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of his professional income to professional services rendered the patient. It is our understanding that the AMA has since decided that it is not unethical for a physician to dispense drugs or to own a pharmacy so long as the patients are not exploited.

We further understand that the current official policy of the AMA is that, while there may be circumstances in which physicians may ethically engage in the dispensing of drugs, the Association urges physicians to avoid the regular dispensing and the retail sale of drugs to patients wherever the drug needs of patients can be met adequately by a local, ethical pharmacist. “Accordingly, the AMA would consider a physician's accepting a rebate or discount from a drug company to be unethical. Owning an interest in a drug company or pharmacy, however, would not be considered unethical."

Our information indicates that the AMA seriously questioned, in 1964, the ethical status of physician-owned pharmacies and that it reversed its stand on this matter the following year. General reasons for the AMA's abandoning the 1955 Code of Ethics include the cumbersome nature of the Code and a belief that there exist many individual situations in which the patient is best served by receiving his drugs from the physician.

Senator Moss. All right. We would appreciate that. That gives me some concern.

Now, your recommendation that these exceptional situations where a doctor may dispense or prescribe drugs that are given in section V ought not to be written into the legislation but left to the regulation by HEW. Is that given for the reason of flexibility? Why do you think they shouldn't be written into the law itself?

Dr. STEINFELD. Well, I think that there would be greater flexibility. We can think of several instances. There may be additional ones that we have not been able to think of before the law actually goes into effect. Certainly, in a big group practice, the incentive is to use as few drugs as necessary; not underutilize because if one doesn't use drugs appropriately, the patient may become more sick and go in the hospital and require more expensive care. So, in such a situation, if a big group had its own drugstore and provided the drugs, it would seem appropriate for them not to be forbidden to do so. There wouldn't be an opportunity there, I don't believe, for conflict of interest or exploitation of a patient.

There might be a physician who buys drugs and gives them to patients. Here, I am not thinking of a physician who would increase his restricted forms of practice, perhaps in allergy or hypertension, where drugs are used, and the physician himself may give the drugs to the patient. In such a situation where the drugs are provided at cost, or no cost, or we might figure out what would be an appropriate sum which would be less perhaps than the patient might have to pay if he went elsewhere. I don't see a reason for prohibition there. I think we want to curb abuses, not unnecessarily get involved in the practice of medicine.

Senator Moss. Do you think this bill, as such, does regulate the practice of medicine or is this for regulating the practice of dispensing and selling drugs?

Dr. STEINFELD. Well, it becomes almost a philosophic question. I think the bill's intent is to curb abuses. I wholeheartedly support that intent. I think there are people who may misinterpret it and there are all kinds of interpretations, as you know, mentioning something other than what it is. I think this we would want to avoid. Certainly, there are abuses that can be curbed effectively.

Correspondence with Edwin J. Holman, Director, Department of Medical Ethics of the American Medical Association on July 10, 1970.

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Senator Moss. Of course, you have recited some of the abuses that have been practiced by some licensed doctors. How is the medical profession itself making an adequate effort to police its own range, as it were, from these abuses from those who indulge in these practices that are considered unethical?

Dr. STEINFELD. Well, I think the medical profession is increasingly attempting to correct abuses. If one reads history in terms of-not in terms of a few years, but in terms of a hundred years or soI think our medical profession has done a very fine job. I think we have as good a medical practice in this country as anywhere else in the world. Unfortunately, there are people who don't behave appropriately. I think this is true in all professions. I don't believe that the sanction that the medical profession itself has are adequate to cope with the task, or at least they have not been invoked. This is the reason that you have felt the need for this legislation and that we support it.

Senator Moss. Senator Pearson, do you have some questions for the doctor?

Senator PEARSON. Doctor, would it come to your attention as the Surgeon General of Public Health Service if a drug company should give an interest in that company to a physician?

Dr. STEINFELD. I don't think it would come to our attention.

Senator PEARSON. To whose attention would that be directed? The Ethics Committee? The AMA?

Dr. STEINFELD. I may have misunderstood you, Senator.

Senator PEARSON. I put this proposition to you. The allegations have been made that it is a conflict of interest and undesirable practice for drug companies to give a physician an interest in that drug company or to give him a rebate or discount. Now, if that should happen, who would know about it? Would your office know about it?

Dr. STEINFELD. I don't think our office would know about it unless somebody brought it to our attention.

Senator PEARSON. Has anybody brought any such circumstances to the attention of your office?

Dr. STEINFELD. Not since I have been in the office.

Senator PEARSON. I am just trying to find the source of the evidence as to this particular complaint. Can you help me or help the committee indicate where we could find such information if it exists?

Dr. STEINFELD. You mean regarding the practices the act alleges to occur?

Senator PEARSON. Yes.

