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The Upjohn Company

Kalamazoo, Michigan

ABSTRACT

UPJOHN ADVERTISING: THEN AND NOW

by Robert Warren Royle

Upjohn Advertising; Then and Now presents no problems, documents
no field research, offers no original marketing plans. It is a report
dealing only in established fact with a minimum of opinion. Its sub-
ject is The Upjohn Company of Kalamazoo, Michigan, and the several
facets of its marketing operations. This subject is discussed in
depth, considering the company's past and present and touching briefly
on its future.

A considerable number of sources were employed in the preparation
of the report. Of particular value were the author's own past papers
concerned with The Upjohn Company, the book Medicine Makers of Kalg-
‘géggg by Leonard Engel (McGraw-Hill, 1961), and various conversations
with several executives of the Marketing Division of The Upjohn Com-
pany.

The report is roughly Split into two parts: a case history of
Upjohn advertising and a case study of several areas of present con-
cern. An appendix is included with the text of the report which con-
tains a number of samples of Upjohn advertising among other informa-
tion.

Part One of the paper includes the first four chapters, which
trace the company's marketing activities from their inception in 1886
to the present. The development of the company as a whole, of speci-
fic products, and naturally of promotional activities are all consid-

ered. One of the chapters in Part One is devoted to the story of the

Robert Warren Royle

development and marketing of Phenolax, a product which was vital to
the company's growth.

Part Two of the paper considers a number of areas of Special
importance to The Upjohn Company and special interest to the author.

The question of government regulation of the drug industry in
general and The Upjohn Company is discussed at length. The various
approaches to drug regulation taken by the Federal Trade Commission,
the Food and Drug Administration, and the Kefauver Subcommittee on
Antitrust and Monopoly are considered in relation to their effect on
drug advertising.

The success of Orinase, the first oral antidiabetic agent, is
considered in depth. Diabetes and the development and marketing of
antidiabetic drugs from insulin to Orinase are discussed. Further,
some interesting parallels are drawn between two of the company's
greatest successes, Orinase and Phenolax.

The paper then considers the emergence of consumer advertising
and reports how a firm strongly oriented to ethical drug promotion
discovers the importance of the consumer in a changing marketing com-
plex. A considerable loss in market share by a leading product,
Unicap, is documented,and the resultant exploratory test marketing
and eventual national consumer advertising efforts are reported.

The paper concludes with a brief statement of The Upjohn Company's
present position and a few thoughts on its future. This final chapter
summarizes the paper's observation of the problems, opportunities, and

successes of the drug firm that grew from a two-man company in 1886 to

Robert Warren Royle

a 7,517-man corporate complex in 1963 and from gross sales of $50,000
in 1886 to nearly $192,000,000 in 1963.

As the paper presents no major problems per se, it solves none.
Its purpose, simply stated, is to bring the advertising and marketing
of The Upjohn Company into reasonablysharp focus for the interested

reader.

UPJOHN ADVERTISING: THEN AND NOW

A Combined Case History and Case Study of the
Advertising of The Upjohn Company
of Kalamazoo, Michigan

By

Robert Warren Royle

A THESIS

Submitted to
Michigan State University
in partial fulfillment of the requirements
for the degree of

MASTER OF ARTS
Department of Advertising

1964

HEX/Dino 1&4 {ti/“W’V6/ % ~ [WWI/i

 

ACKNOWLEDGMENTS

The author is especially grateful to a number of people who contri-
buted materially to this report and to whom it is dedicated:
To Dr. Kanward L. Atkin of Michigan State University's
Advertising Department, without whose encouragement the

author might never have begun this work.

To the pleasant, cooperative, and capable personnel to
be found at all levels of responsibility at The Upjohn

Company.

To my family, who watched the paper slowly grow to com-

pletion over a period of nearly three years.

Especially to my Dad, without whose understanding, en-
couragement, and help of many kinds this report would

never have been completed.

\

b

ii

TABLE OF CONTENTS

Page
ACKNOWLEDGMENTS . . . . . . . . . . . . . . . . . . . . . . ii
LIST OF APPENDICES . . . . . . . . . . . . . . . . . . . . iv
PART I. THEN
Chapter
I. BIRTH AND BEGINNINGS, 1886-1906 . . . . . . . . . 2

II. THE PHENOLAX ERA, 1907 . . . . . . . . . . . . . . 9
III. THE EXPANSION ERA, 1908-1938 . . . . . . . . . . . 15

IV. CONSOLIDATION AND MARKETING GROWTH, l938-PRESENT . 26

PART II. NOW
V. GOVERNMENT REGULATION AND THE DRUG INDUSTRY . . . 36
VI. THE ORINASE STORY . . . . . . . . . . . . . . . . 57
VII. THE EMERGENCE OF CONSUMER ADVERTISING . . . . . . 65

VIII. CONCLUSIONS AND PROJECTIONS . . . . . . . . . . . 75

APPENDICES O O O O O O O O O O O O I O O O O O O O O O O O 78

B IBL IOGRAPHY o o o o o o o o o o o o o o o o o o o o o o o ' 123

iii

LIST OF APPENDICES
Appendix Page
1. Brief Chronology of The Upjohn Company, 1884-1964 . . 79
2. Organization Charts . . . . . . . . . . . . . . . , . 89
3. Domestic Branch Offices . . . . . . . . . . . . . . . 98
4. Foreign subsidiaries . . . . . . . . . . . . . . . .100
5. Kefauver's Bill (S. 1552), Provisions in Brief . . .101

6. FTC Resolution Directing Investigation of Drug
Industry . . . . . . . . . . . . . . . . . . . . .103

7. Selected Examples of Current Uijhn Advertising . . .112

iv

PART I

THEN

CHAPTER I

BIRTH AND BEGINNINGS, 1886-1906

"Medicine--designed for health, produced with care. Fine pharma-
ceuticals since 1886." These words represent The Upjohn Company, one
of the largest drug manufacturers in the world.

Yet there was not always such a thing as a "drug manufacturer."
At one time doctors and pharmacists were their own drug suppliers.
Each supplied whatever drugs or medical compounds were required for
his own practice. The drug industry really began when certain of
these doctors and pharmacists established themmelves as suppliers to
others as well as themselves.

Some of these new manufacturers produced their products for, and
distributed them directly to, the consumer himself. These manufac-
turers grew into the giant proprietary drug houses of today.

Mast Of the drugs produced by these manufacturers were originally
known as "patent" medicines. They were so called because kings, cen-
turies ago, granted exclusive permission for patents to manufacturers
of secret medicinal compounds. As late as the end of the nineteenth
century U. 8. Patents could be granted to drug manufacturers without
requiring disclosure of the ingredients or the techniques necessary
to produce the drug.

Leonard Engel in Medicine Makers of Kalamazoo quotes Stewart H.
Hollbrook as referring to this as the "Golden Age of Quackery."
Products like "Donald McKay's Indian WOrm Eradicator" and "Autumn Leaf

Extract for Females" found wideSpread distribution and acceptance. In

addition, "Syrups containing morphine were sold as tuberculosis cures;
alcohol*was used so liberally in numerous nostruma that more alcohol
was sold (according to one disgusted physician) as a medicine than as
a beverage."1

Other new manufacturers concerned themselves only with the produc-
tion and distribution of pharmaceuticals to be used under the direc-
tion of medically trained professionals. These people supplied the
products that were to become prescription drugs.

Pharmaceuticals produced by these manufacturers were, however,
little more effective than the patent medicines. Although the emer-
gitg ethical drug companies manufactured their products in line with
specifications Offered by the United States Pharmacopoeia, methods of
control were so primitive that little could be found in the way of
uniformity and predictability among drugs then on the market.

Pills produced by these manufacturers, for example, were so hard
that they Often passed right through the patient's system'without even
beginning to dissolve. And it was this prOblem which was attacked and
finally solved by a thirty-one year old physician from Hastings, Mich-
igan, in 1884. His name was Dr. William;Erastus Upjohn.

Dr. Upjohn was the son of Uriah Upjohn, who was also a physician.
Uriah Upjohn had come to the United States at the age of twenty-four,
Obtained a medical degree, and begun his practice in Richland, Michi-
gan, in 1835. Of his twelve children, his oldest daughter Helen and

three of the four boys, Henry U., William 3., and James T., became

 

1Leonard Engel, Medicine Makers 9f Kalamazoo (New YOrk: McGraw-
Hill Book Company, 1961), p. 23.

doctors. All received their degrees, as would generations of Upjohns
to come, from the medical school of the University Of Michigan in Ann
Arbor.

The Upjohn children had spent most of their life on a farm. The
resulting familiarity with, and interest in, farm machinery prompted
Dr. W. E. Upjohn to experiment with machinery in his spare time. It
was this experimentation that resulted in a machine which opened the
way to a revolutionary new method of pill manufacture.

Dr. W. E.'s machine was essentially a revolving pan. A "seed"
was alternately sprayed with powdered chemical ingredients and moisten-
ing agents until the pill had been fully formed. In this way the re-
quired amount Of each ingredient could be carefully controlled. Fur-
ther, and more important, these pills were certain to dissolve in the
system and thus reach the blood stream. They could, in fact, be easily
crushed with the thumb.

Although the patent on this process (No. 312,041) was not granted
until January 10, 1885, Dr. W. E. began producing his "friable pills"
(capable Of being easily reduced to powder) in his attic in 1883. The
market for his pills was good and sales rose. Soon Dr. W. E. found it
necessary to move his "factory" to an abandoned feed mill in Hastings.‘
But the business outgrew even this location and the Doctor again was
forced to move.

This time the move was to Kalamazoo and into a partnership with
his brother, Dr. Henry Upjohn. Shortly thereafter Dr. W. E.'s other
two brothers, Frederick Upjohn and Dr. James Upjohn, entered the newly

formed Upjohn Pill and Granule Company.

Though the Company really began its operation late in 1885 in a
basement in Kalamazoo, its first price list was not printed until
early in 1886. Thus the slogan, "Fine Pharmaceuticals Since 1886."
This price list, the Company's first communication.with its public,
offered 186 different pill formulas compounded from 56 assorted drugs.

Thus The Upjohn Company began its adventure in production and
marketing by Offering two valuable commodities to its customers. One
was, of course, the friability of Upjohn pills due to the new method
Of manufacture. The other was quality. In a market hard hit by in-
tense price competition, The Upjohn Company early established a repu-
tation for quality. In fact, throughout the plant then and in years
to come could be seen signs reminding employees to "Keep the quality
up . . . W. E. Upjohn."

To demonstrate the friability of its product, The Upjohn Company
adopted as its trademark a picture of Dr. W. E.'s thumb crushing a
pill. As Leonard Engel suggests, "It gave Dr. W. E. the most widely
reproduced thumb in history. In one form or another, the thumb trade-
mark . . . appeared in thousands of advertisements and on tens of mil-
lions of package labels."2

The Company's gross sales in its first year of operation were
$50,000. It is interesting to note that Dr. W. E. Upjohn, as head of
the firm, enjoyed a salary of $1200 a year and his brothers Frederick
and James received $900 and $600 respectively.

Unfortunately, in January of 1887 the Company suffered the loss

Of Dr. Henry Upjohn to typhoid fever. The subsequent reorganization

 

21bid., p. 27.

brought John M. Gilmore (the uncle Of the man who was to become presi-
dent, then board chairman, of the Company) and three others in as
partnerS.

Later in the same year the Company was incorporated with capital
stock of $60,000. Its officers included Dr. W. E. as president, Dr.
James as vice-president, Frederick as secretary, and John Gilmore as
treasurer. The market expanded, physical facilities grew, and in 1890
Upjohn gross sales reached a peak of $132,500.

However, the following year (1891) compressed tablets (simply
powdered drugs compressed in molds of any shape) hit the pharmaceuti-
cal market and The Upjohn Company found itself without a "unique sell-
ing proposition."

To meet the competition, The Upjohn Company made two very impor-
tant moves. .First it expanded its product line to include "buyer's
label" goods, special order goods (in bulk quantities), preparations
for hypodermic injections, fluidextracts (concentrated plant extracts),
tinctures (diluted fluidextracts), elixirs (Spiced and/or sweetened
fluidextracts and tinctures), syrups, ointments, and even medicated
wines. By 1900 the catalOgue listed more than 700 different items.

In 1902 the Company officially acknowledged its broader approach to
the pharmaceutical market by changing its name from the Upjohn Pill
and Granule Company to simply The Upjohn Company.

The second move was the Company's recognition of the importance
of advertising. General advertising describing the "Friable Quinine
Pills" had been done in the medical journals of the day, chiefly the

Journal of the American Medical Association (JAMA). But Upjohn ad-

vertising first began tO assert itself during the late 1890's and
early 1900's.

The Company's entire advertising program during this period was,
for all practical purposes, directed and operated by an imaginative
and creative member Of the sales department, Mr. Frederick L. Childs.
Mr. Childs seemed to have a gift for creating variations of standard
formulas and giving them eye-catching names. It was he who designated
Caripeptic Liquid (a mixture of malt enzymes and papaya enzymes de-
signed tO aid digestion) "The Vegetable Digestant."

This vegetable digestant proved to be one of the Company's best
offerings to the market. Nearly twenty years later the Company's first
director of research, Dr. Frederick W. Heyl, found that Caripeptic
Liquid really had little effect in protein digestion. Nonetheless,
its sales continued to run into tens of thousands of dollars annually.

During its period of inception, from 1900 to 1905, Upjohn adver-
tising under Mr. Child's direction consisted largely Of sampling adver-
tising. By the use of this technique, certain Upjohn products (Cari-
peptic Liquid being prominent among them) with a value estimated at
$5.00 were offered to doctors and pharmacists for $1.00. The vehicles
for these ads were quarter pages in the JAMA showing the product or
products and using the headline "$5.00 for $1.00."

This technique was an excellent means of distributing samples
with the potential customer absorbing part of the cost. The campaign
proved itself an immediate success. Dr. L. N. Upjohn, looking back

on the campaign some fifty years later, noted that it was so success-

ful that mail had to be brought from the post office in.buShel baskets.
And in each envelope was a dollar bill.3

In 1905, however, something happened which was to have a serious
effect upon Upjohn advertising. At that time the Council on Pharmacy
and Chemistry was created by the American Medical Association to regu-
late advertising in the JAMA and generally act as an authority on drugs.
The creation of the Council was an apparent attempt to clear the mar-
ket of the innumerable drugs and drug mixtures which had little or no
value in the treatment of disease.

Unfortunately, the Council's regulations affected a number of
ethical drug firms as well as the manufacturers of patent medicines.
The Upjohn Company was among these firms, for the sampling technique
which the Company had been using since the turn of the century was
prohibited by the Council. As the JAMA was the only medical journal
of any consequence at that time, its removal from the Company's media
schedule actually brought all Upjohn professional advertising to a
halt.

A year later in 1906 Congress passed the Pure Food and Drug Act,
which also affected the pharmaceutical industry. As far as advertis-
ing was concerned, however, the congressional ruling was merely a codi-
fied complement to the regulations already established by the Council.

It is interesting to note that regulations of a similar, yet dif-
ferent nature would arise more than a half-century later to create an

even greater complex Of problems for The Upjohn Company and its adver-

tising.

 

3Dr. L. N. Upjohn, interoffice memo dated July 7, 1945.

CHAPTER II

THE PHENOLAX ERA, 1907

The Upjohn Company's first real triumph in pharmaceutical market-
ing occurred in 1908. It began with the manufacture and promotion of
a small mint-flavored laxative wafer. This was the product that was
truly to establish The Upjohn Company as a major force in the rapidly
growing drug industry. The product was Phenolax.

Frederick Childs, the designer of Caripeptic Liquid, discovered
that a small midwestern drug firm was producing a tasteless laxative
which he thought might have possibilities for The Upjohn Company.
Analysis revealed that the laxative's active ingredient was phenol-
phthalein, until then used solely as an acid-base indicator (turning
red in an acid solution and colorless in an alkaline solution).

This laxative was also being marketed in Germany, which was the
world's primary, and almost sole, producer of phenolphthalein. How-
ever, it had met with no real success either in Germany or in this
country.

The Upjohn Company decided to combine this laxative with one al-
ready in the product line to form a "superlaxative" with "built-in
multiple action." Samples were prepared, and the new product was
dubbed "Phenolax."

The new product was presented to Dr. W. E. Upjohn. He liked the
name Phenolax immediately. He did not, however, see the marketing ad-
vantage Of a mere compound laxative pill. He suggested rather a flax
vored wafer, which would provide a unique, pleasant-tasting laxative.

Working from this, the Company's research production and sales
departments combined to place on the market a product that became known

9

10

in virtually every household in the nation. It was the pink, rectan-
gular, mint-flavored laxative wafer Phenolax.

Initially the Company marketed the product only to physicians.
The physicians saw the product, liked it, ordered, then reordered,
then reordered again. Realizing the possibilities for Phenolax, the
Company began a national introduction.

A novel advertising device, which has since become commonplace
in pharmaceutical promotion, was employed. The Company sent a post-
card containing an advertising message and ten Phenolax wafers (under
a strip of parchment) to every physician in the United States. If
the physician would try these samples himself, it was assumed that the
mint flavoring would do the rest. It did.

As well as trying the wafers themaelves, doctors gave the samples
to their patients with the suggestion to pick up some Phenolax at the
drugstore. The public developed an immediate liking for Phenolax and
orders poured in. In fact, sales results were almost too good. The
production department soon found itself hard pressed to keep pace with
the influx of orders.

