent with the best quality. Permit him to practice his profession under these favorable conditions and you will find him to be a loyal and enthusiastic supporter of all that is honest and decent.

SUMMARY STATEMENT-PRICING STRUCTURE 1

1

Company name:

Address:

Representative responding:

no

1. Do you have a minimum shipment limit (yes, no ———), minimum dollar order (yes, no ——) or minimum dollar purchase per year (yes -)? Please explain and state pertinent amounts:

2. What discounts from your catalogue prices do you allow for mimimum purchases by each of the following? What additional discounts are given for quantity purchases?

(a) Individually owned community pharmacies (discounts):
(additional discounts/quantity):

(b) Chain drug stores who maintain warehouse facilities (discount):
(additional discounts/quantity):

(c) Conventional drug wholesalers (discount):

(additional discounts/quantity) :

(d) Physicians in individual private practice (discount):

(additional discounts/quantity):

(e) Privately owned medical clinics or proprietary hospitals (discount):

(additional discounts/quantity);

(f) Tax supported institutions, such as community, state or federal hospitals (discount): (additional discounts/quantity):

no

--) Please

3. Does your company respond to bid offers from federal or state governments, hospitals or other large community purchasers? (yes explain :

11-19

Mr. SKINNER. The reference you just made to the article in the Indiana Pharmacist may be of interest to the chairman-you may be interested to know that this was also printed in the Michigan Pharmacist as well as Wisconsin.

Mr. DINGELL. Since we are referring to the article and since it has been inserted in the record, are there any comments you would like to make on the article at this point that you could do without unduly interrupting your testimony?

Mr. SKINNER. Well, yes, I believe so.

Following the presentation made at this Purdue Management Conference, I sent each of the pharmaceutical manufacturers a copy of the material that I had submitted to the conference. I thought possibly by so doing this would give them an opportunity to see what conclusions I had arrived at and to see what some of the statistics were that I uncovered. I failed to get any replies from any of these companies except just one which is complimentary in nature, strangely. I do not believe I have anything else to mention at this time regarding that unless you have some questions to ask me, sir.

Mr. DINGELL. You noted here in regard to this that from one recipient you received the following items in the mail:

"1. A retail pricelist.

"2. A wholesale pricelist. "3. A physician pricelist.

"4. A surgical supply pricelist.

"5. A hospital pricelist."

Were there appreciable differences between the different pricelists?

1 The completed questionnaires can be found in the appendix to these hearings at pp. A1-A126.

Mr. SKINNER. Each of them was somewhat different. There were several of them that were alike in some categories. You will find all five of those pricelists in the material that I turned over to the committee.

Mr. DINGELL. In order to help the committee evaluate it, are there any discriminatory practices or prices revealed in any of these five items?

Mr. SKINNER. Yes, many.

Mr. DINGELL. Do you want to comment on those, please?

Mr. SKINNER. I do not have them before me, but I think I can recall some of them. In many instances there were prices quoted in which hospitals, proprietary hospitals as well as tax-supported hospitals were given better prices-in some instances much better prices than to the community pharmacist. Also, there were instances in which dispensing physicians were permitted to buy directly and they were given better prices than community pharmacists; and in some instances pharmacists were not permitted to buy direct and were charged a higher price. This isn't true in all cases. It is spotted.

Mr. POTVIN. Mr. Skinner, on the back page at the top of the first column of your article, you state the following:

I have a copy here of a letter dated May 7, 1965, from a California pharmacist to Armor Pharmaceutical Company complaining that the pharmacist had purchased directly from Armour 100 5 cc vials of Acthar Gel 40 USP units at a cost of $2.06 per vial considering the value of the free goods included in the deal. What do you mean by the free goods?

Mr. SKINNER. AS I quoted in the statement, I gave the Red Book price, $4.50

Mr. POTVIN. Will you explain what you mean when you say the "Red Book"?

Mr. SKINNER. The "Red Book" is a publication that lists prices from the many manufacturers.

Mr. POTVIN. This would be the price from the manufacturer to whom, sir?

Mr. SKINNER. This would be the price that the manufacturer has listed as his price to the pharmacist.

Mr. PoTvIN. So this would be the price that you would pay if you bought from a wholesaler?

Mr. SKINNER. That's right. I would pay $4.50 for this vial. Now, your question is, what is the difference between that and the $2.06? Mr. PorvIN. Yes.

Mr. SKINNER. That must have been the free goods referred to here. Mr. PorvIN. When you say "free goods," you mean if you get a certain number of bottles-a certain number of vials of this commodity, Acthar Gel, that you would pay for some and others you would not pay for?

Mr. SKINNER. This is a common practice of the pharmaceutical manufacturers; they have special promotional deals from time to time. Mr. POTVIN. Does everyone get the same special promotional deal? Mr. SKINNER. I can't answer that question in this respect. It isn't always true; no.

Mr. PorvIN. Is it just a matter of negotiation between you and the

salesman?

Mr. SKINNER. No, I think this is a policy that is set up by the pharmaceutical manufacturer that this is a product we are going to promote and in order to get distribution on it we are going to offer an inducement to various segments of our supply setup and we will give them some free goods which will induce them to make a larger purchase.

Mr. POTVIN. Would that be available to you from the manufacturer's salesmen?

Mr. SKINNER. Sometimes it comes as a deal which you can buy from the wholesaler. Sometimes it is a deal which you can only buy direct from the manufacturer. That varies from circumstance to circumstance.

Mr. POTVIN. So this type of discount or promotional allowance, or however you care to denominate it, would not always be equally available from wholesalers and manufacturers' direct representatives. Is that true?

Mr. SKINNER. Yes.

Mr. DINGELL. Are you able to tell the committee whether these deals are advertised in any of the official trade publications or are they advertised through mail leaflets and circulars and items of that kind? Mr. SKINNER. This also varies with the circumstance. It is up to the manufacturer.

Mr. DINGELL. Are they generally advertised in such a way that at least they are made available generally throughout the retail and wholesale trade, or are they matters that are kept rather secret for the benefit of certain particular persons in the trade?

Mr. SKINNER. I would say that better, bigger pharmaceutical companies, while they offer a deal of this type, it is pretty universal to a particular segment. It may be that they have offered this to the hospital and not to the pharmacist, it may be that they offered it to the community pharmacist and not the physician. It may be that they have offered it to the physician and not the community pharmacist. But I would say for the overall national picture it would be pretty uniform. It would have to be.

Mr. DINGELL. Are these ever done on an area wide basis as opposed to a nationwide basis?

Mr. SKINNER. I can't answer that question. I don't know.

Mr. DINGELL. With regard to the instances where they are made available, let us say to a hospital and not to the retail trade, is this a rather frequent practice?

Mr. SKINNER. Yes, this is a frequent practice.

Mr. DINGELL. What form of incentive is given to the hospital when this is made available?

Mr. SKINNER. I might give you a specific example, Mr. Chairman. A pharmacist, community pharmacist, who wants to buy a bottle of 500 Equanil tablets which is a trade name for meprobamate, 400-milligram tablet, will pay-I think the figure is $29 for the 500. Hospitals, at least tax-supported hospitals, are in a position to buy this product in units of a thousand tablets to the bottle for $22.60.

Now, in other words, they are buying a thousand of them for approximately $6 less than the pharmacist will get 500 for. I have been