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got psychotherapy instead, there wouldn't be enough therapists. And as I pointed out in my testimony, I think Valium may be a best buy in terms of economics. As I say, I think some psychotherapists do well with some patients, but I am never sure how effective psychotherapy is on the average, and I think a lot of people who go to the GP with nervous symptoms or a physical condition which is making them nervous probably wouldn't go to a psychotherapist even if they were told to.

I once had a fantasy about doing a study in which a doctor who is going to prescribe Valium, opens an envelope which says, either "Prescribe Valium" or "Talk 15 minutes more" so that the effects of either choice could be compared.

I think the choice a primary care physician has is to talk a little more or prescribe Valium, and he often makes the patient a little happier by prescribing Valium.

I think the elderly are a problem. The drugs build up on the elderly more and they are more likely to get oversedated, and watching the elderly patient carefully is the best thing. Mixing alcohol and Valium is not always either bad or fatal.

I know a lot of people who are on low doses of Valium who drink socially and don't have a problem. I think it is more of a problem if you chugalug a lot of liquor on top of a lot of Valium.

I know a lot of people on Valium who drive. I think they shouldn't drive the first few days when they may be oversedated, and should watch it. An intelligent patient who can observe how he is doing—I think people can drive with it but I think it's worth worrying about.

I keep thinking nobody pays much attention to drug company advertisements. With all the money that is being spent, somebody must be paying attention to it, but I have great trouble telling where. I think doctors are generally more intelligent than the average person in this country and ought to be able to tolerate both detailmen and ads in a sensible manner.

I think patient education is a good thing, but as I mentioned in my testimony, all the education about smoking hasn't penetrated my skull yet. And I would love to see the patient package inserts field tested to see what the effects are before we start handing them out and they mainly accumulate on the pharmacy floor after the druggist hands

them out.

I got a book out about 2 months ago in which a friend of mine and I tried to educate everybody about all kinds of drugs. I think materials are already available to patients and potential patients and doctors about drugs. Unfortunately, I think a lot of patients aren't going to read them or aren't going to understand them.

[Dr. Cole's prepared statement appears on p. 232.]

Mr. WOLFF. Thank you very much, Dr. Cole.

I'd like to first start off with Dr. Schifrin. Dr. Schifrin, in your discussing the amounts of money that are spent in the marketing costs of these CNS ethicals and proprietaries—the total was some $10 billion, as I understand it.

Dr. SCHIFRIN. Yes, sir, that is my estimate for 1978.

Mr. WOLFF. And the total amount spent on marketing was about $566 million.

Dr. SCHIFRIN. That would be the total amount spent on the marketing of domestic CNS drugs. That total is for all CNS drugs, ethical and proprietary, sir. The $10,760,000 is the manufacturer's output of all pharmaceutical preparations for 1978. The $566 million is the total expenditure on marketing of domestically marketed CNS drugs.

So I don't think the $566 million relates so much to the first figure, but it relates to the CNS section only there, which would be about $2.5 billion.

Mr. WOLFF. $2.5 billion?

Dr. SCHIFRIN. The total sales of all CNS drugs for 1978 I estimate to be almost $2.6 billion, yes sir. And $566 million is the promotional effort behind that.

Mr. WOLFF. Do you think that is an inordinate amount?

Dr. SCHIFRIN. Yes, if I can clarify what I mean by that; $566 million by itself is not a good or bad figure. If you ask me, "Do we get 566 million dollars' worth of benefits for the outlay?" I would say no.

Mr. WOLFF. Have you examined the price structure of these substances themselves?

Dr. SCHIFRIN. I have examined the price structure of all pharmaceutical preparations. I have not singled out CNS drugs.

Mr. WOLFF. Let's look at the price structure itself. One of the things that does concern us generally in the Congress-not specifically in this committee is the rising cost of health care. Are you attributing some of this to promotional methods that are used or overpricing by the pharmaceutical companies?

Dr. SCHIFRIN. Well, I am going to make a distinction here.

One, we are all concerned with rising prices, including rising prices for health care. There is a second term which is really the level of prices. Drug prices have not risen very much. They are among the most stable components of all the price index.

Mr. WOLFF. They wouldn't have to rise very much, as I understand it, between the cost of materials and preparation and the final cost of the item at the consumer's door.