But the Company, as in other past and future situations, proved
flexible enough to adjust to the problems and opportunities brought
by booming sales. Production caught up and, in spite of entering com-
petition, The Upjohn Company continued to lead the rapidly growing mar-
ket for flavored laxatives.

The drug industry and the public were happy and things were going
well for all when the world found itself unwillingly plunged into

WOrld War I. The war's effect was immediately felt by the laxative

ll

manufacturers, for it was the German chemical industry which supplied
the world with the phenolphthalein so vital to the manufacture of
Phenolax and competitive products.

Older drug firms which were not so dependent upon a single prod-
uct apparently failed to sense this complication introduced by the
war. But the farsighted management of the young Upjohn Company proved
itself, for it had purchased large stocks of phenolphthalein in anti-
cipation of the war shortage. The result was that The Upjohn Company
became,for all practical purposes, the nation's sole producer of
flavored phenolphthalein-based laxatives.

Phenolax controlled a market all its own until the early 1920's.
When the war ended and phenolphthalein again became available from the
German chemical industry, a flood of competition struck the market.
Upjohn management, recognizing the danger to Phenolax, moved to stop
or slow the competition and retain its product's share of the market.

To accomplish its objectives, management called upon advertising.
Upjohn needed to establish a secondary, rather than only a primary,
demand for its product. Product differentiation and identification
became not only desirable, but necessary, to the survival of Phenolax.

A number of devices were employed to establish identification.
The first move was imprinting the word Phenolax on every wafer. Fur-
ther, red and yellow celluloid window cards were printed and distri-
buted to druggists. They were 12 x 18 inches in size and read, "No
substitution in This Store--We Sell the Genuine Phenolax Waferse-In
Original Bottles Of 30." Service contracts were also designed to al-

low various amounts Of "free goods" to druggists upon their purchase

12

of Phenolax in gross lots and their agreement to display the product
prominently.

The new policy encompassed Upjohn's first serious effort to adver-
tise directly to the public. The Company employed lay advertising
because the job simply could not be done by its sales force, at least
not fast enough in a market suddenly flooded with competition. In
spite of the success of consumer advertising, however, Upjohn did not
use this form again to any appreciable extent until half a century
later.

Possibly the most powerful device used in the Phenolax campaign
was a point-of-purchase display conceived by L. M. Crockett, later to
become a vice-president and director of the Company, and executed by
William Donahey, creator of the weekly comic strip "The Teeny Weenies"
(which still appears in some larger Sunday newSpapers). Donahey pre-
pared a three-paneled display showing the elf-men constructing a house
of Phenolax wafers. The display was an immediate success and was much
sought after by the larger drugstores and chains throughout the nation.

The display was so effective that Phenolax became a household
word. According to Leonard Engel, "Doctors' sons dubbed their jalopies
'Phenolax' instead of 'Leaping Lena.‘ An Upjohn salesman spotted a
thoroughbred trotter named Phenolax (but never reported how well the
horse made out)."4

NO matter how the horse did, the product did very well. During
the period from 1908 to 1925 Phenolax was the bread and butter of The

Upjohn Company. It contributed as much as twenty-five per cent to the

 

aEngel, p. 44.

13

Company's total sales. The peak year for Phenolax was 1924, when
182,393,660 wafers were manufactured for total wholesale sales Of
$795,252.

In 1925 Phenolax sales began sliding. They continued to slide
until the product was finally all but abandoned by the Company. As
late as 1949, however, Phenolax sales were still well over $100,000
per year.

Among the least concerned over this loss was Dr. W. E. Upjohn.
His philosophy was that there is a vogue in drugs just as there is in
women's fashions. He felt that "a product, a procedure, even aIppp,
may be good, but it (or he) must never be considered indispensable."5

Dr. W. E.'s son Harold, who had been instrumental in the success
of the most popular pharmaceutical product Of its day, formally con-
cluded the Phenolax success story when he returned from a trip to his
father's winter home in Pasadena, California, in the mid-1920's. An
Upjohn official reports that Harold summed up the Phenolax situation
as follows: "Well, boys, the Phenolax problem is solved. The answer
is, no more oxygen treatment, no more advertising, no more displays,
service contracts, deals, free goods, or price cuts. Just forget
Phenolax."6

And so the Phenolax era came to an end. It covered what was

probably the most important part Of the Company's history. Profits

from what Leonard Engel calls "Dr. W. E.'s 'Big Thing'"7 allowed for

 

5Stanley Morris, "Upjohn Advertising and Sales Promotion Since
Five-Teinwenty," The Upjohn Coppany Histopy, V (no date), 144. (Type-
awritten.)

6Ibid.

7Engel, p. 40.

14

the building of an extensive research department and great expansion
of the selling force.

If any product from the thousands made by Upjohn then and now
could be singled out as providing for the Company's greatest growth,
it would have to be the pivotal product which was the turning point

in Upjohn history, Phenolax.

CHAPTER III

THE EXPANSION ERA, 1908-1938

From 1905 to 1938 The Upjohn Company carried on its marketing
program without the support of professional journal advertising.

The AMA followed its ruling against sample advertising (which
had been the mainstay of Upjohn advertising for several years) with
a number of articles in the JAMA criticizing various Upjohn products.
Apparently the AMA felt such measures could coerce drug firms like
The Upjohn Company to return to the pages of the JAMA.with full obe-
dience to the new standards set by the Council. The articles appeared
at intervals over a number Of years.

One by L. E. Warren, pUblished in the JAMA of April 17, 1915,
publicly criticized Blaud Pills (used as an iron tonic), whose major
manufacturer was The Upjohn Company. Another article published nearly
20 years later in the May 20, 1933, issue of the Journal criticized
Citrocarbonate, Vitamin D, and a number Of other Upjohn specialties.

The Company apparently had not realized that it was able to adver-
tise at all under the new regulations and had terminated its journal
advertising. Furthermore, the above mentioned articles did little to
stimulate The Upjohn Company to investigate the matter. The question-
able tactics Of the powerful AMA and the stubbornness of the young
drug firm combined to create an enmity that kept Upjohn advertising
from the pages of the JAMA until late in the 1930's.

There is little doubt that this lack Of journal advertising did
a good deal of harm to The Upjohn Company's marketing effort. However,

during this period the Company entered two areas which were to very

15

16

greatly affect its later powerful market position. One of these areas
was sales promotion. During this period the right men, the right prod-
ucts, and the right markets combined to create and develop a program
of sales promotion and detailing support that is perhaps the strongest
in the industry today and is still growing.

One of the most important figures in the growth of Upjohn adver-
tising during this period was Mr. W. Harold Upjohn. Mr. Upjohn, the
son of Dr. W. E. Upjohn, entered the organization in 1907. He felt
strongly that advertising could be attractive as well as dignified
and ethical. One of his first projects was redesigning the Caripeptic
Liquid label. His action brought criticism from some members of the
Company who felt that Upjohn had fallen from, and could never return
to, its former position of severe dignity in packaging. Caripeptic
Liquid's packaging may have lost dignity, but the product's sales
began to mushroom. Compliments poured in from salesmen who commended
the new design and hailed it as a boon to selling efforts.

Harold Upjohn successfully continued his advertising work by
creating an extensive direct mailing program. Promotional literature
--leafleta, blotters, calendars, etc.--was sent to physician-customers
twice a week. One popular direct mailing piece titled "The Doctor's
Prayer" appeared in 1908. Mr. Will Brownell, a retired grocer turned
free lance copywriter was selected by Mr. George McClelland of Upjohn
to write the words. The text was as follows:

Inasmuch as we have, to the best of our ability, relieved the

physical discomfort of those who have called upon us when in

trouble, may they whom‘we have ministered unto have a deep-

seated, organic and absolutely incurable conviction that doc-
tors, at the worst are simply human. May they realize that

17

the disease known as "Financial Cramps" is no respector of
persons; that frequent applications of kind words and good
wishes, while pleasant to take, do not in any way relieve
the griping sensations of a run-down monetary system, and
that while all flesh is grass, it takes real Uncle Sam money
to buy hay* and prunes. May they to whose bedsides we have
always promptly hastened when duty summoned, be suddenly and
severely attacked with a softening of the heart and a loos-
ing Of the purse-strings to the end that we, their doctor,
may be able to hold up our head in the presence of our cred-
itors, and to this end we most devoutly petition.

*Here may be inserted the words "or gasoline." 8
The piece was very successful and gained wide acceptance among Upjohn's
customers for many years. It was reprinted again and again in the
form of small detail pieces, desk blotters, etc.

Of course Upjohn advertising had to have something to sell, and
here the success of Phenolax was again Significant. With funds fur-
nished by Phenolax,the Company established a research department. It's
first chief was Dr. Frederick William Heyl, who came to Kalamazoo from
the University of Wyoming where he had served as professor of chemis-
try. Heyl first set up a small control laboratory from which to oper-
ate. At the time Dr. W. E. Upjohn remarked, "This is going to cost me
$50,000, and I don't know where the money is coming from." Time would
prove that the research department would more than compensate for its
initial cost and for the millions of dollars spent building research
into the backbone of the Company.

Dr. Heyl and his small staff began their work with the problem of
digitalis--a drug made from the powdered leaf of Digitalis purpurea

or common foxglove. Digitalis is used as a heart tonic. It increases

blood pressure by virtue of a regulatory effect on cardiac muscle. It

 

8Engel, p. 51.

18

is invaluable in the treatment of heart disease. Unfortunately, the
clinical usefulness of digitalis involved two problems: (1) the thera-
peutic dose was nearly equal to the toxic dose and (2) the drug lost
about sixty per cent of its power in a year's time.

After extensive investigation and research Dr. Heyl solved both
prOblems. Careful control and standardization solved the toxicity
problem. The discovery Of the effects of light and moisture on sta-
bility was the key to the second problem. Dr. Heyl developed a
sealed, darkened package containing a desiccator to remove moisture.
Later advances led to the production of Digitora, an oral digitalis
tablet which met with considerable success.

About the time Upjohn sales promotion introduced Digitora to the
market, physicians were developing an increasing awareness of the
important fact that human blood was alkaline in nature. Researchers
had found that many diseases upset the acid-alkaline balance id the
bloodstream, which produced further complications.

Sodium carbonate provided the solution because it returned blood
to its alkaline state. However, large doses of sodium carbonate were
difficult to take. Dr. L. N. Upjohn attempted to improve the taste of
sodium carbonate by mixing Vichy salts (chiefly magnesium citrate)
with it. The Vichy salts helped, but did not improve the product
enough to suit Dr. W. E. Upjohn. In accordance with his policy during
the developmental stages of PhenOlax, Dr. W. E. insisted on a better-
tasting, more effective drug.

Dr. Heyl set to work on the problem. In 1921 Upjohn introduced

Citrocarbonate, an effervescent mixture of alkalizing salts, citrates,

l9

and bicarbonates. Two years later the product's sales of $420,000
accounted for about one-eighth of the Company's business. This prod-
uct backed by extensive research, good production methods, careful
quality control and aggressive promotion changed The Upjohn Company's
uncertain sales future to a bright, promising one.

It was also in 1921 that Mr. Harry H. Freeman joined The Upjohn
Company. Mr. Freeman had come to Kalamazoo in 1918 at the request Of
Dr. W. E. Upjohn to help create a new city charter. Kalamazoo accepted
Mr. Freeman's proposed charter and he became the new city manager.

At the same time Dr. W. E. Upjohn was elected mayor.

Thus it was hardly strange that, when Mr. Freeman resigned his
position late in 1921, he came to The Upjohn Company. One Of his first
assignments was a trip to London with Harold Upjohn in the fall of
1922. The Company was attempting to introduce Phenolax to Europe, but
Freeman's mission was not successful. He returned in the late spring
of 1923, having failed to establish Phenolax in the European market.

He returned to the dual position Of editing the Company's house
organ, The Overflow, and doing special work in sales promotion. He
made a study of mailings to physicians and from this determined the
policy that was to guide all future Company promotion and advertising.

Freeman defined sales promotion as a supportive rather than sup-
plantive effort. All promotion was tied closely to the detailing pro-
grams of the salesmen. He attended sales conferences, where be
acquainted the field men with the help being given them by the expand-
ing sales promotion department. He further communicated his plans

through.zpe Overflow, announcing campaigns, running sales contests, etc.

20

This was the kind of promotional support that, with no journal
advertising whatever, was creating a legend of Phenolax and rapidly
building sales of the new "big" product, Citrocarbonate.

Citrocarbonate was, in fact, finding broader and larger markets
than had been imagined for it. It was used in the treatment of dis-
eases marked by an acid-alkaline imbalance in the blood. It was used
as an antacid for gastric upset. Surgeons prescribed it for treat-
ment prior to operations. They were sold by the excellence of the
product itself and by its supportive advertising: "Preoperative alka-
linization for postoperative comfort." The product even enjoyed some
popularity as a preventive of the common cold.

In 1925 Citrocarbonate sales outstripped those of Phenolax. One
year later it became the first Upjohn product to attain gross sales
of more than one million dollars. Its peak year was 1931, when sales
of $2,081,000 constituted 25.4% of company sales. Citrocarbonate
continued to report annual sales of over a million dollars as late as
1945. In fact, the product is still a very active member of the Up-
john line, with a sales volume of $917,000 in 1962.

By the mid-1920's the family partnership that had started in a
Kalamazoo basement, aided by the almost storybook successes of prod-
ucts like Phenolax, Digitora, and Citrocarbonate, had grown to a firm
employing eight hundred employees and grossing four million dollars a
year. In addition to the three "bread and butter" products the cata-
logue listed a line of injectable drugs, a complete line of vaccines,
and a cough medicine which, like Phenolax, was to become a household

word. The cough medicine was Cheracol.

21

Cheracol was originally compounded with morphine. To the Comp
pany's chagrin, however, it became popular with narcotic addicts (par-
ticularly on the West Coast). The Upjohn Company hastily substituted
codeine, a nonhabit-forming narcotic, for the morphine. The codeine
was every bit as effective as the morphine, and thus again a good
product with a pleasant taste found its way into the homes of America.
Once more The Upjohn Company had employed what was later to be called
the "marketing concept" to produce, create, promote, and distribute a
product whose first concern from conception to consumption was the
ultimate consumer.

On.March l, 1926, Harry Freeman left the Company. Fortunately
this man who had really made Upjohn promotional policy was replaced
by a man equally capable, Mr. Stanley Morris. Morris had been with
The Upjohn Company since 1920 supervising the production and distri-
bution of detail materials. It was he who made the direct mailing
program so effective by scheduling the two mailings each month to co-
incide with the product(s) being detailed by Company salesmen. This
was a difficult and extensive job, but Mr. Morris handled it with ef-
ficiency and dispatch. (Practically all direct mailing by the Com-
pany today is done internally by the Promotional Mailing department
under the supervision of Mr. Jack VanDyke.)

Unfortunately, just as The Upjohn Company seemed to have found
the secret of successful sales promotion without journal advertising,
it experienced a serious setback. On October 15, 1928, Harold Upjohn,
who had been the power and creative inspiration behind all Upjohn ad-

vertising since 1907, died. With him died nearly all Company adver-

22

tising, for the advertising program that he had made so successful
lay dormant for an entire decade.

At the time of Harold Upjohn's death Citrocarbonate was a well-
established pharmaceutical. It had been advertised and prompted well
enough that it could provide the Company with sufficient sales without
the aid of continued advertising. In fact, the entire sales organiza-
tion, then under the direction of Mr.!hflcolm Galbraith, was growing
so quickly in size and efficiency that some questioned the need to
advertise any of the Upjohn line.

This question had come up before, but Harold Upjohn had always
been able to sell top management on the need to advertise. Harold
was the only member of the management team who did not have a medical
background. He, probably better than the others, could see outside
the research and production departments to the most important part of
the business mix, the market. He knew the necessity of finding a
need, filling it, and then telling your customers, through advertis-
ing, that you had filled it. But when Harold died, his view of the
market also died, and Upjohn management discontinued the advertising
program.

In all fairness to management, it must be admitted that one of
the major reasons for the neglect of advertising was the fact that a
more important need had arisen. The Company needed a vitamin product
to compete with discoveries being made almost daily in the field of
nutrition. Consequently, money was taken from advertising to pay for

a nutritional laboratory.

23

However, the Company never returned the money to the advertising
budget after building the nutrition laboratory because one year after
Harold Upjohn's death the American stock market crashed. The country
entered the greatest economic crisis it had ever known--the great de-
pression. Pharmaceutical firms had to consider first things first,
and research was most vital. Thus every available dollar of profit
was spent on research.

Throughout this period The Upjohn Company and the entire pharma-
ceutical and medical professions had been vigorously pursuing the
secrets of nutrition. First came vitamin A, isolated near the end of
the 1910's through the efforts of a great many men of science, the
first of these being Sir John Bland-Sutton, who discovered the use of
cod liver Oil in the treatment Of rickets in 1889. The discovery of
vitamin A led in 1922 to the discovery of vitamin D, which was also
found in cod liver Oil.

Vitamins were indeed becoming important to the pharmaceutical
market. The Upjohn Company was able to take advantage of this market
because of the work of Edwin C. Wise, chief of the newly formed nutri-
tion laboratory. In 1928 the Company entered the vitamin field with
a product that, unlike its competitors, boasted controlled potency and
taste. The product was Super D cod liver Oil, and it enjoyed consider-
able popularity as a food supplement for babies and children.

