Sen. Gaylord Nelson (D-Wis.) said yesterday that the nation's major drug companies are guilty of fraud when they claim that brand name prescription drugs are superior to the generic variety. The only difference is that generic drugs are significantly cheaper, he said.

Nelson, chairman of the monopoly subcommittee of the Senate Small Business Committee, said the pharmaceutical industry has spent billions of dollars to persuade doctors, legislators and the public that only the high reputation of the drug companies ensures high-quality drugs.

"Not a shred of evidence has ever been offered to support this claim," Nelson said. "In fact, the evidence shows, just the opposite: that some of the largest and best known drug companies have violated - some repeatedly - the good manufacturing provisions of the law."

Speaking at the first of three days of hearings on the drug industry, Nelson cited numerous examples of major drug firms whose plants were temporarily closed by the Food and Drug Administration for shoddy manufacturing practices. He said the only assurance consumers have that the drugs they buy are safe and well manufactured is through the inspection and testing programs of the FDA.

FDA Commissioner Donald Kennedy, who testified at yesterday's hearing, said he finds "no evidence of widespread differences between the products of large and small firms or between brand name and generic name products." The principal difference is cost.

For example, tetracycline, the generic name, sells for $3.31 for 100 capsules. This compares to $8.30 for 100 capsules for "branded generic," in which the manufacturer adds its name to the generic name. For the brand name, say, terramycin or Sumycin, 100 tetracycline capsules sell for $19.01.

Committee staffer Benjamin Gordon said that penicillin sells for $3.50 per 100 capsules, compared with $5.50 when Smith Kline & French add "SK" to the name.What, he asked Kennedy, does the "SK" add to the penicillin, besides a 133 per cent price increase?

"I suspect you won't be surprised to hear me say that it doesn't add anything," Kennedy said. In other words, Gordon replied, "the public is getting ripped off."

William F. Haddad, director of the New York State Assembly office of legislative oversight, has conducted numerous investigations of the drug industry. In his testimony, he described a recent New York consumer survey his office made that found that price differences between generic and brand name drugs were as high as 700 per cent and averaged 300 per cent.

"The bottom line," Haddad said, "is that the federal government and the Congress, over [the] years have failed - and failed miserably - to protect the states and the consumer from the last of the robber barrons, the prescription drug industry."

Haddad described a 2,000-page list of "safe, effective and medically equal" drugs in common use that his office compiled and that was approved by the FDA. With that list, the New York legislature passed legislation requiring pharmacists to substitute lower priced generic drugs for brand name drugs, even when doctors prescribed the more common brand names. He said that two leading drug companies, opposed to generics, testified under oath that 70 to 80 per cent of their drugs were available generically. If the new law works, he said, those companies would have to reduce their prices or go out of business.

Sen Nelson said, and Kennedy and Haddad corroborated, that many brand name drugs the large firms say they manufacture in their own plants are actually made by small, generic manufacturers and then sold to the public as brand name drugs for three to five times the price.

The technique is called "man-in-the-plant," and consists of a large drug company renting a small company for a week or two and placing one of its own employees in the plant. Then it can market the drug, which is really generic, claim that it manufactured it, and sell it under its own brand name.

"The issue is not one of drug quality," Kennedy testified. "The public is entitled to know when a company is distributing a product it did not manufacture . . . Often the large firm will have publicly demeaned generic drug products and drug firms, and in those cases public disclosure that their product was actually manufactured by a generic firm would be embarrassing."