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The bill also contains $67.3 mil. for FDA, the same amount as approved by the House, and $3.7 mil. below the budget request. Of the cut, some $1.7 mil. was scheduled for drug abuse control, which was shifted to the Justice Dept. after the budget was submitted.

The Senate report said the amount recommended for FDA provides $1 mil. in program increases which will enable FDA to give “increased emphasis” to clinical studies on the side effects of OCs, and to initiate research on the biological equivalency of generic drugs. The latter research “is a prerequisite to the development of equivalency standards necessary for the resolution of the problem of generic v. brand-name drugs,” the report said.

While the Senate cmte. report gave no indication of enthusiasm for NARD's proposal to shift OEO's health functions to H-E-W, there long has been discussion in Washington of giving H-E-W control over all govt. health activities. While the basic philosophy behind such a move has considerable support, the odds appear against it as long as OEO remains an independent agency

OEO has withstood many of the efforts of older-line govt. depts. to cut into the poverty program's operations. Similar success might be achieved by comparing the innovative OEO health prpgrams with the generally recognized bureaucratic lack of creativity in much of the sprawling

H-E-W Dept. The OEO response to NARD's July march on Washington flatly denied many of the assn.'s charges of harm to pharmacists as a result of the OEO centers. The facts do not support" NARD's charges that pharmacies are closing, particularly in Denver and Boston, because of Neighborhood Health Centers (NHC) opening in the area," OEO said.

To support its denial, OEO sent the congressmen a copy of a newspaper article attributing Denver drug closings to a price war, and a letter from the city health dept. saying "not one drug store has gone out of business because of the impact of the center." OEO Says Productive Communication With NARD Members "Difficult To Achieve"

Discussing "the supposition that an on-site dispensary at a NHC will attract the few purchasers of Rx drugs in an area,” OEO repliecd “this is not so ... the opposite is usually the case. ” Before a center opens patients usually get drugs at a country or city hospital or “because of the absence of medical care, never seek Rx drugs at all," 0.0 said.

Opening of a center “generates a greater demand for high quality pharmaceuticals among a population who seldom sought Rx drugs,” O EO added, noting that the centers also help thousands of persons eligible for Medicaid or welfare to enroll in those programs. “Thus consumers are enabled to obtain drugs at the pharmacy of their choice, when they had not, because of sheer poverty, been able to do so before,” OEO said.

OEO also flatly denied “the allegation that patients are directed to govt. dispensaries' or coerced to obtain drugs at health centers.” Contending that “the opposite, again, is really the case," the agency said centers “direct patients to several sources of Rx drugs” by telling them of “their right to procure drugs where they wish, by assisting enrollments in the state Medicaid program, and by the outreach work of home

health aides and visiting nurses. In a direct criticism of NARD, OEO pointed to “the difficulties intrinsic to dealing

with the diversity of organizations claiming to represent the small pharmacist.” OEO reported lengthy discussions with NARD, APhA and at least 12 affiliated and unaffiliated city and state assns.

NARD, the govt. report continued, "claims to 'represent' 40,000 retail drug stores, but it is difficult to obtain their membership rolls. Thus productive communication and program development in coordination with NARD's members in local programs has been most difficult to achieve."

AVELLONE SAYS NARD AND APHA CAN COOPERATE MORE, BUT MUST BE WARY OF

ANTITRUST HAZARDS; NARD PRESIDENT WARNS OF GOVERNMENT INTRUSION NARD and APhA have "ample opportunities for cooperative and coordinated effort,” but both “must take into consideration the basic orientation of each assn.," Exec Cmte. Chairman Nick Avellone told the NARD convention in Las He pointed to the two assns.' pledge of unified effort to support Sen. Hart's (D-Mich.) MD-dispensing bill, and the coordinated APA-NARD criticisms of PMA's call for publicizing Rx prices (“The Pink Sheet” Nov. 4, 1968, page 14).

Although Avellone noted that there “are legal and regulatory hazards to be avoided” when the assns. work in tandem, his comment represented a continuation of the efforts of some pharmacy leaders to heal the breach

between APA and NARD while still recognizing their basic distinctions. He decried the fact that "a few pharmacists have jumped to the conclusion that VARD and APh A were at loggerheads" because NARD “found it necessary to decline membership in the Natl. Pharmacy Insurance Council.” Avellone reiterated NARD's position that it did not join NPIC because assn. counsel Earl Kintner, former FTC chairman, warned of antitrust exposure.

