Earlier in this testimony I offered a number of medical reasons why physicians will dispense. However, since the AMA has clearly stated that a physician has an obligation to be concerned with economic aspects we should turn our attention to our position on section 5 as we feel it would affect the patient. One of the stated purposes of this bill is to prevent unfair trade practices. However, we believe that the proponents of the bill also had a sincere interest in the reduction of the cost of medication to the patient.

During the original hearings of the Subcommittee on Antitrust and Monopoly, chaired by 'the late Senator Kefauver, and later followed by hearings under the chairmanship of Senator Hart, my firm and several of my competitors were mentioned by name and were commended for providing prescription drugs at minimum cost to the physician, and through him to the patient.

Now, getting back to the list of the cost to the patient, there is an article in the latest survey showing that the average Rx cost was $3.05 to the patient. The average for all Rx was $3.86. This covers a survey of independent retail pharmacists. Now, according to this figure, there is an .81 cent differential between the cost of the average Rx and the cost of a generic Rx. I have to question at this point whether the patient would have trouble getting the benefit of a generic Rx.

Now, I have taken as an example the average reimbursement fee of $2 for the professional cost. This will vary depending on the State you are in, but I tell you that $2 is average. A hromycin is $12.50 per hundred. The cost of Tetracycline is $1.75 per hundred. In the fee of $2, 15 capsules of Achromycin could be gotten for less, and thus the entire prescription would cost $3.87 and a half, which is about the $3.87 figure.

Tetracycline, on the other hand, for the same prescription calling for a professional reimbursement fee of $2 boost the cost of 15 capsules to $2.26 and a quarter.

Now, obviously the patient would not be getting the advantage of a lower generic price. I have run off a number of other comparisons on these things-Equanil v. Meprogamate, Serpasil v. Reserpine, Meticorten v. Prednisone, and Pentids v. Penicillin.

We submit that the dispensing physician is today the largest single force in the private sector of the economy promoting generic drugs, and consequent savings to the public. Pharmacy as a whole has never demonstrated much interest in the promotion of generics, and in some cases has actively opposed it.

As examples of this, I have a survey in which Indiana pharmacists held 13 to 1 that we were in favor of pharmacies offering generics. I have a copy of a letter that Senator Long wrote to the head of a large pharmaceutical firm when they opposed his generic formula. As a matter of fact, in the very testimony of the NARD this morning, they make every effort in cases to physicians' offices selling drugs and the use of unknown products, which I assume would be a reference generics.

To the best of our knowledge, until a short while ago, there was only one major wholesaler in the country-McKesson & Robbinswho actively engaged in the promotion of generic drugs. I should further like to point out that the dispensing of generic drugs by physicians has had a carryover into the area of retail pharmacy, even

though in many cases it apparently was against the wishes of the individual pharmacist.

We have been able to estimate fairly accurately that more than one-fifth of all the pharmacies in the United States patronized the members of our association to one degree or another. A pharmacy can buy its name brand needs from its local wholesaler at prices that are the same as ours, and, in addition, presumably receive better service, since the wholesaler is located within the pharmacies' trade area. As a result, it is quite clear that these pharmacies have turned to us for their generic needs.

Thus, more than one-fifth of all the pharmacies in the country are now using generics, and it is our opinion that many of them use the generics because of the competition of dispensing physicians.

In particular, I cite a comment made during the opening days of the 1967 hearings by Mr. Jack Holly, a senior vice president of Webbs City, Inc., a large retail discount pharmacy. On January 25, 1967, Mr. Holly indicated that his firm meets the competition from dispensing physicians and clinic pharmacies by supplying generic drugs on all unspecified prescriptions. In this statement he pretty well summed up one of our arguments: What would happen if there was no competition from dispensing physicians?

We feel certain that the abolition of dispensing by physicians would result in a gradual phasing out of generics in the private sector of the economy, and thus bring about a higher drug cost to the patient.

Furthermore, there would be no assurance that the patient would receive the benefit of lower generic prices even in those cases where generic drugs were available to patients on an individual basis, who did not receive the benefits of Federal, State, or private insurance

coverage.

It is our feeling that the major effect of dispensing by physicians has been to reduce the costs of medication to the patient. Not only will the physician himself bring down the cost by dispensing generic drugs, but the very competition of a dispensing physician will force many retail pharmacies in the area to carry generic drugs in stock, and to dispense them when prescriptions are written. As cited earlier in this testimony many generic prescriptions are filled with higher priced brand-named drugs simply because of the fact that the pharmacies in question do not carry generic drugs in stock.

