Eleven kinds of penicillin and 18 other antibiotic substances were produced in 1956, of which 6 penicillins and 8 others have been listed above. The most important of those not listed were neomycin, oleandomycin, bacitracin, and nystatin, which accounted in 1956 for 6 percent of total sales. The 1956 antibiotics operations of two manufacturers, Commercial Solvents Corporation and S. B. Penick & Company, were confined to the minor products.

Most of these antibiotics are also marketed in combinations with other antibiotics under many different trademarks and trade names. For example, Bristol Laboratories, 1 of the 4 companies licensed to make benzathine penicillin, sells it only in combination with potassium and procaine penicillin, under the trademark Panbiotic. Combinations are rarely mentioned in this report.

Antibiotics of medicinal grade may be sold by original manufacturers either in "bulk" or in "dosage forms" (preparations ready for use by patients) bearing the label of the original maker. "Bulk" sales are commonly defined to include unlabeled dosage forms. The older salts of penicillin, streptomycin, and dihydrostreptomycin are sold in substantial quantities in bulk for packaging and labeling by others. Some of the newer products, such as tetracycline, are also sold in bulk under the terms of patent licenses.

Dosage forms fall into three classes: (a) "oral" forms such as tablets, capsules, and liquid suspensions, which are administered through the digestive tract; (b) those administered by injection and called by doctors "parenteral forms," which may be in solution, or in powder form with instructions on the container for adding a diluent to produce a suspension; and (c) "topical" forms such as ointments, lozenges, and powders, for external application at the site of the infection. There will be little reference to topical forms in this report.

Summary by Chapters

The following summary of the report covers the chapters (and any appendixes pertaining to them) in their order.

1. Origin of the industry

Penicillin, the first useful antibiotic, was discovered in England by Alexander Fleming in 1928, and its ability to eliminate diseasecausing bacteria under test-tube conditions (more precisely: “in vitro") was noted. Not until 1939-41 was evidence provided by Howard W. Florey and Ernst B. Chain at Oxford University that penicillin could operate effectively against bacteria in laboratory ani

mals and in persons.2 Dr. Florey brought his findings to the United States in 1941 and stimulated interest in the potential usefulness of the new drug for the Armed Forces.

Research work on penicillin, already in progress at Columbia University and the Mayo Clinic, was now undertaken at the Department of Agriculture's Northern Regional Research Laboratory in Peoria, Ill. An Agriculture research team had previously worked out an improvement in the deep-vat fermentation process which made possible its application to antibiotics. To this was now added the discovery that corn steep liquor could be used as a nutrient medium in the fermentation process. These two contributions of Department of Agriculture scientists were significant in making volume production of penicillin possible.

The United States Government organized the whole wartime research and production effort, beginning in 1941, through the Office of Scientific Research and Development and the War Production Board. Difficult problems in producing penicillin had first to be solved. Approximately 20 pharmaceutical companies were authorized to enter the business, and most of them did get into production. Before the war ended, military needs had been met, and the drug was being made available in small quantities for civilian use.

One feature of the wartime program was research into the chemical structure and synthesis of penicillin, under contract with the Office of Scientific Research and Development, by several universities, the Department of Agriculture, and (without compensation) ten pharmaceutical companies. In order to speed the research and interchange of results, the Office negotiated a plan for allocation of any resulting patent rights; but few of the patents actually issued were to prove important.

Although synthesis of pencillin on a commercial scale was not achieved, the fermentation process became highly effective. In 1943 the Peoria group found a penicillin mold which increased the yield to about 100 times that of the original Fleming mold. This new mold was sent to the Carnegie Institution, which bombarded it with X-rays. A mutant strain was developed which increased the productivity of the Peoria mold about five times. Later, University of Wisconsin geneticists, using ultraviolet-ray bombardment, increased still further the productivity of this strain.

By 1945 a new and dynamic branch of the ethical drug segment of the pharmaceutical industry had emerged as a result of wartime

Drs. Fleming, Florey, and Chain were awarded the Nobel Prize in Medicine and Physiology in 1945. In 1952 Dr. Selman A. Waksman was awarded this prize for the discovery of the second important antibiotic, streptomycin.

needs and of public and private cooperation in the organization of production and in research. At the same time the discovery of penicillin had given the impetus to a whole new area of study of micro-organisms, the boundaries of which are still being extended.

2. The influence of national defense on the development of the industry

In addition to the purchase of current production for the American and allied armed forces after 1943, Government funds stimulated the wartime development of penicillin through several channels.

Penicillin for medical testing purposes was supplied by the companies commencing late in 1941, and beginning in February 1943 payments totaling $2 million were made for these supplies. The small quantities so obtained made it possible to carry on extensive penicillin research. Contracts were concluded with many educational institutions and hospitals for specific projects. The known cost to the Government of subsidizing wartime research was approximately $2.8 million.

The first penicillin made in the United States was in hospitals, laboratories, and pilot plants. By 1943 enough had been learned to make plant construction possible. The Government built 6 production units at a cost of about $7.6 million, and the companies operating 2 of the plants added nearly $2.9 million in packaging and power facilities. After the war these plants were sold to the companies for a total of almost $3.4 million. The 44-percent recovery on the Government's investment was very close to the 45-percent recovery from the disposal of wartime Government-built plants in all industries. Counting four plants built for other wartime purposes but bought by antibiotics companies after the war, this industry's average payment to the Government did come to 45 percent of original cost.

