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An Economic Analysis Of The Factor Market For Pharmacists
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An Economic Analysis Of The Factor Market For Pharmacists
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AN ECONOMIC ANALYSIS OF THE FACTOR MARKET FOR PHARMACISTS by Edward Carl Erickson A Dissertation Presented to the FACULTY OF THE GRADUATE SCHOOL UNIVERSITY OF SOUTHERN CALIFORNIA In Partial Fulfillment of the Requirements for the Degree DOCTOR OF PHILOSOPHY (Economics) August 1970 ERICKSON, Edward Carl, 1942- AN ECONOMIC ANALYSIS OF THE FACTOR MARKET FOR PHARMACISTS. University of Southern California, Ph.D., 1970 Economics, general University Microfilms. A X E R O X Company, Ann Arbor, Michigan THIS DISSERTATION HAS BEEN MICROFILMED EXACTLY AS RECEIVED UNIVERSITY O F SO UTHERN CALIFORNIA THE GRADUATE SCHOOL UNIVERSITY PARK LOS A NGELES. C ALIFORNIA BO0O7 This dissertation, written by Edward Carl Erickson under the direction of h.X$... Dissertation Com mittee, and approved by all its members, has been presented to and accepted by The Gradu ate School, in partial fulfillment of require ments of the degree of D O C T O R O F P H I L O S O P H Y CJL&jjs ' D u m A u g u st 1970 DISSERTATION COMMITTEE ..... r CT? u <1-.. / PLEASE NOTE: Some pages have indistinct print. Filmed as received. UNIVERSITY MICROFILMS. TABLE OF CONTENTS Chapter I. INTRODUCTION ..................... . Scope and Purpose Past Studies Current Trends and Issues Objective of the Study Method of Investigation Organization Conclusion II. HISTORICAL DEVELOPMENTS IN PHARMACY AND THE FACTOR MARKET ........... III. SUPPLY OF PHARMACISTS ........... Introduction Criteria for Evaluation Licensing of Pharmacists License Requirements Reciprocal Licensing Schools of Pharmacy Chapter Mobility of Pharmacists Summary IV. THE DEMAND FOR PHARMACISTS: EMPLOYMENT AND REGULATION ............. Introduction Criteria for Evaluation Community Pharmacy Federal Regulation of Pharmacies State Regulation of Pharmacies Community pharmacy Hospital pharmacy Manufacturing and wholesale Government, teaching and other Summary V. EXOGENOUS INFLUENCES IN THE FACTOR MARKET Introduction Federal Regulation State Regulation Regulation and Sales Composition iii Page 62 . . 96 iv Chapter Page Pharmacy Organizations Conclusion VI. DYNAMIC FACTOR MARKET PATTERNS AS A MEASURE OF PERFORMANCE ................... 123 Historical Measures of Factor Market Performance Clinical Pharmacy Community Pharmacy Education Institutions and Teaching Stimuli for Future Change in the Factor Market VII. CONCLUSION................................... 154 Summary: The State of the Factor Market Conclusion: The State of the Factor Market Policy Implications and Further Research BIBLIOGRAPHY....................................... 168 APPENDIX I ....................................... 176 I I ....................................... 181 III....................................... 182 I V ....................................... 183 ....................................... 184 LIST OF TABLES Table Page 1. Minimal Standards Required for Member ship in the Association of Colleges of Pharmacy . . . . . . . . . . . . . . . . . 23 2. Percent of Hospitals With and Without Pharmacists............................... 84 v LIST OF ILLUSTRATIONS Figure Page 1. Physician's Order •• • • • . ............. 139 vi CHAPTER I INTRODUCTION SCOPE AND PURPOSE This study applies economic terminology and theor etical analysis to the U.S. factor market for pharmacists in an effort to identify the supply and demand conditions or characteristics of the labor market for pharmacists. The services of pharmacists are demanded not as a final product or consumer good but as an intermediate product or factor utilized in the production of health care. Pharmaceutical products are just one group of the many in puts used in the production of health care which could be used with or as a substitute to other inputs. Pharmacy as a health profession is concerned with the preparation and distribution of medicinal products used in the prevention, diagnosis or treatment of disease. This field of health care must operate within the frame work of federal, state, and professional regulation. The integral role of pharmacy in health care makes information on the derived demand for pharmacists relevant and essen tial to evaluating the allocation of scarce resources both to and within the health care sector of the economy. Recent increases in the demand for health care have occured at a rate faster than general economic growth. Government and private medical payment programs are an important part of this trend. Economic growth in per capita terms permits increasing increments of income to be spent on amenities compared to necessary medical 1 care. As a result of the increased influence of medical payments in national expenditures, health economics has been established as an important independent field of study in economics. Health economics has been defined as ...aspects of the health problem that deal with the determination of the quantity and prices of the scarce resources devoted to this and related purposes and with the com binations in which these resources are employed.2 Operationally feasible definitions of necessary medical care can be found in patient screening procedures used by hospital emergency rooms. 2 Herbert E. Klarman, The Economics of Health (New York: Columbia University Press, 1965} p. 2. 3 Statements on the allocation of health resources which reflect performance in the factor market for pharmacists, at least potentially yield implications for the appro priate policy goals of public and private entities in the rapidly growing field of health care. Even a quali tative study of this area is potentially useful because regulatory bodies and other decision making bodies con tinually operate under limited information conditions. PAST STUDIES Economic analysis has been carried out on various phases of pharmacy in varying degrees of rigor. To date, however, there has been no detailed economic analysis of the factor market for pharmacists.^ Most of the work available on pharmacy does relate in some way to the fac tor market, but it is not directed at this aspect of pharmacy's role in health care. Many of the studies available, which also pro vide information for this paper, have been done by groups or commissions of pharmacy organizations and 3Hereafter, only the term "factor market" will be used whenever clarity permits. 4 governmental bodies. The approach of these groups is problem oriented, investigating such things as drug pricing practices of pharmaceutical manufacturers and retail drug distributors; the cost of pharmaceuticals for the retired, drug insurance programs, profit margins, generic name versus brand name products, misleading ad vertising, and reliability of drug quality. These problem oriented studies tend to concentrate on symptoms (for example, "high prescription drug costs") rather than mar ket structures and institutions which determine supply and demand conditions ultimately giving rise to these and other problems. It is also true that most of the studies lack economic rigor since the work has been done under the supervision of professional pharmacists who lack training in economics. An increasing number of economic studies are 4 See, for example, Donald C. Brodie, The Challenge to Pharmacy in Times of Change (Washington, D.C.: Ameri can Pharmaceutical Association and American Society of Hospital Pharmacists, 1966), and U. S. Department of Health, Final Report. Task Force on Prescription Drugs (Washington, D.C.: U.S. Government Printing Office, 1969) . 5 available on other health care inputs such as the supply 5 and demand of medical doctors in the health care sector. Supply studies investigate entry conditions and the ade quacy of training programs to supply the physicians de manded. Demand studies investigate the (derived) demand for physicians, and attempt to identify new sources of demand created by government and private medical plans. These studies indicate that there are both natural and artificial restrictions, including income foregone during the training period and legal training requirements. CURRENT TRENDS AND ISSUES Current pressures for change in the profession of pharmacy are concentrated in educational institutions and in the very nature of professional employment itself, with an accompanying shift in employment and sales con centration from the smaller retail drugstores to larger stores and hospital employment. The services demanded ^See, for example, Elton Rayack, Professional Power and American Medicine: The Economics of the Ameri can Medical Association (New Yorks The World Publishing Company, 1967), or Rashi Fein, The Doctor Shortage: An Economic Analysis (Washington, D.C.: Brookings Institu tion, 1967). of pharmacists appear to influence the training require ments of this group only after delay. The greatest issue involves training people to perform pharmacy tasks of different skill levels and efficient utilization of those skill levels. The implications of this study potentially en compass the whole country and its health care sector. However, a factor market analysis is also valuable at the regional or local level since changes are implemented at this level. The important trends found in educational institutions, hospitals which may be part of or associated with an educational institution, and retail merchandising are interrelated. A special problem in health economics is that if a person's life or health is at stake, cost or price are of secondary concern, indicating that the demand for health care is price inelastic, i.e., relatively unrespon sive to price changes. Policy makers, regulatory bodies, and the public must concern themselves with the possible existence of exploitation and restrictive practices be sides the volume of limited resources allocated to the health care sector. It is hoped this study will add to the limited information by which health care policy de cisions are made, since limited information does hamper construction of market models for the health care sector. OBJECTIVE OF THE STUDY The objective of this study is identification of the state of the factor market for pharmacists, which may be characterized in mutually exclusive and comprehensive states as involving a surplus, a shortage, or an equili brium. Stated in this manner, the problem of identifi cation theoretically encompasses all influences on the state of the factor market which reflect efficiency in resource use. However, institutional restraints, such as entry requirements which affect supply and legal re quirements for the use of pharmacists which affect demand, are especially critical to identification of the factor market's state and performance. METHOD OF INVESTIGATION Limited data precluded the construction of a for mal mathematical or econometric model of the factor mar ket for pharmacists. As a result, the evidence of this analysis is qualitative, depending heavily upon observa tions o£ institutional structures, restraints and their economic implication. Of course, empirical data is cited whenever available. Influences on the factor market are classified according to their impact on supply and demand in the factor market. This information can be used in relative terms to evaluate the state of the factor market, reflecting the allocation and utilization of resources. ORGANIZATION The analysis is developed by: identifying impor tant historical developments in pharmacy which yield in sights to the current market structure; identifying in fluences on the factor market according to their impact on supply and demand; and finally evaluating the factor market's performance in qualitative terms by citing evi dence on dynamic patterns within the context of the mar ket 's structure. The first phase of analysis (Chapter II) is his torical in its approach, identifying important develop ments in pharmacy which yield insights to the factor market. This section is not a comprehensive historical development of the pharmacy profession, but is meant only to introduce those developments which are useful in under standing and describing the market as it now exists and is most likely to evolve in the future. The second phase of analysis (Chapters III and IV) attempts to identify salient elements of the market's current structure as belonging to either the supply or demand side of the factor market. Discussion of the sup ply of pharmacists revolves around requirements for entry into the profession as a licensed pharmacist. The short- run supply of pharmacists is determined by the existing number of academically trained, and where necessary, licensed pharmacists desirous of work at alternative wage rates. Over the long-run, additional entry occurs when individuals meet the educational, training, and examina tion requirements necessary for jobs in the pharmacy sec tor. Entry into the profession is influenced by the num ber of schools of pharmacy in operation, schooling costs, curriculum and degrees offered, academic standards, state pharmacy licensing practices, and various socio-economic factors. The legal requirements of entry into any profession are effectively "artificial" barriers to entry. "Natural barriers to entry are those entry requirements or costs which the marketplace itself erects. The evidence indi cates educational requirements in excess of those jus tifiable for the pharmacist's current type of employment in terms of public health, safety and welfare are an arti ficial barrier to entry. However the barriers to entry do not appear to be as serious as in the medical profes sion. The demand for pharmacists is discussed by iden tification of the sources of demand for pharmacists. The major categories of demand are: community pharmacies; hospitals; manufacturing and wholesale; and government, teaching and other. As on the supply side, the institu tional entities are scrutinized for practices that would potentially alter the effective demand for pharmacists, and in turn, affect the factor market's state. It is shown that legal requirements create and protect an effective demand for pharmacists, especially in the case of retail sales. Other evidence shows that demand creation is not restricted to the dispensing of prescription drugs. The relative ease of entry to the 11 pharmacy profession through training requirements as they exist implies that the higher incomes created by restric tive practices could result in over-entry. The final phase (Chapters V and VI) provides a qualitative evaluation. It examines exogenous factors influencing the present factor market structure and trends important for the market's future structure. The organization of many state boards of pharmacy, along with their regulations and licensing practices, indicates a conflict of interest which has resulted in favoritism to the single proprietorship form of retail pharmacy. Professional pharmacy organizations are able to influence institutional or artificial restrictions to entry; con trol of the profession, however, is minimized relative to physicians by the abundance of special interest groups, no one of which provides a unified voice for pharmacy or pharmacists. There are four measures frequently used to inves tigate supply and demand problems, as found in the ques tion under investigation. The four measures are: need, manpower rations, direct statements on supply and demand, and indirect measures reflecting supply and demand. 12 The concept of "need" is humanitarian and fre quently used in the health care sector, but neglects the scarcity of resources in our economy. Population manpower ratios are available, but fail to account for possible changes in the health care inputs used due to changes in their relative values and productivity. The simple con cept of supply less than demand or vice versa is not directly operational. Indirect observations made in the market place are taken as evidence on supply and demand conditions in the market. One example of an indirect observation is the rate of change in relative incomes for different occupations, but this measure is also sub ject to criticism. The analysis is continued by identifying in detail dynamic elements of the market and how they relate to the above measures of market conditions, especially mar ket imperfections. In hospitals, where dispensing regu lations are not so stringent, the pharmacist can be re placed by less skilled, resulting in lower cost of labor. Regulation of community pharmacy does vary by state, but generally there has been a lag in innovative changes. Restrictions on drug sales are slowly falling by court 13 decisions. While the number of outlets is decreasing, the average size of retail outlets in terms of sales is increasing and the per cent drug sales represent of total sales of these outlets is also increasing. These changes indicate an improved allocation of resources, including that of pharmacists. Increasingly the pharmacist is being used in a patient centered role as a member of a health care team as a consultant on drugs. This trend is also evidenced in the increasing number of schools offering and requiring courses in clinical pharmacy and in several proposals for training pharmacy technicians. CONCLUSION The conclusion as to whether there is a shortage or surplus of pharmacists is couched in terms of the mar ket characteristics and elements of change identified. No quantitative answer is possible, but the weight of the evidence indicates significant artificial barriers to entry of the pharmacy profession and deliberate attempts to create effective demand. Significant evidence also emerged at many points to indicate that the supply and 14 demand for pharmacists is not independently determined. It is concluded that market imperfections have resulted in a surplus of pharmacists as they are now trained, a shortage of pharmacists prepared to accept clinical pharmacy roles, and a shortage of pharmacy tech nicians who could adequately perform many tasks with super vision. Implications for policy construction may easily be drawn, although no clear policy is outlined here. CHAPTER II HISTORICAL DEVELOPMENTS IN PHARMACY AND THE FACTOR MARKET The elements of pharmacy as described at the be ginning of Chapter I can be identified throughout the history of health care and medicine. While those who possess and administer the knowledge of pharmacy are especially important to the diagnosis and treatment of disease, the importance and fulfillment of pharmacy tasks has varied over time. Only in this century has pharmacy evolved to the point where it is widely recognized as an independent profession. The increased role of pharmacy in health care and its status as a profession has been accompanied by increased regulation of pharmaceuticals, pharmacies and pharmacists. A problem not uncommon to the discussion of indus tries, products, or markets is that of definitions. Con sider the term "pharmaceuticals:" it is not always clear what qualifies as a pharmaceutical. For example, all food 15 16 has a physical effect upon the individual consuming it. Of the many goods commonly considered pharmaceuticals, some are over-the-counter (OTC) while others are pre scription, and these prescription drugs may be sold by generic or brand name. There are even several alternative views which can be taken on health care, the basic concern of health economics. First, health care might be classified as a normal consumption expenditure on a final good or service whose demand is normally relatively inelastic. Second, health care expenditures may be viewed as an investment in human capital. Increasingly, returns on education are being measured in this way and health care might also be given this interpretation. Finally, health care might be viewed as a resource subject to abuse and premature depletion without regulated utilization.^* If this were an empirical investigation precise definitions of pharmacy and pharmaceuticals might be found in the legal definitions of tax rulings. If a ^■John A. Biles and Beverly Wong-Masaki, "An Ab stract of the Academic Plan for the School of Pharmacy at the University of Southern California," Los Angeles, 1968, p. 15. (Mimeographed.) 17 definition of pharmaceuticals were selected it would be clear who is involved in the production and distribution of pharmaceuticals. This study makes no attempt to define the exact boundaries of pharmacy but examines the tasks performed by licensed pharmacists and the training re quired for their licensing. The criteria of license requirements and duties is not a norm, but only a con venient basis for discussion. The fulfillment of pharmacy tasks has changed considerably through history. These developments in phar- 2 macy are documented in numerous histories of pharmacy. It has been said that pharmacy as a full time profession had its beginning with the development of the hospital pharmacist. Pertinent to the U.S. factor market is chronology of responsibility for pharmacy tasks and evolution of the relationship between physicians and pharmacy. Initially, there was no clear distinction between those responsible for compounding and dispensing pharmaceuticals or those 2 See, for example, Edward Kremers and George Ur- dang, History of Pharmacy, revised by Glenn Sonnendecker (3rd ed#; Philadelphia: S.P. Lippincott, 1963) among others. 18 consulting with the public on their proper use. During development and settlement of the United States many areas lacked the services of a physician, a chemist, or an apothecary shop, or possibly any of these. Until recent times many physicians played an im portant role in the dispensing and preparation of phar maceuticals. This role of the physician is now concen trated in those rural areas without the services of a pharmacy; the age of the family automobile and all-weather highways have reduced this role further. The apothecary shop, where general advice and home remedies were avail able, gave way to the independent retail drugstore, an almost unique piece of Americana. In many cases and yet today, the local drugstore was an all-purpose outlet for sundries, especially in the case of chain drugstores. There does seem to be an attempt to redevelop the apothe cary in the sense of a source of general health care information for both physicians and the public. Today's pharmaceutical industry evolved from a variety of groups of which all played a part in pharma ceutical preparation. The earliest pharmaceuticals were botanicals needing little preparation; later development 19 led to the use and development o£ chemicals. Basic chem icals were obtained from the developing chemical industry which had its beginnings with the raw chemical and pigment industry in Germany. Raw chemicals were prepared for final pharmaceutical use by both physicians and the apo thecary chemist. Today almost 95 percent of all prescrip tion drugs are prefabricated.^ Significant as a turning point for pharmacy as an independent profession is the establishment of inde pendent schools and the split with the medical profession. Law, medicine, and religion are commonly referred to as the original professions, but the term profession is not easily specified. The professional status of pharmacy has been discussed with respect to the areas of training, legal responsibility, professional-client relationships, and ethical relationships, plus possible adjustments for utilization of professional skills and the pervasiveness 4 of the profit motive in client and ethical relationships. United States Department of Health, Education and Welfare, Office of the Secretary, The Drug Makers and the Drug Distributors. Task Force on Prescription Drugs (Wash ington, D.C.: Government Printing Office, 1968), p. 54. ^F. Marion Fletcher, Market Restraints in the Re tail Drug Industry (Philadelphia: University of 20 A commencement address at the Temple university School of Pharmacy Identified the following eleven items as the earmarks of a profession: intellectual character of ac tivities, practical nature, specialized intellectual tech nique, independent judgment and individual responsibility, research and creative work, organized literature, superior personnel, schools on the college and university level, self organization, social regulation, and general educa tion.