Now, the survey shows that 8.8 percent of all prescriptions last year were written generically. It is not in the pharmacists' interest to carry a duplicate set of inventory if the prescriptions having inventory indicate such a small interest in this generic.

There is another thought that should be brought to the attention of the committee. A great deal of concern has been expressed at past hearings with the possibility of a monopoly being created by 250,000 physicians. I wonder if it has been pointed out that the abolition of dispensing, which may very well eliminate the monopoly potential on the part of physicians, may, at the very same time, create a monopoly potential for the 50,000 pharmacies in the country. It has been demonstrated that there is a growing trend in the country toward the consolidation of retail operations, and it has been predicted that the present system of 50,000 independent pharmacies may some day evolve into 300 or 400 large chains, plus a few hundred or a few thousand independent retail pharmacies. As an example, there are three

major retail chains in the metropolitan Washington, D.C. area, and they control 87.5 percent of all retail pharmacy sales. I have the documentation with me. Further, there are figures that show that chain pharmacies comprise 30 percent of the total number of pharmacies in the country and they do 54 percent of all the business. There is no reason to believe that this trend will not be continued in other areas. Thus, in a sense, you are setting up a monopoly potential for the 300 or 400 large chains that may someday dominate retail pharmacy.

The bill as it is presently proposed covers a wide range of abuses, some of which we have recognized in the testimony given, and which we consequently support. However, the section to which we object will not really accomplish the stated purpose. We feel the committee should think not in terms of what it would like to do, but what it would actually accomplish. Section 5 would attempt to regulate moral and ethical behavior through economic legislation. This is a difficult, if not impossible, task.

We were grateful to see the inclusion of the fourth exception from the prohibition on dispensing which we feel came about in part because of testimony that we gave at the 1967 hearings. In particular we appreciate Senator Hart's careful attention to this very sensitive area, and his responsiveness and awareness of the problem, which has been demonstrated in the inclusion of the fourth exception. However, we genuinely feel that the inclusion of the fourth exception is merely another indication of the complex nature of the problem and it points out the very weakness of the entire section regarding the prohibition on dispensing. The sentence in question allows an exemption in the case of "dispensing occasionally, but not as a usual course of doing business by a medical practitioner." At this point we must question the definition of "occasionally." Who is to decide what is "occasional" dispensing will it be the practitioner himself, or possibly someone with a grievance against the practitioner, who because of the vagueness of the wording will have grounds for a capricious charge under the terms of the bill. Now, I feel that eventually a limit will have to be defined. In earlier proposals there was a reference made to where a minute pharmacy is not available. In this legislation it has been defined at length, I believe. Now, somewhere along the line a definition of "occasional" will have to be brought in also.

Now, will this not set a legal limit on larceny. Will you not in effect say to a man, you might, in effect be saying to him you can clip your patients 30 percent of them, but, after that, it is against the law? Furthermore, I feel that the law in itself—the wording of this particular section, would be setting a boundary on conscience. What happened when you have a man who is in a situation of trying to help his patient. Now, the law defines that arbitrarily 30 percent dispensing or higher is illegal. This means that the physician in question can help 30 percent of his patients but could not help the rest because it would be in violation of the law. In effect, you are setting a limit for the largeness and setting a boundary for the man with conscience.

It is our contention that the total number of physicians who abuse the dispensing privilege is quite small in relation to the number of physicians who use the privilege beneficially to their patients. Now, as an example of my last testimony, I introduced 104 orders that have been directed in 1 day which was accompanied by 120 patient's

checks. Today, I have about 108 orders which are accompanied by 150 patient's checks. Now, numerically, if you add this up and take them over the period of time that these hearings have been going on, I think you will find that the statistical balance is greatly in favor of the man who has been helping the patients.

if

Hearings and investigations have been going on by this committee and earlier committees for several years. Admittedly, you have turned up cases of abusement. How many hundreds would you have you did? At the same time, if I were to have collected these orders at the rate of 100 or more-well, there are six firms just like mine. I think it would take us two or three trucks just to take care of the documentation of the physicians who are trying to help their patients. Furthermore, it is our belief that the prohibition on dispensing would not affect the man who is deliberately abusing his dispensing privilege. If you pass a bill that prohibits him from dispensing he can just as easily turn to injecting, since injecting is specifically exempted under the second paragraph of section 5. For every tablet that can be given there is usually a comparable injection, and the true abuser will simply start giving his patient injections. If you then pass a bill which would prohibit him from injecting he could begin to require unnecessary diagnostic tests on patients that he sees. Thus, to take an example, if a patient went to see a doctor with a complaint of feeling listless, one man in good conscience could examine him and determine that he might need a vitamin supplement or possibly a week's vacation. Another man, under the guise of a more thorough examination, might require a urine analysis, blood test, basal metabolism, and any other tests that he deemed necessary for complete diagnosis of the problem.

