In the conclusion of her recently published book, “Bottle of Lies,” Katherine Eban briefly notes that the Food and Drug Administration avoids sanctioning generic manufacturers that sell drugs that are in short supply regardless of how poorly manufactured or counterfeit they are. “Drug shortages had become a game,” she writes, “and the FDA was getting played.” Eban quotes an assessment by former FDA inspector Peter Baker: “There are no consequences for companies that are shipping substandard product. … It’s a win-lose situation and [patients] are the losers.”

Quality concerns aside, the FDA reports that there are currently more than 150 drugs and biologics in shortage. These include anesthetics, antibiotics, antimicrobials, cardiovascular medications, and chemotherapy products. Last November, the FDA concluded that the occurrence of drug shortages is increasing, the durations are longer, and both the intensity and public health impact are high. The primary reason for supply shortages is low prices. That’s not surprising, since these drugs are ostensibly generics, sole-source contracts, and complex supply chains, or some combination of the three.

Are federal policy makers currently and effectively addressing drug shortages? Sadly, the answer is no.

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The example of BCG

Bacillus Calmette-Guérin (BCG) is an off-patent biologic that has been in short supply for most of this decade. Initially isolated as a tuberculosis vaccine in 1921, BCG is one of the first examples of immunotherapy. It has been used since the 1970s to effectively treat non-invasive bladder cancer, which affects nearly 75,000 Americans each year (more men than women) and kills 17,000.

The shortages of BCG began early this decade when Sanofi’s Toronto manufacturing facility suffered flood damage, causing it to be cited by the FDA for mold problems. This contributed to Sanofi’s exiting the BCG market in 2016, leaving Merck as the only producer. Though Merck states it has increased production by more than 100%, the company still cannot meet the worldwide demand.

As a result, bladder cancer patients are forced to accept reduced dosages or combinations with less effective medications. They are also forced to accept abbreviated or no maintenance treatment, or accept as substitutes less-effective therapies that can result in needing to have the bladder surgically removed or dying of bladder cancer. Similar issues plague patients facing other drug shortages.

Other adverse effects include lost treatment time for clinicians who must manage and work around shortages, postponed or canceled medical research, and price gouging. The latter results in increased health care spending by payers and patients, possibly more than $400 million a year, which is particularly problematic when a patient’s insurer refuses to pay for a substitute treatment.

Unsuccessful efforts by Congress

Over the years, Congress has attempted to address the drug shortage problem. The FDA Safety and Innovation Act of 2012 (FDASIA) expanded requirements to report shortages and established an FDA task force to develop a mitigation plan. The 21st Century Cures Act of 2016 authorized the FDA to award grants to study improvements in manufacturing. The 2017 FDA Reauthorization Act, more specifically the Generic Drug User Fee Amendments, which were initially enacted in 2012 to ensure that patients have access to safe and affordable generics, created a program to extend priority review for generics with a single manufacturer.

These efforts haven’t been successful. Despite recently noting drug shortages are increasing, the FDA stated under FDASIA the agency was able to avoid 145 new drug shortages in 2017, though there appears to be no evidence supporting its assertion. The requirement to publicly report shortages may, in fact, be counterproductive since it provides incentives for scalpers to buy and exorbitantly mark up drugs for resale and/or cause providers to hoard.

Former FDA Commissioner Scott Gottlieb created the Agency Drug Shortages Task Force last summer, but it has been ineffective largely because the FDA does not have the authority to require manufacturers to produce a certain drug, increase output, or determine how a drug is distributed. And there is no evidence to date that the three grants awarded last year under the 21st Century Cures Act will prove successful.

A 2018 fact sheet published by the Pew Charitable Trusts concluded it is “unknown” if the FDA can successfully expedite generic reviews. Even if it is possible, doing so may leave the FDA inadequate time to conduct necessary facility inspections — a worrisome prospect considering its poor track record in regulating the manufacturing of generic drugs, particularly overseas (“Bottle of Lies” truly is a must-read). Pew also expressed skepticism about related proposals to waive FDA user fees for priority generic applications because “they pair faster FDA review with a reduction in resources.” As for priority review vouchers for use in expediting subsequent or second generic drug applications, related FDA voucher programs for tropical and pediatric diseases have not proven successful.