^ Some of these items could be quantified, but others are clearly subjective in nature. Pharmacy has gone through the educational stages of apprenticeship, proprietary schools and university or associated training as have the professions of law, medi cine, and religion. Rapid evolution took place in phar macy around the last half of the nineteenth century. Up to this period, training in pharmacy was associated with medical training programs or apprentice training in the drugstore or apothecary which was often operated by Pennsylvania Press, 1967), pp. 20-22. ^Lloyd E. Blauch, "The Earmarks of a Profession," in Readings in Pharmacy, ed. by Paul A. Doyle (New York: John Wiley and Sons, Inc., 1962), pp. 280-94. 21 physicians. The first schools of pharmacy were estab lished as a reaction against the medical profession's efforts to dominate the field of pharmacy, especially in training.6 Often associated with reaction against the medical profession was the development of pharmaceutical associations, especially local societies. There was a period of rapid expansion of proprie tary schools in the last quarter of the nineteenth century, after which the trend was toward association of both new and old schools with universities or general colleges. In 1905 there were 80 schools teaching pharmacy, of which 7 32 had some such affiliation. It has been suggested that this phenomena was associated with the high costs of operating independent schools, the number of which was 8 increasing rapidly. The independence of pharmacy training programs Henry M. Burlage, Charles O. Lee, L. Wait Rising, eds., Orientation to Pharmacy (New Yorks McGraw-Hill Book Co., Inc., 1959), p. 169. 7 Kremer and Udang, History of Pharmacy, p. 214. 0 Edward C. Elliott, The General Report of the Phar maceutical Survey, 1946-49. (Washington, D.C.s American Council on Education, 1950), p. 20. 22 from medicine reduced control by the medical profession but allowed greater self-regulation; however, no detailed attempt to determine the significance of this control will be made here. It does seem clear, though, than an increased opportunity for communication between general education facilities and professional pharmacy training was created. During the first quarter of this century there was a steady increase in minimum curriculum standards for schools of pharmacy belonging to the Association of Colleges of Pharmacy; these are shown in Table 1. Legal regulation of pharmaceuticals, pharmacists, and pharmacies has evolved with the growth of the profes sion. Major responsibility for the control of pharmaceu tical sales and production currently lies with the Federal Food and Drug Administration (FDA). It was not until 1938 that the FDA was established by the Federal Food, Drug and Cosmetic Act and strengthened in the same year by the Wheeler-Lea Amendment. Additional sales regula tions date to the Federal Food and Drugs Act of 1906 and the Harrison Narcotic Law of 1914. Although federal con trols over pharmaceuticals influence the factor market 23 TABLE 1 MINIMAL STANDARDS REQUIRED FOR MEMBERSHIP IN THE ASSOCIATION OF COLLEGES OF PHARMACY® Year Admission Requirement Length of Course Deqree 1900 None specified in Constitution and By-Laws 1904 Grammar School 40 Weeks 1907 50 Weeks in 2 Years 1908 1 year of high school 1918 2 years of high school 1923 High school graduation 1925 3 years b Ph.G or Ph 1932 4 years BS or BS in Phar 1960 5 years Known as the American Conference of Pharmaceu tical Faculties prior to 1925. ^Member colleges conferred at least 6 degrees prior to 1925: Ph.D; BS in Phar; D Phar; M Phar; MS in Phar. Source: R.A. Deno, et al., The Profession of Pharmacy (Phil.: J.B.Lippincott Co., 1959), Table 2, p. 33. 24 directly, these controls have been relatively stable and less interesting than the various direct controls by the individual states. There were attempts at the regulation of pharma cists by states early in the 1800's, but lasting regula tion did not come about until after the Civil War. Local attempts at pharmacy regulation were generally ineffective and short-lived. State enactments of pharmacy law after the Civil War did not always make graduation from a school of pharmacy mandatory for licensing as a pharmacist. In some areas licensing requirements were resisted because they would have eliminated the existing outlets for phar maceuticals in many rural areas. In all states the independent neighborhood phar macy has been the dominant retail outlet. Mass merchan dising techniques have had a significant impact on phar macy as well as other areas. Chain drugstores were oper ating in the United States by the turn of the century. The competitive response of independent pharmacy owners can be found in the application of fair trade laws to pharmacies and the regulation of pharmacies by states as discussed in Chapter IV. At the present time, 38 states 25 have fair trade laws on the books, but their status varies 9 with court decisions that have been laid down. Fair trade laws will not be discussed in detail since they are part of the pharmaceutical product market and only in directly an influence on the factor market. From even this brief discussion of the evolution of pharmacy and the profession, it is clear that legal and organizational restraints in the factor market for pharmacists act and emanate on both the supply and demand side. CHAPTER III THE SUPPLY OF PHARMACISTS INTRODUCTION This chapter attempts to identify and evaluate the supply mechanisms which influence entry to and exit from the pharmacy profession; present refined quantita tive techniques for estimating the supply function for pharmacists are not used. The conditions for entry to the profession are identified and discussed as potential economic costs or barriers to entry. The pervasiveness of a pharmacist's license as a condition for employment in the factor market made it advantageous to use licensing as a bench mark for dis cussion. From licensing requirements and reciprocal licensing between the states, the discussion proceeds to the number of pharmacy schools, their curriculum and stu dents, and finally the mobility of pharmacists. Under lying this approach is the implicit assumption that mech anisms through which the supply of pharmacists is 26 27 forthcoming are equally or more important than an empiri cal estimation of the supply function to evaluate the market's performance. CRITERIA FOR EVALUATION A mathematical estimation of a supply function for pharmacists has been ruled out for this study because of inadequate data and difficulty in identifying bound aries of a factor market for pharmacists. Instead, the criteria for evaluating the supply of pharmacists is in terms of the institutional and market imposed restrictions placed on entry to the pharmacist factor market and labor practices found within this market. A pharmacist's license, granted by state authority, is an almost universal requirement for jobs considered part of the pharmacy profession. The licensing require ment is a useful bench mark since approximately 95 percent1 of those in the pharmacy profession are licensed and of ^Five percent allowance is mainly for research scientists employed by pharmaceutical firms who may not be licensed. See Pharmaceutical Manufacturers Association. Prescription Drug Industry Fact Book (3rd ed.j Washington. O.C.: Pharmaceutical Manufacturers Association. 1968). p. 49. 28 2 these 80 percent are involved in the retail dispensing of drugs where law requires licensing. This use of license requirements is not meant to imply sanction of these standards as a norm. The definition of pharmacists as those licensed as pharmacists has been rejected because this definition does not cover all jobs that are legiti mately included in the pharmacy profession as has been discussed earlier. Additionally, an accurate survey of the number of pharmacists at some specific time need not represent a homogeneous health care input since training and license requirements vary by state. State licensing of pharmacists can be interpreted as a legal certification that one has met the minimum legal qualifications applied to those in retail pharmacy. Licensing, whenever required, is tantamount to a legal monopoly that establishes a legal minimum standard for entry to the profession. In the previous chapter the history of increasing legal licensing requirements was noted. In the short-run, the stock of pharmacists may be identified as those who have licenses, and the greatest 2 See Appendix II. 29 percentage of any pharmacy school graduates waiting for the next state board examination. Variations in degree requirements of the different schools of pharmacy might be taken as one measure of skill levels. Economic theory hypothesizes the number in this stock of pharmacists offering their services in the factor market will vary according to the wage rate. Only by increases in licenses issued or by changing licensing requirements, ceteris paribus, can the number offering their services in the factor market at all wage rates increase. The long-run in this framework would be defined in terms of the prere quisites for licensing. Theoretically, the supply of pharmacists will vary by state with different licensing requirements, and labor mobility would reflect differences in barriers to entry. Data on the state in which a pharmacist was originally licensed or graduated and the state in which he is currently practicing is one measure of labor mobility and recognition of training and credentials between the states. In a perfectly competitive market those possessing the best knowledge of pharmacy would be hired as pharma 30 cists first and at the highest wages. Over time, those not possessing even the minimal qualifications demanded by prospective employers would have to obtain these quali fications or leave the factor market for pharmacists to find employment. Extra-market barriers to entry indicate barriers above and beyond what a market would impose; these are of special interest for their economic implications. Cur rently, legal licensing requirements, with minor excep tion, force all pharmacists to meet job qualifications by formal training. The paths available for fulfilling mar ket-imposed or artificially imposed barriers to entry of fer one method on investigating the supply mechanism. LICENSING OF PHARMACISTS All states, as well as the District of Columbia, Puerto Rico, and the Virgin Islands, license pharmacists under their own statutes. The license granted amounts to a legal monopoly. Economic significance of this monopoly varies with the requirements for its possession and the enforcement of these conditions. The trend of increasing license requirements alone, is not prima face evidence 31 of an attempt to restrict entry. Technological advance ment and increased knowledge could just as well lead to new entry requirements. State control of licensing requirements may re duce the cost of experimentation that would result under standardized federal controls. At the same time, state control allows barriers to be erected against out-of- state pharmacists as well as potential entrants to the profession. A detailed discussion of the factor market's institutions and regulatory bodies follows identification of the elements of both supply and demand. LICENSE REQUIREMENTS In most states licensure as a pharmacist requires that the applicant be twenty-one years of age, a graduate from an accredited school of pharmacy, have completed a period of intership training, and have a passing grade 3 on the state board examination. Additionally, 44 states ^U.S. Department of Health, Education, and Welfare, Office of the Secretary, The Drug Makers and the Drug Distributors. Task Force on Prescription Drugs, (Washing ton, D.C.: Government Printing Office, 1968), p. 78. Currently all states and the District of Columbia require a written examination administered by the State Board of Pharmacy, except Mississippi where the examination is 32 require pharmacists to be of good moral character and 35 require U.S. citizenship. None of these requirements seem particularly onerous, but each must be evaluated for re- 4 strictive implications. The economic implications of each control and important variations between the states must be couched in terms of the factor market for meaning ful evaluation. Procedurally it is now necessary to graduate from an accredited school of pharmacy before qualifying to take state board examinations for licensing. Formal aca demic training is an old requirement for state examination, but graduation from a school of pharmacy was not adopted by all states until 1956.5 Additionally one's pharmacy education must be from a school accredited by the American Council on Pharmaceutical Education. The economic signi ficance of the educational requirement and necessity of its accreditation depends upon the method of adoption and administered only for reciprocity of licensing between the states. Additionally, 31 states plus the District of Columbia require an oral examination. 4Ibid. ^F. Marion Fletcher, Market Restraints, p. 17. application. Adoption of the educational requirement was not used to eliminate those already registered as pharmacists Accreditation of all schools has evolved through efforts of the American Council on Pharmaceutical Education to make an education requirement coterminous with an accre dited education? These efforts included increasing the minimal education standards. As noted earlier, initial licensing was possible with formal education or by exami nation. Theoretically formal education and licensing should be used as supplements to each other and not as repetitive screening devices. Initiation of both require ments saw no attempt to coordinate the two screening pro- Q cedures. Although the lack of coordination in require ments was noted some years ago, the recommendation is 6Ibid.. pp. 17-19. 7Elliott, The General Report of the Pharmaceuti cal Survey. 1946-49. pp. 40-41. ®Ibid., pp. 23-24. 34 9 still being made today. So long as coordination of educational and examination requirements is lacking these two controls may be interpreted as duplicative or at best random and an unnecessary requirement. Further evidence of inefficiency in state board examination procedures is suggested in the failure rate amont those taking the exams. For all jurisdictions listed in Appendix IV the rate of failures in 1968 was 14.3 percent. The highest failure rate was 46.7 percent in Washington, D.C. followed by New York with 38.0 percent, New Jersey with 36.4 percent, Hawaii with 35.0 percent, and California with 32.0 percent. In total there were only 9 jurisdictions with a failure rate above the average, indicating a low rate of failures in most states with little variation from year to year. Of the 53 jurisdic tions, there were 15 with a zero failure rate. The 9 jurisdictions with a greater than average failure rate includes 2 of the 3 states without reciprocity and 2 of 9 U.S. Department of Health, Education and Welfare, Office of the Secretary, Final Report. Task Force of Pre scription Drugs, Background Papers (Washington, D.C.: Government Printing Office, 1969), p. 20. 35 the 7 states without schools of pharmacy. With the excep tion of the states with above average rates of failure, the state board examinations do not appear to be effective as a screening device. Academic records alone might iden tify those likely to do poorly on the examinations. Another restrictive condition has resulted from adoption of both educational and examination requirements. The formal education requirement with a residency require ment has eliminated other education sources^ and the self-educated from pharmacy. It is useful to compare state board examination and accreditation practices of pharmacy with those in law and medicine.^ In the case of law, the state bar examination must be passed to practice law, but this does not require an accredited education. If for one reason or another a person finds it impossible to attend the better known schools which are usually accredited, there are two other alternatives. One alternative is to ^Kremers and Urdang, History of Pharmacy, pp.216- 218. n Arlene S. Holen, "Effects of Professional Licen sing Arrangements on Interstate Labor Mobility and Resource Allocation," The Journal of Political Economy, LXXIII, (October, 1965), pp. 492-498. 36 study at unaccredited schools with lower requirements and the other is to study under the direction of a practicing lawyer, although this method is rarely used today. The rate of failure among those taking the bar examination 12 ranges between 5 percent and 50 percent. Since the range of failure rates fluctuates greatly from year to year, this seems to imply meaningful screening device, for whatever its purpose. In the medical profession, evidence indicates that licensing practices have had the effect of restricting entry to the profession and as a consequence yield an unearned monopoly return to those in the profession. The American Medical Association's effective control of state medical examination boards and medical school accredita tion standards has allowed control of entry. The AMA apparently has used increased licensing requirements an medical school accreditation standards to limit the number of practicing physicians. Evidence includes a reduction in the number of medical schools from 160 in 1904 to 81 in 1920 and a reduction in the number of students from 12Ibid., p. 495. 37 28,142 to 14,088 with negligible changes since then.^ The same controls exist within the pharmacy pro fession, although to a lesser degree because of divided interests in the factor market. Through control of license and accreditation standards, pharmacists poten tially control both the number of schools which prospec tive pharmacists are required to attend as well as quali fications for entry to these schools. Economically, a non-accredited professional school has little chance of survival because students may not use such training to pass the state board exams and enter the profession. At the present time there are no schools of pharmacy which lack accreditation. Later during dis cussion of schools of pharmacy, the number of pharmacy schools and pharmacy school graduates will be discussed as a crude test of entry restriction. Forty-four states as well as the District of Columbia, have adopted the National Association of Boards of Pharmacy's recommendation of a one year internship 13 Elton Rayack, Professional Power and American Medicine: The Economics of the American Medical Associa tion, (New York: The World Publishing Company, 1967), p. 69. 38 with three months o£ the internship occurring after 14 graduation. Three states require only six months internship, three require none, and one state requires more than the recommended period. There is also a wide variation in when a pharmacy student may obtain his intern card and begin fulfilling the internship requirement. The concept of an internship or apprentice program is justifiable as a method of providing practical experi ence and has historical precidence in many occupations. Partial completion of education requirements is a pre requisite to commencement of intern training. The current structure of practical training is a carry-over from the beginnings of pharmacy as a profession when manufacturing 15 and dispensing were an integrated operation. Great economic significance emerges from the structure of the existing intern program. Suggestions to change the intern program emerge in the discussion of ^U.S. Department of Health, Education, and Wel fare, Office of the Secretary, The Drug Makers and the Drug Distributors, p. 78. 15 Elliott, The General Report of the Pharmaceu tical Survey. 1946-49, pp. 20-22. 39 demand and skill requirements. Specific regulations vary by state, but effectively the intern may legally perform any act restricted to a registered pharmacist so long as the intern is under supervision of a registered phar- . 16 macist. These regulations force all who desire to be licensed as a pharmacist to acquire the training re quired for the dispensing portion of the factor market. Under supervision the intern is an effective part of the factor market and with experience the intern requires less supervision and his productivity increases corres pondingly. For those positions not requiring retail training a dispensing internship program is restrictive. On theoretical grounds, the internship program, no matter what its length, is not a barrier to entry for those expecting to actively dispense drugs, if the wages of interns approximate their marginal productivity or worth. A wage less than marginal productivity would effectively increase the cost of entry and benefit those already in the profession. This hypothesis is based upon ^California State Board of Pharmacy, California Pharmacy Law with Rules and Regulations (1968), 29. 40 the assumption that interns may do all tasks under super vision. Intern wages increasing with experience would 17 suggest market recognition of increased productivity. Examination of intern wages just prior to licensing pro vide a possible test of whether the wage level at all stages reflects marginal productivity. A survey at the University of Southern California shows intern wages in crease with experience but the average hourly wage of seniors did not at all approach the wage level of licensed 18 pharmacists. The average hourly wage of freshmen was $2.42 while seniors on the average earned $3.62 an hour. This evidence indicates intern programs are a barrier to entry. Another source of labor supply reflects upon the economic value of the intern program. For some years many states licensed "assistant pharmacists," who could fill prescriptions under the supervision of a pharmacist James M. Henderson and Richard E. Quandt, Micro- economic Theory. (New York: McGraw-Hill Book Company, 1958), pp. 64-66. ^University of Southern California, School of Pharmacy, News Capsule. Los Angeles, 1970, p. 1. (Mimeo graphed .) 41 and for short periods, e.g., during lunch, without super- 19 vision. The general requirements for this license were state examination and a period of supervised training. See Appendix V for the latest data on assistant pharma cists. Of the 1545 assistant pharmacists rostered, 1111 are in active practice in 27 states. Currently, new assis tant pharmacists are licensed only in Alabama. The ques tion arises as to why assistant pharmacists — with lower job qualifications and costs equal to the cost of formal education — could not handle the physical dispensing of prescriptions. It has been suggested that "this subpro fessional group was abolished in order to deny prescrip tion filling authority to all except registered pharma- 20 cists." For whatever reason assistant pharmacxsts has been eliminated, one potential source of lower cost labor supply has also been eliminated. One licensing requirement, continuing education, attempts to compensate for the rapid growth rate of phar maceutical knowledge and the drug products available. ^Fletcher, Market Restraints, pp. 17-20. 20 Ibid., p. 18. 42 Continued education is required to maintain a current 21 license in Florida and Kansas. Much discussion is found in the literature on the obsolescence of knowledge 22 but little beyond recommendations has transpired. To prevent the adoption of useless educational require ments from effectively increasing the cost of entry, or in this case continued market membership, the tasks de manded of and performed by pharmacy manpower must be iden tified and requirements assigned accordingly. Many requirements for becoming a licensed phar macist are unrelated to pharmacy skills. These restric tions again vary by state and identification would require study of each state's pharmacy laws. It is only practical to cite the most common non-pharmacy regulations and illus trate their economic significance in pharmacy. An age requirement of twenty-one is universal in all states ex- 23 cept Hawaii. At this time age is not significant as a 21U.S. Department of Health, Education, and Wel fare, Office of the Secretary, The Drug Makers and the Drug Distributors, p. 78. 22 Elliott, The General Report of the Pharmaceu tical Survey. 1946-49. pp. 230-231. 23 U.S. Department of Health, Education, and Wel fare, Office of the Secretary, op. cit.. p. 78. 