In essence he would not be practicing bad medicine, although in all likelihood he would be practicing unnecessary medicine. The point that is to be made from these two examples is that there is more than one way to skin a cat, and the prohibition on dispensing would not stop a man who truly falls into the category of an abuser. The question of this man's activities are really moral and ethical, and the proper means of dealing with him would be through moral and ethical gislation rather than through economic legislation such as S. 1575. On the other hand I ask you to consider the case of a physician who, in the interest of his patient, is dispensing medication in order to help the patient financially. This man could possibly be subject to a capricious charge brought against him, and rather then go to any sort of trouble for a matter that is simply being done as a favor, he probably would rather forget about dispensing altogether. Accordingly, the net effect of section 5 would be to drive out the physicians who try to help their patients, while in no way affecting the physicians who profit unduly.

Perhaps the AMA has the answer, in their advocacy of dispensing where, in the opinion of the physician, it is in the best interest of the patient. This I believe is also the same position that was taken by the Surgeon General this morning. The AMA's position is a moral position, and we feel it is more appropriate in keeping with a problem that is basically moral. As I have pointed out earlier in the testimony, it is difficult, if not impossible, to control moral behaviour through economic legislation.

Similarly it should be mentioned that the very exceptions that are made in the enclosed bill point out some of the safeguards that are already inherent in the system, and which would partially be negated if the bill were to be passed in its present form.

At the present time the patient who lives in a big city is partially protected from unfair practices because of the fact that there are many physicians as well as many pharmacies within his local area. That is, if there was a dispensing physician or group of dispensing physicians to whom he objected, he would have the freedom to go to another physician.

At the other end of the extreme we have the case of the lone country physician who does quite possibly have a monopoly potential, but who at the same time has been specifically exempted from the provisions of the proposed bill because of valid medical reasons. In the middle we have the semirural area which supports one or possibly two drug stores, and at the same time may have one, two, or possibly more physicians. The lone pharmacy in a rural area has a de facto monopoly, and we feel that the potential of a dispensing physician in the area serves as a deterrent to abuse of this monopoly. If the potential for dispensing is removed, there would be nothing left to protect the patient from possible abuse by the pharmacy.

We are aware of the tremendous job of study and research which this committee and which the Committee an Antitrust and Monopoly and their staffs have devoted to the problem, and we wish to congratulate both committees on the job that has been done. We wish to reiterate our support for sections 4 and 6 of the proposed legislation, and we sincerely hope that the committee, and later Congress, will act favorably on these provisions of the bill.

We do hope, however, that our remarks regarding section 5 will be kept in mind when a final draft of the bill is prepared. Although we recognize that there are those who might disagree with our concern respecting section 5, we suggest that the bill without this section, or modified along the lines suggested by the AMA covers substantially most of the abuse that has been demonstrated in the field. We believe that section 5 should be eliminated, or modified, as suggested, and the bill should be passed in its present form. A period of time can then elapse, and we are certain that no great harm will result in the interim, while the impact of the bill on the general public, the dispensing physician and the pharmacist will be tested. If amendment be required, it can then be done on the basis of the achievements of this legislation and the possible shortcomings. Frankly we believe that the bill without section 5 will substantially cure the abuses that have been brought to the attention of the subcommittee, with great benefits to the public, and without any undue hardship to either the medical profession or to the profession of pharmacy.

Once again I urge the committee, as a Committee on Commerce, to remember that the relationship between a physician and patient is quite distinct from the relationship between a physician and a drug company or a physician and a pharmacy, and I ask you to consider section 5 in a different spirit from sections 4 and 6.

Thank you for permitting me to appear here today and for allowing me to present the views of the National Association of Mail Order Pharmaceutical Suppliers, Inc.

49-480-70- -6