In recent history, drug shortages became somewhat of a phenomenon, tripling from 61 shortages in 2005 to 178 in 2010.
Cause for Shortages
Competition for generic drugs, low profit margins, and substandard manufacturing facilities have all contributed to drug shortages in the United States.
When new generic drugs enter the market, the presence of the new product can force market competitors to drop their prices to compete. Sometimes, these prices are reduced so low that it negatively impacts profit margins. The resulting low profit margins drive manufacturers to seek the least expensive suppliers, often outsourcing to China and India, where quality control may not be as stringent as in the United States.
This can result in poor-quality products and quality-related recalls.1 This model is not sustainable long term and a manufacturer can frequently be forced to sell its product at unrealistically low prices or drop out of the generics market.
Those remaining in the generics market find that there are few resources to maintain or upgrade manufacturing facilities, buy quality active pharmaceutical ingredients from reliable suppliers, or ensure that business continuity plans, redundant manufacturing capacity, and well-stocked inventories are available to prevent shortages in the event of a natural disaster.
When manufacturers leave the market, the resulting decrease in competition and a shortage of supplies shifts the pendulum the opposite way to the few remaining companies that can increase prices and take advantage of a higher demand for these drugs. Meanwhile, US factories have not been modernized to include improved quality systems, which results in shortages at domestic facilities.
Drug shortages have become somewhat of a phenomenon, over the past 15 years, tripling from 61 shortages in 2005 to 178 in 2010. This spike resulted in an inquiry by the Obama administration, which determined that the shortage problem is complex and stems from economic, legal, regulatory, policy, and clinical decisions that are deeply interconnected.2
Drugs Affected by Shortages
More than 200 drugs have been listed on the FDA and the American Society of Health System Pharmacists’ drug shortage lists. Among these are sterile injectable drugs and critical drugs, such as those used in oncology.
In addition, many life-saving products commonly used in surgeries and hospital emergency rooms, such as anesthesia medications, antibiotics, pain management medications, nutrition and electrolyte products, and chemotherapy agents have all experienced shortages. Even the sterile saline solution used to administer drugs intravenously has been in short supply.
The most challenging drug shortages are:
Price Gouging as a Consequence
An unfortunate consequence of drug shortages is that some drug wholesalers capitalized on the supply-and-demand aspect and increased prices for their products to take advantage of the situation. One example of this was when a leukemia drug with a typical per vial contract price of approximately $12 was being sold for $990. Another shortage-related increase occurred when a high blood pressure medication normally priced at $26 was being sold at $1200.
There are many causes and potential solutions to this challenge. Addressing this significant public health problem requires the urgent attention of the pharma industry, other stakeholders, and government officials.
The Obama administration inquiry resulted in an executive order directed at the FDA and Department of Justice to reduce drug shortages, protect consumers, and prevent price gouging. Among the recommendations made were for early notification of potential drug shortages to help the FDA work with manufacturers, hospitals, physicians, and patients to prevent or mitigate shortages before a crisis occurs.
Currently, federal law requires drug manufacturers to notify the FDA when production of a critical drug is being discontinued. The president’s order also directed the FDA to broaden its reporting of potential shortages of certain prescription drugs. Additionally, the executive order requires the FDA to expand its efforts to expedite review of new manufacturing sites, drug suppliers, and manufacturing changes to prevent shortages.
Once the FDA is notified of a shortage, the agency has multiple options to prevent or mitigate it. In many cases, the agency takes multiple actions. In the shortages studied, the agency’s 3 most common actions were asking other firms to increase production (31%), working with manufacturers to identify ways to mitigate quality issues (28%)—ie flexibility through regulatory discretion—and expediting review of regulatory submissions (26%).
Also notable was that in 5% of cases, the FDA also exercised regulatory discretion regarding controlled importation of products approved abroad but not in the United States. Among a series of steps to address the prescription drug shortage and ensure that patients have access to lifesaving medicines, the Obama administration also:
FDA Oversight: Interagency Drug Shortage Task Force
Despite these efforts, the instances of drug shortages increased in both 2017 and 2018. In June 2018, a bipartisan group of 31 US Senators and 104 members of the House of Representatives wrote the commissioner of the FDA to ask for assistance in addressing the nation’s drug shortage crisis. Their letters urged the FDA to convene a task force to study the problem, prepare a report on root causes of drug shortages, and make recommendations for enduring solutions.
A 2018 industry presentation by the FDA Drug Shortages Task Force noted that shortages are lasting longer. The task force reported that more than 10 drugs have been in short supply for 5 years or more and nearly 30 generic medications have been in short supply for 2 years or more, with the 5 longest shortages having lasted more than 8 years.
The FDA also reported that shortages remain consistently intense, meaning that much less product inventory is available than needed to meet patient demand. The combined impact of generic drug shortages on public health is high, according to the FDA.