Dr. SCHIFRIN. Yes. I say, therefore, I am not concerned about them rising; I am concerned about the heights they have attained already. Mr. WOLFF. What would you say is the average markup on overall pharmaceuticals today?

Dr. SCHIFRIN. You mean between the time it leaves the manufacturer and reaches the consumer?

Mr. WOLFF. No, between the time of manufacture to the time it reaches the consumer. I am concerned with not only the material costs, but obviously the research costs and preparation costs and everything else, but on an overall basis-the cost of an item that reaches the consumer, a dollar figure?

Dr. SCHIFRIN. I would say that of each dollar that the drug company receives, on the average, before taxes, a third would be a modest estimate of the profit contained.

Mr. WOLFF. A third?

Dr. SCHIFRIN. Yes.

Mr. WOLFF. That's at the manufacturer's level?

Dr. SCHIFRIN. Yes.

Mr. WOLFF. Then you have the middleman and the wholesaler involved generally.

Dr. SCHIFRIN. Yes. Generally I would approach it this way. If the manufacturer sells something for which he is going to receive a dollar, by the time it gets to the consumer it will cost $2. That is a good rule of thumb. So if the consumer pays his $2, half of that goes to the manufacturer. Approximately 40 percent is absorbed in the retailing, and 10 percent is a rough estimate of the middleman costs of bringing that product to the consumer. These are just rules of thumb. Mr. WOLFF. Do you think there is some way to reduce the cost of these items to the public today?

Dr. SCHIFRIN. Oh, yes. I think there are numerous ways.

First, I really want to make a point here, and it does not contradict my testimony. I think the drug industry has made an enormous contribution to health and well-being, and I think in many ways drugs are more cost effective than the medical care we are receiving for certain conditions. But on the other hand, even if they are good bargains, the prices we pay are usually too high.

And I think that we can take advantage of there being good bargains and save money if we look at what part of that money being received by the company represents things for which the consumer does not receive benefit. The promotion is the most outstanding one; this is an extremely large outlay and it is an expense that is very easily passed on to the consumer, because we need the product.

Mr. WOLFF. Would not the cost be greater-and then I will yield to my colleagues-would not the cost be greater if the volume was down? In other words, by increasing the volume of a particular item on an economic basis, don't you reduce cost?

Dr. SCHIFRIN. There is such a thing in economics as economies of scale where "larger" is more efficient. The demonstrated cases, however, almost always indicate that "pretty big" may be more efficient than "small," but "big" is not more efficient than "medium," and "very big" is extremely rarely more efficient than "big" in terms of the scale of operations. There are endless studies in industrial organization on this matter of economics of scale.

Mr. WOLFF. Thank you very much, Dr. Schifrin.

Mr. Burke.

Mr. BURKE. Thank you, Mr. Chairman.

Dr. Schifrin, I notice a little disagreement in your statement to some degree in which I feel that you have agreed probably with Mr. Brannan in his statement-I don't know whether you were here when he made his statement or not. But it seems you do disagree to some extent with Dr. Cole.

I say that because you mention in your statement that in part the medical community is to blame for allowing physicians to become highly dependent on drug firm representatives and advertising materials for its new and continuing education on drugs.

Dr. SCHIFRIN. Yes, sir.

Mr. BURKE. Dr. Cole, on the other hand, said he didn't think the advertising meant very much to physicians, and he thought physicians themselves could analyze the salesmen's presentations to some degree. That is on page 4 of your statement. And I am trying to make an exact determination of who is at fault.

First of all, Dr. Cole, I have this disagreement with you. You mentioned the high levels of education that the physicians have, but being

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a former practicing lawyer anyhow and a lawyer by profession, I'd like to think we are pretty much on a par, too. But even we are deceived by a good deal of the advertising and some of the statements that are made. Particularly, most of us can't read or understand the language in an insurance policy.

Mr. WOLFF. Nor a prescription. [Laughter.]

Mr. BURKE. Nor a prescription. So I would like to ask Dr. Schifrin in trying to get some analysis between the two statements you made, and particularly in view of the statement that Mr. Dornan made, and then I am going to yield my time to Mr. Dornan because I think he made some extremely critical statements that I am not sure are actually based upon true facts. So I'd like you gentlemen to talk to him. Dr. SCHIFRIN. My response would be to say John Wanamaker, who brought advertising to retail marketing, was told that half of his advertising was wasted. He said that was true, but he didn't know which half. [Laughter.]

