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SAMPLING IS SURE TARGET OF HOUSE DIVERSION HEARINGS, OVERSIGHT SUBCMTE. STAFFER TELLS NARD MEETING; OUT-AND-OUT BAN ON REIMPORTATION POSSIBLE

Executive Summary

The elimination of Rx sampling is likely to be one of the upshots of the recent House hearings on drug diversion, a Commerce and Energy Oversight Cmte. staffer told the Natl. Association of Retail Druggists' (NARD) annual meeting in New York, Oct. 22. Subcmte. staffer David Nelson predicted: "If I had to bet on it I would say that . . . elimination of physical sampling is one of the two or three things most likely to come out" of the Hill investigation. The Oversight Subcmte. staffer noted that the cmte. members themselves "all have a lot of different ideas on how to solve this problem." He forecast "quite a lively closed session when we get around to laying out all of the alternatives and seeing exactly what they want to do with their recommendations." Sampling, however, stands out as an issue with the potential for agreement, Nelson indicated. He noted the investigation staff has "pretty much concluded that the sample problem has just got to be dealt with." The investigation, he said, did not reveal any "substantial good policy reasons running on the other side." At a minimum, Nelson stated, "any further sampling programs must be conducted on the basis of strict accountability and careful management." FDA's Program To Monitor Reimported Products Is A "First Step," Nelson Says Nelson pointed out that alternatives to the physical handling of samples such as patient coupons have been made more feasible by the advent of computers. Programs are now in operation, he explained, "where manufacturers give out Rx pads or coupon forms, where a patient can take that specified dosage form down to the local pharmacy, get it filled, and then the manufacturer reimburses the pharmacy directly and nobody handles the samples." The physical handling of the samples, Nelson said, is the problem. During Q-&-A, a St. Louis pharmacist, Larry Shriber, referred to the on-line coupon concept: "It benefits the patients. It benefits the company. It shows the company that the salesman is out there doing the job so that they can at least send any type of followup material to the physician. And, of course, the patient benefits, the pharmacist benefits, as well as the physician he does not have a jar full of outdated samples." Nelson further predicted that "an out-and-out ban" on the reimportation of pharmaceuticals may also be recommended by the House subcmte. The subcmte. staffer pointed to the pilot program agreed to by FDA to more carefully examine all pharmaceuticals imported under the category of "American Goods Returned" as a first step toward solving the problem of diverted drug importation. "Hopefully out of this, only people who have some purpose reimporting drugs, as opposed to some inordinately unfair profit opportunity with reimported drugs, will do so," Nelson said. However, he added that this step may not be enough, and that "one of the things the subcmte. will undoubtedly consider when they get around to legislative suggestions is an out-and-out ban on the reimportation of pharmaceuticals." Although counterfeit products generally enter the U.S. under the "American Goods Returned" identification, Nelson explained, this tariff category has not received much attention from the greatly overworked" customs service. Nelson urged support "to help us fend off administration attempts to keep cutting the size of the customs service." Even if the importation aspect of the diverted drug problem is solved, Nelson said, "the unauthorized use of physician samples, resales by hospitals or other health care institutions that purchase products at well below average wholesale, dumping or deals by pharmaceutical salesmen to inflate their sales volumes, the obtaining of pharmaceuticals by fraudulent representation such as alleging they are for bogus charities, and by outright theft will continue to fuel the domestic diversion market without further corrective action by federal, state, or local authorities or by changes in the law." In discussing available solutions to the problem of drug diversion and related unfair and fraudulent discounting practices, Nelson told the NARD members that he "had serious questions" whether antitrust action under the Robinson-Patman Act was "the way to go." Non-profit institutions, which "notably in the West Coast . . . are without doubt the largest source of input into the diversion market," Nelson said, "may be the toughest part of this thing." Several Other Investigations Along Lines Of Atlanta "Pharmoney" Are Underway Although Congressional Research Service lawyers have concluded that resale of pharmaceuticals by non-profit institutions does violate the Robinson-Patman Act as currently written, Nelson said, such sales continue. "We are concerned with the ambiguities of Robinson-Patman and the way the courts have interpreted" the act, the staffer said. He also expressed concern over the FTC's ability or willingness to act. Nelson suggested that the recent Atlanta investigations, which "produced some very interesting interpretations of wire fraud and mail fraud standards," may be pointing the way to criminal proceedings as a better currently available avenue. Forty-three individuals and companies were charged with criminal informations in August after a two-year investigation by the FBI called "Pharmoney" ("The Pink Sheet" Aug. 12, p. 4). "I think a few more people spending some time in jail around the country would have a lot more effect on the way non-profit institutions deal with questions involving resale of their pharmaceuticals then all the Robinson-Patman actions that you all can ever hope to get the FTC to bring put together," Nelson told the pharmacists. He noted that the Atlanta investigation ws just one of a number being conducted around the country, and that the investigation by his congressional staff would also continue, even following the subctme.'s issuing of legislative recommendations. Nelson asked the pharmacists for their help by reporting directly, or through the association, "any occasions in which you are offered pharmaceuticals that are close to going out of date or are already out of date, offers for special deals on pharmaceuticals in baggies, pharmaceuticals labeled for hospital use only, for clinic use only, for export only, particularly for the export only cases." The House investigator promised that his staff would look into the reports or would refer them to the state agencies that have responsibilities for looking into them. On the agenda for the House investigations staff, Nelson told NARD, was a visit to Puerto Rico to evaluate its relationship to the drug diversion market. Nelson emphasized that the House investigation of drug diversion it tightly focused on pharmaceuticals. "There is an enormously powerful lobby out there for the maintenance of gray market goods," Nelson said. What we were trying to say is "look, we are not taking on all the gray market -- we are talking about the gray market, the diversion market . . . that threatens health and safety." Subcmte. Chairman Dingell recently released a statement praising Revco's plan for assuring the quality of gray market goods by random sampling of lots from secondary sources ("the Pink Sheet" Oct. 7, T&G-3).

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