In other words, this would indicate that the decisions on important policy were made abroad, in order to be outside the territorial jurisdiction of the American antitrust laws.

Mr. SCHIMMEL. Do they get that immunity?

Mr. BERGE. It all depends. Sometimes acts performed in this country pursuant to a plan originating outside would be within the antitrust laws. On the other hand, if what they did was actually confined to activities abroad, they would gain immunity.

Mr. SCHIMMEL. But their intention was to make decisions abroad with relation to activities in the United States, so if you found out about those consultations, they would lose that immunity.

Mr. BERGE. That would be a problem of proof. Of course, the answer in this case was they were indicted notwithstanding, but certainly it is harder to prove a case where they operate in fact abroad than where they occurred in this country. They at least must have had that factor in mind. In this case, we were able to establish antitrust jurisdiction anyhow.

Senator MURRAY. Now this complete letter can be carried in the record.

Mr. BERGE. Now, as to the cartel's influence on exports.

As in the case of Schering A. G. and Schering Corporation, the other cartel members bound their United States affiliates to agreements which precluded exports in any manner which would interfere with the division of territory among members of the cartel. The agreement of April 1, 1938, between N. V. Organon and Roche-Organon contains the following provisions:

Roche-Organon agrees not to deal in or manufacture glandular and hormone preparations other than those originated by Oss (N. V. Organon), nor to export or sell for export from the territory any glandular and hormone preparations. (The territory is defined as the United States, its Territories and possessions, Canada and the Philippine Islands, and Cuba.)

The other agreements contain similar restrictions with some variations as to the exact territory.

Now, the principles of competition, price, and research heretofore discussed are well exemplified by the case of a competing product, Stilbestrol, to which I will briefly refer.

Stilbestrol is a recently discovered pharmaceutical which has effects similar to those of the female sex hormones. It is the product of research supported by Government grant in England, several scientists of the University of London and of Oxford University, headed by E. C. Dodds, being responsible for the development. Throughout all of the work of Dodds and his colleagues the Medical Research Council, a British Government organization, undertook the necessary financial support.

While stilbestrol is not a synthetic hormone, it has most of the valuable therapeutic effects of these substances although it may not be entirely free from side reactions. Its cost of manufacture-and the price to the consumer are much lower than those of the equivalent hormones.

The American hormone cartel members were aware of stilbestrol and its possibilities as early as 1939. In a conference of Roche

Organon, Ciba and Schering officials on August 1, 1939, the following discussion took place according to minutes found in Ciba's files:

Mr. Kamp (Ciba) brought up the subject stilbestrol.

Mr. Hammer (Schering) said he thought that any concern would have a hard time getting stilbestrol accepted in this country.

Dr. Oppenheimer (Ciba) pointed out that in this country estradiol prices may not be too much out of line with those of stilbestrol compared with Great Britain. The question of side effects from stilbestrol was then discussed.

Dr. Josephy (Roche-Organon) told of reports from Amsterdam on the use of stilbestrol in animal experimentation. He said that he thought the government would look not only at the favorable reports on a preparation which was submitted but also the unfavorable ones.

Mr. Kamp said he thought some concern had already filed with the government a request to market stilbestrol.

In other words, they were discussing whether it would have the effect in this country that it had in Great Britain, of certain displacement on the market because of its lower price. It would be a competitor. They expressed doubts that it would, because prices weren't so much out of line here as they were in Great Britain.

Senator MURRAY. And it was inferior?

Mr. BERGE. That, I take it, is a question on which there was some difference of opinion. There was some question as to whether American authorities would let it in.

A memorandum in Schering's file concerning this same conference of August 1, 1939, is somewhat more revealing:

XVIII. Stilbestrol.-Ciba and Roche-Organon want to have it just to be able to knock it with physicians. They say the hormone business in England has been destroyed just by this new product. On the other hand, it is said to injure the liver and there is doubt that the United States Government will allow it to be used.

Stated otherwise, it would seem to mean that two of the cartel members were willing to let it come in because they thought that the side effects which would be discovered here, which were known to American medical authorities, would give the thing a bad reputation, a black eye, and its introduction would be, in effect, suicidal to its own claims as a competing product. That was the notion of the two cartel members.

Mr. SCHIMMEL. Didn't they have hopes that this would eventually give it a black eye back in England?

Dr. HUNTER. I interpret that first sentence, "Ciba and RocheOrganon want to have it just to be able to knock it with physicians," to mean they wanted to have it as their product and then be free to tell physicians it wasn't any good, where there would be some restriction about their telling that if they were knocking a competitor's product.

