[dropcap]T[/dropcap]he United States has had congressional hearings about price gouging in key industries—including pharmaceuticals— for many decades, and nothing has ever come of it for reasons well known to the politically awake. These periodical exercises in pseudo democracy are meant to provide a cover for the sordid truth: that politicians—from presidents on down— have long been in the pocket of the monopolists' lobbyists, or, to put it in a different way, they are agents of the billionaires who own all of the major industries and financial institutions dominating the economic life of the nation, including, perhaps, the most crucial social resource of all, the media, which define reality for the ordinary citizen. The upshot of this pervasive corruption—normal under capitalism—is pre-ordained. As Irish socialist icon James Connolly once put it, "Governments in capitalist society are committees of the rich to manage the affairs of the capitalist class." Thus, the abuses of a rigged, completely antisocial system continue because, as indicated, the capitalist media and other key sources of opinion moulding refuse to put continued focus on the topic. Flash-in-the-pan reporting is useless in a society defined by massive ignorance, huge distractions (like the cultivated obsessions with sports and celebrities), a pathetic attention span, and a public mind soaked in commercial messaging and mythologies favoring the viewpoint of big corporations and the superrich.
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As far as price gouging for prescription drugs is concerned, the disgraceful situation defining life in the United States is reinforced not just by the very real collaboration of politicians at all levels, but by the fervid marketing done by the pharmaceutical industry and its lobbying arm, PhRMA, eloquently denounced by Michael Moore in his memorable documentary SiCKO. (That was when Moore still had a radical compass, before becoming, like many other liberals, a pussycat for the Democrats' phony resistance to Trump). This marketing, costing tens of billions of dollars each year, takes two tracks: one basically hidden from view and one in the open, largely television advertising:
Lisa Schwartz and Steven Woloshin, two physicians at Dartmouth who also study medical communication, combed through data available from three media-monitoring groups and the US National Health Expenditure Accounts. Of all the money spent advertising drugs, the majority went towards efforts to market to doctors. In 1997, the total spending on marketing to physicians was $15.6 billion. By 2016, it was $20.3 billon. Marketing to physicians includes sending paid representatives to doctors’ offices to talk about a drug, free samples of it, or compensating physicians for speaking engagements about the drug. (ProPublica created a tool you can use to see if your doctor has been compensated by pharmaceutical companies.) (1)
So, here's the ugly part of this: many doctors —usually a conservative crowd—are complicit in this scheme, either by active cooperation with the drug companies and the rest of the for-profit healthcare system as organised in the US, or passively, by simply keeping quiet, going along.
Television journalism, one of the chief offenders, is not liable to suddenly become a crusading pro-public interest platform, since that medium gets more than 10 billion dollars each year for its tacit collaboration. These billions spent on maintaining this expensive regime of industry superprofits obviously assures that patients will be looking at higher prices than in those nations (markets) where the drug companies have been brought to heel. In that regard, the US is almost alone, even among fellow capitalist nations, for its outrageous betrayal of the public inerest, itself a very direct critique of "democracy", American style.
Readers are probably well aware that intrusive Big Pharma's tv ads—or DTC, direct to consumers messages— are now ubiquitous across the television spectrum. The pestiferous DTC regime, permitted now only in the US, (2) is not just a logical abomination (the ads usually suggest you tell your doctor, precisely the person who is supposed to know this better than you— your health situation, and the meds you take, before prescribing the endorsed drugs), but quite probably an unexamined quotidian psychological stressor for many, a tedious reminder of our fragility and mortality, as the ads constant din about scores of dreadful diseases —from cancer to hepatitis (a huge profit center) to psoriasis to Crohn's disease—all supposedly lying in wait, cannot fail to subtly dampen the spirits of anyone exposed to this cascade of unpleasantness, and I'm not talking here about the effect of this insalubrious effluvia on just the minds of professional hypochondriacs!
How and why this sickening imbecility is permitted, something that has no public value whatsoever, is, again, something to be explained by the political corruption that defines the American system. Even mild attempts at making this violation of the public interest less obvious are resisted tooth and nail by the industry and its paid acolytes in Washington:
Drug pricing, for instance, has been a point of contention between industry and lawmakers. In one recent battle, several congressional leaders pushed for pharma companies to have to disclose drug prices in DTC ads — an idea that was met with strong opposition from the well-funded industry lobbying group PhRMA. (3)
[dropcap]2[/dropcap] The (programmed) ineffectiveness of politicians
Theater aside, bought politicos will not bite the hand that feeds them—period. Here's an example (there are many others) of Big Pharma executives supposedly being "grilled" by politicians in Washington. Such exercises in phony auto-da-fés, designed to appease the public, suggest that "something is being done; or that their "representatives are listening", usually have no punitive tails for the malefactors, and there is rarely any urgency attached to the proceedings, hence their conduct remains the same. The media's tone is also mild, contributing to a general atmosphere of decorous civility enveloping the exchanges, thereby burying what should be denounced and frequently repeated in stentorian terms. Consider this typical report by CBS, the hearings triggered by the latest round of abuses perpetrated by Big Pharma, the arbitrary rise of prices for insulin:
CBS This Morning
Published on Apr 11, 2019
Truthtellers exist, but rarely reach the big audience
In his 2007 mordant and well executed documentary on the healthcare scandal in the US, SiCKO, Michael Moore while also denouncing the health insurance scam, also included a telling clip literally showing how the US Congress is bought by Big Pharma. While the documentary was seen by a respectable audience, and it created some positive repercussions in activist circles, the official response was negligible. The status quo weathered the storm, and things soon went back to the criminal normal that passes for inevitable in the US. (Incidentally, eagle-eyed readers may notice that Moore shows a WHO list of countries in which the US ranks 37th in the quality of its health system—France occupying the #1 slot—but the same list puts Cuba below the US, which is simply ridiculous, and an affront to one of the best health systems in the world.)
The Lies Big Pharma Use to Justify Soaring Drug Prices
Kefauver launches first hard look at the drug industry's antisocial practices
Estes Kefauver: A progressive man well ahead of his time—then and today.