43 restriction, since other requirements preclude the normal individual from being ready for licensing by this age. Additionally, this restriction is a part of the broader question of what the legal age should be, and this is be yond the scope of this study. Forty-four states require pharmacists to be of 24 good moral character. In most states moral character is defined in statutes which prohibit the licensing or practice of pharmacists convicted of specific crimes, especially violation of drug laws. Such an operational statement is a potential source of harassment by enforce- 25 ment of antiquated but unrepealed pharmacy laws. Later discussion shows that harassment has been directed mainly at pharmacies, not pharmacists. Thirty-five states require citizenship for 26 licensing. Aliens are allowed to obtain licenses only if they have initiated the process of becoming a citizen. 24Ibid.. p. 78. 25 Fletcher, Market Restraints, p. 271. 26 U.S. Department of Health, Education, and Wel fare, Office of the Secretary, The Drug Makers and the Drug Distributors, p. 78. 44 Plausibly this requirement is motivated by xenophobia or fear of additional sources of labor to the factor market. In comparison, in the medical profession foreign interns 27 are widely used and actively sought as low cost labor, but must have internship training in the United States to become licensed. RECIPROCAL LICENSING Out-of-state pharmacist licenses are generally recognized through reciprocal licensing agreements coor dinated by the National Association of Boards of Pharmacy. If for economic or other reasons a state wishes to impose licensing standards higher than other states, this is done by not recognizing the pharmacist licenses granted by other states. Only three states - California, Florida 28 and Hawaii - do not permit reciprocal licensing. In most states with reciprocity, regulations are standardized 2^I.S. Bengelsdorf, "Twenty Percent of U.S. In terns Study Overseas," Los Angeles Times. May 3, 1970, Sec. H, pp. 1-22. 28U.S. Department of Health, Education, and Wel fare, Office of the Secretary, The Drug Makers and the Drug Distributors, p. 78. to require that an individual only have been eligible for licensing in the state to which he is applying at 29 the time he received his original license. Mobility of pharmacists in the factor market is reduced by the lack of reciprocity or any variation in the magnitude of state licensing requirements. Most states follow closely licensing requirements recommended by the National Association of Boards of Phar macy with minor variations, as noted above. There are some variations in the procedural formalities of recipro city which are potential restrictions to labor mobility. One procedural formality followed by some states is proof of internship in one's home state.Completion of intern ship is not always required before examination in some states. At least in the short-run this curbs labor mobility. Prohibition of reciprocal licensing for a period of one or two years after original licensing^ Ralph W. Clark, Orientation in Pharmacy (2nd ed.; Philadelphia: Lea and Febiger, 1961), p. 30. 46 puts an even more significant restriction on labor response to wage differentials between the states. There are two hypotheses which explain a time requirement for reciprocal licensing. First, is an economic desire to restrict entry to a state. Effectively total mobility would be reduced since recent entrants to any occupation are more mobile than those already estab lished. This would be very significant in states without or with only small schools of pharmacy with respect to their population. This hypothesis does not fit the data available on pharmacist population ratios by state, shown in Appendix II. Second, the regulation requires establish ment in the profession before acceptance by another state. This allows the maintenance of standards (or discipline 32 as in the case of the medical profession) by preventing transfer from state to state of pharmacists not in good standing with their state pharmacy board. There is no documented evidence known to this author of a systematic attempt to use reciprocal licensing 32 Rayack, Professional Power and American Medicine: The Economics of the American Medical Association, pp. 202-272. 47 requirements as a method of controlling entry and profes sional practices. The major exception is the two way nature of reciprocity agreements. States with reciprocity do not recognize the licenses of those states without reciprocity. Motivation for restriction against states without reciprocity can only be for reprisal since the licenses of all other states are recognized. However, this criticism cannot apply to states lacking schools of pharmacy of which Hawaii is the only one. The weight of the evidence thus makes it more probable that state variations in pharmacist licensing requirements are designed to maintain standards deemed desirable by some criteria of the state board of pharmacy. Even for California and Florida pharmacists trained else where may practice in these states, by passing the state's examination. If distances are large, examination in another state may add significantly to relocation costs. Unless continued education as a license renewal requirement is adopted in a simultaneous and equal manner it will restrict mobility. Of the two schools which have a continuing education requirement. Florida is also one of the three states wLthout reciprocity. 48 Reciprocity as a factor in mobility will be dis cussed further in conjunction with schools of pharmacy. For now it is interesting to note that the three states without reciprocity have the most mild climates of any states and the most rapidly expanding populations. SCHOOLS OF PHARMACY Currently, accredited schools of pharmacy offer the only practical method for meeting minimal levels of educational competence for employment in the profession as dictated by law or the factor market. The legal re quirement stems from licensing which requires an accre dited education as a prerequisite and as noted before, licensing is legally required of most jobs in pharmacy. These facts establish the number of pharmacy schools, their enrollment capacity, and their procedural regula tions as an effective limit to short-run responses in the number of licensed pharmacists to demand conditions. For the academic years 1967-68 through 1969-70 there were 74 colleges of pharmacy accredited by the American Council on Pharmaceutical Education. See Appen dix I for a listing by geographical area and state. These 49 schools were in 43 states and one each in the District of Columbia and Puerto Rico. The seven states without a school of pharmacy are Alaska, Delaware, Hawaii, Maine, Nevada, New Hampshire, and Vermont. Of the 74 schools, 52 are public found in 41 states and Puerto Rico, and 22 are private found in 12 states and the District of Columbia. Two states have four schools: Pennsylvania in which all are private and Ohio in which one is private and three are public. Three states, California, Michigan, and Texas, have three schools each; only California has private schools, there being two. Eleven states have two schools each, with seven states having one private and one public, four states having two public, and only Massachusetts having two pri vate schools. In the 24 states plus Puerto Rico and the District of Columbia with one school each, 25 are public and only the District of Columbia has a private school. The distribution of schools indicates a prepon derance of either public or private schools in states with more than two schools. For example, in New York, Pennsylvania, and California, private schools dominate while public schools dominate in Ohio, Michigan, and 50 Texas. This could be taken as evidence on the relative influence of the public and private sectors in the pro fession. Private schools need much greater support from the private sector in all areas than would a state sup ported school. Detailed investigation of historical conditions state by state is beyond the scope of this study, but might offer a partial explanation of the pat tern of public and private schools. As the recognized accrediting body for schools of pharmacy, the American Council on Pharmaceutical Edu cation effectively controls minimum curriculum standards. The present minimum curriculum length of five years for a 33 bachelor of pharmacy degree was begun July 1, 1960. The change from a four-year to a five-year requirement was not applied to current students but all students receiving their degree after April 1, 1965 were required to complete a five-year program. The change was given additional support by a resolution of the National Association of 33 James Newcomer, Kevin P. Brunell, Earl J. McGrath, Liberal Education and Pharmacy. Institute of Higher Education, (New York: Bureau of Publications Teachers College, Columbia University, 1960), p. 98. 51 Boards of Pharmacy favoring a five-year course in pharmacy beginning in the Fall of I960.34 Extension of the curriculum requirement by one year allows evaluation not only of course additions, but also response to a forced curriculum change in terms of the relative emphasis of the subject areas. The previous four-year program was adopted in 1932, meaning the impact on graduates began in 1936. The curriculum requirements for a degree in pharmacy generally fall under the headings of general or liberal education, basic sciences, and phar macy. Electives allow students to take additional courses in areas of their choice. A survey of the four-year curriculum in twenty- two schools of pharmacy and curriculum adopted for the five-year program in twelve schools provides data to com ment on the increased length and content of pharmacy pro- 35 grams. The schools surveyed were choosen to reflect the nature of school control (e.g., public or private, denomination or nondenominational, independent or 35Ibid., Ch. 3 and 7. 52 university affiliated), geographical location, and size. In this study, curricula were divided into five subject areas: (1) liberal arts, covering liberal education courses; (2) supporting or semi-professional, covering science, mathematics, and business administration courses deemed necessary for pharmacy; (3) professional or courses directly related to the practice of pharmacy; (4) elec tives without subject restriction; and (5) miscellaneous consisting mainly of physical education and ROTC. Partial results of this study are found in Appendix III. Comments here focus on the changes made and their implications rather than evaluation of the arguments offered in sup port of changes made. The miscellaneous category has been neglected as being insignificant. Change from a four to a five-year program is a 25 percent increase in length of study. This contrasts with an increase of only 15 percent in the mean number of hours required. Measured as hours required, the yearly academic load of pharmacy students declined, but the hours required were already above those required in most 36 liberal arts programs. Therefore the additional year 36Ibid.. p. 100. 53 required can be interpreted as an attempt to compensate for previous curriculum increases, and not to restrict entry. The data in Appendix III shows that the mean change in hours of professional courses required was approximately zero yielding a 6.3 percent decline in the percent of study time devoted to this area. Pharmacy school offi cials were given the chance to increase the hours of pro fessional training required, but they did not. This is taken to indicate that pharmacy school officials deemed the time devoted to professional curricula adequate to train pharmacists for tasks currently demanded of them or any new tasks expected in the near future. The mean hours devoted to semi-professional or supporting courses in creased, but the percent of hours devoted to this category dropped by 0.5 percent. This leaves the major increases in hours to liberal arts and electives. The time devoted to liberal arts requirements in creased from 10.8 percent to 14.3 percent and the time devoted to electives slightly more than doubled, going from 2.9 percent to 6.1 percent. Arguments for increased liberal arts requirements may in part be explained by the rise in the general educational level in the United States 54 where the number of years schooling completed by those over twenty-five years of age rose from 8.6 years in 1940 37 to 10.6 years in 1960. The increase of approximately 5 percent in liberal arts hours does not however compare favorably with the rise in electives allowed. The elec tive requirement only increased enough to allow two addi tional courses or an increase of over 200 percent, and these courses need not be liberal arts but may be in any area. It is unknown whether increases in curriculum prior to the five-year requirement added liberal arts courses. It does seem safe to conclude that the additional year required does not restrict entry significantly compared to general education levels of the general versus tech nical course changes. A six-year program leading to a Doctor of Pharmacy degree is the minimum program offered at the University of Southern California and the University of California at San Francisco but optional at California's third school, 37 U.S. Department of Commerce, Bureau of the Census Statistical Abstract of the United States. 1969 (90th ed.y Washington, D.C.t Government Printing Office, 1969), p. 109. 55 38 the University of the Pacific. It seems significant that in California where there is no reciprocal licensing, two of the three schools of pharmacy require a six year program. Again, increases in the general education level minimize the entry cost imposed by one year's income for gone and one year's additional schooling costs. The lack of a serious barrier is also shown in the pharmacist- population ratio in California relative to the ratio for the United States. Students who wish to be trained in California, have the option of attending the University of the Pacific where a six-year program is not mandatory. For the aca demic year 1968-69, California pharmacy schools granted 156 Doctor of Pharmacy degrees, one being from the Univer- 39 sity of the Pacific, and 57 four-year degrees. This is strong evidence that pharmacy students in California had I a choice in their programs length and exercised it. In 38 Biles and Wong-Masaki, "An Abstract of the Aca demic Plan," pp. 27-28. 3^Charles W. Bliven, "Report of Degrees Conferred by Schools and Colleges of Pharmacy for the Academic Year 1968-69," American Journal of Pharmaceutical Education. XXXIV (February, 1970), pp. 87-90. 56 other states, degrees conferred indicate possible but not mandatory doctor of pharmacy programs at the Philadelphia College of Pharmacy, the University of Tennessee, and the University of Michigan. The six-year graduate degree was started by the 40 University of Southern California in 1950. Schools offering the six-year graduate degree are limited but most, including the University of Southern California, offer the standard Master of Science and Doctor of Philosophy degrees through regular graduate school programs. The importance of these programs can be seen in enrollment 41 figures. These degrees are oriented toward research rather than the now modal employment of drug dispensing. Pharmacy students are the key input for producing pharmacists but their potential in the production of health care changes with their training. For this reason greater time has been spent identifying schools and their general curriculum programs. The group from which pharmacy 40 Biles and Wong-Masaki, "Academic Plan for the School of Pharmacy," p. 28. **Bliven, "Report of Degrees," pp. 87-90. school students are drawn is another way of measuring entry costs. Special problems arise in training programs when non-pharmacy skills are demanded of pharmacists. Phar macy schools have been accused of brainwashing students into thinking that pharmacy and other skills are incompa- 42 tible. Other skills frequently mentioned as useful to pharmacists include advertising, salesmanship, journalism, 43 marketing, and business research. The question embodied here deals with the economic efficiency of having phar macists perform non-pharmacy tasks. This point will be clarified after identifying structural elements on the demand side of the factor market. Discrimination against any group or groups of applicants to pharmacy schools would be a restriction to entry and hence supply. A survey of six Midwest and Eas tern schools measured the distribution of pharmacy school 42 Arnold Faudman, "Pharmacy 1985 - Men or Machines in Meeting the Challenge of Change in Pharmacy, ed. by Delbert D. Konnor (Detroit, Michigan: Wayne State Univer sity, 1967), p. 55. 43 Burlage, Lee, and Rising, eds., Orientation to Pharmacy, Ch. 8. 58 applicants and found the distribution wider than for medi cal students, but not as representative as the populations A A distribution. This again indicates a lower cost of entry relative to the entry barriers faced by physicians. A positive correlation has been found between pharmacy students and those with pharmacist fathers or 45 relatives. It was suggested that those in contact with pharmacists have better knowledge of opportunities in the profession. It is worth noting that in economic terms this reflects a lower cost of information to this parti cular group. Frequent references to the recruitment of women in pharmacy raises the question as to whether there have been barriers against them in the profession.^ If there was a specific discrimination against women it has been reduced as evidenced by the increasing number of women in 44 Mickey C. Smith, "Social Class Background of Pharmacy Students," American Journal of Pharmaceutical Education. XXXII (November, 1968), pp. 596-609. 45Ibid. 4®See, for example, Elliott, The General Report of the Pharmaceutical Survey, p. 152 and W. Paul Briggs, "Outlook in Pharmacy," in Readings in Pharmacy, ed. by Paul A. Doyle, p. 22. 59 pharmacy. However, the increased proportion of women in pharmacy may be partially due to the increased participa tion of women in the labor force. MOBILITY OF PHARMACISTS The mobility of labor can be tested as the ratio of pharmacists per 100,000 population in those states without reciprocity and without schools of pharmacy (see Appendix II for data). For all states as of July 1, 1968, there were 62.1 active pharmacists per 100,000 population. The range of this ratio was from 27.8 in Hawaii to 86.5 in Massachu setts. Twenty of the states had a ratio greater than the average, and these states represent approximately 36 percent of the population. Nineteen states have a ratio between 50 per 100,000 population and the average of 62.1. The geographical concentration of pharmacists is in New England, the Middle Atlantic and Mountain states, repre senting approximately one-fifth of the population. Significant exception to the average ratio of pharmacists is found in those states without schools of pharmacy which had the following ratios: Alaska 38.2; Delaware 44.4; Hawaii 27.8; Maine 45.3; Nevada 73.6; New Hampshire 48.4; and Vermont 49.1. Of these states, only Nevada has a ratio above the average. Since five of the six states without schools of pharmacy have a pharmacist population ratio below the average, the number of pharma cists appears to be a function of the presence of a school of pharmacy. Assuming wage differentials do not account for this difference, it may be assumed that mobil ity could be increased. Also, this may be evidence of an attempt to restrict entry to the states, for example, Hawaii has the lowest ratio for all states and does not have a school of pharmacy or allow reciprocal licensing of pharmacists. This makes Hawaii especially suspect of restrictive practices and an area likely to be fruitful in further investigation. SUMMARY This chapter has attempted to identify the insti tutional mechanisms which influence the supply of phar macists in the factor market. Institutional factors include the number of schools of pharmacy in operation, schooling costs, curriculum and degrees offered, academic 61 standards, state pharmacy licensing practices. Further investigation could consider in detail socio-economic factors such as mortality rates, retirement age, and the impact of increased women into the profession. It does appear that some institutional factors are in excess of what might be justified to maintain standards in the profession. CHAPTER IV THE DEMAND FOR PHARMACISTS: EMPLOYMENT AND REGULATION INTRODUCTION This chapter attempts to identify and evaluate the major sources of demand in the factor market for pharma cists. Empirical estimates of the demand for pharmacists are available but they tend to be crude. In a later chap ter some implications of this discussion will be compared with empirical techniques that have been used. Central to the discussion of this chapter, as in the discussion of supply, are the institutions which have an effective demand for pharmacists. The sources of de mand identified are: community pharmacy; hospital phar macy; manufacturing and wholesale; and government, teach ing and other. The effective demand of these employers is both natural and artificial. Although the factors influ encing demand are similar for all employers, their 62 pervasiveness varies greatly. 63 CRITERIA FOR EVALUATION Given that there is a demand for pharmacists, we shall proceed by identifying the employers of pharmacists and the factors influencing their employment. The demand for pharmacists is attributed to either normal market de mands or artificial, legally imposed demands. Comments on the performance of this part of the factor market de pend to a large extent on the nature of the legal controls, since in a market without controls employment would be according to occupational qualifications and not legal requirements. Any legal restriction in the pharmaceutical phase of health care, which directly or indirectly requires the services of a pharmacist, legally creates an effective derived demand for pharmacists. The concept of government restrictions in the field of health care as an effort to maintain minimal health standards will not be challenged per se? rather the implications and relative costs of controls as evidenced in the demand for pharmacists will be identified. 64 Chapter II noted major historical changes in pro fessional tasks from the compounding of drugs and filling of prescriptions to almost exclusive filling of prescrip tion and merchandising of other goods related to health care. Further evolution in the profession seems likely in the future. Behind any current or future changes in the nature of the profession lie important inferences for the productivity and utilization of resources and, by implication, for supply and demand conditions in the fac tor market. Knowledge of employers, differences in duties of pharmacists, and probable causes of these variations offer potential insights into the structure and perfor mance of the factor market. Although most pharmacists are employed in retail pharmacies, identification of all employment opportunities is necessary for later considera tion of current trends in the factor market. The number of pharmacist employers, listed in or der of magnitude, are available by state for the following categories: (1) community pharmacy, (2) hospital phar macy, (3) manufacturing and wholesale operations, and (4) other types of practice, including teaching and government. (See Appendix II for the latest data.) COMMUNITY PHARMACY 65 Numerically, the community pharmacy, employing 84.6 percent of pharmacists, is by far the most important employer. The sale of prescription drugs in a state licensed community pharmacy under supervision of a licensed pharmacist distinguishes the community pharmacy from other retail businesses. Community pharmacies are grouped, first, according to the nature of their owner ship as independent pharmacies of chain drugstores, and second, by the composition of their sales. The independent pharmacy, commonly known as the traditional American drugstore, may be organized as a proprietorship, partnership or closely held corporation. Most independent pharmacies are at least in part owned by a pharmacist. In recent years the number of independent pharmacies has been declining.^ Sales emphasis of the independent pharmacy is placed on health care merchandise. The 1968 annual Eli Lilly survey showed prescription vokne *U.S. Department of Health, Education, and Wel fare, Office of the Secretary, The Drug Makers and the Drug Distributors, p. 62. 