Senator MURRAY. It would have the effect of boosting their others. Mr. BERGE. In the minutes (from Ciba's files) of a conference of representatives of the three companies on Friday, October 27, 1939, there is this statement at page 3:

During the discussion stilbestrol was mentioned and Dr. Weltzien (president of Schering) remarked he hoped "none of us will introduce stilbestrol."

These quotations indicate the hostility of cartel members toward a new product which endangers their control of the market.

Dr. HUNTER. In all of the minutes that word is spelled "Stilboestrol," which I assume is the Germanized spelling. In this country it is spelled "Stilbestrol."

Mr. BERGE. Stilbestrol was put on the market in this country late in 1941 and had an immediate effect upon the sales of the higher priced hormone products.

Senator MURRAY. Does anybody know whether stilbestrol was entitled to this criticism that was made of it?

Mr. BERGE. I think we have someting on it in a publication called Drug Topics.

Dr. HUNTER. Yes, it's the 1942-43 edition. It is a magazine that regularly comes out each month, and then each year they bring out a price book supplement, and they have a discussion of hormones on page 32. On page 34 a rather extensive discussion of stilbestrol appears. I might read a sentence or two from that, if you like? Senator MURRAY. All right.

Dr. HUNTER. Under the heading of "Toxicology":

A significant number of side reactions may occur during therapy with stilbestrol. The most common of these are nausea, vomiting, and headache. So far, however, according to the American Medical Association, no evidence has been presented that thereapeutic amounts are actually harmful to human beings, and there appears to be conclusive evidence that experimentally stilbestrol is not specifically more toxic than the natural estrogen. Most authorities now believe that unpleasant symptoms following stilbestrol administrations are systemic in origin, rather than local.

Senator MURRAY. There is always an effort on the part of some manufacturers of drugs to make it appear that others that are introduced as having the same effects are inferior. Take, for instance, aspirin. The German manufacturers of aspirin claim that everything else is much inferior to the German article.

Mr. SCHIMMEL. I would like to point out that the staff has informally contacted a number of Federal agencies to see if there is a technical expert working with the Government in this field. They don't seem to have technical experts in this field.

Dr. HUNTER. There are over 30 firms listed here as marketing stilbestrol at the present time.

Mr. SCHIMMEL. Isn't it true that the British stilbestrol has not been put under any patent controls whatsoever and is therefore being made available to all drug concerns which manufacture it?1

Dr. HUNTER. That is my understanding.

Mr. BERGE, Well, in conclusion, from what I have said, it seems clear that in this field of synthetic hormones the cartel control has been such as to be detrimental to our national interest. When such control can be used to make American corporations the tools of those of other countries it is unfortunate. When carried to the point of causing corporations in this country to aid the Axis, it could not be and was not tolerated. The seizure of two of these companies by the Alien Property Custodian has put an end to the German control. From the point of view of encouragement of research those two companies are much better off than they were when tied to the apron strings of their parent companies in Germany. Complete removal of cartel restrictions from the entire industry would be definitely in the interest of the general public in this country and throughout the world.

1 See exhibit No. 190 on page 1141.

Now, I believe we have some additional exhibits we want to offer. Dr. HUNTER. We will offer all the letters and agreements mentioned in the statement. There is one here that indicates the working of such a relationship between two companies, one in Europe and one in this country, in the photographic supply industry, that we thought would be illustrative of how this thing was handled. It was indicated in this statement. Actually, the Senate Patent Committee hearings have a number of other illustrations. This is one in addition to those. Mr. BERGE. This is in the photographic supply field. Didn't one of these companies which I was discussing today operate in this field?

Dr. HUNTER. Schering A. G. did. This doesn't have any relation to that, but

Mr. BERGE (interposing). This is an agreement between Agfa Ansco Corporation and I. G. Farbenindustrie Aktiengesellschaft and Ansco Photoproducts, Inc., which we would like to offer as a record. Senator MURRAY. It may be a part of the record.

Mr. SCHIMMEL. Mr. Berge, does the suppression of this particular industry have any bearing on the war effort? Are any of these hormones of any significance to war production?

Mr. BERGE. Yes. Specifically, I know that there is good scientific opinion that cortin is useful in the treatment of shock, which is of course being so widely experienced by the troops.

Mr. SCHIMMEL. Do you have any information in regard to sex hormones?

