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Mr. NELLIS. Were you told why they would not? Normally, as you might know, when companies sell products or services, they don't mind putting sales quotas in memoranda and they pass them around to their divisional managers, and the divisional manager passes them to the sales manager, and each salesman knows what his particular quota is. Why do you suppose it was that your company would not put this in writing?
Mr. BRANNAN. Well, because it has to do with human beings.
Mr. NELLIS. The product you are selling has to do with the health of people; is that correct?
Mr. BRANNAN. Yes, but again psychologically
Mr. NELLIS. Wait a minute, Mr. Brannan. Let's stay on that for a minute. If it has to do with the health of human beings, why would not good policy dictate that goals be put on paper?
Mr. BRANNAN. Because it's not good policy.
Mr. NELLIS. Why? Why do you suppose it isn't good policy? You worked for them for 7 years. I assume you must have gathered some information as to why the policy was not good.
Mr. BRANNAN. Well, probably because of the publicity. If it was generally known that Roche had a goal of $350 million for the year of 1977, or whatever the goal would be, and the press got hold of it or whoever got hold of it
Mr. NELLIS. How would it embarrass the company for the press and the public generally to know that the company wanted to sell 350 million dollars' worth of Valium? You will have to explain that to me.
Mr. BRANNAN. Well
Mr. NELLIS. Are you saying it is because the company does not want the public to know that it is going to sell 350 million dollars' worth, whether the public needs it or not? Is that your point ?
Mr. BRANNAN. Basically that's what I'm saying.
Mr. NELLIS. Is that what you're saying? The company's policy was to establish goals for its own profit, is that right, whether the public needed these particular drugs or not? Is that what you're saying?
Mr. BRANNAN. Well, they'd better need it, in other words. If a goal is there I didn't answer the question because if you are given a goal to sell $10 million, as a salesman, or whatever your goal is, salesmen have a tendency of just meeting goals. Because they don't want to go too high or too low. They just want to keep their job and get their quota or their goal. If they go too high over their quota, next year the quota is higher. This is just sales talk. Because if you have a product like Valium where you don't know what the goal would be or what the top is because it goes from $50 million to $285 million in about 5 years, you can't put a goal on something like that, because you don't have a good handle on the goal. And that's why quotas and goals are revised because of lay publicity, what is happening, going under control.
Mr. NELLIS. Your testimony, then, is that the company did in fact establish sales quotas which it called goals; that these sales quotas, which the company called goals, were handled by verbal instruction; and that they were not written for the same reason that the company did not desire the public to know what its profit and sales goals were.
Is that a correct summation of what you're telling me?
Mr. NELLIS. Thank you, Mr. Brannan. I have no further questions. And when the committee members return, we will go to our next panel.
[Recess.] Mr. WOLFF. The committee will come to order. The next panel will consist of Dr. Leonard Schifrin, professor
of economics, College of William and Mary, Williamsburg, Va.; and Dr. Jonathan Cole, chief of the psychopharmocology program, McLean Hospital, Belmont, Mass.
Will you gentlemen be sworn, please.
[Whereupon, Dr. Leonard Schifrin and Dr. Jonathan Cole weru sworn.]
Mr. WOLFF. I understand that one of your gentlemen has to leave shortly. I should ask you, if you would, to summarize your testimony and your complete statement will be included in the record at this point.
TESTIMONY OF DR. LEONARD G. SCHIFRIN, PROFESSOR OF ECONOMICS, COLLEGE OF WILLIAM AND MARY, WILLIAMSBURG, VA.
Mr. WOLFF. We will proceed with Dr. Schifrin.
Dr. SCHIFRIN. Thank you. Rather than summarize what I have said—because my statement is short-may I just touch on some highlights without worrying about covering all of it.
I have a statistical attachment to my prepared statement, and I would just like to run through some of the numbers in it to show you the dimensions of the industry we are discussing.