The need to find alternative drugs that can serve the same purposes or make changes to electronic health records to support changes in products adds millions of dollars in staff time to health care costs.3
The task force identified the following root cause analysis:
Root Cause 1: Lack of Incentives to Produce Less Profitable Drugs
Root Cause 2: Market Does Not Recognize and Reward Manufacturers for Mature Quality Management Systems
Root Cause 3: Logistical and Regulatory Challenges Make It Difficult for the Market to Recover After a Disruption
Task Force recommendations
Responses to the root cause analysis include:
Recommendation 1: Create a Shared Understanding of the Impact of Drug Shortages and the Contracting Practices That May Contribute to Them
Efforts need to be made to collect and analyze comprehensive drug shortage information to quantify the effects or closely observe contracting practices that may be driving them. This information needs to be collected to monitor or predict the frequency, duration, and intensity of shortages. It is important to quantify the impact of the shortages on the health care delivery system.
Recommendation 2: Create a Rating System to Incentivize Drug Manufacturers to Invest in Achieving Quality Management System Maturity
This proposal aims to rectify variations in quality by developing a system to measure and rate the quality management maturity of individual manufacturing facilities based on specific objective indicators. A rating would evaluate a manufacturing facility’s quality system and could be used to inform purchasers about the state of, and commitment to, the quality management of the facility making the drugs that they are buying.
Recommendation 3: Promote Sustainable Private Sector Contracts
Providing more comprehensive information on the cost of shortages to patients and the health care delivery system will help payers understand the tradeoffs between paying the lowest possible price for generics and having reliable access to these often life-saving drugs over the longer term.
Payers need to consider ways to shift financial risk and uncertainty away from drug producers, especially those who manufacture older generics. Instead, they should consider paying sustainable prices to manufacturers that can ensure a more reliable supply of safe and effective drugs, thus lowering the risk of shortages. Meanwhile, manufacturers could be rewarded for implementing mature quality management systems.
Civica Rx is an innovative approach to the drug shortage crisis taking the task force findings into action. Established in 2018 by multiple health systems (CommonSpirit Health, HCA Healthcare, Intermountain Healthcare, Mayo Clinic, Providence St. Joseph Health, SSM Health, and Trinity Health) and 3 philanthropies (Gary and Mary West Foundation, Laura and John Arnold Foundation, and Peterson Center on Healthcare), its goal is to reduce chronic generic drug shortages and related high prices in the United States.
Civica is a non-profit, non-stock corporation committed to stabilizing the supply of essential generic medications in a hospital setting. The company is built on transparency and offers fair and sustainable prices to its member hospitals.
It is able to accomplish this by dedicating manufacturing capacity for medications that are most desperately needed in US hospitals through redundant manufacturing and a strategic safety stock of medications. To prevent drug shortages, Civica aims to stabilize the supply of antibiotics, anesthetics, cardiac medications, pain management medications, and other essential sterile injectable medicines used in hospitals.
Civica also actively pursues a 3-pronged product supply strategy:
• Work with multiple generic drug manufacturers that have the FDA-approved manufacturing facilities and the capacity to produce Civica-labeled generic drugs, allowing manufacturers to re-enter the market or increase existing capacity.
Civica recently announced a partnership with Xellia Pharmaceuticals to provide 2 critical antibiotics, vancomycin and daptomycin. A second partnership with Hikma Pharmaceuticals provides 14 medicines used daily by hospitals in emergency care, surgery, pain management, and in treating hypertension. A third partnership with Exela Pharma Sciences provides sodium bicarbonate.
• Develop abbreviated new drug applications (ANDAs) for generic drugs and working with contract manufacturing organizations to produce Civica medications.
• Acquire and build Civica manufacturing facilities using Civica's ANDAs.
Civica Rx is a prime example of effectively abating the drug shortage crisis and the significant impact on our health care system by addressing the specific issues outlined by the Drug Shortages Task Force. These include monitoring the availability of generic drugs, ensuring fair payment for generic drugs, and establishing quality controls on manufacturers.
By implementing their strategies, they can effectively break the cycle of low supply and high demand for life-sustaining medications. Civica’s mission and process also strives to alleviate the burden on pharmacists and other health care workers who need to obtain drugs and prevent treatment delays. Most importantly, patients are kept safe and receive the health care services that they need.
About the Author
Nivedita Kohli earned her Bachelor of Pharmacy degree from the Bouvé College of Health Sciences at Northeastern University and is currently enrolled in the Master of Pharmacy Business Administration (MPBA) program at the University of Pittsburgh, a 12-month, executive-style graduate education program designed for working professionals striving to be tomorrow’s leaders in pharmacy business. She spent the past 20 years developing and implementing drug safety initiatives for a health plan and pharmacy benefit management provider serving Western New York. Over the past decade, she spearheaded educational programs for healthcare practitioners around appropriate opioid prescribing in addition to supporting the Erie County Opioid Epidemic Task Force with multi-faceted programs to improve the outcomes and reduce the impact of the opioid epidemic in Western New York. More recently, she is focusing on opportunities to provide high quality, sustainable healthcare in the current US market, employing her skillset in managed care and business.