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Executive Summary

House Energy & Commerce Committee Chairman Dingell (D-Mich.) is finished negotiating on the Drug Diversion Bill for 1986. In response to an Oct. 9 request from the Pharmaceutical Manufacturers Association Board for continued negotiations, Dingell cut off discussions on the bill and committed himself to hearings on Rx marketing practices in 1987. Prior to PMA's decision to call for further negotiations, the trade association and Dingell's staff had been debating the extent of sanctions against corporation for violations of the bill's sampling provisions by individual detailmen. Capitol Hill staffers believed that one major roadblock to the legislation -- the interpretation of criminal penalties against higher level corporate execs for sales force violations -- had been removed prior to the PMA board consideration. Drug company counsels had been concerned that a Park style corporate responsibility provision similar to FD&C Act sanctions would have been established in the sampling field. Dingell's staff believed that concern was rectified by an Oct. 3 draft of the diversion bill. The Oct. 3 version of Dingell's bill, which received the full Energy & Commerce Committee's stamp of approval on Oct. 7, established penalties of $50,000 to be assessed manufacturers or distributors whenever an employee is convicted of a violation involving sale or trade of samples. The corporate fines would increase to $1 mil. for a third offense occurring within a 10-year period, unless the company provides information leading to the conviction or demonstrates that it was conducting an investigation "which would have led to the reporting of information" leading to such a conviction. In his opening statement at the Oct. 7 markup, Dingell called the legislation bipartisan and noted that it had 34 House cosponsors, including 11 Commerce Committee members. He further pointed out that the bill had the support of the major professional and trade associations, "Merck & Co., Marion Laboratories, and many other organizations and companies [which] recognize the evils that the bill would attack." On Oct. 9, however, the PMA board declared that the revised sanctions against companies for employee diversion convictions remained "unduly harsh." The PMA board issued a statement on Oct. 10 acknowledging that substantial progress in the diversion bill's treatment of sampling had been made in earlier Congressional discussions. However, the sanctions related to sampling remained a breaking point in the PMA view. The Oct. 3 compromise would have permitted distribution of drug samples by industry sales personnel to physicians who sign a request form. The provision also contained several handling, storage, and recordkeeping requirements and establishes penalties for violations. The compromise also explicitly stated that the storage, handling, and recordkeeping requirements for sales rep distribution of samples did not apply to sample distribution by mail nor to distribution of trial coupons. Without PMA endorsement HR 4820 has no chance of clearing the Senate, where passage would require unanimous consent. In a colloquy during House markup, Dingell and Rep. Wyden (D-Ore.) had strongly urged drug manufacturers not only to endorse the compromise but also to help push it through the Senate. Noting that the "extensive negotiations" were aimed at forging "a compromise that would allow the bill to be enacted this session," Wyden pointed out that the parties to the negotiations are bound to the agreement only during the current session of Congress. Wyden said and Dingell agreed that "if HR 4820 is not enacted in this Congress . . . we will be in effect starting fresh next year and that none of the parties in the negotiation are bound to the existing provisions in the bill . . . even if the bill passes the House but does not become law." By rejecting the compromise version of the drug diversion bill, the PMA board implicitly stated that the monetary penalties for diversion convictions are more of a threat than the potential for a more draconian form of anti-sampling diversion legislation in the next Congressional session. PMA has already forced Dingell off of his strong anti-sampling position once, and the association's board appears to feel secure on that issue. To the PMA board, the legislative calculus on Dingell's bill appeared to reduce to the recognizable downside from a bill with severe diversion penalties compared to the less certain potential for a more restrictive bill next session. However, the major fall-out may not be only a revised diversion bill. The industry is taking a chance on the length and strength of Dingell's commitment to marketing hearings in 1987. A full-fledged set of hearings by the Energy & Commerce Committee in 1987 could be a high price for PMA to pay for backing away from the diversion bill in 1986. Marketing practice hearings were one of the key points-of-departure for Sen. Kennedy in his prolonged attack on the drug industry in the 1970's. One of Kennedy's first hearings in that cycle of investigations was a March 1973 expose on alleged "payola" marketing practices. That widely publicized Kennedy hearing focused on testimony by five former detailmen. Dingell has alerted the industry that he is interested in similar hearings to push a new diversion bill next year. Dingell's five hearings on diversion and counterfeiting have not commanded the media attention of the Kennedy hearings, and Dingell's publicity threat may not be as daunting to the PMA board. One upshot of the diversion negotiations of 1986 may be an ironic undercutting of PMA efforts to improve the drug industry's public image. The association is on the verge of launching a major image campaign; the adverse media coverage from House hearings on diversion could negate that effort before it has a chance to get started. Dingell hearings also could have a negative impact on relations with other segments of the trade. The drug wholesaler group, which took the brunt of the initial diversion investigations, was reported to be particularly interested in a legislative resolution of the matter in 1986 to quiet the diversion issue. Pharmacy groups such as the American Pharmaceutical Association and the National Association of Chain Drug Stores (NACDS) could use a fresh start on the issue to push again for a ban on samples or sampling-through-pharmacy plans. NACDS has said it would prefer that drug diversion legislation incorporate provisions proposed by Rep. Luken (D-Ohio) to require nonprofit institutions to register with FDA ("The Pink Sheet" Sept. 22, T&G-10). If Dingell takes up the gauntlet for marketing practices, Health Subcommittee Chairman Waxman could be a source of further drug industry investigative leads. In addition to marketing practices, Hill interest continues in the subject of Rx price increases vis-a-vis overall inflationary indices. There have also been recent expressions of interest in Washington on the subject of the purity of clinical investigations. Two overt examples of that interest are the recent Health Research Group petition to remove the NDA for Ortho's Suprol and a GAO study on FDA's policing of clinical investigations. PMA's BOARD POSITION ON DINGELL Rx DIVERSION BILL The PMA Board of Directors Thursday directed PMA representatives to continue to work with Rep. Dingell and other sponsors of the drug diversion and pharmaceutical marketing bill (HR 4820) to achieve satisfactory safeguards against abuses in the sampling of Rx drug products. The Board expressed satisfaction that earlier discussions resulted in agreement to drop a provision to require distribution of pharmaceutical samples by mail or common carrier rather than through pharmaceutical representatives; and to include in the bill a voluntary code of sampling practices recently adopted by the PMA Board. The PMA Board expressed concern, however, that the latest draft of the bill includes sanctions against companies for employee diversion convictions that are unduly harsh, and that the draft fails to include language holding harmless a company that exercises due diligence to prevent sampling abuses by its employees. The Board reiterated its interest in working with Chairman Dingell and other sponsors to establish workable and reasonable controls over Rx drug sampling that control abuses and permit pharmaceutical representatives to continue to personally distribute samples to health care professionals. PMA has stated that the practice of sampling is an integral part of the nation's health care system that benefits both patients and physicians, and that abuses in distribution can be controlled by less drastic means than banning the present sampling system altogether, or restricting distribution to the mails.

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