The Bay Village, Ohio, pharmacist said NARD rates "the problems of thirdparty payment programs the number one concern in pharmacy today. VARD, he said, "is as up-to-date on these developments as well as anyone in the nation." P-D Chairman Says Third-Party Payments Will Boost Generic-Named Products

Outgoing President Michael Perhach told the Oct. 12-16 convention that one of the major problems facing pharmacists is communications with each other, among assns., with govt. and with the public. He urged “constant and continuing emphasis on the facts to convince some of our bureaucrats and some of our media people that pharmacists indeed contribute to the health and welfare of the public-and that they, in turn, are justified in establishing an equitable profit margin."

The NARD president added that “if we are to keep from being overwhelmed by antagonists on the natl. scene, our congressmen and senators must have the facts about . . retail pharmacy We must emphasize that the public will be better served ... through the available pharmaceutical services of community pharmacy, rather than through any institution or govt. dispensary.”

Govt. pharmacy programs also drew the attention of NARD Exec Secty. Willard Simmons in his convention report. "Instead of allowing patients to exercise their legal right to have their Rxs filled at the drugstore of their choice, OEO administrators make them travel unnecessary distances, wait for long periods of time, only to receive their medicines, in many cases-without the benefit of personal advisory service available

to them in their own community pharmacy,” Simmons said. "These tactics have resulted in closing of a number of retail pharmacies, of loss of jobs to the citizens of the community, and loss of tax revenues,he added. “Yet these things are done under the misnomer of 'economic opportunity'."

Parke, Davis Chairman Austin Smith told the NARD meeting that as thirdparty payment for drugs grows, generic-named products will probably increase Their proportionate share of ethical sales, but brand-name drugs will continue to dominate the market. “The presence of this third party will proba bring a closer pricing between the branded products and generics,” Smith added.

Perhaps the purplest prose presented to NARD came from ED Wimmer, VP of the Natl. Federation of Independent Business. Harking back to NARD's support of fair trade, he said “if everyone who stood to benefit .. had acted as VARD acted, prostitution of name brands by parasite-discount houses now turning the market place into an Egyptian bazaar would never have seen the light of day."

Wimmer also blasted mfrs.'s price discriminations, advocates of generic drugs, and chain stores. He quoted a Kroger ad saying: “Our professional pharmacists don't dirty their hands with other work; they spend their time professionally filling

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your Rxs.

Wimmer said that "o the other side of this counterfeit coin one finds the statement of a supermarket chain official who said 'it is pure hogwash to say that a pharmacist lends prestige to a supermarket. What a

pharmacist brings in is profits, and if he doesn't where is his prestige?'” Other speakers on NARD's program included House Majority Leader Albert (Okla.), Minority Leader Gerald Ford (Mich.), Rep. Wright Patman (D-Tex.), and President Nixon's consumer advisor, Virginia Knauer (see story, page 10).

Among the 31 resolutions adopted, virtually without debate, at NARD's closing session Oct. 16 were ones:

49-480_70_10

Urging the H-E-W Dept. to put a pharmacist in a high-level staff position to direct pharmacy services.

Opposing the Nixon Administration's cutback in funds for health research projects. NARD's Revenues Are $1,180,603, Up $48,718 From Previous Year

Continuing opposition to the use or recognition of pharmacy technicians at any level.

Endorsing voluntary continued education for pharmacists.

Supporting BNDD's new regs restricting exempt narcotics to pharmacist-only sales.

Urging continued efforts to obtain passage of a strong federal fair trade law.

Calling for continuation, on an annual basis, of NARD's Washington conference on legislative matters.

Reiterating endorsement of Sen. Hart's MD-dispensing bill, and urging grassroots support for the measure.

Seeking postal and other regulations to restrict mail-order Rx sales.

Urging curbs on OEO-type pharmacy installations, more accurate guidelines for govt. dispensaries, and strict enforcement of such guidelines.

Calling for use of a vendor system in any Medicare out-patient Rx program, and continued free choice of pharmacy in all federal programs.

NARD reported gross revenues of $1,180,603 for the year ended July 31, up $48,718 from fiscal 1968. Income in FY 69 exceeded expenses by $39,245, increasing the NARD general fund to $1,453,099. The assn.'s 1970 convention will be held Oct. 18-22 in Atlantic City, NJ.

Illinois pharmacists win injunction halting UAW Rx program offered by four Caterpillar plants in the state through Metropolitan Life's Medimet plan. In a ruling that-if upheld—could have implications for the entire health insurance field. Peoria, Ii., state circuit court Judge Robert Hunt said the United Auto Workers' third-party program covering Caterpillar employees since Oct. 1 represents an “illegal restraint of trade” since the standard reimbursement schedule to participating pharmacists-acquisition cost plus $2.10 professional feeamounts to price-fixing among competitors.

