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Executive Summary

Free Pfizer freezers, Peggy Lee records from Abbott and Darby gift catalogues provided part of the background visuals when Sen. Kennedy (D-Mass.) went after alleged "payola" promotional schemes in the pharmaceutical industry seventeen years ago. During three weeks in March 1974, Sen. Kennedy deftly painted an image of overprescribing and zealous sales tactics in the drug industry which colored the industry's reputation through the rest of 1970's and into the first years of the last decade. Kennedy had a simple and straightforward plan for the 1974 promotion hearings before his Senate Labor and Human Resources Committee: (1) first make overprescribing a given in the mind of the general media; (2) use former detailmen to provide the specifics of promotion techniques; and (3) then put senior pharmaceutical execs on the spot to explain the appropriateness of sales practices. Pfizer President Gerald Laubach, for example, was grilled by Kennedy in 1974 for an hour-and-a-half against the backdrop of a vaccine incentive program tied to free freezers. Laubach maintained that the use of premiums by the company in relation to vaccine sales was a "well-intentioned" effort by the company to join with a campaign being sponsored by the government to stem a decline in polio vaccinations. Laubach also had to testify in the wake of accounts of "Vistaril dinners." An ex-Pfizer detailman told Kennedy of special set-asides in his budget to take groups of doctors to dinner with the intent to turn the conversations to the Pfizer product. Laubach and Pfizer obviously survived. Laubach is just now getting ready to retire on Feb. 1 after more than 18 years as president. But the Kennedy promotion hearings in 1974 and the drug testing hearings that followed in 1976 represent a public relations low-point for the drug business matched only by the legendary Kefauver hearings that precipitated the 1962 amendments. When Laubach retires, he will be the last of the front-line witnesses who faced Kennedy in 1974 to leave the industry. At least one other current senior exec in the drug industry, Roche's Irwin Lerner, appeared at the promotional hearings but in a staff, support position for then Roche President Robert Clark. In addition to Pfizer and Roche, the other six companies represented at the big promotion hearings in March 1974 were Eaton, Lederle, Merck, Ortho, Searle and SmithKline. The senior executive in the group was Merck's Chairman Henry Gadsen. On Kennedy's staff, one key figure remains. Walter Sheridan, a consummate Capitol Hill investigator with experience ranging back to the Jimmy Hoffa investigations, has been a primary mover behind the current review of the drug industry. Sheridan is a venerable figure among Hill investigators. One current congressional staffer has praised Sheridan's investigatory skills, calling him a "national treasure." Kennedy's top aide during the 1974 period, and the showman with the sense for good media material, was a young doctor, Lawrence Horowitz. Now a West Coast investment banker, Horowitz has kept his hands in FDA/drug regulation issues as a member of the Edwards Committee that is reviewing FDA's mission. A big role for Horowitz in the preparation of the upcoming hearings is assumed in Capitol Hill circles. Some observers believe that Horowitz has been actively consulting with the committee and will give its plans a final going over before the hearings in mid-December. Horowitz was not involved in the committee's Nov. 26-30 planning sessions. He was out of the country on a trip to the USSR. The third member of the Kennedy team for the 1974 hearings is now a prominent lawyer in the health care field, Allan Fox (Fox, Bennett & Turner). Fox could turn up advising on the other side of the witness table in this round of hearings. In 1974,Kennedy and his staff parlayed the combination of a consumer appeal of pharmaceuticals with the public fascination in Kennedy's political charms to make the 1974 hearings a media event unmatched by succeeding Hill investigations. His hearings effectively linked in the public mythology the image of the drug industry's "hard selling" with a reputed 30,000 deaths per year from adverse drug reactions. Kennedy was a sharp, well-briefed and demanding inquisitor during the pharmaceutical hearings. One exec, who faced him as a witness twice during those hearings, refused to return to Washington for any meetings for fifteen years after his encounters with Kennedy. Typical of Kennedy's preparation and staff work for the 1974 hearings was a bag of promotional gifts and catalogues that Kennedy kept close to his side during the testimony of the detailmen and the senior execs and from which he frequently withdrew intriguing examples with effective showmanship. Typical of the Kennedy rhetoric of the 1970's hearings is a segment of his opening statement for the session with senior pharmaceutical company execs. "What we have is a system of hard sell, rather than a system of objective information dissemination," Kennedy declared. "We have salesmen instead of analysts," Kennedy charged; "we have the tools of selling -- gimmicks, gifts, bonus deals -- rather than the tools of science and medicine -- comparative information, analysis of risks and benefits of competing products." Against those types of charges, it is difficult for an industry to maintain an image of R&D-orientation and public service. The bad atmosphere for the drug companies was not missed by the investment community in the mid-1970's. The "F-D-C" index of drug stocks tumbled 22% in the year of the first Kennedy hearings. The list of alleged abuses summarized by Kennedy on March 8, 1974 could be a starting point for upcoming hearings (see box on previous page). One of the practices, the review of prescribing records, was immediately abandoned by the industry in the wake of the first Kennedy hearings. However, even that practice may come back to haunt the industry in a different form as various new computer audit tracking systems are perfecting the level of prescription tracking back to the individual doctor. While the 1974 hearings failed to lead to specific legislation, they had a direct link with the slowdown in FDA drug approvals through the second half of the 1970s. That link was supported with the fallout from Kennedy's subsequent investigations into industry bias among FDA managers and new drug reviewers and alleged improprieties by third-party testing services. Kennedy did propose two pieces of legislation from the hearing: (1) a 1975 bill specifically meant to control marketing practices; (2) a 1979 omnibus reform bill for FDA. The new investigations may be part of Kennedy's effort to retake a leadership role in the legislative future of FDA. KENNEDY's LIST OF MARKETING ABUSES, CIRCA 1974 Reprinted by "The Pink Sheet" from an opening statement by Sen. Kennedy (D-Mass.) at the March 8, 1974 hearing on drug detailing practice. Rewarding MDs and pharmacists who buy the right company products with gifts -- the size of the gift dependent on the size of the purchase ranging up to freezers, color televisions, dishwashers, etc. This does not seem to me to be promotion based on the dissemination of objective information; it isn't based on cost savings to the consumer -- it smacks of payola! We will look long and hard at this kind of practice. The widespread use of samples which are then frequently abused by both the MD and the pharmacist. The sampling policy of the industry must come under careful scrutiny. The use of gimmicks, such as golf balls, pen and pencil sets, etc., to gain entrance both to a MD's office and to his favor. The unauthorized review of Rxs written by a MD so that the detailman can know what each MD prescribes and in what quantities. The apparent tendency of detailmen to downplay side-effects and the tendency of MDs to rely heavily on detailmen for prescribing information.

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