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FDA Takes on Drug Shortages in New Report

— Agency admits that marketplace solutions aren't working

MedpageToday

Concerned about a rising tide of shortages affecting key drugs, the FDA outlining what officials see as the underlying causes, and offering some potential solutions.

It's the closest a federal agency is likely to come to conceding that market-based solutions aren't adequate to maintaining high-quality supplies of medically necessary but low-volume drugs with no sales growth prospects.

In fact, according to top FDA officials, textbook economics theory seemingly doesn't apply to drugs of this type, which mostly are generic sterile injectables.

"Importantly, prices rarely rose after shortages began, and during shortages, production typically did not increase enough to restore supply to pre-shortage levels," said Ned Sharpless, MD, the FDA's acting commissioner, and Janet Woodcock, MD, director of the agency's drugs division, . "Many manufacturers reported discontinuing the production of drugs before a shortage for commercial reasons (e.g., loss of profitability). These results suggest a broken marketplace, where scarcity of drugs in shortage or at risk for shortage does not result in the price increases predicted by basic economic principles."

Other causes identified in the report include the complexity of drug supply chains and lack of monetary incentives for companies to maintain high quality standards.

At bottom, the report indicated, for-profit companies increasingly find it unrewarding to produce low-volume drugs. Only a few suppliers exist for many such drugs, and when one stops production for some reason, others don't automatically step in to fill the void. The report noted the considerable barriers to market entry in drug manufacturing, given the needed investment in specialized equipment and staffing, as well as regulatory hurdles that take months to clear.

Examples cited in the report included recent shortages of bleomycin (a traditional chemotherapy), the anesthetic agent lidocaine, and norepinephrine, used in septic shock treatment.

Although the report didn't say so directly, the clear implication is that Wall Street demands for perpetual sales growth are incompatible with medical needs when it comes to drugs with limited markets and traditions of low prices. In essence, the current system asks drug manufacturers to make some products as a charitable endeavor, with zero tolerance for error.

For solutions, the FDA suggested three general approaches:

  • Better data collection and analysis to identify risk factors for shortages, including contracting practices that discourage companies from producing needed drugs
  • Rating systems for "quality management maturity" as a means to identify producers with especially robust quality-control practices that allow them to maintain uninterrupted production
  • New contracting structures, potentially including "financial incentives to make certain that manufacturers, especially of older generic drugs, earn sustainable returns on their products"

On the latter point, the report suggested contracts under which drug buyers guarantee minimum purchase volumes and "fair prices," while producers would work to establish "supply chain redundancies." It did not, however, offer real-life examples of such contracts in place, nor did it discuss what would constitute fair prices. Certainly in the current political environment, higher prices would be a tough sell.

Not mentioned was the possibility of direct or indirect government subsidies, nor of the government establishing its own manufacturing capability. These, of course, would also be a tough sell, particularly within the current administration.