not only for those who find it difficult to pay for health care, but also for those who are financially able to pay for it, but are unable to obtain health care for want of sufficient numbers of health-care facilities and health-care personnel.

With your permission, Mr. Chairman, I will skip a few pages.

Senator Moss. You may do so, but the whole statement will go in the record.

Mr. SACKS. Thank you, Mr. Chairman.

Today's drastic shortage of physicians to provide medical services. has been widely documented. We need only point to the American Medical Association's own policy position within the past year which would encourage the training of nurses to serve as so-called "physicians assistants." We might also point to expanding interest in the training and development of new types of paramedical personnel.

Yes, we could even point to the development of broader roles for the pharmacist, including a primary responsibility as a drug consultant and drug therapy planner for the physician.

The point is that we don't have enough physicians in this country to perform those functions for which the physician is trained, namely, the diagnosis and treatment of disease. It is incredible, in the face of this shortage, that a small but significant segment of the medical profession is attempting to perform not only their traditional health care role, but also the health care responsibility traditionally assigned to the pharmacist.

Pharmacists spend an average of 6 years being trained as experts in the preparation, storage and handling, and dispensing of drugs. This training and pharmaceutical practice make the pharmacist the most knowledgeable member of the health care team with regard to pharmaceutical products.

This expertise is wasted to a great extent, because the pharmacist is prevented from exercising his knowledge by overly restrictive laws and inhibited by the attitudes of many physicians. The threat of the physician dispensing hangs over every pharmacist's head. We will make further reference to one aspect of this problem shortly and show how physician's ownership of drug interests can seriously degrade health care.

Another aspect of this waste is attributable to dispensing physicians whose knowledge of drug product quality is limited at best, and whose selection of drug products frequently reflects the salesmanship of drug manufacturers rather than pharmaceutical training and knowledge.

The question which Congress must face squarely at this time is whether or not it is in the public interest to continue the use of pharmacists as members of the health care team.

If pharmacy is guaranteed a professionally independent and economically sound future, the pharmacist will continue to serve the public health needs of the Nation. He will, in fact, take on an expanded and far more important role in the delivery of health care services than that performed today.

On the other hand, if pharmacists are not guaranteed the freedom to exercise professional judgments within their own area of expertise and the freedom to practice their profession with assurance of a reasonable, secure financial future, major incentives to recruit new pharmacists will have been destroyed.

We have brought with us several examples of the inferior methods of dispensing physicians which are a threat to health care. These samples of drugs dispensed by physicians were provided us by the Michigan State Pharmaceutical Association.

Some were gathered in the emergency room of St. Lawrence Hospital in Lansing in connection with accidental poisoning cases. Pharmacists know that similar samples can be obtained in virtually every State. In the office of such physicians, the drug dispensing function is often relegated to a nurse, or worse, a totally untrained assistant.

If you will examine these envelopes, you will note that their labeling is totally inadequate, and directions for use are either confusing or nonexistent. The name of the patient is not indicated and the date when the drug was dispensed is not given.

Moreover, all of these drugs have been dispensed in small envelopes with absolutely no regard for the storage standards which are established to assure the stability and therapeutic value of the drug.

Thus, most of the drugs in these samples are required to be stored in prescription vial type containers according to the standards of the official compendia, which, as you know, have been adopted as the Federal standard for drugs under the Federal Food, Drug, and Cosmetic Act, as well as State acts.

We would point out that under sections 502 and 503(b) of the Federal act, and also under the State acts, every one of these samples would be deemed to be misbranded and subject to seizure if dispensed by a pharmacist. When Federal and State laws require specific dispensing practices to protect public health, how does the public health benefit when drugs are dispensed in this fashion by a physician? The fact is that there is no Federal enforcement of these provisions of the FDC Act against physicians who dispense drugs. The further fact is that physicians who dispense are either unaware of the requirements of the law, or "too busy" to comply with them.

With your permission, Mr. Chairman, I would like Mr. Olson to read excerpts from a letter in regard to physician dispensers, and have it put in the record.

Senator Moss. Very good.

Mr. OLSON. This happened in Kansas-Hillsboro. It was a town that was serviced by dispensing physicians, and this pharmacist decided he would put in a pharmacy in Hillsboro. These are examples he has collected after 2 years of practice in this particular town. He

states:

As there had not been a pharmacy in town for fifteen years, the patients are rather reluctant in asking for prescriptions, and these defensive questions certainly discourage them.

(1) One doctor was overheard to say that, should the Hart bill pass, he would go to seven dollars on his office calls and put medication out free.