SUMMATION
Senator Estes Kefauver with wife, shown on the cover of Newsweek, February 4, 1952, announcing presidential bid.
As a champion of congressional reform and anti-monopoly measures, he chaired the House Select Committee on Small Business, which investigated economic concentration in the U.S. business world in 1946. In keeping with what he saw as his mandate, Kefauver introduced amendments to the Clayton Antitrust Act designed to strengthen the act. In May 1948 Kefauver also proposed that more staff and money be allocated to the Antitrust Division of the Justice Department and to the Federal Trade Commission to make it easier to prosecute large corporations. He also chaired a committee investigating television and juvenile delinquency in the mid-1950s. This was in response to concerns from some members of the public about the increase in juvenile violence, and the possibility of this behavior being related to violent television programs.
The Kefauver hearings were extremely popular with the general public, which could see the proceedings on regular theaters or at home on tv (in the late 1950s not as ubiquitous as today).
From 1957 and 1963, Kefauver's Senate Antitrust and Monopoly Subcommittee investigated concentration in the U.S. economy, on an industry by industry basis. It issued a report exposing monopoly pricing in the steel, automotive, bread and pharmaceutical industries. In May 1963, Kefauver's subcommittee concluded that within monopolized U.S. industries no real price competition existed anymore and also recommended that General Motors be broken up into competing firms. This committee also held hearings on the pharmaceutical industry between 1959 and 1963 that led to enactment of the Kefauver-Harris Drug Act of 1962. Kefauver was appalled by the excess profits that U.S. drug companies were making at the expense of consumers. At that time, the U.S. Food and Drug Administration had limited authority to require efficacy standards or disclose risks. Kefauver was accused by his critics of expanding the power of government unnecessarily, of interfering with the freedom of doctors and patients, and of threatening the viability of the pharmaceutical industry. It looked for a time as if his legislation was likely to fail. But in 1961, European and Australian doctors reported that an epidemic of children born with deformities of their arms and legs was caused by their use of thalidomide, which was heavily marketed to pregnant women. This revelation underscored the need for greater regulation of the pharmaceutical industry. (5)
The Kefauver hearings were later edited and published in the book In a Few Hands: Monopoly Power in America (1965), which I highly recommend to anyone wishing to learn in earnest about how the US economy is really run.
Appendix
Thanks to the few drops of wisdom and loyalty to the masses that manage to penetrate the thick wall of presidential and Congressional obstruction of any measure favoring the public, we still have critical resources such as The CQ Almanac, a compendium of legislation from each annual session of Congress published every spring. I'm certain this is the kind of comparatively insignificant expenditure most Republicans would automatically frown on, and Trump no doubt elininate, if he could. Still, because of the CQ we have this record of Estes Kefauver's brave campaigns against US monopolies and their abuses, more than half a century ago, showing how resilient capitalist corruption is in the US and how much more we need to do to stamp it out, branch and root, once and for all.
Subcommittee Investigates Drug Prices
An article from CQ Almanac 1960
Document Outline
Background
1959 Hearings
1960 Hearings
FDA Reports, Rules
Kefauver at work with members of his committee. His kind of "Democrat" is long gone.
The hearings, held over a seven-month period and scheduled to resume in 1961, brought Subcommittee charges of over-pricing and excessive profits, violation of antitrust laws in agreements for production and marketing of drugs, and misleading advertising. The Food and Drug Administration came under fire when the hearings in May focused on alleged conflict of interest activities of Dr. Henry Welch, director of the FDA's Antibiotics Division. Subsequent disclosures of Welch's activities as an editor and contributor to several large medical publications and a partner in a medical publishing company, which yielded him financial profits, led Health, Education and Welfare Secretary Arthur S. Flemming to demand Welch's immediate resignation. The disclosures also led Flemming to appoint a board of scientists to review Welch's decisions at FDA and to set up a special FDA investigative unit to check charges by some witnesses about employees' practices in the agency.
The hearings covered these subjects: marketing practices on newly developed wonder drugs; sale of tranquilizers; general drug industry problems; handling of oral anti-diabetic drugs; prescription by trade name instead of by medical or generic name; activities of Dr. Welch and the pricing of antibiotic drugs.
Legislative proposals prompted by the hearings included one by Kefauver (S 3677) to require HEW licensing of drug manufacturers, pharmacists and others making or selling drugs for use in interstate commerce and to require FDA to evaluate new drugs for their efficacy as well as safety. Flemming also sent Congress a proposal (S 3815, HR 12949) for amendment of the Food, Drug and Cosmetic Act of 1938 to tighten federal control over drug manufacturing. The board of scientists which reviewed the Welch case, in a September report to Flemming, recommended legislative action to strengthen FDA statutory authority over the drug industry. Since hearings were not concluded in 1960, no legislative action was taken.
The FDA in December issued new regulations covering the labeling used in promoting drugs and the marketing of new drugs.
Background
Evidence of possible price-fixing irregularities in the drug industry came before Congress in 1957 in a report by the House Government Operations Intergovernmental Relations Subcommittee on activities of the Department of Health, Education and Welfare relating to polio vaccine. The report (Aug. 15, 1957 – H Rept 1175) was based on October 1956-March 1957 hearings and it recommended that the Justice Department extend its inquiry of possible price-fixing in the sale of polio vaccine and also conduct a new investigation on possible antitrust law violations in the sale of drugs and hospital supplies to the Government.
The report said hearings indicated state and federal agencies purchasing the vaccine “received literally hundreds of identical bids throughout the country” and that the vaccine prices “exhibited an unusual resistance to the law of supply and demand.” Both HEW and the Public Health Service were criticized because they “did not exercise a proper regard for economy and efficiency” in handling the vaccine purchase program and “did not exercise proper precautions to guard against the possibility of antitrust law violations….”