66 of these outlets amounted to 43.2 percent of total sales up 9.1 from 1967 while other sales increased by only 3.0 2 percent of total sales. Prescription sales have been increasing steadily both in numerical terms and as a percent of total sales. Assuming ceteris paribus, at the risk of error from many sources, the increased importance of prescrip tion sales has made the licensed pharmacist more impor tant to the independent pharmacy, since it might be said that pharmacists have increased the time spent at the job for which they are trained. The percent of time a licensed pharmacist spends dispensing prescription drugs is a potential measure of effectiveness in the use of pharmacists relative to their training or supply relative to demand. There is even a recurring debate in pharmacy about whether it is proper for a professional man such as the pharmacist to be involved in merchandising. It has been stated by pharmacists that most pharmacies could not prosper without nonprescription 2 Eli Lilly and Company, Inc., Lilly Digest. 1968 (Indianapolis, Indt September, 1965), p. 5. 67 3 sales. The theory of perfect competition would conclude that there are too many pharmacies and also pharmacists if nonprescription items could be handled at lower cost by another type of retail outlet. A good case can be made for utilizing the labor of pharmacists in a purely merchandising capacity under special conditions, however. Where nonprescription sales of the pharmacy are health related goods, the pharmacist may provide information at a service at the time of sale. Theoretically, pharmacies with a large volume of sales would have the greatest call for this type of service but evidence indicates socio- 4 economic factors are a more significant factor. In communities not large enough to support a pharmacist full time in pharmaceutical activities it may be necessary to pay high pharmaceutical prices to support a pharmacist who spends a large portion of his time in non-health re lated merchandising activities. Chain drugstores consist of four or more retail ^Clark, Orientation in Pharmacy, p. 111. 4 6. Dwaine Lawrence, "The Prescription and Its Price," Pharmacist's Management. II (October, 1968), pp. 26-28. pharmacy outlets that are centrally owned and managed. The criteria of four units for a chain drugstore is that used by the Bureau of the Census and National Association of Chain Drug Stores. Prescription sales of chain stores have been increasing in total value and total number of prescriptions relative to the independent pharmacy. An economically plausible explanation of the growth in chain drugstores are lower operating costs,^ which are subse quently reflected in their lower prescription costs.6 This limited information is therefore interpreted as evidence that any restriction on the formation of chain drugstores or protection of independent pharmacies must result in an inefficient allocation of pharmacists. Addi tionally, this implies efficiency in the use of pharma cists is greater where the pharmacist spends a greater portion of his time dispensing pharmaceuticals as in the case of larger as opposed to smaller pharmacies. Any evidence of an inefficient use of pharmacists could indi cate an artificially created demand which thereby creates, 5U.S. Department of Health, Education, and Welfare, Drug Makers and the Drug Distributors, p. 68. 69 in relative terma, a shortage of pharmacists. Prescription pharmacies and pharmaceutical centers are community pharmacies distinguished by the composition 7 of their sales. The prescription pharmacy is generally identified as deriving 70 percent or more of its sales from prescriptions. Most prescription pharmacies are associated with or near concentrations of health care facilities. In most cases these pharmacies would show greater efficiency, where productivity is measured as the number of prescriptions filled per pharmacist. Typically there is no merchandising of goods un related to health care in such pharmacies. The difference in sales composition is also reflected in a lower average capital investment requirement than for the average inde pendent pharmacy. Higher labor costs as a percent of 8 sales indicate a greater utilization of pharmacists to sell pharmaceuticals rather than low cost labor to sell merchandise unrelated to health care, or other special patterns of business. ^Ibid., p. 69. 8Ibid. 70 The pharmaceutical center has high prescription sales like the prescription pharmacy. Criteria for clas sification as a pharmaceutical center is set by the Ameri can Pharmaceutical Association. Most crucial for the factor market is the requirement that all sales be by pharmacists or under their supervision. The basis of this requirement is that all customers be personally advised of the directions for taking all drugs and any possible side-effects. This consultation is done with the personal record of all patients available for consultation. Addi tionally health care literature must be available for the public and reference library available for the pharmacist and physicians. FEDERAL REGULATION OF PHARMACY Federal law regulates the status of all pharmaceu tical products as over-the-counter (OTC) or prescription. Great economic power lies within the responsibility of setting a drug's status as OTC or prescription. Assuming total sales remain the same, any new prescription require ment creates an effective demand for pharmacists. Special controls are placed on narcotics and other drugs considered 71 dangerous. Further implications of these controls and the criteria used are discussed in the next chapter. The control of drug sales is extended much further by state regulation of pharmacies. STATE REGULATION OF PHARMACIES Community Pharmacy All but five states have operating restraints on the pharmacy above and beyond regulations dealing with prescription requirements. These restrictions are not uniform in all states but are common enough to identify and discuss with respect to their relevance to the factor market as a whole. The laws and regulations of pharmacy operation fall into the following categories* (1) phar macy ownership; (2) general prohibitions; (3) physical requirements; (4) advertising restrictions; and (5) em ployee restrictions. Historically, restriction of pharmacy ownership dates back to the rapid expansion of chain retail food stores in the 1920's. Their cost advantages from quantity 72 9 buying have been well documented. New York State, in 1923, passed the first law restricting the ownership of pharmacies to licensed pharmacists. Restriction of phar macy ownership to licensed pharmacists creates a field of business opportunity open exclusively to pharmacists. Enforcement of such a law is simple, since the state board of pharmacy can refuse to license any pharmacy not owned by a pharmacist. The requirement of pharmacist pharmacy ownership legally protects one source of demand for the services of pharmacists. Allocation of resources by fiat, pharmacists in this case, is likely to be inefficient unless there is evidence of externalities. Evidence on the regulation of pharmacies suggests instead that protection of the independently owned pharmacy is at the expense of other modes of operation. A detailed account of The Kroger Company's experiences with the Michigan Board of Pharmacy over the ownership requirement shows arbitrary license denial, irregular pharmacy board procedures, discriminatory 9 Leonard W. Weiss, Case Studies in American Indus try (New York: John Wiley and Sons, Inc., 1967), pp. 231-236. 73 application of standards, delaying tactics, and erroneous testimony.1"® In 1967 ownership laws were still on the books in four states, but not considered enforceable be cause of unfavorable constitutional rulings in other state courts.^ A more limited ownership prohibition has been used 12 against physician ownership of pharmacies. There are special economic and ethical implications of physician ownership of pharmacies for which the American Medical Association has taken both a pro and con position. The physician, as a drug prescriber, has two potential advan tages as a pharmacy owner. First, the physician can recommend any pharmacy in which he has ownership, and even order prescriptions by phone for patients, especially in prescription pharmacies and pharmaceutical centers. Second, the physician can prescribe expensive brand name *°Fletcher, Market Restraints in the Retail Drug Industry. Ch. 9. 11Ibid.. pp. 143-144. ^ Ibid.. pp. 147-156. In 1964 it was reported physicians owned more than 2200 pharmacies, not including possible ownership through corporations. drugs rather than cheaper generic equivalents and minimize capital requirements by stocking only the drugs prescribed. With respect to capital requirements, the independent pharmacist consequently is at a disadvantage compared to the physician as well as to the chain store. Income of the pharmacist, and hence attraction to the profession, may vary with the pricing system used. With a professional fee charged for dispensing each prescription, there is no benefit in selling a high priced drug. With a percentage markup, the owner of a pharmacy benefits more from the sale of higher price products. General prohibitions have been used to control the location of pharmacies and deny licenses to the opera tors of discount stores and supermarkets. Physical re quirements cover such things as the physical separation of pharmacy activities from other business activities, entrances, floorspace, inventories, and self-service regu lations. In twelve states, these requirements have been used to limit the size of drugstores and prevent super- 13 market ownership. The Arkansas Board of Pharmacy in 1966 75 even made the decision not to grant a new pharmacy license on grounds that the current supply was adequate in terms . 14 of need. On grounds of professionalism, health, safety, and welafer, advertising restrictions have been used to prevent price competition. Restrictions have dealt with discounting of pharmaceuticals, advertising prescription drugs, and even pharmacy store signs. In many cases dis counting, or in essence pricing practices, are subdued on professional grounds, limiting price as a viable element of competition, when pharmacists as professionals are com mitted to offering the best possible service.1^ One can only conclude that the net effect of these controls is maintenance of pharmacists' incomes, encouragement to enter the factor market, and establishment of new pharmacies. That is, a surplus of pharmacists in terms of resource allocation and utilization results from such restraints. Drugstore restrictions exist in fourteen states by law and in two states by pharmacy board regulation. The 14Ibid., p. 207. ^Clark, Orientation in Pharmacy, p. 91. restrictions include pharmacist-managers for drugstores, dispensing procedures, and regulation of hours. Require ment of a pharmacist manager for drugstore is a clear case of legalized demand protection. It has been argued that non-pharmacist managers might induce pharmacists to commit acts detrimental to the public's health, safety, and welfare, but acceptance of this argument differentiates usually without evidence, between the civic-mindedness or morality of pharmacists and all other people. It might be argued that the pharmacist's knowledge of phar maceuticals would give him a comparative advantage in the management of a pharmacy, but if this were the case the market place would allocate him to this job anyway, with out the current legal requirements. Employee restrictions have protected effective demand in the factor market by forcing pharmacies to provide prescription service whenever open. Until being struck down in several court cases the presence of a phar macist had been required whenever retail businesses which dispense prescription drugs are open for any business. The logic of this requirement is clear whenever an outlet is dispensing prescription drugs, but not if the prescrip- 77 tion department is separate and can be closed. Minimum and maximum working hours for pharmacists clearly affect the factor market. Any limit on working hours would tend to increase the total number of pharma cist's jobs. Union activity is one plausible explanation of this restriction in the state of New York. Union acti vity is generally concentrated with large chain employers. A minimum number of hours on the other hand, effectively forces the one-pharmacist pharmacy to be open a minimum number of hours and prevents the use of part-time phar macists. Any restriction on the dispensing of pharmaceuti cal or health care goods to a licensed pharmacist or super vision of such a person potentially creates an effective demand in the factor market. Certainly drug users want the best health care possible, but inelastic demand makes redundant safety checks possible. The situations in question are pharmacies with high prescription volume, where there could be a division of labor. Historical evidence indicates a long record of pharmacy board regula tions and state laws to prevent this and to preserve the traditional proprietorship pharmacy at the expense of 78 the public. In eight states, by board o£ pharmacy regu lation. the use of clerks in prescription filling is pro hibited in spite of the advantage to having such clerks. Trends toward the use of clerks will be discussed at length later. Two further restrictions deal with nondrugstore drug sales. First, in seventeen states mail order pre scriptions are prohibited. Any mail order operation can concentrate its efforts on prescription drugs and utilize the labor of pharmacists for this purpose only. Most restriction of mail order sales was a reaction to a pro gram of the American Association of Retired Teachers Asso ciation operating in Washington. O.C.. and a nonprofit mail plan for charge account customers, started by Spiegal 16 Inc. of Chicago in 1961. It was argued that mail order sales prevent the pharmacist from discussing the drugs' proper use with the patient, checking for contraindica tions with other drugs being taken, and verification with the issuing physician. But the federal government 16Fletcher, Market Restraints, pp. 261-266. 79 continues to utilize the mails for the Veterans Adminis tration mail order drug service for veterans eligible to receive free prescriptions. State pharmacy organizations and the American Pharmaceutical Association have been especially active in trying to prevent this practice. This form of dispensing is still rather recent and the guidelines for its practice are not yet established. It appears as if cost benefits of the practice will encourage its limited, but continued use. The second restriction is the prohibition in twenty-three states of the sale of all drugs by vending machines. The need for such restrictions is clear in the case of prescription drugs, but not in the case of simple proprietory items. Whatever the arguments against vending machines, prohibition of their use can only create an effective demand for sales personnel and, potentially, pharmacists in the case of drugstore sales. The tools of microeconomic analysis have been ap plied to community pharmacies by both economists and pharmacists. Within these discussions, implications for the factor market often emerge, but are not always expli citly identified. Pharmacists in their application of 80 economic analysis have tried to provide information on how to maximize the profits of a pharmacy. The typical dis cussion covers fixed costs, variable costs, markup or 17 margin and the break-even point. Little or no concern is paid to the organizational structure of a pharmacy and what combination of inputs is optimal in the optimal size firm.18 Economists have used community pharmacies as an example of monopolistic competition in a cartel with en forcement of prices through fair trade laws, but with 19 relatively free entry. under these conditions it is shown that excessive profits created by resale maintenance laws result in entry in the long-run and hence excess capacity. Specifically, entry of independent pharmacies has been encouraged while entry of chain drugstores has been discouraged, with variations by state. It is clear that entry has not been free for all potential entrants. ^Lilly, Lilly Digest, p. 15. 18 An exception is the article by G. Dwaine Lawrence "Add Up Your Prescription Success," Pharmacist's Manage ment. Ill (July, 1969), pp. 7-17. 19 Leonard W. Weiss, Case Studies in American Industry, pp. 248-254. 81 Easy entry along with some of the regulation of pharmacies implies a greater demand for pharmacists. For example, restriction of ownership, minimum working hours, minimum store hours, and management requirements all serve to pro vide a demand for pharmacists. Hospital Pharmacy Hospitals, the second largest employer group of pharmacists, employed 9428 as of January 1967 or about 7.6 percent of the total. The American Hospital Associa tion has indicated that in 1966 there were about 4500 hospitals with pharmacies,but other data is not consis tent with the number of hospitals which actually employ 21 pharmacists. Although the portion of pharmacists in hospital pharmacy is small and data on hospital pharmacy is not adequate or current, conditions are significantly different from the community pharmacy in ways important to the factor market. 20Mickey C. Smith, Principles of Pharmaceutical Marketing. (Philadelphia: Lea and Febiger, 1968), p. 224. 2*U.S. Department of Health, Education, and Wel fare, The Drug Makers and the Drug Distributors, pp. 72-73. 82 The hospital has become the center of health care activity where all potential inputs for health care may be utilized. Only in the hospital do physicians and pharmacists work as part of the same producing unit. Hos pital inputs can be grouped as comparable hotel room ex penses, food and special diets, nursing. X-ray, laboratory tests, pharmaceuticals, medical records and resident doctors. The type of care provided by hospitals varies, and with this variation different combinations of inputs are used. Even for the same ailment there is potential substitution between inputs for health care and this in cludes the services of pharmacists, and pharmaceuticals. There is one thorough study of the hospital phar macy which provides good information for discussion of the factor market, although the data is not as current 22 as it might be. The presence and number of pharmacists in hospitals has been found related to a hospital's size and whether the care provided is short-term or long-term. Table 2 reports the distribution of hospital pharmacists by bed size for all hospitals in 1957, based upon a 22 See Francke, et al.. Mirror to Hbspital Phar macy. 83 sample of 2749. The increase in the percentage of non- federal, short-term hospitals with full-time pharmacists from 53 percent in 1963 to 72 percent in 1968 indicates the number of hospital pharmacies has continued to in- 23 crease. This trend may be interpreted as evidence that hospitals have increased their employment of pharmacists at a rate faster than employment in community pharmacies. The greatest growth has probably been concentrated in the larger hospitals without the services of a pharmacist. The hospital pharmacy and, by implication, the hospital pharmacist, is involved in activities not found in the community pharmacy. These activities provide ano ther source of demand, especially for the full-time hos pital pharmacist. Duties of the hospital pharmacist may include preparation of intravenous solutions, responsi bility for radioactive isotopes, stocking of nursing units, durect consultation and meetings with other hospital staff, maintenance of a formulary system, and possible teaching and research. ^U.S. Department of Health, Education, and Wel fare, The Drug Makers and the Drug Distributors, pp. 72- 73. TABLE 2 PERCENT OF HOSPITALS WITH AND WITHOUT PHARMACISTS* Bed Capacity Percent of Hospitals with Full-time Phar macists Percent of Hospi tals with Full-tii or Part-time Phar macists Short-term Under 50 3 7 50-99 18 26 100-199 72 75 200-299 96 96 300-399 100 100 400-499 100 100 500 and over 100 100 Long-term All sizes 27 34 Average 33 38 aCalculated from: Don E. Francke, Clifton J. Lateolais, Gloria N. Francke, and Norman F.H. HO, Mirror to Hospital Pharmacy (Washington, D.C.: American Society of Hospital Pharmacists, 1964), Table 2, p. 51 and Table 16, p. 68. 85 The hospital, brings together the acts of pre scribing, dispensing, and administering of pharmaceuticals. Continual contact between physicians and pharmacists can make its pharmacist an active member of what is frequently referred to as the health care team. Large and small capacity hospitals seem to have time in excess of that needed for dispensing which can be devoted to other hospi tal programs and decision-making.^ It is logical that most time be spent in dispensing, but hospital pharmacy tasks can be coordinated with other hospital programs. Most hospitals differentiate between acts of phar macy and the administration of pharmaceuticals. In 1957, almost half of the hospitals regulated their nursing units' administering of drugs, and almost 80 percent of the hospitals prohibited nurses from changing drug labels, filling medication containers or performing other "phar macy acts" even on the hospital floor where nurses typi cally obtain drugs for administration.25 Even with these 24 Francke, et al.. Mirror to Hospital Pharmacy. p. 104. 25lbisLu* P. H6. 86 institutional controls there is a wide variation of the handling of pharmaceuticals in hospitals. Hospitals without the services of a full-time pharmacist handle pharmaceuticals in three ways. First, a community pharmacist may be employed part-time to pro vide his services to the hospital as an employee. Second, a community pharmacist may act as an outside supplier of pharmaceuticals to the hospital, but not participate in the hospital's functioning. Finally, there may be no pharmacist who participates in the hospital's use of phar maceuticals. In the second and third cases the dispensing of drugs to patients is done entirely by nonpharmacists, usually technicians and nurses. Interesting discussions have arisen over the use of pharmaceuticals in hospitals. While hospital dispen sing and administering pharmaceuticals to the inpatient is clearly justifiable, discussions have arisen with com- 26 munity pharmacists over dispensing to outpatients. 26 Donald C. Brodie, The Challenge to Pharmacy in Time of Change. American Pharmaceutical Association and American Society of Hospital Pharmacists. (Washington, D.C.: 1966), p. 19. 87 The hospital pharmacy is in an advantageous position to dispense to ambulant outpatients, but has generally not actively pursued their business, which is in direct com- 27 petition with community pharmacies. A growing problem for hospitals is the cost of administering the paperwork for third party payments. At the present time Internal Revenue Service regulations require payment of taxes on 28 such income even in nonprofit hospitals. For many hospital outpatients, there is a finan cial advantage in obtaining prescriptions at a hospital pharmacy. In 1957 almost half of the outpatient prescrip tions dispensed were to indigent or partially indigent patients and about 70 percent of all outpatient prescrip- 29 tions were subsidized in part or full. Most federal hospitals and large community hospitals, where such pa tients are cared for, are equipped to handle outpatient 2®U.S. Department of Health, Education, and Wel fare, The Drug Makers and the Drug Distributors, p. 72. 29 Francke, et al.. Mirror to Hospital Pharmacy. p. 118. 88 dispensing.30 As government aid to health care increases and insurance plans with drug coverage for hospital care continues to grow, hospital use of pharmaceuticals will continue its expansion. The expenditure of hospitals on pharmaceuticals in 1956 was $322 million or 27 percent of total expenditures.31 Total drug purchases of hospitals in 1967 had more than doubled to $816 million with a more rapid rise in outpatient prescriptions relative to the 32 traditional community pharmacy. The importance of hos pital pharmacy and its employment will continue to expand relative to other types of pharmacies so long as there is a money and a convenience advantage to patients. Legal controls on hospital use of pharmaceuticals and related health care products have special significance for the factor market. Relative to community pharmacies, the restrictions on hospital and physician use of phar maceuticals are minimal. The limited scope and nature 30 Brodie, Challenge to Pharmacy, p. 54. ^^Francke, et al.. Mirror to Hospital Pharmacy. p. 102. 