New FDA report claims low prices contribute to drug shortages

October 31, 2019

The low price of some older generic drugs gives manufacturers less incentive to produce them.

A report from the FDA’s Drug Shortages Task Force claims one of the root causes of drug shortages is the low price of older generic medications.

The task force, which is made up of members several federal agencies, released the report October 29. It examined 163 different drugs which experienced shortages.

The overall conclusion of the report is that, due to medications not following generally accepted rules of supply and demand, any time there is a quality issue with a drug the manufacturers have trouble replacing the flawed stock due to economic factors.

The cause

The price of these older generic drugs was listed in the report as the first root cause of drug shortages which have led to 56 percent of hospitals reporting they had changed a patient’s treatment as a result of a shortage.

Low prices, the report claims, limit a manufacturer’s profitability and makes them less motivated to stay in or enter the market for these older generic drugs and invest in manufacturing quality and redundancy.

The report also identifies the lack of available information on which facilities produce drugs thus inhibiting the market from rewarding quality producers as another root cause. This leads manufacturers to limit their investment in manufacturing quality.

The last root cause the report identifies is that after a supply disruption, sometimes caused by lax quality management, logistical and regulatory challenges make it difficult for the market to recover.

Proposed solutions

To remedy these issues, the task force presented three recommendations which may alleviate the identified root causes.

The first is to create more awareness of the impact of drug shortages and the “contracting practices” which may lead to them. It suggests:

·      Quantifying the harms of drug shortages through assessing the cost of them

·      Characterizing shortages better through quantifying their frequency, persistence, or intensity

·      Creating greater transparency in private sector contracting practices

The report also recommends creating a rating system which would incentivize manufacturers to invest in their quality management systems. It says that this system could be used to inform patients, insurance companies, and group purchasing organizations and provide manufacturers who invest in quality management a competitive advantage in the market.

The last recommendation is to promote sustainable private sector contracts which provide the aforementioned financial incentives and rewards for manufactures with mature quality management.

“Given the potential scale of impacts from drug shortages, and the fact that these impacts have continually been underestimated, it is likely that drug shortages will continue to persist absent major changes to this marketplace,” says Norman E. "Ned" Sharpless, MD, acting commissioner of Food and Drug at the FDA, in a statement. “The root causes of shortages involve economic factors that are driven by both private- and public-sector decision-making. This means that the types of enduring solutions proposed in the report will require multi-stakeholder efforts and rethinking business practices throughout all sectors of the health care system. It will also require a fuller characterization of the true costs of shortages and more comprehensive and reliable analysis of the effects shortages have on patients and the health care system.”

Legislative solutions

In addition, the report also lists a series of legislative proposals and planned FDA initiatives which the task force felt could help prevent supply obstructions and shortages. They are:

·      Improved data sharing and guidance

·      Risk management plan requirement and guidance

·      Lengthened expiration dates

·      ICH Guideline Q12, which outlines ways to increase understanding of drug development and establishes an effective drug quality system