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FEDERAL RESERVE BANK OF PHILADELPHIA
MARCH
Drugs and Bugs
How Did Banks Make Out in 1958?
1 5
9 9
DRUGS
On Philadelphia’s Spring Garden Street west
logicals in Marietta (Lancaster County), and
of Broad there once stood a huge, hoary brick
the shiny quarters in Radnor house the labora
building where Baldwin made locomotives—
tories and administrative functions of the com
great, big steam locomotives. On the same spot
pany reaching as far west as Idaho.
National Drug, which merged with Vick Chem
now stands a tidy, modern structure where Smith,
Kline & French makes pills— teeny, tiny pills.
ical, has a stand in Philadelphia; McNeil Labora
Just around the corner on Broad Street, a mere
tories recently absorbed by Johnson & Johnson
seven-iron shot north of Spring Garden in a
(surgical dressings) has been making drugs in
building of the nineties vintage, Philadelphia’s
Philadelphia for fourscore years, and in nearby
famed Sharp & Dohme has been making pills for
Hammonton, New Jersey, Whitehall Laboratories
generations. Merged with Merck in 1953, Merck,
makes pharmaceuticals in a brand-new plant. It
Sharp & Dohme now also operates a 300-acre
is not intended to create the impression that
laboratory and pill plantation in the suburbs at
Philadelphia has a half-nelson on the pharma
West Point.
ceutical industry, but the Quaker City is the focus
Wyeth Laboratories — a division of Ameri
of an important drug-manufacturing area largely
can Home Products— makes pharmaceuticals in
because of the city’s longstanding prominence as
Philadelphia, antibiotics in West Chester, bio-
a center of materia medica.
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makes a lot out of a little.
MATERIA ECONOMICA
How the industry stacks up for size depends
upon what it is compared with in the American
Pharmaceuticals are as old as Egypt and as new
family of almost 500 manufacturing industries.
as nucleonics. The industry is research-rooted
Alongside the big ones, it is little; alongside the
and market-minded. Producers are lavish in ex
little ones, it is big. Why not dispense with the
penditures on product development and equally
confusion of numbers and just call pharmaceu
lavish in cultivating their markets. It’s an indus
ticals a big little industry?
try of small fixed-capital investment but heavy
selling expenses. Some companies are large;
Who's who?
others small. Some make a full line of drugs;
Drug
others specialize in a limited line. The industry
classes— the ethical and the proprietary (no un
is split between firms selling products for usage
ethical implications). The ethical houses make
manufacturing
concerns
fall into two
under professional direction and those selling
products which are used under professional di
products advertised to consumers.
The industry is highly competitive, handsomely
rections and the purchase of these drugs may
require both money and a doctor’s prescription.
profitable, alert, healthy, vigorous, unseasonal,
Money alone buys the products of the proprietary
uncyclical, public-spirited, and wise in public
relations. It is subject to Government scrutiny
concerns. Ethical drugs are things like antibiotics,
sulfonamides, vaccines— high-voltage stuff for the
for malpractices, and to investor scrutiny for
killer diseases. Proprietary drugs are low-voltage
profitable practices. Companies usually compete
concoctions like aspirin products, cold remedies,
with each other like cats and dogs but during
and laxatives.
emergencies like wars or epidemics, they cooper
Proprietary drugs are often but erroneously
ate like brothers. Moreover, companies compete
called “ patent” medicines. To get a patent in
with themselves. New and more effective drugs
are forever pushing older products off the pro
this country, you must come up with something
duction lines and off druggists’ shelves. By cease
usually the ethical houses that develop new drugs
less striving to put itself out of business, the
and get them patented. Thus, patent medicines
industry puts itself more firmly into business.
are seldom patented medicine.
new and original. In the realm of medicine, it is
Among the most widely known ethical manu
A big little industry
facturers are Abbott Laboratories; American
By latest count, the pharmaceutical industry con
Home Products; Lederle; Lilly; Merck, Sharp &
sists of 1,163 concerns that employ 77,000 people
Dohme; Parke, Davis; Pfizer; Schering; Searle;
who work up $482 million of raw materials into
Smith, Kline & French; and Upjohn. Some of the
$1,643 million of pills, capsules, ampules, liquids,
leading firms in the proprietary field are Bristol-
salves, ointments, hormones, vaccines, antibiotics,
Myers;
and other finished products. Few if any other
Plough; Sterling; Vick; and Warner-Lambert.
industries have as great a spread, percentage
Ethicals have been growing fast and now account
Mead Johnson;
Norwich Pharmacal;
wise, between raw-material costs and value of
for almost three-quarters of the total pharmaceu
products shipped. In other words, the industry
tical sales.
