Better (and Faster) Hoarding Wins

Pharmacy Times Health Systems Edition, January 2020, Volume 9, Issue 1

A more reasonable way to address shortages: price drugs at a level that provides incentive to ensure a consistent, high-quality supply.

In the cover story in this issue of Pharmacy Times® Directions in Health-System Pharmacy, Katie Bui, PharmD, provides a concise discussion of drug shortages and the impact on patient care from a clinician’s perspective.

As we all know, drug shortages are the new normal in health-systems pharmacy, and most of us have become good at managing around and through these shortages, even as their frequency and severity have worsened in recent years.

I am fortunate at my institution to have a great team that is focused on all aspects of drug shortage management, including identifying alternative (legitimate) sources and clinical strategies, managing inventory, modifying electronic medical records, recovering from the shortage (that is, undoing everything we did), and tracking trends. Our pharmacy information technology (IT) group has also developed some great analytical tools that allow us to quickly determine estimated days on hand, summarize our inventory position, project our needs to a theoretical date of resupply, and understand our most recent usage data. The tools also tell us where all the supply of a drug is located so that inventory can be consolidated or moved around as needed.

But most important, I am somewhat ashamed to say, is that we have become really fast and good hoarders. We jump on the earliest signs of a pending or real shortage and scour the landscape to procure adequate inventory to weather any impending storm. Recently, a national news network reported on a major medical center in the Northeast that was dealing with a severe shortage of heparin and discussing potentially canceling cardiac surgical procedures. I was able to assure our hospital leadership that we were not in danger of a severe heparin shortage. The reason: we had reacted quickly months earlier to ensure an ample stockpile because of the swine flu outbreak in China. My highly skilled hoarders had done their job, perhaps to the detriment of others.

Being able to deftly manage most drug shortages, real or imagined, does not come cheap. We have added full-time equivalents to specifically manage shortages, and we steal time from our clinical team, departmental leadership, IT group, supply chain staff, and many others around the institution, as needed.

Vizient recently estimated the increase of drug shortage—related personnel costs for US hospitals at about $359 million per year, associated with an 8.9 million increase in personnel hours of labor.1 This does not capture all the other costs associated with drug shortages, including higher-cost alternative drugs, increased risk of adverse events, inventory-carrying costs for us hoarders, reallocating resources from other valuable activities, lost revenue from canceled infusions or procedures, and updated technology to safely manage alternative products. Drug shortages are very expensive for hospitals and continue to worsen.

All of us know that hoarding is bad, and most experts on drug shortage management advise against it, but we all do it. What choice do we have? We also know that hoarding at the first suggestion of a potential shortage can drain the distribution pipeline and actually create the situation we hope to avoid. Those slow to react are left with no access to important drugs, so being fast to respond is important.

There are also professional hoarders in the marketplace. Initially, speculative gray market companies attempted to predict future shortages, stockpile inventory, and resell a product at considerably higher prices. These have often included companies of dubious reputation, creating concerns about the integrity and pedigree of their products. I am fortunate and proud to say that my health system has never dealt with gray market distributors. More recently, other professional hoarders have emerged, including large group purchasing organizations, major distributors, and third-party companies that work with large distributors to protect against shortages.

Some of these groups have offered these as valueadded services to their members without direct financial impact, but most are profit-motivated “insurance plans” against shortages. The health system typically receives a list of presumably high-risk drugs included in the program, commits to a volume, and pays a premium price for the products, whether or not a shortage is experienced. These programs stockpile an inventory of these agents when supply is readily available to hedge against a potential shortage and

therefore provide protection, at a price, to participating members. Given the overall cost of shortage management, this may be a worthwhile investment, provided the professional hoarding group has a functioning crystal ball and can predict accurately.

Bui discussed the recently released FDA task force report on drug shortages, which identified 3 primary root causes of the problem.2 First: Because of their low prices, the generic injectable drugs often implicated in drug shortages are not very profitable to manufacture. This has led to consolidation of the industry, as companies have stopped making these drugs, increasing the market’s susceptibility to disruptions in manufacturing and distribution. Manufacturers are incentivized to shift limited production capacity to more profitable products, and they lack incentive to renovate and modernize aging manufacturing facilities, which leads to quality failures that contribute to drug shortages. A recent editorial in an industry publication affirms that the etiology of drug shortages is primarily financial.3

I don’t want to sound naïve, but it seems that a reasonable solution to reduce the frequency and severity of drug shortages involves realizing that manufacturers need to price these agents at a level that provides adequate incentive to ensure a consistent, high-quality supply. Although I am not one to advocate for price increases, it seems that modest and reasonable price concessions would be good for all involved, because health systems are spending considerable sums on managing shortages primarily driven by paying too low a price for the drug when it is available. We obviously do not want to see outrageous price hikes similar to those of drugs such as isoproterenol and vasopressin (and those companies should be ashamed of their behavior) but, rather, a fair price that will encourage generic drug manufacturers to remain in the market.

Until then, we will keep hoarding to protect ourselves and our patients from the ill effects of drug shortages.

I conclude with something I said at a national meeting: I will promise to stop hoarding if you promise to stop hoarding.

REFERENCES

  • Drug shortages and labor costs. Vizient website. vizientinc.com/our-solutions/pharmacy-solutions/drug-shortages. Accessed December 5, 2019.
  • FDA. Drug shortages: root causes and potential solutions. fda.gov/media/131130/download. Published 2019. Accessed December 5, 2019.
  • Peters RC. Breaking the drug shortage cycle. Pharmaceutical Technology. November 2, 2019. pharmtech.com/breaking-drug-shortage-cycle. Accessed January 1, 2020.

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Curtis E. Haas, PharmD, FCCP, is the director of pharmacy for the University of Rochester health care system in New York.