In keeping with business tradition, competition found something
better. By irradiating ergosterol, a fatlike plant substance, with
ultra-violet light, scientists could form an almost pure concentrate

of vitamin D. The Upjohn Company failed to obtain a license to produce

24

Vitamin D in this manner; but, undaunted, it searched for other ways
to meet the competition. In 1936 Edwin Wise went to Europe, where he
traveled extensively in Scandanavia for more than half a year. He set
out to find the best source of cod liver oil available. He found it
off the northern coast Of Iceland.

The revelation of this extremely potent Oil was coupled with the
discovery of ethylene chloride, an organic chemical capable of dissolv-
ing vitamin D and thus isolating it from cod liver oil. The firm
which made the discovery, International Vitamin Corporation, granted
an exclusive U. 8. license to the process to The Upjohn Company. Super
D concentrate was therapeutically superior to the ergosterol irradiated
vitamin D, and The Upjohn Company again led the drug industry.

Drug researchers were working not only with vitamins A and D.

In 1926 Dr. Joseph Goldberger Of the Public Health Service discovered
niacin (nicotinic acid). Vitamin C (ascorbic acid) was finally iso-
lated in 1928. In 1931 Dr. Harry C. Sherman of Columbia University
isolated vitamin B2 (riboflavin). In 1935 Dr. Robert R. Williams of
Bell Telephone Laboratories isolated vitamin B1 (thiamine).

Working to combine all these into a single vitamin product, The
Upjohn Company introduced its first multivitamin in 1930. Myeladol
was a combination of iron, bone marrow, malt, and cod liver oil. It
provided clinical efficacy but was somewhat less than a smashing sales
success. Continued research produced Cerelexin in 1937. Cerelexin
combined liver extract, iron, and an excellent source of B-complex
vitamins, yeast extract. Cerelexin proved to be a popular and rather

successful contribution to the multivitamin market.

25

In 1938, the year The Upjohn Company returned to the pages of
the JAMA, Teleostol Compound C was introduced. This multivitamin was
a combination of crystalline thiamine chloride, ascorbic acid, and
concentrates Of vitamins A and D. Like Myeladol, Teleostol Compound C
failed to provide the hoped-for sales. But the best was yet to come.

The Upjohn Company was losing the race for the greatly increasing
vitamin.market, so the research department went back to work. They
came up with a small capsule containing the adult minimum daily require-
ments of vitamins A and D, B1 (thiamine), B2 (riboflavin), C (ascorbic
acid), pyridoxine, and niacinamide. This time a product "designed for
health, produced with care," and prepared for an already established
market was supported by the power created by a reawakened interest in
sales promotion and advertising.

In 1940 Unicaps exploded into the American drug market!

CHAPTER IV

CONSOLIDATION AND MARKETING GROWTH, 1938-PRESENT

The year 1938 marked the end of The Upjohn Company's long absence
from the pages of the professional journals. It was, in fact, the end
of a decade of almost complete lack of any form of advertising.

On June 2, 1938, the Company submitted a list of twenty-five
products to the Council on Pharmacy and Chemistry of the AMA for con-
sideration. It was accepted. A letter from Dr. Leech, then Secre-
tary of the Council, dated July 29, 1938, stated that "The Upjohn
Company will be considered a concern having accepted products as of
September 1 . . . . The Secretary wishes to express on behalf of the
Council, appreciation of your willingness to cooperate."9

It is interesting tO contrast this with a statement from another
letter written five years earlier by Dr. Leech: "The Upjohn Company
has never cooperated with the Council on Pharmacy and Chemistry. At
times the firm has indicated its intention of submitting products to
the Council, but no product has ever been accepted for inclusion in

New and Non-official Remedies."10

Although this letter was written
to a physician, it is easy to see the change in attitude, both of the
Council and the Company.

AMA acceptance was, of course, a major factor in the re-emergence
of Upjohn advertising. However, as at other points in The Upjohn Com-
pany's history, a man also played a key role in the Company's progress.

Mr. C. V. (Pat) Patterson began his career with The Upjohn Com-

pany in 1925 as a salesman in Kansas City. In 1928 he became a sales

 

9Morris, op, cit.

10
Ibid. 26

27

supervisor. In 1931 he was elevated to the position of Secretary to
the Director of Sales, Mr. Malcolm Galbraith. This led to a promotion
to Assistant Director of Sales and shortly thereafter to Sales Direc-
tor of the Company. Mr. Patterson concluded his active career with
The Upjohn Company on January 4, 1960. He retired from the position
of Executive Vice-President, but he continues to serve as a consultant
and remains a member of the Board of Directors.

Mr. Patterson was keenly interested in the role played by adver-
tising in Upjohn's sales, and he was instrumental in alerting manage-
ment to the growing importance of advertising and sales promotion. At
his insistence the Company again undertook a fairly ambitious program
of direct mailing in 1938 and 1939.

At this time the Company entered into its first agency relation-
ship. It hired McManus, John and Adams (presently agency of record
for both the Pontiac and Cadillac divisions Of General Motors) to work
on the creation and production of Company advertising which appeared
in the JAMA in 1939.

McManus also engineered the Company's direct mailings. These
mailings were done entirely independently Of the detail work (i.e.,
the personal selling effort). A comprehensive study was made of this
effort which proved that direct mail is considerably more effective
when used to support detail work, rather than supplant it.

Applying this principle and others slowly gained from experience,
the Company proceeded with its advertising program. In 1940, apparently

in favor of retaining an agency, but disenchanted with McManus, The

28

Upjohn Company switched the handling of its account to the L. G. Maison
agency of Chicago. Dr. Maison himself acted as account executive.

In this year (1940) twelve separate mailings were made and a
series of twelve 4-color inserts was run in the pages Of the JAMA.
Copies of these twelve ads, "Studies in Avitaminoses," were made avail-
able to physicians in portfolio form. Revisions of this portfolio re-
sulted in the publication of two books, Clinical Aspects Of Avitamin-
oses, published in 1943, and Vitamins in Medicine, published in 1947.
Both‘were made available free tO doctors. (An even later publication,
The Vitamin Manual, published in 1953 and distributed at no charge to
professional people, teachers, etc., was written from material in
these two books.)

In 1941 The Upjohn Companx,still experimenting with the powerful
new tool of advertising, changed agencies again. The new agency was
Campbell-Ewald of Detroit, among whose clients presently is Chevrolet
Division of General Motors, one of the largest single advertisers in
the world. Mr. Karl Pittelkow acted as account executive.

Ten direct mailings were made in 1941 and a journal schedule sim-
ilar to that Of the previous year was maintained. In addition, two
new features became a part Of the advertising program.

The first was a series of institutional advertisements run in
national magazines. These ads discussed the theme "Why Your Doctor
Knows." The series constituted one ad each month from September, 1941,
through May, 1942, in SaturdaygEvenipggPost, Time, Parents, and flygglg.
Like the "Avitaminoses" ads, these nine ads were later reprinted in

book form and distributed by salesmen to physicians. The suggestion

29

was made to make the books available to patients by placing them in
physicians' waiting rooms.

The second new feature of Upjohn advertising was §pppp, intro-
duced in October, 1941. This prestige periodical was intended as a
quarterly journal, but in reality it was rarely published that Often.
gpppEDcontained news and feature articles Of interest to the physi-
cian, as well as advertising. It was distributed free to doctors.
Unfortunately, due to its high production cost and erratic publication
schedule, Spppg was discontinued with the December, 1957, issue.

Scope's successor had been born two years earlier. On January 2,
1956, the Company published the first issue of Scope Weekly. This
tabloid newSpaper featured brief articles on current news stories con-
cerning the medical and pharmaceutical professions. Gone were the
prestige, "class" feature stories of the coated stock journal.

Like the magazine, Scope Weekly was distributed free by mail to
nearly all the approximately 175,000 physicians in the nation. Librar-
ies of the country's leading medical schools also received it at no
charge. William Douglas McAdams agency of New York handled entirely
the services of reporting, producing and distributing Scope Weekly at
a cost of $1,500,000 a year.

An expenditure of this size, however, could not be made long no
matter what the return (which Upjohn studies showed was far from great).
Consequently, with the November 2, 1960, issue Scope Weekly died.

With it died any attempt to distribute a house organ to doctors.

The McAdams agency (not to be confused with McManus, mentioned

earlier) was hired in early 1943 to create and produce all Upjohn ad-

30

vertising except national lay advertising, which was left with Camp-
bell-Ewald. WOrking with McAdams, The Upjohn Company increased its
1943 mailings to fourteen and expanded its journal advertising.

In December, 1943, the Company adopted the "Your Doctor Speaks"
national lay campaign proposed by McAdams, which ended the association
with Campbell-Ewald. "Your Doctor Speaks" dealt with diseases often
encountered by physicians and told of the progress of medical science
in the treatment of these diseases. Each ad was illustrated by a
four-color fine art painting.

The Company employed the aforementioned four national magazines
for the series for the next three or four years. Other magazines were
occasionally included in the schedule, among them Life, Colliers,
Newsweek, and Fortune.

In 1944 twenty-four mailings were made and journal advertising
expanded further.

Twenty-nine mailings were made in 1945. In this year the first
ten advertisements of the "Your Doctor Speaks" series were published
in book form. Every physician in the United States received copies
of the book for use in his waiting room.

During World War II The Upjohn Company included slogans like "Buy
War Bonds" in its national magazine advertising. Ads like these were
also occasionally placed in the Kalamazoo Gazette.

In 1946 a series of two-page ads called "Civilian Medicine During
the War Years" was placed in the JAMA. McAdams prepared these ads,

which discussed diseases and conditions for which progress in treatment

31

had been made during the war years. Some years later the theme Of
this series was changed to "Recent Advances in Medicine."

In 1946 forty-eight mailings were scheduled, probably the most
ever attempted in a single year. Journal schedules remained about
the same.

In 1948, 1949, and 1950 the Company cut its mailings almost to
the point of discontinuation. Journal advertising remained steady.
Institutional national advertising declined somewhat.

During this period of growth, from 1938 to the present, profes-
sional and direct mail advertising were not the only promotional wea-
pons the Company employed in its assault on the drug market. Detail
materials (printed materials used as props for sales presentations
and/or as "leave-behinds"), window diaplays, and Special promotional
exhibits also figured prominently in The Upjohn Company's promotional
armamentarium.

In 1920 the only advertising used was a group of detail materials.
The area of detail materials has, of necessity, grown tremendously
since that time. The flow of new products has required great amounts
of detail materials to introduce these products to the doctor or drug-
gist and to aid the salesman with his presentation.

Much of the Company's detail material comes from ideas submitted
by salesmen. These ideas range from simple black-and-white charts to
elaborate leather-bound booklets with celluloid envelopes containing
photographs, charts, graphs, outlines, etc. Through the years detail
pieces have become more elaborate and colorful. In 1948 mechanical

gadgets were added to the Company's detail effort. Presently the Com-

32

pany is experimenting with slide projectors and motion picture projec-
tors to be used in presentations made by detail men.

In 1940 the detail cards, blotters, folders, leaflets, and book-
lets were ordered in quantities of 50,000. By 1948 these items were
ordered in quantities up to 200,000. This is still true in 1963.

Upjohn's first use of window displays has been mentioned in the
Phenolax "success story" in Chapter II. Displays were used intermit-
tently from then until the late 1930's. Beginning in 1938 the Com-
pany prepared vitamin diaplays annually for use in drugstore windows.
These centered in a human interest painting and featured Upjohn vita-
min products .

In 1939 the Company commissioned Normal Rockwell to do a group
of paintings. Among themeere a painting of a small boy measuring
himself by marks on the wall and a country doctor writing a prescrip-
tion for a mother and her three children. Reproductions Of Rockwell's
works may still be seen in doctors' Offices across the nation.

Window displays also featured paintings from the "YOur Doctor
Speaks" series of national advertisements. Other special product
displays were prepared as the need arose.

Advertising through medical exhibits began in 1892 with a small
booth at the Chicago World's Fair. The booth, run by Dr. W. E. Upjohn
himself, showed the advantages of the "friable pill." Stickpins (min-
iature bottles containing layers of vari-colored pills) were distri-
buted to interested onlookers. The pins were attached to a card upon

which.was printed "Compliments of the Upjohn Pill and Granule Company."

33

Special exhibits appeared intermittently from that time until
1947, when major exhibits on Gelfoam, an absorbent and absorbable
surgical gelatin qaonge, were shown at medical conventions in Buffalo
and Chicago. Registration cards written on the spot provided a
natural follow-up for Upjohn salesmen.

Exhibiting increased in 1948 to cover eight national, eleven
state or city, and three specialized medical conventions. Upjohn
built exhibits which could be adapted from a Gelfoam presentation, for
example, to one on the adrenal cortex products. Even veterinary medi-
cine was represented: three exhibits in 1947 and four in 1948.

Certainly one of the Company's most ambitious exhibit efforts
.has been the construction and display of The Cell. This tremendously
magnified model (twenty-four feet in diameter) of the most fundamental
biological unit of life has been displayed at a number of conventions
across the nation. It resides now in Chicago's Museum of Science and
Industry.

The Cell contains over two-thirds of a mile of special acrylic
plastic tubing in 2,200 separate pieces, which are glued and clamped
together. One mile of electrical wiring provides lighting for the
effect of life within The Cell.

The model has left the Museum only ones. In 1959 at the urgent
request of the British Broadcasting Company it was flown to England
to be the star of two one-hour television programs on cancer and can-
cer research.

Actually The Upjohn Company has experienced what is probably its

greatest growth period in the last ten years, for example:

34

1952 1962
Gross Sales $75,958,000 $173,181,000
Net Sales 8,405,000 23,255,000 11
Total Number of Employees 4,267 7,025

The Upjohn Company owned sixty-six buildings in 1950;12 the current

total is 149.

The estimated 250 professional journals used by Upjohn in 1950
has been trimmed to about twenty, but the number of advertising
agencies employed has increased. Since 1950, when McAdams was the
only Upjohn agency, five agencies have been added: RObert A. Becker,
Inc., McCann-Marshalk (Division of Interpublic), Aves Advertising (to
reach the agriculture and drug trade), Fitzsimmons, Inc., and L. G.
Maison (the same agency which had been retained earlier in the Company's
history).

Perhaps of greatest interest is the increase in advertising ex-
penditure from $666,000 in 1950 to $5,198,000 in 1962. This represents
a significant increase in advertising as a percentage of sales from
1.04% in 1952 to 3% in 1962.

These figures do not, however, belong to the history of Upjohn
advertising, but to the present. They reflect the constant and contin-
uing growth of a company that, through extensive research, efficient
production, and aggressive marketing, has established itself as a

world leader in the manufacture and distribution Of pharmaceuticals.

 

11The Upjohn Company, Annual_Rep9rt, 1952 and 1962.

12Ibid., 1950.

PART II

NOW

CHAPTER V

GOVERNMENT REGULATION AND THE DRUG INDUSTRY

In 1957 a painful and torturous era began for the drug industry
as major attacks against it were leveled from.at least three direc-
tions. The question involved was one of drug regulation; and the drug
f irms, whose very reason for existence was the prevention and cure of
disease and, therefore, the health of every man, woman, and child in
the U. 8., suddenly found themselves pictured to the public as villain-
ous, profit hungry individuals, who were more concerned with selling
ineffective or, worse, harmful medicines to the poor overworked physi-
cians and an unsuspecting public. Taken unawares, the industry could
only gape at the charges.

Here was an industry that had grown by leaps and bounds over the
past thirty years. Most companies had begun, much as Upjohn had, as
small firms handling the manufacturing of medicines as directed by the
physicians. As Lawrence Lansing, writing for Fortune magazine, put
it, "Formerly the pharmaceutical industry made only what the doctor
prescribed; now the doctor prescribes what the industry makes. In the
last 30 years or so, medicine has encompassed more advances than in
the preceding five hundred."13 Thus an industry responsible in part
for making this country one of the least disease-ridden countries in
the world was being attacked for allegedly taking advantage of an un-
suspecting public in order to secure greater profits.

As the attacks took form, several basic reasons for them became

clear:

 

13Lawrence Lansing, "Laws Alone Can't Make Drugs Safe," Fortune

(March, 1963), p. 3.
36

37

l. The Federal Trade Commission (FTC) charged six companies,

Upjohn among them,'with unfair methods of competition and
unfair acts and practices. The charge made particular
reference to the marketing of various forms of tetracy-
cline, a broad-spectrum antibiotic.

2. The Food and Drug Administration (FDA) felt that it was

not able to adequately control the marketing of new drugs
being placed on the market.

3. The Kggauver Commpgtee (full title: Senate Subcommittee

on Antitrust and Monopoly [; part of the Senate Judiciary
Committe27,whose chairman.was the late Senator Estes Ke-
fauver of Tennessee) aimed its attack at the excessive
profits Mr. Kefauver was convinced the drug companies
were making. The attack eventually broadened into ques-
tions of controlling not only those profits, but also
advertising content and marketing methods as applied to
products on the market.

As the industry reeled, searching for reasons for the attacks and
for weapons to combat them, it became clear that a good deal of the
blame for the assaults lay with the industry itself. Its notable lack
of institutional and corporate advertising and Of public relations and
lobbying, activities so vital to big business, had left it vulnerable.

Senator Roman L. Hruska, then himself a member of the Kefauver
Committee, explained it rather clearly when he said, "The prescription
makers had in the mind of the public no reservoir of good will, no

general awareness of their phenomenal service to mankind. Their story

38

had never been told. In the popular jargon they had no 'image.’ To
the inquisitors, they were not just fair game; they were sitting ducks.
So they were duly nominated for assault."14

To compound the problem of the Pharmaceutical Manufacturers Asso-
ciation (PMA), which represented the industry, all three federal at-
tacks came within the same Space of time, roughly the two years 1960
and 1961.