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The trouble with the twofold division, just ex
You get the feeling you are going through a
plained, is that it is getting fuzzy. Heretofore
laboratory— and as a matter of fact you are. A
strictly ethicals are going into proprietaries, and
shop of this kind is essentially a laboratory, with
some of the proprietary firms are going into
a production department attached to make the
ethicals. Invading each other’ s preserves is done
laboratory self-supporting. It is significant that
either by developing new-product lines or by way
the word “ laboratories” appears in the title of a
of consolidation and merger.
number of leading manufacturers of ethical
drugs. With or without the word— and note the
A tour through a pill mill
plural-—no respectable pharmaceutical house is
In some respects, a pill mill, or tablet factory
without them. In many lines of business it is
for technical accuracy, is like any other fac
fashionable to have laboratories, but in this busi
tory. In other respects, it isn’t. As you might
ness, laboratories are indispensable.
suppose, a pill— like any other product— must
It isn’t exactly unusual to find a library at
be designed, the ingredients are carefully weighed
tached to a business organization, but in a phar
according to the recipe, and shaping takes place
maceutical house you find a library where the
on little tablet-punching machines that punch
them out at the rate of 2,000 a minute. What a
librarian seldom languishes in loneliness. Maga
zines by the hundreds and books by the thou
sickly people we must be! After spray coating,
sands, mostly highly technical stuff and in all
comes polishing done on a machine that resem
languages— and believe it or not, people read
bles a concrete mixer. The hissing and the swish
ing them.
ing in the pill-polishing department are perhaps
the most distinctive sounds the tourist through a
The mouse and monkey department
pill factory takes with him. Bottling and packag
In their native habitat, mice are mice, and mon
ing are high-speed, mechanized operations— the
keys are monkeys— but in a pill mill, both are
same as in a dairy or a distillery. There is endless
guinea pigs. So are chicks, cats, dogs, rabbits,
checking and inspecting and testing, which is
and an occasional horse, cow, or bull. Mice and
quite understandable, for here is a business where
monkeys seem to be the favorite guinea pigs,
an error cannot be tolerated because it might
judged by the number kept on hand to try out
new drugs. Breeding pharmaceutical mice is a
be fatal.
The machinery, materials, and inhabitants of
a pill factory are also what you might expect—
special business engaged in by several firms along
the Atlantic Seaboard.
huge tanks with interconnecting piping, auto
The monkey business is different. Monkeys
claves, centrifuges, filter presses, kettledrums full
come from Burma, India, Malaya, Pakistan,
of mentholated mixtures, herbs, carboys, drums,
Thailand, and the Philippines. They are flown
scales and pails, and all kinds of professional
into this country on regularly scheduled cargo
paraphernalia like beakers and bottles, Bunsen
planes and by charter flights. Immigrant monkeys
burners, pipettes and petri dishes aplenty, and
are now arriving in this country at an annual rate
professional people wearing long white coats, and
of about 225,000 animals. The average cost of a
some also wearing masks to scare away the deadly
monkey is about $50, and they are used not only
bugs they are playing with.
by the major drug companies but also by re
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search foundations, biological laboratories, medi
apiece to the patient. Five to $10 worth usually
cal schools, Federal agencies such as the National
gets you on your feet, when laid low by a bug of
Institute of Health, the armed services, the
some sort. Precisely what bug bit you is a fact
Atomic Energy Commission, etc.
you or your doctor may never know. But this
you know and lived to tell— that the antibiotic
MICROCOSMIC COMPETITION
For all our scientific fuss
made you well. And what are antibiotics?
Research is still a blunderbuss,
Scientific witchcraft
We fire a monstrous charge of shot
A sufficiently powerful microscope trained on a
And sometimes hit, but mostly not!
drop of water or a speck of soil would reveal
— “ T he S kills
E conomist ,” by
more living things and a greater variety than the
Kenneth E. Boulding (Howard, Allen, Inc.,
publishers, Cleveland 6, Ohio)
population of New York City! You would see
of the
an unbelievably colorful jungle of wiggling wild
George Washington was often exposed to
life— strange beings waging unremitting warfare
enemy fire, but what finally killed him was not a
with each other for food, water, space, and exist
bullet but a bug. During his final illness the doc
ence. These microbic organisms, including molds
tors urged him to dring a sickening mixture of
and bacteria, are on the borderline between
molasses, vinegar, and butter, but he couldn’t
plants and animals and look like an arboreal
take it. Then he was made to eat a menthol vapor
nightmare. So tiny that a teaspoonful would num
rub. The doctors drained a pint of blood and
wrapped around his throat a flannel cloth soaked
ber millions of millions, they multiply and fight
furiously, and as they grow they become visible
in menthol vapor rub. They bathed his feet in
warm water, applied a blister of Spanish flies to
like the mold on a piece of stale bread.
his throat, bled him another pint, made him
bugs to the layman, are not all vicious, as might
gargle with sage tea and vinegar, and bled
be imagined. Some microbes are useful, like
him again.
