GOVERNMENT: Dissent on Wonder Drugs

One of the incredible-growth stories of U.S. industry belongs to the manufacturers of antibiotics. Last year Americans paid an estimated $700 million for antibiotics, all of them unknown to the public 15 years ago, but now accountable for more than half of all prescription sales. To the Federal Trade Commission, this inspiring success story is flawed.

Last week, climaxing a two-year investigation of the wonder-drug industry, the FTC accused six major companies of rigging the price on tetracycline, the biggest and most popular of the so-called “broad spectrum drugs,” i.e., useful against a wide variety of microorganisms. Tetracycline accounted in 1956 for 24% of the industry’s sales dollars but only 7% of the physical volume.

Accused by FTC of a “dangerous attempt” to create a monopoly in tetracycline and such related drugs as Aureomycin and Terramycin were: American Cyanamid Co., biggest antibiotic maker; Chas. Pfizer & Co., second biggest; Olin Mathieson, Upjohn, Bristol-Myers and its subsidiary, Bristol Laboratories.

Cent per Dose. In addition, FTC singled out Pfizer for a more serious charge, saying that it had “made false, misleading and incorrect” statements when it obtained the basic tetracycline patent in 1955. Tetracycline already had been on the market for a year from various mak ers, and the patented method of manufacture was not truly an invention because it was “obvious to anyone having ordinary skill” in the antibiotics art. If sustained by the Federal Trade Commission after hearings start Oct. 1, this charge could lead to an FTC request to relax the Pfizer patent.

All companies entered vigorous denials to FTC charges. As the kingpin of the alleged monopoly, Pfizer’s President John E. McKeen said: “Pfizer never engaged in a conspiracy, never misused its patents, never fixed prices, and wields no monopolistic powers.” Although recognizing that the newer wonder drugs do command high prices, the manufacturers long since have cut the price of the older standbys, such as penicillin and streptomycin, so low that they are added in large amounts to animal feed. Said Bristol-Myers’ President Frederick N. Schwartz: “Our average profit on all antibiotics sold in 1957 was less than 1¢ per dose.”

Too High? In spelling out its indictment, the FTC lent considerable support to the man in the street’s opinion that lately the price of the highly touted newer antibiotics is too high. Many of the drugs, said FTC, are in fact duplicates that individual companies insist on renaming for real or fancied trademark advantage, to the point that doctors no longer can remember what the particular properties are. The FTC conceded that the antibiotics industry has let consumers in on progress. From 1951 to 1956 output doubled, but average prices were cut so much that the industry’s income decreased (see chart). The FTC also acknowledged that the business is cruelly competitive. Unless a maker gets in fast, makes a profit with a new product and keeps on finding newer products, he soon loses out.