Interest building for drug shortage solution

Government officials point fingers at drugmakers, but some market observers say federal price controls may be a big factor.

By Doug Trapp — Posted Dec. 12, 2011

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More congressional committees are investigating the causes of national drug shortages, increasing the possibility that more lawmakers will offer legislation to address this issue.

Two House committees and a Senate panel have each held hearings since September to explore the causes of drug shortages. Many of the more than 200 drugs in shortage are older generic sterile injectables, the Food and Drug Administration said.

Federal health officials testified Sept. 23 at a House Energy and Commerce health subcommittee hearing that manufacturing problems, supply disruptions and industry consolidation are the key causes of drug shortages.

But witnesses at a House Oversight and Government Reform health subcommittee hearing on Nov. 30 said Medicare price controls also have contributed to shortages. A 2003 law limits Medicare payment for physician-administered drugs to average sales price plus a 6% administration fee, which has limited profit margins and drugmakers' ability to maintain and upgrade their facilities.

"The incentive to stay in the market has been reduced," said Ted Okon, executive director of the Community Oncology Alliance, which advocates for cancer patients and their physicians, at the Nov. 30 hearing.

Drug shortages also have been exacerbated by tighter FDA enforcement of drug manufacturing standards, said Scott Gottlieb, MD. Dr. Gottlieb, also a witness at the Nov. 30 hearing, is a resident fellow at the conservative American Enterprise Institute and was FDA deputy commissioner for medical and scientific affairs from 2005 to 2007.

However, FDA spokesman Shelly Burgess said agency policy has not been a factor in drug shortages. The agency expedited more than 300 industry applications for new or updated manufacturing facilities in the past two years, she said.

Focus on price controls

At least one former Obama administration official also believes Medicare price controls may be a big factor in drug shortages. Ezekiel Emanuel, MD, PhD, an oncologist, bioethicist and former health care adviser to President Obama, said no one has confirmed all the reasons behind drug shortages. But he said Medicare price limits are one of three likely main culprits. The others are slow FDA approval of new or upgraded drug manufacturing facilities and consolidation in the drug industry, said Dr. Emanuel, who in September became the department chair of the Center for Bioethics and the Dept. of Medical Ethics and Health Policy at the University of Pennsylvania's Perelman School of Medicine.

He said prices for some generic shortage drugs aren't increasing enough to encourage more manufacturers to produce them, and the price controls need to be adjusted or abandoned. "If these companies were making a lot of money on these drugs, they would not let the production lines go down."

Another factor is the drug distribution system. Physicians face pressure from health insurers to obtain the best prices for prescription drugs through multiple distributors. However, distributors tend to provide the best prices and most stable supply to high-volume purchasers, said Rena Conti, PhD, assistant professor of health economics and policy at the University of Chicago. Conti, a witness at a Dec. 7 Senate Finance Committee hearing on drug shortages, studies the market for specialty oncology drugs.

She said failure-to-deliver penalties in drug purchasing contracts tend to be weak and unenforced, which has led to uneven drug distribution and pricing around the country. Financial production incentives might work, but it's unclear how quickly and how much incentive may be needed.

Legislation may be next step

Any legislative solution to drug shortages should require drugmakers to maintain production of critical drugs and have a contingency plan in case of a disruption in the supply chain, said Michelle P. Hudspeth, MD, a witness at the House hearing on Nov. 30 and division director of Pediatric Hematology/Oncology at the Medical University of South Carolina.

Congressional Democrats, Obama and others have called for more advance warning of impending drug shortages and more FDA action.

Obama signed an executive order on Oct. 31 directing the agency to require drug manufacturers to report drug discontinuances in advance. Obama also ordered the FDA to expedite reviews of drug suppliers and manufacturing processes. The American Medical Association adopted a policy in November in support of mandated reporting. But better advance reporting alone will not solve shortages, said Rep. Paul Gosar (R, Ariz.), the House Oversight and Government Reform health subcommittee's vice chair. "What we need to be is more proactive ... instead of just putting our fingers in the dikes."

Reps. Elijah Cummings (D, Md.) and Danny Davis (D, Ill.) said the subcommittee hearing should have included witnesses from the FDA and pharmaceutical industry. The lawmakers on Dec. 1 called on the panel's chair to hold another hearing with drug industry witnesses.

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Shortage drugs often are older, have one supplier

View in PDF

Click to see data in PDF.

Most of the estimated 168 prescription drugs in a shortage status as of October are offered by a single supplier or a small number of firms, and most were introduced before 2000.

Suppliers Products
None 7
One 56
Two 23
Three 23
Four 19
Five 15
Six 6
Seven 10
Eight 3
Nine 1
Eleven 2
Twelve 2
Seventeen 1
Shortage started Products
1970s or earlier 31
1980s 58
1990s 37
2000s 38
2010s 4

Source: "Drug Shortages: A closer look at products, and volume volatility," IMS Institute for Healthcare Informatics, November (link)

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Shortages spiking

The number of any type of drugs in shortage has more than quadrupled since 2004.

Year Drugs in shortage
2001 120
2002 88
2003 73
2004 58
2005 74
2006 70
2007 129
2008 149
2009 166
2010 211
2011 251

Note: 2011 data is as of Nov. 30

Source: American Society of Health-System Pharmacists, December

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External links

Video, House Oversight and Government Reform health subcommittee hearing on drug shortages (link)

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