those employed to make wine, beer, bread, and
Microbes, molds, fungi, bacteria, or just plain
As the General got worse, he was given a
cheese, through a process called fermentation.
heavier bleeding— a full quart— and was given a
These, the helpful microbes— technically known
laxative of calomel and an emetic of tartar. A
as saprophytes— might be called the “ goodies.”
young physician who advised slitting the Gen
Then there are the harmful microbes— the para
eral’s windpipe below the point of mucous ob
sites — that bring pneumonia, typhoid, small
struction, to assist breathing (today’s tracheot
omy operation), was overruled; instead, blisters
pox, tuberculosis, etc., that might be called the
“ badies.” It is only within the past few years
of wheat bran were applied to the General’s feet.
that we have learned how to use the goodies to
Then the General died.
fight the badies.
In the light of today’s knowledge, Washing
Among
chemical
substances
produced
by
ton’s terminal illness would probably be diag
microbes are two groups of compounds: (1) the
nosed as streptococcic laryngitis. Too bad the
growth type, which are stimulating— vitamins—
doctors didn’t have any antibiotics.
they are the good-will microbes; (2) the growth-
Antibiotics come in tiny capsules at 50 cents
inhibiting or antibiotics are the ill-will microbes.
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Thus, antibiotics are chemical substances pro
of the microcosmic competition in the labora
duced by a microorganism, or identical substances
tories throughout the industry— competition in
produced by chemical synthesis which have the
the little world of the microbes. Each company
capacity to inhibit the growth of other micro
tried to outdo the other in bringing out the most
organisms or to destroy them.
effective bug killer.
Penicillin, the first useful antibiotic, was dis
covered in England by Alexander Fleming in
Laboratory technicians worked overtime to
discover new antibiotics. As fast as they found
1928, who found its ability to eliminate disease—causing bacteria in vitro, that is, under test-tube
them, they tried them out on mice and monkeys,
and then on man. After getting approval of the
conditions. In 1939-1941, two other Englishmen
— Drs. Howard W. Florey and Ernst D. Chain—
Food and Drug Administration as to the purity,
safety, and potency of the new antibiotic, and a
found a way to use penicillin as an effective de
patent to ward off competitors, the new drug
stroyer of bacteria in vivo, that is, in laboratory
went to market. Competition was fast and furious.
animals and in persons. For their discoveries, the
New antibiotics appeared in rapid successsion.
three microbe hunters received the Nobel Prize
American Cyanimid’s Lederle Laboratories pa
in Medicine and Physiology in 1945.
tented Chlorotetracycline in 1949, and the same
Prodigious efforts were made during World
War II to improve the potency and productivity
year Parke, Davis patented Chloramphenicol.
Patents were granted in 1950 on Pfizer’s Oxyte-
of penicillin. In 1943, the Department of Agri
tracycline, and in 1951 on Lilly’s Penicillin V,
culture’s Peoria laboratory found a penicillin
in 1953 on Wyeth’s (American Home Products)
mold which increased the yield to about 100
Benzathine penicillin, and Lilly’s Erythromycin,
times that of the original Fleming mold. Further
and Pfizer’s Tetracycline. All of these and two
increases in yield were obtained at the Carnegie
Institution, where the Peoria mold was bom
dozen others that might be mentioned are the
broad spectrum antibiotics— drugs effective in
barded with X rays, and still greater increases
fighting a wider range of germs than the original
in yield were obtained by University of Wis
narrow spectrum, penicillin.
consin
geneticists,
who
used
ultraviolet-ray
bombardment.
For all we know, most of the antibiotics just
mentioned may now be obsolete because the
The first significant product of company-
competition maintains such a fast pace that one
financed research was streptomycin, discovered
company’s product is rapidly superseded by an
in 1943 by Dr. Selman A. Waksman and his
assistants working at Rutgers University on a
improved antibiotic from either its own labora
tory or that of a competitor. Unlike formerly,
grant by Merck & Company which magnani
when it took about ten years to develop a new
mously gave up its contractual “ sole right to
drug, which was good for about 15 years, it now
develop commercially” any results of this re
takes much less time to bring out a new product,
search. Streptomycin was the first drug to attack
and its life span is likely to be short.
the tuberculosis germ directly in the body of
the victim.
MACROCOSMIC COMPETITION
The basic microbial discoveries outside the
Competition in the laboratories in the little world
pharmaceutical industry touched off a stampede
of microbes is only half the competition in this
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industry. The other half takes place in the wide,
The hailstorm of "happy pills"
wide world of markets. This is macrocosmic
competition.
Canst thou not minister to a mind diseas’d,
Pluck from the memory a rooted sorrow,
How to get a drug on the market
Raze out the written troubles of the brain,
How a drug gets on the market depends on
And with some sweet oblivious antidote
whether it is a proprietary or an ethical drug.