Dr. STEINFELD. We will do our best to find evidence of these practices in conjunction with some of the national organizationsmedical, pharmaceutical, and others.

(The information follows:)

There is no agency or organization at present to which complaints about the practices, to which S. 1575 refers, would come regularly. Some of the more visible instances of those practices (physicians owning pharmacies, owning drug repackaging companies, dispensing drugs for profit, and receiving rebates or discounts from drug companies) have come to the attention of state boards of pharmacy, state pharmaceutical associations, the American Pharmaceutical Association, the American College of Apothecaries, state medical societies, and the American Pharmaceutical Association has cited two instances of such practices.

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Senator PEARSON. Well, the allegation is also made that a physician holding an interest in a pharmacy might exploit patients. Where would we find evidence of that?

Dr. STEINFELD. The physician-I think one would have to look at his records very carefully to determine whether indeed he was prescribing drugs that the patient needed, prescribing by a particular brand name, look at the charges he has made and compare them to the prices prevailing in his area.

Senator PEARSON. I have a memorandum here from a physician in Kansas who is president of the Kansas Association of MedicaỈ Practice Groups, who is opposed to this legislation. In reference to their position that this legislation is discriminatory, he cites the fact that less than 1 percent of the estimated 70,000 retail pharmacy outlets in the United States fall into the classifications or categories set forth in this bill. Does that sound like a reasonable estimate to you?

Dr. STEINFELD. I don't have any basis on which to make a judgment. However, I did try to make the point that while abuses occur in every profession, I think the vast majority of physicians are ethical and behave in an extremely ethical way.

Senator PEARSON. I agree.

Dr. STEINFELD. I wanted to make a point that in no way should our support of this bill be interpreted as signifying that physicians are as a group behaving unethically. There are opportunities for abuse. If these exist and are not being covered through voluntary agreements, then a law may be necessary to curb them.

Senator PEARSON. The point is also made in this memorandum that this legislation would constitute a burden upon the physician to know when he can dispense drugs and when he cannot. Do you feel that this is a proper objection to this legislation?

Dr. STEINFELD. I think, Senator Pearson, this is what we had in mind when we suggested that the Secretary of Health, Education, and Welfare be empowered to determine what the exceptions should be. I could conceive of many instances where a physician might dispense drugs and save his patients both difficulty and travel from one place to another, as well as expense. This would be in the best interests of the patient. Such exceptions where they would promote good patient care should be made.

Senator PEARSON. In my State, and I am sure in the chairman's State, we have quite a problem with medical services in the rural areas. Some years ago Dr. Franklin Murphey, who became a chancellor of the University of Kansas and went on to become chancellor of UCLA-you probably know Franklin Murphey very well-was a pioneer in his encouraging of young doctors going out into the rural areas. Well, we did well for awhile. Now the condition is very severe in most of the rural parts of the country. The memorandum that I have here in opposition to this legislation says that it fails to take into account those special circumstances of the rural practitioner or of the rural area. Do you think that is a valid objection?

Dr. STEINFELD. I think it is. This is what we had in mind, again, with respect to the Secretary determining the exceptions. I think where it is to the benefit of the patient we should make exceptions. What we are interested in is curbing abuse or the potential for abuse.

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We are not interested in making it difficult to obtain good patient care. I would hope and I would expect that the Secretary would proceed carefully, in cooperation with representatives of the medical profession and pharmacy profession and consumers, as well as with the Congress, in determining what these exceptions should be.

Senator PEARSON. I should like to know what action these said agencies of the various States, if any, have taken in this particular field. Would it be possible for you to acquire that information and to supply it for the record?

Dr. STEINFELD. What the various State laws might be in this regard?

Senator PEARSON. State laws or State legislation.
Dr. STEINFELD. Yes, sir; we can do that.
(The information follows:)

Seven states (California, Iowa, Maryland, Michigan, Nevada, North Dakota, and Pennsylvania) prohibit physician ownership of pharmacies by statute. Five states (Colorado, Minnesota, Montana, New Mexico, and Utah) prohibit, by regulation, such ownership. Mississippi by statute permits ownership but by regulation has prohibited pharmacists from accepting employment from any prescriber. Arizona, New Mexico, and Utah have pharmacy Acts which preclude physician dispensing, but all state Medical Practice Acts appear to implicitly sanction such dispensing. Since 1966, legislation on matters covered by S. 1575 has been introduced and defeated in at least fourteen states.

Senator PEARSON. I suppose we could get this from the record of the hearings. We have been having hearings on this bill, I understand, since 1963. Would it be possible through your testimony to have a summary of what voluntary actions have been taken by the various medical associations?

Dr. STEINFELD. Yes; I think we can pull that together and provide it for the record.