That is what we are talking about here. It is very difficult to know the impact of advertising on physicians' prescribing habits. Some years ago, in some studies financed by the AMA called the Fond du Lac studies, advertising programs were tried on a local basis, for example, and detailmen were sent through local areas, and then after they had gone through, a record was made of how the prescribing habits of physicians had changed by actually looking at prescriptions in drug stores, the products that had been detailed to them, and so on. And I think that was the first study that showed this influence on physicians to be very, very strong.

I don't know if you have seen this [indicating]. I have submitted a recent publication to the committee, a medical textbook that has just come out, "Clinical Pharmacology," in which I wrote an article called, The Economics and Epidemiology of Drug Use. In it, I have drawn heavily on the vast literature in this area.

Mr. BURKE. I didn't see that.

Dr. SCHIFRIN. Let me read to you parts of a very thorough study on this.

1. The available evidence seems to clearly indicate that detailmen are the most influential source of drug product information in the early stages of the adoption process. However, detailmen do not appear to be as influential in the later stages of the adoption process, particularly at the time the decision is made to prescribe the new drug.

2. All studies on the influence of medical journals seem to point to a rather significant contribution. In general it appears journal articles are nearly as important as detailmen in the early stages of the adoption process. Advertising may also be important in the early process-mailings, really-but seem to be more important at the time of trial of a new product, not as a source of legitimating information but as a source of information on dosage forms, adversary reactions, and so on. Several studies have found direct mail to be of less overall importance than detailmen and journals and indicate direct mailings are most influential in the early adoption process.

Then it goes on to samples. In 5 it talks about meetings, and 6, a very interesting point touched on lightly by Mr. Brannan:

"Patients have a greater influence on prescribing than most physicians would care to admit."

This tells us that these impacts parallel very closely the dollar volume spent on each type of promotion, which indicates the companies

know what they are doing. They are spending their money on what has the most impact.

I don't know if that answers your question, but that gives you what I know about the topic.

Mr. BURKE. Dr. Cole.

Dr. COLE. He is obviously the expert in this area and I am not. And I'd like a copy of the paper because I have not seen it. I know of some drugs which are good drugs but the psychiatrists in the Massachusetts area have never heard of them because I think the company doesn't detail them properly. I think if you have heard about a drug and try it and it works, you may prescribe it on your own.

Mr. BURKE. I intended to ask you because you said in your statement you had not much experience with Valium because your patients didn't use it and that wasn't your field. And yet, you talk a great deal about Valium and the fact it is a good drug, and so on and so forth.

And that is why I raised the question of who has the responsibility and really who is the expert on making this determination even with your statement.

Dr. COLE. I guess my position would be that I read all the literature on Valium and get asked to make talks about drugs like that and do, in fact, know a good deal about its pharmacology. I know the literature well on Valium but I don't prescribe it for a lot of patients.

Mr. BURKE. I see.

Mr. WOLFF. One point that was made here, however, in your discussions you talk about the patient doing the prescribing. What effect do you think a publication like Reader's Digest or Health Digest has upon the overall number of patients' requests for specific drugs?

Dr. COLE. I suspect a good deal. I have gotten five referrals by phone from the most recent Reader's Digest articles, I think. Certainly people do respond to things like that.

Mr. WOLFF. Mr. Dornan.

Mr. DORNAN. Thank you, Mr. Chairman.

ago be

Dr. Cole, you say on page 2 of your written statement, "Is this situation 'bad'? It's very hard to tell. Drugs like Valium are really much safer than most other drugs. Huge doses, taken alone, are not lethal." I imagine you took great exception if you saw the CBS "60 Minutes" show on Valium last spring and was rerun a few weeks cause it made a much different statement on Valium potency. Dr. COLE. I did not see the show. Mr. DORNAN. Did you hear about it? Dr. COLE. Yes, but not in any detail. Mr. DORNAN. I'm sure the gentlemen who will be here this afternoon from Hoffmann-La Roche saw it because the show was entitled "Valium." And most of the drug abuse correction centers around this country, whether at street level or of a pretty sophisticated type, are beginning to report just the opposite, that although there are few reported cases of just straight Valium death, and there is an incidence of pure Valium death, that this tranquilizer combined with alcohol and other drug mixing, has become a very, very serious problem. And yet I recall it was only a few years ago that Valium was put in the Dangerous Substances Act, along with Librium, which was still equally popular at that time.

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