Announcement of Senate hearings on administered prices in the drug industry was made in September 1959 by Kefauver. He said his Antitrust and Monopoly Subcommittee also would seek to determine whether several large commercial banks and mutual funds had acquired corporate control of any of the 20 principal pharmaceutical manufacturers. A Subcommittee economist said financial records on drug company ownership had been subpenaed from three New York City banks: the Chase Manhattan Bank, Bankers Trust and the Morgan Guaranty Trust Co. Subpenas also were served to several investment houses and mutual funds as well as to the 20 drug manufacturers, he said.
Hearings opened in December 1959 and Kefauver, in an opening statement, said the investigation would deal with two broad categories: product hearings on each of the major types of drugs – antibiotics, hormones, diabetic drugs, tranquilizers, etc. – and hearings on the general financial structure and practices of the drug industry. He outlined the unique manner of marketing prescription drugs and said the prospective customer could not shop around for lower prices because prescriptions usually were written out in trade terms. Although he could not know what he should get, the consumer had to take exactly what had been prescribed by his physician, Kefauver said, and as a consequence, “the drug industry is unusual in that he who buys does not order and he who orders does not buy.”
1959 Hearings
COMMITTEE – Senate Judiciary, Antitrust and Monopoly Subcommittee.
HEARINGS – Dec. 7, 1959 - Sept. 14, 1960, intermittently, on administered prices in the drug industry.
TESTIMONY – Dec. 7 – Sen. George A. Smathers (D Fla.) said the prices of newly developed wonder drugs placed them beyond the financial reach of many persons of average and low income. He said some medicines produced in the United States cost the patient many times as much as similar preparations sold abroad.
The Subcommittee produced figures showing that drugs marketed by the Schering Co. of Bloomfield, N.J., were marked up as much as 7,000 percent. Schering President Francis C. Brown said the figures were misleading and did not include the company's business costs. He said vast amounts were spent for research, product supply and distribution and promotional and information campaigns.
Dec. 8 – Brown denied Subcommittee charges that licensing arrangements made by Schering with five other drug firms for the production and distribution of two hormone drugs constituted a violation of antitrust laws. Staff investigators had reported that Schering had agreed to supply the five companies – Merck and Co., Upjohn Co., Pfizer and Co., Parke, Davis and Co. and CIBA Pharmaceuticals Inc. – with the drugs in return for royalty payments of 30 to 50 cents on every 100-tablet bottle for three years. Brown held that Schering had a legal right to obtain royalty “rewards” for discovering the drug.
Dec. 9 – John T. Connor, president of Merck and Co., denied that his company's prices were excessive, that the major firms kept prices at fixed levels, that drugs were sold more cheaply overseas than in the U.S., that supplies of new drugs were restricted and that an international cartel existed in the drug market.
Dec. 10 – Dr. Louis Lasagna, director of Johns Hopkins University's clinical pharmacology division, said drug manufacturers had a “pharmaceutical numbers racket” of bringing out new drugs to make existing ones obsolete, that many new ones were of “miserable” quality, and that Merck & Co. had used misleading advertising to promote a new anti-arthritic drug.
Dr. Philip S. Hench, Mayo Foundation professor, challenged Lasagna's qualifications as an “expert” and said he saw nothing objectionable in Merck advertising.
John T. Connor, Merck president, said the Government was given lower prices than druggists on the new drug because it usually bought in larger quantities and had its own quality control facilities. He said Merck could not stay in business if it had to rely on the level of profits earned from Government sales.
Dec. 11 – Seymour N. Blackman, executive secretary of Premo Pharmaceutical Laboratories, South Hackensack, N.J., said big drug firms had won control of medicine pricing by controlling patents on new wonder drugs.
Dr. Ethel Percy Andrus, president of the Retired Persons Assn. and the National Retired Teachers Assn., said three drug manufacturers, Parke, Davis & Co., Lederle Laboratories and W.H. Merrill & Co., had refused to sell medicines to the organizations' Washington pharmacy, established for non-profit, discount sales to members.
Dec. 12 – Subcommittee Counsel Rand Dixon said the Upjohn Co. used only 14 cents worth of raw materials to make a hormone product it sold for $15, an increase of “about 10,000 percent.”
E. Gifford Upjohn, the company's president, said the comparison was unfair since raw material was “but a fraction of the cost,” and administrative, selling, advertising and distribution expenses and taxes should be included as part of the “cost of doing business.”
Subcommittee Chairman Estes Kefauver (D Tenn.) said hearings would resume in mid-January and that evidence showed an annual spending of $250 million for drugs that were no good while major drug firms over the past three years had the highest profit rate of any industry.
1960 Hearings
Tranquilizers
The second phase of the hearings began Jan. 21, 1960. Kefauver said the purpose was to determine whether purchasers of tranquilizer drugs were “adequately protected by the force of competition.” He said the sale of tranquilizers had grown into a $200-million-a-year business since being introduced into the U.S. in the early 1950s.
As the hearings opened, Senate Minority Leader Everett McKinley Dirksen (R Ill.) challenged the “absolutely incredible and fantastic” reports of drug markups disclosed during the Subcommittee's probe of arthritis drug prices in December 1959. He said he was startled by newspaper accounts of the earlier hearings which he did not attend. He said testimony from drug manufacturers showed profits of 16-20 percent, a “far cry” from allegations of 2,000 to 7,000 percent margins. Kefauver replied that the findings of the Subcommittee were objective and that it had tried to determine why drugs sold in the U.S. were more expensive than those marketed abroad. “Frankly,” he said, “a satisfactory answer was not forthcoming.” Highlights of testimony:
Jan. 21 – Walter A. Munns, president of Smith, Kline and French Laboratories, said his company knew it was sometimes impossible for poorer patients to afford tranquilizers, but he said the prices were reasonable and he defended the company's profit margins.
Kefauver said the prices and profits were “completely out of line” and noted that the company ranked second among the Nation's 500 most profitable manufacturing firms.
Jan. 22 – Mike Gorman of the National Committee Against Mental Illness proposed a Government crackdown on what he called “profiteering” in tranquilizers.