Though the three manifested some interplay, one affecting the
other, this report will consider them separately for purposes of reader
clarity and convenience.

The Federal Trade Commpssiop. In a speech before the Proprietary
Association convention at White Sulfur Springs, West Virginia, in May,
1961, Federal Trade Commission Chairman, Paul Rand Dixon, cited a
report that revealed an unfavorable trend with respect to pharmaceuti-
cal advertising.

It appears that ten years ago the Commission.was issuing

only about five complaints a year against proprietary drug

advertising but that the number of these complaints has

increased to the point where 19 were issued in 1960 . . .

All five members of FTC are deeply troubled by the content

and tone of the thousands of letters complaining about

advertising that we receive each year from the public.

Many of these are forwarded by senators and congressmen who

add their own expressions of concern.

Thus on July 13, 1961, the FTC put forth a "Resolution Directing
Investigation of . . . Corporations Engaged in the Sale and Distribu-

tion Of Drugs and Drug Products":

 

14Senator Roman L. Hruska. Address before the New Jersey Pharmaceu-
tical Companies, Far Hills Inn, Somerville, New Jersey, November 16,1961.

15Paul Rand Dixon. Speech before the Proprietary Association Con-
vention, White Sulfur Springs, W. Va., May 14-17, 1961.

39

Now, Therefore, Be It Resolved that the commission in the

exercise of the powers vested in it by law, and pursuant to

its published procedures and rules of practice (16 CFR, 1958

Supp., 1.1 et seq.), and with the aid of any and all compul-

sory processes available to it, do forthwith proceed to in-

vestigate, for the reasons and purposes stated herein, the
organization, business, conduct, practices, management, and
relation to other corporations, partnerships, and individuals

of corporations engaged in the manufacture, distribution and

sale of drugs and drug products. 16

To the Upjohn Company's credit, Dixon's investigation of "good"
and "bad" ads (chosen chiefly from then current issues of the JAMA)
listed advertising for two Upjohn products, Monase and Orinase, as
"good." No Upjohn advertising appeared on the "bad" list.

Even this admission, however, was given grudgingly. Concerning
an Orinase ad in the May 6, 1961, JAMA, FDC Repprts quotes Dixon as
stating that "although the color of the print describing the side ef-
fects and contraindications is distinctive, the print is too small to
be read without eyestrain."17

This, then, would be the tone of all government investigation to
follow: inquiry into hundreds of small considerations which, before
it was over, would involve a considerable loss of time and money and
eventually partial loss of freedom Of advertising and marketing for
The Upjohn Company and the industry as a whole.

The FTC investigations were not, of course, concerned solely with

advertising, though advertising is naturally our major consideration

here. The entire scope of these investigations is discussed by Raymond

 

16Federal Trade Commission. Resolution Directipg Investigation of

Pricing Practices, Policies, Allowances, Service Discounts, Terms of

Sale and Adpertising of Corporations Epgaged in the Sale and Distribu-

gipn of Drugs and Drug Products, July 13, 1961.

 

17FDC Reports, September 11, 1961.

40

Moley in Newsweek. He considers FTC hearings in which six companies
(American Cyanamid, Bristol-Myers Company, Bristol Laboratories,
Pfizer, Olin.Mathieson, and Upjohn) were charged with "unfair methods
of competition and unfair acts and practices" with reference to the
marketing of various forms of tetracycline. After extended hearings,
according to Malay, Robert L. Piper, examiner for the FTC, prepared
a 195-page report, which was "an exhaustive survey of the technical
and commercial aspects of the manufacturing and marketing of these
drugs. His conclusions clearly exonerated the companies from the
charges."18

The Food and Drpg Administration. Perhaps the greatest peril to
drug advertising, if not to the drug industry as a whole, lay in the
investigations and actions of the FDA, especially as it was affected
by the Kefauver Committee. The FDA examined the question Of labeling
regulations and eventually of certain advertising and marketing regu-
lations. Printer's Ink expressed the FDA position this way: "By a
wild stretch of its authority, the Food and Drug Administration has
decided that advertising is the same thing as labeling and thus should
include all the warnings required on labels."19

Actually this FDA ruling did not apply to all advertising. The
PMA Bulletin clarified the FDA position:

Any labeling Of a prescription drug distributed by or on

behalf of the manufacturer or distributor (this would in-

clude promotional mailings) that furnishes or purports to

furnish information for use or suggests a dosage, must also
contain adequate information on side effects, contraindica-

 

18Raymond Moley, "Wonder Drugs and Law," Newsweek (December 4,
1961).
19

Printer's Ink, Editorial (December 22, 1961), p. 71.

41

tions, precautions, etc. If the drug is the subject of an

effective new drug application, this informational material

would be that contained in the "Official brochure." This
requipement applies to all prescription drugs, whether "new

drugs or not, and regardless of whether the ordinary prac-

titioner commonly knows these facts. 20

Advertisements in medical journals and other similar publications
were thus not considered labeling since they do not directly contribute
to the distributional scheme of the product considered. If, however,
reprints of these ads were used by detail men or as direct mailing
pieces or if they furnished information for use and/or suggested dos-
age, they then became "labeling" and were subject to the provisions
Of the FDA ruling.

Changing Times treated the labeling issue somewhat humorously:
"Truth in labeling can go too far. Imagine Omar Khayyam'wooing his
girl friend with 'a loaf of bread, calcium propionate added to retard
spoilage, a jug of wine, color added, and thou.'"21

Many saw very little humor in the FDA ruling and its possible ex-

tensions and consequences. An editorial in Printer's Ink warned of

 

these extensions and consequences:

The FDA has authority over the labeling of foods and cos-
metics as well as drugs. Will it, sometime in the future,
require full disclosure in food and cosmetic advertising?
Government control over deception in advertising is one
thing, and it is welcome. Government dictation of the con-
tent of truthful advertising is another, and it is a danger-
ous precedent for the advertising business. 22

 

20Pharmaceutical Manufacturers Association Bulletin NO. 60-13,

August 10, 1960.

21Changipg Times (May, 1962), p. 2.

22Printer's Ink, Editorial (December 22, 1961).

42

Whether a dangerous precedent or not, the new FDA interpretation
of the law became one more regulation threatening to seriously inhi-
bit the free competition of the American drug industry. As potentially
threatening a situation as this was, however, it did not Offer the
greatest danger to the drug industry. That was the danger Of ppp
legislation, which was to arise from the much publicized hearings be-
fore the Senate Subcommittee on Antitrust and Monopoly.

The Kefauver Committee. When Senator Kefauver began his attack
upon the drug industry in 1959, it was based on the premise that the
drug firms were realizing too great a profit on their products Och
and above the cost of their manufacturing. He cited examples of drug
markups from 1,000 per cent to over 10,000 per cent. His charges made
headlines and the headlines immediately created an unfavorable picture
of the drug industry:

Drug Firm Accused of Boosting Product Price 7,000 Per Cent

Asthma Drug Price is Found Eleven Times Cost23

Without a doubt, Kefauver's methods Of attack were highly unor-
thodox, and as a result the Senator received nearly as much criticism
as he gave. But his attacks were primarily geared to hit the head-
lines, and the press gobbled them up as an anteater would ants. The
drug industry was at a big disadvantage. As Raymond Moley reports:

Since the business of a big company is complicated, rebuttal

takes time and misses the headlines. Months passed before

federal agencies respOnsible for administration of existing

laws wereluard, and the professional and trade associations
appeared much later. 24

 

23Hruska, op,cit.

24Raymond Moley, "Kefauver's Inquisition," Reader's Digest (Decem-
ber, 1961), p. 69.

43

Even before the drug firms could answer the excessive profit
charges leveled by the Committee, they found that the original attack
had poured into other areas, chiefly patenting, licensing, and adver-
tising. The drug industry offered considerable opposition to the Com-
mittee's evident desire to change the existing law, and after a long
struggle it was able to retain the status quo in the areas of patent-
ing and licensing. On May 8, 1962, the full Senate Judiciary Committee
defeated the patent and licensing provision of the proposed Senate
Bill #1552 by a vote of seven to three.

Raymond Moley offers perhaps the briefest and most concise report
of the initial stages of Senator Kefauver's investigation into drug
advertising:

Kefauver . . . first summoned the presidents of the drug

companies, who were confronted with "when-did-you-stop-

beating-your-wife" questions cunningly designed to make
sensational headlines in the press. Then miscellaneous
witnesses offered charges against the industry--generally

wild, irresponsible, and sometimes untrue. 25

The investigations lasted some two and a half years, with testi-
mony published in twenty-six volumes comprising 16,505 pages.26 It is
interesting to note at this point a comment from Senator Hruska, a
member of the Republican minority of the Subcommittee:

In the course of all its dreary history prior to the drug

investigations the Subcommittee has burdened the library

shelves of Congress with 26 volumes of transcripts. Of

these weighty tomes, the steel industry hearings accounted

for three; the automobile industry for two; and asphalt
roofing for one. 27

 

25 1

26

0..

Ibid., p. 70.

 

27Hruska, op. cit.

44

As the hearings ground their way slowly but surely to a close,
the Subcommittee met in the Senate Office Building on January 20, 1962,
to question Dr. Arthur M. Sackler and Dr. DeForest Ely, Chairman of
the Board and President, respectively, of William Douglas McAdams,
Inc., New York, one of The Upjohn Company's several advertising agen-
cies. The topic at hand was drug advertising and the effect Of the
proposed hill 8. 1552 upon that advertising.

In his opening remarks Senator Kefauver outlined the reason for
this last session of hearings:

The bill contains several provisions relating directly to
drug advertising. Thus it would prohibit the making of ex-
cessive claims as to a drug's efficacy. It would require
the inclusion in all advertisements and descriptive matter
of a full and correct statement of a drug's "efficacy" as
well as a warning of "any dangerous or harmful property or
effect thereof." It would also require the inclusion in
advertisements of "the official name, presumably the generic
name, like 'Tolbutamide' rather than just ’Orinase' printed
in type at least as large and prominent as that used for

any trade or brand name thereof" . . . . The problem lies in
the quality of advertising and promotional material directed
to the physician. Specifically, the complaint has been that
the claims of a drug's efficacy are frequently excessive in
terms of its actual performance and that cautions concerning
a drug's side effects are Often wholly absent or far from
adequate. 28

Though the industry as a whole was attacked on several fronts
during this session, Upjohn specifically was questioned on only a few
items.

One of the first charges involved a series of nine ads for Medrol

(a leading Upjohn corticosteroid) which employed in each case two

 

28Hearings Before the Subcommittee on Antitrust and Monopoly of
the Committee of the Judiciary United States Senate Pursuant to S. 1552,
January 30, 31, February 1, 6, and 7, 1962, Part 6, Advertising Provi-
sions.

45

x-rays. One showed a patient prior to treatment for a specific condi-
tion; the other showed a patient following treatment for that condi-
tion. Most of these ads were clearly labeled with "before Medrol” and
"after Medrol" captions or similar captions.

In one ad, however, the first x-ray showed and labeled the condi-
tion (in this case, ulcerative colitis) and the second showed a patient
"following successful therapy." The implication was, of course, that
the therapy had been Medrol. The fact was that the two x-rays were
not related as to time (before and after), were not even of the same
patient, and were in fact shots of patients, neither of whom had ever
been treated with Medrol!

Though some twelve pages of testimony are exhausted on the sub-
ject, the issue is really clear-cut. The Upjohn Company had been
caught trying, by implication, to convince the physician that something
that was not necessarily so, in fact was. At the worst this form of
advertising was "false, deceptive, and misleading." Even assuming the
technique was necessary to meet printing deadlines or for some other
reason, it was, at best, suspect--a little on the shady side.

A second Subcommittee inquiry into Upjohn advertising practices
resulted in only four pages of testimony concerning the question of

vitamin B advertising.

6
An Upjohn ad appearing in the September 10, 1958, issue of Scope
Weekly had suggested that vitamin B6 is the "Happy Baby Vitamin" and

makes a contribution to the well-being of babies under six months of

age. The copy had informed the physician that "that's why basic baby

46

vitamin supplementation calls for Zymabasic, the formula with all
four: A, D, and C, plus B6."

The ad was based upon a paper published in the July, 1957, issue
of Pediatrics in which Drs. Hansen and Bessey reported their work with

B The paper stated that "it would seem wise to give Special atten-

6.
tion to the needs and intakes of vitamin B6 of infants less than six
months of age." This statement the ad quoted. However, the paper

went on to say that this B need is, in most cases, adequately pro-

6
vided by the baby's daily diet.

Senator Kefauver was evidently trying to suggest that there is
something inherently evil about quoting out of context in advertising
pieces. However, as this had been done by all parts of American busi-
ness at one time or other and as the Senator really hadn't much of a
case, this issue, like many other even smaller barbs and attacks, was
dropped from discussion almost as soon as it appeared.

This particular sesSion of the Subcommittee also leveled separate
attacks on the industry as a whole. For example, criticism was
directed at the drug advertisers who, because of differences in stand-
ards set by medical journals, sought to place the same ad in two maga-
zines,each giving different information.

Kefauver charged that this was, in effect, misleading the physi-
cian. Dr. Sackler countered by pointing out that, because trade maga-
zines had different standards, that did not necessarily indicate that
any one was right and the rest wrong. Nor, because the ads had to in-

clude some information for one magazine and exclude it for another,

did this mean that either ad was all right or all wrong. Rather, the

47

advertiser was attempting to present his product as honestly as pos-
sible within the requirements specified by each magazine.

Kefauver also attacked the approach of drug company detail men.
He suggested that a detail man inform a physician on all products,
whether or not they were produced by his company. Incredible as it
may seem, the Senator actually appeared to feel that the proper func-
tion of the detail man, who is after all a salesman, is to act as a
part of a giant information service to the medical profession by im-
partially praising and/or criticizing competitors' products as well
as his own.

Certainly it is the work of the detail man to supply the doctor
with information on new and existing drugs; it is one reason he is
so important to the busy physician. But the detail man's primary pur-
pose, the job for which he is being paid, is to sell his company's
products. It is not the job of the drug manufacturer merely to edu-
cate his customers any more than it can be his job only to put forth
a hard sell of his product. The "education" of the physician is an
accepted, and important, by-product of the selling job. But it is
only a by-product, a secondary function.

There is certainly no reason that selling 23g education cannot
coexist. Dr. E. Gifford Upjohn, Board Chairman of The Upjohn Company,
expressed his feeling,and no doubt that of most pharmaceutical execu-
tives,by objecting to "the implication that pharmaceutical promotion
is necessarily contrary to or in competition with or opposed to educa-

tion." He went on to state his feelings about the possibility of too

48

much regulation, which might curtail the usage Of promotional and ad-
vertising tools in the drug industry:

If we could not encourage full use of our products, making
them known and understood by physicians, we could not hope
for nationwide sales to finance the research establishments
that have yielded today's advanced drugs and from which our
future drugs will come. Remember that in America, unless
we can sell our products, we cannot get them used. Unless
they are used there is no point to discovery, invention and
research. These are dismal prospects, for life and health
are involved.

All that we have accomplished, all that we have which makes

our system superior to any other, and all our hopes for fu-

ture breakthroughs in the cause of health are financed by

money from sales. Sales in turn fluorish to the extent that

our products are known, understood and used. Restrict com-

petitive promotion and distribution and you will restrict

sales. Restrict sales and you will surely wreck the whole

edifice. 29

Senator Kefauver, however, rather obviously disagreed with this
philosophy. He even carried his own thoughts a step further and indiu
cated that drug advertising should seek to draw comparative studies
with competitors' products and that all products be mentioned by name.
That is, Kefauver was suggesting that drug firms make it their busi-
ness to undertake lengthy comparative studies of all drug products on
the market and, naming names, furnish doctors with thorough reports
on each drug classification. The drug companies would thus, in effect,
be working together to make the doctor's decision for him. This would
perforce be done with no thought of profit in mind, but for purely a1-

truistic reasons.

 

29E. Gifford Upjohn, "Promotion Versus Education," Bulletin of
the New York Academy of Medicine, Second Series, XXXVIII, No. 1 (Jan-
uary, 1962), 59-63.

49

The Senator apparently made his suggestions with no thought to
previous testimony, which had indicated that advertising which uses
comparative studies to offer disparaging and critical comments about
a competitive brand, which it calls by name, is unfair advertising and
in extremely bad taste. Many trade journals, in fact, refuse to allow
this form of advertising to appear in their pages.

Dr. Sackler's answer to this statement reveals the situation that
the drug firum were facing:

I said before that we are damned if we do and we are damned

if we don't. In one situation we have put in the names of

the products. In the other situation you say that we have

tried to hold back information in respect to our products.

It is quite clear that there is a difference of Opinion,

since you hold two different positions at the same time. 30

The questions and answers about advertising, the thrusts and
counterthrusts, and the accusations and denials continued, as they
had for months and months previously, finally concluding on February 7,
1962. Naturally much of the testimony during the hearings did not in-
volve advertising and therefore is not applicable to this report. In
any event, it would be futile to try to recapture the drama, excite-
ment and personalities present during the Kefauver subcommittee ses-
sions.

There is, however, one more quotation that should be included.

