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LETTER OF John A. Nash, ATTORNEY AT LAW, Chicago, ILL.

DECEMBER 18, 1933.
Hon. Royal S. COPELAND,
Chairman Senate Committee on Commerce,

Senate Office Building, Washington, D.C.
DEAR SENATOR: I represent a number of concerns which are selling through the
mails preparations intended for the relief, alleviation, and cure of various diseases
and disorders which afflict the human race. These are products within the classi-
fication of patent medicines and these clients of mine are all interested in the
so-called Tugwell bill which, I understand, is properly entitled Senate bill 1944.

This office was represented at the hearing before the subcommittee when you presided and we were very greatly interested in the statements of the various witnesses. I understand that you have given permission to the various interests represented to submit suggestions or briefs for consideration by the full committee on or before December 20. I suppose most of the objections to the bill have been very well presented, but there are one or two things which occur to me because of the nature of part of my practice that I do not think have been enlarged upon and which might be of some service to the committee in considering its report on this bill.

I served in the Post Office Department as an assistant to the Solicitor for many years and we had many of these medical cases before us. In my practice I have been familiar with the work of the Federal Trade Commission, the Post Office Department, and of the Food and Drugs Administration of the Department, of Agriculture, and perhaps I am in a position, arising from my experience in the practice of law, to make some suggestions that may be worth while for the consideration of the committee in framing its recommendations on this bill.

May I call your attention, Senator, to the fact that this bill attempts to give powers to the Department of Agriculture which have been fairly exercised by another department and commission of the Government in a very fair and salutary manner for many years. The Department of Agriculture properly may deal with standards, ingredients, and adulteration of drugs and foods, but when it attempts to go beyond these limitations in an effort to obtain power to determine what shall be sent through the mails in the way of advertising, it seems to me that it is usurping the natural jurisdiction of the Post Office Department and the Federal Trade Commission. I have no doubt that the Department is aiming to remedy in a general law particular wrongs to the public, and its desire in this respect is commendatory. However, the proposed law is so broad in its terms that it brings the Department of Agriculture into a field which has been fairly and effectively covered, heretofore, for many years, by the Post Office Department and the Federal Trade Commission.

As you know, the Post Office Department has authority to issue so-called "fraud orders” against any individual or concern that the Postmaster General determines, upon evidence satisfactory to him, is engaged in obtaining money by means of false or fraudulent pretenses, representations, or promises. This law has been for many years very effectively and conscientiously enforced. It is true that it is necessary for the Post Office Department in issuing such orders to determine that the advertiser is not acting in good faith in making the representations which are charged to be false. This has not been a deterrent to the Department so far as the enforcement of this law is concerned. As any lawyer knows, the question of good faith is a matter of inference. Where a man makes statements that he should know are false, the natural inference is that they are not made in good faith.

In addition to this, the courts have held frequently that a man selling medicines or drugs for the relief or cure of disease is in the peculiar position of purporting to have knowledge of the effect on human beings of the drug which he sells. In other words, his position is quite distinct from that of the ordinary vendor of merchandise because thereapeutic claims, according to the decisions of the courts, carry with them the implied representation that the vendor thereof has peculiar knowledge of the value of the drugs or medicines which he is selling. This is the well-established doctrine of law upon which the Post Office Department can well rely in making its findings; and I believe that an examination of the records of the Post Office Department, in the so-called medical cases that have been before it, will show that it has not been embarrassed in any way in finding lack of good faith in the administration of the postal fraud law.

From my personal knowledge the personnel of the Post Office Department is such that its administration of the postal fraud law has been most effective so

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far as these medical mail-order schemes are concerned.' It is true that in some instances fraud orders have not been issued where, under the proposed law, the concern would be put out of business or criminal action taken, but the interest of the public has been well subserved by the requirement that all misrepresentation be abandoned or that the concern making them discontinue business. Why the Department of Agriculture would seek to exercise a surveillance over the mails, in view of the very efficient administration of the postal fraud law, is something I cannot comprehend. In addition to this, Senator, there is, as you know, a statute which makes it a criminal offense for any individual or concern to use the mails in the conduct of a scheme to defraud. Many convictions have been obtained in the Federal courts under this statute, which is a cognate statute with the postal fraud law.

