Senator HART. Mr. Cary advised me that the president of the Interstate Drug Exchange, Inc., Mr. Marvin Sandler, is present and has asked the opportunity to state the position of the National Association of Mail Order Pharmaceutical Suppliers, Inc.

If there is time, we will be glad to hear him. I think at 12:30 the Democratic policy luncheon is taking place. Maybe Senator Pearson has a 12:30 Republican luncheon.

Senator PEARSON. I do, as a matter of fact.

STATEMENT OF MARVIN SANDLER, INTERSTATE DRUG EXCHANGE, INC., FOR NATIONAL ASSOCIATION OF MAIL ORDER PHARMACEUTICAL SUPPLIERS, INC.

Mr. SANDLER. Mr. Chairman, my name is Marvin Sandler and I am associated with the Interstate Drug Exchange, Inc., of Plainview, Long Island, N.Y. I am here representing the National Association of Mail Order Pharmaceutical Suppliers, Inc. I appreciate the opportunity of expressing our views on S. 1575.

The members of this association are in the business of selling drugs, sundries, and surgical products to practitioners licensed by their respective States to write prescriptions or to fill them. In other words, we do not fill prescriptions ourselves, nor do we sell to the general public.

I think it would serve a useful purpose in rounding out the introduction to my remarks if I would point out to this committee that the members of our association have been most instrumental in bringing generic drugs to the market and thereby substantially reducing the cost of drugs and medicines to the American public.

The bill in question is under consideration by the Committee on Commerce, and the bill concerns itself with the regulation of trade in drugs and devices that are introduced into interstate commerce. In essence, therefore, the bill concerns itself with a doctor's financial relations with drug companies, his financial relations with pharmacies, and with his relations with his patients. Please note that in the latter respect I have omitted the word "financial."

To begin with, we must compliment the sponsors of the bill on the spirit and intent of the law, and we wholeheartedly support most of the findings of fact and resulting prohibitions. In particular we endorse the provisions of sections 4 and 6 which serve to deter practitioners from unethical conduct in which economic considerations might be placed before the welfare of the patient. These provisions are actually a guide to moral conduct in any business or profession. Furthermore, these provisions in no way interfere with the practitioner's freedom to practice his art as he chooses, with the best interest of the patient in mind. In situations covered by sections 4 and 6, the relationship between the doctor and the drug company and the relationship between the doctor and the pharmacy is purely financial, and quite properly falls into the scope of conduct that should be subject to the regulation of a congressional Committee on Commerce.

However, we feel compelled to take exception to section 5, which, in effect, interferes with the practitioner's freedom to practice medicine in accordance with the laws of his State-a purpose for which he has been specifically licensed. Furthermore, I urge the committee not to

consider a doctor-patient relationship in the same spirit that you have quite properly considered the relationship between the doctor and the drug company and the doctor and the pharmacy.

A doctor-patient relationship is certainly not the same as the other relationships described in the bill nor, for that matter, is it typical of the relationship that would exist between two persons. The doctorpatient relationship involves faith and trust on the part of the patient, and the patient will speak to his doctor with the full knowledge that professional discretion will be exercised and the matter will be kept in complete confidence. Accordingly, the relationship is quite often very personal, with the doctor taking into account both the emotional and financial status of the patient. A doctor is often in a position to dispense and/or prescribe a generic drug in an effort to reduce costs to the patient. I should like to point out, however, that when prescribing he has no guarantee that the lower priced generic will be used.

According to the Raymond Gosselin Co., one of the leading statistical compilers for the pharmaceutical industry, a substantial percentage of all generically written prescriptions are filled with higher priced brand name pharmaceuticals.

In support of this, I have an article involving the survey showing the relative number of prescriptions that were generically given but which were filled with higher priced brand name drugs. I will supply this to the committee for the files of the record, as I see fit.

Furthermore, I have a 74-page report that was issued by the California attorney general regarding the dispensing of drugs that were generically done. One of the parts of the report stated "in situations where an inexpensive generic drug could be dispensed, the patient shall be given it." In the State of California in its medical program it can't be assured of what the patient will get. I wonder if the doctor did.

I also have an article on a HEW report which indicates that the pharmacist might not necessarily dispense a lower cost generic drug, and I will submit that also.

