Drug shortages are a major challenge for hospitals. Today, 121 key lifesaving drugs are in short supply and 70% of all hospital pharmacists report at least 50 shortages a year. Without these lifesaving drugs on hand, providers may be forced to delay medically necessary care or substitute therapies that may not be as effective. Health systems like ours can help alleviate the problem.
Drug shortages are triggered by a variety of events, including natural disasters or manufacturing quality problems that take producers offline for weeks or months at a time. Some shortages occur when manufacturers have difficulty finding sources of raw materials, others when there is a sudden surge in demand due to a disease outbreak or seasonal spike in cases, such as flu season.
Most shortages occur with generic drugs. Because many of these are low-margin products, too few companies produce them. As a result, many drugs have just one or two suppliers for the entire country, creating a fragile supply chain that isn’t strong enough to handle variable market demand.
Earlier this year, for example, a physician chronicled in STAT the shortage of a generic drug used to treat pediatric cancer. Last year, the American Society of Anesthesiologists suggested that doctors “consider postponing an elective procedure when the risks of proceeding might outweigh the risks of using medications that are alternative to those in short supply or unavailable.”
One shortage of norepinephrine, a drug used to treat septic shock, resulted in a nearly 4% increase in inpatient deaths and added $13.7 billion in costs to the nation’s health care tab.
Recognizing the dangers of hospital drug shortages, the Food and Drug Administration has made great strides to encourage additional manufacturers to enter the market. Until recently, though, the FDA had a drug approval backlog that took most new manufacturers of existing drugs more than four years to move through, giving legacy drug makers a de facto, multiyear monopoly that not only limited options and compromised the nation’s supply but also led to dramatic price increases.
In response, the agency has fast-tracked approvals in shortage categories, increasing the number of drugs on the market by nearly 17%, while cutting average reviews of new drug applications by six months. At the same time, the FDA began publishing a list of drugs that are off patent but lacking generic competition, giving manufacturers a clear set of opportune targets.
Though helpful, these efforts have not produced a permanent fix to hospitals’ drug shortage problem.
That is why health systems like ours have been working on new solutions to reorganize the market and create incentives to increase drug supplies at prices that won’t bust the budget.
Our health systems are owners of Premier Inc., a health care improvement company that created a subsidiary called ProvideGx that is devoted to increasing the supply of shortage generic drugs. (Approximately 200 other health systems also have ownership stakes in Premier, which is publicly traded.) As an alliance of health systems, we are working to curb shortages by fundamentally altering the market dynamics between buyers and sellers of drugs.
Specifically, we are mitigating the risks manufacturers face when entering the market by aggregating the demand of hospital members and approaching manufacturers with a guaranteed buyer base if they enter a new market or increase their production of shortage products. This creates a predictable sales channel for the manufacturer, thereby cutting down its financial risks. In exchange, health systems get a guaranteed supply at a guaranteed price and, most importantly, patients get access to the medications they need in a timely manner.
Through this work, Premier has brought one manufacturer, Baxter, back into the market to produce metoprolol, a drug used to treat high blood pressure that has been in short supply, and partnered with another, Fresenius Kabi, to increase production levels for injectable thiamine, lidocaine, diphenhydramine, hydromorphone, and morphine sulfate, all of which have been in shortage for a year or more. Over the long term, we expect to put capital to work by investing in new, competitive drug manufacturers to help lower the risk burden of entering new markets.
By using creative financing and group purchasing options, we are able to create more stability in the pharmaceutical manufacturing market that will encourage new entrants to step in and provide more competition and more options for providers, hopefully addressing the drug shortage problem in a more sustainable manner.
Although much good work has been done to curb drug shortages, hospital leaders must continue to step up and support new models that provide incentives to nourish the drug manufacturing market and bring it back to life. When we do this work together, we can create a circle of partnerships between buyers and sellers, reinvent the economics used to source generic drugs, and solve the shortage problem once and for all. As Helen Keller once said: “Alone we can do so little. Together, we can do so much.”
Barclay E. Berdan is CEO of Texas Health Resources, an integrated health system that provides care to 7 million residents in North Texas. Scott Reiner is CEO of Adventist Health, a faith-based, nonprofit integrated health system serves 4.8 million patients on the West Coast and Hawaii. Terry Shaw is president and CEO of AdventHealth, a faith-based health care organization headquartered in Altamonte Springs, Fla., that provides care to 4.7 million patients.