I am calling these things to your attention, Senator, with the idea of asking you and your colleagues to bear in mind in your consideration of the proposed bill that there are already laws which adequately cover the offenses which are to be reached by this substitute for the Food and Drugs Act. I certainly think, from my experience both in the Government service and outside it, that some opinion should be sought from the Post Office Department as to the necessity for the enactment of a bill of this character. It probably will be said that the Post Office Department, in administering the law, must in order to prevent fraud determine that fraud is contemplated. The opinion of this office is that this is an entirely sensible requirement. To convict a man and send him to prison because of the fact that he inadvertently and in good faith makes statements that are not in accord with the general agreement of medical opinion seems to me far beyond any proper conception of justice and far outside of the general understanding of criminal acts in the United States. It goes far beyond constitutional ideas of the freedom of the press and far beyond the Anglo-Saxon conception of the liberty of the individual to puff his merchandise and attempt to sell it as better than that which is offered by others. To leave to the Secretary of Agriculture the determination of whether by ambiguity or inference a misleading impression is created by advertising is far beyond anything that has yet been attempted in American law. After all, these things rest upon the old conception of fraud and to put it into the power of one individual, whether a Government official or otherwise, to determine that a man is a liar or a law breaker because he speaks an opinion not in harmony with that of the majority of physicians, or what the Secretary of Agriculture determines is not that of a majority of physicians, is absolutely not harmonious with the trend of the decisions of the courts and of the general conception of legal principles. In this connection I would respectfully call your attention to American School of Healing v. McAnulty, 187 U.S. 194; Post v. United States, 135 Federal, 1; U.S. v. Raladam Co., 283 V.S. 643.

I'would respectfully also call your attention to the fact that the Federal Trade Commission has authority supported by decisions of the highest court in the land to prevent the making of false and deceptive representations in advertising and it has exercised this power fairly. May I call your attention to the case of Sears Roebuck & Company v. Federal Trade Commission, reported in 259 Federal, 307, and other cases of similar import. The Federal Trade Commission has ample authority to prevent the making of false or deceptive or misleading representations regarding drugs or medicines. May I respectfully suggest that the proposed law be submitted to the Federal Trade Commission for its recommendation?

In conclusion, let me say that the proposed law is objectionable and should not be enacted into law for the reasons that:

1. The jurisdiction which it seeks to enter is already adequately, fairly and properly covered by laws which empower both the Post Office Department and the Federal Trade Commission to prevent the abuses which the proposed laws seek to authorize the Department of Agriculture to deal with.

2. There is no necessity for the enlargement of the jurisdiction of the Department of Agriculture to cover advertising and any additional power that it may be deemed proper to give to the Department of Agriculture should be restricted to those powers which naturally may belong to it, covering the ingredients and the value thereof contained in package medication; it should not be empowered to go into the field of advertising, duplicating a control that is already exercised by the Post Office Department and the Federal Trade Commission, and giving to a personnel composed of physicians antagonistic in general to the sale of patent medicines a power that is now exercised by organizations not composed of physicians but largely of lawyers and men of general experience and feeling who are guided by principles of law and common sense that can not be ascribed to the medical profession as a whole.

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In view of these suggestions, I respectfully submit that the committee should report the proposed bill unfavorably. If it decides that this should not be done, I would respectfully suggest that it eliminate from the proposed bill paragraph J of section 2, all of section 9, paragraphs 3 and 4 of Section 17 and all other provisions of the proposed law which contemplate giving to the Department of Agriculture the jurisdiction and the power over advertising which are now enjoyed and exercised by the Post Office Department and the Federal Trade Commission. Respectfully submitted.

John A. Nash.

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BRIEF OF CHARLES T. STOUT, ON BEHALF OF THE DELSON CHEMICAL

CO., INC. The Delson Chemical Co., Inc., was incorporated in April 1915. It manufactures pharmaceuticals and chemicals for physicians and for veterinary practice. It specializes in pharmaceuticals compounded from pure drugs. It owns and operates processes for the improved manufacture of drugs, among which is the Delson process for refining medicinal_creosote. This company has had many years experience in dealing with the Federal bureaus under the laws now on the statute books. It is the opinion of this company, formed after a careful study of the proposed measure and a survey of conditions, as revealed by its own contracts and experience, that Bill s. 1944 known as the “Tugwell Bill” will defeat the purposes for which it is inteded and is in itself fraught with danger to health and public welfare. This bill is unsound because:

(1) It legalizes the distribution of adulterated, deleterious, and poisonous drugs.

(2) It is unfair to the manufacturer and destructive of his property rights. (3) It exploits the medical profession and the public.

(4) It places too great power in the hands of those who have neither the knowledge nor the facilities to properly enforce the law, and who have repeatedly abused the power granted to them in the past.

(5) It proposes to establish by law something that does not exist and which has been a constant source of disagreement in the past, "the general agreement of medical opinion.”