In data provided by the Bureau of the Census on industry in America, the pharmaceutical preparations industry has grown from approximately $7 billion sales at the manufacturer's level in 1974 to my estimates of about $10.76 billion at the manufacturer's level for 1978. It is roughly divided about 3 to 1 in regard to ethicals versus proprietary preparations. So we are dealing with about an $8 billion industry when we speak of the ethical drug industry.
Within the categories of domestic ethical and domestic proprietary drugs, we see the present annual dollar volumes of sales therein for central nervous system ethical drugs to be approximately $2 billion and for CNS proprietaries to be approximately $600 million. That means each of these two represents dollarwise approximately 25 percent of the total categories within which they fall. In other words, approximately one-fourth of all ethical drugs are CNS products, and one-fourth of all proprietaries are CNS products.
For drug companies in America, the typical revenue dollar is divided up among many components, and one of those is marketing. In fact, marketing takes the largest cut of the dollar revenue of the drug manufacturing firm. Industry data shows that about 22 percent of the sales · dollar, on the average, is devoted to this marketing effort. That being
the case, the total expenditure on marketing of domestic ethical and proprietary CNS drugs would be $566 million in the current year. Of this amount, there is 436 million dollars' worth of promotion and marketing effort for ethical CNS drug products and $130 million for proprietary CNS products.
Now, how is that marketing money spent ? Of that money, looking at 1977 and 1978—I have taken the $400 million of CNS domestic ethical marketing for 1977 and $436 million for 1978 and divided them up according to the proportions of different promotional efforts made by the companies in this industry. Here, I am dealing only with ethicals.
The breakdown I use showing the estimated percent of total promotion allocated to each marketing method was provided by the Pharmaceutical Manufacturers Association to Senator Kennedy in the 1974 hearings on the drug industry. Using their proportions then, we would expect the outlay for detailing of CNS ethical preparations to be $240 million in 1977, $262 million in 1978; journal advertising to be $40 million and $43 million respectively; direct mail, $32 and $35 million; sampling, $48 and $53 million; and conventions, exhibits, miscellaneous, $40 and $43 million for the 2 years; in sum, these figures show the division of $400 million for 1977 and the $436 million for 1978 that was spent on the promotion of ethical CNS drug preparations.
Now, these data indicate the dimensions of CNS drug marketing in our society, and they carry some implications about the punch or effectiveness of this marketing effort. It is as large as it is simply because it works.
It is clear that the character of competition, the main facet of competition in the drug industry, is promotional competition. Very rarely is price the sharp edge, the cutting edge of market rivalry.
This promotional expenditure goes for the conveying of “information" of varying degrees, varying qualities, from simple reminders to technical pieces or reprints of articles, and covers a very broad range of things. Most of it, though, goes for a very informal sort of contact between the industry and the medical profession, the visit of the detailman to the physician. And a lot of the uncertainties that we have heard this morning about what is said in that contact stems from its highly personal and informal nature.
Now, it should be clear to us that the drug industry does not produce only drug products. It also produces information—an extremely important coproduct of the tangible drug product. It is drugs and the information about their use that determine whether we will use those drugs properly or not, whether we will use them effectively and efficaciously or not.
Information thus becomes extremely important, because it guides the use of these powerful items in our society. Information about these products must be objective, complete, balanced, precise. There is nothing wrong with the consumer paying for this information, as long as the consumer is better off for having paid for that information, in other words, the information is a socially efficient product if it meets these criteria I hảve specified, and thus guides the wise use of the product. Since we pay so heavily for this information, we have
the right to expect large, positive results from it. There has long been serious doubt that we are getting these results in full measure.
We see other parts of the problem, too. This information mechanism is so structured that it reflects an informational dependence on the medical community and the public on the very firms which develop, produce, and distribute drugs.
We have touched on that informational dependence this morning: The physician and his lack of continuing education, in the face of a confusing proliferation of new products and drug combinations make it very hard for doctors to keep up with new knowledge in their fields, particularly the knowledge of new drugs. In regard to proprietary drugs, the consumer, of course, is similarly bewildered.