32 U.S. Department of Health, Education and Wel fare, The Drug Makers and the Drug Distributors, p. 72. 89 of artificial controls on hospital use of pharmaceuticals potentially make this portion of the factor market much closer to a competitive market. Federal prescription controls in the hospital without a pharmacist are the responsibility of the pre scribing physician. In hospitals with the services of a pharmacist, it is his duty to see that there is compliance with federal controls. Most variation in control occurs at the state level. State controls and supervision of hospital phar macies by the state board of pharmacy are considerably 33 less than for community pharmacies. Only thirty states give their board of pharmacy authority over hospital phar macies and six grant joint authority to the board of phar macy and board of health. Although the board of pharmacy has potential influence over hospitals in thirty-six states the most significant controls used on community pharmacies have not been applied to hospital pharmacies. While phar macy permits are required of all community pharmacies only ten states require them of hospital pharmacies. Highly 33Ibid.. p. 73. 90 significant to our discussion of the factor market is the fact that only five states specifically require hospi tal pharmacies to comply with state pharmacy laws. The implication of hospital pharmacies not being required to comply with state pharmacy laws is that licensed pharmacists need not be utilized in the dispen sing or administering of pharmaceuticals. This condition is especially interesting in the case of those hospital pharmacies which dispense pharmaceuticals to not only in patients but also outpatients. No safety check is required of prescriptions as for retail sales at a community phar macy. Relative to community pharmacies, it is clear that hospitals have a much greater legal freedom in the substitution of inputs. Later discussion shows that the greatest and most rapid innovation in pharmacy is coming from the hospital on the demand side of the factor market. Manufacturing and Wholesale Employment of pharmacists by the manufacturing and wholesale sectors of the economy as of January 1, 1969 was 4979 or about 4.0 percent of the total. This category of employment involves several diverse 91 occupational jobs which are worthy of brief comment al though a detailed employment breakdown is not available. Manufacturing in the pharmaceutical industry re quires the services of pharmacists for setting up produc tion and maintaining product quality. The services re quired of pharmacists vary with the product produced, but it has been shown that many jobs in the pharmaceutical 34 firm involve more than a knowledge of pharmacy. Addi tional pharmacists are employed by industry for research and development. Of course not all research and develop ment employment falls into the manufacturing sector; some is done by schools of pharmacy, the federal government, medical schools, or some combination of these. The Phar maceutical Manufacturers Association reported that in 1965 the pharmaceutical industry employed 8890 research 35 scientists. These people need not be licensed pharma cists, but many are likely to have a significant knowledge ^4Richard A. Deno, Thomas O. Rowe, and Donald C. Brodie, The Profession of Pharmacy. (Phil.: J.B.Lippincott Co., 1959), pp. 172-73. 35 Pharmaceutical Manufacturers Association, Pre scription Drug Industry Fact Book. (Washington, D.C.: Pharmaceutical Manufacturers Assotiation, 1968), p. 49. 92 of pharmacy which could be equivalent to or better than that of the licensed pharmacist. Wholesale activities are basically a business en terprise involved in the distribution of health care pro ducts. For purely distributional activities the services of a pharmacist are not required. At least potentially, manufacturers and wholesalers could employ pharmacists in their promotional selling activities. Selling activi ties are rather unique and almost ignore the pharmacist, except on nonprescription items. Promotional activities are directed at the physician for prescription drugs not the patient or pharmacist. Most of this activity is handled by detail men who rarely have a pharmacy back ground, let alone details on clinical tests of a drug. This sector of employment is not free of regula tion, but is free of effective demand creation by legis lation. More is said on this later in discussion of the utilization of pharmacists. Government, Teaching and Other The last category of employment, teaching, government and other, was 4876 in January 1967 or slightly more than 3.8 percent of the total. This category would 93 actually be larger if those pharmacists working in govern ment hospitals were not included under hospital pharmacy. Other government categories of employment include the Food and Drug Administration, Public Health Service, and military service. Jobs in the Food and Drug Adminis tration including food and drug inspectors or chemists, are likely to require a knowledge of pharmacy as obtained in pharmacy school. Public Health Service employees working in hospitals would be included in the hospital figures with only other administrative and research jobs being covered here. These Food and Drug Administration or Public Health Service jobs require a knowledge of phar macy as offered by schools of pharmacy, but registration as a licensed pharmacist need not be required. An example of unnecessary training would be the internship program which usually encompasses retail experience. Military service (employment) may again be covered under hospital employment. Jobs in this area parallel closely those in community or hospital pharmacy. In this category however, there is freedom from restriction in dispensing and qualifications of the pharmacist. There have been conflicts with the profession on the methods 94 of military dispensing. At the present time licensed pharmacists must be used to dispense to dependents of military personnel but not to military personnel. Academic employment by schools of pharmacy would usually have as a prerequisite knowledge of pharmacy or related subjects, although this does not necessarily in volve registration as a pharmacist. Other employment covers specialized jobs requiring knowledge of pharmacy such as library science, pharmaceu tical journalism, law, etc. Significance of these mis cellaneous jobs and the others in this category is the lack of regulation of job requirements. This is taken as an indication that job requirements reflect true market requirements. SUMMARY Community pharmacies are by far the most impor tant employers of pharmacists. Within the community pharmacy sector of employment there are significant arti ficial restrictions which create an effective demand for licensed pharmacists. Hospital pharmacies, which employ pharmacists in capacities very similar to the community pharmacy, are relatively unrestrained and do not utilize pharmacists as extensively. Other pharmacist employers are relatively less restrained and typically do not uti lize pharmacists where a knowledge of pharmacy is not required, as is often done in community pharmacy. Striking is the insignificant use of subprofessionals, as for example, pharmacy assistants in community pharmacies. CHAPTER V EXOGENOUS INFLUENCES IN THE FACTOR MARKET INTRODUCTION The discussion to this point has emphasized in separate chapters the institutions supplying and the in stitutions demand pharmacists. Included in the discus sion were the major controls on the supply and demand sides of the factor market. An attempt to comment on or evaluate the factor market at this point would amount to an implicit acceptance of the established institutions and controls. Further comment is made in this chapter on the nature of those bodies from which controls of the fac tor market emanate. In addition to preference and cost conditions, influence on the factor market also emanates from the federal government, state governments, and pro fessional pharmacy organizations whose members have a stake in the factor market. Examination shows in many cases controls or 96 guidelines of activity in the factor market come from entities which simultaneously belong to the sector being controlled or have power over both the supply and demand side of the factor market. Interdependence frequently appears in prescription requirements and pharmacy licensing being in part due to the composition of state regulatory bodies and activities of professional pharmacy organiza tions. The frequency and extent of supply and demand interdependence raise serious questions about performance of the market mechanism as an allocative device in the factor market. Interdependence, where it can be identi fied, must be considered carefully as a potential source of demand creation or supply restriction. FEDERAL REGULATION Federal controls of pharmacy center upon the pharmaceutical industry, with controls emphasizing manu facturing standards, drug effectiveness claims, and drug 1 control. The bulk of federal authority lies with the Food and Drug Administration and the Bureau of Narcotics ^Fletcher, Market Restraints, p. 37. 98 and Dangerous Drugs, in the Justice Department, created April 8, 1968 by combination of the Treasury's old Bureau of Narcotics and the Food and Drug Administration's Bureau of Drug Abuse Control. The employment of pharma cists by the federal government is small with respect to the total, but the controls imposed are significant. Restrictions on drug sales are determined by the dangers in a drug's misuse, especially as an overdose. This danger is measured on a continuum of toxicity, toxi city being quantified as the multiple of a drug's normal 2 dosage which will produce adverse effects. For example, a drug that does not result in adverse effects with up to twenty times the normal dosage would be designated as an OTC drug, and be unrestricted in its sales beginning with the manufacturer. The toxicity continuum does not lend itself to an easy specification of criteria for prescription drugs. One group, which includes the American Pharmaceutical Association, argues that a continuum approach allows dangerous drugs to be made OTC and another group, which ^Ibid., pp. 84-86. 99 includes The Proprietory Association, argues an unfair criteria of drug safety is placed on the producer who must prove a drug's toxicity warrants OTC status.^ The basic issue is whether all drugs are potentially dangerous and should therefore be controlled to provide the greatest safety possible. Regardless of toxicity, stringent con trols are placed on the distribution and sales of all sti mulants, depressants, and narcotics, which are often called 4 "dangerous" drugs. Regulation of these dangerous drugs often limits the number of refilled prescriptions allowed and specifies some period of time for which records must be kept. Careful inventory record of this group of drugs is also required. Each pharmaceutical classified as a prescription drug, which requires a perscription record, creates and protects by legal sanction an effective demand for the labor of pharmacists. In line with their self-interest in the factor market, pharmacy organizations at times have 3Ibid.. pp. 83-86, 93-96. 4U.S. Department of Health, Education, and Wel fare, The Drug Makers and the Drug Distributors, p. 81. 100 taken positions on the sale of pharmaceuticals.^ The stake in prescription status of drugs is reflected in the magnitude of pharmacist employment in retail dispensing. The Food and Drug Administration's responsibility also encompasses drug production standards and drug effec tiveness. A significant change in recent years has been a more active role by the Food and Drug Administration in requiring verification of advertising claims to keep useless drugs off the market. After lengthy hearings. Congress passed the Kefauver - Harris Amendments of 1962 to the Federal Food. Drug and Cosmetic Act of 1938.** This amendment required manufacturers to have medical proof of a drug's medical efficacy in addition to its safety as previously required. After the amendment was passed, a conference was held by the Food and Drug Admin istration on implementation at which industry representa tives and organizations were vocal against proposals that would result in costs to the pharmaceutical industry or ^Fletcher, Market Restraints, pp. 93-96. ^William E. Hassan, Jr. Hospital Pharmacy (2nd ed.; Philadelphia: Lea and Febiger, 1967), pp. 100-102. 101 reduce product differentiation by standardization of drug names.^ One response to the situation was establishment in August of 1962 of the Commission on Drug Safety by a 8 grant from the Pharmaceutical Manufacturers Association. Much of this activity on drug safety is also no doubt correlated to bad experiences with the drug Thalidomide. Recently attempts have been made by the Food and Drug Administration to increase effectiveness standards. The application of increased standards is meant for all drugs that have come on the market since 1938, including molecular variations of drugs already licensed. The Pharmaceutical Manufacturers Association has attempted to block application of higher Food and Drug Administration testing regulations by a court order, but regulations have now been issued allowing requirement of evidence on drug 9 effectiveness. 7U.S. Department of Health, Education, and Wel fare, Proceedings. Food and Drug Administration Conference on the Kefauver-Harris Drug Amendments and Proposed Regu lations (Washington, D.C.: Government Printing Office, 1963), pp. 31-35. 8 Hassan, Hospital Pharmacy, p. iii. ^Wall Street Journal. May 11, 1970, p. 14. 102 Requirement of proof that a drug is safe and effec tive is not necessarily a market restriction; greater in formation on the effectiveness of drugs from different producers could improve market resource allocation. Since the demand for pharmaceuticals is inelastic (probably almost always), a case might be made for demand creation in the factor market through testing requirements that would benefit firms. Total manufacturing and wholesale employment figures, however, do not support the hypothesis that drug testing requirements create a significant effec tive demand in this section of the factor market. Alternatively, it may be hypothesized that drug effectiveness regulations may limit attempts to differen tiate drugs produced for the same purpose. There is evidence that drug producers, encouraged by patent laws, have attempted to differentiate their drugs by molecular 10 manipulation. At the present time there are no major proposals for legislation of new controls by the federal 10 U.S.Department of Health, Education, and Welfare, Office of the Secretary, Final Report. Task Force on Pre scription Drugs, Background Papers (Washington, D.C.: Government Printing Office, 1969), pp. 31-35. 103 government, although the Food and Drug Administration has issued new guidelines for testing procedures within the existing legal framework. The greatest impact of federal controls on the factor market lies not in manufacturing, but in dispen sing at the retail level. Any drug given prescription status or other prescription requirement, legally creates an effective demand for pharmacists, assuming no net change in drug sales as a result. There is no documented evidence known to this author that federal regulations or their enforcement have been purposely used as a tool of factor market discipline or demand creation. Interdependence at the federal level has no doubt been minimized by the fact that the Food and Drug Administration employees are not exclusively pharmacists and that there has been no down ward trend in prescription requirements on sales. STATE REGULATION The structure of state regulatory bodies indicates that they cause greater factor market interdependence of supply and demand than regulatory bodies at the federal level. The economic implication of this interdependence 104 is demand creation. State variation in regulations offers evidence of a comparative nature on demand creation re sulting from supply and demand interdependencies. Occupational control of the pharmacist and phar macies originates from state legislation. Variations in state regulation of pharmacies provide greater opportunity for insight into the factor market's structure than do federal regulations, which are standardized for the whole country. The focal point of state regulation is retail pharmacy, with lesser control on hospital drug use and almost complete neglect of manufacturing and wholesale drug distribution. In most states the responsibility for licensing pharmacists and pharmacies is granted to a state board of pharmacy. State Boards of Pharmacy are effectively indepen dent monopolistic licensing agencies with powers comparable to independent regulatory agencies of the federal govern ment, since they are not clearly a part of the executive, legislative, or judicial branches of the government. A state pharmacy board's control over pharmacy may vary according to allocation of controls between different state agencies. In some states there have been attempts to consolidate licensing into a licensing agency that would reduce the possibility of outside pressures and effect an increase in regulation for the public's interest. The American Pharmaceutical Association opposes any such moves on the grounds that the self-regulation of pharma cists would be menanced.** Close examination shows that retail pharmacy is indeed very nearly self-regulated as is openly admitted by the American Pharmaceutical Associa tion. The interdependencies inherent in self-regulation potentially benefit independent retail pharmacists. In most states legislation only covers general requirements, such as licensing pharmacists and pharmacies, or general criteria for drug dispensing. The details of drug dispensing are granted to the state board of phar macy of some equivalent. In all 50 states and the District of Columbia this body has the power to adopt and to enforce 12 its rules and regulations. The greatest power of en forcement lies in the right to grant pharmacy licenses. To identify potential abuses of state boards of pharmacy ^Fletcher, Market Restraints, p. 38. 106 it is necessary to be familiar with the selection and composition of the board members. Market Restraints in the Retail Drug Industry by M. Fletcher, which has previously been referred to, is an excellent survey of state regulation of retail pharmacy. The structure of retail pharmacy, the major employer of pharmacists, is especially relevant to the demand side of the factor market. The dual control state pharmacy boards have in regulating pharmacies and pharmacists makes Fletcher's study especially useful. The process by which board members are selected is subject to serious criticism. In 41 states, the gover nor makes the official board of pharmacy appointments, but is often supplied a state pharmaceutical assiciation list from which to select appointees. In 23 states there is a list of three to five names for each vacancy sub mitted to the governor and in ten states the appointees must be picked from this list. Even in states where there is no legal status of recommendations, state pharmacy organizations may still make them. In 8 of the 9 states where the governor does not appoint the board members, their appointment is still subject to approval of the governor. With three exceptions, state pharmacy laws limit pharmacy board appointments to registered pharmacists.^ California has an eight man board of which one official is to be a "public" member. This would support the hy- pothesis that the differences in California regulations are in the public's interest and not in the interest of the profession by restrictionism. In Idaho and Pennsylvania a public health official sits on the board of pharmacy. In 39 of the jurisdictions, pharmacy board members must be licensed for some period before appointment, the 14 modal time period being 5 years. Maturity may be a justification for this requirement, but there seems little reason to require 10 years experience as is done in 12 states. This licensing requirement is not made of California pharmacy board members. Three other common requirements for state board of pharmacy members are clearly discriminatory and bias the board's orientation.^ First# forty of the jurisdic tions over pharmacists require that the board members have been actively engaged in retail pharmacy. This effectively grants control of pharmacy to those in the retail sectors. For practical purposes those in pharmaceutical manufac turing, hospital pharmacy, research, and teaching are excluded from board representation irrespective of how they are affected by board actions. Second, nine states extend this exclusion to prohibit any person connected with a school of pharmacy from being a board member. It has been suggested that this last practice, although re strictive, may be partially explained as a historical carry-over from the days when all full-time pharmacists were in the retail sector with only part-time work avail- 16 able in academics. Finally, 14 states require board members to be members of good standing in the state's pharmaceutical association. Membership in a state phar maceutical association may indicate a person active in the profession, but also gives the state association 109 control over who is or is not a board member. A person may be prevented from joining or be expelled for unpro fessional conduct as spelled out in the code of ethics which is duscussed later. This technique has also been used by the American Medical Association and has been especially crucial in the restriction of hospital pri- 17 vileges. It is concluded that boards of pharmacy are gen erally controlled by state pharmaceutical associations, which are in turn dominated by retail pharmacists, the largest part of the pharmacist population, and of these retail pharmacists, independent pharmacy owners dominate 18 reatil pharmacy. This domination is a potential ex planation of stands favorable to independent pharmacist pharmacy owners which have been taken by boards of phar macy. Salaried pharmacists have a smaller stake in re tail pharmacy regulation than pharmacists who own their own pharmacy. In some state pharmaceutical associations, 17 Rayack, Professional Power and American Medicine, pp. 211-214, 221-227. IQ Fletcher, Market Restraints, pp. 49-50. 110 memberships are differentiated according to pharmacist drugstore owners. The benefits from money devoted to union organization or other forms of collective bargaining are likely to be higher for the salaried pharmacist. In theoretical terms, the licensing of pharmacies is a part of the pharmaceutical product market, but re flects directly on the pharmacist factor market as an important source of employment for pharmacists. Theore tically, the licensing of pharmacists and pharmacies could be a separable act, but this has not always been the case. Cases handled by individual state boards indicate that pharmacies have been controlled to restrict retail compe tition and that the boards pressure pharmacists into be having in a manner beneficial to those in the factor mar ket. In many cases the boards have exercised powers equal 19 to that of legislative and judicial bodies combined. Licensing of pharmacies includes fixing fees for licensing, regulations for practice and periodic inspec tions of pharmacy establishments. In most cases, this board authority includes issuing, revoking, or suspending ^Ibid.. pp. 52-53. Ill licenses, inflicting penalties, regulating the sale of drugs, specifying the legal meaning of pharmaceutical terms, establishing minimum standard equipment, and specifying the time for which prescription files must be kept. To carry out these duties, boards usually have the power to employ inspectors, chemists, and any required legal personnel. Most significant in this gamut of con trols is the power to regulate the sale of drugs. This regulation is in addition to Federal control mentioned earlier in this chapter. REGULATION AND SALES COMPOSITION During the 1950's there was a rapid expansion of nonprescription drugstore items being sold in food 20 stores. At the same time drug store sales volume of proprietory items remained relatively stable. Besides the health, safety and welfare arguments against this expansion of sales in food stores, there has been explicit use of economic arguments. Encroachment of supermarkets in the sale's areas of drugstores has been declared unfair 20Ibid., pp. 90-92 112 competition. Supermarkets do have a lower cost as re flected in their mark ups. It has been argued that any forced closings of drugstores due to lower sales and income caused by loss of market share may lead to a shor tage of prescription service outlets. This line of rea soning is negated by data which shows expanding per capita drug sales and the trend toward professional and community pharmacies, as has been noted in the previous chapter. The tactics in response to sales composition has varied by state, but the goal of pharmacists has been to have the sale of all drug items restricted. This position is professed by the American Pharmaceutical Association and the National Association of Retail Druggists, both using the argument that there is a continuum of dangerous 21 drugs. Most vocal in favoring this objection are state pharmaceutical associations and independent drugstore owners. Several arguments are used to support sales re- 22 strictions. First is the argument that the pharmacist 23-Ibid.. pp. 83-84. 