The remaining 16 wartime antibiotics plants were financed by private industry, their total cost plus the private contribution to the first 6 plants being $22.6 million. Of this amount, $14.5 million, or approximately 64 percent, was approved for accelerated amortization under the Federal income tax. This permitted the companies to deduct their investment from taxable earnings over a 5-year period instead of the 12 to 15 years usually required for chemical manufacturing plants. Rapid amortization was a regular feature of the overall wartime program for stimulating expansion of defense industries. Toward the end of the war and during the years following, additional antibiotics and new forms of the earlier antibiotics began to emerge from the research laboratories. Meanwhile, demand grew steadily as the uses of antibiotics were enlarged through clinical testing. The industry met the growing demand by expanding its

capacity and replacing the early flask-type production units with deep-vat fermentation equipment. Efforts were made to satisfy some of the foreign demand as well, at first through exports of penicillin under lend-lease and as relief to devastated countries. Later, penicillin production units were also sent to Europe.

The Korean war brought another major advance to antibiotics production. Under "Expansion Goal No. 129" (penicillin), industry expenditures of $110.3 million were approved, to expand capacity of the existing plants. On $62.8 million, or 57 percent of this $110.3 million, the accelerated 5-year amortization was granted.

An original production capacity goal of 3.6 billion international units of penicillin annually was set by the War Production Board during World War II. The goal at the time of the Korean war was 600 billion units. The plant expansion then and in the following years brought capacity to approximately 800 billion units at the end of 1956, as against 1956 production of about 560 billion units. For streptomycin and dihydrostreptomycin, two other important antibiotic substances developed during and shortly after World War II, the percentage of reserve capacity was about as great. In the newer antibiotics it was still larger.

The supply and potential supply of antibiotics appear to be substantial. Also, Government stocks have been established for civil defense and for military uses. In the event of a national emergency, these stocks would be available, and production could be stepped up to capacity.

3. Antibiotics production and manufacturers

Most chemical materials used in the production of antibiotics are purchased by the manufacturers, but a few firms produce some of them.

All principal manufacturers engage in the finishing and packaging of dosage forms from their bulk product. On the older salts of penicillin, these dosage forms come into competition with those of packaging firms-of which 45 were listed in the Drug Topics Red Book in 1956 which purchase their bulk product from these same manufacturers.

Between 1948 and 1956 total output increased from 240,000 to 3,081,000 pounds. Penicillin accounted for 65 percent of the total in 1948 and 34 percent in 1956. Streptomycin accounted for 34 percent and 5 percent in the 2 years, and dihydrostreptomycin for 1 and 16 percent. The first broad spectrum antibiotic was introduced in December 1948. In 1956 the 4 drugs now in the broad spectrum group accounted for 39 percent of total antibiotics production. More than half of this broad spectrum production, however, went into animal

feed supplements. The remaining antibiotics in 1956 consisted of erythromycin, 2 percent of the total; bacitracin, nystatin, and novobiocin, 2 percent when taken together; and various minor products, 2 percent.

Seventeen salts of penicillin and 22 other antibiotic substances have been produced at one time or another since 1948. Eleven penicillins and 18 other substances were being produced in 1956. Of this number, four penicillins and four other substances were introduced in 1956.

Due to price differences, antibiotics rank in dollar sales in a different order than in physical output. Counting only sales from the manufacturers' own production, which were approximately 90 percent of total sales in 1956, dollar totals came to $165 million for the broad spectrum antibiotics, $67 million for penicillin, $24 million for streptomycin and dihydrostreptomycin, $18 million for erythromycin, and $27 million for all others.

The peak year of manufacturers' dollar sales was 1951. Between 1951 and 1956 aggregate production of antibiotic substances doubled, but total dollar sales decreased. This was largely caused by falling prices for the older antibiotics and the development of new, non-medical uses at lower prices for both older and newer antibiotics. Seventy-two percent of volume of antibiotics production in 1956 was of medicinal grade, and 27 to 28 percent of animal feed supplement grade, while the remainder went for such other uses as crop spraying and food preservation. The total value of medicinal grade sales from the companies' own production was $273 million in 1956, and that of other grades was $28 million.

The nonmedicinal grades are generally sold in bulk containers at lower prices. The average sales value at the manufacturing level for chlortetracycline, which accounted for almost half of all animal feed sales in 1956, was $43 a pound when sold for this use. It was $259, or 6 times as much, in the medicinal grades.

No company in the industry started as a manufacturer of antibiotics, and all make other pharmaceutical products as well. Seven of the manufacturers were founded before 1900; 5 of these are still primarily or solely pharmaceutical manufacturers, while 2 have been absorbed into diversified corporations with important nonpharmaceutical interests-Wyeth Chemical Company, into American Home Products Corporation, and E. R. Squibb & Sons, Inc., into Olin Mathieson Chemical Corporation. Two of the other five manufacturers (those entering pharmaceutical production after 1900) are primarily or solely engaged in the pharmaceutical business, while 3 are connected with diversified companies. These three are the Lederle Laboratories Division of American Cyanamid Company; the Bristol Laboratories Inc., subsidiary of Bristol-Myers Company; and the ethical drug operation of Commercial Solvents Corporation.