Mr. SHAFFER. Fine. I would like to say that some of the prices are for nothing. In some of these clinics that are opening up, we have a situation which is now plaguing the pharmacists in Massachusetts, especially those like myself whose practice happens to be in a lowincome area comprised of many welfare recipients. Boston City Hospital has a little pilot program whereby they purchase medication through the inpatient pharmacy and ship it to-to what is not a new outpatient program, and give it to the people that come into the hospital.

I would say well, I received two bottles which I have in my pharmacy, one a bottle of Pen-Vee suspension, which is a penicillin made by Wyeth. They give this quantity, sometimes two, three, or four bottles of the medication, to the patient free. According to our laws in Massachusetts, it is incorrectly labeled; they are in violation of the law because they do not have a prescription number on there, have any dosage directions, and, most important, the name of the prescribing physician.

So, therefore, God forbid, if this medication were contaminated, and the company called for a recall, they would be in a sorry situation. They have no records on this and they have also done this with Pentids for sirup which is a penicillin preparation.

So you can see Wyeth and Squibb are competing with themselves. I have customers coming into the pharmacy with the bottle saying, "Can you fill this for me?" I said, "Where did you get this?" And they would say, "I got this at the city hospital; they gave me four bottles.” Can you imagine that? This costs me $2.50 a bottle and they want me to fill it.

Mr. CONTE. Are these welfare recipients?

Mr. SHAFFER. NO. Some are, but the ones that came into my pharmacy were not.

Mr. DINGELL. How does the hospital get the drug that you are referring to?

Mr. SHAFFER. They purchase it through the inpatient pharmacy. Mr. DINGELL. Purchase it through the inpatient pharmacy? Obviously, the hospital, although a charitable institution, is not going to be passing drugs out to the community at large. There must be some reason why they are doing it, and why they are able to finance even the modest initial cost. How do they do that?

Mr. SHAFFER. If Congressman Conte would ask the Boston Fin Com or an appropriate Federal agency to investigate this problem, I would be grateful to him and the Massachusetts State Pharmaceutical Association would also be grateful, and if he sets this investigation we can bring it to a head. I, as a citizen, or practitioner of pharmacy, just do not have the power that you people sitting here have. I can only speak and relate the stories, but it is hard for me to enforce the rules and regulations and laws.

Congressman Conte, I wish you would do that for me.

Mr. DINGELL. I think that is a little out of a Member of Congress' line of work.

Mr. SHAFFER. Through your channels, maybe some of your constituents back home could be asked to this for you. I would apppreciate it. Mr. DINGELL. We are not the elected representatives of the city of

Boston. Our responsibilities are as elected Federal officials. We have no direct power over those matters.

I am interested in everything you tell us, though, and, if you would, I would like to know how the initial purchase by the hospital is financed? Are these given to the hospital by the drug house?

Mr. SHAFFER, No.

Mr. DINGELL. Is it done by the Office of Economic Opportunity, the welfare office, the city of Boston, or how?

Mr. SHAFFER. I can't give you documented proof. The only thing I could say is opinion, personal opinion. I have a pharmacist who works for me who was a hospital pharmacist and told me the way they circumvent the rules and regulations, or I imagine the laws of the hospital, is that the inpatient pharmacy which services the patients on the ward, purchases the medication on the requisition purchase slip, not on a contract basis.

In turn, the inpatient pharmacist brings it over to the outpatient pharmacy. This is more or less a cash transaction or check type of transaction, and at this outpatient clinic they distribute it free of charge to the patrons.

Now, who is paying for this, I don't know. I would assume the city of Boston taxpayers are paying for this. Possibly, if they have any subsidy or Federal grants, the Federal grants are paying for this, too. Mr. DINGELL. Is this done on a doctor's prescription or just given out by nurses and hospital orderlies?

Mr. SHAFFER. That is another area. I would say that there is no doctor's name on the label. I am sure there is no written prescription because if there were a written prescription it would have a number, so if the patient wants it refilled they would come back to the pharmacy and say, "I would like to have this refilled," and then they would look up the number and there would be the record of the prescription. But there is no number, so I would assume it is just given to them without the original-the orginal label is not even on there. It is taken off. Mr. POTVIN. Mr. Chairman.