Walgreen, SupeRx and S&C pharmacies were named along with UAW and Caterpillar in the action, but the temporary injunction, which will be issued today (Oct. 13), applies only to the heavy equipment mfr. The suit, initiated Sept: 26, was formally brought by only one Peoria-area pharmacist, but legal costs were shared by 28 others including Ill. Pharmaceutical Assn. (IPhA) immediate past-President Milton Christy. IPhA officially opposed the suit, though some top Íll assn. leaders, infuriated by UAW's encouragement of Rx discounting, were secretly rooting for the Peoria group.

The effect of the court's action is to turn an anti-trust spotlight on the cost-plus-fee system favored by APh A while giving a clean bill of health to the NARD-preferred usual and customary charge practice. Hunt made it clear that the temporary injunction would outlaw only the fee plan used by participating pharmacies, not the usual and customary reimbursement approach approved for use by non-participants and out of state stores. The court's 12-page, Oct. 8 opinion affects only the portion of the UAW plan offered through four Caterpillar plants but the union is fearful that

pharmacists in other areas may press similar suits. "The probability of a material increase in Rx costs to the public at large resulting from a changeover • : from the present competitive method to the uniform method of cost.plus-fixed fee : . is apparent and extensive," the judge wrote. The fee, he added, “is the only reward which the participating (pharmacist) may receive regardless of his volume of business, his ability to buy subject to quantity discounts, or the proportion of the Rx trade to . . . 'front-end' business." For a non-participating pharmacist “to be competitive and to remain solvent” the judge said, he would have to adopt a fee system for all customers or lose a substantial part of his business.

Peoria UAW Rx Plan Injunction Overturned by Ill. Supreme Court in a May 27 decision reversing a state circuit court opinion that the union insurance program's cost-plus-fee reimbursement system promotes “restraint of trade. In lifting the eight-month-old injunction, the high court said the UAW plan offered through Caterpillar Tractor falls within the requirements of Ill. insurance laws and the program's fixed-fee provisions do not involve illegal price-fixing.

The decision, written by Chief Justice Walter Schafer, also upheld arguments of United Auto Workers attorneys that the union's third-party plan is exempt from the state's antitrust statute, which specifically excludes the activities of any labor organization directed solely to labor objectives which are legitimate under the laws of either the state of Illinois or the United States,"? (“The Pink Sheet" March 9, page T&G-4). The Peoria pharmacists, who launched the suit immediately after the plan went into effect Oct. 1, had urged the court to uphold the injunction to force UAW, Caterpillar and Metropolitan Life to switch to a patient reimbursement system with fewer "anti-competitive consequences.'

Spokesmen for the Peoria pharmacists said they were surprised by the decision and unsure of what their next step will be. They have at least three alternatives: attempt to appeal the ruling to the U.S. Supreme Court; initiate a new pricefixing suit in the federal court system; or drop their battle for “usual and customary" reimbursement. The suit has already cost $10,000 in legal fees, and the 40 Peoria-area pharmacists who are backing the action have run out of funds. *Without outside financing or direct aid from NARD, it is questionable whether we will be able to move to the federal courts,” a spokesman told “The Pink Sheet."

Although the Illinois ruling does not affect the legal status of fixed-fee third-party Rx reimbursement outside of that state, the decision is expected to provide at least moral support to Virginia Blue Cross, which is fighting a similar anti-trust action against its Rx insurance program. Oral arguments on that case, which were not scheduled to be heard until late this summer, are now set for June 9 and 10, and a decision from the state's Supreme Court of Appeals is likely by September.

A 10-YEAR REVIEW OF PHARMACY OPERATIONS A substantial sales increase during 1968 boosted sales in the average Lilly Digest pharmacy to almost $199,000—a record high. Chart 15 shows the strong pattern of sales growth over the past decade. At the present rate of growth, average sales will pass the $200,000 mark easily during 1969.

The relationship between sales and expense control is evident in Table 23. When expressed as a percent of sales, the data show a steady uptrend in total expenses and a resultant decline in net profit during the past decade. It is important to note the relative stability of rent and other expenses and the subtle rise in emplovee wages. This perhaps indicates that pharmacist owners are holding down other expenses in an effort to offset increases in the area of wages.

