That may be happening in isolated cases, under the table, where the salesmen or distribution managers are doing it. But the company policy from any national manufacturer of drug pharmaceuticals or sundries they have the same proposition for all in competing circumstances. It may not be disseminated because it would cut the cost of distribution by not calling on accounts which would not justify the cost of the call.

Mr. POTVIN. You have seven outlets. Is that correct?

Mr. FORT. Thirteen-the last six were tough.

Mr. POTVIN. Do you have personal knowledge of the handling of the drug Equanil?

Mr. FORT. I have not bought that product in years.

At one time I did most of the buying, but I am familiar with it, and was familiar with it at the time I bought it, and if you could buy 1,000 bottles of 50's-everyone had that opportunity.

Mr. POTVIN. Was your price always based on the per 50 units?

Mr. FORT. As I recall, it would be in quantities of 50. If you bought 5,000 tablets in 50's or 10,000 in 50's, there would be a differential in price.

Mr. POTVIN. There was a differential?

Mr. FORT. Yes. I am not in a position to say today whether that is true or not. I believe it was true.

Mr. POTVIN. Could you check it out when you get home and let us know? It would be an interesting comparison with Mr. Shaffer's experience in the size of the two operations.

Mr. FORT. You understand it might not be disseminated in some instances you may not even know that it is available unless you inquire. My experience with the large manufacturers is that they do not, in general application of their policies, violate the antitrust philosophy. I am not offering this as a legal opinion, but I know we try to buy it better and I know the response we get and I would like to know if they are selling it lower to someone else. They may be. They quote us the law and the reason why we cannot buy the bigger quantity or get a better price.

An analysis of quantity price differentials in retail drug distribution discloses that there is generally a cost differential of from 15 percent to an extreme of 47 percent (as for 10,000) between the very lowest price price in the greatest quantity and the highest small package price. I am talking about retail distribution, not hospitals, where a large operator would buy at 47 percent lower than a small operator, based on the volume purchases. This should be available to everyone, but it isn't available to small businesses because of economic conditions. You might buy a package of 10,000-if you could handle 10,000I remember one instance in which the manufacturer offered a 100,000 price and we couldn't buy that much but we started looking for someone who could buy it with us so we could get it at the 100,000 price.

We found other retailers who could help us buy, so we got that in a drum but it was packaged and sealed by the manufacturer. The average would be, as I say, about 15 to 20 percent. Our experience indicates that most small drugstores can buy quite a large percentage of their merchandise at the lowest price. That is an opinion.

Mr. DINGELL. Are some put up for volume purchase arrangements but not made available to, say, pharmacies while they are made available to hospitals and institutional type purchasers?

Mr. FORT. Yes, that is true. That is why there will be some bootlegging of that merchandise with so much price differential to offer a profit to anyone who would bootleg it.

Mr. POTVIN. When you say the lowest price, you mean statistically the lowest price available to the retailer?

Mr. FORT. Right.

However, after 11 years our company cannot buy everything at the lowest quantity price. When the quantity lowest price is based on 100,000 tablets and it takes 6 to 8 months to sell that quantity, we look for other retailers to share the purchase. In this way we are reaping the type of benefit offered small businesses in voluntary chains.

A survey conducted by Drug Topics magazine revealed some interesting facts on the question of voluntary chains:

The grocery business, through voluntary chains, has been returned to independent grocers to the extent that the majority volume of business is now done in such voluntary associations.

I don't mean to compare the grocery business with the pharmacy business, but this is just to indicate a possible solution.

Asked if they have had an opportunity to review voluntary chains or associa tions, 56 per cent of the retail pharmacists polled by Drug Topics' latest nationwide spot check replied in the negative. On the other hand, 44 per cent have noted such operations to see whether they could be effectively applied to the independent retail pharmacy field. The spot check was told by 75 per cent of the respondents that the independent retail pharmacy could compete better in such an association or chain. One of the disadvantages would be where an association would buy a drum or the largest package and the difficulty, the greatest difficulty to exist, would be to distribute that between members-this would be a problem. However, in the grocery field it could be done.

Mr. DINGELL. Under the Food and Drug Act, they would have to apply for a permit to repackage.

Mr. FORT. The one who did the redistribution would be the repacker and the ones who received it would be on the registration.

