The Shortage of Generic Sterile Injectable Drugs: Diagnosis and Solutions

From NCPA

According to the U.S. Food and Drug Administration (FDA), the number of times drugs were in short supply annually has increased dramatically in recent years. These are mostly injectable drugs for cancer and other important therapies, and they are not dispensed by community pharmacies, but rather administered by health professionals in clinical settings, says John R. Graham, director of health care studies at the Pacific Research Institute.

• The proportion of drugs suffering shortages is less than 1 percent of all drugs available in a given year; however, the shortages are concentrated in a vital category of medicines.
• The number of times drugs were in short supply almost tripled from 61 in 2005 to 178 in 2010.
• This figure reached more than 250 in 2011.

The reasons for the shortages, therefore, can be broken down into supply-side issues and demand-side issues. The issues on the supply side represent substantial obstacles to increasing production.

• Due to the inherent danger in the manufacture and distribution of these injectable drugs, there are high standards for production at all levels.
• The constraint of this inherent danger extends to the acquisition of the active ingredient in these injectable drugs.
• Additionally, the burdensome regulatory atmosphere created by the FDA limits the ability of manufacturers to create new drugs or expand current production operations.

On the demand side, government-dictated rebates or discounts for programs such as Medicare, Medicaid and the 340B program have been shown to somewhat affect producers' incentives. Because low reimbursement rates for these programs can make certain drugs less profitable, they can presumably reduce incentives to prevent shortages.

Policy recommendations to stem the growth of shortages into the future are numerous:

• American patients should be freed to use generic injectable drugs authorized by regulators in other developed countries
• The FDA's regulations on manufacturing should be limited to setting standards and measuring outcomes, rather than specifying every step of the manufacturing process.
• Medicare reimbursement for certain injectable drugs -- especially for cancer -- should be shifted from the Medicare Part B program to the Part D program, where reimbursement rates can be more effectively negotiated.

Source: John R. Graham, "The Shortage of Generic Sterile Injectable Drugs: Diagnosis and Solutions," Mackinac Center, June 14, 2012.