Cleanse the stuff’d bosom of that perilous stuff
If it is a proprietary, you know very well how
Which weighs upon the heart?
it gets on the market— the same way any other
— “ M a c b e t h A c t V, Scene 3.
product gets there: advertising in the newspapers,
magazines, on radio and TV. The gunman who
More hospital beds are occupied by mental
specializes in robbing lone women proprietors of
patients than the total of all other types of dis
small retail stores is all set to get his fourth
ability combined. In the past half-dozen years,
victim.
about to
numerous medical agents have been found which
close in on him, comes the commercial— about
calm the patient and make him more amenable
somebody’s stomach sweetener, illustrated with
to other types of therapy. The market is flooded
animated cartoons so dearly beloved by little
with more than 30 different types of tranquilizers,
children. Oftimes the advertising department has
professionally known as ataractic drugs (from
just discovered a new ingredient that causes the
the Greek word, ataraxia, meaning freedom from
remedy to rotate clockwise in ever-widening cir
mental disturbance), and popularly known as
“ I-don’t-care pills,” “ mood pills,” “ happy pills,”
Just when the police
are
cles throughout the entire abdominal cavity as
prima facie proof of its curative power. And
only 590 at your nearest drugstore.
etc. In calling all doctors, the discoverers of new
pharmaceuticals set up quite a clamor.
Most ethical drugs, though bought by the ulti
One way of calling to the attention of doctors
mate consumer, require a doctor’s prescription,
a new drug is the obvious one of advertising in
as already mentioned. Consequently, the adver
the medical journals, of which there are a great
tising must be pitched at the doctors, and that
many— journals and advertisements.
calls for a technique quite unlike proprietary
Probably more effective is direct mail. Doctors
pitching. When an ethical house has developed a
are the recipients of a constant and enormous
new drug and is ready to launch it, the manufac
turer virtually ignores the market of 175 million
barrage of direct mail advertising designed to
potential consumers and directs his efforts on the
country’s 225,000 physicians. It sounds easy but
mind them of drugs no longer new. Big drug
companies think nothing of spending $500,000
in reality it is tough because most doctors are
in the first year’s promotional mailing on a new
very busy people who put in an average work
product. A widespread practice is to send along
week of better than 60 hours. So the problem is
with the literature samples of the new drugs, and
inform them about new drugs as well as to re
how to catch them in an idle moment to tell them
sometimes also mechanical pens or pencils with
all about a brand-new drug they have never
which to write the prescriptions, and other gad
heard about. This may be explained with refer
gets like prescription blanks, rulers, calendars,
ence to the advent of tranquilizers.
desk pads, etc.
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Then there are sales promotion devices such
nervous little mice and tamed ferocious rhesus
as motion pictures, closed-circuit television pro
monkeys. After successful trials on man, the com
grams, guided tours, lectures and exhibits at
pany got clearance from the Food and Drug
medical meetings.
Administration to market the new tranquilizer.
Most important of all are the detail men.
In harmony with the company’s New Bruns
Major pharmaceutical houses have squads of
wick laboratory policy of naming experimental
detail men who personally call upon physicians
products after nearby communities, this drug was
to introduce and promote new products and an
swer questions relating to them. It is the job of
called Miltown— adapted from Milltown, drop
the detail man to develop in the physician enough
ping one “ 1.” With that most unmedical name, the
drug went to market. Initially, it was a slow
interest in the new product so that he will pre
burner with monthly sales of scarcely $7,500.
scribe it. A detail man may have a territory in
Sales perked up after an advertising organization
cluding 200 doctors, 40 retail drugstores, and
was hired to stir up publicity, and after several
10 hospitals. Estimates of the total number of
complimentary articles about it appeared in a
detail men employed by the pharmaceutical in
learned medical journal. But it really caught fire
dustry range from 10,000 to 12,000. Detailing
when the movie colony in Los Angeles began
accounts for the lion’s share of promotional ex
buzzing about tranquilizers in general and Mil-
penditures of a large house. Total promotional
town in particular. Unlike most drugs, its name
expenditures for the year in which a new product
was easily pronounceable and, better still, lent
is launched by a company may run to as much
itself to punsters and jokesmiths on TV screens
as $2Y2 million.
in the homes of millions of people. Example:
Midst the maelstrom of mood drugs, it is
“ Miltown Berle,” or “ The Government is giving
apparent that a new drug, regardless of its in
out a Miltown with every income tax blank,” or
herent merits, encounters gigantic competition
“ Use a Miltown instead of an olive to make a
and needs a mighty big push to get recognition
‘Miltini.’ ” Demand for the product exploded
and acceptance. That is one reason why each
like a conflagration, and the company had to
tranquilizer has a trade name as well as a generic
struggle mightily to satisfy the market. Annual
name. If a doctor prescribes by generic name,
sales of Miltown and the basic powder shot up
the druggist may fill the prescription with any
of several manufacturers’ products he may hap
to a $25 million peak.