(2) Another example, a lady received a prescription for her medication. The doctor charged for the office call, plus one dollar for the prescription, since she wasn't getting the medicine from him.

(3) A lady brought in a bottle from the doctor's office with a tablet in it, and asked me what my price would be for thirty of these tablets. I told her I wouldn't charge anything for thirty tablets like that one. I then pointed out to her that the tablet was imprinted "sample" and hadn't cost the doctor anything. She said that she had certainly paid for them.

(4) A man brought in a bottle from a doctor's office with a tablet in it, and wanted some more. I was sure that I knew what the drug was, and told him I could not let him have any, but would be glad to call the doctor for him. The doctor confirmed the tablet; however, he said that he would like to see the man's wife before she got any more tablets, which is good medical practice.

I told the man that and he said it wasn't necessary, as he could get them from the girl in the office. I saw him the next day, and asked him if he had gotten the tablets. He said that he had gone directly to the doctor's office from my pharmacy, handed the bottle to the girl in the office, and had received the tablets, which was definitely not good medical practice.

(5) A lady was in last week and said that she had asked her doctor three times for prescriptions for medication her husband was taking. He would not give it to her, so she changed doctors. She knew what she was taking and wanted to know what a month's supply of these cost. I priced it and it came to twelve dollars. She had been paying forty dollars. Maybe this is why her prior physician wouldn't give her the prescription.

(6) Another customer was in and priced medication she had been getting from a doctor's office. I was able to identify the tablet and she said she got sixty at a time. I priced the tablets to her for $.90. She was very surprised as she had been paying the doctor $10.80.

(7) When doctors are out of town or on vacation, the offices remain open and the girls in the office continue to dispense medication.

Thank you, Mr. Chairman.

Senator Moss. Thank you, Mr. Olson.

Mr. SACKS. Mr. Chairman, I will continue with our testimony.
Senator Moss. All right.

Mr. SACKS. Senator Hart's prior hearings on physician ownership of pharmacies and manufacturing and repackaging companies, as well as his hearings concerning the dispensing practices of the so-called fat doctors, have dramatically exposed individual practitioners to public view. Unfortunately, there are always some on on whom such lessons. have little or no effect. Abuses, both real and potential, continue.

At this point, we wish to submit two such instances for the record. Appended to our statement is an article which appeared in the Louisville, Ky. Times on April 16, 1970. The situation described in that article relates to a small Kentucky drug firm, which apparently numbered among its stockholders a substantial number of physicians or members of their immediate families.

It illustrates a classic example of the need for S. 1575. While the article speaks for itself, we feel there are several points which should be emphasized.

Firstly, the Kentucky and Indiana Pharmaceutical Associations had received inquiries from their members about this company, and the sudden change in many physicians' prescribing habits to prescribing products of this firm by brand name. As the article points out, so-called anti-substitution laws in almost all States prohibit a pharmacist from dispensing the same drug in dosage form manufactured or distributed by a different company if a prescription is written for a particular brand name product. In other words, if a prescription is written for ampicillin under the trade name of one manufacturer, the pharmacist may not legally dispense ampicillin of any other manufacturer.

We seek the repeal of such State laws because they represent an unacceptable encroachment on the professional prerogatives of the pharmacist and specifically his unique ability to exercise professional judgments in selection of quality drug products. Antisubstitution laws, applicable to most pharmacists, prohibit them from selecting a quality product available at the most reasonable cost to the patient, and frequently force the pharmacist to dispense a product of lesser quality against his best professional judgment.

We point out that the pharmacist is placed on the horns of this dilemma not because he willingly purchases products of lesser quality,

but because prescribers are writing prescriptions for them. We would also point out that the patient often pays a premium for such products, certainly in terms of the price paid in relation to the cost of the product. There can be no question but that the physicians in this situation were given or sold stock to increase sales of the company's brandname products.

I would like to refer to the last page of the testimony and read part of a letter from the American Medical News, of June 1, 1970:

Another alternative which will be exercised by many physicians is increased dispensing. Since any physician can buy prednisone and tetracycline for $1.30 a hundred, and since these cost the patient a minimum of $10.00 a hundred on prescription, the margin for "doing well by doing good" is fairly wide.

As a practicing pharmacist, and I practice daily, I cannot buy tetracycline or prednisone for $1.30 a hundred, and I do not charge anywhere near $10 for those products.

Secondly, we would point out that ethical considerations were apparently insufficient to keep the physicians involved with this firm from resisting the temptation of financial gain, even to the point of attempting to disquise their ownership interests by having stock issued in the names of their family members.