22Ibid., pp. 87-90. 113 has expert knowledge in the field of drugs and should be available to answer questions. This requirement is a clear source of effective demand for pharmacists. It has been shown, however, that non-pharmacists usually handle such sales and that pharmacists handling these sales only 23 infrequently are asked for or offer advice. Second, restrictionists also argue that labeling of pharmaceuticals is often inadequate and the public may not understand the information which is given. It has also been argued that some OTC drugs are prescription drugs in stronger dosages and should therefore be sold only under supervision of a pharmacist. This argument is weakened on the one hand by increases in the public's median education level, but strengthened on the other hand, by the increased hazards in the use of many modern drugs. Third, drug recalls are said to be easier through drugstores since each must be registered. Although true, this point neglects the fact that OTC drug recalls are rare. 23Ibid., pp. 113-116. 114 Finally, it has bean argued that the consumer can only be appraised of possible contraindications or inter actions of prescription and proprietary drugs by the phar macist. It is implicitly assumed here, however, that the physician failed himself to warn the patient about contra indications, and either the purchaser or pharmacist has knowledge of all other drugs the purchaser is taking. PHARMACY ORGANIZATIONS Pharmacy organizations are an important source of influence within the factor market, but classification of these groups as an element of supply or demand in the factor market is not always possible. In many cases, pharmacy groups belong clearly to one side of the factor market but are also influential in the factors which af fect or regulate their own members. Economic performance under such interdependent conditions is open to criticism. The following discussion concentrates on the most influ ential bodies within pharmacy and shows how their activi ties and memberships relate to the factor market and its performance. At the present time, pharmacy organizations are 115 oriented toward institutions of the three major segments of pharmacy: manufacturing, retailing, and institutions. 24 Pharmacy organizations, numbering in excess of 700, are clearly too numerous to discuss individually. It does become clear that there is no single body to which phar macists or their institutions rally for representation. It has been said, "the tri-partite of pharmacy - as a profession, as a large manufacturing enterprise, and extensively as a form of retail merchandising - pre cludes the possibility of ever having one voice speak 25 for it." Special interest groups in any situation are a serious impediment to change. In the pharmacy profession, the pervasiveness of the status quo has been attributed 26 to the guild-like behavior of the profession. At least one pharmacist believes the pharmacy profession would be better off if restrictionist policies similar to the 24 Clark, Orientation in Pharmacy, pp. 73-74. 25 Burlage, ed.. Orientation to Pharmacy, p. 178. 26Task Force on Health Manpower, Health Manpower (Washington, D.C.: Public Affairs Press, 1967), pp. 69- 70. 116 American Medical Association for restricting entry had 27 been pursued. Of the national pharmacy organizations, the American Pharmaceutical Association is the largest and 28 includes the widest range of pharmacy interests, but membership does not begin to approach that found in the American Medical Association. American Medical Associa tion membership as a percent of licensed physicians, although falling in recent years, is still approximately 60 percent which compares to about 20 percent of licensed pharmacists who have membership in the American Pharmaceu- 29 tical Association. For all pharmacists, membership to a professional organization is 78 percent of the total in a 1962 United States survey.30 The greater potential for a unified professional voice in the case of physicians is 27 Donald E. Franke, "Let's Separate Pharmacies and Drugstores," American Journal of Pharmacy and the Sciences Supporting Public Health. CXLI (September, 1969), pp. 161- 164. 28 Deno, Rowe, and Brodie, The Profession of Pharmacy, p. 82. 29 Hassan, Hospital Pharmacy, p. 372. 30u.s. Public Health Service, Health Manpower f ource Book. Section 15 (Washington, D.C.s Government rinting orrice, i»b5), p. 4. 117 clear. The American Pharmaceutical Association has been instrumental in formation of state pharmacy associations, whose objectives have been frequently to sponsor laws to protect the profession and the public. Typically, state, county and local associations have focused their efforts 31 on regional problems. The orientation of pharmacy or ganizations to the independent community pharmacy reflect the 93 percent membership of self-employed pharmacists to some organization, 73 percent to a state organization and 32 65 percent to a local organization. Interdependence of state associations with boards of pharmacy was noted in the previous discussion. Given the orientation of activities it is not surprising to find frequent comments in pharmacy literature that commer cial and legislative interests absorb most energies of many regional pharmacy organizations while neglecting professional activities.^ Legal action against state ^Clark, Orientation in Pharmacy, p. 68. ^United states Public Health Service, Health Manpower, p. 10. 33 Clark, Orientation in Pharmacy, p. 68. 118 pharmacy laws and state pharmacy board regulations indi cate that there are self-interest restrictions but there is not well coordinated control of state associations as in the case of the well run and financed American Medical Association. Adam Smith long-ago indicated the danger of fraternal organization in his statement that: People of the same trade seldom meet together but the conversation ends in a conspiracy against the public, or in some diversion to raise prices. From the above evidence, it appears interdependencies have resulted in less than optimal allocation and utilization of resources, but the lack of professional unity through a representative body in the factor market has prevented degree of professional control held by the AMA over physicians. The American Pharmaceutical Association's Code 35 of Ethics acts on the factor market's supply of labor 34 As quoted by Robert Heilbroner in The Worldly Philosophers (3rd ed.; New York: Simon and Schuster, 1967), p. 63. ^^Burlage, Orientation to Pharmacy, pp. 277-279. 119 and competition by spelling out proper behavior for mem bers. Two statements on the proper behavior illustrate orientation of restrictions in the factor market. First is the position that "the pharmacist does not discuss the therapeutic effects or composition of a prescription with 36 a patient." This position is somewhat peculiar given that the pharmacist is supposedly an expert on drugs. Of course, any discussion with patients should be informa tive and not meant to distress the patient. Second, the pharmacist will not take any unfair advantage of other professionals. This position illustrates the frequent position that patients come before profits and competi tion, which is characteristic of products for which there is an inelastic demand. Currently, this code is in the process of being revised. Problems have arisen between the American Phar maceutical Association and the American Society of Hos- 37 pital Pharmacists over their respective code of ethics. 36 Ibid., p. 278. 37 Donald C. Brodie, The Challenge to Pharmacy in Times of Change, p. 19. 120 With the expansion of hospital pharmacy sales, the American Pharmaceutical Association took a position that hospital dispensing of prescriptions to outpatients could constitute 38 unfair competition to community pharmacists. The American Society of Hospital Pharmacists, with its own code of ethics, has made it clear that hospital pharmacists have moral and legal responsibilities to serve both indi gent and nonindigent patneits by filling prescriptions. In economic terms, with respect to the factor market, this can be interpreted as a jurisdictional dispute over limited demand. Other action by the American Society of Hospital Pharmacists clearly attempts to create effective demand 39 in the factor market. In 1935 the American College of Surgeons adopted the Minimum Standard of Pharmacies in Hospitals, which was revised and adopted by the At least in California there is some evidence that pharmaceutical sales to hospitals were eliminated as the last area of competitive pricing by manufacturers. See 6. Dwaine Lawrence in a letter to Robert C. Johnson, dated April 17, 1970 in Fletcher, Market Restraints, p. 123. 39 Hassan, Hospital Pharmacy, p. 15. 121 American Society of Hospital Pharmacists in 1950. Most significant to this discussion is the goal of having a pharmacy department and legally trained pharmacist in all hospitals. If these standards should gain legal sanction, there would be a sudden increase in the demand for phar macists, with a prospect for higher incomes for existing pharmacists at least in the short-run. Other national organizations, important as bodies of influence in the factor market include the American Council of Pharmaceutical Education, The Pharmaceutical Manufacturers Association, the Proprietory Association, National Association of Chain Drug Stores, National Asso ciation of Retail Druggists, and the National Association of Boards of Pharmacy. CONCLUSION Evidence on regulation from the federal level does not indicate decisions have been actively prejudiced in favor of the profession. Control of pharmacy by the federal government is not centered on the hands of phar macists. At the state level, however, control is centered on the hands of pharmacists who have a vested interest in the decisions made. At the state level restrictions designated to protect the public appear to do more to promote the in dependent community pharmacy. The independent pharmacy has been promoted and probably preserved by direct attempts to eliminate discount stores, chain drugstores, and super markets as dispensers of drugs, or at least to eliminate any competitive advantages such as lower costs that these firms might have. Interdependence between elements of the factor market and pharmacy organizations add further support to the views that the independent pharmacist is in a favored position. The advantageous position of the independent pharmacist does not appear to be offset by activities of other pharmacy organizations. CHAPTER VI DYNAMIC FACTOR MARKET PATTERNS AS A MEASURE OF PERFORMANCE While previous chapters have examined the factor market's structure and its economic implications, this chapter attempts to evaluate performance in terms of factor market changes. Two distinct techniques exist for empirically evaluating the market's performance. Past evaluations have been done with statistical techniques of varying sophistication or examination of historical conditions, especially institutional practices. After identification of existing evaluations, the qualitative topics of clinical pharmacy, community pharmacy, education and expected changes are considered. Hypothesis testing of market conditions, that is whether a shortage or surplus exists, provides a framework within which the pitfalls of alternative performance evaluations can be made. Limited information has re stricted the evaluation of this chapter to economic 123 124 implications on the evolutionary market trends measured only as the absolute direction of change. This clearly qualitative evaluation allows incorporation of institu tional variations and constraints with tentative state ments on general and partial equilibrium and on static and dynamic conditions that could not be quantified. Traditional concepts of pharmaceutical dispensing are being challenged. The most prominent trend from the demand side of the factor market today is an integration of the pharmacist into the health care team. The pharmacist in the future will assume the role of the therapeutic adviser to the physician. As an expert in dosage forms and pharmacology the pharmacist will be provided excellent opportunities to use his intellec tual skills in institutional or community practice.^- These trends in pharmacy, given the current pat terns of health care delivery, imply changes in hospitals, where the health care team acts as an integral unit; retail pharmacies, where dispensing is being reevaluated; and educational institutions, which are responsible for ^University of Southern California, "School of Pharmacy, 1968-1970," Bulletin. LXIV (August, 1968), p. 8. training labor entering the factor market 125 HISTORICAL MEASURES OP FACTOR MARKET PERFORMANCE Past evaluations of factor market performance have been unsatisfactory in two respects. First, there has been no comprehensive attempt to evaluate the factor market. Second, many statements on performance do not include a clearly stated criteria. The basic structure of statements on performance depict the state of the market as some measure of a surplus or shortage. Studies of health care have utilized several al ternative definitions of the term for market shortage or surplus. First, the term shortage has been used in an arbitrary manner where value judgements are not made explicit. This definition, for example, would fit an editorial suggesting, without even verbal justification, 2 that there may be a surplus of pharmacists in the future. Second, shortages have been intimated on the basis 2 George B. Griffenhagen, "Challenge of Utiliza tion, " Journal of the American Pharmaceutial Association. NS III (July, 1963), p. 353. 126 of how health care services are produced. By such a definition, demand may be taken as a given and related to the supply of health care services as they are produced. Value judgements are clearly involved in any assumptions made about the desired nature of the health care produc tion function. This chapter's evaluation considers the factor market's role from both the supply and demand side, attempting to avoid or identify the value judge ments involved. Third, a traditional specification of shortage or surplus is demand relative to supply at some price. Such a static disequilibrium could only continue to exist with market imperfections or special dynamic long-run conditions. Finally, performance may be evaluated in the con text of resource allocation. A shortage would exist in a health care sector where there was less than optimal allocation of resources measured in terms of present values or internal rates of return on alternative invest ments. With careful specification, this definition could be made operational as a test of health manpower market conditions. 127 The most common attempts to Identify health man power shortages found in the literature of health econom ics include need, health manpower-population ratios, pro jection of anticipated supply and demand, relative changes in income, and institutional job classifications. Each of these attempts to determine health manpower shortages have advantages and disadvantages which provide a useful background on which to examine the limited information on • A . pharmacy. The concept of need has been criticized on the grounds that economic scarcity is ignored. Need in economic theory is best equated to desired rather than effective demand. Sophisticated uses of the need con cept have estimated need as the number of hours required for a type of care multiplied times the expected incidence of a disease or injury. Such calculations accurately reflect medical terminology, but ignore financial or resource constraints, impacts on resource pricing, alter natives of health care delivery, and the consequences of not obtaining the needed care. This approach to evalua tion includes a certain subjectivity in the value judge ments stated. Various health manpower ratios have been used as 128 supply measurements by comparing current ratios with expected changes in the population and health personnel. This approach can be criticized as assuming constant productive relationships in the health care sector. Poten- tial increases in the productivity and consequent exter nalities of health care services are ignored. The tools of economic analysis not reflected include substitution among the alternative inputs, changes in factor prices, changes in technology, and changes in the composition of health care services. The use of fixed manpower coefficients must be challenged on the grounds that population is the only variable in the system. The simplest criticism is that health manpower ratios indicate nothing about the rate of utilization. Only over the long-run would there be adjustments to rates of utilization. It is also true that the response to unemployment in the profession could be restrictive practices to raise income and create jobs rather than encourage exit from the industry. Any price changes in the factors used in the pro duction of health care are likely to result in input sub stitution. This substitution may be of lower cost labor 129 with less training or capital equipment. Technological changes alter the production func tion. The nature of the technological change itself, however, determines whether the mix of inputs will be changed. An advance in technology could be such that the services of more pharmacists, not less would be demanded. Finally, changes in the pattern of consumer de mands or public expenditures may alter the appropriate (efficient) health manpower ratio. This change seems probable in an economy such as the United States where the basic requirements of existence are met. Illustrations of manpower ratios and their draw backs in pharmacy are relatively easy to find. One good illustration of the problems is found in the survey of 3 hospital pharmacy. This discussion of hospital pharmacy includes a calculation of the average number of years worked by hospital pharmacists and an annual replacement rate required to maintain the current manpower ratios. The annual replacement factor is calculated as an average of three alternative calculations. Even with the attempt ^Francke, et_al., Mirror to Hospital Pharmacy. pp. 79-85. 130 at careful calculations, it is dangerous to assume pro ductive relationships and technology will remain constant. This criticism is especially serious in the case of a survey study which makes recommendations for changes in the job orientation that imply productivity changes. Additional conflicts have arisen over the inter pretation of health manpower ratios in pharmacy. A sug gestion has been made that the pharmacist-population ratio may have remained relatively constant over the last fifty 4 years in part due to recruiting efforts of the profession. A world-wide survey of pharmacy attempted to compare variations in the pharmacist population and pharmacist- 5 physician ratios. This survey showed the United States has the lowest ratios of population per pharmacist and pharmacists per physician. It is suggested by the author that this is evidence that there is a reason for evalua ting the utilization of resources not only in the United *David A. Knapp and Robert V. Evanson, "Review of Manpower Problem ... Pharmacy's Responsibility," Journal of the American Pharmaceutical Association. NS III (July, 1963), p. 366. ^Griffenhagen, “Challenge of Utilization," p. 353. 131 States, but in the rest of the world as well. Resource evaluation through country comparisons would have to in clude consideration of differences in factor market entry requirements. More than population has been considered in some projected estimates of demand. The comparison of demand relative to supply is valid, but anticipated supply pro jections are typically based upon fixed input coeffi cients and technology. The health care production func tion is clearly not a stable one. An operational quantitative measurement of supply relative to demand has been attempted in the case of physicians.** This uses the rate of change in physician's incomes relative to other jobs. This measurement has the advantage of reflecting all factors influencing sup ply relative to demand. Although all factors are re flected, the results are influenced by several exogenous conditions whose relative weights are not indicated. Implicitly it is assumed that all labor and product mar kets are devoid of imperfections. Additionally, changes ^Rayack, Professional Power and American Medicine. Ch. 5. 132 in relative income may reflect relative changes in produc tivity. Where there have been changes in relative pro ductivity, the base period used influences the results. Even with these drawbacks, such measures in pharmacy would potentially add to total knowledge, but limited data prevents even such a measure. A recent dissertation, by Leonard Weiss at Harvard* attempted another approach for operational testing of performance in several health professions, but pharmacy 7 was not included. This dissertation progresses from the meaning of the term shortage which considers value judge ments on how health care should be produced. Instead of accepting existing production or sociological-economic relationships found in United States Census classifica tions, an entirely new job classification scheme was formulated. The study identified those jobs which should be considered health jobs and ranked each job in three steps according to the level of health care content for each job. 7 Jeffrey H. Weiss, "The Changing Job Structure," (unpublished Ph.D. dissertation. Harvard University, 1966). 133 Although a survey in the detail done by Weiss has not been feasible in the case of pharmacists, the approach is applicable to pharmacy and there is evidence of similar job classification changes in the major trends of pharmacy. Through a grant by the Department of Health, Education, and Welfare, a study has been done to develop 8 a Pharmacy Technician curriculum. in this study, an attempt is made to identify the training required of the various tasks in pharmacy. The trends indicate that pharmacy must change in the future. One change appears to be the adoption of clinical pharmacy and pharmacy aides or technicians. Also, rapid expansion in hospital pharmacy drug sales and les stringent regulation by State Pharmacy Boards of this type of pharmacy has allowed greater response to economic stimuli indicating greater and more evident alternatives in hospital pharmacy practices in the near future. Q See Robert Heinrich, National Technical Advisory Committee for Pharmacy. Meeting Report, Los Angeles, May, 1969 (Los Angeles: Allied Health Professions Pro ject, 1969). 