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Executive Summary

Differential drug pricing and drug counterfeiting will be examined by the House Energy & Commerce/Oversight & Investigations Subcmte. at a hearing, tentatively scheduled for mid-June, subcmte. member Rep. Sikorski (D-Minn.) told the Natl. Assn. of Retail Druggists (NARD) during the group's annual legislative conference May 20-22 in D.C. Commenting on the issue of drug counterfeiting, Sikorski told NARD that "you can't talk about counterfeiting drugs without talking about diversion [and] without talking about price differentials." Sikorski said that the hearings would look at such practices as pharmaceutical "brokers" making arrangements with non-profit hospitals to obtain at cost excess drugs purchased by the hospitals at discount prices. Nonprofit institutions are eligible for the discounts under an exemption to Robinson Patman Act antidiscriminatory pricing provisions. The Dingell cmte. has been investigating the distribution of counterfeit versions of Searle's Ovulen 21 since last fall ("The Pink Sheet" Feb. 4, T&G-2). A member of Rep. Dingell's (D-Mich.) House Commerce/Oversight & Investigations Subcmte., Sikorski said that although "most nonprofit institutions deserve special treatment under Robinson-Patman," Congress must "insure that the exemption is not abused and undermined." He maintained that "some nonprofit institutions . . . are seduced or reduced into selling products in competition with private pharmacies" by "enterprises . . . that are devoted solely to working with loopholes in nonprofits and the Robinson-Patman Act." Sikorski noted the subcmte. is investigating the extent of the drug diversion and of counterfeiting. "We want to know just what is at stake, how much trade there is in counterfeits." Part of the problem occurs when "bargain-priced drugs given to retail chains make their way to the public," is the risk of counterfeits. "I'm not against the bargain; in fact, I'm for bargains. It's just that I want to be sure that what I bargain for is what I'm getting," the congressman said. "When it comes to drugs, I want to be doubly sure that the quality of the product has been maintained from the moment it's made right up to the moment it's consumed, and I want to eliminate any risk of counterfeiting." The issue of differential pricing is NARD's top legislative priority in 1985, and the assn. has developed model legislation which make price differentials available only to "charitable" institutions. The model legislation is being circulated by NARD on Capitol Hill in hopes of finding a sponsor to introduce a bill this summer. The NARD proposal would refine the Robinson-Patman Act's definition of charitable institution in the law's discriminatory pricing provisions to organizations "substantially supported by charitable contributions and whose functions are substantially limited to providing services to those financially unable to purchase such services." The NARD proposal adds that an institution does not qualify for the exemption "if it accepts payment for services or products provided." NARD's draft explains that such an amendment to the law is needed because "commercial nonprofit institutions, including hospitals and health maintenance organizations, are obtaining drugs at prices not available" to retail pharmacies "and reselling them in competition with" retailers. NARD said that the practice was "never contemplated by Congress in passing an exemption from the Robinson-Patman Act for charitable institutions." The assn. added that commercial nonprofit institutions also receive "tax and other economic benefits which subsidize their competition with for-profit pharmacies."

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