Ever-mounting publicity eventually boomer-
pen to have on his shelves. But if the M.D. pre
anged. Doctors became hesitant to write Miltown
on their prescriptions, which everybody could
scribes by the trade name, that’s it; and the
druggist may not substitute another virtually
understand, and shifted to other tranquilizers
identical drug without the doctor’s permission.
with more medical syllabification. Sales of Miltown began to fall off as its own popularity
When Miltown caught fire
hastened the appearance of a host of competing
Miltown is an example of how a small company
tranquilizers. When the wisecrackers on screen
hit the jackpot. Wallace Laboratories, division of
and radio finally exhausted the bag of jokes
Carter Products (Little Liver Pills), developed a
about Miltown and shifted their attention to
tranquilizer— meprobamate— that calmed down
Sputniks which had just appeared in the skies,
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TRENDS OF ANNUAL DEATH RATES FROM ALL
CAUSES BY AGE GROUPS, 1900-1952
AN N UAL DEATH RATE PER 1,000 POPULATION
Miltown became just one of many tranquilizers,
people are sick most of the time, and most people
and something had to be done. Quietly, the com
are sick some of the time, so there is a constant
pany brought out a new tranquilizer named
Meprotabs— a restyled Miltown wearing a differ
demand for drugs. Moreover, the population is
ent coat.
consume more drugs than those in the prime of
growing in numbers and longevity. Old people
life. Another peculiarity about demand is that the
^ FOR PROFITS
consumer of ethical drugs is utterly helpless about
It is no secret that the pharmaceutical industry
what drug he buys, how much he buys, whose
is profitable. It is one of the most profitable of
drugs he buys, and how much he pays. When
manufacturing industries. Every year from 1950
you’re sick, you take what the doctor prescribes.
through 1957, the manufacturers of drugs and
In the ultimate analysis, it’s the microbes that
medicines made a larger return on net assets than
determine- the total demand curve, the doctors
manufacturing industries generally. How do they
determine what company shall profit by your
do it?
illness, and you pay the bill.
Well, it’s a peculiar industry. Illness doesn’t
The price of a drug is influenced by its cost
ride up and down with the business cycle. Some
of production, the number of companies produc
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ing it, whether or not there is another drug that
BARNYARD DRUGS
will do the same job, and the patent situation.
The fewer the companies producing a drug, the
Have you noticed that animals in the barn
higher the price is likely to be. A patent is a
yard are friskier than they used to be? It is
first-class price prop while it lasts, but in this
because they are getting antibiotic supple
business it is seldom long before a competitor
ments in their feed. As a result, calves, pigs,
brings out something just as good or perhaps
lambs, and beef cattle grow faster; cows
even better.
give more milk; hens lay more eggs; and
Price-wise, some of the strangest bedfellows
broilers produce more meat. O f course all
are to be found in this occult industry. A drug
for which one manufacturer charges the druggist
this adds to the farm surplus problem, but it
is being done more scientifically.
S3 a bottle, with a generic label, may be priced
Animals also need tranquilizers. It shouldn't
at $18 a bottle with a trade label by another
surprise you that animals on the way to the
house, though the two products are identical.
slaughterhouse get nervous and apprehen
Sweet are the uses of neology!
sive, so much so that they lose weight— which
The record of good earnings in this industry is,
partially defeats the purpose of the trip. By
of course, based upon the reports of the large
feeding them tranquilizers before they leave
companies, but they make most of the drugs.
home, they face death with equanimity, if
Large companies can make money and small com
not actual joy. A t least they don't lose weight.
panies can make money, and all of the large
Tranquilizers are also being used to facili
companies once were small. It is also easy to lose
tate live capture of wild animals in the forests
your shirt in this strange industry, and that is
and denizens of the deep. To get a cardi
why industry is spending ever-increasing sums
ograph of a whale off the coast of California,
of money on research. For example, research ex
the beastwas tamed with a harpoon equipped
penditures by the industry rose from $127 mil-
with a tranquilizer warhead. This may mean
AVERAGE LENGTH OF LIFE:
DEATH-REGISTRATION STATES, 1900-1953
YEARS
that in commercial whaling the familiar cry,
"Thar she blows!" may become "The Needle,
A h a b !"
AVERAGE LENGTH OF LIFE TOTAL POPULATION
lion in 1957 to $170 million in 1958, and $190
million has been budgeted for 1959. The leading
companies spend an average of about 7 per cent
of their sales for medical, agricultural, and chem
ical research. That’s a good deal more than most
other industries spend.
