362 



before use, and the Food and Drug Administration required submittal 

 of test data along with each api^lication for release ; however, if the 

 FDA did not act in 60 days, the approval was automatic. The public 

 acceptance of novel drugs, and the generally favorable experience of 

 the medical profession with potent new formulations, meant that 

 drugs had an assured market irrespective of price, as long as the 

 prescribing physician could depend on the reliability of the drug 

 houses, and as long as the drug houses could continue to meet the 

 demand for new remedies. Since the market was limited to persons 

 requiring medical care, the effect was to generate a highly profitable 

 but very limited market for new drugs. The new market needed to be 

 created and consolidated quickly. The process needed to be repeated 

 as often as possible. 



The situation that resulted from these various trends was one of 

 potential hazard. Many physicians and pharmacologists were out- 

 spoken in their criticism of it. Leaders of the American Medical Asso- 

 ciation voiced concern and devised a new and more intensive control 

 plan to improve the information available to physicians about new 

 drugs. However, the understaffed FDA did not advise the Congress 

 of the growing problem, nor did it seek stronger controls or larger 

 staffing. And within tlie drug industry, technical quality and pro- 

 fessional standards in the scientific sector were increasingly jeopard- 

 ized by the urgency expressed by the business and mechandising sector, 

 in the face of the very substantial financial rewards for good sales 

 records. 



/ 

 II. Criticism of Ethical Drug Industry in Antitrust 

 In\^stigation, 1959-61 



A voluminous set of hearings directed at the financial aspects of 

 the drug industry was compiled by the Subcommittee on Antitrust 

 and Monopoly, of the Senate Committee on the Judiciary, under the 

 leadership of Senator Estes Kefauver of Tennessee. By the time the 

 report of this drug investigation was submitted. May 8, 1961, the 

 subcommittee had accumulated 11 volumes (8,669 pages) of testimony 

 and exhibits bearing on the management and operations of the drug 

 industry in the United States.'' The purpose of the investigation, 

 according to the chairman, was to examine a number of typical indus- 

 tries thought to be characterized by "administered prices." In such 

 industries, the question to be explored was "How to bring about an 

 equitable distribution of the fruits of scientific progress" and, it was 

 observed, on this matter "there is no existing public policy." * 



s U.S. Congress. Senate. Commltte*^ on the Judiciary. Administered prices. Hearings 

 before the Subcommittee on Antitru.'Jt and Monopoly of the • • * Parts: [Entitled] Ad- 

 ministered Prices in the Drug Industry. Pursuant to S. Res. 57, 86th Cong. 1st and 2d 

 sess. Pt. 14 (Corticosteroids), Dec. 7, 8. 9, 10, 11, and 12. 10.59; pt. 15 (Corticosteroids — 

 appendix) pt. 16 (Tranquilizers). .Inn. 21, 22. 26, 27. 28. 20. 1060: pt. 17 (Tranqnilizers — 

 appendix). Pursuant to S. Res. 283. a6th Cong. 2d sess. Pt. 18 (General: Physicians and 

 other Professional Authorities), Feb. 25, 26, Apr. 12, 13, 14, 15, 1960; pt. 19 (General. 

 Pharmncentlcal Manufncturers Association), Feb. 23, 24, and Apr. 20, 1960; pt. 20 (Oral 

 Antidiabetic Drugs), Apr. 26, 27, 28, May 3 and 4, 1960; pt. 21 (General: Generic and 

 Brand Names). Mav 10. 11. 12. and 13. 1960 ; pt. 22 (The Food and Drug Administration : 

 Dr. Henrv Welch).' Mav 17, 18, June 1. 2, 3, and 6, 1960; pt. 23 (The Food and Drug 

 Administration: Dr. Henrv Welch — appendix) ; pt. 24 (Antibiotics), Sept. 7, 8. 9. 12. 13, 

 and 14 19R0; pt. 25 (Antibiotics — app. A); pt. 26 (Antibiotics — app. B). (Washington, 

 U.S. Governmpnt Printinsr Office. 1960-1961). pp. 7837-16505. 



*U.S. Congress. Senate. Committee on the Judiciary. Administered Prices. Drugs. Re- 

 port of the * • • made bv its Subcommittee on Antitrust and Monopoly, Pursuant to 

 S. Res. 52. 87th Cong. 1st' sess.. Together with individual views, to study the antitrust 

 laws of the United States, and their administration, interpretation, and effect. Study of 

 Administered Prices in the Drug Industrv. S7th Cong. 1st sess. S. Rept. No. 448. (Wash- 

 ington, U.S. Government Printing Office, 1961). p. 2. 