TABLE 23.-AVERAGES OF PHARMACY OPERATIONS-1959-68 (BASED ON PHARMACIES REPORTING)

(Expressed in dollars)

Proprie-
tor's or

man-
ager's
salary

Cost of
goods
sold

Employ.

ees'

Other Total
Rent expenses expenses

Value of Net inventory profit at cost

Gross margin

Year

Sales

wages

1959
1960
1961.
1962
1963
1964
1965
1966
1967
1968

134, 238 86, 431
138, 342 88, 825
139, 176 89, 129
146, 185 93,493
153, 262 97, 415
161, 773 103, 440
167,647 106. 894
174, 646 111, 901
118. 429 120, 786
198, 917 127, 872

47,807
49, 517
50, 047
52,692
55, 847
58, 333
60, 753
62, 745
67, 643
71, 045

10, 861 11, 377 11,595 12, 244 12,610 12, 840 13, 396 13. 604 14, 926 15, 896

15, 045 15, 749 15, 838 16, 758 17,495 18, 531 18.602 20.004 21,933 23, 383

3. 094
3, 181
3, 324
3, 515
3,878
2,960
4, 143
4, 404
4,662
4,923

11, 128
11, 909
12, 128
13, 105
14, 305
14, 806
14, 938
15, 911
17, 160
18, 070

40, 128
42, 216
42, 885
45, 622
48, 288
50, 137
51, 079
53, 923
58, 681
62,272

7,679 7, 301 7, 162 7,070 7, 559 8. 196 9,674 8, 822 8, 962 8,773

22. 680 23, 700 24, 354 25, 792 26, 952 28, 207 28, 642 30.542 33. 882 35, 300 TABLE 24.-PRESCRIPTION TRENDS IN LILLY DIGEST PHARMACIES

TABLE 23.-AVERAGES OF PHARMACY OPERATIONS—1959-68 (BASED ON PHARMACIES REPORTING)-Con.

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TWENTY YEARS OF PRESCRIPTION DEPARTMENT DATA Lilly Digest data clearly indicate that the prescription department continues to grow at a remarkable rate. Chart 16 graphically illustrates the steady uptrend in ratio of prescription sales to total sales since 1949. The past score of years has witnessed an almost threefold increase in this important statistic. On the basis of this information, it can be concluded that community pharmacists are, indeed, providing essential health services to their patrons.

The average Lilly Digest pharmacy gained in all categories listed in Table 24. The number of prescriptions and the prescription revenue rose substantially. A new high in prescription revenue, expressed as a percent of total sales, was recorded in 1968 at 43.2 percent. It is noteworthy that the figure for prescription

ales per dollar of prescription inventory once again increased and represents an all-time high at $7.49. This statistic suggests effective control of the professional inventory, particularly when a comparison is made with the steadily falling sales return per dollar of stock in nonprescription merchandise.

(Averages per pharmacy

Sales

Percentage
of prescrip-
tion sales to Number of

total sales prescriptions

Year

Prescription

Other

Total

Percent renewals

Prescription

charge

1949 1950. 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968

$14, 806

15,987
18.617
21.735
22, 546
25, 054
27, 688
31, 430
38, 477
40, 454
45, 319
47,825
49, 144
52, 578
58, 688
63, 157
68, 587
71,586
78. 789
85, 953

$63, 007
62,203
66,852
69, 799
70, 511
75, 732
73, 905
75, 268
86. 107
84. 403
87, 930
90, 517
90, 032
93, 607
94, 574
98, 616
99, 060
103,060
109, 640
112, 964

$77, 813
78, 190
85, 469
91.534
93. 057
100, 786
101, 593
106, 698
124, 584
124, 857
133, 249
138, 342
139, 176
146, 185
153, 262
161, 773
167, 647
174, 646
188. 429
198, 917

19.0 20.4 21.8 23.7 24.2 24.9 27.3 29.5 30.9 32.4 34.0 34.6 35. 3 36.0 38.3 39. O 40.9 41.0 41.8 43.2

9, 258 9. 020 9,875 10.436 10, 295 11, 037 11,273 11,985 13,502 13,693 14,656 14, 972 15, 135 15, 817 17, 320 18. 532 19, 708 19, 962 21. 544 22, 848

41.5 42.2 42.5 40.6 40.1 42,3 43. 2 44.5 45.7 47.0 48.0 49. 3 51.1 52.1 52.0 53.7 53.7 53.6 54.5 54.8

$1.60 1.77 1.90 2. 08 2. 19 2.27 2. 46 2.62 2.85 2. 96 3.09 3. 19 3. 25 3. 32 3. 39 3.41 3. 48 3. 59 3. 66 3. 76

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