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products doubled in the period that I am talking about, and you

did nothing about finding out why they doubled? Dr. SPEIR. May I refer this

to Mr. Hal Smith, our special representative.

Mr. Smith. Mr. Nellis, I can appreciate your concern over looking at those figures, because they would be misleading to someone who wasn't familiar-or confusing.

Mr. NELLIS. Maybe I am confused. Mr. SMITH. Maybe I can put that in perspective for you. The nature of our business has changed considerably in the past several years. We used to have a number of direct accounts in the area of perhaps 15,000 direct accounts. And with our business, we have had a tendency to go to the wholesaler, the major accounts, and concentrate our business flow in that area.

In the Chicago market in particular, we have flag drugs. And I represent the company and cover an area of 16 States, so my geography, as a regional area, is pretty vast. And they represented the largest single dollar volume account that I had in my region of the 16 States.

And late last year—as a matter-of-fact, somewhere during the middle of the year--maybe as early as May of 1977—we no longer shipped them. They became a poor risk to our company financially, so we decided not to ship them.

So naturally, you would look for someone to pick up that lost business. What I am talking about is dollars.

Mr. NELLIS. You didn't mean "lost business"; you mean "lost increased business.” Your business was on the increase throughout this period.

Mr. SMITH. Well, sir, I am talking about an account that does maybe in excess of a half a million dollars. My concern, naturally, would be, as a businessman, where are those dollars going to go? And inasmuch as we have competitive, or very competitive, wholesalers in the Chicago market, I felt assured that they would pick up that slack, which they did.

Mr. MURPHY. Mr. Smith, may I interrupt you! You expressed a concern, as a businessman, of loss of sales, where your dollars are going to go. Has it ever occurred to you people to express some concern about the doubling of the use of a drug, the social consequences of that?

Mr. SMITH. Yes, sir, that is an obvious concern of ours. As a matterof-fact, the president of our company addressed that very question thoroughly last year, when he directed all regional managers, as well as division managers and our salespeople, to alert them to any problems that they hear developing, any newspaper articles that we see, anything that would direct us and give us some indication there is some abuse to the product.

In addition to that, we have a “check Talwin.” Every order that goes in in excess of a certain volume is checked, and a determination is made at corporate level.

Mr. MURPHY. What has led you to do that?

Mr. SMITH. We have been doing that for several years, according to our

Mr. MURPHY. What has led you to do that? How did you come to that decision to check Talwin?"

Mr. SMITH. “Check Talwin?” It has just been part of our policy for some time.

Mr. MURPHY. Do you check all the drugs you deliver like that?
Dr. SPEIR. No; we don't.
Mr. MURPHY. I am talking to Mr. Zahn.

Mr. SMITH. I am Mr. Smith. This is Mr. Zahn. He is with the Zahn Drug Co.; I am with Winthrop.

Mr. MURPHY. I thought you were Zahn; excuse me.

Mr. Smith. For us, yes, we do check it periodically; and it has been going on for several years, I am led to understand.

Mr. MURPHY. What led you to this checking procedure! I am told that the drug came on the market in the early 1960's. You tell me you went into a checking procedure the last 2 years. What led you to that checking procedure?

Mr. SMITH. Well, I didn't say “in the last 2 years.” I said "for several years."

Mr. MURPHY. How many years are we talking about?

Mr. SMITH. You could be talking about—I don't have the firsthand knowledge on that, but it has probably been 4, 5, 6 years, perhaps.

Mr. MURPHY. What led you to that procedure in the last 4 or 5 or 6 years, to check

Mr. Smith. That was a corporate decision, sir.

Mr. MURPHY. Do you know the thinking behind that corporate decision?

Mr. SMITH. No, sir, I wouldn't know.
Mr. MURPHY. Does anybody at this table ?

Dr. SPEIR. I had a chance to look back through the files recently, Mr. Murphy, to address this. This was a decision apparently made back in 1969, when the very first reports of dependency came out, very slight though they were, on the advice of Dr. Moe Seevers, and I think Dr. Nathan Eddy from Johns Hopkins.

We instituted an internal system to check on that.
Mr. MURPHY. What is that system? Describe that system.

Dr. SPEIR. That system is one where orders over a certain amount, or orders that represent a substantial increase in percentage of anyone, get flagged. This was done manually for years. And in 1974, they instituted a computerized

Mr. MURPHY. So you were alarmed at the number of sales coming into this area?

