Trouble in Miltown

The makers of tranquilizers had reason to down a few pills themselves last week. In a Manhattan federal court, the U.S. Justice Department charged that two of them had conspired to monopolize the $40 million-a-year market for meprobamate, better known as Miltown or Equanil. The defendants: Carter Products, Inc., recent loser in a 17-year struggle with the FTC to preserve the "Liver" in Carter's Little Liver Pills, and giant (1959 sales: $450 million) American Home Products, which sells 90 household products, from Chef Boy-Ar-Dee ravioli to Anacin and Preparation H (for hemorrhoids). Trustbusters charged that Carter, which developed meprobamate and controls one-third of the market, and American Home Products, which controls the other two-thirds under a licensing deal with Carter, conspired to fence out the competition and gouge the customers.

Some support for the charges came last week from Washington, where Senator Kefauver's antimonopoly subcommittee probed into the high price of tranquilizers --which cost up to six times as much in the U.S. as in foreign countries. One Miltown tablet costs only .7-c- to make, testified Carter President Henry Hoyt, but it sells to druggists for 3.3-c- and retails for about a dime. Why the wide spread? Into every pill, replied Hoyt, Carter figures research costs of .4-c-, promotion costs of 1-c-, profit of 1.2-c-. As for promotion, Carter has a blue-ribbon mailing list of 92,000 doctors, figures it spends 18-c- a week on each one to push Miltown; the industry as a whole spends much more to promote older medicines --up to 25% of sales--than to create new ones. As for profits, said Hoyt, "if you cannot get a return of 20% on your net worth, you had better get out of business." Carter need not worry. Its 1959 earnings ran 44% of its net worth (v. the U.S. manufacturing average of 11%); Carter rang up sales and royalties of $51 million, put $1,032,000 into research, had earnings of $7,000,000.

Kefauver was even more curious about how Carter and American Home Products happened to bid identically--down to a thousandth of a penny--on bulk Government orders for meprobamate. American Home Products Chairman Alvin G. Brush had an explanation. The two firms either had to offer exactly the same prices or wage a price war, and then "I don't know where the price would be now." Asked the Keef: "If you bid under, do you think that Carter would have bid under also?" Answered Brush: "I am sure they would."

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