Mr. DINGELL. It would create some very, very large problems. Mr. FORT. That is true. So that would be the greatest handicap in the quantity pharmaceutical field.

Continuing this quote

Nevertheless, 19 per cent threw cold water on this thinking largely because of the unique professional character of pharmacy. In response to another spotcheck question, 63 per cent of those polled believed that, as independent operators. they could accept the direction and guidance of an organizational management of their buying and selling as it would be required in a voluntary chain. But, 31 per cent refused to see it in this way. However, a small number 41 per centwould join the voluntary chain or association if it were available to them. Refusal to cooperate was voiced by 31 per cent, while 22 per cent expressed serious doubts whether they would join up.

You can see the complexities. You could do it in the sundry field but it would be difficult to do it where you compete in the large drum-type pharmaceutical preparations.

Many share my opinion that a voluntary chain plan with Federal tax advantages for participants would be one solution to cost differentials-without raising the retail price to the consumer, by eliminating earned and economically justifiable volume discounts.

Precedent has been set in the tax field to offer benefits-to offer tax benefits to solve problems and that, I know, is something no one likes to talk about. But this is a problem in which we may not find another solution. In my opinion it would be a great investment for the Federal

Government to establish a retail pharmacy as a small business. The man has enough problems-he has about the same number of problems as a man who has 10 children-so give him $6,000 profit free before you tax him.

I think many small pharmacies would agree that is a fair comparison of the problems involved. That is not an impossibility, under the plans activated before. I know my recommendation is not going to affect the tax structure but I think that would be a very good method. If you gave the small businessman in the drug field an opportunity to make $6,000 before he is taxed, you would have the most competitive situation in that field that you could imagine.

Of course, it would have to apply to all small businessmen, but that might be one suggestion.

Mr. DINGELL. Your suggestion merits following up by the committee. We will look at it carefully.

Mr. FORT. Some retail pharmacists might disagree with me. They might feel 20 children might be more like one retail store as far as problems are involved.

One of the serious weaknesses of the present system of protecting consumers and the drug distribution system, especically the small drugstore, or one-pharmacist operation, is the manner in which a dangerous drug or one improperly distributed is taken off the market. The Food and Drug Administration weekly recall list is not available to every pharmacist in the United States except from trade journals. In the case of a dangerous drug this method is too slow. If the dangerous drug has reached the patient, there is a moral, and perhaps legal responsibility for the pharmacist to retrieve the medication. Since the community pharmacist is closest to the consumer in the drug distribution system, he must act immediately at great loss of time and money, to: (1) conduct a time-consuming search of his prescription files. The prescription files generally are by number. When he gets a drug recalled, the pharmacist can't look through a file and simply pull what involves that drug. He has to go back for a reasonable time, and even then he is not sure he is recalling it all.

It is a very expensive process and time-consuming process to go through all the files.

I want to point out, too, to do that by clerical help wouldn't be safe. It has to be done by a pharmacist and it is very expensive and as we will see, compensation should be shifted.

(2) Notify the physician.

(3) Physically retrieve the medication. That sounds like an easy job but it is a terrific job. He has to call the customer and then tell the customer that they may suffer if they take any more, or that the drug is suspect.

That is a big job for the pharmacist, as he is the final distributor. Then he has to arrange for the refund, and if it is a delivery he has to pick it up and take the cash, and it is a dangerous system and should be corrected at the base, which would involve billions of dollars, as I will mention in my recommendations later.

Mr. DINGELL. Who gets stuck with the recall the manufacturer or the pharmacist?

Mr. FORT. The manufacturer. But he only gets stuck for what he charged you for the drug. All this other cost and all of this other

legal and moral responsibility is the pharmacist's. It is my opinion now that in the United States, only-really a small percentage is being retrieved after it gets in the consumer's hands.

Recalled drugs are being retrieved generally off the shelf, but it is a time-consuming job and it is not a reflection on the pharmacist. It is sometimes an impossible job under the present system. Mr. WILLIAMS. How often is this a problem?

Mr. FORT. Many times a week. It is no reflection on the Food and Drug Administration, but we play roulette with people's lives every day in drug distribution because Federal law now provides inadequate protection.

Mr. DINGELL. What is the average number of recalls in a given week?