Mr. BERGE. I haven't any extensive scientific knowledge in the field, but I am told on reliable authority that administration of certain of these hormones I guess the female sex hormone is of value, important, in treating certain ills of middle age. From the national standpoint, it is particularly important in the case of many women war workers; women in their late forties can benefit immensely from the proper administration of these hormones, and I am told that efficiency experts and those men whose business it is to study the efficiency of labor say that illness associated with the menopause is an important factor in industry in time lost from duty.

Mr. SCHIMMEL. The staff has tried to get data on this subject, in connection with finding technical experts. The information we have is essentially the same as your testimony, that it is an important problem, although the figures are not available.

Mr. BERGE. Aren't there experts in the Labor Department or the Children's Bureau or the Women's Bureau, or something of that sort? Mr. SCHIMMEL. I don't believe they have any quantitative figures. We can check more formally with them.

Mr. SCHIMMEL. Mr. Francis C. Brown, the new president of Schering Corporation, has submitted some material to the committee, with a statement briefly outlining the attempts to change the policy of that corporation.

Senator MURRAY. It may be made a part of the testimony and included in the printed record.

(The statement referred to was marked "Exhibit No. 189" and follows:)

EXHIBIT No. 189

STATEMENT OF FRANCIS C. BROWN, PRESIDENT, SCHERING CORPORATION

All of the arrangements and activities which have been described by Assistant Attorney General Berge occurred in the year 1941 and prior years when the company was under the domination of its former German owners. Since April 1942, Schering Corporation has been operated under the close supervision of the United States Alien Property Custodian, who seized the stock interests of the Germans in the company, The principal stockholder of the company is now the United States Government and its current operations are in complete harmony with the objectives of the Government.

The Custodian replaced with native American citizens the former Germanappointed high executives of the company. I am one of the newly designated executives. Although my knowledge of past matters is limited, I think there can be no question but that Schering Corporation was forced into situations by its German owners which it would have avoided had it been owned by American stockholders. During the period prior to Pearl Harbor, when America was in the war in sympathy but not in fact, the Germans cunningly maneuvered to obtain supplies from the American company for their South American affiliates and undoubtedly had planned to supply their world market from the United States. These plans were defeated by the action of the Government in seizing the company and discharging the persons responsible. The rank and file of the company's employees, including its technical staff and many of its executives, had no part in any of these transactions, as these men have always been and are now completely loyal to the United States and, with but few exceptions, are native American citizens.

In the pre-war period the Nazi design appears to have been forced upon Schering just as it was upon the other German-owned companies in the United States and the plan for supplying the export subsidiaries from this country followed the familiar pattern.

Schering Corporation's pharmaceutical products have always been of the very finest quality and the company has been and is today the acknowledged leader in the United States among the manufacturers of synthetic sex hormones and X-ray diagnostic media. It is probably the largest manufacturer of pure synthetic hormones in the world today, even larger than its former German parent, its manufacturing operations being conducted in plants located in Bloomfield and Union, N. J.

The hormone patents which Schering owns are largely the product of Schering research. These patents are similar to those which other American pharmaceutical houses own or control, notably among which are patents covering processes of manufacturing sulfa drugs, insulin, vitamins, antibacterial agents, sedatives, and the like. Through Schering's control of its hormone patent rights and their licenses under other patents in the fields of its manufacture, the American public is assured of an ample supply of these high quality products. Since the new management took control of Schering Corporation it has placed great emphasis upon research, both in the field of chemistry and the medical use of its products.. Aside from the broad political and economical consequences of the restrictions imposed upon Schering during the period of its German control, I have found no evidence that research accomplishments were suppressed or that specific research projects were held back, although it is perfectly evident that such research would have been held back had it served the Nazi purpose to do so. Although the company was the American outlet for many new pharmaceutical products resulting from research work in the German laboratories, Schering Corporation's own research staff had steadily grown and developed and constituted a very important asset of the company which the present management has enlarged and expanded so that today Schering's research laboratories are outstanding in its field. Some of the most important hormones which Schering manufactures are commercially available today only by reason of the development in Schering's Bloomfield laboratories of large-scale manufacturing processes utilizing low-priced starting materials which have brought these products within the reach of the average man.

There is ample evidence that the former German parent company held back from the American company valuable information on manufacturing techniques or "know how" which had to be developed anew in the United States at great expenditure of money and time to the American company. These problems have now been overcome and many improvements have been made in the German processes as the result of which Schering has been able in the past 2 years to make