Accordingly, the physician, because of his intimate knowledge of the financial status of the patient, will very often dispense, rather than prescribe, if he feels that it is in the best interest of the patient. Actually there are a number of reasons, both medical and financial, why a physician will dispense. Obviously the committee recognizes these in several exceptions that have been made, and which include those situations (1) in an emergency, (2) in a unit dose (ordinarily where an injection is necessary), and (3) where there is no community pharmacy in the area. There is no need to dwell on these exceptions since they have already been recognized and are incorporated into the proposed bill.

However, there are many other compelling reasons-medical reasons why a physician will dispense as follows: (4) to make sure the patient actually gets the medication (5) to make sure his physical condition is checked once again before a refill of the medication is recommended (6) in connection with the fitting of certain devices (7) the administration of drugs preparatory to examinations, tests, and operations.

Evidently the medical profession feels that the reasons listed above cover a number of valid medical reasons for dispensing, and ap

parently these reasons provide adequate justification for the elimination of section 5, since many medical groups, and the AMA, to the best of my knowledge, have gone on record as opposing section 5 in its present form.

I should also like to point out that Dr. James Goddard while he was head of the Food and Drug Administration, also testified in front of hearing in Senator Hart's committee, that he felt the dispensing was not necessarily detrimental. We have just had testimony today from the Surgeon General indicating that there are certainly a number of instances where dispensing is not only useful, but beneficial. Up to this point I have listed medical reasons why a physician will dispense. However, before continuing to economic reasons, I feel that a clear distinction should be made. The findings of fact of the proposed legislation refer to the best interest of public health, and then continue on to a consideration of unfair trade practices in interstate commerce, an obvious economic reference. The committee should realize that these two interests do not necessarily coincide, and this has been recognized by both the medical and pharmaceutical professions, as well as by legislatures of many different States. In particular, I would like to mention the State of New Jersey in which a 1966 law was upheld by the State supreme court, regarding the advertising of prescription prices. There are a number of other States that have similar laws on their books. I have documentation to the fact that there are 35 different States which have similar laws or to the code of ethics.

The New Jersey State Legislature passed a law in 1966 which specifically prohibited the advertising of prescription prices. There certainly can be no question about the fact that the removal of advertising resulted in a reduction in competition, since it is only through advertising that a customer can be made aware of the fact that price differentials are available. The only other alternative would be to go to a number of different stores and to price the prescription at each one, which would probably be a hardship on a person who had to have a prescription filled presumably because he was not completely healthy. The law was later contested by a discount pharmacy in New Jersey, who felt that advertising was the only means by which it could get its message across to the public and to indicate that the same prescription could be filled at its store for a lower price.

The case was brought before Judge Mintz of the New Jersey State Supreme Court and the law was upheld. The logic in the decision is quite interesting and I quote:

If the customer frequents one pharmacy for all his prescription needs the pharmacist in that pharmacy is in a position to check his records and thereby determine if a prescription is in anyway antagonistic or contra-indicated by his previous prescription record. The legislature concluded that this important function of pharmacists would be impaired if they were permitted to advertise and thus encourage Rx price shopping.

A copy of the complete decision by Judge Mintz is now in the files of the Subcommittee on Anti-Trust and Monopoly, since I submitted it when I testified before the subcommittee during February 1967.

I wish to bring out that the judge's decision in this case indicates that the public health is of paramount importance and that the price paid by the consumer is of secondary importance, and that the two interests do not necessarily coincide. The AMA has recognized the importance of both interests, and although they correctly continue

to stress the health of the patient they also give considerable attention to the economic aspect. The AMA has come out with a policy statement: "Medical considerations must be paramount in the selection of drugs. In addition, the physician also has an obligation to be mindful of the economic consequences of the treatment he prescribes." This is followed by the statement: "He (the physician) has a clear responsibility to protect the economic as well as the medical interest of his patient."

Obviously the AMA, in marked contrast to the various State and national retail pharmaceutical associations, has given a clear mandate to its members in an attempt to lessen the burden of medical costs. Now, in this respect, I submitted at the last hearing approximately 104 orders. I think that it was that much, in which the patient's check accompanied the order. It was clearly shown in those cases that the patient was paying for the medication. The check was made out to my firm and the patient was aware of the costs of the medication. Again, I have approximately 108 orders this time. I believe I have something like 150 patients' checks covering these. I would like to submit these for the record.

