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Medically Necessary: Shoring up the pharmaceutical supply chain

A U.S. Food and Drug Administration scientist evaluates beads used for coating a controlled-release generic drug. (Credit: FDA photo by Michael J. Ermarth)

This is an excerpt from the April 8, 2021 edition of Medically Necessary, a health care supply chain newsletterSubscribe here.

The problem: Drug shortages have plagued the U.S. for years, but the scarcity of certain drugs during the pandemic energized some experts to renew efforts to address the problem. 

  • The U.S. Food and Drug Administration currently lists more than 100 drug shortages, mostly for cheap, injectable drugs.

The fundamental issues causing drug shortages will take years to resolve, but a fresh focus on the health care supply suggests there’s momentum to take action now.

Backstory: The number of active drug shortages peaked at about 450 in 2012, according to the Government Accountability Office. Since then, the number of new shortages has slowed, but ongoing shortages persist.

Reducing drug shortages has been an FDA priority for years, and the agency has taken action to address the issue.

  • A 2011 GAO report on drug shortages found that FDA didn’t track shortages in any systematic fashion, but reporting has since improved.
  • In 2018, Congress urged FDA to create a drug shortage task force, which resulted in a detailed report with specific recommendations a year later.
Active drug shortages peaked in 2012. Since then the number of new shortages has declined, but shortages remain a consistent problem. (Credit: GAO)

The profile: Expensive, name brand drugs rarely experience shortages. Instead, it’s usually cheap, generic drugs that run into problems.

  • “Most of these drugs in shortage are low-priced, long off-patent, which means they have very low profitability,” Penn State supply chain researcher Hui Zhao told FreightWaves. “Manufacturers don’t want to enter into producing them, which is understandable.”

Injectables, rather than capsules or tablets, are also more likely to run into shortages, Zhao said. They’re more likely to experience quality problems that require manufacturing pauses for inspections and improvements.

Quality problems, which can result in manufacturing pauses, were the leading cause of drug shortages between 2011 and 2013. Shortages from increased demand were rare. (Credit: GAO)

The pandemic: The COVID-19 pandemic presented a new challenge. Government shutdowns across the globe disrupted drug production, but many shortages were driven by demand.

  • “There were definitely different causes of drug shortages this year than other years,” Joshua Sharfstein, a public health researcher at Johns Hopkins University and former FDA official, told FreightWaves. “We saw demand-induced shortages here, which are not typical.”

The reaction: FDA can expedite the approval process for new manufacturing facilities, offer regulatory flexibility for importing foriegn drugs and extend expiration dates during a shortage.

However, those tools mainly allow FDA to react to existing shortages, rather than prevent future problems or address the underlying issues.

  • “We want them to be proactive. Look at the warning signs,” Mary Denigan-Macauley, director of the GAO’s health care team, told FreightWaves.

FDA declined an interview request about drug shortages.

Solutions: Experts say increasing data transparency, offering financial incentives for supply chain resiliency and strengthening contracts could help prevent drug shortages.

  • “I think there’s a lot of bipartisan interest in the supply chain,” Sharfstein said. “I think that there’s certainly been interest in some of these legislative ideas. … FDA is going to need to pay a lot more attention to the supply chain in the future.”

Data: GAO wants FDA to use the data it already has to predict and stop future shortages. The agency also wants FDA to gather more detailed information about the pharmaceutical supply chain. 

  • Currently, FDA doesn’t know which suppliers a manufacturer is using for a finished product. Last year, officials had to individually call 180 manufacturers to ask whether their suppliers were affected by the pandemic.
  • “We don’t even know where all our vulnerabilities are,” Denigan-Macauley said. “We have some serious data issues at the moment.” 

Mapping: A group of researchers at CIDRAP recommended creating an “in-depth map” showing where each drug is made and where its raw materials come from.

  • “The map will be used to determine the networking and interdependence of suppliers at all levels in the supply chain and to report and assess its vulnerabilities,” the authors of the report wrote.

Onshoring: The CIDRAP and GAO teams both recommended encouraging companies to bring more pharmaceutical manufacturing back to the U.S. They say that could increase supply chain visibility and guard against supply disruptions caused by natural disasters or trade disputes.

  • “How can we bring home some of that manufacturing? How can we ensure that all of our [active pharmaceutical ingredients] for example aren’t over in China when we need them?” Denigan-Macauley said.

Incentives: In a recent report, researchers from Johns Hopkins University argued that Congress should authorize FDA to grade the resiliency of drug manufacturers’ supply chains.

  • Zhao said grading the reliability of manufacturers’ supply chains would incentivize them to invest in resilience. 
  • “A lot of the shortages are caused by quality disruptions, which means that there is some difference there,” she said. “Some of these facilities are better equipped. They have more advanced … quality control methodologies than the others, and they’re not rewarded for that.”

Higher prices: Hospitals and patients suffer tremendously when there are drug shortages, but the price of many generic drugs is so low that other players in the supply chain aren’t motivated to resolve the problem.

Zhao said hospitals and health care providers should consider translating that pain into higher prices.

  • “From the hospital side, they need to know that it’s not just lower price,” she said. “If you keep pressing the price down for these critical drugs, you’re not going to have them anymore.”

Stronger contracts: Higher prices alone probably won’t do the trick. Zhao’s research suggests price increases should be paired with a contractual clause penalizing manufacturers who fail to supply drugs.

  • “The penalty is the stick, but we need the carrot,” she said. “If there’s no carrot, who wants to do this? We cannot just have sticks. The manufacturers do not have to produce this.”

Gaining steam: There are some signs that the pandemic is adding momentum to efforts to end drug shortages. 

  • In February, the White House issued an executive order instructing the Department of Health and Human Services to evaluate risks in the pharmaceutical supply chain. 
  • President Joe Biden’s recent infrastructure plan proposes funding for bringing pharmaceutical manufacturing back to the U.S. 

Sharfstein said the decline in coronavirus cases early this year gave public health officials a chance to breathe after a tumultuous year. He’s hoping they’ll use that respite to add resiliency to the nation’s drug supply.

  • “This is a moment to think about how to strengthen the supply chain,” he said.

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