BUGS BITING THE DUST
___ 1
____________ 1
___________ J ____________ 1
____________ 1
____________ 1
_______
1900
1910
1920
1930
1940
1950
10
Research teams of the pharmaceutical industry,
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DECLINE IN TUBERCULOSIS DEATHS
to 68.7 years in 1953. In 1956, the expectation
Death rates per 100 ,0 0 0
estimated m id-year population.
of life at birth increased further to just a shade
short of 70 years; however, this may have been
DEATH RATES
pulled down slightly in 1957 by the influenza
50
epidemic in the last quarter of that year. Note
N
5
—
_
5
in the chart the havoc wrought by the 1918 in
s
i
5
fluenza pandemic.
:r
O J
5 3
1_
«0
0
(
U
_
_
According to mortality conditions prevailing
Z
*
j<
11
11
at the turn of the century, one-fourth of the new
,1
2 8
Source: National Office of Vital Statistics.
the Government, universities, and independent
foundations are striking terror into the little
world of hostile microbes. One by one the bad
bugs are biting the dust. Meningitis, pneumonia,
tuberculosis, and syphilis, and other heretofore
fatal scourges of mankind have become casualties
of the scientific attack.
Since the introduction of sulfa drugs in 1937,
deaths from influenza-pneumonia have declined
75 per cent. The principal diseases of child
hood— scarlet fever, streptococcal sore throat,
diphtheria, whooping cough, and measles— which
caused 10 deaths per 100,000 children in 1945,
dropped in the space of 10 years to one death
per 100,000, a decline of 90 per cent. According
to unpublished data of the National Office of
Vital Statistics, the mortality from all infectious
born would fail to reach their 25th birthday.
Now less than 5 per cent of the newborn face that
dismal destiny.
The sulfa drugs, antibiotics, hormones, and
vaccines have not only increased longevity but
decreased misery. People recover from illness
much faster than formerly. Prior to the advent
of these wonder drugs, pneumonia patients who
survived had to spend 100 to 110 days in the
hospital; but as a result of the sulfa drugs, the
pneumonia patient’s hospital stay was cut down
to about 18 days. Subsequent to the introduction
and use of penicillin and the wide spectrum
drugs, the pneumonia patient’s hospitalization
has been cut down still further to about nine days.
In each successive advance, the amount of time
INCREASE IN DEATHS FROM DISEASES
OF HEART AND CIRCULATION
Death rates per 100 ,0 0 0
estimated mid-year population.
DEATH RATES
diseases dropped in a half-century from 672.2 per
100,000 in 1900 to 44.3 per 100,000 in 1956. The
steepest declines in mortality have been in the
younger age groups, as shown in the chart. After
age 44, the declines have been slow and moderate.
As the age-adjusted death rate goes down, life
expectancy goes up. As shown in the single-line
chart, the average duration of life for the total
population has increased from 47.3 years in 1900
11
b usin ess re v ie w
DEATH RATES FOR THE TEN LEADING CAUSES OF DEATH IN 1900,
AND DEATH RATES FOR THESE SAME CAUSES IN 1956*
Rank
(1900)
1
2
3
4
5
6
7
8
9
10
Rate per 100,000
population
Cause of death
(Sixth revision of international lists, 1948)
Influenza and pneumonia .......................................................................
Tuberculosis, all f o r m s ...........................................................................
Gastro-enteritis .....................................................................................
Diseases of the heart
.................................................................
Cerebral hemorrhage and other vascular lesions affecting central
nervous system ...................................................................................
Chronic nephritis ...................................................................................
All a c c id e n ts ...........................................................................................
Cancer and other malignant neoplasm s...............................................
Certain diseases of early in fa n c y ...........................................................
Diphtheria ...............................................................................................
All c a u s e s .....................................
1900
1956
202.2
194.4
142.7
137.4
28.2
8.4
4.5
360.5**
106.9
81.0
72.3
64.0
62.6
40.3
1,719.1
106.3
f
56.7
147.9
38.6
0.1
935.4
* Some of the progress is accounted for by better diagnosis.
** Part of the cause for the rising incidence of heart diseases is the fact that more people live to attain the age o f ca rdiac trouble,
t Not com parable because of change in classification.
required for Nature to cure the patient has been
cancer, the cure rate is already better than 30 per
reduced.
cent. It has been predicted that an effective cure
for cancer will be obtained by 1965. By 1962,
UNFINISHED BUSINESS
it is expected, we will have developed a heart-
All of us are indebted, and some of us more than
disease drug, as well as drugs for mental disease,
we know, to the great pioneering scientists like
and an effective vaccine for the common cold.