134 CLINICAL PHARMACY Clinical pharmacy utilizes pharmacists as a drug information specialist on the health care team. The clinical pharmacist may supervise a patient's hospital drug therapy and regularly act as a consultant to the physician on drug therapy problems. The use of this technician correlates with the hospital's evolution as an 9 institution of centralized health care as well as the rapid development and obsolescence of drugs. Changes are away from the independent practitioner as the focus of health care delivery. In economic terminology, the hospital is a pro ductive unit trying to find the lowest cost combination of productive inputs from any given health problem. With most alternative health care inputs close at hand in the hospital, substitution of inputs is not difficult but increasingly investigated where operation is nonprofit. ^Rayack, Professional Power and American Medicine, pp. 43-46. *®Herbert E. Klarman, The Economics of Health (New York: University Press, 1965), pp. 123-124. 135 It is again crucial to recall that the hospital has the greatest flexibility in the dispensing and administration of pharmaceuticals. Clinical pharmacy influences hospital costs and patient expenses through its impact on nurse administration of drug therapy* physician's drug prescrip tions* and the length of patient stays. The hospital pharmacist's activities are in many cases being oriented toward the role of drug consultant and drug therapy supervisor and away from the traditional isolated dispensing role. Admittedly* the pharmacist has always been a source of drug information; but* for a period* drug monographs and hospital formularies reduced utilization of the pharmacist as a source of drug infor mation. Even the attitude of pharmacists has influenced the consultant role of pharmacists. For example* in 1957 the hospital pharmacy survey showed 10 percent of the hospital pharmacists did not want to provide drug information.^ It is interesting to note that the first ^Francke, et_al., Mirror to Hospital Pharmacy. p. 131. 136 clinical pharmacy program, introduced at the University of Washington in 1946, was disapproved immediately by the American Association of Colleges of Pharmacy and the 12 American Council on Pharmaceutical Education. This is another piece of evidence that restrictive practices have been frequently used. It is unclear how rapidly the pharmacist is being accepted as a member of the health care team, but phar macy literature includes many discussions of this trend and has documented evidence for some hospitals. Documented evidence of utilization of the clinical pharmacy concept 13 includes Long Beach Memorial Hospital in California and 14 Charles F. Kettering Memorial Hospital in Ohio. The 12 Donald E. Franke, "Let's Separate Pharmacies and Drugstores," American Journal of Pharmacy and the Sciences Supporting Public Health. CXLI (September-October, 1969), pp. 161-78. 13 See William Smith, Claire O'Malley and Jack W. Weiblen's "Clinical Pharmacy Services in a Community Hos pital," Long Beach, California, 1970. (Mimeographed.) 14 See Wallace Slater and Joseph Hripto, "The unit- Dose System in a Private Hospital - Implementation, Part I,” American Journal of Hospital Pharmacists. XXV (August, 1968), pp. 408-17 and Slater and Hripko, "The Unit-Dose System, Part II," American Journal of Hospital Pharmacists. XXV (November, 1968), pp. 641-48. 137 adoption of clinical pharmacy in these hospitals has proved successful and allows identification of the changes accompanying clinical pharmacy. A clinical program is also under development for the Los Angeles County-U.S.C. Medical Center which has resulted in closer association of the University of Southern California's Schools of 15 Medicine and Pharmacy on the Medical School campus. Clinical pharmacy in these two cases required new pronouncements on the specialization and division of labor between physicians, pharmacists and nurses. The tradi tional handling of drug orders is still used by pharmacists but pharmacists are assuming additional responsibility in joining physicians on hospital rounds and supervising drug therapy administration by nurses. The physical dispensing of pharmaceuticals is altered in two distinct ways in clinical pharmacy. First, pharmaceuticals are dispensed under a system known as the unit-dose system. As the name implies, drugs under this system are dispensed from supplies packaged in one 15 Ralph R. Bennett, Jr., "Proposed New School of Pharmacy at Los Angeles County-U.S.C. Medical Center," Pharm SC 1970. May, 1970, pp. 8-10. 138 unit dosages. In both studies, the unit-dose system reduced medication errors, contraindications, and patient drug costs. Second, under the unit-dose system more of the physical dispensing of pharmaceuticals is handled by pharmacy aides or technicians. The pharmacist, however, still reviews and checks drug orders as illustrated in Figure 1. Greater flexibility in hospital regulation permits the use of pharmacy technicians as a low cost substitute for the pharmacist. Many large hospitals without the unit-dose system utilize the services of pharmacy techni cians. The job category of hospital pharmacy technician- helper is officially recognized by the American Society of Hospital Pharmacists and the American Association of Colleges of Pharmacy.16 So far indications are that clinical pharmacy improves the allocation and utilization of resources. Pharmacists have been given new tasks; for example, ^6William E. Hassan, Jr., Hospital Pharmacy (2nd ed.; Philadelphia: Lea and Febiger, 1967), p. 44. 139 FIGURE 1 PHYSICIAN'S ORDER Pharmacist Interprets Orders 4 Transcribes Orders tot (1) Pharmaceutical Service Record (2) Drug Rolodex Card Pharmacy Assistant Prepares Unit-Packaged Doses From Drug Rolodex Card Pharmacist Checks Doses Using Pharmaceutical — Service Record Nurse Inter prets Orders Transcribes Orders tot Medication Record Assistant Gives Checked Doses to Nurse Nurse Checks Doses Using Medication Record . . Nurse Administers Medication to Patient A Nurse Charts on Medication Record Source: Smith, O'Malley and Weiblen, "Clinical Services in a Community Hospital," Long Beach, California, 1970, p. 3. (Mimeographed.) 140 clinical rounds are being made by the pharmacists, where they spend more time utilizing their training, including recent educational changes discussed below. Pharmacists are freed for their new tasks by the use of pharmacy aides for lower level pharmacy tasks as shown in Figure 1. The nurse's responsibility in pharmacy was reduced by the unit-dose system allowing nurses to spend greater time on traditional nursing tasks. Major statistical evidence on the effects of clinical pharmacy have indicated lower hospital costs, but favorable interpretations are not without question. What may be a significant implication for partial equilibrium of the factor market is the hospital pharma cist's salary. In 1957 half of the chief pharmacists were earning less than the estimated rate paid those in community pharmacy.*7 There are several significant hy potheses which may explain this difference. The most interesting is that the lower wage paid by hospitals re flects the true marginal productivity of pharmacists to hospitals. Fewer legal requirements gives the hospital 17 Francke, et al.. Mirror to Hospital Pharmacy. pp. 77-78. 141 greater flexibility in the substitution of inputs which is not possible in community pharmacy. There are several assumptions necessary to make this hypothesis tenable, and it is likely other alternatives also play a part. First, it is necessary to assume licensed pharma cists are equally capable of working in a hospital or community pharmacy. Additionally, there cannot be material fringe benefits to hospital employment which offset the difference in pay. Discussions of the 1957 survey do not lead one to believe that this could be the case. With mobility between hospital and community phar macy it would seem the pay differentials would be elimi nated. There may be psychic benefits accruing to hospital pharmacists, however. Hospitals in their demand for pharmacists may not have depleted the supply of those deriving a psychic benefit from hospital employment. Potentially, this psychic income is derived from a pro fessional identity, within a constrained setting where public and professional contact is minimal. It has already been noted that hospital pharmacies only carry a limited stock of non-health care merchandise. under this interpretation, as more and more 142 hospitals adopt clinical programs, the marginal produc tivity will result in higher incomes for hospital phar macists and possibly greater use of pharmacists relative to other health care inputs. At least superficially this interpretation fits the growth of hospital pharmacy rela tive to community pharmacy, the introduction of clinical pharmacy, changes in educational programs, and likely future use of pharmacy aides in both hospital and com munity pharmacy. COMMUNITY PHARMACY Like hospital pharmacy, changes in community pharmacy reflect existing professional and educational pressures. Probably the most frequent recommendation for change in community pharmacy is the introduction of phar macy technicians. In two to three decades, however, com- munity pharmacy has seen no appreciable improvements. The slow response in terms of pharmacy regulations and United States Department of Health, Education and Welfare, Office of the Secretary, Task Force on Prescription Drugst Second Interim Report and Recommen dations (Washington, D.C.: Government Printing Office, 1968), p. 21. 143 educational programs would seem to indicate status quo has been preserved by vested interests in community phar macy and the self-regulating aspects of state boards of pharmacy. In community pharmacy there seems to have been a deterioration rather than improvement in the allocation and utilization of pharmacists. As noted in Chapter III, original state licensing of pharmacy assistants has been discontinued, except in Alabama where it was only recently started. Most state pharmacy regulations through increased licensing require ments have made new pharmacy assistants unqualified to fill prescriptions. As a result, most pharmacy assistants entered the factor market through supervised training by a pharmacist rather than through formal education. In some cases pharmacy assistants were allowed to become licensed pharmacists when the category of pharmacy assis tant was eliminated. The professed desire of increasing the qualifica tions of those filling prescriptions no doubt has merit, but other alternatives could have been used. Instead of eliminating the job category, new pharmacy assistants could have been restricted in the tasks they were allowed 144 to perform. Restrictions on pharmacy assistants would have been equivalent to the current pharmacy technician proposals. Related to the utilization of pharmacists is the suggestion that the community pharmacy become a health 19 information center. To date there is little evidence that the pharmaceutical or health information center has been put into practice except in limited settings as discussed in Chapter IV. Under such a setting the phar macist clearly devotes more of his time to professional activities. Pharmacist's themselves frequently offer state ments that most community pharmacies could succeed without 20 non-health care sales. Other examples show recommenda tions that pharmacists stop thinking of themselves as 19 Daniel L. Wertz, "Pharmaceutical Center - Guide to the Future," in Meeting the Challenge of Pharmacy, ed. by Delbert D. Konnor (Detroit, Michigan: Wayne State University, 1967), pp. 69-79. 20 William S. Apple, "Road to Professional Success," Journal of the American Pharmaceutical Association. LIII (February, 1963), pp. 66-68. 145 retailers rather than as health care specialists.^ Pharmacy as a profession is in a dilemma which includes the strong vested interests of community pharmacy, regu latory biases in favor of the independent pharmacist owned pharmacy, and required prior acceptance of educa tional programs before it is legally and economically practical to adopt them. EDUCATIONAL INSTITUTIONS AND TEACHING The trend in pharmacy education has been toward increased requirements including a continuing education requirement, with some compositional changes, and greater contact between schools of pharmacy and hospitals. A six year pharmacy curriculum was first given strong sup- 22 port by the Pharmaceutical Survey in 1948. The end result was compromise on a five year program, with the current exceptions noted in Chapter III. A professional 21 Robert J. Gillespie, "The Profession of Tomor row ... of, by, for Pharmacists,1 1 Journal of the American Pharmaceutical Association. NS III (June, 1963), pp. 318-320, 332. 25 Elliott, The General Report of the Pharmaceutical Survey. 1946-49, p. 230. 146 attitude that health care must be the best possible is reflected in the statement: "To compromise professional education is to compromise the profession of which it is 23 a part." This point of view is to be admired, but it fails to cope with the limited nature of resources. At no time has there been a meaningful attempt to evaluate the proper allocation of resources to or within pharmacy. Importantly, this includes development of a program for pharmacy technicians. The recently completed Task Force on Prescription Drugs recommends that the Bureau of Health Manpower should support development of a pharmacist aide curriculum in junior colleges and pharmacy school programs to train pharmacists as drug 24 information specialists on the health care team. The University of California at Los Angeles tech nician study is only the first step in implementing a program. As noted by Dr. Brady of the University of 23 Brodie, The Challenge to Pharmacy in Times of Change, p. 45. 2*U.S. Department of Health, Education, and Wel fare, Final Report, p. 20. 147 Southern California School of Pharmacy, the type of pro- 25 gram is important. From the economic standpoint of resource mobility and utilization, the best training pro gram is one in which it is open-end as opposed to closed- end training, which indicates whether or not past work may be applied toward future work in a field. There would seem to be no logical reason for imposing the high cost of a closed-end program on those who wish to advance in a field. The greater the training requirements in pharmacy the lower the mobility between pharmacy jobs, which has usually been higher than for other fields of 26 medical occupations. Proposals for training pharmacists as drug infor mation specialists include frequent suggestions that this be handled in a clinical hospital setting. This sugges tion has been made in two ways. First, it has been recommended that a specialized school of hospital pharmacy 25 Heinrich, National Technical Advisory Committee on Pharmacy, p. 7. 26 Klarman, The Economics of Health, p. 82. 148 27 be established. At the same time it is recommended that the hospital pharmacy program require six years of training. The other suggestion is that schools of phar macy cooperate with hospitals in providing practical clinical experience. It has even been alledged that hos pital experience teaches students about drugs rather than 28 the obligations of a hospital pharmacist. Program suggestions for clinical pharmacy also include improved physician training in medical schools by including a 29 course in clinical pharmacology taught by a pharmacist. The role of the hospital pharmacist in training programs could involve more than the simple training of future pharmacists.^0 Internal hospital teaching could involve the hospital pharmacist with student nurses and other medical staff. In external teaching programs, the 27 Francke, et al.. Mirror to Hospital Pharmacy. p. 163. 28 Joseph A. Oddis, "Facing Up to Hospital Pharmacy Manpower Needs,” American Journal of Hospital Pharmacists. XXIV (June, 1967), pp. 300-305. 29 U.S. Department of Health, Education, and Wel fare, Final Report, p. 22. ^°Hassan, Hospital Pharmacy, p. 27. 149 hospital pharmacist would participate in the programs of schools of pharmacy and medicine. Both alternatives indi cate a better integration of health care inputs. The Pharmacy Manpower study of 1962 has been interpreted as indicating that inadequate resources have been devoted to research and teaching Efficiency in the utilization of health care resources has also been commented on in a context closer to general equilibrium. It has been noted that very little has been done in the way of identifying the returns 32 available on alternative health care expenditures. This includes utilization of resources for research and direct health care with current techniques. In pharmacy it might be argued that commercial pharmaceutical research may lead to duplication of effort which would be an argument for centralized controls or research. 31 Paul Q. Peterson and Maryland Y. Pennell, "Phar macy Manpower Studies of 1962," Journal of the American Pharmaceutical Association. NS III (July, 1963), pp. 354- 58, 360-1. 32 Simon Rottenberg, "Economics of Health: The Allocation of Biomedical Research," American Economic Review. LVII (May, 1967), p. 110. 150 Increases in health care output may reflect not the use of more resources, but an intensification in the use of resources, as found in the case of the British 33 National Health Services. Such a condition would amount to an increase in the productivity of health resources 34 as found in the case of dental services by Weiss. Hopes of increased productivity are directly applicable to phar macy where it appears there is great opportunity for real location to intensify the use of resources for increased productivity. STIMULI FOR FUTURE CHANGE IN THE FACTOR MARKET Evidence of influences in the factor market are likely to aid in construction of any predictions. Train ing responses as noted reflect institutional trends in retail pharmacy, hospital pharmacy, research and develop ment, and government programs. Included in institutional 33 Seymour E. Harris, The Economics of American Medicine. (New York: The MacMillan Company, 1964, p. 276. ^^Weiss, "The Changing Job Structure," p. 223 151 entitles are the number o£ dispensing locations (retail or hospitals) and probable productivity changes. Trends in drug sales between community and hospital pharmacies will influence the number and size of dispensing locations. Trends in drug sales and other health care items are a direct reflection of demographic, sociological, and economic factors. Population increases are likely to yield higher sales as is the increase in the population's average age and income. A relatively new factor in the drug market is the pre-paid health insurance plan which includes pharmaceuticals. Third party payments for phar maceuticals are relatively new and may affect costs and the utilization of pharmacists. Each of these items reflects back on the factor market in some way. Socio logical impact in the market can be seen in the increased number of women entering the factor market. The conclusion to be drawn from the dynamic as pects of the factor market is that several changes must be made to improve the allocation and utilization of re sources to alleviate a probable shortage of pharmacists in the future. There is widespread agreement that phar macists are over-trained for most of the normal dispensing tasks they perform. Replacement of pharmacists by lower skilled labor such as pharmacy technicians would allow greater quantities of pharmaceuticals to be dispensed with the present stock of pharmacists. The use of tech nicians would not be expected to have any appreciable affect on the total labor market. Inertia of the status quo must be overcome to make this change. If pharmacists are not relieved of their many routine tasks, any rapid adoption of the pharmacist as a drug consultant on the health care team is likely to lead to at least a short-run shortage of pharmacists as measured by rising incomes and inefficient resource utilization or reduced output. Theoretically there is the unfortunate possibility that rising incomes could be caused by increasing marginal productivity through misallocation of resources or by legal and other market restrictions. Educational programs are being molded to meet the clinical role which appears to be increasingly accepted in pharmacy and medicine. Rapid increases in the demand for physicians is actually one force working to break down traditional production techniques. 153 Any final statement on conditions in the factor market depends upon several alternative assumptions. By some arbitrary decision, for example by a statement of a board of pharmacy, it could be declared that there is a shortage or surplus of pharmacists. In health care pro duction where pharmacists continue their dispensing chores, but also take on a consulting role, there is likely to be a short-run shortage of pharmacists by over utilization through misallocation. If pharmacists are relieved of their routine dispensing chores there is not likely to be a shortage of pharmacists. This last state ment is predicated on adoption of pharmacy technicians at a rate equal to expansion of the pharmacists consultant role, indicating the necessary responses from educational and regulatory institutions. The indicated role for edu cational institutions is a program less than five years in length for technicians and a six year program for clinical pharmacists. CHAPTER VII CONCLUSION SUMMARYi THE STATE OP THE FACTOR MARKET This study has attempted a qualitative economic analysis of the factor market for pharmacists. The methods used have been institutionally oriented rather than empirical. Examination of pharmacy institutions in cluded identification of the supply mechanisms, sources of effective demand, and major areas of change. Conclu sion on the factor market's state is qualified, not incon sistently, under two alternative approaches: as a sur plus and as a shortage. The initial task was identification of historical elements in pharmacy pertinent to development of the fac tor market. The development of pharmacy has important ties with the medical profession in terms of the use of pharmaceuticals and with the chemical industry in terms of the production of pharmaceuticals. Initially, there 154 155 was no clear distinction between those responsible for prescribing compounding and dispensing pharmaceuticals or those consulting with consumers on their proper use. Pharmacy has gone through the educational states of apprenticeship, proprietary schools and university or associated training. Significant for pharmacy as a pro fession was the establishment of training programs inde pendent of the medical profession. The development of pharmacy from the Civil War to the 1920's was very similar to the medical profession. After this time there was not the tight control of entry to the factor market as it existed in the medical profession, but there was signi ficant control of pharmacist utilization in the factor market. With this background material, the analysis pro ceeded to identify the factor market's current structure and patterns of conduct. The factor market's structure was approached first from the supply side and then from the demand side. Pharmacists, as they are currently known, are licensed by all states. The license granted entails a legal monopoly which, at least theoretically, results in 156 a shortage of pharmacists relative to the quantity de manded by restricting entry. Investigation of the most common license requirements revealed that many# at least by implication# are restrictive. Restrictiveness of licen sing requirements is especially clear where requirements vary by states. License reciprocity proved to be a par ticularly interesting situation when compared to license examination failure rates# states without schools of pharmacy and pharmacist-population ratios. Educational requirements# in terms of both length and content# are suspect of being restrictive when con trasted with the current modal pharmacist employment. Again# in theoretical terms, unnecessary education require ments raise the cost of entry# and result in a shortage of pharmacists relative to the quantity demanded and sup plied under competitive conditions. The barriers of educational requirements raise some interesting points on the nature of the factor mar ket and its allocation of resources. Pharmacist licensing requirements establish minimum standards for pharmacists. For jobs where pharmacists by law must be used# there can be no gradation in the labor force's skill level below 157 that o£ licensing requirements. Elimination