It is the advertising philosophy of the McAdams agency, which Dr.
Sackler was permitted to read into the record.
We would like to explore with you briefly the function and

effectiveness of prescription drug advertising. We do so
against a very positive background--the American people are

 

3oSubcommittee Hearings, op. cit., p. 3108.

50

healthier, not sicker; our children have less disease, not
more, our lifespan has increased, not decreased.

Good ethical advertising depends on sound and useful pre-
scription drugs. Advertising is no substitute for product
performance, and no amount of money or promotional ingenuity
can match demonstrated benefits for patients from good pre-
scription drugs. The prescription drug which does not ful-

fill the claims of its promotion cannot be a success either

medically or commercially . . . . The function of ethical

pharmaceutical advertising is to promote the use of a drug

within its therapeutic potential for the alleviation of ill-

ness, and to do so in accord with good medical and good

business practices . . . . Ethical drug promotion, moreover,

is never the sole source of a physician's information of

prescription drugs. But (brackets) in bringing information

about new therapies to the attention of the practicing phy-
sician, ethical drug promotion serves to close the time gap

between discovery and use of such new developments. 31

On February 7, 1962, hearings on S. 1552 concluded. Shortly
thereafter the bill was reported to the parent Judiciary Committee
and thence to the floor of the Senate, where it began the last leg of
its journey to the desk of the President and-its position as a law of
the land.

The bill that left the Subcommittee was one considerably weaker
than the original, as the struggle put up by the formerly helpless PMA
had its effect on the proposed legislation. The drug industry was
somewhat reassured and was beginning to offer claims of victory in
its long, drawn-out battle with the government.

In view of this, it is perhaps not so strange that criticism of
the Senator's handling of the hearings picked up momentum and that
magazines and newspapers which had supported him or remained silent

throughout the testimony began to reevaluate the handling of the drug

industry investigations.

 

31Ibid.

51

Criticism of Senator Kefauver came through various channels,
chief among which were magazine columns and editorials. Raymond Moley
wrote some of the most vehement attacks on Kefauver. He stated that,
while the Subcommittee was supposed to limit itself to monopoly, mono-
poly was not proved nor even charged. He also stated that the main
question of the controversy was whether the public was paying exces-
sive prices for drugs and added that "by comparison with other repre-
sentative industrial companies the drug manufacturers are,ppp_making
excessive profits. This is the record despite Kefauver's effort to
make it seem otherwise."32

Henry Hazlitt, in an article in Reader's Diggpp, pointed out to
Senator Kefauver that the average person spends no more of his health
dollar, and a smaller portion of his income, for drugs today than he
did in 1929. This, of course, suggests that in fact drug markups are
down, not up.

Some members of the medical profession, the group that was theo-
retically being victimized, also ventured opinions. Dr. Morris Fish-
bein, former editor of the JAMA said: "My personal opinion is that
Mr. Kefauver is clear off the beam. He is not getting very good
scientific advice, if he is getting any."34

But an even more powerful attack came not from magazines, not

from doctors, but from Senator Roman L. Hruska, himself a member of

 

32Moley, op, cit., p. 71.

33Henry Hazlitt, "Criminals or Benefactors?" Reader's Diggst
(December, 1961), p. 71.

34Printer's Ink (July 14, 1961), p. 14.

52

the Subcommittee. He was extremely disillusioned with Kefauver's in-
vestigation and in fact titled a speech that he gave to New Jersey
pharmaceutical companies in November, 1961, "The Anatomy of Congres-
sional Investigation, or, The Disillusionment of a Senator."

In this speech Hruska launched a vehement attack against his col-
league (Kefauver) and his handling of the drug investigations. This
attack covered the major areas Kefauver had attempted to investigate.
As to the investigation as a whole Hruska stated:

While protesting its concern for the welfare of the patient

and the future of medical care, it is undermining forces

largely reaponsible for the most productive life-preserving

generation in the entire history of medicine . . . . No gen-

eral in his right mind would ever sabotage a combat team

that was winning and on the march. In war, it would be

called folly and treason. 35

One of Senator Hruska's primary concerns with the drug investi-
gation was that it seemed to him a dangerous attack on this country's
free enterprise system. The fact that this attempt at drug regulation
was another step toward socialism was apparently obvious to him. Sev-
eral quotes from his speech indicate that he found this an extremely
dangerous precedent for the United States government to set. He said:

The committee has conducted snooping expeditions into areas

of industry which are none of its business, or the business

of anyone else in government unless we have already abandoned

our basic system of free enterprise in favor of the corporate

state . . . . There are those who would have us believe that

profits mean greed. Nothing could be further from the truth.

Profit means opportunity--Opportunity to grow and to prosper.
The profit system is the genius of American economics. 36

 

35Hruska, _p, cit.

36Ibid.

53

These quotations serve to show the depth of feeling surrounding
the Kefauver investigations and in part sum up the bitterness and dis-
taste that was left in the mouths of many of those involved in the
proceedings.

But, as stated, the pharmaceutical companies put up a consider-
able fight and gained some ground with S. 1552. The bill had been
considerably watered down, the patent section had been scratched, the
drug lobbyists had influenced enough people to prevent any truly major
changes in the existing laws, and despite the harassment that the drug
industry had had to put up with for more than two and a half years, it
looked as if it might be the one to score a victory.

And then a tragic situation occurred; tragic not only for the
thousands of deformities it caused, but also because it aroused the
American government, spurred on by vigorous public opinion, to turn
the tables on the drug manufacturers. A pill, introduced by Chemie
Grunenthal in Germany under the trade name Contergan, so perfect and
so harmless that it was called "The Sleeping Pill of the Century"37
was discovered to be responsible for phocomelia (a malformation in
newborn babies resulting in either loss of some or all limbs or the
appearance of imperfect, seal-like appendages). Some 7,000 babies
were afflicted and the cause was directly related to Contergan, known
by its generic name as thalidomide.

Thalidomide, though it was for the most part kept out of the
United States, was brought to the attention of the American public by

a headline hungry press. The drug manufacturers were caught standing

 

37§gy§pggk (August 13, 1962), p. 52.

54

in a glaring spotlight, unable to dodge the questions and the unwel-
come publicity thrust upon them. As Newsweek put it:

What medical testimony and government investigation failed
to achieve in thousands of hours and hundreds of reports,
the thalidomide tragedy has accomplished with strong and
sudden impact. Dramatically, vividly, the pill-taking pub-
lic has learned that drug-makers and doctors are not infal-
lible, that present laws are lax, and that the stream of new
pills which flood the market at the rate of about one every
three days are not necessarily wonder drugs. 38

The Chicago Daily News came out with what it reported was the
"full story" on the thalidomide tragedy and the drug investigations.
As the Daily News told it:

Senator Estes Kefauver (D-Tenn.)--in a story not previously
told--killed one huge lobbying campaign in the battle over
a new drug bill with a single, well-timed thrust.

At the crucial moment in the campaign, after his own tough
bill appeared dead, Kefauver carefully planted a dramatic,
front-page story his subcommittee had been researching for
more than two months.

It was the story of Dr. Frances O. Kelsey and her heroic
battle against private industry pressures to keep the baby-
deforming drug thalidomide Off the market in the United
States.

The drug control issue caught fire. Within weeks the tide
shifted, as Kefauver had expected it might.

His tough approach was saved.

The incident--common1y thought mere happenstance--came as

a fitting climax to a rough, tough 2-1/2-year battle between
Kefauver, as chairman of the Senate anti-trust and monopoly

subcommittee, and the Pharmaceutical Manufacturers Assn. 39

The Kefauver-Harris bill (Rep. Harris initiated a bill similar to

s. 1552 in the House of Representatives, which was later absorbed in

 

381bid., p. 52.

39James McCartney, "How Drug Lobbyists Lost Big Battle," Chicago
Daily News (Wednesday, October 10, 1962).

55

the Sentate bill), now rigidly constructed and with most major issues
included, passed both the House and the Senate unanimously and was
signed into law by the late President Kennedy in October, 1962.

Prior to the final enactment of the bill the advertising regula-
tions of S. 1552 which had been withdrawn were put back in the body
of the bill. This was due primarily to the impact of the thalidomide
tragedy. These regulations were reported in Advertising Age.

The basic advertising amendment adopted by the committee

specifies that all ads and descriptive matter for prescrip-

tion drugs, issued by manufacturer, packer, or distributor,

must disclose (l) the generic name of the drug "printed

prominently and in type at least half as large as that used

for any trade or brand name"; (2) the formulas showing quan-

titatively each ingredient of the drug; and (3) information

about side effects, contraindications and effectiveness. 40

This, of course, is an oversimplified explanation of a lengthy
and complicated bill, but it does serve to explain the three major
provisions of the advertising amendment in the new legislation.

In the final analysis the results of both the Kefauver-Harris
bill and the new FDA ruling have been far-reaching. The effects have
been felt in every drug company in the United States, whether it is a
giant corporation or a small private concern. As Printer's Ink puts
it:

The consensus adds up to this: The drug makers can live

with the bill-~now law. They'll have to work harder. Some

will advertise more, others less. And drugs will probably

go up in price, which ironically, was one of Kefauver's
major complaints when he began his drug probe. 41

 

40"Congress Puts Teeth Back in Drug Bill," Advertising Age (AUSUSt
13, 1962), p. 1.

4¥££$2§2£L§_l§§ (October 19, 1962), p. 15.

56

Whether or not the provisions of the new legislation are essen-
tial, or even important, to the state of the nation's health and well-
being is open to debate and personal opinion. The greater question of
whether or not this legislation opens the door to other, more danger-
ous government control of business is a question that only time can
answer. It is a possibility that is considered by many to have poten-
tially very serious consequences. Even the champion of government
control, Senator Kefauver himself, said, "If you regulate one industry,
then you would soon be regulating something else, and we would have
all-out regulation, which should not be done, except in time of war or
great emergencies."42

Certainly in the minds of many the end was justified by the means.
However, the suspicion remains that Kefauver, the FDA, and FTC,in their
separate but closely related attacks on the drug industry and its ad-
vertising,more closely approached "show business" than legitimate gov-
ernment investigation. After a number of years of trying, these gov-
ernment agencies had remained unable to prove the drug industry and its
advertising to be the villains they had arbitrarily defined.

With or without strong government controls, one thing remains cer-
tain. In the words of the then Chairman of the Board of The Upjohn Com-
pany, Dr. E. G. Upjohn: "Promotional effort which is grounded in fact,
designed to assist, and executed in good taste, is . . . ultimately in

the best interests of the medical profession and the public."43

 

42Nation's Business (August, 1961).

43Upjohn, op. cit.

CHAPTER VI

THE ORINASE STORY

Exactly half a century after the development and subsequent
impressive success of Phenolax, the now firmly established Upjohn Com-
pany came up with another outstanding drug contribution. The new
product was Orinase, the first and still leading oral antidiabetic
drug.

The production and marketing histories of the two products are
remarkably similar. Phenolax came along when the Company badly needed
a big product to supply it with capital for survival in an increas-
ingly competitive market. And it was Phenolax money which paid for
The Upjohn Company's first research laboratories and allowed it to
prosper and grow.

Orinase, though not essential to the continued life of the Com-
pany, was necessary to its continued growth. Though it was working
on several research fronts at the time, the Company found itself
standing relatively still in a business where day-to-day existence
depends upon progress.

To understand fully the impact of the new drug, a little back-
ground on diabetes, the condition it treats, and on its forerunner
(and still an important antidiabetic agent) insulin is necessary.

Diabetes mellitus is a condition wherein the afflicted individual
is unable to metabolize carbohydrate properly. The primary cause is
believed to be an inability of the pancreas to release the amount of
effective insulin that is required to support normal metabolism. As

a result of this inadequacy there is an impairment in the entry of

57

58

blood glucose into individual tissue cells concerned with converting
it to energy. The decreased utilization of glucose results in an in-
creased blood glucose level and an attempt by the body to eliminate
the excess via the kidneys.

The more common symptoms of diabetes mellitus include excessive
thirst, hunger, weight loss and excessive fatigue. In responsive
patients Orinase controls these symptoms by stimulating the release
of native insulin via normal channels.

A control for diabetes was somewhat slow in coming. Probably the
first treatment was prescribed by Dr. John Rollo, surgeon general of
the British Royal Artillery, in 1796. This was the controlled diet.
"The diet," he claimed, was "to consist of animal foods principally."44

A century and a quarter later, in 1921, Drs. Frederick Banting
and Charles Best of the University of Toronto pursued some research
done a year earlier on the pancreas by Dr. Moses Barron of the Univer-
sity of Minnesota. Their study resulted in the isolation of insulin,
one of the greatest breakthroughs in medical research. In recognition
of their work they were awarded the Nobel prize.

Insulin was immediately accepted as a miracle drug, which saved
many lives and allowed thousands and thousands of diabetics to return
to reasonably normal existences. Unfortunately, insulin is destroyed
in the digestive tract and so can be administered only by injection.

It has the further drawback of being introduced into the body in massive

doses rather than slowly, as the pancreas does in the normal system.

 

44Milton Silverman, "Good News for Diabetics," The Saturday Even-

ing Post (August 24, 1957), p. 46.

59

And so the search went on. Later in the 1920's Germany produced
an oral antidiabetic drug called Synthalin. However, testing of the
new drug was inadequate and it was found to cause serious liver damage
in forty to fifty per cent of the patients who tried it.

It was not for another twenty years that an antidiabetic drug
again appeared, this time by accident. In 1942 Dr. Marcel Janhon, a
French physician, treated his typhoid patients with a newly developed

sulfa drug called 2254-RP.45

The new drug was remarkably effective,
but erratic. It produced positive results in some patients and tremb-
ling, dizziness, and heavy perspiration in others.

Puzzled, Dr. Janhon consulted with Dr. Auguste Loubatieres at the
physiology laboratories of the University of Montpelier. Dr. Louba-
tieres concluded that the effects Dr. Janhon described were caused by
the lowering of the sugar concentration in the bloodstream. He sup-
ported his diagnosis with extensive research with animals and proved
his thesis. He then further discovered that the drug was effective
only if the pancreas was intact. Dr. Loubatieres published his stud-
ies, which pointed the way to another breakthrough in the struggle
against diabetes, but no one apparently paid any attention.

Milton Silverman, in the August 24, 1957, Saturday Evening_§ost,
quotes an American drug company official as saying, "We knew about his
research for more than ten years. Until my dying day I shall continue

to wonder why we didn't pick it up."46

 

451mm.

46Ibid.

60

More than a decade later, in Germany in 1954, the drug firm of
C. F. Boehringer and Sons discovered a long-lasting sulfa drug, car-
butamide. It was given routine tests as a germ killer by Dr. Karl
Fuchs of Boehringer. His testing revealed the drug's value as an oral
antidiabetic agent.

Rights to the drug were purchased by Eli Lilly and Company of
Indianapolis, a major Upjohn competitor, who designated the new drug
8255. Testing in this country showed promise for the new drug until
the results of tests on thousands of patients revealed that B255 was
toxic in five to nine per cent of the cases tested. As a result, the
drug was never introduced into the market.

Almost simultaneous with the development of carbutamide was the
development of its chemical cousin tolbutamide by the Hoechst Dye Works
of Germany. Tolbutamide was a little different from carbutamide--it
was not toxic! This was supported by Hoechst's testing in 1955 of
tolbutamide, designated D860, in five German clinics on 781 patients.

However, American drug companies seemed unimpressed. Apparently
convinced by the failure of BZ55 that an oral antidiabetic drug could
not be found, no American drug company was interested in the new D860.
No company wanted to gamble on the new drug.

No company, that is, except one. "In Kalamazoo The Upjohn Co.
did gamble, betting boldly on D860. It poured over a million dollars
into one of the greatest clinical investigations in history. Hundreds
of physicians from coast to coast used up three tones of the new drug,

now called Orinase, on more than 20,000 diabetics."47

 

47Paul de Kruif, "A New Day for Diabetics," Reader's Digest (April,
1958), p. 131.

61

The tests proved the product, the federal government passed it
for prescription sales, and Orinase was on its way to being the big-
gest thing since Unicaps.

Orinase was completely safe. It could be taken orally, which
eliminated the need for regular injections. Finally, it was not an
insulin substitute; it caused the pancreas to release insulin slowly
and naturally. Thus the danger of shock caused by excessive massive
doses of insulin was reduced.

Orinase was to become a real boon to the millions of diabetics
in the United States. The American Diabetes Association estimated in
1957 that there were one million known cases of diabetes in this coun-
try, another million undiagnosed cases, and nearly five million poten-
tial cases. The Association estimated that about 65,000 new cases
were diagnosed each year.48 (Orinase, in fact, became an aid in
diagnosis because it lowered the blood sugar concentration of the
normal system much more than that of the diabetic.)

And so, again armed with a new product with a unique selling pro-
position, The Upjohn Company entered the market with Orinase. After
months of market research, background and preparation of promotional
materials, Orinase was introduced to doctors in June, 1957.

A total advertising budget of $598,000 was allocated to the last
half of l957--the first six months of Orinase's promotional life.

This figure represented 17.1% of total Upjohn product advertising ex-

pense for the year. Of this amount roughly $100,000 was allocated to

 

48American Diabetes Association, Inc., "Fact about Diabetes,"
New York, July 18, 1957, p. 25.

62

Orinase announcement literature in the form of blotters, diets, book-
lets, and other detail materials. The remainder was spend on journal
advertising, scientific displays, direct mail, samples, and production
expense.

