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The Pharmacists stand ready to assist the Physicians at all times in their consideration of therapeutic treatment for the patient. It is an extra "fall back" system of drug choice that is essential for proper patient safety and efficient economical treatment.

In my experience all practicing Pharmacists and the great majority of Physicians agree with this position.

We strongly urge the passage of these bills into law.

Sincerely,

JAMES BOYNTON, President.

SOUTHERN CALIFORNIA PHARMACEUTICAL ASSOCIATION, LTD.,
San Fernando, Calif., June 9, 1970.

Mr. J. MARTIN WINTON,
Vista Drug,

Fresno, Calif.

DEAR MARTIN: The Officers and Executive Board of this Association have repeatedly and on every occasion taken the position that physicians should diagnose, and pharmacists dispense.

They support the Hart Bill without question, as they feel that the Public Welfare would be better served if the physicians did not own and operate the point of sale and dispensing of prescription drugs.

Kindest regards,

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Mr. J. MARTIN WINTON,

Vista Pharmacy,

Fresno, Calif.

DEAR MARTIN: This is in response to your request for additional information pertaining to physician-ownership of pharmacies in California.

As you know, the California State Board of Pharmacy has consistently supported legislation which would prohibit physicians from owning financial interest in a pharmacy.

Our reasons are based on a tendency which exists, and a temptation which is placed, in the mind of the physician-owner to prescribe:

(a) drugs when they were not needed;

(b) in excess of the amounts called for;

(c) only those drugs which are in stock in the captive pharmacy;

(d) by trade rather than generic name because of the higher price of the former;

(e) by grade name and cause to be filled by generic name-viz., illegal substitution because of the lower price of the latter.

Accordingly, it supported several bills at the California Legislature designed to financially divorce the physician who prescribes from the pharmacist who dispenses (as does Senator Philip Hart's Bill S. 1575).

Of special significance to us in California was the Holmes Act (AB 2509 which added Chapter 1303-Statutes of 1963). This added Section 4084.5 and Section 654 to the Business and Professions Code.

Briefly, Section 4080.5 prohibits the Board of Pharmacy from issuing any new permit to conduct a pharmacy to a licensed physician; Section 654 requires a licensed physician to divest himself of any menbership, proprietary interest, or co-ownership in any form, in or with a licensed pharmacy, by June 1, 1967.

By 1965 the intent of the legislation was challenged in an action brought for declaratory relief by Magan Medical Clinic, et al, vs. California State Board of Medical Examiners.

The Court rules that individual doctors or partnership of doctors could not own a pharmacy; but the law did not prohibit a corporation (whose stock was wholly owned by physicians) from owning and operating a pharmacy. All of this is well known to Senator Hart since it was ably presented to him by Benjamin Kingwell from the California Pharmaceutical Association on January 25, 1967 (see copy enclosed).

Since this interpretation clearly circumvented the express intent of the Legislature, additional attempts were made to close the loophole. AB 1691 introduced by Assemblyman Powers in 1967 would have prohibited physicians from owning any interest in any corporation which owns a pharmacy or which leases or rents space to a pharmacy at more than the prevailing rates, regrettably, it failed of enactment.

A survey conducted in California during 1961 revealed the following:

There were 219 physician-owned pharmacies; 541 physicians were involved in ownership of these pharmacies; 144 of the 219 were hospital pharmacies; 75 pharmacies were owned by physicians either as individuals, partnerships, or corporations.

During 1963 (when the Holmes Bill was enacted), our records showed that: 14 Retail pharmacies were owned by corporations whose officers were physicians Hence, it can be concluded that 61 retail pharmacies were owned by physicians or partnerships of one or more physicians.

Since then, and probably as a result of the Magan Medical Clinic case decision, the number of retail pharmacies owned by corporations partially or wholly controlled by physicians has increased to 27, or almost double the 1963 figure.

It must not be presumed that the above figures necessarily reveal the entire extent of physician-ownership. It is suspected that there are instances where controlling interest by physicians is hidden. This can be accomplished by: transferring ownership to relatives, or to trust funds, or by other subterfuge.

We should urge Congress to press for passage of the Hart Bill, since legislation enacted at the state level has been only partially successful in eliminating the evils inherent in a situation which permits the physician to become a profit-seeking businessman.

We trust that this may be helpful to you in your presentation of testimony in behalf of S. 1575.

Very truly yours,

JOSEPH F. BOTTINI,

Executive Secretary, California State Board of Pharmacy.

[From the Oakland Tribune, Aug. 11, 1963 (Parade Section)]

Is it true that many doctors today have become money-grubbers in search of the fast buck?

Is it true that many doctors today practice needless surgery?

Is it true that many doctors today treat a patient by first feeling his purse? Is it true that many doctors today charge what the traffic will bear?

Is it true today that doctors, surgeons, and dentists, earn more money than any other professional men?