(6) It is a restraint on the advancement of science.

(7) The proposed law is unenforcible even if supported by excessive appropriations.

In support of this opinion the following evidence is offered, accompanied by exhibits which have been filed with the Subcommittee of the United States Senate Committee on Commerce.

IT LEGALIZES ADULTERATED AND POISONOUS DRUGS

The bill accepts the standards of purity of the United States Pharmacopoeia. In the membership of the United States Pharmacopoeial Convention are the names of many members of firms of drug manufacturers representing the wholesale and retail drug trade in their national and State pharmaceutical associations. The standards for many of the drugs which these conventions have adopted are commercial standards, not standards of purity. Some of the drugs manufactured under these standards are very poisonous. If the manufacturers of pure drugs were permitted to freely advertise and distribute their products, poison drugs would be soon driven from the market, but special privileges are extended to manufacturers of official drugs. At the same time the full power of the Federal Government has been exerted to prevent the distribution of improved products which may interfere with the business of protected manufacturers. There are men in key positions in the Federal bureaus who have promoted the interest of favored manufacturers. Some of these key men are later found in the employ of the large drug manufacturers.

IT IS UNFAIR TO THE MANUFACTURER AND DESTRUCTIVE OF HIS PROPERTY RIGHTS

The bill (S. 1944) provides for the disclosure of formulas which carry, in many instances, good will values which have accrued over a period of years. The manufacturer of pharmaceuticals has come to rely upon the secret formula for the protection of his rights, for the reason that the Federal bureaus may contest the validity of patents granted by the Patent Office, subjecting the holder to expensive litigation; trade-marked names may be granted to competitors if & way is found of slightly varying the spelling—as in the case of one of our products substituting “ph” for “f.” If the manufacturer of a reliable products is forced to disclose his formulas he may find his products in competition with cheap imitations compounded with poisonous U.S.P. drugs that will be sold as “just as good," which will eventually ruin the reputation of his formulas, and may even reflect on the reliability of the drugs of which they are composed.

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IT EXPLOITS THE MEDICAL PROFESSION AND THE PUBLIC Because of public faith in the symbol U.S.P. it has been possible to market official imitations of pure drugs under this symbol. The following is an example: In the list of pharmaceuticals which this company manufactures are products containing pure beechwood creosote. The creosotes of the Pharmacopoeia are distilled from the tars of mixed hardwoods. The standard for creosote specifies 90 percent purity, the standard for creosote carbonate 85 percent purity. A patent (No. 1199271) has been granted for the manufacture of “beechwood creosote" from the tar oils obtained from “hardwood” tar. The Food and Drug Administration has taken the stand that there is no difference between these creosotes. The unregulated 10 percent of creosote U.S.P. may, if distilled at too low a temperature, contain phenol (carbolic acid). Phenol is one of the most deadly and rapidly acting poisons known. A 24-percent solution of phenol

A applied to the surface of the body may produce serious injury, subacute phenol poisoning has occurred by its absorption from surgical dressings. If the 10 percent unregulated portion of creosote U.S.P. is distilled at too high a temperature it will contain coerulignol, a deadly poison, a drop of which placed on the tongue will cause bleeding. Many attempts have been made to obtain a revision of the creosote standards of the Pharmacopoeia, notably suggested changes by L. Wallis Gibbons (exhibit 1), before the tenth revision. What happens when these poisons reach the internal organs? The death rate in diseases like pneumonia tells the story. The mortality in pneumonia treated with pure beechwood creosote carbonate is less than 5 percent as demonstrated by careful investigators (exhibits 2 and 3) as compared with the normal death rate of about 25 percent. Since the adulteration of the drug, even the medical textbooks are uncertain of the value of creosote in this disease.

There can be no greater exploitation of the public than to levy taxes, on the plea of public health, to support a system which permits the official substitution of an imitation for a drug that is used in cases of life and death. In the case of the physician it may cost him the life of a paying patient, or the confidence of the people who make up his practice. For no physician can give reliable service if the drugs he prescribes are unreliable.

IT PLACES TOO GREAT POWER IN THE HANDS OF THOSE WHO HAVE NEITHER THE

KNOWLEDGE NOR THE FACILITIES TO PROPERLY ENFORCE THE LAW

The Federal Food and Drug Administration has neither the knowledge nor the facilities to enforce the law. It has been the practice of Government Bureaus to look for outside help from universities supporting medical colleges and other institutions of similar character. Information obtained from these sources may or may not be reliable. In 1918 at a time of national emergency (the influenza pandemic) this company offered its pure beechwood creosote carbonate to the United States Government. The product was sent to a medical college and a false report was made of its medicinal value. It developed years afterward that the report was handled by one who holds a high position with a competitor, & well-known drug firm (exhibits 4 and 5). This company now has evidence of four false reports of its products made by or for the Government.