Proposed remedies

Because the provider community could no longer wait for federal policymakers to address root cause market failure, Civica Rx (previously named Project Rx) was launched in September 2018. The organization, a nonprofit formed by five health care systems, including the Veterans Health Administration, announced in January 2019 it will manufacture and offer its members up to 100 generics over time. In May and July, the company signed production deals with manufacturers based in Denmark and the United Kingdom to produce essential antibiotics and more than a dozen injectable drugs. As many as 900 hospital partners will pay Civica Rx based on production costs and the size of the partner’s organization.

A similar company launched in January 2019: ProvideGx, founded by Premier, a health care improvement company with 4,000 allied hospitals.

Following Civica Rx’s lead, Sen. Elizabeth Warren (D-Mass.) and Rep. Jan Schakowsky (D-Ill.) introduced in December 2018 the Affordable Drug Manufacturing Act (S. 3775) that would task the Department of Health and Human Services to manufacture generic drugs “in cases where the market has failed,” according to Warren. Other countries already do this. Sweden, Thailand, and Brazil, for example, use government-owned drug companies for so called “threat capacity” purposes. S. 3775 has not been reintroduced this Congress, nor has there been any related conversation within the germane congressional committees.

And no presidential candidate, including Warren, has so far proposed government manufacturing or any other fixes for drug shortages.

The current drug policy debate should include drug shortages. Here are six options that policy makers should consider:

  1. Financial incentives could be offered to manufacturers via grants, contracting, or tax credits. These could be dependent on meeting predefined production schedules. Preference could be given to drugs produced in facilities based in the U.S.
  2. The Centers for Medicare and Medicaid Services could pay a premium for drugs that are in short supply. CMS already has the authority under the Medicare Modernization Act of 2003 to do the opposite or lower drug prices.
  3. Like many countries, the U.S. simply assumes the market will deliver drugs in short supply with optimal efficiency. The FDA’s authority could be expanded to include supply chain management in certain circumstances.
  4. Other things the FDA could do include tracking regional shortages, those based on dosage, and shortages caused by manufacturing under threat of climate disasters; streamline the approval of drugs in shortage and waive, reduce, or reimburse generic user fees; allow for guaranteed exclusivity; prioritize facility inspections and include assessments of production output; and reevaluate the expiration dates of drugs in short supply.
  5. Because group purchasing organizations and others buy in large quantities, they put downward pressure on prices. The government could create incentives for production by requiring such organizations to negotiate exclusive and long-term agreements, particularly if the manufacturer would be repurposing an existing production line.
  6. Congress could clarify or expand march-in rights provided under the 1980 Bayh-Dole Act whereby the government can expand licensing of a drug in shortage.

Conclusion

It is difficult to know if solving drug shortage issues would simply result in more drugs of dubious quality being unleashed in the U.S. This is particularly true if, as Eban found, the FDA continues to announce in advance overseas inspections and/or downgrade inspection findings for drugs in shortage.

Nevertheless, stimulating the market for drugs in short supply could create newly approved or properly inspected facilities that galvanize existing manufacturers to improve their production techniques and thereby reduce the FDA’s motivation to avoid imposing appropriate restrictions on short-supply drugs they know are unsafe.

David Introcaso, Ph.D., is vice president of regulatory policy at Strategic Health Care, a health care consulting firm based in Washington, D.C. Zack Szlezinger is a public policy student at the University of Virginia and a Strategic Health Care intern. The views expressed by the authors are their own and do not necessarily represent those of the company or university with which they are affiliated.

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  • The all-mighty US government could do something very useful here: implement a “Body” tasked with ensuring sufficient supply of drugs (all those essentials that are however in short supply as they are apparently too un-profitable for Big Pharma – that prefers to spend big on lobbying etc). Really take care of your population. Very simple, if you are as powerful as you portray to be. Right?

  • An important element of drug shortages is overlooked and that is PBMs. They have driven many producers out of business. No one is paying attention to the stealth player (PBMs) for the generic markets.
    May 4, 2018 I had proposed what I call GEN plan to improve affordability and reduce shortages (http://bit.ly/2IXHiY6). It is similar to Civica plan. Amazon/JPMorgan and Berkshire plan can work. Drugs have to be sold directly to the patients.

    PBMs will make sure that direct sale to the patients is killed on arrival. Why? Generics and PBMs have legislators in their back pocket. Any Alternate proposal that will dent their profits will be killed on arrival.

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