Dr. SPEIR. No, sir, I don't think we were alarmed at it. We wanted to make sure we would be able to detect any substantial change that might represent an improper use.

Mr. MURPHY. Wouldn't 100 or 200 percent be a substantial change

in

your sales ?

Dr. SPEIR. It would, indeed.
Mr. MURPHY. So. would you be alarmed at that?
Dr. SpEiR. We would be; but what happened was as follows
Mr. MURPHY. You would or you wouldn't be ?

Dr. SPEIR. We would certainly be concerned and want to look at it and see what it represented.

Mr. MURPHY. What did you find when you looked at it?

Dr. SPEIR. When we looked at it, we found that the sales to our wholesalers were volatile. They went up very markedly and would go down, much more so than our sales to our direct accounts.

Again, Mr. Smith may be able to address this better than I can. Mr. MURPHY. And what did you attribute to that?

Dr. SPEIR. This was attributed, during the last year when this was happening Mr. MURPHY. I understand the period, but why? What did you

attribute to that?

Dr. SPEIR. The volatility?
Mr. MURPHY. Right.

Dr. SPEIR. Wholesalers have a different pattern of buying. Again, Mr. Smith can address this better than I can, but my understanding is that they will buy several months at a time in order to take advantage of discounts.

Mr. MURPHY. But your total sales for the year, Doctor?
Dr. SPEIR. We did not know these figures.

Mr. MURPHY. You don't check your total sales of Talwin for the year?

Dr. SPEIR. Yes, we do, sir, but we don't check them just for the Chicago area, which we have done in response to your request.

Mr. MURPHY. Well, the chairman finds it a little amazing that, first of all, you order a checking procedure—you named a couple of doctors names, in turn, within the company, who have become alarmed at sales—then you tell me you checked just certain categories of sales at a certain level to your wholesalers. And then you use the word “volatile,” to use your word, and it goes up and down. And you say you are puzzled by all this. And you knew nothing further than that?

Dr. SPEIR. These sales were checked at the central office, and it was felt that they represented sales to legitimate large volume wholesalers, whose buying patterns were a volatile one. They would go up very

Mr. MURPHY. You just got through testifying you don't check, you don't know what the Chicago sales were.

Dr. SPEIR. We knew what each particular order was. These are flags that are put on a given order for a given account, not the sales for the entire Chicago area, because we don't keep our records that way.

Mr. MURPHY. It would seem to me, Doctor, if I were dealing with the drug, dealing with the public, and you are getting reports, alarming reports, to use the words, about maybe “misuse" of this drug, and you see your sales go 100, 200 percent over a couple of years; and you say there was a meeting within your corporate structure, internally, and you were becoming alarmed and used some doctors' names that were becoming alarmed—these were warning signs to the drug company.

And it would seem to me that the response of a company was to counsel with the Federal Drug Administration and the legal law enforcement situation over the city, to go to the Illinois Public Aid, where most of your pills were being moved and where they have graphs that demonstrably tell a story.

This is information we picked up, and it wasn't a bit hard for people in the business to do that. It just seems to me—and also by counsel saying that you were going to resist scheduling, too, I find this hard to believe; and I don't find it to be a responsible conduct of a responsible company.

Mr. Rodwin. If you would like to pursue the numbers further, Mr. Murphy, I do think Hal Smith, our regional manager, can try to help more than Dr. Speir has, because it is simply not his responsibility.

Mr. MURPHY. We don't care who responds, Counsel.
Mr. Rodwin. Fine.

Mr. Smith. Mr. Murphy, again, I would like to address myself to that question, the reason for some of the changes that you are concerned about—and you say "an increase of 100 percent”– I just might add that we have other drugs in our market that go through a wholesaler, like Mr. Zahn's wholesale, that show 71, 81, 100 percent increase. So that, really, in itself, would not alarm us; OK!

The reason for that

Mr. NELLIS. Excuse me, Mr. Chairman, I would like to make a request, Mr. Chairman, that the company submit to us information, similar to the information we got on Talwin, with respect to all your other controlled drugs—that is, all your other drugs that are required to be prescribed-in view of that statement.