The results obtained with our pure beechwood creosote as compared to the mortality in diseases where the adulterated official creosote was prescribed began to call attention to the quality of the drugs that were permitted in distribution. An effort was made to prevent the advertising of our pure products. A complaint, by an unknown complainant, was filed with the Federal Trade Commission and information from which false charges were manufactured was supplied to the Commission by the Food and Drug Administration. The Federal Trade Commission charged unfair methods of competition, in advertising our pure beechwood creosote products, giving as the reason “that creosote, the basic ingredient of Delson Chemical Co.'s products, has no antiseptic effect upon the digestive organs, nor has it been proven to be an effective therapeutic agent in any respect."

Creosote has been used medicinally for more than 100 years. It is recognized in the pharmacopoeias of every civilized nation. No objection was raised by the

Federal bureaus against advertising and selling an adulterated creosote. It was only when a pure creosote came in competition with the adulterated drug that an effort was made to restrict its distribution. Hearings were held in Washington, D.C., New York City and Columbus, Ohio, where the witnesses to be heard resided. Evidence for the Government was supplied by the Federal Food and Drug Administration. The testimony covered 419 pages. This testimony, made under oath, disclosed that the charges were based on a false and fraudulent test of our product. There is some evidence that the product was tampered with before testing. The official of the Federal Food and Drug Administration, in charge of the test, testified that he had held this position for 5 years, during which time approximately 8,000 preparations had been examined. On cross-examination it developed that he did not know the common principles of common drugs (exhibit 6). He testified that the Department did not have any inspection system of food or drugs. What work was done depends "entirely upon the activities of the Food and Drug Administration according to the funds they have available."

To establish commercial competition the names of seven firms were introduced as being in competition with this company. Six of these firms were advertising and selling their products in violation of the rulings of the Federal Food and Drug Administration. The medical director of one of these firms admitted that this was done with the "passive consent” of the Administration. The examiner for the Federal Trade Commission ruled that there was no relevancy to the issues in the case whether or not other manufacturers were violating the law. In other words, a reputable manufacturer selling pure drugs may be put to great expense defending false charges sustained by false evidence, because he is in competition with manufacturers who, although they are violating the law, have been able to obtain illegal assistance from the Food and Drug Administration.

Much has been made of the so-called “chamber of horrors”, an exhibit of patent-medicine preparations collected by the Food and Drug Administration as examples of law violation. On June 24, 1930, Walter G. Campbell, Director of Regulatory Work, United States Department of Agriculture, appearing before the United States Senate Committee on Agriculture and Forestry admitted, because of limited funds, the Bureau was obliged to “make some decision with respect to how they can be employed most effectively in the protection of the health and the pocketbook of the public. The Administration was permitting some firms, because of their “reliability", to utilize substandard drugs for the manufacture of standardized products. Senator Wheeler, at the hearing above referred to, criticized the conduct of the Administration, “If the Congress of the United States could not pass that law by reason of the fact that it would be class legislation, then it cannot delegate to the Secretary of the Treasury, the Secretary of Agriculture, or to any other governmental agency, a power that it does not itself possess. That is just simply elementary”. We now find these same “reliable" firms manufacturing products for our competitors who are selling these products in violation of the Department's rulings with the passive consent of the Department. If special privilege is extended to "reliable” manufacturers to violate the law, others may follow their example.

The purity of drugs involves technical questions that only those with the knowledge of chemistry and medicine can pass on. There are, however, legal questions here with which every layman is familiar. The laws against false witness are as old as the Tablets of Moses. False evidence has been presented, attorneys for the Food and Drug Administration and the Federal Trade Commission have falsified evidence in their briefs. Decisions of the United States courts have been disregarded. We felt that our company was protected from bureaucratic aggression under decisions of the United States courts. On October 12, 1932, we wrote to the Department of Justice:

"We feel that we are entitled to know whether these decisions of the United States courts can be depended on. If they are so doubtful that they cannot be enforced, or if there is unwillingness on the part of the Government to enforce them against the bureaus, we believe we should be so informed.'

We finally received the following answer on November 14, 1933:

“We wish to inform you that the Attorney General is permitted by statute to give opinions only to the President and the heads of the executive departments" (exhibit 7).

With this evidence before us we believe it would be unsafe to intrust greater powers to the Federal bureaus.

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