of labor with lower pharmacy skill levels tends to standardize labor in the factor market. Under some conditions, input (pharmacist) standard ization might lower health care production costs but this does not seem to fit the nature of tasks performed by the pharmacist. Factor market unification or standardization has eliminated specialization and division of labor in lower levels of pharmacy skills. In pharmacy, this is a shortage (by legal prohibition in community pharmacy) of pharmacy aides or technicians. Licensed pharmacists, consequently, must perform the tasks of lower skill levels, and this has created a surplus of licensed phar macists in terms of their efficient utilization. Further evidence of allocative inefficiency in the utilization of resources is found in geographic mobility patterns of pharmacists. There is a significant correla tion between mobility patterns, measured as pharmacist population ratios and state variations in factors affect ing the supply of pharmacists, indicating imperfect geo graphical mobility. Imperfect geographical mobility is evidence that shortages and surpluses exist by geographic 158 locations. Further investigation might show similar patterns by state for physicians. Structure of the factor market's demand side was approached in the context of market employers, which in clude: community pharmacy, hospital pharmacy, manufac turing and wholesale, and government, teaching and other. Further insights into the allocation of resources are provided by variation in occupational duties. Community pharmacy, or the retail drugstore, em ploys the greatest percentage of pharmacists. The weight of evidence indicates pharmacists spend much time, in this setting, at chores where their knowledge of pharmacy is not utilized. The trend away from owner-operated phar macies is hampered by community pharmacy regulation which favors this form of operation. Chain drugstores and hospital pharmacies are the most rapidly expanding areas of drug distribution. Economies of scale seem to favor chain drugstores. Lower levels of regulation in hospitals has allowed operation in an unrestrained market setting, relative to community pharmacy. Evidence shows some hospitals have replaced the pharmacist with other labor sources, for tasks a 159 pharmacist is required to do in a community pharmacy. The other areas of employment, manufacturing and wholesale, and government, education and other, are rela tively minor in terms of total jobs for pharmacists. Activities of these sectors are important, but not in terms of effective employment demand in the factor market. Factor market conduct and performance are seriously influenced by government regulations and phar macy organizations. There is strong evidence that per formance of the factor market as an allocative device is seriously impeded by market-place interdependencies per petuated by the drive of self-interest. Regulation from both the state and federal level interferes with the mar ket mechanism. Restraints on the demand side of the fac tor market center on the licensing of community pharmacies. With the major exception of federal government specification of drug status as prescription or OTC, community pharmacies are for practical purposes regulated by pharmacists through state boards of pharmacy. Arbi trary state pharmacy board regulations have been used to restrain competition between drugstores. Market restraints show a favoritism toward the independent owner-operated 160 pharmacy, which does not reflect favorably on factor mar ket performance. Implied is a surplus of pharmacists in terms of over-utilization perpetuated by job creation and protection that encourages factor market entry. Pharmacy organizations do not approach the stature or power held by the AMA, but they do wield con siderable influence as special interest groups. Official positions have been taken on most problems in pharmacy by one or more of the numerous organizations. Many groups have a code of ethics which spell out professional practices. Enforcement of discipline, especially in com munity pharmacy, can come through the state board of pharmacy. Careful examination of dynamic aspects provides the clearest opportunity to evaluate the factor market's performance. It is from this final consideration of per formance plus information from earlier discussions that the state of the factor market emerges. Changes in the factor market center around hospital pharmacy, community pharmacy, and educational training. Traditional concepts of pharmacist utilization are being challenged. The hospital, which is evolving as the 161 center of health care, is turning to clinical pharmacy where the pharmacist is used by the health care team as a drug consultant. Along with the adoption of clinical pharmacy, hospitals are instituting the use of pharmacy aides or technicians, and drug distribution to the patient through a unit-dose system. Although limited so far in use, both technicians and the unit-dose system have been shown to reduce hospital costs. The unit-dose system has also improved patient care by reducing medication errors. Community pharmacy has been much less responsive to innovative changes, and practice of clinical pharmacy at this level is limited. The evidence presented on pharmacy laws and regulation, especially when compared with hospital regulation, lends strong support to the theory that community pharmacy has been restrained. For increased efficiency through changes, pharmacy regulation must permit innovation. Adoption of the clinical pharmacy concept in com munity and hospital pharmacies will require several areas of response in addition to legal changes. Individual educational institutions, even if innovative, cannot force changes in curriculum programs, for development of 162 technician and clinical training programs. Schools of pharmacy compete for students and are influenced by pharmacists through the accrediting bodies and other or ganizations dominated by pharmacy interest. Physicians must also accept the pharmacist as a drug consultant. Other dynamic factors exist, but play a lesser role. CONCLUSION t THE STATE OF THE FACTOR MARKET The thesis of this work on the state of the factor market is best broken down into static and dynamic terms. This approach permits identification of short and long- run implications of factor market conditions that of course ultimately depend upon the assumptions made. Equilibrium as the factor market's state can be eliminated on two grounds. First, in a dynamic economy, equilibrium in the static sense does not exist. Second, the existence of restrictions in the factor market, eliminate the possibility of either a static or dynamic competitive equilibrium. Between factor market conditions of a surplus and shortage, the weight of evidence in this work supports the thesis that there is a surplus of pharmacists as 163 presently trained and licensed, but a severe shortage of pharmacists with other skill levels. There is a surplus of pharmacists as they are presently trained and licensed, based upon evidence of the tasks performed by pharmacists in dispensing. Legal and institutional restrictions have created and protected these jobs, especially in community pharmacy. Theore tically, artificial maintenance of the demand for phar macists, in the short-run, leads to movement along the supply curve and, in the long-run, the supply curve may shift through factor market entry. Entry in the long- run will influence the extent to which demand creation maintains the incomes of pharmacists and encourages poten tial entrants to incur the cost of factor market entry. There is a severe shortage of pharmacists with lower skill levels due to the lack of training programs and legality for use, and a lesser shortage of pharma cists with very high skill levels, again due to the absence of training programs. Pharmacists' training requirements are greater than necessary for the mode of community pharmacy, as it is practiced. There is almost a complete absence of pharmacy technicians, which cannot 164 be justified, except for self-interests of the profession. The future state of the factor market will depend upon the rates at which elements change. As the concept of clinical pharmacy is adopted, there will be a greater demand for pharmacists with clinical training. Few schools have clinical pharmacy programs, and experience indicates that clinical curriculum requires training in excess of what can be eliminated from current programs. It appears that any widespread adoption of clinical phar macy curriculum should be accompanied by adoption of a pharmacy technician program. Serious consideration as to impact on the state of the factor market of any new programs especially their length and whether or not they are open-ended. Failure or delay in the development of clinical pharmacy can be attributed to pressures of the status quo in retail pharmacy and to some degree the edu cational system, and probably the medical profession where loss of responsibility and control has been fre quently fought by the AMA. Policy and research recom mendations must recognize the limited nature of this qualitative research. 165 POLICY IMPLICATIONS AMD FURTHER RESEARCH The goal of this work waa an economic analysis of the factor market for pharmacists. This analysis leaves little doubt that the allocation and utilization of resources is less than optimal. No operational policy alternatives have been made to attain what appears to be a desirable policy objective, namely greater adoption of pharmacy technicians and use of the clinical pharmacy concept. This policy objective must be recognized as partial equilibrium in nature. The general recommendation for further study is development of an operational policy through investigation of policy-oriented factors not given consideration here. The latter include welfare criteria, input substitution, externalities, medical care programs, and the role of government. Behind any policy proposal lies a welfare criter ion and the welfare implications of health care seem important enough to consider before suggesting a policy for market interference. Inelastic demand in most health care sectors intensifies the danger of restrictive practices to purchasers. Attempts of the pharmacy (and medical) profession to maintain high professional 166 standards for health care are laudable. Unfortunately, however, they restrict health care output and result in what appear to be monopolistic practices measured in terms of health care indices. This occurs by failing to recognize the trade-off between returns on the alter native uses of inputs, since logically, operation under the premise that a price cannot be put on human life or suffering would see all resources allocated to health care. At present, institutional restraints appear to prevent the market place's experimentation in input sub stitution. Input substitution could come not only within the pharmacy sector, but pharmaceutical services might be used as substitute inputs in other health care sectors. Health care substitutions might reveal externalities and a divergence of private and social benefits. Benefits may be found for example in various medical care programs. Further information is needed on input substitu tion. especially in the use of pharmacy technicians and drug consultants. Such data would be invaluable to edu cational planning in pharmacy that might overlap into other medical professions. Detailed income data would 167 also be invaluable in comparisons with other professions and regional variations within pharmacy. In addition to a role for prevention of restric tive practices, the role of government could include health care production and financing on four grounds: (1) the collective nature of public health, where bene fits accrue to all; (2) external consumption effects where others benefit to some extent; (3) declining per unit costs of production; and (4) society preference for non-profit or government facilities.*" Two major problems appear unsolved: first, allowance for the divergence of private and social costs and benefits in health care, and second, solution of conflicts in private and social economic interest brought about by the interdependencies of self-regulation. *lClarman, The Economics of Health, pp. 49-51. 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Washington, D.C.t Government Printing Office, 1969. United States Department of Health, Education, and Wel fare. Proceedings. Foed and Drug Administration Conference on the Kefauver-Harria Drug Amendments and Proposed Regulations. Washington, D.C.t Government Printing Office, 1963. United States Department of Health, Education and Welfare, Office of the Secretary. Task Force on Prescrip tion Drugs. Second Interim Report and Recommen dations. Washington, D.C.t Government Printing Office, 1968. 175 United States Public Health Service. Health Manpower Source Book. Section 15. Washington. D.C.: Government Printing Office. 1965. . Health Manpower Source Book. Section 20. Washington. D.C.: Government Printing Office. 1965. APPENDIX I Schools of Pharmacy: Students Enrolled and Degrees Conferred for 1968-69* Students Degrees Schools by Districts enrolled Conferred _______________________________________1968-69 1968-69 District 1 Connecticut: University of Connecticut 214 75 Massachusetts: Massachusetts College of Pharmacy 325 111 Northeastern University 148 56 Rhode Island: University of Rhode Island 93 41 Totals 780 283 District 2 Maryland: University of Maryland 154 59 New Jersey: Rutgers State University 132 55 New York: Union University, Albany College 241 78 Long Island University, Brooklyn College 243 94 a Calculated from: Charles W. Bliven, "Report of Degrees Conferred by Schools and Colleges of Pharmacy For the Academic Year 1968-69," American Journal of Phar maceutical Education, XXXIV, No. 1 (February, 1970), 86-91. 176 177 Columbia University 198 65 Fordham University 132 46 State University of New York at Buffalo 172 54 St, John's University 187 86 Pennsylvania: Duquesne University 98 38 Philadelphia College of Pharmacy 353 114 University of Pittsburgh 160 59 Temple University 196 79 Virginia: Medical College of Virginia 215 64 Washington, D.C.t Howard University 102 19 West Virginia: West Virginia University 147 33 Totals 2730 933 District 3 Alabama: Auburn University 225 75 Samford University 207 55 Florida: University of Florida 211 67 Florida A & M University 72 17 Georgia: University of Georgia 425 136 Mercer University 203 58 Mississippi: University of Mississippi 239 82 North Carolina: University of North Carolina 372 96 South Carolina: Medical University of South Carolina 79 23 University of South Carolina 140 43 Tennessee: University of Tennessee 307 95 Totals 2480 747 178 District 4 Illinoist University of Illinois 438 123 Indianat Butler University 112 34 Purdue University 340 140 Kentuckyi University of Kentucky 171 49 Michigan: Ferris State College 273 72 University of Michigan 92 53 Wayne State university 142 40 Ohio: University of Cincinnati 167 46 Ohio Northern University 124 31 Ohio State University 176 62 University of Toledo 99 24 Wisconsin: University of Wisconsin 460 169 Totals 2594 842 District 5 Iowa: Drake University 179 51 State University of Iowa 182 67 Minnesota: University of Minnesota 256 81 Nebraska: Creighton University 104 34 University of Nebraska 196 62 North Dakota: North Dakota State University 247 69 South Dakota: South Dakota State University 169 49 Totals 1333 413 179 District 6 Arkansas: University of Arkansas 134 46 Kansas: University of Kansas 189 67 Louisiana: Northeast Louisiana State 382 128 Xavier University 62 14 Missouri: University of Missouri at Kansas City 130 45 St. Louis College of Pharmacy 269 75 Oklahoma: University of Oklahoma 214 75 Southwestern State College 352 92 Texas: University of Houston 328 86 University of Texas 386 151 Texas Southern University 164 45 Totals 2610 824 District 7 Idaho: Idaho State University 109 21 Montana: University of Montana 99 27 Oregon: Oregon State University 228 59 Washington: University of Washington 221 58 Washington State University 127 31 Wyoming: University of Wyoming 64 20 Totals 848 216 180 District 8 Arizona: University of Arizona 210 46 California: University of California 244 79 University of the Pacific 219 63 University of Southern California 311 108 Colorado: University of Colorado 118 32 New Mexico: University of New Mexico 88 24 Utah: University of Utah 188 52 Totals 1378 404 Puerto Rico: v> University of Puerto Rico U 48 Totals 48 GRAND TOTALS 14,153 4,710 ^Statistics not available on this figure APPENDIX II Pharmacists by Type of Practice by States and Resident Pharmacists In Practice per 100,000 Population* as of January 1, 1969 Location ' Total Llcanaad In State In Practice Total In Practice In Stata Community Pharmacy Hospital Pharmacy Manufac turing Teaching, Gov't 4 Other Pharma* ceutlcel Cspadtiee Total In Coanunlty Practica in Stata toner Employee Total* 135.905 124,486 105,203 51,584 53,619 9,428 4,979 4 676 Ala* 2.214 2,057 1.737 727 1,010 196 14 110 A]<iki 92 92 82 40 42 2 5 3 Arts* 1.106 1,016 833 2a 389 121 31 31 Ark* 1.175 995 924 U6 476 52 9 10 12.739 11,640 10,259 5,630 4,629 889 320 172 Colo. 1.163 1,643 1.426 477 949 66 96 53 Cono. 2.624 2,524 1,868 862 1,006 207 139 310 Dal* 260 233 203 73 130 16 6 4 D.C* 64B 595 497 86 411 51 18 29 rUe 4.828 4,432 3,781 1,463 2,316 363 35 253 Go. 2.732 2,504 1,921 1,066 835 127 276 160 Bewail 205 202 143 45 98 37 16 6 Idaho 562 490 436 225 211 26 13 13 Ills 6.661 5,756 4.700 1,973 2,727 656 243 157 Ind. 3.310 3,097 2,524 979 1,545 241 2a 66 Iowa 2,001 1,767 1,513 626 687 125 23 126 Reuse• 1,526 1,285 1,125 571 554 107 36 15 Ry. 1,734 1.542 1,366 641 745 115 18 23 La* 2,267 2,223 2,012 972 1,040 90 60 61 Main* 450 436 411 316 95 11 11 3 Md. 2,507 2,242 1,970 372 1,598 77 69 106 Mate. 5.156 4,699 3,797 1,557 2,240 385 249 266 Mich. 5,938 5,420 4,569 2,027 2.542 604 156 69 Mlon* 2,609 2,221 1,640 879 761 167 60 354 Mica. 1,130 l,C87 974 547 427 66 30 17 Mo. 3,057 2,518 2,134 928 1,206 249 121 14 . Moot. 527 426 383 216 167 22 12 Pebr. 1,157 1,009 822 402 420 72 57 56 Nov. 336 323 295 75 220 20 3 5 U.K. 346 336 308 166 142 20 7 3 H.J. 4,686 4,206 3,704 1,852 1,652 138 231 135 V. Mas. 610 564 455 232 223 49 16 42 N.Y. 12,751 12,493 10,146 7,815 2,331 931 697 519 B.C. 2,130 1,973 1,807 666 941 115 26 25 M. Dak. 401 354 311 161 150 26 9 8 Ohio 6,8a 6,495 5,700 2,625 3,075 365 220 210 Okla. 2,168 2,122 1,938 763 1,175 65 64 55 Ora. 1,508 1,321 1,152 467 685 101 27 41 Pa. 10,365 9,605 8,072 4,450 3,622 650 525 356 Rico 948 946 793 331 462 25 14 116 R.l. 836 746 625 233 392 64 26 29 *.c. 1,412 1,375 1,253 521 732 54 26 42 * • Dak. 458 458 408 168 220 22 17 11 2,647 2.351 2,003 957 1,046 212 69 47 Tii. 6,830 6,064 5,262 2,326 2,956 450 168 164 |f^ a 736 697 566 220 346 62 29 40 223 206 193 85 106 5 3 7 ’ MtM* T 2.050 27 1,860 26 1,435 20 630 9 805 1 1 128 5 37 0 260 1 2,450 1,940 776 1,164 343 69 98 Vut. 1 , n t 710 616 267 331 77 6 7 W V i A 3,4(2 2.3a 1,676 833 1,063 346 66 54 3 * » 4 262 233 106 127 9 3 17 Sourcei National Association of Boards of Pharmacy, Pro ceedings of 65th Annual Convention (Montreal, Canadat 1969), p. 194. “From National Association of Boards of Pharmacy, Proceedings of 65th Annual Convention (Montreal, Canadat 1969), p. 193. APPENDIX III M e a n H o u r s a n d P e r c e n t a g e o r T o t a l C u r r i c u l u m D e v o te d t o F iv e C o m p o n e n t s o f t h e PHARMACBUT1CAL CURRICULUM AT TWELVE COLLEGES OF PlIARMACT High Total Low Total Mean Total Liberal A rts Mean St unpro fessional or Supporting Mean Profes sional Mean Elective Mean Mitcel- laneous Mean Program Hour* % Hours % Hours % Hours % Hours % 4-year prograrrN. 166 122 141.25 15.3 (0.8 S4.1 38.0 65.0 462 3.8 2.9 3.0 2.6 5-year program 184 139 162.08 23.4 14.3 61.0 37.5 64.6 39.9 9.7 6.1 33 2 2 C o u r se R e q u d ie m e n t s in T w e n t y -t w o C o lleges o f Ph arm acy: t h e F our-year C urr ic ulu m 1 2 3 4 5 Liberal Semi-professional Total Hours Arts or Supporting Professional Total Per Electives Miscellaneous College centage of Required Hours Percentage Hours Percentage Hours Percentage 2 and 3 Hours Percentage Hours Percentage 1 161 15 9.3 58 36.0 86 53.4 89.4 0 0 0 0 II 140 12 8.6 57 40.7 68 48.6 89.3 3 2.1 0 0 III 13 5 6 4 4 65 48.1 58 43.0 91.1 6 4.4 0 0 IV 138 6 4.3 3*1* 27.9 871* 63.4 91.3 6 4.3 0 0 V 144 15 10.4 56 38.9 69 47.9 86.8 0 0 4 2.8 VI 139 21 15.1 36 25.9 70 50.4 76.3 4 2.9 8 5.8 VII 138 IS 10.9 59 42.8 57 41.3 84.1 3 2.2 4 2.9 VIII 152 13 8.6 69 45.4 70 46.0 91.4 0 0 0 0 IX 125 II 8.8 72 57.6 42 336 91.2 0 0 0 0 X 142 12 8.5 51 359 59 41.5 77.4 14 9.9 6 4 2 XI 128 12 9.4 39 30.5 64 500 80.5 13 10.2 0 0 XII 141 27 19 1 52 36.9 62 44.0 80.9 0 0 0 0 XIII 122 10 83 45 35.1 58 47.5 82.6 5 4.4 6 4.9 XIV 122 12 9.8 38 309 58 47.5 78.4 7 5.9 7 5.9 . XV 145 12 83 38 26.2 80 55.9 82.1 6 4.1 8 5.5 XVI 115 15 13.0 51 44.8 49 42.2 86.0 0 0 0 0 XVII 146 14 9.6 69 47.3 51 34.9 81.2 12 8.2 0 0 XVIII 166 IS 10.8 75 45.2 73 440 892 0 0 0 0 XIX 124 18 14.5 45 36.3 57 46.0 82.3 4 32 0 0 XX 156 26 16.7 63 40.4 56 35.9 763 0 0 11 7.0 XXI 143 14 9.8 41 28.7 88 61.5 90.2 0 0 0 0 XXII 140 15 10.7 53 37.9 66 47.1 85.0 0 0 6 4.3 High1 166 27 19.1 75 57.6 88 63.4 _ 14 10.2 11 7.0 Low1 115 6 4.3 36 26.2 12 33.6 _ 0 0 0 0 Mean1 1393 14.5 10.4 53.2 38.2 64.9 46.6 — 31 2.8 2.7 2.0 * The Afures in (he various cattforics do not tolel 100 because (hey represent different institutions. Sourest James Newcomer, Kevin P. Brunnell and Earl j. McGrath, Liberal Edu cation and Pharmacy (New Yorkt Bureau of Publications, Teachers College, Columbia University, 1960), p. 102. 183 APPENDIX IV Licensure of Pharmacistsi calendar Year 1968 lien... 1..U.4 LociCloo Appllc.nt. {or .xmln.tlon Applic.nt. F.ll.d Bp ot.nl> nation By rtcl- proclty By r.ln> at.tm.nt By 4t.th By su.pan- •lon or rtvocatloo Totals 5,660 719 4,941 1,881 392 1,437 1,233 Alt* 103 4 99 18 - - Alaska t 0 2 2 0 0 0 Arts* 43 2 41 110 0 23 39 Ark. 42 0 42 10 8 32 23 Calif. 724 176 530 0 4 234 229 Colo. 3» 2 37 39 79 22 121 Coon. 42 0 42 29 ' 1 41 2 Dole 6 0 6 17 1 2 0 D.C. 47 22 25 19 0 0 0 Fla. 344 38 306 0 3 46 6 Co. 147 8 139 81 0 33 0 Hawaii 20 7 13 0 0 1 3 Idaho 23 - ' 23 17 1 3 IS III. 272 33 239 129 • • I pda 118 13 103 39 47 1 lows 122 5 117 24 0 32 49 Xaaaaa 36 0 36 34 3 26 49 53 2 31 52 3 23 93 U. 146 3 143 28 14 23 49 Ms loo 28 6 22 17 3 18 9 Hde 68 19 49 84 1 36 t Haas. ' 162 0 U2 20 0 11 Kick. 126 11 113 32 3 31 9 Kino a 81 9 72 29 0 48 0 Miss. 6* 1 68 22 1 14 0 M O a 102 3 99 67 8 60 74 Moot. 15 0 15 21 0 7 0 Mohr* 31 1 50 8 1 32 99 Haw. 196 10 186 27 6 3 39 Hale 20 2 18 12 0 4 0 H.J. 176 64 112 33 0 • 9 I. Max. 19 0 19 29 2 17 Hat. 486 183 301 73 • 14 H.C. 90 16 74 63 12 35 H. Dak. 63 0 63 8 1 7 129 Ohio 181 10 171 90 0 2 Okla. 116 3 113 27 42 Ora. 63 13 30 34 3 23 11 ' Fs. Fuorto Elco 215 44 1 11 214 33 34 7 10 ISO te la 27 0 27 8 3 6 SC, 67 2 65 27 14 11 S . Dak* 16 0 16 14 0 • 12 0 Toon. 120 6 114 63 9 41 1 ' TtSa 323 14 309 128 0 137 Dtafc 30 0 30 11 0 1 9 £ Vt. 17 1 16 17 2 8 Virginia 89 1 88 47 3 32 0 v*r*lii I. 1 0 1 0 0 0 < V.ih. 92 2 90 . 37 2 0 9 • « • n. 39 4 35 8 2 16 s « • . 97 7 90 46 0 33 Jl a 18 0 IS 6 0 11 w Source: National Association of Boards of Pharmacy, Pro- ceedings of 65th Annual Convention (Montreali 1969), p. 202. 184 APPENDIX V Assistant Pharmacists According to Residence and Activity Status: January 1, 1969 Location Total Registrations Residence Activity Status Outside of Stata WithIn Stata Active Inactive Totala 1,547 369 1,178 1,111 436 Ala. 159 0 159 159- 0 Colo. 230 216 14 14 216 Conn. 57 10 47 20 37 Sal. 15 2 13 8 7 111. 331 0 331 331 Ind. 7 1 6 2 5 1 1 0 0 1 La. 49 0 49 49 0 Maaa. 83 34 49 49 34 Minn. 24 18 6 6 18 Mlaa. 59 3 56 56 3 Mont. 34 11 23 16 18 Rev. 4 3 1 1 3 H.J. 3 1 2 0 3 H.C. 18 1 17 17 1 R. Dak. 6 6 0 0 6 Ohio 11 0 11 5 6 Okla. 177 8 169 164 Ora. 2 0 2 1 1 Pa. 91 0 91 91 0 R.I. 31 6 25 21 10 S.C. 70 0 70 65 5 S. Dak. 1 0 1 1 Virginia 3 1 2 1 2 Virgin I. 8 0 8 8 0 W. Va. 18 4 14 14 4 Via. 55 43 12 12 43 Source: National Associations of Boards of Pharmacy, Proceedings of 65th Annual Convention (Montreal: 1969), p. 205.
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Erickson, Edward Carl
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An Economic Analysis Of The Factor Market For Pharmacists
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