Reasonably enough for a new product's introduction, the percen-
tage of advertising budget led the percentage of sales, which in 1957
was 5.2%. Though a comparatively small percentage of total sales,
Orinase sales amounted to some $5,781,000. In December, 1957, average
daily sales for Orinase amounted to $93,000. In January, 1958, this
figure had risen to $103,000.

. Three different forecasts were made for 1958 Orinase sales. The
original, made in the fall of 1957, estimated $12,200,000. The second,
made on May 22, 1958, was for projected sales of $17,000,000. A final
forecast, made in June, 1958, as sales looked better and better, was
$20,000,000. The actual total sales figure for Orinase in 1958 was
$17,820,000, more than the first two estimates but over two million
dollars less than the third.

The high $20,000,000 estimate might well have been achieved if
competition had not entered the market. On November 1, 1958, Diabi-
nese was introduced by Chas. Pfizer and Company. This pr0duct, though
it captured only a 1.2% share of the total antidiabetes market versus
Upjohn's 44.1%, caused a 20% decline in Orinase November sales as com-
pared with October.

In 1959 the Orinase advertising expenditure of $982,000 repre-
sented 24.6% of all Upjohn product advertising expense. Sales in-

creased from the 1958 level to $24,430,000, 18.5% of total sales. From

63

1959 on, this percentage of total advertising slowly declined and
leveled off at about 10%. Sales during the same period rose consis-
tently.

The 1963 Orinase marketing effort concentrated on internists, as
these 16,000 specialists (out of 150,000 M.D.'s--approximately 10%)
treat 27% of all diabetes cases. They further average 6.2 pg! diabetic
patients every six months versus only 2.8 for general practitioners.
Advertising was designed to establish and maintain The Upjohn Company
as Egg oral antidiabetic house.

The sales message was told through journal advertising, films,
direct mail, samples, and of course the all important personal selling
of detail men. The new healthy journal advertising support consisted
of forty-eight two-color pages,which appeared in eleven professional
journals.

This aggressive marketing effort, coupled with a good product
reaching the right audience, resulted in 1963 sales of roughly forty
million dollars and a dominant market position. Orinase's total mar-
ket share of 20.7% in 1957 rose to an estimated 55% in 1963. Most of
this gain was naturally at the expense of insulin, whose market share
dropped from 79.3% in 1957 to roughly 30% in 1963. The Orinase share
of the 2531 antidiabetic market was in excess of 80%.

It is interesting to note at this point that, although Phenolax's
peak sales were only $795,252 and Orinase's roughly $40,000,000, both
contributed over 25% of the sales of all Upjohn products in their time.

In 1964 it is estimated that Orinase will account for about 10%

of all Upjohn product advertising expense. Total Orinase sales for

64

the year are estimated at $42,000,000, 28.6% of total gross sales.
This means that, for a company in business for over three-quarters of
a century, nearly one of every three dollars spent for its products
will be spent for a product which is less than seven years old. (In
fact, well over 75% of all Upjohn sales are made on products less than
ten years old.)49

Thus the now mature Upjohn Company has been able to take advantage
of the research, production, and marketing lessons it has learned so
well over the past eight decades. It has been able to find a need and
fill it, to keep pace with one of the fastest moving industries in the
world, and to supply the nation and the world with one more weapon in

the continuing fight against disease.

 

49Figures from The Upjohn Company, Marketing Research Department,
July 15, 1964.

CHAPTER VII

THE EMERGENCE OF CONSUMER ADVERTISING

National advertising direct to the consumer has been used very
little and very carefully by The Upjohn Company. There are two pri-
mary reasons for this:

1. The Company must consider how the physician will react to

the advertising.

2. Upjohn is an ethical pharmaceutical house and in the past

has chosen (with a very few exceptions) not to engage in
direct consumer advertising.

In the past several years a few forays into consumer advertising
have been made on behalf of nonprescription products like Unicap,
Zymacap, and Mycitracin. The media employed have been almost solely
women's service magazines like MbCall's, Ladies Home Journal, and gggd
Housekeeping.

However, the Upjohn consumer advertising of twenty years ago had
a broader reach than the above approaches. In the early 1940's dual
interest, as well as Special interest, magazines were running twelve
time schedules for three or four years in a row. These included pub-
lications like Life, Colliers (which unhappily ceased publication not
too long thereafter), Iimg, and Fortune, as well as "naturals" like
Parents and Hygeia.

And so for the last dozen years or so The Upjohn Company coasted
on little or no consumer advertising. The philosophy was, and to some
degree still is, that the ethical (prescription) drugs are the main

business of the Company and should receive the advertising support and

65

66

that the OTC (over-the-counter or nonprescription) products, supported
by the Upjohn name, can take care of themselves.

Nor did Upjohn management have far to look to support this phi-
losophy. Unicap, the vitamin sales leader of The Upjohn Company and
the entire drug industry, had enjoyed multimillion-dollar sales and a
dominant market position since its introduction in 1940. The peak
year for Unicap was 1958, when its sales were $11,006,686.

But then, something happened! Sales began slipping--slowly at
first, then more rapidly. The year 1959 found sales down more than
half a million dollars; in 1960 they slipped over two and one-half
million; and in 1961, nearly three million. By 1961 the 1958 market
share had dropped from 28% to 20%.50

The reason was not readily apparent to the somewhat conservative,
ethical drug-minded management of the Company. However, the answer
soon became clear. In 1959, for the first time in the history of the
industry, a competing multivitamin product exceeded Unicap in drug-
store sales.

The product was Miles Laboratories' "One-a-Day" multiple vitamins.
Miles had successfully exploited the incredibly powerful, and still
new, medium of television. Using as vehicles highly rated network
family shows like "The Flintstones," Miles had carried its story direct
to the consumer.

Miles had learned its lesson from consumer advertisers, not ethi-

cal advertisers, and had dislodged the former giant, Unicap, from its

 

50The Upjohn Company, Marketing Research Report, July 15, 1964.

67

twenty-year leadership of the field. From that day to this, Miles'
continuing program of consumer advertising has enabled One-a-Day to
hold the position of sales leadership in multivitamin products.

It took a six million dollar sales loss within the short Space of
three years to do it, but Upjohn management was at last alerted to the
need to reach the consumer directly. Once more the Company found it-
self in a new situation, faced with the need to adapt to that situa-
tion.

However, the now mature and established corporate complex that
was The Upjohn Company was neither able to, nor inclined to, rush into
the new problem on a "let's take a chance" or "let's try this" basis,
as had the younger Upjohn Company with Phenolax, for example.

It directed McCann-Marschalk, one of its advertising agencies and
a part of the Interpublic complex, to test Unicap consumer advertising
in the Denver and Kansas City markets. The campaign, relying on spot
radio and point-of-purchase materials, was tied to a "give-away" pro-
motion. The promotion ran during July and early August, 1961. During
this period consumers in the Denver and Kansas City markets were of-
fered 124 Unicaps at the 100 capsule price.

Results of the promotion revealed several things: (1) consumer
advertising could, and did, increase product movement and lower inven-
tories; (2) consumer advertising could, and did, again move Upjohn to
the number one Spot in market share; and (3) consumer advertising,
eSpecially on a test basis, is very expensive.

In Denver the promotion stimulated product movement approximately

55% beyond normal levels for the period. Further, Unicap inventory

68

levels were reduced 21% from prepromotion levels. Finally, market
share rose during the test from 34% to 40%, which outstripped One-a-
Day's steady 38%.51

In Kansas City the same promotion.was conducted simultaneously,
but without the use of spot radio. Here sales rose 10% above normal
levels (versus Denver's 55%) and inventories dropped 8% (versus Den-
ver's 21%). Share of market was not significantly affected.52

It is also important to note that the major sales gains brought
about by the promotion were through the grocery chain stores-~a heavily
ggnsumer-oriented retail outlet. Sales through independent and chain
drugstores, the "normal" retail drug outlets, were considerably less
than anticipated.

Unhappily, but reasonably enough, a comparison of sales gain and
promotional expense showed a net loss to the Company of more than
$9,000 in Denver and about $3,500 in Kansas City. Thus from a strictly
economic viewPoint the test was a failure.

There were, however, several extenuating circumstances involved
in this failure:

1. The promotion ran in midsummer, the lowest seasonal point

in the vitamin market. Probably at no other time of year
are customers less concerned with vitamins.

2. The offer of 24 free Unicaps could not really be consid-

ered a new or unusual or especially compelling offer, as

 

SIR. L. Pernice, "Results of Unicap Consumer Promotion," The Up-
john Company, Marketing Research Report, August 28, 1961.

SZIbid.

69

other drug companies like Squibb had been employing this
technique for years.

3. Point-of-purchase and Spot radio (radio in Denver only)
were the media employed for the promotion. Radio was
used primarily because it was felt to be less offensive
to the medical profession than other media. Yet it is
interesting to contemplate what might have happened if
the more powerful medium of spot television or the
stronger local medium of newspapers had been considered.

4. There is considerable question as to whether retailers,
especially drug chains, supported the promotion fully.
Certainly stronger retail support would have changed the

picture considerably.

In spite of these circumstances, which doubtless had an adverse

effect on the promotion's success, the fact remains that in both test

markets

sales went up considerably, inventories went down, and market

share improved.

In the words of Mr. Ralph Pernice of Upjohn's marketing research

department:

While the results of this experiment, one of Upjohn's first
ventures into the consumer area, must classify as discour-
aging, it would be shortsighted indeed to accept them as an
across-the-board indictment of the potential promise of lay
advertising of our over-the-counter line. This experiment
has clearly indicated that Unicaps will respond to consumer
advertising, that such a program can reduce inventories, and
that this can be achieved without alienating the medical
profession. 53

 

53Ibid.

70

Satisfied with the results of the test, Upjohn management made
the decision to enter the area of consumer advertising on a national
basis. On September 7, 1961, W. F. Allen, vice-president and market-
ing director, and W. C. Sugg, director of Upjohn domestic sales, met
in New York with G. L. Williams, senior vice-president of McCann-
Marschalk, to plan national consumer advertising strategy.

On September 21, 1961, the agency submitted a proposal for an ad»
vertising campaign to support the "124 Unicaps for the price of 100"
promotion on a national basis. The proposal called for radio spot ad-
vertising with some TV spot activity in the top fifty markets. This
broadcast activity was to be additional to the point-of—purchase cam-
paign planned by The Upjohn Company.

Upjohn budgeted $350,000 for the broadcast schedules and $40,000
for point-ofnpurchase. This money, plus the $15,000 broadcast produc-
tion cost and $3,000 point-of-purchase production cost, brought the
total budget expenditure to over $400,000. The promotion was to begin
January 8, 1962.

Upjohn presented the proposal to its branch sales managers on
October 9, 1961. During this meeting several sales managers questioned
the coverage of a radio schedule. The entire program was reviewed and
discussed at length, and an important decision was made to move the
bulk of the budget to network television participations.

At last The Upjohn Company was making a positive effort to reach
the consumer by advertising through a consumer medium. The Company

hoped the new departure would not meet opposition (which to date it

71

(has not) from the medical profession. A November issue of Advertising
Age reported the schedule in its entirety:

Upjohn Co. will break into radio and television advertising

for the first time in its history . . . . Unicap multiple

vitamins will be promoted in participations on NBC-TV's

"Saturday Night at the Movies" and on its daytimers "Say

When," "Concentration," "Jan'Murray Show" and "Loretta Young

Show" from Jan. 6 through the end of February. During the

same period, 30-second commercials will be run on NBC Radio's

"Monitor."

The new scheduling, and the addition of extra coverage of the
Kalamazoo-Grand Rapids market, brought the broadcast budget (including
production costs) to roughly $372,000. This plus the $43,000 in
point-of-purchase made a very respectable advertising expenditure over
the two-month period of winter promotion.

The campaign began on January 8, 1962, and admirably accomplished

its goal of reaching large numbers of consumers with Unicap's sales

and promotion message. The agency reported these results from Niel-

 

 

son:
Date Show Ave. Rating Ave. Share
Jan. 9 Say When 6.8% 38.4%
Jan. 9 Concentration 12.8% 52.8%
Jan. 8 Jan Murray 6.4% 25.3%
Jan. 8 Loretta Young 8.3% 31.8%
Saturday Night Movies 21.8% 34.8%

"This means, in the instance of the movies, that 21.8 per cent of TV
homes in America (total 49,000,000) were tuned in to NBC-TV. Thus, our
audience totaled 10,682,000 homes. The average number of viewers per

set is 2.1 so the number of viewers,according to Nielson,is 44,322,000."54

 

54John N. Patterson, McCann-Marschalk Co., Inc., letter to J. S.
Campbell, The Upjohn Company, January 24, 1962.

72

During the January-February period the Cowpany aired a total of
forty television commercials and twenty-four Monitor radio commercials.
The results of the promotion.were impressive. Added sales covered all
but approximately $100,000 of estimated profit for the period. How-
ever, though this was money spent, it was not money lost. The normal
7.8 months' supply of inventory had shrunk to 6.9 months' supply, all
time high sales to drugstores were recorded, market share and position
improved considerably, established Upjohn customers increased their
purchases, and an unknown number of new customers were added. The
Upjohn Company had at last discovered the value of advertising direct
to the consumer.

In the fall Upjohn again entered television.with daytime televi-
sion commercials and a five-minute health show, which was featured
once a week on NBC's "The Today Show." According to a general list
notice to Company employees, dated October 2, 1962, Upjohn commercials

could be seen on these shows:

ABC Yours for a Song QB§_ Calendar
Jane wyman Theater I Love Lucy
Camouflage The Real McCoys
Day in Court Pete and Gladys
Seven Keys Love of Life
Queen for a Day Password
Who Do You Trust? House Party
Millionaire
‘NBQ The Today Show Secret Storm

The weekly "News of Your Life" health show was narrated by Howard
Whitman, who had narrated several Upjohn-sponsored Medical Special
Events films. Purpose of the show was to keep people up-to-date on
the latest developments in the field of health. The weekly show was

featured at a different time and on a different day each week.

73

The Upjohn Company was now beginning to feel a little more con-
fident about consumer advertising. Its program for 1963 began with a
three-month schedule which included daytime network television, "News
of Your Life" on "The Today Show," and sponsorship of "Chet Huntley
Reporting" and the four-part "Profile of Communism" series done by NBC.

The "vitamin season" schedule ended with the last of the Commu-
nism series on April 10. However, positive sales results prompted the
Company to extend "News of Your Life" by seven weeks, the last tele-
cast being May 16.

Broadcast advertising was then suspended again until the fall of
1963, when Upjohn sponsored a part of "The Today Show" and added spon-
sorship of "Exploring" on Saturday afternoons and another series of
specials, "The Saga of Western Man." "The Sage of Western Man" was a
four-part series produced for ABC-TV. Counting one repeat per show,
it ran evenings at irregular intervals from October, 1963, through
April, 1964.

Ideas, men, and events culminating in the American Revolu-

tion, provide the dramatic material for "1776," second of

the four-part series, The Saga of Western Man, Sunday, Dec.

8, from 6:30-7:30 P.M. EST (ABC-TV).

The first of the four-part series, "1492," was received

warmly by teachers, students, and the general public. Sub-

sequent programs, following "1776," will deal with "1898"

and "1964." The series is being produced by Helen Jean

Rogers and John H. Secondari for the ABC News Special Pro-

jects Division. It'is sponsored by The Upjohn Company.

"1776" is narrated by Secondari, who has also written the

script. Prof. Henry Steele Commager (Amherst) served as
historical consultant. 55

 

55Howard L. Hurwitz, "Teleguide," Scholastic Teacher, LIII, No.
12 (December 6, 1963).

74

Consumer advertising planning in 1964 has considered a move away
from sponsorship of network shows into spot television and radio in
the top thirty metropolitan markets. A five-week campaign utilizing
30-second radio spots and 20- and lO-second TV spots to promote the
"24 free Unicaps" idea is scheduled to get underway in September. The
radio spots will run during heavy driving hours, 7 to 9 AWM. and 4 to
6 P.Mt; the television spots, during heavy female viewing hours, 9 to
11 A.M. and 3 to 5 P.M.

Medical journal advertising will be closely tied to the spot
broadcast effort in an attempt to draw doctors into the picture by
telling them about the free offer and stressing the economy of vitamin
supplementation.

As The Upjohn Company's experience with consumer advertising
broadens, it is apparently recognizing the now established trend away
from direct association with one or several shows (due in large part
to rising costs) and is moving to extend its reach, at the same time
concentrating on key markets, through the use of spot broadcast adver-
tising.

And so, although not the first this time, nor the biggest--and
with its approach to the unknown tempered by the caution gained with
maturity-~The Upjohn Company has entered that area of almost incalcu-

lable potential, consumer advertising.
a

CHAPTER VIII

CONCLUSIONS AND PROJECTIONS

We have traced the promotional activity of The Upjohn Company
from its first ads in trade journals, which carried a picture of a
thumb crushing a friable pill, to its present position as a multimil-
lion-dollar advertiser employing a wide variety of ads and commercials
which are carried by nearly all the communication media from trade
journals to spot television. '

We have seen the many occasions when an organization in the vital
business of protecting the nation's health has found a need and filled
it. we have considered two of these contributions to the nation's and
the world's well-being in depth, as we examined the research, produc-
tion, and promotion of Phenolax and Orinase-~products completely dif-
ferent, yet strikingly similar in their contribution to the prosperity
of The Upjohn Company.

