In a story last Friday on a hearing on drug prices, a sentence about the testimony of Fr. Sheldon G. Gilgore, president of Pfizer Pharmaceuticals, should have said that he "emphasized that to get the business of huge drug chains, his firm sometimes meets a competitor's extra-low price, but does not offer - and is not required to offer - the same price to other customers."
In the 10 years that ended in 1969, the cost of medical care increased 50 per cent. It would have increased even more had it not been for prescription-drug prices, which actually dropped 12.2 per cent.
Now in the 1970s the cost of care has gone up another 50 per cent - but in only seven years; it is rising faster. One reason is a reversal in drug prices; rather than falling, they have risen 13.8 per cent.
This reversal hits hardest at the elderly, who comprise only 11 per cent of the population but buy 25 per cent of the prescriptions. Many of them have limited, fixed incomes. By 1973-1974, according to a survey of members of the American Association of Retired Persons, they were spending 10 per cent to 45 per cent of their incomes - $200 to more than $1,000 annually - on prescription drugs.
This was true even though the elderly receive Medicare; it only pays drug costs during hospitalization.
The development also troubles the Department of Health, Education, and Welfare, which pays most of the $3 billion annual bill for prescription medicines for Medicare and Medicaid recipients.
The prices of prescription drugs in the United States are rising even though they already are the world's highest - 4 1/2 times higher than England's, for example, according to a recent survey by a Dutch consumer group.
Yesterday, Sen. Edward M . Kennedy (D-Mass), chairman of the Senate health and antitrust subcommittees, held the first in a year-long series of hearings on why this situations exists and what may be done about it.
Investigating drug prices has become something of a Senate institution. The late Sen. Estes Kefauver (D-Tenn) began 2 1/2 years of hearings in December, 1959. Sen. Gaylord Nelson (D-Wis) began an investigation a full decade in 1967.
But some new things turned up yesterday in testimony by Robert A. Derzon, administrator of HEW's Health Care Financing Administration.
He said a study of pharmacists' invoices shows that at the same time, and sometimes in a single geographic area, they are paying any of several major manufactures widely differing prices for the same brands of medicine.
One example is the prices pharmacists pay for 100 capsules of ampicillin, a widely prescribed antibiotic. For Ayerst Laboratories' Penbritin brand the range was $5.29 to $14.54, Derzon said. For Parke-Davis's Ameill brand the range was $5.05 to $11.94. For Smith Kline & French's brand it was $2.05 to $7.25.
Derzon, saying "we don't understand why" there should be such variations, said HEW has referred the data to the Federal Trade Commission, which is responsible for enforcement of antirust laws.
A panel of pharmaceutical executives, insisting that price competition in the industry is vigorous and even "ferocious," attributed the variations to natural economic phenomena such as discounts. Dr. Sheldon G. Gilgore, president of Pfizer Pharmaceuticals, emphasized that to get the business of huge drug chains, his firm sometimes underbids a competitor with extra-low prices that it does not offer - and is not required to offer - other customers.
But an aide to Derzon who heard the industry testimony told a reporter afterward that it doesn't explain away some of the situations HEW has found.
Derzon pointed out that although most major drug producers have become conglomerates, pharmaceutical profits regularly run far above those for all other industries. In the four years 1970-1971 and 1975-1976, the net profit of American Home Products ranged between 25.8 per cent and 28 per cent of net stock holder's equity. For Merck & Co. the range was 23.2 per cent to 24.4 per cent.
Why did prices fall in the 1960s? Partly because patents ran out on several key drugs, ending the monopolies their makers had, Derzon said. But in the 1970s, Derzon, said the rises have been twice as large for drugs in which a patent makes the producer the sole source as for multi-source medicines.
He discounted raw materials and labor, saying that these constitute "a relatively minor portion of the selling price of most pharmaceuticals," and that "research, promotion and profit are among the most critical aspects of pricing."