To get to my conclusion, my basic point is that, as we discuss this informational mechanism, we must ask whether the information conveyed creates an attitude toward drugs and their use that transcends their rational scientific application to society's needs for medical assistance. Information is constantly accumulating on drug experience. Yet, the fundamental flaw in the industry's operations, as I see it, is the lack of an appropriate mechanism for gathering and disseminating this information in a fully objective manner.
It is not fair to expect the industry to be totally objective about conveying information when they stand to gain financially from structuring that information so that their own products are chosen over somebody else's. It is an extremely ambiguous role in which they find themselves. And to generalize, I would say the compelling need is for better, that is, fuller and more objective information on drugs (1) before they come to market, (2) while they are new, and (3) in their long continuing use—the prompt and continuing collection, gathering, interpretation, and dissemination of this vital information.
I personally believe the most efficient way, economically and socially, to provide this information is to use the best information that we can generate-that information coming from drug companies and physicians to the FDA-and for the FDA to assume the leadership in distilling this information for the medical community-perhaps as my colleague calls it in providing "nondenominational detailmen," or a "truth squad,” as other people have called it but to utilize the personal meetings of FDA representatives with physicians, so that the representative, not having his personal financial well-being tied to the selection of a particular product, can provide fully objective information to the physician.
Mr. WOLFF. Thank you, Dr. Schifrin.
Dr. Cole, would you summarize your statement, please?
COLOGY PROGRAM, MCLEAN HOSPITAL, BELMONT, MASS. Dr. COLE. I will do my best.
I am in an unusual position, I think, probably relative to the rest of the experts you are likely to run into a medicipe, and that is I work in a 250-bed psychiatric hospital where I mainly see people with
more severe psychiatric illnesses than are usually given Valium by the GP, so I see people with schizophrenia or severe depression for whom a Valium prescription is inappropriate.
I can say in my contacts with people and patients—and I have some of both—I have not run into much in the way of serious problems with Valium. I know of two or three people who have had trouble getting off the drug, and I know patients who seem to do better on it for long periods than they do off it. When they have been off it for 6 months they continue to get in fights with their bosses and boyfriends even though they are off it, while on the drug they get along well.
There is an awful lot of Valium being prescribed, and I worry that some of it is being prescribed inappropriately, but I don't even have good standards for measuring the degree of inappropriateness, and I wish somebody would do a detailed study of exactly what happens in the doctor's office. If someone would study Valium prescribing at the doctor's office to find out what kind of people get it and what happens to them, I would be happy.
As to street abuse, in the Boston area by rumor Valium is mainly sort of a third-class drug. People would rather use Quaaludes. People do abuse it but it is college kids taking a handful over a weekend to see whether it works because they borrowed it out of their mother's medicine cabinet.
But probably given a choice among all the drugs of abuse, Valium would not be No. 1. If I would have doctors handing out large amounts of things, I think Valium is probably safer than others. I wish GP's and primary care physicians could do a better job of deciding who is depressed and giving them an antidepressant because I don't think Valium is a particularly good drug in depressed patients and I wish they could pick up schizophrenia faster.
În the anxiety area I am more worried about use of Mellaril and Stelazine more than I am for Valium because you can get a serious and sometimes semipermanent tardive dyskinesia out of drugs like Mellaril and Stelazine which is, I think, worse than most things that happen with Valium.
How to get doctors educated ? I think a good deal more continuing medical education, recertification. Retaking the exam every few years is about to be imposed on everybody, and drug questions are easy to make in a multiple-question format, so I think there will be a lot there.
Even with psychiatric residents I find in teaching them psychopharmacology the first months on the job they don't understand what they are hearing. And after they have lived with patients a long period of time they begin to listen better and learn more, so I think some postgraduate education in drugs has to be done. I guess detailmen do some of it.
I myself have one drug I am using because a detailman gave me some information which I had scanned and forgotten, and by God, his antidepressant has fewer side effects than other people's, and he pointed it out and I tried it and it's right. I learned something from à detailman. They don't usually try to sell me things but that was useful.
The question of whether everybody ought to get psychotherapy I worry about, because if everybody getting Valium in this country