Mr. MURPHY. Counsel, is that too much of a burden?
Mr. Rodwin. Are you referring to all prescription drugs?
Mr. NELLIS. Yes, sir.
Mr. Rodwin. Or all controlled drugs?
Mr. NELLIS. I am referring to all prescription drugs.

Mr. Rodwin. One that Mr. Smith was talking about is an antibacterial—do you wish this at all ?

Mr. NELLIS. Yes. I think we ought to have them all, because if you are contending your sales went up comparatively, as your sales in Talwin, this committee has to have some evidence of that.

Mr. Rodwin. We will be happy to provide that.

Mr. NELLIS. Mr. Smith, I am referring to Dr. Speir's statement that no steps were taken to reduce such orders to appropriate sizes were warranted. I would like for you to name, for this committee, a single instance, involving a single buyer, where you reduced an order of Talwin in the last 2 years.

Dr. SPEIR. I can't give you a specific date, Mr. Nellis; but I have been informed that there was a direct account in Puerto Rico.

Mr. NELLIS. In Puerto Rico? What about Chicago, Ill., Dr. Speir ? Dr. SPEIR. In Chicago, Ill., I do not know.

Mr. NELLIS. Not a single account, I can tell you in advance, can we find wherein you have reduced any orders or any sales. And I am quoting you, Dr. Speir, “Steps were taken to reduce such orders to appropriate sizes, where warranted.” And you had 200 and 150 percentage increase in sales in Chicago, and you took no such steps here.

Now, I would think, in the chairman's words, “in order for you people to be responsible, you would have to come back and say, We missed the ball. We missed the boat.""

Now, let's get on to something where we can correct this situation, and one of the best ways you could do that would be to come and say, “We agree with schedule II, and we think Talwin ought to be on schedule II.

Mr. RODWIN. I can't agree with your conclusions. We are here to try to help understand and do something better than what we have already done. I think several of the witnesses have indicated—not only the witnesses on this panel, but the prior-panels—the emerging picture was not as clear to them, as well. And for that we apologize and say our system perhaps wasn't as sensitive as it should have been.

Mr. Smith is here today to try to explain, as you inquired, some of the numbers and why they seemed to him to be not peculiarly large or mysterious. He is still prepared to explain the Chicago market. Mr. MURPHY. Mr. Railsback.

Mr. RAILSBACK. May I ask one question? I don't know who might have the answer.

I am curious what is the effect on the sale of a particular substance that comes under control ! In other words, what would be the effect of scheduling something as a schedule II controlled substance? Say, sales of Talwin—what do you predict would be the effect on your sales ?

Mr. Rodwin. If you are asking specifically with respect to Talwin, in the Chicago area, again, I think Mr. Smith can tell you what our

І experience has been, generally speaking. I think the answer is obvious, and that is control does have an effect in decreasing these sales.

Mr. RAILSBACK. How much have the sales decreased since it became schedule II ? It still hasn't been listed on the Federal schedule.

Mr. SMITH. Mr. Railsback, in answer to your question, in this final quarter, I can see some trends in the second quarter from August when we went on schedule, I think. I believe the date was August 11 when it went under schedule II.

In the third quarter our sales have dipped a drastic 60.2 percent for the third quarter versus the same sales period, third quarter, 1977.

Mr. RAILSBACK. Is that just in the Chicago area? Mr. SMITH. Yes, sir, and I think the point of interestMr. RAILSBACK. Could I just follow up by asking what the total picture has been as far as Talwin sales for that quarter? In other words, give us your national figure.

Mr. ŠMITH. All right, I can do that for the Talwin tablet. The Talwin tablet-we have a national quota, and they had a national attainment of 131 percent nationally.

Mr. RAILSBACK. They had what?
Mr. SMITH. 131 percent nationally.
Mr. RAILSBACK. Is that an increase ?

Mr. Smith. Yes, that would be an increase and over a target. They said, “Establish a quota versus 1977 historical sales.”

Mr. RAILSBACK. Let me see if I can phrase it so that I understandwhat would be the percentage increase or decrease of the sale of Talwin over your last yearly reporting period compared to the year before! ?

Mr. Smith. It would be difficult to say at the end of the third quarter because we just completed the third quarter and I have not been back in the office to gather those figures. But we are probably talking 30 to 40 percent.

Mr. RAILSBACK. Could you give us that submit those figures ?
Mr. Chairman?

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