Jan. 26 – Henry H. Hoyt and Dr. Frank M. Berger of Carter Products Inc., makers of Miltown, denied Subcommittee allegations of excessive profits on their product and said they made only a little over a penny per tablet.
Jan. 27 – Hoyt, president of Carter Products Inc., said his company had never conferred with other firms on the price of meprobamate, a tranquilizing drug. Hoyt's statement was in reply to Kefauver's comment that several bids to sell tranquilizers to the Government had corresponded to a thousandth of a cent.
(The Justice Department the same day filed a civil antitrust suit against Carter Products Inc. and American Home Products Corp. for allegedly conspiring to monopolize trade in mild tranquilizers. Carter makes Miltown and American Home puts out Equanil, both containing meprobamate.)
Jan, 28 – Rep. John A. Blatnik (D Minn.) said the American Medical Assn. in 1958 had tried to hamper an inquiry into the drug industry by his House Government Operations Legal and Monetary Affairs Subcommittee. The AMA immediately denied Blatnik's allegations.
Jan. 29 – T.F.D. Haines, president of CIBA Pharmaceutical Products Inc., said that Serpasil, a CIBA tranquilizer and blood pressure drug, was “reasonably priced” at a cost to the patient of “$1.35-$2.25 per month.” He said CIBA had worked for seven years to get the drug on the market. Haines' testimony wound up the tranquilizers phase of the Subcommittee's drug inquiry.
Feb. 23 – Dr. Austin Smith, president of the Pharmaceutical Manufacturers Assn., said Government restraints on the industry would “inevitably slow the flow” of drugs. He said drug prices rose 3 percent in the last 10 years while the average wholesale price of all industrial products rose 22 percent.
Frederick L. Thomsen, also from the Association, said manufacturers' average profit per retail dollar paid for drugs was “roughly 6 percent” and if the entire profit were wiped out buyers of consumer drugs “on the average would hardly notice the difference in prices.”
Feb. 24 – John Blair, the Subcommittee's chief economist, presented figures from a 1958 report based on 51 drug products which he said represented two-thirds of all prescription drugs. He said in 27 cases 100 percent of all production was by one company; in seven more it was limited to two; and in nine it was limited to three.
Smith said the figures only showed “the companies are producing what is needed.” (He later issued a statement calling Blair's report “grossly misleading”.)
Feb. 25 – Dr. Haskell J. Weinstein, director of a California chest hospital and former research director for a New York drug manufacturer, Charles Pfizer & Co., said physicians had been almost “brainwashed” to think of drug trade marks and that “even new disease states have been invented to encourage the use of some drugs….”
Dr. Martin A. Seidell, associate medical director of Riker Laboratories in California and a former Pfizer Co. medical director, said in a prepared statement that he had resigned his job with Pfizer because of the firm's “perverted marketing attitude”.
The Pfizer Co. in a Feb. 25 statement denied the criticisms of Weinstein and Seidell and said it was “worth noting” that Seidell resigned “only after his assistant received a promotion to which Dr. Seidell thought he was entitled himself.”
Feb. 26 – Chairman Estes Kefauver (D Tenn.) in a concluding statement said it seemed clear that “on occasion the conflicts between a drug company's advertising people and its own doctors has not been resolved clearly and explicitly in favor of the position taken by the doctors…this is intolerable.” He said absence of “clearcut authority” for medical men over advertising claims could cause confusion and danger to patients' health and that drug manufacturers should see to it that their code of ethics on this point was “observed rigorously” or “Congress or an agency of Government will do it for them.”
RELATED DEVELOPMENT – Feb. 29 – The Supreme Court, in a 6-3 decision, reinstated charges that Parke, Davis & Co. had violated the Sherman Antitrust Act by conspiring to fix prices of its drug store products in areas without fair trade laws. The ruling reversed a June 1958 U.S. District Court action dismissing the case.
GOP Opposition
The hearings, which had recessed at the end of February, reopened on a partisan note as Republican Committee members resumed their objections to investigating techniques used by Kefauver.
Dirksen April 7 released a statement protesting witnesses selected by Kefauver. He said that although Kefauver had promised to call representatives of the American Medical Assn., he had not done so and that it was not an objective approach to call individual doctors rather than the president of their association.
Dirksen and Sen. Roman L. Hruska (R Neb.) April 12 released separate statements which said doctors called by Kefauver were known antagonists of the drug industry. Hruska said he not only wanted to be fair to the drug industry, but to the public as well and added that “unless this Subcommittee mends its ways thoroughly – and quickly – it shall have failed” in its trust. Testimony:
April 12 – William F. Bean of the Iowa State Medical College said some drugs put on the market were “acclaimed as the latest and best cure,” but too often resulted in disappointment and disillusionment. He said “the problem is with companies whose sole concern is business” and which operated on the assumption that the richest earnings occurred when a new drug could be “marketed before competing drugs can be” released. Bean added, however, that “modern medicine owes a tremendous debt to the pharmaceutical industry” for developing new drugs.
Hans Popper of Mount Sinai Hospital, New York City, said some newly developed wonder drugs had caused jaundice. He said the evidence of the disease usually was apparent only after the drugs had been in use for some time.
April 13 – A. Dale Console, former medical director of Squibb Laboratories, said the industry was forcing “relatively worthless” drugs on the market with high pressure sales programs. He said it was a fallacy “to conclude drug advertising and promotion is education” even though a testimonial was written by a doctor and “given an additional cloak of respectability” by a scientific journal. Console said unless sweeping reforms were instituted, a truly ethical drug house could not survive in the “present competitive wrangle”. He said pressure for the reforms probably would have to take the form of restrictive legislation.
April 14 – Dr. James E. Bowes, Salt Lake City physician and teacher at the University of Utah, said Congress should eliminate the “bulk rate” category in postage rates and make drug concerns pay first-class rates in order to reduce the heavy promotional mailings by drug manufacturers. He said he had surveyed 100 doctors and found 64 percent of them immediately dropped almost all drug circulars in the waste basket. Bowes said he had collected and weighed all drug advertisements and samples he received in the mail in one year and they weighed more than 365 pounds.
