As Drug Shortages in U.S. Reach All-Time High, Experts Propose Range of Solutions

As the U.S. continues to grapple with drugs in short supply, a variety of strategies from onshoring production of agents to stockpiling have been proposed. A recent event by The Hill brought together a mix of stakeholders to take a closer look at the situation. Multiple factors are contributing to it, and, thus, one single solution is not going to address the situation, but numerous steps could help alleviate the current, as well as future, shortages, industry experts claimed.

Sponsored by the Healthcare Distribution Alliance, the event, titled “Keeping Pharmacy Shelves Filled: Solutions to Address Drug Shortages,” was held June 25 in Washington, D.C.

In the first quarter of this year, there were a record 323 drugs in short supply in the U.S., including cancer drugs, generics and therapies for attention-deficit/hyperactivity disorder (ADHD), noted Joe Ruffolo, senior vice president and general manager of The Hill.

The situation is “very frustrating,” asserted Rep. Larry Bucshon, M.D. (R-Ind.), vice chair of the House Energy & Commerce Subcommittee on Health, in the first session, a conversation with Kathleen Koch, contributing editor at The Hill. Bucshon, who was a physician and surgeon before he came to Congress, acknowledged that shortages have long been an issue — about 20 years ago, 40 to 50 drugs were routinely in shortage — but not to the extent they are today.

“This is a critical issue,” he said.

Koch explained that shortages can be due to variety of factors, including a sudden event like a tornado or hurricane and “unexpected demand” as seen with ADHD and weight-loss agents. However, the majority of the current shortages are due to manufacturing and production issues, and these mainly affect generics.

When Koch asked which of those types he was most worried about, Bucshon said, “all of them” but then added that ones impacting active pharmaceutical ingredients (APIs) are “really critical for the United States because actually it’s starting to go into the national security space a bit,” pointing to China in particular.

However, increasing the amount of medicines manufactured in the U.S. is “very difficult” due to “economics,” he said. Stockpiling medicines, while seeming like a good short-term solution, also is complicated as well. Nearshoring or friendshoring with countries such as Japan, Australia and some European nations may be “a good option,” but “there’s no one silver bullet here.”

When Koch suggested “instead of having this race to the bottom on pricing, you’ve got to find a way to reward quality,” Bucshon agreed but stated it was a “difficult challenge” because “it’s a free market economy.”

Koch noted that at least 10 bills focused on drug shortages have been introduced in Congress, including the Mapping America’s Pharmaceutical Supply (MAPS) Act, which Bucshon and Rep. Doris Matsui (D-Calif.) introduced in January. That legislation would require HHS to update its essential medicines list and establish a database mapping the drug supply chain in order to identify and address vulnerabilities.

Bucshon acknowledged that while disagreements on how to solve the problem existed among members of Congress, those differences are “very, very small.” The issue, he maintained, is “unifying” because it impacts everyone. “It’s such a critical issue because it affects people’s quality of life.”

Market Should Reward Reliability

During the second session, Koch spoke with Mark McClellan, M.D., Ph.D., director of the Duke-Margolis Institute for Health Policy and former FDA commissioner, who pointed out that the efforts around drug shortages are building upon programs that the FDA already has in place. A team within the agency monitors the supply chain and tries to prepare for shortages. And while “more information would potentially help there,” he agreed that “it’s not just about information on the supply side and the supply chain but also the supports available in the market for having a reliable supply of drugs.”

Most of the agents in short supply are injectables that require “sophisticated manufacturing,” he said, but they cost less than $1 per dose. That pricing means that companies are “not able to sustain at a large scale sustainable manufacturing.…It’s not profitable or sustainable for many of these manufacturers to invest in.”

“More clarity on reliable manufacturing is important,” he maintained, noting that “we don’t have a market that really rewards reliability.”

Currently hospitals or their purchasing organizations may have an arrangement with a manufacturer, but if they find a better price elsewhere, their contract allows them to purchase those drugs. This “doesn’t create a very good environment for manufacturers.”

“We need to shift the market,” said McClellan, “and get availability of good information on reliability, as well as quality of the manufacturers and their supply chains, and link that to contracts where the norm, not the exception, is purchasing for reliability.”

Some examples of this already exist, such as Civica Rx. Companies will pay a little bit more — perhaps 10% to 30% more — “but in return for that, they get a committed contract where the manufacturer, in this case Civica, says, ‘We will supply this drug. We will face a financial penalty if we don’t deliver it every day.’ So there’s adequate supply whenever you need it,” he explained.

This approach may not be needed for every single agreement “but just enough to make a big shift in the market,” he stated.

Asked about onshoring, McClellan acknowledged the necessary discussion about national security implications. He also pointed out that there is a “distinction between having supply that comes from the U.S. or nearshoring versus having a supply that’s reliable.” Shortages and reliability problems have impacted manufacturers worldwide. “It’s not so simple to say, ‘Well, if we make this in America, the problems will go away.’”

More Visibility Is Needed Into Potential Shortages

Many of the shortages involving sterile injectables involved companies in a “dominant position, and then they tripped,” said Michael Kleinrock, lead research director for the IQVIA Institute for Human Data Science, during the final session. That said, shortages are not all the same.

“‘Shortage’ needs defining,” he added. “We talk about 300-plus shortages, but those include stockouts. Those include the supply being in the supply chain but actually in the wrong spot.…We think ‘shortage’ means ‘I can’t get something,’ and that’s true. You can’t get it, but that doesn’t mean someone else can’t. That doesn’t mean that it’s not sitting somewhere else in the supply chain serving patients with shorter waiting lists at certain hospitals.”

Marta Wosinska, Ph.D., senior fellow in the Center on Health Policy at The Brookings Institution, said that she categorizes shortages into two major buckets. One consists of “the existing persistent shortages,” which are mainly generic sterile injectables used in hospitals, and the other is potential shortages. “There’s a lot of concern around our exposure to China in supply chains,” she said. “We have yet to have a shortage that was caused by export restrictions.…[It’s] a very rare occurrence that we would have a shortage because of API shortages, but it’s a very possible one.”

“Where we need to prioritize and where we need more visibility and where we need more strategy is the potential shortages,” she asserted. “There are multiple thousands of drug products, each with a different supply chain, each with a number of steps throughout the supply chain. We need to think about prioritizing this.”

Brookings has proposed thinking critically about this in three ways:

(1) Criticality: Is it medically necessary?

(2) Reach: How many patients does it affect?

(3) Vulnerability: Where is the supply chain vulnerable?

“Using this kind of a framework, we can then start thinking about where the government would need to invest,” said Wosinska.

When Cencora’s manufacturer partners let the distributor know that they are anticipating “a little bump in the road with the amount of inventory that [they] can put into the U.S. market,” the company will make those products available via fair share allocation, explained Heather Zenk, president of the U.S. supply chain for the company. “We make available to multiple sites of care as much inventory as possible versus putting it into specific maybe large density areas or large academic health centers or large entities. We really do try to look at and every single day make inventory available so every site of care can care for the patients that they have.”

Asked about the strategy of having buffer inventory, Kleinrock noted that these had been in place. Everyone had a buffer, [but] “we plowed right through it and distributed it before the allocations came into effect. So I think a lot about checks and balances. If there are buffers at the manufacturer level, how they get to the distributor level and then how they get to the purchasers is really what this is about.”

According to Wosinska, stockpiles are distinct from buffer inventories. With stockpiles, a drug is locked up in a warehouse and when a trigger event occurs, the drugs are distributed. But with a buffer inventory, a wholesaler will hold a large amount of a product for a set number of days, and it’s “first in, first out so there’s no product that expires.”

Some of the bills in Congress have proposed this sort of approach, she said, adding that it’s “inefficient” to have end-users hold the inventory; rather, a “much more efficient and…much less costly” approach is holding it upstream, with manufacturers or wholesalers.

Onshoring is “a distraction [and]…fairly political,” asserted Kleinrock. “The economics that have driven businesses to favor lower cost of production are still here.…Generic companies make money by feeding on slightly higher prices” in the six to 12 months after a patent expires. “After that, it’s a diminishing return.”

“I get very nervous that where we’re going to land with Congress is ‘Raise your hand if you want to onshore,’ and then money will be thrown at it, and we’ll pretend that we solved the problem, and we ended up wasting a lot of money,” said Wosinska. She noted that “there’s been a lot of discussion about onshoring API into the U.S, [but]…the ingredients for API may come from China, so what problem did we solve?”

Some, she said, may think it’s as simple as “if we build it, they will come. Well, the problem is they [manufacturers] are not coming.” Some manufacturers of generics have moved over to conducting contract manufacturing “to sustain themselves in the current environment and the current economics in the United States. So, if we’re thinking about supporting infrastructure in the U.S. and onshoring, we better think about how those manufacturers are going to survive.”

Onshoring “isn’t the silver bullet that solves all,” agreed Zenk.

A lot of discussion has been happening about what the government can do to provide new incentives for companies, stated Wosinska, but some government policies actually are contributing to the problem. For example, ADHD drugs are not hard to make, and plenty of companies would be willing to manufacture them. The problem is that the Drug Enforcement Agency’s (DEA) quota for these drugs — in place due to concerns around abuse — has been flat for the past five years.

She also pointed to Medicaid inflation rebates and how they are structured and the 340B Drug Pricing Program. “There are other policies that really need to be addressed.”