Pasteur, Fleming, Florey, Waksman, Chain, Salk,
As this goes to press, comes the announcement
and many others who have made epochal break
that four young British scientists have isolated
throughs in the relentless battle on the bugs.
in pure form the basic substance of penicillin
Nevertheless, the job of banishing disease still
has a long way to go. The accompanying table
summarizes some of our major accomplishments,
INCREASE IN CANCER DEATHS
as well as the unfinished business. Diseases like
Death rates per 100,000
estimated m id-year population.
pneumonia and tuberculosis are no longer tak
ing a frightful toll, and diphtheria is all but
conquered.
Diseases of the heart and cancer, as the table
shows, are now the major killers. Among the
principal causes of morbidity are the common
cold, arthritis, rheumatism, and mental diseases
(tranquilizers do not cure mental diseases). All
these diseases and others are under attack and in
time, no doubt, will be conquered. For operable
12
DEATH RATES
b u sin ess re v ie w
which could lead to countless “ tailor-made” peni
bug bomb that will annihilate any and all bugs
cillin varieties capable of defeating organisms
that may bite you, when all people not killed by
that escape the existing type or have grown re
accidental causes or homicide will live to a ripe
sistant to it.
old age and just fall apart like the “ wonderful
Will the time ever come when all diseases will
one hoss shay” ? Some virologists tell us that it
have been brought under control? When the
is bound to come and is closer at hand than we
family doctor will carry in his little black bag a
think. Long live the microbe hunters, and more
variety of pills or perhaps some kind of an atomic
power to their armamentaria!
13
HOW DID BANKS
MAKE OUT IN 1958?
When a banker asks “ How is business,” he is not
easier reserve positions, they sought outlets for
likely to be indulging in idle conversation. Trends
available funds. The fact that their earning assets
in production and consumption, in spending and
increased S1 billion to $7.9 billion shows that
/^
saving, and other economic factors, as well as
outlets were found, but suitable lending oppor
fiscal activities and actions of the monetary au
tunities were less frequent than investment op
thorities are grist for his mill. These are the
portunities. They added $260 million to their
materials he uses in appraising current condi
holdings of United States Government securities
tions and prospects and their potential effect on
during 1958, a year when the marketable debt of
the operations of his bank. During 1958 he had
the Federal Government increased considerably.
to take into account a recession in activity con
And they increased holdings of other securities,
tinuing into the spring and a marked recovery
chiefly obligations of States and local govern
in later months.
ments, by $110 million.
In the fore part of the year, the Federal Re
Approximately $120 million was added to
serve System took several steps to help turn the
loans, but this was only one-fourth of the expan
recessionary tide. It reduced discount rates and
sion in total earning assets. Real estate credit
reserve
United
accounted for much of the loan increase, with
States Government securities. Later in 1958,
requirements,
and
purchased
smaller additions to business and securities loans,
when business was on the upgrade, the Reserve
and a slight decline in credit extended to individ
Banks raised their rates.
uals for personal expenditures— automobiles, ap
Third District member banks borrowed much
less from the Reserve Bank than in 1957. With
14
pliances, remodeling, doctors’ bills, and the like.
Country
bank
loan
portfolios,
adjusted
for
b usin ess re v ie w
mergers, increased 6 per cent, while those of re
serve city banks were down 1 per cent.
Sharply increased earning assets contributed
to an expansion of nearly S1 billion in deposits
/^
of Third District member banks, lifting the total
to $9.2 billion. Dollarwise, this was the largest
increase on record. Gains, substantial at both
reserve city and country banks, were mainly in
time balances.
Bankers reported an increase of $14 million
to $376 million in total earnings, but their cur
rent expenses moved up $18 million. Salary out
lays and miscellaneous expenditures continued
to rise, but most of the increase in expenses was
MEMBER BANKS
Third Fed. Res. District
( Dollar amounts in
millions)
Loans:
Business ......................
Secu rity......................
Real estate ................
To banks ....................
Consumer ..................
All o th e r....................
Total ..................
Less reserves.......
Loans, n e t ......................
U. S. Gov't securities . . .
Other securities.............
Dec. 3 1
,
1958*
Change in year**
Amount
Per cent
$1,740
143
1,242
3
1,180
153
$4,461
114
$4,347
2,632
957
+ $ 28
+
16
+ 88
1
0
+
1
+$123
+
1
2
+ $ l 11
+ 263
+ 11
3
Deposits: Demand .........
Time ..............
Total deposits . . . .
Capital accounts...........
$6,251
2,924
$9,175
912
E a r n in g s , e x p e n se s , an d
p ro fits
Year
1958*
—
+ 2%
+ 1
3
+ 8
5
— 1
+
1
+
+
3%
1
2
+
+
+
3%
II
1
3
+$164
+ 322
+$486
+ 32
+
+
3%
1
2
+
+
5%
4
$ 62.1
24.4
232.1
57.9
$376.5
+$ 3.0
+ 4.5
+ 3.3
+ 3.6
+$14.4
+ 5%
+ 23
+
1
+ 7
$109.1
55.6
85.9
$250.6
$125.9
+$ 5.6
+ 10.7
+ 2.2
+ $ 18.5
— $ 4.1
+ 5%
+ 24
+ 3
+ 8%
3%
+ $ 19.4
+313%
—
+
— 1
9
+ 22
in interest on time deposits, reflecting higher
rates paid and the rising volume of such deposits.