Dr. Chauncey D. Leake, Ohio State University drug expert, said “physicians in general should be skeptical of the descriptions of new drugs offered by pharmaceutical manufacturers in flamboyant brochures or advertisements.” He opposed any greater Government regulation of the drug industry and said “free men should regulate themselves”.
April 15 – Dr. Solomon Garb, associate professor of pharmacology at the Albany, N.Y., Medical College, said a college study of drug advertising showed the majority of mailed ads were unreliable and with most, “a physician trusting them could be seriously misled”. He said continuous federal inspection of all drug manufacturing and warehouse facilities, such as “the type now used for meats”, would insure pure drugs. He also called for revision of trademark laws to ban use of newly coined names as product names.
April 20 – Dr. Austin Smith, president of the Pharmaceutical Manufacturers Assn., said in prepared testimony that the Government did not provide enough staff to inspect drug manufacturing plants more than once every five-and-one-half years. Lack of proper inspection, he said, meant doctors sometimes were reluctant to prescribe some less costly brands of medicine because they did not trust the companies' inspection systems. Smith also said the Subcommittee had used charts and graphs that were “grossly misleading” in showing growing monopolistic tendencies by drug firms. Smith said the 140 members of his organization produced 95 percent of all prescription products on the market, that these companies insisted on good safeguards and that over the past six years only four to 10 actions per year had been taken against these firms by the Food and Drug Administration. Actions against non-members totaled 139 to 203 annually, he said, since these were companies with inadequate safeguards that produced cheaper drugs.
Oral Anti-Diabetic Drugs
April 26 – Chairman Estes Kefauver (D Tenn.), opening a new phase of hearings on oral anti-diabetic drugs, praised the Upjohn Co. of Kalamazoo, Mich., for its three-year research program with a new drug, Orinase, before introducing it to the market. He said, however, the Justice Department should investigate the “highly restrictive” agreement by which Upjohn was licensed as the exclusive United States manufacturer and seller for the drug, discovered by a German firm and officially named tolbutamide. Kefauver said it was estimated that Orinase sales brought Upjohn about $20 million annually.
Dr. E. Gifford Upjohn, president of the firm, said his company had not abused its rights to handle Orinase, that he doubted he would sell any of it to a competitor “at this particular time”, but that any American company could manufacture and sell it and settle financially later with the winner of a dispute over U.S. patent rights between the German firm, Farbwerke Hoechst, and another company whose name was not disclosed. Upjohn said the average price of Orinase to the patient was 12 1/2 cents a dose, and he figured this was about the same as the cost of insulin, taken by injection.
John Blair, Subcommittee chief economist, said the price of Orinase to the druggist in the U.S. was higher than anywhere else in the world, that while the “computed production costs” for 1,000 tablets, were $13.11, the cost to the druggist was $84.30 and the cost to the consumer was $139.
Upjohn said he had checked and found five countries had a higher price than that charged American druggists for Orinase, and that Blair's figures were not “anything like the cost” because they did not include such items as plant overhead costs, administration and taxes. He said the company did not keep separate records of profit or loss in individual items.
April 27 – Dr. Henry Dolger, chief diabetes specialist at Mount Sinai Hospital, New York, said in prepared testimony that the Food and Drug Administration in 1958 approved the sale of Diabinese, the trade name for chlorpropamide, an oral diabetes drug manufactured by Charles Pfizer & Co., after “some 2,000 case reports” were submitted by Pfizer that included 43 deaths and a number of instances of jaundice in clinical tests. (Dolger later told newsmen only eight of the deaths could be traced to the drug.)
John E, McKeen, Pfizer's president, said Dolger had made “a very serious misstatement of facts”, and he presented a testimonial from 36 doctors who said “the incidence of serious side-effects is sufficiently low that the drug can be appropriately used in properly selected patients with the proper dosage.”
Dr. George J. Hamwi, professor of medicine at Ohio State University, said he knew of only four deaths that could be related to the drug and “after very careful study of these cases it was concluded all might have been avoided” with proper use.
Dr. Alexander Marble, specialist at the Joslin Diabetic Clinic in Boston, said there was need for an “unbiased” review of all new drugs after their general release.
Drs. Roberts M. Rees and Robert C. Warner of the Pfizer Co. staff contested Dolger's testimony and said company tests of Diabinese showed only 29 known jaundice cases out of 60,000 treated.
April 28 – Dirksen forced delay in the hearing when he blocked the unanimous Senate consent required for the Committee to meet during a Senate session. He said the Subcommittee, composed mainly of men who were lawyers by profession, seemed an unlikely group to explore the disputed safety and efficacy of an oral diabetes drug, Diabinese. Dirksen said he would demand a closed session for “laying out some better guidelines.”
McKeen made public a letter to Kefauver questioning whether the hearings had entered an improper area. He said his company endorsed an April 27 proposal by Dr. Alexander Marble, Boston diabetes specialist, for a study of new drugs by some scientific forum.
May 3 – Dr. Samuel D. Loube, former president of the Washington, D.C., Diabetic Society, said he considered Diabinese “valuable” for treating some patients but that it could have serious side effects. He said the Pfizer Co. had distributed widely medical literature telling the entire story of the drug but he wished the drug industry generally would use more self-restraint in its advertising.
Dirksen again forced the hearing to recess by refusing in the Senate to give unanimous consent for its meeting. Kefauver told the hearing that Dirksen “misunderstands the issue,” and that the main question was not whether one drug was better than another but whether the producers of Diabinese had made excessive claims in advertising.
(Dirksen inserted in the Congressional Record a May 2 letter sent to Kefauver by Dr. James M. Moss, director of the Georgetown University Diabetic Clinic, which said “careless testimony” on Diabinese April 27 by Dr. Henry Dolger “has created undue anxiety among patients with diabetes.” Moss said some patients had discontinued the drug and “do not plan to return to the physician who prescribed” it, and that Kefauver would “be directly responsible for the irreversible deterioration of the health of these unfortunate victims of a chronic disease.” Moss said the only person qualified to decide on medication for a patient was “the physician who has examined the patient and who has studied the literature containing the reports of the experiences of other physicians.”)