Senator HART. We will receive them.

Mr. SANDLER. I would like to have these submitted, but I wouldn't want the names published, for the protection of my customers. Senator HART. It will be received and kept in the subcommittee files.

Mr. SANDLER. The committee has an obligation to request documentation of any effort whatsoever on the part of organized retail pharmacy to lower prices. In northern California the pharmaceutical association was indicted and convicted of attempting to fix prices at an artificially high level. In both Michigan and Massachusetts the State Boards of Pharmacy have tried to stop the licensing of pharmacies of certain chains who are obviously meant to be discount operations. In New York State a pharmacy bill was proposed which would restrict pharmacy ownership to licensed pharmacists, thus reducing competition severely. Without exception, organized pharmacy has supported fair trade legislation which would support prices at a higher level than competitive situations would dictate.

Furthermore, organized pharmacy has advocated legislation which would prohibit the advertising of discounts, as cited earlier in this testimony, and in those cases where legislation could not be obtained. the same prohibitions were placed into professional codes of ethics. As mentioned earlier, there are 35 States now who have either codes or laws of that nature.

Legislation has also been promulgated at the urging of organized retail pharmacy, which would restrict the number of pharmacies in certain states in order to limit the RX business to a chosen few and to limit competition.

These measures, and measures similar to them have been espoused in the name of protection of the health of the patient.

However, when it suits the purpose, the question of the patient's health sometimes becomes secondary and chameleon-like, organized pharmacy champions the cause of competition.

As an example, there is a case whereby organized pharmacists are requesting the cooperation of the OEO, claiming it is putting the pharmacist out of business. All of the evidence of facts are that

they supported S. 260, which is a bill that would have restrained monopolies. In addition, a group of organized pharmacists opposed it under the contention that it would reflect freedom of competition.

S. 1575 refers to unfair trade practices and is concerned with the effect of dispensing on retail pharmacies. In past hearings on S. 260, the Medical Restraint of Trade Act, witnesses testified regarding isolated cases where pharmacies claimed to have been financially injured because of physicians dispensing in their local community. At those hearings I presented detailed evidence from the Lilly Digest, which attested to the health of retail pharmacy operations. I should like to submit extracts of the latest Lilly Digest, which is a summary of pharmacy operations for the year 1968. These figures indicate that the average community pharmacy owner earned a record $24,669 during 1968. Furthermore, I have a supplemental report on 1969 operations which show that his income rose to $26,943an increase of 9.2 percent over the year before.

The Digest also points out that the prescription department, the only department that would be affected by dispensing physicians, has increased both in total sales volume and as a percentage of total sales for the past 20 years without a single exception. In 1949 the prescription department accounted for 19 percent of the total sales. By 1968 it had increased to 43.2 percent, and the supplement for 1969 indicates that it increased to 43.8 percent. In 1949 the average pharmacy had total sales of $77,813, whereas by 1968 it had $198,917, and thus, in the 20-year period, total sales had somewhat less than tripled.

The prescription department, on the other hand, went up more than six times in volume from a 1949 figure of $14,806 to a 1968 figure of $85,953.

Thus the prescription department, the one department that is affected by dispensing physicians, has been increasing at a rate much faster than all other departments of the average retail pharmacy. This trend was continued in 1969, when the prescription department increased 12 percent over the 1968 figures whereas the other departments increased by 9.3 percent. Thus, the Lilly Digest points out in patently clear terms that a health business, run by good management, is doing better than ever.

I also introduced a document in the last hearings which is known as the failure record. This is published by Dun & Bradstreet and it contains a comprehensive listing of all failures of retail operations in the United States by category. In the document that I presented, and which is now a part of the subcommittee's files, it was shown that retail pharmacies ranked third from the bottom among all retail categories in the United States in number of failures. In other words, they had the third best record, and just to give you statistical figures, the total number of failures in 1966 was 155 retail pharmacies of a total of more than 50,000 in the United States. I am sure that everyone present will agree that 155 failures out of 50,000 stores is a remarkably fine business record.

The facts, as expressed in the Lilly Digest and in the Dun & Bradstreet failure review, do not support the contention that dispensing physicians are materially affecting the operations of retail pharmacies. On the contrary, both documents would indicate that pharmacy is one of the healthiest segments of American retail business.