Drug Shortages Grab Congress' Attention

Author: Ross Margulies, JD, MPH, and Jayson Slotnik, JD, MPH

The specialty pharmacy community should be prepared for legislation that could alter the supply and distribution of specialty pharmaceuticals.


What has long been a pressure point on specialty pharmacies has finally found itself within Congress’ crosshairs—a nationwide shortage of life-saving medications, in particular generic sterile injectables, has recently become the subject of several key Congressional hearings and an FDA public workshop. To stem this crisis, the last few months have seen a number of House and Senate bills introduced to address the growing number of drug shortages and the resulting impact on distributors, pharmacies, and patients. While no piece of legislation has yet emerged as the front-runner, the specialty pharmacy community should be prepared for legislation that could alter the supply and distribution chains of specialty pharmaceuticals.

According to the University of Utah Drug Information Service, which tracks drug supply and distribution, drug shortages reached a record high in 2010 and are on pace to exceed that level in 2011, with 210 shortages of different drugs being reported as of September 15, 2011. In addition to limited patient access for vital medications, an emerging market of pharmaceuticals coming from an unofficial supply channel (known as the “gray market”) has resulted in steep price increases and safety and quality issues for pharmaceuticals in short supply. A report conducted by Premiere in the beginning of 2011 recorded 1745 gray market offers to its health care alliance providers, with an average markup on these drugs of 650%.

The impact of the drug shortage crisis is felt across the distribution stream— research institutions are citing detrimental effects on clinical trials; pharmacies are reporting gross markups and the emergence of unauthorized distribution chains; and providers are being forced to seek alternative treatment options for their patients when the recommended medication is unavailable.

The vast majority of drugs in short supply are generic sterile injectables, including vital drugs needed for sedation and chemotherapy. The causes for these shortages are numerous: industry and the FDA both cite aging production facilities, consolidation of market share, small profit margins on generic drugs, and compromised raw materials overseas. Solutions are less clear.

At both the Senate HELP and House Energy & Commerce hearings in September, legislators and industry alike debated a number of solutions designed to ensure patients are not denied access to vital therapies. While no single proposal has unanimous support, several key features of the major proposals in Congress are worthy of review.

Proposals are wide-ranging and include establishing a national pharmaceutical tracking system (known as a “pedigree” system) and the creation of an early notification system to mandate that firms communicate with the FDA in advance of a drug shortage. Legislators and industry are also examining changes to drug reimportation regulations and different approaches to facility reinspections. Generic manufacturers recently agreed to help fund inspections of their facilities as part of a generic drug user fee program.

A national pedigree system would allow the FDA to monitor individual drugs as they move through the supply and distribution chain. A drug pedigree is the record of transactions from the manufacturer of origin through to the dispensing pharmacy (pedigrees generally include dates, names and addresses of all parties involved in a transaction, and specifics about the drug being transferred, including lot number). The adoption of a nationwide pedigree system would place new requirements on specialty pharmacy to confirm that a pedigree will be supplied prior to purchase from the distributor, and that each transaction is authentic.

An early notification system would mandate that drug firms notify the FDA about any discontinuance or interruption in prescription drug manufacturing in advance, or in the case of an unplanned supply shortage, as soon as possible. While an earlier Senate version of this proposal did not include certain biologic products, the Preserving Access to Life-Saving Medications Act, introduced by Rep Diana DeGette (D-CO), includes all biologics in the mandate. While the legislation as currently written only places reporting requirements on manufacturers, it is possible that a final piece of legislation might include reporting requirements on all parts of the supply and distribution chain, including pharmacists.

Congressional action on drug shortages is a long time coming. The specialty pharmacy community has been at the front lines of this national public health crisis for years—and will probably be required to be part of the solution. Current Congressional proposals to shore up communication lines between manufacturers, distributors, pharmacists, providers, and patients, as well as the FDA, are a likely step in the right direction. However, the underlying problems will likely still remain.

Generic sterile injectables, which comprise the vast majority of these shortages, have extremely low profit margins and are manufactured at facilities in dire need of modernization and repair. Until the proper incentives for these medications are provided, manufacturers will have no incentive to devote additional resources to their production.

In the meantime, specialty pharmacy must remain vigilant in the selection of suppliers, ensuring that products provided to patients are genuine, safe, and handled appropriately. Hopefully, in the near future and with additional Congressional action, this crisis will be a thing of the past. SPT


Ross Margulies is a health policy specialist at Foley Hoag LLP with expertise in federal and state health law and policy issues including Medicare and Medicaid, community health, and the impact of health care reform.





Jayson Slotnik focuses on health regulatory issues in his current practice at Foley Hoag LLP. He was formerly the director of Medicare reimbursement and economic policy at the Biotechnology Industry Organization in Washington, DC.