May 4 – Kefauver submitted a report from the Food and Drug Administration stating that an October 1958 letter sent by Pfizer along with a brochure to every doctor in the country announcing the marketing of Diabinese “contained misleading comparisons” with other oral diabetes drugs. The report said FDA “strongly rebuked” Pfizer both for the letter and for failing to clear its text with the agency “because of the importance of the drug and great risk” of introducing it.
McKeen denied the letter was misleading, said it had not been cleared with FDA because of a misunderstanding but the matter later was “satisfactorily cleared up” and an FDA-approved letter was sent out.
Prescription Practices
May 10 – Dr. Charles O. Wilson, Oregon State College School of Pharmacy, said the Subcommittee could do a great service by “bringing some order into the nomenclature of pharmaceuticals”. He said some of the names coined by the drug companies indicated ingredients in their preparations that were lacking.
May 11 – Dr. August H. Groeschel, New York City Hospital, said he thought the National Pharmaceutical Council (composed of 22 large drug firms) had been waging a campaign of “continual harassment” to prevent nonprofit hospitals from saving money by dispensing drugs under scientific names rather than brand names. Groeschel said the $500,000 a year his hospital spent on drugs would have been 25 percent higher if only brand-name medicines had been bought.
Dr. Mildred E. Brady, Consumers Union, said Congress should close loopholes in inspection laws.
May 12 – Thomas D. Rowe, dean of the University of Michigan College of Pharmacy, opposed proposals that Congress enact laws to require or encourage the prescription of drugs by their medical names. He said evidence about possible savings if doctors would give their patients a choice among similar medicines, instead of prescribing by trade name, had been exaggerated.
Dr. Harold F. Pierce, former medical director of the Connecticut State Welfare Department, said federal laws should be revised to give the Food and Drug Administration more authority to investigate drug production. He said patents on drug products raised their prices and should be abolished, but patents on methods of production should be retained.
Dr. Walter Modell, associate professor of Pharmacology at Cornell University, said drug naming had become so confusing that the same drug might be known by 25 or more different trade names.
May 13 – Dr. Lloyd C. Miller, revision director for Pharmacopeia of the United States, a private agency which sets federal drug standards, said federal inspection was so inadequate that it was unsafe to prescribe medicines without knowing the manufacturer was reliable.
Newell Stewart, National Pharmaceutical Council, opposed any system encouraging doctors to prescribe by generic names if this would allow druggists a wide latitude in the use of ingredients they considered identical.
Welch Inquiry
May 17 – The Subcommittee began hearings on alleged conflict of interest activities of Dr. Henry Welch, director of the Food and Drug Administration's Antibiotics Division.
Arthur S. Flemming, Secretary of Health, Education and Welfare, submitted a statement saying HEW in 1959 reviewed Welch's activities as an editor and contributor to several large medical publications and a partner in a medical publishing company. Flemming said as a result of the review, he Oct. 14, 1959 announced a new policy governing outside activities of Department employees and ordered Welch to discontinue certain publishing activities. Flemming said that as of January 1960 Welch had “assured” the Department that he had complied.
May 18 – Committee investigators said that Welch, in addition to his annual Government salary of $17,500, received $287,142.40 from outside medical publishing jobs, most of which were connected with promotion outlays by drug companies.
Flemming the same day asked for Welch's “immediate resignation”. Flemming said Welch had “deliberately misled his superiors” and “we should have thoroughly investigated his statements to us”. Welch resigned May 19, but denied any wrongdoing.
June 1 – Dr. Gideon Nachumi, a resident physician at Kings County, N.Y., Hospital, said that in 1956, while writing advertising copy for the Charles Pfizer & Co. drug manufacturing firm, he had helped “jazz up” a scientific speech by Welch “to bring out the sales points” of Sigmamycin, a new antibiotic introduced by Pfizer. Nachumi said the speech did not include the drug's trade-name but mentioned its ingredients; incorporated a slogan chosen for the drug, “A Third Era in Antibiotics”, and used the term “synergistic” to describe its power. Synergism is a quality that gives two drugs combined more strength than both separately, and Nachumi said Pfizer had planned to stress in its advertising that Sigmamycin was the first of the synergistics on the market. He said at the time he felt there was nothing improper in his editing but he since had noted medical authorities disputed claims for the drug and he now considered the editing “an abuse” of Welch's position.
Subcommittee investigators introduced documents showing that Pfizer bought $23,183 worth of ads for Sigmamycin in Welch's medical publications, with Welch receiving about $1,700.
June 2 – Dr. Barbara Moulton, who resigned in February after serving for five years on the FDA's Bureau of Medicine staff, said the FDA had lost most of “the crusading spirit it once possessed and has become… merely a service bureau for industry.” Drug company aides had ready access to FDA technicians passing on their applications for new products and private talks “are the rule rather than the exception,” she said. She told of frustrating personal attempts to take off the market or prevent release of what she felt were worthless or dangerous drugs and said her resignation came after the FDA's New Drug Division released two new food additives without consulting its own medical department and just after she had finished gathering evidence that one – folic acid – was unsafe.
Dr. Ernest King, FDA's former associate medical director, disagreed with Dr. Moulton's testimony and said FDA employees “have the public interest at heart or they wouldn't be there.” He said no one ever tried to make him release a drug against his judgment.
June 3 – Flemming said he asked Dr. Detlev Bronk, president of the National Academy of Sciences, to appoint a group of top-level non-Governmental scientists to review all decisions made by Welch, and that he was setting up a special FDA investigative unit to check charges against specific individuals, and possible conflicts of interest. Flemming disputed Dr. Moulton's testimony on folic acid and said the drug actually had been kept off the market on her recommendation. (For reports by these groups, see below)
Flemming proposed legislation to provide that: FDA test samples of all antibiotics; drug manufacturers be required to report to FDA all cases of injuries produced by approved drugs, instead of leaving the report optional; FDA inspectors be permitted to examine manufacturers' controls on drug purity and to see complaint files which they now are barred from inspecting.