A second situation which we would bring to your attention is described in articles appended to our statement which appeared in the Des Moines, Iowa Tribune, on October 23, 1969, and F-D-C Reports ("The Pink Sheet") on May 4, 1970. The staff of the Senate Antitrust Subcommittee is intimately familiar with this situation.

It involves Woodland Drug Holding Co., a subsidiary of the Woodland Corp. in which physicians own a very substantial interest. Through Woodland Drug Holding Co., the Woodland Corp. owned three wholesale drug companies in Iowa, a distributor of medical and surgical supplies and equipment, and a pharmacy franchising firm. Although, the "Pink Sheet" article describes, the financial fortunes of Woodland Drug Holding Co. have fallen upon hard times, this clearly was not intended. What apparently was intended, and achieved in large part, was control of drug distribution at the wholesale level in Iowa, and a substantial interest in drug distribution at the pharmacy level both in Iowa and elsewhere. The Woodland situation makes clear that the physician owners were involved in a substantial conflict of interest in at least the following ways:

(1) Physician owners had the incentive to stimulate moving drug products in the wholesaler's warehouses by prescribing for them.

(2) Physician owners had the incentive to direct patients to Woodland franchised pharmacies paying percentage fees.

(3) Physician owners had the incentive to overprescribe for their patients, thereby increasing sales by the wholesalers and also increasing the percentage fees received from pharmacy franchises.

In addition to these two specific examples involving abuses related to physician ownership, we can also state that percentage leases of the type that would be prohibited by S. 1575 are in force and continue to be demanded of pharmacists who wish to establish pharmacies in physician-owned medical centers, clinics, and even regular commercial buildings.

With you permission, Mr. Roberts would like to present a situation of this type for the record.

Senator Moss. All right. Mr. Roberts.

Mr. ROBERTS. Senator Moss, just a few days ago we received a telephone report from the Iowa Pharmaceutical Association concerning a situation in Ames, Iowa, in which a pharmacist was seeking to establish a pharmacy in a physician-owned medical clinic. The situation in Iowa, the board of pharmacy requires that for any pharmacy which is to be established in a clinic, that the lease must be submitted to the board of pharmacy for review.

At first the physicians and their attorneys were reluctant to submit the lease to the board, but finally acceded to the demand. When reviewed, the lease revealed that it was a percentage lease, that the percentage stated was 14 percent of the total prescription volume up to $400,000, with a 10-percent override on volumes over $400,000.

And the board of pharmacy at that point informed the attorneys for this clinic that it would not approve a lease of this type for, among other reasons, that the AMA Council on Judicial Ethics declares percentage leases of this type to be unethical.

At that point, the attorneys for the clinic brought in a new lease. This lease states a flat rental. Under normal circumstances, a flat rental would be found to be acceptable, and certainly not unethical.

However, in this case, the rental amount stated was $48,000 a year, which figures out on a square foot basis to $40 a square foot for rental for pharmacy space. The highest amount for similar space that we have ever heard of is $10.

At this point, the board was itself placed on the horns of a dilemma, because when it expressed disapproval of this lease, the attorneys indicated that that would be fine with them, they would simply not submit an application in the name of the pharmacist for a pharmacistownership of the pharmacy, but would simply submit an application on behalf of the physicians themselves, so that it would create another physician-owned pharmacy situation.

At this point, apparently the Iowa Board of Pharmacy has concluded that it would rather have a pharmacy-owned and controlled pharmacy at a flat rental of $48,000 or $40 a square foot, rather than create another physician-owned pharmacy. And to the best of our information, the board of pharmacy is being forced in this case, because of the tactics being used by the doctors, to approve the $48.000 lease.

Senator Moss. Thank you, Mr. Roberts.

Mr. SACKS. It is apparent that mere ethical pronouncements by the AMA's Judicial Council are not and will not be sufficient to remedy the problem we are facing. Legislation is needed.

We emphasize that the failure to legislate with regard to the problem in the drug field has unquestionably, in our view, created the "hands-off" climate in which these abuses can flourish in medicare and medicaid generally. This failure to legislate also has made possible one of the most indefensible decisions made by Government officials in connection with the medicaid program.

The Department of Health, Education, and Welfare's Handbook of Public Assistance Administration entitled "Medical Assistance Programs Under Title 19 of the Social Security Act (Supplement-D)" was issued on May 16, 1967. Section D-5150 originally specified that Federal financial participation with regard to prescribed drugs: