A shortage of generic IV fluids has left health care providers across the country struggling to treat a spike in flu cases. This scarcity problem is just the latest in a growing number of drug shortages.
The Food and Drug Administration has made good progress in preventing future shortages, but federal officials continue to ignore their own role in causing many of the nation’s drug-supply difficulties. Government policies that artificially reduce pharmaceutical prices and regulations that needlessly disrupt supply chains are a primary cause of medicine shortages.
In a recent report, the Government Accountability Office found that the total number of shortages has steadily increased since 2007. Indeed, 2012 saw more than 450 new or ongoing drug shortages throughout the country — some lasting longer than five years.
On the bright side, the report found that new shortages are on the decline. This trend is partly due to 2012 reforms that allow the FDA to manage the problem more aggressively. Among other things, the new law empowered the agency to show more regulatory flexibility when resolving manufacturing and quality issues.
This is important progress, but when it comes to shortages, the FDA still bears much of the responsibility.
Of the observed shortages between 2011 and June 2013, 40 percent were due to a slowdown in production resulting from quality concerns. What the GAO study fails to mention explicitly, however, is that these disruptions are mostly the FDA’s handiwork. Indeed, most of these so-called quality concerns had little or nothing to do with concerns about threats to patient safety and a great deal to do with over-zealousness in regulatory enforcement.
Shorting good manufacturing processes can have dramatic repercussions. According to a 2012 report from the House Committee on Oversight and Government Reform, by hastily ramping up enforcement actions, the FDA “effectively shut down 30 percent of the total manufacturing capacity at four of the country’s largest producers of generic injectable medications.”
Resolving this problem will require the FDA to work with manufacturers to find practical, science-based solutions to quality issues that neither compromise safety nor slow down production.
But regulatory discretion doesn’t address the biggest cause of today’s drug shortages: artificially low prices. Here, too, federal policy is largely to blame.
Through a number of programs, including Medicaid and the 340B drug discount program, the government requires drug makers to sell their products at substantial discounts. Such programs reduce the potential for profit for pharmaceutical firms.
The link between profits and shortages is borne out by government research. A 2011 report by the Department of Health and Human Services found that “oncology sterile injectable drugs that experienced shortages since 2008 decreased in price from $56.17 per unit in Q1 2006 to $37.88 per unit in Q1 2011. Oncology sterile injectable drugs that have not experienced shortages have had relatively stable prices over this period.”
Not surprisingly, most drug shortages occur in the low-cost generic market. Not only is profit already small, government-mandated discounts make it unlikely that many companies will enter the market. For any given medicine there are only a handful of manufacturers.
In the case of IV fluids, for example, three manufacturers are responsible for nearly all of the country’s supply. In such a situation, a shortage is all but inevitable — a problem with any one producer can throw the entire market into disarray.
Sure enough, the current shortage of IV solution can be traced to a scheduled maintenance shutdown by Baxter HealthCare, a company that supplies 45 percent of the nation’s intravenous saline solutions.
As the Department of Health and Human Services has written, “drugs that subsequently experienced a shortage are those in which the volume of sales was declining in the 2006-08 period prior to the shortages.”
The evidence is clear: When the government doesn’t remove the potential for profit through price-fixing policies, shortages rarely occur.
The FDA is off to a good start in its efforts to prevent drug shortages. But the only way to relieve the scarcity of medicines that persists around the nation is to eliminate federal policies that artificially reduce drug prices.
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