Reviewing the Welch case, FDA Commissioner George P. Larrick said he did not know until May 18 that Welch got “a fixed percentage of drug advertising and of reprints sold by the outside medical journals he had edited.”
Larrick proposed that FDA be given authority to check effectiveness as well as safety before approving new drugs.
June 6 – Kefauver criticized Flemming and his aides for failure to question Welch's outside income. Flemming said it was primarily a matter of “misplaced confidence” in a trusted scientist who had been with FDA for 22 years. He said Welch at all times had said he got only “an honorarium” from the magazines he edited.
Flemming referred to his June 3 announcement on an investigative unit for FDA and said the “principal” members would come from outside HEW.
RELATED DEVELOPMENTS – June 7 – The Subcommittee made public letters from Welch's private files showing he had solicited reprint orders for his magazine ventures from drug firms.
June 15 – Kefauver introduced a bill (S 3677) to require HEW licensing of drug manufacturers, pharmacists and others making or selling drugs for use in interstate commerce. The bill also required the Food and Drug Administration to evaluate new drugs for their efficacy as well as safety.
Kefauver said that “facts in the record” of Subcommittee hearings on the drug industry proved the need for “some legislation” to safeguard the public even before Subcommittee hearings ended. However, there was no subsequent action on the bill in 1960.
Flemming announced appointment of a Special Investigative Unit to look into allegations against employees and procedures in the Food and Drug Administration. Three chief members of the group were Charles H. Kendall, general counsel of the Office of Civil and Defense Mobilization, director of the special unit; Charles Austin Doan, dean of the Ohio State University School of Medicine; and William A. Costello, a regional inspector of the Internal Revenue Inspection Service.
June 24 – Flemming announced that a Special Advisory Committee of eight medical professors had been appointed by Dr. Detlev Bronk to review policy, procedure and decisions of the FDA Division of Antibiotics and New Drug Branch when headed by Welch. The eight were Drs, C. Philip Miller, University of Chicago, chairman; John H. Dingle, Western Reserve University; Maxwell Finland, Harvard University; Colin M. McLeod, N.Y.U.; Karl F. Meyer, University of California; John R. Paul, Yale University; Carl F. Schmidt, University of Pennsylvania; and Wesley W. Spink, University of Minnesota.
July 1 – Flemming sent to Congress a proposal (S 3815, HR 12949) for amendment of the Food, Drug and Cosmetic Act of 1938 to tighten federal control over drug manufacturing. In a letter accompanying his proposal, Flemming said the Administration had not yet completed a full study of the Flemming suggestions.
The Flemming plan required drug manufacturers to keep records of the clinical effects of new drugs and submit reports on them to the HEW Department. It also required controls adequate for public safety in drug-making and packaging, and extended federal certification to all antibiotics (existing regulations covered only insulin and some antibiotics).
There was no action on the bill in 1960.
Antibiotic Drug Prices
The hearings in September focused on the price of antibiotic drugs, and at the end of the month were recessed until 1961. A Subcommittee spokesman in December said testimony still was to be heard from representatives of the American Medical Assn. and related groups on general practices in the drug industry. He said an interim report was being readied and probably would be released in January 1961.
Sept. 7 – Kefauver said the Subcommittee had “persuasive evidence” from the cost-production reports of certain drug companies which indicated they had exercised monopolistic control over drug prices. He said the companies included Lederle Laboratories of the American Cyanamid Co. and Bristol Laboratories, both of New York City and Parke, Davis and Co. of Detroit. Kefauver said the three companies had sold a particular drug at the same price level for nearly 10 years, but recently, apparently because of the Subcommittee's investigations, had reduced its price by 15 percent.
W.G. Malcolm, president of the American Cyanamid Co., said Lederle Laboratories aimed for a 12 percent to 15 percent profit after taxes, but that the profit in recent years had been “slightly in excess of 15 percent.”
Sept. 8 – Rear Admiral William L. Knickerbocker, executive director of the Military Medical Supply Agency, the largest purchaser of drugs for the Federal Government, said the MMSA in some instances had received what it considered “non-competitive prices” from U.S. drug firms which had forced MMSA to buy drugs from foreign concerns. He said U.S. companies had refused to adjust their prices regardless of the quantity of drugs purchased and that in one instance purchases from Farm-ochimica Cutolo-Calosi, an Italian firm, at about one half the price of the lowest bid by an American firm, had saved the Government over $1 million.
Lyman Duncan, manager of Lederle Laboratories, said Italian drug companies “steal” U.S. researched drugs and processing techniques and then with cheaper labor undersell the U.S. product. Italian firms had advertised for U.S. technicians to offer their services as consultants, Duncan said. He said the firms promised to keep the arrangement confidential – an “open invitation to our own employees to steal our secrets and turn them over to the Italians.”
Sept. 9 – Philip I. Bowman, president of Bristol Laboratories, said the company's earnings in 1959 were 8.4 percent of total sales and that throughout its existence the company had put nearly $2 into research for every dollar of profit. Bowman's statement was made in reply to evidence presented by Subcommittee investigators that Bristol Laboratories in 1956 had reported a 67.7 percent net profit before taxes on drug sales to the Government. Bowman added that research was the cornerstone of the drug industry and that for “every $20 million of industry research expenditure” one major antibiotic was developed. Elimination of patents in the drug field would force many small firms out of business, permitting the larger firms to take over the market, Bowman said, and added that “patents are a small firm's–and the public's – best friend.”
Sept. 12 – Dr. Maxwell Finland of the Harvard Medical School said an impartial national board was needed to evaluate new drugs because there was too great a lag between the time a new drug went on the market and its proper evaluation through use.
