5 Medicines

In a very real sense the producers and distributors of medical products occupy a position of public responsibility. On the whole, those in the drug industry who are charged with this responsibility have carried out their obligations in a highly praiseworthy manner. They are to be commended and congratulated.

In nearly every instance in which the standards of service and of public welfare have not been maintained we find that monopoly groups have been responsible for the abuse of public confidence. When monopoly is able to impose restrictive conditions on the production, the price and the distribution of vital medicines and to determine who may buy and sell products, it is in the interests of the drug industry and the public alike for government to intervene.

Thus when it was found that a small ring of producers had been able to maintain fixed prices on insulin and to pick and choose those who would be allowed to distribute insulin to the public, it was necessary for the government to act.

There are approximately two million persons in the United States suffering from diabetes. Most of these sufferers require one or more daily injections of insulin. They are dependent for their very lives on an adequate supply of the drug at a reasonable price. Yet a monopoly group exploiting its privileged position took advantage of the industry and of the public to impose arbitrary prices and unreasonable conditions of distribution. Wholesalers, distributors, and retailers were compelled to adhere to the edicts of the monopoly group under the threat that if they did not do so, no insulin would be sold to them.

The possible consequences of this exercise of monopoly power on the well-being of victims of diabetes are appalling, yet in the hands of monopoly the needs of the public become subordinated by the edicts which are imposed on the industry and the public alike. It is for this reason that the industry itself, as well as government, must continuously be vigilant to oppose the growth and exercises of monopoly power and to stimulate wholesome competition.

Few effects of monopoly have been more insidious than the consequences of cartel control over many areas in the drug and medical field.

Because of cartel and patent agreements which carve up world markets and divide fields of production, American drug manufacturers have in some cases been denied the right and the chance to develop the American drug industry to its full possibilities. Because international cartels have been able to set up their own trade restrictions, American drug manufacturers have been prevented from competing within the United States. In many cases American manufacturers have been barred from engaging in competition in other countries and from exporting to such countries. In particular, American producers have found themselves shut off from South American markets. Illegal patent abuses and agreements have in other cases prohibited American manufacturers from entering production or carrying on research in many important fields dominated by foreign interests.

The fight against disease is a primary concern of society everywhere. Yet the brilliance and the industry of modern scientists have all too often been perverted by the efforts of selfish groups to fasten the grip of monopoly on products essential to health and welfare. There have been numerous illustrations of the malignant effects of monopoly on national health and on the maintenance of free enterprise in the pharmaceutical industry. It is instructive to recall some of the more flagrant examples of the abuse of monopoly power in the drug and medical field.

The cartel spirit in the pharmaceutical field is exemplified by the following paragraph, written in July 1938 by the German company, I. G. Farbenindustrie:

“There is an agreement between German and Swiss firms of the Chemical Pharmaceutical Industry for the protection of original preparations which are marketed by the individual members of the group.... This agreement provides that products which compete with the original products of members of the association and their subsidiaries or affiliated firms shall not be introduced in any country throughout the world.”

This agreement may be described as a conspiracy to deprive the world of the benefits of research in new drug products wherever such benefits may conflict with the vested interests of any of the participating drug manufacturers.

The present war is not the first time that the United States has found itself dependent in a period of crisis for vitally needed drugs and medicines on cartels dominated by foreign interests. During the first World War the scarcity of salvarsan, of veronal, of novocaine, and similar synthetic medical products seriously affected the health of our people. It was not until after the war was over that we were able to relieve some of these shortages. In the years between the World War and the present global war cartel interests once more were able to reestablish their monopolistic control over new pharmaceutical products.

The myth of German superiority in the production of organic medical compounds has been dispelled for many years. It is necessary, however, to recall that this prestige rested not on superior skill but on the abuse of monopoly and patent privileges. A well-known instance of the way in which the German cartel interests sought to exploit their monopoly position is the story of Bayer 205, sometimes called Germanin. Shortly after the end of the World War I. G. Farben announced that it had discovered a cure for sleeping sickness, the disease which is so prevalent in Africa. The Germans refused to reveal the formula for Bayer 205. Instead they sought to use their discovery as the basis of an exchange of the secret process in return for the restoration of Germany’s lost colonies. While this bold attempt to balance medical achievement against political advantage is an extreme case, it nevertheless reflects a cartel attitude.

From the standpoint of the progress and growth of the American drug industry it must be realized that the influence of cartels has been the principal factor in keeping American products from world markets. Foreign concerns, by making treaties with monopoly groups in the American drug industry, have been able to monopolize practically the entire continent of South America. One typical agreement between an American corporation and a German concern divided the world market for more than 400 pharmaceutical and chemical products into non-competitive areas. Among the fields included in the agreement were quinine derivatives, sulfa drugs, vitamins and narcotics. The American firm was prohibited from exporting. This same pattern of restriction by which American producers were barred from selling to South America has been found in a whole roster of cartel agreements involving pharmaceutical products. The effects of these agreements have severely handicapped our good neighbor relations with South America and have made more difficult the establishment of healthy trade between the United States and Latin American countries.

If we are to succeed in our efforts to create a better postwar world, it should be evident that we must uproot every vestige of illegal monopoly control over products essential to the health and welfare of our people. Whether the restriction stems from the efforts of a cartel to confine American industry to the domestic market, or to strangle research and production by American concerns, or to use patents to impose unlawful restraints on trade in the drug industry, it must be our determined purpose to restore free enterprise in the pharmaceutical field. Given freedom of opportunity and the incentive to enter branches of the industry heretofore dominated by cartel interests, we may rest assured that American drug manufacturers will demonstrate their outstanding capabilities in research and their ability to compete both at home and abroad. Competition will benefit the American drug industry and permit it to attain its maximum development. What is perhaps even more important, this country will be assured that in the future the health and welfare of its citizens will not be dependent upon the arbitrary exercise of monopoly power.

I am sure that responsible persons in the pharmaceutical industry will not argue that European technology in this field is so superior to ours that competition is futile. If American manufacturers have free access to technology and are not barred by the misuse of patents and the resurrection of cartel arrangements, then the industry will find itself in a healthier financial and technological position as well as in a position more fully to discharge its obligations to the American people. The myth of European superiority in the medical field has been carefully nurtured by foreign interests which have used this propaganda as a commercial device. Only free competition and free enterprise can fully dispel this myth. This cannot be done, however, unless the pharmaceutical industry sees to it that victims of diabetes, malaria, pellagra, rickets and arthritis are not at the mercy of privileged groups who have abused public confidence and exploited human suffering.

The laboratories of our pharmaceutical industry have brought forth wonderful discoveries. Their achievements have been a boon to the human race. But they have a responsibility to erase the blemish caused by those few who have misused their economic power to violate their trust.

The promotion of public welfare as well as the best interests of the pharmaceutical industry are served when research, production and distribution are carried on free from the taint of monopoly. National health, like national economic well-being, demands that freedom of opportunity to conduct research, to engage in business, and to compete in domestic and foreign markets be preserved. No compromise is possible with monopoly control in an industry which is so directly concerned with human welfare.