The American Medical Association, which operates one of the richest and most powerful lobbies in the country, will shout NO! It will point out that never before in our history has the nation been tendered more efficient health care. Never before has the medical profession reached such high standards of practice. Perhaps, it will concede, there are a handful of unethical men practicing medicine as in every other profession. But the vast majority of doctors are kind, selfless men, who care more for curing the sick than earning some of the best livelihoods in America. Undoubtedly what the American Medical Association contends is true. But equally true is the contention that the old-fashioned public image of the American doctor as a combination hero figure and Good Samaritan is now rapidly deteriorating.

One reason for this: More and more doctors are making more and more money, from such allied fields as pharmacies and hospitals.

Prior to 1954, the AMA laid down a strict rule for doctors: Limit your income from your profession to "services rendered the patient." But that rule has long since gone by the board.

Take the question of pharmacies.

Are medical ethics endangered when a doctor is also owner of a drugstore? Is there a possibility that a doctor faces perilous temptations in writing prescriptions if he has an interest in the prescription-filling pharmacy?

The American Medical Association cannot make up its mind.

In November 1962, its Judicial Council said: "It is unethical for a physician

to participate in the ownership of a drugstore in his medical area unless adequate drugstore facilities are otherwise unavailable."

In March 1963, however, the AMA Judicial Council changed its policy with this statement: "It cannot be considered unethical for a physician to own or operate a pharmacy, provided there is no exploitation of the patient."

But there has been exploitation of the patient.

For example, at a recent hearing conducted by the California State Board of Pharmacy, Charles Markley of the Contra Costa County Welfare Department testified that a Richmond, California doctor who was writing prescriptions for welfare patients at the rate of $10,000 a year, opened a pharamcy next to his office in 1960. In the next 12 months the doctor's prescription business zoomed to $50,000 without any correspondent increase in the number of patients he treated.

THE WHOLE TRUTH

Verbatim testimony from the public hearing follows:

Q. During a usual month for Dr. Benedict before he acquired the Sixth Street Pharmacy in Richmond, what were his average bills?

A. Less than a thousand dollars a month.

Q. Subsequent to his acquisition of the Sixth Street Pharmacy, what was the average bill submitted by Dr. Benedict?

A. Five thousand.

Q. Would you describe for the Board the physical relationship between Dr. Benedict's office and the Sixth Street Pharmacy in Richmond?

A. They are adjoining.

Q. By adjoining" — was there a door from the doctor's office into the pharmacy? A. Yes.

Q. Did you have occasion, sir, to examine the—and collect affidavits from patients of Dr. Benedict?

A. Yes, we did, from the District Attorney's office.

Q. And the results of this investigation indicated that the prescribing habits of Dr. Benedict were somewhat unusual?

A. Yes, very.

Q. Let me ask you, sir, specifically in regard to the purchase of penicillin drugs, what your investigation revealed as to Dr. Benedict's prescribing penicillin, or how he handled the particular thing.

A. You mean how much quantity? By the gallon.

Q. How many gallons a month?

A. Three.

Q. Did your investigation also reveal the fact that some of his patients, or many of his patients, received penicillin?

A. All.

Q. Every patient that consulted him received a shot of penicillin?

A. Yes.

Q. How many patients did Dr. Benedict see, according to your figures, every day, 365 days out of the year?

A. 70.

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Q. Would you also advise this Board as to how Dr. Benedict's habits-physically what would he do with his patients? As they left the office, what would he do?

A. He took them to the pharmacy.

Q. By the hand?

A. Practically,

Q. And normally, if I understand the investigation that has been made, he would shout through his office to the pharmacy, is that accurate?

A. This is true.

Q. Let me ask you, sir, the amount of money Dr. Benedict, from his medical practice, received from the County of Contra Costa?

A. $75,000.

Q. How much did Dr. Benedict receive from his pharmacy located next door?
A. $50,000.

Q. I think your testimony also was that- —or let me suggest that our discussions have revealed that Dr. Benedict after his acquisition of the pharmacy, could you state for the Board, in percentages, his increase in writing of prescriptions?

A. 500 percent.

Q. Do you have any present knowledge of the whereabouts of Dr. Benedict?
A. He's in Europe.

In California where 526 physicians are known to own more than 252 pharmacies the figures may be much larger since it is impossible to document all physician-ownership interests in drugstores a common procedure is for a group of doctors to erect or lease a medical building, establish their own clinic and own the pharmacy. That way they get the patients coming and going.

Edward Berger, a Canoga Park pharmacist, has testified that the doctors who owned a pharmacy in a Los Angeles clinic asked him to manage their pharmacy for $15,000 a year.

Previously these doctors had leased out the drugstore to a licensed pharmacist on a 12 per cent of the gross basis. The pharmacy did so well that the doctors decided to take it over themselves.

They asked Ed Berger to "front" for them so that patients would think it was HIS pharmacy. To induce Berger to take the job they agreed to sweeten the pot by giving him 2 or 3 per cent of the gross. They told him this would prove to be a considerable amount since they could pad their prescriptions.

"You know," one doctor told Berger, "I can write two prescriptions instead of one. I can write them bigger; instead of giving 50 pills, I can write for 100."