Harry J. Loynd, president of Parke, Davis and Co., said sales, advertising, research, taxes and profits nearly doubled the production cost of Chloromycetin which the Subcommittee had said gave the company a 16 percent profit on sales when based on the cost of the drug excluding those items. Under questioning. Loynd said that his company bought about one-tenth of its output from an Italian firm for $1.52 a bottle and that it eventually sold for about $51 per bottle.
Sept. 13 – Eugene N. Beesley, president of Eli Lilly and Co., said his firm had lowered prices on antibiotics by as much as 94 percent over the past 10 years.
Sept. 14 – Dr. Harry F. Dowling of the Univ. of Illinois College of Medicine, said drug advertising should be more strictly controlled. He said physicians needed more facts and that misleading advertisements had caused doctors to make mistakes in prescribing the drugs.
FDA Reports, Rules
Welch Case
The Special Advisory Committee authorized in June by Flemming and appointed by Dr. Detlev Bronk Sept. 27 submitted a report, released to the public with Flemming's comments Oct. 6, on its investigation of Welch's decisions and FDA policies and procedures in general. The report said that, “taking into account the limitations of FDA's authority, funds, and scientific personnel, the Committee found the decisions it reviewed acceptable, despite certain deficiencies in the quality and quantity of the data upon which they were based.” The Committee said it “found no evidence of disregard for the public health,” but that “certain weaknesses inherent in the existing law and current staffing and budgetary support hamper the FDA in its task of protecting the public health.”
The report said it would have been impossible to review, in any reasonable period, even a portion of the “thousands of voluminous applications for certifiable antibiotic preparations and new drugs,” so it had selected 29 applications considered to be of “especial significance”. They covered three preparations of certifiable antibiotics, 14 of antibiotics classed as new drugs and 12 of other new drugs.
Recommend Ations
The Committee recommended that the FDA be given statutory authority to: require proof of the efficacy, as well as safety, of all new drugs; require manufacturers of new drugs to keep records and submit reports of clinical experience both before and after release of the drug, with evaluation subject to revision; apply certification procedures to all antimicrobial agents for use in infectious diseases. It also endorsed strengthening factory inspection authority, more complete labeling of drugs and better coordination of the supervision of labeling, promotional material and other drug advertising. The Committee said FDA staff members processing applications “should be supported to the utmost in their efforts to obtain submission of truly dependable scientific information,” and that “the data initially submitted by the manufacturer are not always of sufficient quality and quantity to permit a sound decision as to the merits of the product.” It also urged establishing an advisory group of scientific and technical experts to advise on FDA procedures and policies. The Committee said FDA's present resources were “less than adequate,” both in funds and personnel, to meet existing responsibilities.
(The New England Journal of Medicine Aug. 11 charged Congress with being “unreasonably deaf to any pleas for a decent regulation” of the drug industry and said Congress had “crippled” the FDA by not providing it with enough money and power to police manufacturers adequately.
(It said Congress has been “pouring millions upon millions of dollars into medical research but (has been) unreasonably deaf to any pleas for a decent regulation of some of the results of that burgeoning business.”
(Congress in fiscal 1960 appropriated $400 million to the National Institutes of Health, a large part of the sum being earmarked for medical research. Appropriations to the FDA during the same period totaled $13.8 million.
(The journal criticized Congress for refusing to grant an FDA request in 1953 for “a comprehensive factory inspection law that would permit it to make reasonable investigations, including a look at a company's formula, personnel and complaint files.” It said makers of prescription drugs had favored such a law, but Congress had yielded to pressure from the Proprietary Assn. (patent medicine manufacturers) and the National Retail Druggists Assn.)
FDA Staff Investigation
The Special Investigative Unit headed by OCDM General Counsel Charles H. Kendall Oct. 31 reported that, “on the basis of all the evidence before us, it is our judgment that there are no present employees of FDA whose sources of personal income are incompatible with their Government employment.” The report said analysis of all of the unit's investigation had not been completed, but it was expected it would “demonstrate the possibility of organizational or procedural improvements.”
New Drug Labeling Regulations
The FDA Dec. 9 announced new regulations requiring changes in labeling used to promote the sale of prescription drugs to physicians. FDA said the purpose was to insure that such labeling disclosed both the hazards and advantages of the drugs. Regulations requiring full information for use would become effective March 9, 1961, with other required changes effective Jan. 8, 1961.
Major labeling changes included these requirements: labels of drugs for injection must give quantity or proportion of all inactive, as well as active, ingredients; labels of prescription drugs must bear identifying lot or control numbers for determination of manufacturing history; any labeling of prescription drugs or devices including promotional literature mailed or given physicians by company representatives must include data on any relevant hazards and on conditions for non-use; for new drugs, information on use, dosage, hazards and contra-indications must be substantially that contained in applications for marketing the drug; labeling on uses and dosage must show the date of issuance or latest revision.
Changes in regulations to assure safety of new drugs provided: permission to market could be denied on refusal of a manufacturer to allow inspection of methods, facilities or controls; applications for marketing could be made conditionally effective pending verification by inspection of adequacy of manufacturing methods.
Document Citation
"Subcommittee Investigates Drug Prices." In CQ Almanac 1960, 16th ed., 11-743-11-749. Washington, DC: Congressional Quarterly, 1960. http://library.cqpress.com/cqalmanac
Document ID: cqal60-880-28173-1331186
Document URL: http://library.cqpress.com/cqalmanac/cqal60-880-28173-1331186
(2) See Jacob Bell, Pharma advertising in 2018: TV, midterms and specialty drugs.
(3) Ibid.
(4) The video was produced by SCIQ ON TYT / Jayde Lovell and Bec Susan Gill. ScIQ is a partner of the The Young Turks Network. Twitter: @ScIQ_TYT Patreon: https://www.patreon.com/sciQ
(5) See Persons of Interest: Estes Kefauver.
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License
Revolutionary wisdom
Words from an Irish patriot—
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–Dom Helder Camara, Brazilian Archbishop and liberation theologian
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Sadly, pharmaceuticals are the most corrupt companies, when they should look for the people’s health