While net earnings from current operations
were off somewhat from 1957, profits on securi
ties were much more substantial and transfers to
valuation reserves and charged-off losses de
clined. These changes more than compensated for
the decline in net current earnings and heavier
income tax payments. As a result, net profits
available for distribution moved up from $57
million to $72 million. Relatively little of this
increase, due so largely to non-recurring trans
actions, was carried over to cash dividends, which
increased only $2 million to $39 million.
The number of member banks in the Third
Federal Reserve District declined from 533 to
513 during 1958. Sixteen member banks merged
Earnings:
On U. S. Gov't
securities.............
On other securities .
On lo an s................
All o th e r................
Total earnings . . .
Current expenses:
Salaries and wages . .
Interest on deposits .
All o th e r................
Total expenses . . .
Net current earnings . .
Recoveries, profits, and
transfers from reserves $ 25.6
Losses, charge-offs, and
32.9
transfers to reserves .
46.2
Taxes on incom e.........
Net profits ................ $ 72.4
Cash dividends declared
39.2
7.9
8.2
+$ 1
5.0
+ 2.1
+
4%
+ 26%
+ 5
*Preliminary tabulations.
**Adjusted tor mergers, etc.
into or were purchased by other members in the
District, two by members in the Fourth District,
banks absorbed five nonmembers in the course
and two by nonmember banks. District member
of the year.
15
FO R THE R E C O R D . . .
Third Federal
Reserve District
Factory*
United States
Per cent change
Ja n . 1959
from
mo.
ago
LOCAL
CHANGES
Ja n . 1959
from
year
ago
mo.
ago
— i
+ 8
+ 1
+ 2
+ 2
— 4
+ 8
+ 1
2
- 3
EMPLOYMENT AND
IN C O M E
— 3
+ 3
— 1
— 2
— 5
— 1
+ 6
+ 1
— 3
+ 1
+ 6
+ 3
Per cent
change
Ja n . 1959
from
Per cent
change
Ja n . 1959
from
Per cent
change
Ja n . 1959
from
Per cent
change
Ja n . 1959
from
mo.
ago
mo.
ago
mo.
ago
mo.
ago
Reading
- 3
— 1
+ 1
+ 2
— 1
— I3f
+
+
+
+
+
+
+
+
+
+
+
+
9
8
1
7
1
8
1
4
4
6*
1*
0
0
+
+
1
+
.......
Scranton .......
1
1
W holesale .........................
Consumer ...........................
‘ Adjusted for seasonal variation.
f20 Cities
{ Philadelphia
1
year
ago
year
ago
year
ago
0
-
2
0 -
— 10 + 6
1 + 8 + 9 +29
1 + 3 -
0 + 1 — 6 + 7
0
0
0 + 1 — 7 + 3
5
7 + 6 — 1
3 0
— 2 — 3 — 1
year
ago
— 9 — 2
— 2 — 2 — 2 — 1
Trenton .........
7f
— 4
0
+ 1
+ 1
— 1
— 7
9
5
1
5
17
year
ago
Philadelphia . — 1 -
PRICES
Per cent
change
Ja n . 1959
from
Lancaster . . . .
- 1
— 1
BAN KIN G
(A ll member banks)
Deposits ............................
Loans .................................
Investments .......................
U.S. Govt, secu rities....
Other ................................
Check payments ..............
Stocks
Lehigh V a lle y . — i — 7 — 5 — 9
Harrisburg .. .
TRADE*
Department store sales . . .
Department store stocks ..
Sales
year
ago
OUTPUT
— 2
— 6
+ 2
Payrolls
mo.
ago
Per cent change
Factory employment
(Total) ..............................
Factory wage incom e.......
Check
Payments
Em ploy
ment
SUM M ARY
Manufacturing production.
Construction contracts . . .
Coal mining .....................
Department Storef
0 + 8
0 -
0 -13
+ 8
3 — 14 — 4
0 + 2 —1 — 2
6
0 -
7 +
1 -
1 — 2 +
4
1 + 1 + 2 - II
Wilkes-Barre .
0 -
3
0 -
1 — 6 -
2 — 2 — 1 — 5 + 9
W ilm ington ..
0 — 4 + 4 + 4 + 4 + 1 + 8 + 8 -17
2
York ..............
-
1 -
2 +
— 8
+32
1 + 5 — 6 + 5 — 1 + 6 — 4 + 3
*Not restricted to corporate limits of cities but covers areas of one
or more counties.
{Adjusted for seasonal variation.
@FedFRASER