Mr. Shaffer, despite my extremely limited knowledge of your profession, is it not a fact, sir, that penicillin suspensions are notorious for being quite unstable. That is to say, there have been some problems about their going through certain chemical changes over a relatively brief period of time?

Mr. SHAFFER. Yes, there are stable penicillin preparations and unstable preparations. This is true.

Mr. PoTvIN. Is this one of the advantages that Pentids solution has? Mr. SHAFFER. Pentids is an unstable preparation once it is constituted with sterilzed, distilled water-but in a dry powder it is stable for years.

Mr. POTVIN. My question is this: If it is impossible to track these down, this handing out of bottles, are there not some real dangers here?

Mr. SHAFFER. Yes, there certainly are. But they have handed out two types. I mentioned they handed out Pen-Vee suspension, which is a stable preparation for several years, and they have handed out Pentids for syrup. When mixed, it is stable for 10 to 14 days, and then it loses its potency gradually.

Mr. PorvIN. There is absolutely no prescription number at all? Mr. SHAFFER. I could send this to the counsel and committee, if they would like to see it for their own visual proof. No prescription label, no doctor's name, and no original label.

Mr. CONTE. Continue, Mr. Shaffer.

Mr. SHAFFER. These, in essence, are some of the problems we are plagued with in the pharmaceutical industry. If there is anything that I have presented to this committee that may be helpful, then I feel that I have fulfilled my role in acting on behalf of our State pharmaceutical association, and if anything can develop from this, then I feel that I have fulfilled my deeds as a pharmacist, a good citizen, and president of the State association.

Mr. CONTE. Mr. Shaffer, you concentrated on the discrimination as to the cost of these medications in favor of the hospitals as opposed to the pharmacies in Massachusetts. Do you have any similar discrimination, price discrimination, between the chain drugstores in Massachusetts and the small pharmacy?

Mr. SHAFFER. Well, in Massachusetts, we have been fortunate and blessed with a wise board of registration in pharmacy. In Massachusetts at the present time we do not have any large chain discount drugstores. We have a chain in Massachusetts which is the LiggettRexall chain, and I tend to believe that it does not have preferential practice there. I am not sure, but I just haven't investigated it.

Mr. CONTE. Do you have any objection to a one-price list with only quantity discounts?

Mr. SHAFFER. One price list with quantity discounts? No, I think that is fair and equitable. If an individual is capable enough in purchasing larger quantities, he should receive a reduction. I am sure it goes right along the way with packaging, et cetera. If they are capable, they should receive it.

Mr. WILLIAMS. Mr. Chairman.

May I elaborate on that? Would one price apply to hospitals, chainstores, and doctors?

Mr. SHAFFER. Not doctors, not physicians. They are physicians, they are diagnosing cases, and they may administer an injectible, or something like that. But not tablets or elixirs, or anything else. This is community practice and this is pharmacy.

Mr. WILLIAMS. We have had some illustrations of doctors who live in communities where there is no drugstore; they are given preferential treatment apparently in their prices, even though of necessity they dispense drugs.

Mr. SHAFFER. That is another problem. We could be here all day, discussing it.

Mr. WILLIAMS. You would insist on one price for all types of purchases except for quantity discounts?

Mr. SHAFFER. Yes, I think this is fair, I think it is equitable, and I think it is morally right.

Mr. PorvIN. Is physician dispensing on the increase in Massachusetts?

Mr. SHAFFER. Well, the board of pharmacy could best answer that; I can only relate what seems to occur where I practice pharmacythat with all the hospitals we have available, with pharmacies practically on every corner, we still have this plague of doctors who pre

scribe and dispense medication. It should cease. Of course, this is up to the board of registration in pharmacy to bring it to the attention of the medical society, but the medical society is the strongest union in the world and it is deaf to our complaints.

Mr. POTVIN. Mr. Chairman.

Mr. Shaffer, I would like to give you, if I may, a questionnaireconcerning a selected number of drugs. We tried to choose an area in which there is fairly intense competition, asking your source of supply, cost per unit, and your price per unit. We first of all request. that you fill it out and return it to the subcommittee. And would you be willing to undertake to have a representative group of your members-the Philadelphia Association has volunteered to have 50 of its members complete it-give us the same information based on their operations?

Mr. SHAFFER. We would be happy to cooperate with the committee, and I am sure our members would be able to help you out.

Mr. POTVIN. Thank you, sir.

Mr. DINGELL. Are there problems with promotional allowances within the retail industry? In other words, special deals, tie-ins, free goods, samples-matters of this kind?

Mr. SHAFFER. Yes, there are professional allowances, advertising allowances, display allowances. This sometimes reflects in the price reduction itself over the counter but has no bearing with the prescription items.

Mr. DINGELL. Do you have samples given to hospitals?

Mr. SHAFFER. Well, sampling has almost come to a halt, but there are samples that are still distributed. I would say most of the companies are counting their samples a little more closely now. A lot of them have gone to literature material rather than actual samples. But they are still available.

Mr. DINGELL. Do you find samples are used as a device to give rebates and discounts that may not otherwise-how should I say that-be clearly on their face lawful?

In other words, will the manufacturer-or wholesaler-make available a free sample or samples, in addition to a purchase of, let us say, number of a particular item?

Mr. SHAFFER. Absolutely. This is how they circumvent the law. Mr. DINGELL. Do you have any information to give the committee on that?

Mr. SHAFFER. The only thing I could say is-well, as far as invoicing, such as the Sumycin or Steclin, which I quoted to you as $4.95 a hundred to the hospital, and I pay $5.50, it may be a technicality, I really don't know, but they will lift-say I buy five 100's of Steclin or Sumycin, they will bill me $11 per 100. And then it will indicate five free.

Mr. DINGELL. Five free? Does this show on the bill or invoice?
Mr. SHAFFER. Yes, it will say five, and five bonus.

Mr. DINGELL. Five, and five bonus. Would this be available to everybody similarly situated?

Mr. SHAFFER. Yes.

Mr. DINGELL. Are there instances where this practice makes available samples, let us say, under the table or apart from the billing and invoices?

Mr. SHAFFER. I would say so because this is the information that is filtered out through pharmacists that work in hospitals or pharmacists who work in multiple pharmacies or chains, where salesmen will entice, I imagine-I don't know if they are actually representing the company this way-but I tend to believe that salesman who is working for a company, represent his company and this would be the practice of his company.

Oftentimes the hospital or a larger chain of pharmacies will purchase medication and they give them stock packages to offset a price reduction. But this is not on paper.

Mr. DINGELL. Is there any way you could help the committee obtain information on how this is done? by whom? and when?

Mr. SHAFFER. This is almost impossible. This would incriminate individuals and I am sure nobody is going to do this.

Mr. DINGELL. With regard to promotional discounts and allowances of this sort, is there any information that would tend to indicate that these are going more to one kind of purchaser or outlet than to others? For example, would chains or large pharmacies tend to get a greater advantage on this for a given quantity of a commodity purchased than, let us say, the corner retailer?

Mr. SHAFFER. Are you talking about prescription medications? Mr. DINGELL. Yes.

Mr. SHAFFER. I would say it is more prevalent in over-the-counter preparations such as the patent medications, and health and beauty aids. It is notorious where there is a preferential for chains, supermarkets, et cetera, receiving all kinds of display allowances, and promotional allowances. It is unbelievable.

Mr. DINGELL. Are these allowances available to all persons similarly situated in the retail business or do they go particularly to categories like chains and so forth?

Mr. SHAFFER. Even if they were available, it would probably be beyond the scope of the small, independent pharmacist.

Mr. DINGELL. In terms of the amount that would have to be purchased?

Mr. SHAFFER. They would virtually make it impossible. The small business is just like Daniel in the lion's den. He is just gobbled up. He cannot compete with them. It is impossible.

Mr. DINGELL. Let me go into another aspect of this that concerns me. What about these samples? Are they identified or marked differently from other samples, or are they marked the same as any other package of the commodity?

Mr. SHAFFER. Well, I would have to answer that two different ways. As I indidated to you before, some companies will give stock packages as a device, which are not marked. Those are not samples; those are stock packages of 100's, 50's, whatever the size might be. But samples are entirely different. Some companies mark the samples, "Sample", "Complimentary", where other companies do not mark it at all. So it depends upon the company.

Mr. DINGELL. Are those promotional deals advertised throughout the trade so that everybody becomes aware of them, or are they kept very close under the counter so only particular persons and particular beneficiaries will be able to take advantage of them?