We have examined in detail the cause and effect of government
regulation upon The Upjohn Company and the drug industry as a whole.
We have seen that this regulation has forced drug advertising to be-
come more informational and instructive and somewhat less persuasive
and sales directed. Perhaps this is good, perhaps not. At any rate
the drug industry, apparently not too hampered by federal regulations,
continues to supply the country and the world with better weapons for
the never-ending battle with disease.

Finally, we have watched The Upjohn Company awaken to a competi-
tive danger to its position of leadership and slowly but surely involve

itself in the important and growing area of consumer advertising.

75

76

We have, in short, observed the problems, opportunities, and suc-
cesses of a drug firm which grew from a two-man "Pill and Granule Com-
pany" in 1886 to a 7,517 employee corporate complex in 1963; from a
Kalamazoo basement in 1886 to over 150 buildings including 20 domestic
offices and 17 foreign offices in 1963; and from gross sales in 1886

of $50,000 to 1963 sales of $191,748,042 with net profits of

$25,770,991.56

we have watched a company more than three-quarters of a century
old which has refused to stagnate in its research, production, or mar-

keting programs--a company which is making 77.2% of its sales on prod-

ucts less than ten years old.57

It is, then, a company that has grown, is growing, and will con-
tinue to grow in the competitive drug market. The Upjohn Company's
future, according to Merrill, Lynch, Pierce, Fenner, and Smith, is
bright. The New York brokerage firm suggests several reasons for this:

Its inherent strength as a broad line major drug manufac-
turer with a strongly-established marketing organization and
an excellent reputation for quality within the medical pro-
fession;

Its demonstrated effectiveness in maintaining its position
in major drug markets despite intensified competition and
somewhat static demand, as illustrated in the still leading
position of its Unicap and Zymacap brands in the ethical
vitamin field;

The broad scope of its research program, which the company
is increasingly coordinating with management and marketing
goals . . .

 

56The Upjohn Company, Annual Report, 1963.

57D. H. Sanborn, The Upjohn Company, Marketing Research Report,
July 15, 1964.

77

Its expanding operations in . . . foreign markets, which

should enable it to realize more fully the complete poten-

tial of its strength in research and chemical process devel-

opment; and

Its modern.plant facilities, which are regarded as second to

none in the domestic drug industry, and its strong, liquid

financial position, which should permit future growth.with-

out dilution of the stockholder's equity. 58

The facts revealed in this report force us to agree with Merrill-
Lynch. It is abundantly clear that The Upjohn Company has answered,
and will continue to answer, its responsibility to protect the health
of the nation and the world by producing and marketing "Medicine--

designed for health, produced with care. Fine pharmaceuticals since

1886."

 

58"Brokerage Firm Rates Upjohn High; Thorough Study Indicates
Growth in Years Ahead," Intercom (The Upjohn Company, Kalamazoo, Mich-
igan),II, No. 7 (July, 1964), 6.

APPENDICES

APPENDIX I

BRIEF CHRONOLOGY OF THE UPJOHN COMPANY, 1884-1964

1884

1885

1885

1885
1886
1886
1886'
June

1886

1887
January

1887
November

1887

1887

1888

1888

1889

Dr. William E. Upjohn, a young physician in Hastings,
Michigan, makes experiments to try to produce a pill
more soluble than others on the market. Produces a
"friable" pill.

Dr. William E. Upjohn and brother, Dr. Henry Upjohn,
form partnership, including wives.

Production begins in basement of building in Upjohn
Block on South Burdick Street, Kalamazoo.

First price list issued, including 186 items.
Frederick L. Upjohn joins company.

Dr. Henry builds two and a half story brick building
at rear of Upjohn block to house pill factory.

Dr. James T. Upjohn joins brothers in Company after
graduating from School of Medicine, University of Michi-
gan.

Company makes early selling and advertising efforts.

Dr. Henry U. Upjohn dies.

Business incorporated as stock company with capital of
$60,000. Officers elected.

Company hires first Upjohn salesman, named Booth.
Lazell-Dalley & Company become Upjohn distributors in
New York. Truax-Greene & Company become Upjohn dis-
tributors in Chicago.

Archie Stone, another Upjohn salesman, hired.

Building now known as No. 4 built on East Lovell Street.
Four stories.

Charles Little employed in production department.

79

1890
October 15

1890

1891
1891
1891
1892

1895

1898

1898
February

1899

1899

1900

1900

1902
1902
1904
1904
1905
1905

1905

80

New York branch opened. F. L. Upjohn, manager.

Severe competition encountered with new compressed
tablet. Period of financial strain begins which lasts
until after turn of century.

First listing of tablets made by Upjohn.

H. Sanford Mead, salesman, employed.

Building No. 5 built next to No. 4. Four stories.

Fluidextracts first manufactured.

Dr. W. E. Upjohn purchases Babcock farm near Augusta.
Calls it Brook Lodge.

Dr. William Abbett, Indiana salesman, employed.

Hall Brothers and Company, Kalamazoo pharmaceutical
manufacturers, destroyed by fire.

Arthur Crooks, Albert Latson, and Frederick Childs
employed. (All three had worked at Hall Brothers
Chemical Company.)

DevelOpment of tinctures, elixirs, syrups, cordials,
wines, ointments.

John S. McColl employed as bookkeeper. William F.
Little employed in tablet department.

Palmo-Dionin, first cough syrup, developed by Fred
Childs.

Reorganization as The Upjohn Company.

Caripeptic Liquid first listed in catalog.

Dr. L. N. Upjohn employed.

E. R. Lewis appointed first sales manager.

Fred Staley employed in assay laboratory.

Walters H. Sellman Opens agency in San Francisco.

Beginnings of cost accounting.

1905

1906

1906

December

1906
1907
1907
1907
1907
1908
1909

1909

1909

1909

1911

1911

1911

March 8

1912
1913
1913
1913

1913

81

Establishment of Council on Pharmacy and Chemistry
interrupts Upjohn advertising in Journal of America
Medical Association.

Dr. L. N. Upjohn made sales manager.

Dr. L. N. Upjohn goes to New York as branch manager.
George C. McClelland becomes sales manager at Kalamazoo.
Dr. W. E. Upjohn works out plan of bank insurance.
F. L. Upjohn retires.

W. Harold Upjohn enters company.

Dr. S. Rudolph Light employed. (October 1, 1907.)
Phenolax Wafers announced.

Sales conferencing initiated at New York.

First Overflow issued.

Kansas City branch opened with Malcolm Galbraith as
manager.

Company reorganizes after withdrawal of Dr. J. T.
Upjohn and F. L. Upjohn.

Dr. S. Rudolph Light becomes production manager,
succeeding Dr. J. T. Upjohn.

San Francisco agency changed to branch. Waters H.
Sellman, manager.

Lewie M. Crockett joins company.

Plant swept by fire.

Formation of American Drug Manufacturers Association.
White Office built.

Pilot laboratory begins Operation.

Percolating distilling building unit built.

Dr. F. W. Heyl employed to organize research department.

1913
1914
1918
October 18

1919

1920

1920
1921

1922

1924

1925
November 18

1926

1926

1928

1928
October 15

1930
1930

1931
January 2

1932
October 18

1933

82

F. G. Varney employed.

Dr. M. D. Hart joins Company as reasearch fellow in
chemistry.

First sales conference in Kalamazoo.

New York branch building built.
architect.

Hobart Upjohn,

J. Bryant Fullerton, Stanley Morris, and E. D. Mayo
employed.

Fluid packaging building built.

Citrocarbonate announced.

W. Harold Upjohn and Harry H. Freeman go to England

to arrange for manufacture there of wafer like Phenolax
to be called Mylax.

Building No. 18 completed.

Warren K. Allen joins organization.

Contact department organized.

Two Congress playing card factory buildings purchased,
to be known as Buildings 19 and 20.

Dr. H. S. Adams appointed plant superintendent.

W. Harold Upjohn dies.

Dr. S. R. Light resigns.
Development of soft elastic capsules described.

Memphis branch opens a6 299 South Front Street. F. W.
Griffis, sales manager, W. G. Freeman, office manager.

Dr. w. E. Upjohn dies.

Research Industrial Fellowships announded (first series).

1933
1933

1933

1934

1934

1934
1934

1934
January 2

1935
November 1

1935

1936
1936

1936
April 1

1937
1937
1938
1938

January 2

1938
September 1

1940

83

Bank holiday begins.
Loose leaf catalog adOpted.

Dr. John F. Norton employed as head of bacteriology
department.

First history of The Upjohn Company written by Dr.
L. N. Upjohn at the request Of the American Pharma-
ceutical Association.

Dioramas loaned tO Smithsonian Institute at Washington,
D. C.

Concentrate building erected.
Kalamazoo branch Opens as separate entity.

Dallas branch Opens at 901 McKinney Avenue. W. Fred
Allen, sales manager, D. H. Dowell, office manager.

Toronto branch Opens at 384 Adelaide Street. Violet

Braiden, office manager.

Administration building (NO. 24) and power plant erected
and occupied.

Tincture Mercresin and Oral Pentacresol introduced.
New production building (NO. 25) completed.

Atlanta branch Opens at 25 Fifth Street. W. G. Freeman,
sales manager, D. H. Dowell, Office manager.

Medical department established.
Personnel department established. F. G. Varney, manager.

H. E. Turbeville made assistant personnel manager.

R. C. Byce, sales manager,
Located at 1740 Chester

Cleveland branch Opens.
F. O. Chapman, Office manager.
Avenue.

Council on Pharmacy and Chemistry of the American
Medical Association announces acceptance of first fifteen
Upjohn products.

Dr. L. N. Upjohn talks on Company history to foremen and
supervisors.

1940
January 2

1941

1941

1941

1941
1941

1941
December 1

1942

1942

1944

1944

1945

1945-46

1945

1945

February 20.

1946

1946
August 7

1946

84

Boston branch Opens at 11 Deerfield Street. H. W.
Bowdoin, sales manager, J. J. Neylan, Office manager.

Printing department expands.

Steel sheds erected for cod liver Oil storage, two miles
north Of Kalamazoo.

Rosenbaum property on East Lovell Street purchased for
additional parking Space.

Research Industrial Fellowships announced (second series).
SCOPE, journal for physicians, begins publication.
Minneapolis branch Opens at 110 Fifth Street.

F. L. Tritle, Jr., sales manager, H. J. White, Office
manager.

Soft elastic capsule building completed.

Joldersma & Klein prOperty purchased for expansion of
medical department.

Dr. F. W. Heyl resigns.
fill vacancy.

Dr. M. C. Hart appointed to

Physics laboratory established. Oliver Woods, director.
Transferred from production to research division on
May 1, 1945.

New revised group insurance adOpted.

Building planned for production Of antibiotics by sub-
merged culture method.

Trademark, "thumb crushing pill" given up. New trade-

marked - name UPJOHN.

Joint seminar of research and medical grOups starts
series of meetings.

UPJOHN NEWS begins publication.

First meeting of Basic Operating Committee with D. S.
Gilmore, M. C. Hart, E. G. Upjohn, C. V. Patterson, and
W. F. Allen present.

Film, "We, The Upjohn Company," produced.

1946
1945-6

1946-7

1946
1947

1947

1947
1948
1948

1948
January 2

1948
January 2

1948
1949

1949

1949

1950

1951

1952

85

Electron microscOpe purchased.
New manufacturing plant on Portage Road planned.

First buildings of Portage Road plant erected - antibiotics
and adrenal cortex buildings.

Temporary power plant erected at Portage Road.
Disposal plant erected at Portage Road.

John S. McCOll resigns as treasurer. Succeeded by
D. G. Knapp.

R. S. Jordan and R. G. White visit Latin America.
H. B. Roberts goes around the world.
Catalog simplified.

Chicago branch Opens at 1001 East 87th Street. John
Schma, sales manager, F. O. Chapman, Office manager.

Portland, Oregon branch opens at 1333 N. E. Union Avenue.
J.A.S. Rodda, Sales manager, M. C. McDonnell, office
manager. " . ,

Fine chemicals department established.

Dr. M. C. Hart visits EurOpe.

Folic acid manufactured. This project represents the
first really significant venture of this Company in the
field of synthetic chemical manufacture.

Printing department enlarged.

R. G. White visits Mediterranean and Near-East markets.

R. S. Shhreiber appointed vice-president and director Of
research (May).

Stanley Morris, first manager of the advertising depart-
ment and editor of The Overflow, retires (Jan.).

New Portage Road production plant Opens (June).
Export Division established. R. S. Jordon named to head

activities. Upjohn makes cortisone by new process,
microbiological synthesis.

1952

1953

1954

1955

1956

1957

1958

86

Dr. L. N. Upjohn retires as chairman of the Board

Of Directors (September). Donald Gilmore elected to
chairman of the board and managing director. Dr.

E. G. Upjohn elected president.

Mrs. W. E. Upjohn, wife of the founder of The Upjohn
Company, dies at 87 years of age (October).

Solvent recovery unit added to Portage Road facili-
ties.

H. W. Bowdoin retires as sales manager of Boston branch.

The Upjohn Company of Canada moves to new quarters at
865 York Mills Road, Toronto.

Dr. F. W. Heyl retires as director Of research.

Disneyland Opens. Upjohn drugstore included on Nine-
teenth Century Street.

Brook Lodge estate and 160 acres purchased. Construc-
tion Of guest cottages begins.

Memphis branch moves to new quarters (December).

First South American subsidiary established in San Paulo,
Brazil.

Washington, D. C., branch Opens (April).
Conference hall at Brook Lodge constructed.
Long Island branch Opens.

Orinase released for general sale after two years' ex-
tensive clinical evaluation.

Sixteen hundred acre farm acquired and placed under
direction of Veterinary Division.

New branch buildings in Kansas City and Minneapolis
Opened.

International Operations, Inc., a management service
organization founded.

Upjohn Overseas Corporation and Upjohn Inter-American
Corporation founded.

Columbia subsidiary established in Bogata.

1958

1959

1960

1961

1962

1963

87

Tuco (Pty) Ltd., founded in Johannasburg, South Africa

Upjohn stock sold publicly through secondary offering
Of 2,410,000 shares.

C. V. Patterson, executive Vice-president, retires.

R. T. Parfet and P. 8. Parish elected executive vice-
presidents.

New pharmaceutical production plant Opens in Sydney,
Australia.

New San Francisco distribution center Opens at Menlo
Park, California.

New production building dedicated in Mexico City.

Two new subsidiaries founded in Europe--Upjohn S.A.
in Milan, Italy and Upjohn S.A. in Brussels, Belgium.

D. S. Gilmore retires as active head Of the company.
R. T. Parfet elected president and general manager.

H. B. Allen, corporate secretary, retires.
Michigan Agricultural Company formed.~'
Chemical development building completed.

General office building on Portage Road completed
and occupied.

Controlling stock interest in Anodia S.A., BuenOS
Aires, Argentina, acquired.

Assets of The Carwin Company, an organic chemical
manufacturer with plants in North Haven, Connecticut
and Houston, Texas acquired.

L. M. Crockett, vice-president for engineering, dies.
Leslie HarrOp, vice-president and general counsel,
retires because of ill health. G. Thomas appointed

general counsel.

J. C. Gauntlett elected vice-president for pharmaceuti-
cal marketing.

R. M. Boudeman, president of Upjohn International,
elected a vice-president.

88

1963 C. H. Ludlow elected treasurer. Gordon Knapp retires
as treasurer.

C.P.R. International Corporation, Torrance, California,
fabricators Of polyurethane foam, acquired.

New manufacturing building in Puurs, Belgium, completed.

1964 C. P. Continental S.A., cosmetic firm in Mexico City,
acquired.

A. H. Howard Chemical Company, Canada, manufacturers
Of agricultural products, acquired.

Joint venture in Spain established.

APPENDIX II

ORGANIZATION CHARTS

Selected Organization Charts Showing
Top Management and Marketing Structure

89

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APPENDIX III

UPJOHN DOMESTIC BRANCH OFFICES

Listed in Chronological Order of Opening

 

Branch Date Opened
Kalamazoo (Originally 1885. Separate
301 Henrietta Street entity, November 1, 1934)
New York October 15, 1890

40 Seventh Avenue, South

Kansas City December 1, 1909
25 East Pershing Road

San Francisco February 16, 1911
199 First Street

Memphis January 2, 1931
299 South Front Street

Dallas January 2, 1935
901 McKinney Avenue

Atlanta April 1, 1936
25 Fifth Street, N. W.
I
Cleveland January 2, 1938
1740 Chester Avenue

Boston February 1, 1940
11 Deerfield Street

Minneapolis December 1, 1941
110 North Fifth Street

Los Angeles January 2, 1947
900 N. Cahuenga Boulevard

Portland January 2, 1948
1333 N. E. Union Avenue

Chicago January 2, 1948
1001 East 87th Street

98

Philadelphia
401 North Broad Street

Denver
3730 East 48th Avenue

Washington
6130 North Capitol Street

Cincinnati
4910 Para Drive

Long Island
205 Glen Cove Road

Buffalo
3901 Genessee Avenue

Pittsburg
Four Parkway Center

99

July 1, 1949

November 1, 1954

April 1, 1956

August 1, 1956

June 3, 1957

July 1, 1964

September 1, 1964

APPENDIX IV

FOREIGN SUBSIDIARIES

Listed in Chronological Order of Opening

Toronto, Canada

85b Paulo, Brazil

Mexico City, Mexico
Sydney, Australia

Bogota, Colombia
Johannesburg, South Africa
Paris, France

Colon, Panama

Tokyo, Japan

Caracas, Venezuela

Milan, Italy

Brussels, Belgium

Lima, Peru

Manila, Philippine Islands
Crawley, England

Buenos Aires, Argentina

Athens, Greece

July 24, 1952
October 15, 1954
July 21, 1955
September 13, 1956
January 17, 1958
February 24, 1958
August 8, 1958
December 6, 1958
July 3, 1959
November 9, 1959
April 21, 1960
September 9, 1960
March 3, 1961
February 22, 1962
April 8, 1962
July 20, 1962

August 8, 1963

10.