Here's another case of how doctors throughout the nation are profiting from the prescriptions they write, prescriptions to be filled by drugstores they own outright or in partnership with pharmacists. Six Los Angeles doctors own a hospital and its pharmacy. They employ a pharmacist to run it for them. In 1961 on an inventory of $10,000, this pharmacy earned a net profit of $90,000.

HOW DO THEY DO IT?

How did the doctors manage so exorbitant a profit? One method was to have their pharmacist fill prescriptions with generic rather than brand-name drugs. For example, one doctor would write a prescription for Mrs. Jones for Serpasil tablets to bring down her blood pressure. Serpasil is a brand name for a drug generally known as reserpine. The pharmacist would give Mrs. Jones reserpine tablets, which cost 50 per cent less than Serpasil, and charge her for Serpasil. Lest you think these are isolated examples, take the case of Jenny Gonzales. Her doctor gave her a prescription to be filled at a pharmacy. The prescription read: "T.P.A.B. oz. 83: t.i.d." Jenny took it to a pharmacy other than the one recommended by her doctor. The pharmacist could not understand it and phoned Jenny's physician. Said the latter, "It's a special formula available at the Metropolitan Pharmacy. That's where she should have gone.”

Jenny's doctor owns the Metropolitan Pharmacy.

To prevent such abuses as the above and to get doctors out of the pharmacy business, the California legislature a few weeks ago passed a bill prohibiting physicians and surgeons from having full or part ownership in retail pharmacies.

The law becomes effective September 20. It forbids the State Board of Pharmacy from issuing any new licenses to physicians to operate pharmacies. Those physicians who are already licensed have until June 1, 1967 to get rid of their interests.

The law has several loopholes. It1

owned pharmacies located in hospitals and says a physician may own the building in which a pharmacy is located but must lease out the store.

The law is aimed at preventing possible patient exploitation by not permitting the person who writes a prescription to fill it.

How do doctors themselves feel about pharmacy participation? The magazine "New Materia Medical" took a nationwide random sampling of physicians and asked if they thought it unethical for physicians to own a pharmacy. Of the doctors questioned, 46.1 per cent said "Yes," upholding the AMA statement of November 1962, and 53.9 per cent said "NO," upholding the AMA position of March 1963.

1 Printing was not clear on copy from which this typing was done.

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The magazine then asked: "Would medicine's public relations be hurt if patients knew that doctors had a financial interest in a pharmacy?"

"Yes" said 64.1 per cent of the doctors, medicine's image is injured when patients learn that a physician has a financial stake in a local pharmacy.

In short, many doctors see nothing unethical about owning a pharmacy; they just don't want the public to know about it.

Doctors work long and hard. They invest $80,000 and as many as 15 years of their lives before they become doctors. They deserve and are entitled to earn ethically as much money as possible-but not in allied business which pose a definite conflict of interest.

The opinion of spokesmen for the AMA on this subject is split. But Dr. Edward L. Fitzgerald of Hutchinson, Kansas has wisely observed that "when the physician who prescribes and the pharamcist who dispenses are financially divorced from each other, the physician can freely exercise a genuine interest in prescribing for his patient as economically as it is possible to prescribe."

Senator HART. Let me thank all of you for testimony of the character that you have just voiced. I think it is an objective analysis of the proposal sharing your point of view. Of course, I am not the best fellow to cross-examine you. But let me ask you this one, whether it be to Mr. Woods or whoever wants to answer it.

I was in attendance at a meeting over on the House side and unable to be here myself when Dr. Steinfeld testified. My staff, however, tells me that he, the Surgeon General, earlier today gave qualified support to the bill that we are considering, S. 1575. He made clear that he recognized the significant conflict of interest that was indicated by the bill. However, he suggested that the bill went beyond-went too far. The specific point that he made, on which I would like your reactions, was that the Secretary of HEW be empowered to determine by regulation instances in which physicians might dispense or might own their own pharmacies rather than the flat provision of the bill. He said, let it be a matter for the Secretary to determine. How do you react to that suggestion?

Mr. Woods. Well, Mr. Chairman, certainly we are pleased to have an endorsement of the bill by anybody from HEW. To be frank with you, first, the Surgeon General I believe does not have the responsibility there maybe I am wrong with respect to regulations that we complained of. Those regulations were developed over in the title 19 department. Second, I would say that if our experience in the past is any indication of the results that we will get in the future from an HEW regulation, we would much prefer the law.

Senator HART. I see your associate is nodding in agreement.
Mr. SIMMONS. Yes.

Senator HART. You have just described the experience you have had on the title 19 business. Is that the sort of thing that you fear would occur if, rather than prohibiting ownership and dispensing, we authorize the Secretary to establish regulations and limitations on it? Is that the sort of thing you are worried about?

Mr. Woods. Yes, sir. Really, we had many discussions with the people in the Medicaid Department of HEW. Let me say generally, that we have strongly supported the medicaid program because of its vendor aspects and generally the patient's freedom of choice. We think it was a good program in that respect. But, in our discussions with the people in HEW, and some of them were physicians with whom we had friendly discussions, we filed our objections with the Department, which we have offered for the record. Our letter stated

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