Mr. FORT. The last publication-one of these gentlemen-one of the publishers could answer it better, but it would vary from six to 15 a week. It is going to get worse because the Federal Government is in the position now-many people in the Federal Government are condoning distribution and encouraging indiscriminate use of untested generics without properly protecting the public-not that they are doing it for any ulterior motive.

Mr. POTVIN. First of all, sir, you are stating that the public is not actually being protected because, as you say, most of it is not being retrieved from the ultimate user.

Mr. FORT. I would say it is almost a physical impossibility.

Mr. POTVIN. Secondly, the retailer who has filled prescriptions with recall material, through no fault of his own, is put to considerable time and expense, and I should think the activity is really injurious to his public relations and image in the community. He is not reimbursed at all, and your suggestion is that the manufacturer should pick up that tab and reimburse the retailer?

Mr. FORT. That is exactly right. We don't handle any generics at all unless specified by the physician-we refused to dispense unknown generic names when the Welfare Department told us we must. The situation was so serious we couldn't do that. I am talking about retail distribution now. This is not as a chemist. After the factory inspection from the Food and Drug Administration and after the good manufacturing procedures are established, in the interim what happens next?

A million people may take what they produce before it is recalled. Then after it is recalled maybe thousands of doses will be taken because the consumer already had it before it was recalled off the shelf.

We have experienced no problems with the major manufacturers concerning credit and assistance in getting it done. Information indicates, however, from what I have read, not from experience because we don't handle generics, but if you have a drug recall involving a manufacturer who is suspect, you may be forced to look in the Blue Book or Red Book to get the address. You don't know what you will find. You may be buying as high quality as the major manufacturer produces or you may be buying a tablet that won't digest or dissolve in the digestive tract. If it costs billions of dollars, U.S.-guaranteed medication is something the American public should have.

Mr. DINGELL. You are talking about generics. Does not the Food, Drug and Cosmetic Act require that they be safe, that they be effica

cious, does it not provide for factory inspections to insure good manufacturing practices?

Mr. FORT. Right.

Mr. DINGELL. The drug is subject to condemnation, and the manufacturer is subject to criminal prosecution where the generic is unsafe or is contaminated or is adulterated or dirty or where it is not manufactured according to good manufacturing practices. Am I correct? Mr. FORT. That is correct.

Mr. DINGELL. What you are saying is that the hazards in genericsand I am not convinced at this particular moment that they existresult from the failure of the Food and Drug Administration to utilize the tools and devices that are available to it in the law to assure the production of the safe generic drug.

Mr. FORT. Congressman Dingell, I am voluntarily and by necessity a good friend of the Food and Drug Administration.

Mr. DINGELL. So am I.

Mr. FORT. I think they are doing a very good job.

Mr. DINGELL. Your statement here today does not so indicate. Mr. FORT. The problem is the law. The method-he sets up his equipment and they check his procedure. What happens after that? The next step is seizure.

Mr. DINGELL. They can also get an injunction against production of the commodity.

Mr. FORT. When they know it.

Mr. DINGELL. They have authority for factory inspection and for the scrutiny of books and records of the manufacturer. They cannot go to a pharmacist's books and records, but they can go to the manufacturer's books and records.

Mr. FORT. That is why I asked for more money for the Food and Drug Administration.

Mr. DINGELL. But on the basis of your comments today, I am not sure this is going to be very helpful. They have an abundance of authority and, as near as I can figure, every nickel they ask for. You are saying generics are unsafe because Food and Drug is not doing the job.

Mr. FORT. Then I did not say it properly. I don't mean Food and Drug is not doing the job.

Mr. DINGELL. You say generics are not safe.

Mr. FORT. Right.

Mr. DINGELL. Then I point out to you the powers that Food and Drug has. If Food and Drug were utilizing fully the powers that it has, generics would be safe.

Mr. FORT. From my limited knowledge, I would disagree with that. Mr. DINGELL. If FDA utilizes its powers fully, vigorously, and on a continuing basis, generics would be safe.

Mr. FORT. If they had the money to inspect continuously or on a batch-on-batch basis to verify the contents of every label.

Mr. DINGELL. Therefore, it follows that it is not utilizing these powers on a full, effective, continuing basis.

Mr. FORT. But I am saying, they are doing the job they are set up to do under the law with present powers and capabilities.

Mr. DINGELL. You and I are in agreement with what the law says. They can inspect what somebody is marketing-they can seize, con