(The information follows:) In at least sixteen states (Alabama, Connecticut, Illinois, Indiana, Iowa, Maryland, Massachusetts, Michigan, Minnesota, New York, North Carolina, Oklahoma, Rhode Island, Texas, Oregon, and West Virginia) the state pharmacy association and state medical association have adopted codes of interprofessional conduct. The Iowa code has served as a model for many of the others.

Senator PEARSON. Thank you, doctor.

Mr. Chairman, I have this memorandum here. I am not sure that I agree with all of it or even a substantial portion of it. It is a sensible intelligent discussion of this particular piece of legislation by some outstanding people of my State. With the reservations that I have already expressed, I think it will serve the record if we insert this memorandum and make it part of the file or part of the record. It is submitted by Dr. H. Thomas Gray, who is the president of the Kansas Association of Medical Practice Groups.

Senator Moss. Without objection, it will be put in as part of the record.

(The material follows:) I am writing to you as President of the Kansas Association of Medical Practice Groups to express the views of the Association in opposition to the above Bill which has been referred to the Senate Committee on Commerce. I understand that hearings on the Bill will be held before the Committee this Fall. The Association which I represent has a membership of 13 clinic groups located in various Kansas communities. Approximately 200 physicians are associated with the 13 clinics. Three of the clinics lease space to pharmacies, and ten clinics own and operate pharmacies.

The purpose of our Association is to develop and disseminate information of mutual interest to member clinics and to improve the standards, economies, and efficiency of group medical practice in Kansas.

In substance, S. 1575 proposes to make it unlawful for any person who is licensed to practice medicine, osteopathy, chiropody, or podiatry, to dispense drugs or devices, to own any interest in a pharmacy, to receive any consideration or income from any pharmacy, resulting from the furnishing to patients of drugs or devices by such pharmacy, or to own any interest in any drug company, other than a publicly owned company. The Bill contains certain definitions and exceptions. It also provides for jurisdiction in the United States Courts to enjoin and restrain violations and for damage suits upon the part of any person who claims to be injured in his business or property by reason of any violation of this Act” with stated potential liability on the part of the defendant for "threefold the damages” sustained, and costs, "including a reasonable attorney's fee.”

Although there are numerous valid objections to proposed legislation of this character, I shall limit my comment to the following:

1. In Section 2, the Bill is premised, in part, upon the erroneous assumption that the dispensing of drugs and devices by medical practitioners, directly or indirectly through ownership of pharmacies or interests therein, is inconsistent with the best interest of public health, and denies "consumers free access in an open market ... and tends to induce unfair trade practices ..."

The fact is that pharmacies owned by medical groups, or which occupy space leased from medical groups, are numerically infinitesimal. Less than 1% of the estimated 70,000 retail pharmacy outlets in the United States fall into such category or classification.

Although a purpose and objective of the Bill is purportedly to free and broaden the market for drugs and devices and to curtail alleged unfair trade practices, the obvious result of its enactment would be the reverse. It could only serve or tend to limit or restrict the ownership of pharmacies, thereby reducing the market opportunities of the consumer, at his ultimate expense.

2. The Bill is discriminatory in that it is applicable only to persons who are licensed to practice medicine, osteopathy, chiropody or podiatry. It seems unjust and unfair to single out members of those professions when the same factors which proponents of the Bill cite as justification for its enactment, if they exist, may be equally applicable to persons licensed to practice other professions. Neither this Bill nor any other type of legislation of which I can conceive, can fully protect patients or clients from the few unprincipled professional men or women who do not abide by the tenets of their profession. But if this Bill has merit, shouldn't it be extended to include optometrists who do refractions and prescribe and dispense correctional lenses, dentists who prescribe drugs in the course of their practice, and veterinarians who dispense and prescribe drugs? The practitioner of any profession (medicine, pharmacy or other), if he is inclined to be unfair, may take advantage” or gain unreasonable profit from his professional status or relationship with his patient or client.

3. Section 5 of the proposed Bill would make it unlawful "for a medical parctitioner to engage directly or indirectly in the dispensing of drugs or devices” with certain exceptions.

The term “drug' as defined in Section 3(b) includes any article “(2) intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease in man, (3) intended to affect the structure or any function of the body of man, ...” The term "device" is defined in Section 3(c) to include “any instrument, apparatus, or contrivance intended (1) for use in the diagnosis, cure, mitigation, treatment, or prevention of disease in man, or (2) to affect the structure or any function of the body of man ..." The verb "dispensing” is not defined in the Bill.

The exceptions contained in Section 5 would not prohibit "(1) a medical practitioner from furnishing a patient any drug or device in an emergency; . . . (4) the dispensing occasionally, but not as a usual course of doing business by a medical practitioner.”

If a medical practitioner uses any device in treating his patient, such as splints, casts, bandages, adhesive tape, and slings, or uses any device such as X-ray, electrocardiograph or laboratory and physical therapy equipment in his diagnosis

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