11.

12.

13.

14.

APPENDIX V

KEFAUVER BILL (8.1552)--PROVISIONS IN BRIEF

. NO patent for a modification Of a drug or a combination Of drugs

unless new product has substantially greater therapeutic effect
than the original.

. No patent for modification or combination until Patent Commis-

sioner Obtains (though he doesn't have to agree with) the Opinion
of the Secretary of HEW as to whether new product has substantially
greater therapeutic effect than original.

. NO new drug application approved unless HEW finds it is efficacious

for claimed uses.

. NO new drug can legally be shipped in interstate commerce without

express Okay of HEW.

. Approved new drug application can be suspended if substantial

evidence Of lack of safety or efficacy turns up.

. Secretary may determine Official names Of drugs if non-governmental

procedures do not work.

. Labels must carry Official names in same type size as brand names.
. Labels must carry expiration dates.

. All antibiotics must be certified by government.

Any drug information transmitted to doctors must include full text
of package insert.

All ads (including "oral") must show Official name as large as
brand name and must include warning and other statements approved
by Secretary and full and correct statement of efficacy.

Drug firms must register with Secretary and satisfy his require-
ments as to the ability to produce each drug before being allowed

to produce it and continue to produce it.

Federal inspector can check at any time to see if plant meets
registration standards.

Foreign producers can register but may be charged inspection fees.

101

102

15. Secretary can revoke registrations.
16. Secretary must publish and distribute c0pieS of package inserts.

17. Registration provisions require notice and appeal.

APPENDIX VI

FTC RESOLUTION DIRECTING INVESTIGATION OF THE DRUG INDUSTRY

UNITED STATES OF AMERICA
BEFORE FEDERAL TRADE COMMISSION

COMMISSIONERS:

Paul Rand Dixon, Chairman
Robert T. Secrest

Sigurd Anderson

William C. Kern

Philip Elman

RESOLUTION DIRECTING INVESTIGATION OF PRICING PRACTICES, POLICIES,
ALLOWANCES, SERVICES, DISCOUNTS, TERMS OF SALE AND ADVERTISING OF COR-
PORATIONS ENGAGED IN THE SALE AND DISTRIBUTION OF DRUGS AND DRUG
PRODUCTS.

WHEREAS, the Commission has information to the effect that certain
corporations engaged in the manufacture, distribution and sale of drugs
and drug products in interstate commerce have, Since January 1, 1959,
discriminated in price, allowances, discounts and services in favor of
some purchasers and against other competing purchasers Of commodities of
like grade and quality, and engaged in unfair methods of competition in
commerce and unfair or deceptive acts or practices in commerce; and

WHEREAS, such practices and policies may constitute violations Of
Section 2 of the Clayton Act as amended by the Robinson-Patman Act (15
U.S.C. Sec. 13) and Section 5 of the Federal Trade Commission Act (15
U.S.C. Sec. 45), statutes administered by the Commission; and

WHEREAS, the Commission believes that it is in the public interest
to investigate the said practices and policies of such corporations to
determine whether they constitute violations of the said statues; and

WHEREAS, the Commission has the authority under subsections (a) and
(b) of Section 6 of the Federal Trade Commission Act (15 U.S.C. Sec. 46
(a) (b)) to investigate corporations engaged in interstate commerce and
their practices to determine whether the laws administered by the Com-
mission may have been violated:

NOW, THEREFORE, BE IT RESOLVED that the Commission, in the exercise
of the powers vested in it by law, and pursuant to its published pro-
cedures and rules Of practice (16 CFR, 1958 Supp., 1.1 et seq.), and
with the aid of any and all compulsory processes available to it, do
forthwith proceed to investigate, for the reasons and purposes stated

103

104

herein, the organization, business, conduct, practices,~management,
and relation to other corporations, partnerships, and individuals, of

corporations engaged in the manufacture, distribution and sale of drugs
and drug products.

By the Commission.

Joseph W. Shea, (signed)
Secretary

Date: July 13, 1961

105

UNITED STATES OF AMERICA
BEFORE FEDERAL TRADE COMMISSION

COMMISSIONERS:

Paul Rand Dixon, Chairman
Robert T. Secrest

Sigurd Anderson

William C. Kern

Philip Elman

 

In the Matter of

THE UPJOHN COMPANY FILE NO. 621 0158

vvvvvv

 

SPECIAL REPORT ORDER TO CORPORATIONS
ENGAGED IN THE MANUFACTURE, DISTRIBUTION
AND SALE OF DRUGS AND DRUG PRODUCTS

 

The Federal Trade Commission, in the exercise of the powers vested
in it by Section 6 of the Federal Trade Commission Act, has adapted and
entered of record a resolution, a c0py Of which is enclosed, authorizing
and directing an investigation Of companies engaged in the manufacture,
distribution and sale of drugs and drug products to determine if any such
companies are engaged in acts and practices in violation Of Section 2 Of
the amended Clayton Act or Section 5 Of the Federal Trade Commission Act.

This report is mandatory from corporations. Within forty-five (45)

days from the date Of receipt Of this Special Report Order, your company
is ordered tO return Egg copies of a completed report in response to this
questionnaire to the Federal Trade Commission, Washington 25, D. C.
"Your Company" includes the reporting company and its divisions and sub-
sidiaries located within the United States. In responding to this ques-
tionnaire, report separately for each division or subsidiary engaged in
the manufacture, distribution and sale Of drugs and drug products.

 

This report is required to be subscribed and sworn to by an official
who has prepared or supervised its preparation from the books and records
Of your company.

Your report should restate each item of this order with which the
corresponding answer is identified. If any question cannot be answered
fully, give such information as is available tO you and explain wherein
and why your answer is incomplete.

106

I

l. Furnish the correct corporate name, mailing address, and the
state and date Of incorporation Of the company submitting this report.

2. Furnish the correct name and mailing address (and the state and
date Of incorporation where applicable) of each division or subsidiary
included in this report.

3. If for any reason you are not reporting for all Of your divi-
sions or subsidiaries located within the United State engaged in the
manufacture, distribution, and sale Of drugs and drug products since
January 1, 1959, name each such division or subsidiary not included and
state the reason for not including it in this report.

4. If you have a parent company engaged in the manufacture, dis-
tribution, and sale Of drugs and drug products which is not included in
this report, name such parent company and state the reason for not in-
cluding it in this report.

II

Briefly describe the Operation of your company and furnish the
following information:

1. A table of organization.

2. A list, for the period from January 1, 1959, to date, showing
the official title, name and address of each Officer, director, and
sales executive.

3. The most recent annual report.

4. All memoranda or reports filed with the Securities and Exchange
Commission and any analysis, studies, memoranda or presentations made
in connection with the Offering or sale of stocks or bonds since
January 1, 1959.

5. A list of the drugs and drug products manufactured, distributed
or sold.

6. A general description covering the method of distribution of
each drug or drug product.

7. Copies Of all brochures, memoranda, or Other writings furnished
to your sales force or commission men relating to the sale or distribu-
tion of prescription drugs and drug products for the period from
January 1, 1960, to date.

107

III

Report the total dollar volume of sales in the United States of
drugs and drug products by your company during the calendar year 1960
or during the most recently completed fiscal year (indicate the period
covered by your reply).

IV

Report separately for the same period used in answering III, the
total dollar volume of sales in the United States of prescription
drugs and drug products which contain any of the following:

(a) Antibiotics (e) Antihistamines
(b) Barbiturates (f) Vitamins

(c) Tranquilizers (8) Narcotics

(d) Hormones (h) Sulfonamides

Prescription drugs and drug products containing two or more of the
types of drugs listed above should be reported separately with an identi-
fication of the types of drugs included therein. Bulk sales, private
label, and unlabeled dosage form sales are to be reported separately.

V

Furnish a complete list and description covering each dosage form
and package size of each prescription drug and drug product containing
any of the types Of drugs listed under IV, together with the trade name,
or names, used in the marketing of each such dosage form and package size.

VI

1. Where any dosage forms or package sizes of products containing
any of the types Of drugs listed under IV are sold to Others for resale
under a trade name different from your own trade name, furnish a list of
all such other trade names, the products covered, and the name and ad-
dress of each purchaser Of such products, together with the dollar
volume of purchases of each product type by each such purchaser for the
same period used in 111.

2. If any sales of products containing any of the types of drugs
listed under IV were made in unlabeled packages, or in bulk, specify
the products and furnish the name and address of each purchaser, to-
gether with the dollar volume of purchases of each product type by each
such purchaser for the same period used in III.

108

VII
For the period January 1, 1959 to date, furnish a copy of each

price list, sheet, or announcement issued or in effect, and any docu-
ment (whether distributed or not) announcing or concerning prices,
discounts, allowances, rebates, free goods, or any other adjustment to
price, for any and all of the prescription drugs and drug products
listed by your company in response to V.

VIII

For the period January 1, 1959 to date, with respect to each pre-
scription drug and drug product listed under V, report:

1. Manufacturing locations.

2. Type and number of sales force (missionary and detail men, com-
mission men, etc.) with a short explanation of their respective duties.

3. All classifications and categories of customers for pricing
purposes, such as but not limited to the following:

(a) independent druggists
(b) chain stores
(c) doctors
(d) veterinarians
(e) city, county, state agencies and institutions
(f) federal agencies and institutions
(g) private hospitals and clinics
(h) drug wholesalers
(i) other wholesalers
(j) mail order houses
(k) industrial plants
(1) department stores
4. According to customer classification or category, the price,

type of discount (including quantity and annual volume), and rate or
amount of discount granted to each classification or category.

109

5. Each other price concession of whatever nature, including
trade plans, purchase plans, and free goods, accorded to each cuss
tomer classification or category.

6. Each type of advertising or promotional allowance, the
classification or category of customers to whom extended, and c0pies
of announcements and methods of notification of the availability of
such allowance to each customer classification or category.

7. Each type of service and facility, the classification or
category of customers to whom extended, and copies of announcements
and methods of notification of the availability of such service and
facility to each customer classification or category.

IX

Report which of the classifications or categories of customer,
if any, reported in answer to VIII (3) are not permitted to resell to
all types and classes of customers. Report the classes of resale cus-
tomers so restricted, if any, and explain the restrictions.

X

If during the period Since January 1, 1959 to date, any of the
prescription drugs and drug products listed in your answer to V were
not offered for sale in your full range of package sizes to all class-
ifications or categories of customers reported in your answer to VIII
(3), then identify such products, and the package sizes available to
each customer classification or category.

XI

For the same period used in answering III, furnish a list of all
the customers who purchased any of the prescription drugs and drug
products listed in response to V, where such customer is located in or
purchasing for resale in:

Kansas City, Missouri
LOS Angeles, California
New Orleans, Louisiana
Newark, New Jersey
Washington, D. C.

For each customer listed above, report:

1. Name and address (including buying headquarters if located
elsewhere).

2. Customer classification or category as reported in your answer
to VIII (3).

110

3. Total combined dollar volume of purchases Of prescription
drugs and drug products listed in your answer to V.

4. For each customer granted,:allowed or paid any (1) quantity
discount, (2) annual volume or other rebate, (3) handling or distri-
bution allowance, (4) free goods, (5) promotional or advertising
allowance, (6) service or facility in any form, or (7) any other
consideration amounting to a lower price adjustment, report for each
prescription drug and drug product, where any of the foregoing are
granted, allowed or paid, the total dollar sales of such product to
such customer on such product under each of the foregoing seven
separate categories.

XII

Furnish one copy of each type or form of franchise, agency,
sales, distribution or other agreement covering prescription drugs
and drug products, in effect with any customer at any time during
the period January 1, 1959 to date, together with any amendments,
riders, changes or limitations thereto in effect during said period.

XIII

For the period January 1, 1960 to date, furnish a OOpy covering
each type of advertisement published or disseminated, such as leaflets,
brochures, pamphlets, professional journal advertisements, tear sheets,
posters, cartoons, articles, drawing, prints of speeches, radio '
scripts, and television scripts (together with a COpy of the filmed
commercial) used or disseminated in connection with the sale, promo-
tion or introduction of any and all of the prescription drugs and drug
products listed in reSponse to V, which mentions or advises of the
claimed therapeutic effect, symptomatic relief, or of the side effects,
of such prescription drugs or drug products.

XIV

Furnish a sample copy of each label, or labels, under which each
of the prescription drugs and drug products listed in your answer to
question V were sold or distributed during the period January 1, 1959,
to date. Where any dosage form or package size has been sold to one
customer classification or category under a caution label different
in its wording from the caution label on dosage forms or package sizes
of the same prescription drug or drug product when sold to any other
customer classification or category, furnish a copy of each label and
explain the reason for the use of such different label for different
customer classifications.

You are advised that Section 10 of the Federal Trade Commission
Act provides for penalties for failure to file Special Reports within

111

the time fixed by the Commission. Penalties for filing false reports
are also provided. The Special Report called for in this Order is to
be filed within forty-five (45) calendar days from the date received.

By direction of the Commission.

Joseph W. Shea, (signed)
Secretary

APPENDIX VII
SELECTED EXAMPLES AND STARCH EVALUATIONS OF CURRENT JOURNAL ADS

 

 

AVERAGE
SEEN-ASSOCIATED

RANK ADVERTISEMENT (STARCH)

1 Medrol - Psoriasis 36

2 Medrol - Family 30

3 Medrol - Contact dermatitis 29

4 Panalba 25

5 Adeflor 24

6 Medrol - Asthma 22

7 Provera 18

8 Orinase - Diagnosis 17.5

9 Orinase - 5 years 17

10 Didrex 16
Comments:

1. Technical information - case histories - on an older product
can achieve high interest and readship. Medrol is an example.

2. A new product that involves a new concept of treatment can
achieve high interest which results in high scores. Adeflor is an
example.

3. While it is difficult to boost readership on an older product
where there is no unique medical information, it can be done. The
compelling graphics and simplicity of the Panalba ads is an example.

4. The readership of an ad is based on a variety of factors--
impact of the ad itself, its position in the publication, the physi-
cian readership in the particular issue, current interest in the use
of the product from a therapeutic standpoint, the relative position
of the product in the market.

5. Scoring of individual ads is one helpful way to measure the
effectiveness of the message (or campaign) over a period of time and
to compare results with the previous campaign. It is not an end in
itself but a valuable guide.

112

113

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antibiotic-reinforced antibiotic

mrImMUQ—m

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in olilis media
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reinforced with novobiocin to
protect against resistant staph.

Reminder ldvertiument Pie-u soc cultu-

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BIBLIOGRAPHY
Articles and Periodicals

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"Brokerage Firm Rates Upjohn High; Thorough Study Indicates Growth in

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Changigg Times. ‘May, 1962, p. 2.

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DeKruif, Paul. "A New Day for Diabetics," Reader's Digest, April,
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Detroit Free Press. December 8, 1961.
FDC Reports. May 22, 1961, September 11, 1961, and March 19, 1962.

"Fishbein Joins Forces with AMA in its Tilt with Kefauver," Printer's
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Hazlitt, Henry. "Criminals or Benefactors?" Reader's Digest, December,
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Hurwitz, Howard L. "Teleguide," Scholastic Teacher, LIII, No. 12
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Kalamazoo Gazette. February 26, 1886.

"Kefauver Unit Probes Free Plugs for Drugs," Advertising Age, February
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Lansing, Lawrence. "Laws Alone Can't Make Drugs Safe," Fortune, March,
1963, p. 3.

Moley, Raymond. "Kefauver's Inquisition," Reader's Digest, December,
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. "Wonder Drugs and Laws," Newsweek, December 4, 1961.

McCartney, James. "How Drug Lobbyists Lost Big Battle," Chicago Daily
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123

124

Pharmaceutical Manufacturers Association, Bulletin No. 60-13, August
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"What Does FDA.Mean by 'Full Disclosure' in Drug Ads?" Printer's Ink,
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Reports

American Diabetes Association, Inc. "Facts About Diabetes," New York,
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Prescription Drggs and the Public Health. A digest of the presenta-
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The Upjohn Company. Annual Report. 1950, 1952, 1959-1963.

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Books

Engel, Leonard. Medicine Makers of Kalamazoo. New York: McGraw Hill
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Other Sources

Deal, John L. Packaging Drggs Today. Paper presented at the 28th AMA
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1959.

125

Dixon, Paul Rand. Speech before the Proprietary Association Conven-
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Hruska, Senator Roman L. Address before the New Jersey Pharmaceutical
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Public Documents

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Unpublished Materials

Figures from The Upjohn Company, Marketing Research Department.
July 15, 1964.

Morris, Stanley. "Upjohn Advertising and Sales Promotion."

Patterson, John N. (MeCann-Marschalk Co., Inc.). Letter to J. S.
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Pernice, R. L. "Results of Unicap Consumer Promotion," The Upjohn
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. "Organization Problem: The Upjohn Company, Inc." Paper
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. "Government Regulations and the Drug Industry." Seminar
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126

Sanborn, D. H. The Upjohn Company, Marketing Research Report, July 15,
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Upjohn, L. N. "Cumulative History, Advertising." Dictation intended
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. Interoffice memo. July 7, 1945.

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