Life Science Compliance Update

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October 23, 2014

Drug Shortages Update


Thomas Sullivan

Over the years we have discussed the impact of drug shortages on healthcare in the United States. With increasing national attention on the threat of Ebola, our August post regarding the relationship between public distrust of the pharmaceutical industry and slower research and development of important antibiotics is particularly relevant. The public, for the most part, remains unaware of the extensive role played by pharmaceutical companies in the funding of important research. Experts recommend the industry consciously articulate its work in getting treatments and cures to patients.

For our readers interested in the Sunshine Act, this is especially relevant as we debate the need for more context surrounding Open Payments data, so that the public can have a more complete understanding of the role collaboration between companies and physicians play in the research and development of much needed drugs.

Drug Shortages Remain

Unfortunately, many necessary drugs are simply not being produced at an adequate rate—if at all. Last year we reported a University of Utah assessment which found 300 “active" -- or ongoing -- drug shortages at the end of April 2013, just about the same as it did at the end of December 2012 (299 shortages) and September 2012 (282 shortages). We also noted a national survey reporting that of almost 25 oncology pharmacists, 93% reported delays in chemotherapy administration or changes in treatment regimens, 85 percent saw higher costs, and 10 percent experienced reimbursement challenges.

Shortages of cancer drugs also led to additional labor expenses to address the problem, such as the extra hours hospital pharmacists spend trying to locate and purchase scarce medications or find alternatives, according to a research announcement from St. Jude Children's Research Hospital.

Legislation introduced to help tackle this ongoing problem, such as U.S. Rep. Elijah Cummings (D-MD) bill, The Gray Market Drug Reform and Transparency Act of 2013 (PDF) (H.R. 1958), went nowhere. The legislation came after a report Cummings co-authored with Sens. John Rockefeller (D-WV) and Tom Harkin (D-IA), finding that "many hospitals and healthcare providers were unable to procure injectable cancer drugs from their usual and reputable sources.” Additionally, “those sources had reported being bombarded with unsolicited calls offering the hospitals and healthcare providers the same drugs, but with a catch: The drugs were subject to massive markups”.

Administration Efforts Have Not Worked

This year, a New York Times story on drug shortages outlined the persistent problem, and how it forces doctors to resort to rationing in some cases or to scramble for alternatives. The number of annual drug shortages — both new and continuing ones — nearly tripled from 2007 to 2012. The story notes that drug shortages have become an “all but permanent part of the American medical landscape.” Most commonly, shortages exist for generic versions of sterile injectable drugs, in part because the factories that make them are growing older and suffer from quality control issues causing temporary closings of production lines or even entire factories.

In an analysis by the United States Government Accountability Office (GAO) which was required by the 2012 law giving the U.S. Food and Drug Administration (FDA) additional power to manage shortages, the GAO concluded that FDA was preventing more shortages now than in the past, yet the shortages have continued to grow.

"From prolonged duration of a disease, to permanent injury, to death, drug shortages have led to harmful patient outcomes," the GAO found. For example, a 2012 study by researchers in the Pediatric Hodgkin Lymphoma Consortium found that when drug shortages forced doctors to switch medications in a national clinical trial for Hodgkin lymphoma, the number of patients who were cancer-free after two years fell from 88 percent to 75 percent (see page five of the report; AARP bulletin).

Because of the law, manufacturers are now required to alert FDA of potential shortages before they happen. But as reported, agency officials have been careful when using their regulatory muscle. For example, in some cases where particles were found to be contaminating a drug that was in short supply, the agency allowed the company to filter the drug to avoid disrupting supplies instead of shutting down the production line altogether.

FDA’s Role in Drug Shortages

In the past few months, FDA updated sections of its website relating to drug shortages. The agency has a publicly available question and answer section providing new information on drug shortages and updated FDA policy positions. When asked what FDA can do to address shortages, the agency states its two major goals are to address “underlying causes” and “enhance product availability”. Using a case-by-case approach, FDA looks at the cause of the shortage and assesses its risk to the public health before acting.

If a manufacturing or quality problem exists, FDA works with the firm to address the issues. Problems may involve very low risk (e.g. wrong expiration date on package) to high risk (particulate in product or sterility issues). Regulatory discretion may be employed to address shortages to mitigate any significant risk to patients, some of which is provided to the agency through legislation like FDASIA.

Food and Drug Administration Safety and Innovation Act (FDASIA)

FDASIA itself provides both expanded authority to FDA and additional regulatory requirements on manufacturers, which must report to FDA permanent discontinuances of certain critical drugs, as well as temporary interruptions in manufacturing that may lead to a shortage. Before FDASIA, the law only required reporting of discontinuances. FDASIA also requires all manufacturers of critical drugs to notify FDA of discontinuances or interruptions in manufacturing, whereas previously this applied only to sole source manufacturers. 

In addition, FDASIA enables FDA to require mandatory reporting of discontinuances or interruptions in manufacturing of biological products. The legislation also requires FDA to issue a public non-compliance letter to manufacturers who fail to comply with the early notification requirements. Before the passage of FDASIA, the agency lacked any enforcement mechanism for early notification.

Other FDA Actions

FDA states that it will work with other firms making a drug deemed in shortage, in an effort to help ramp up production if the firm is “willing to do so.” Often the firm needs new production lines approved or new raw material sources approved to help increase supplies. FDA can expedite review of these to help resolve shortages of medically necessary drugs. However, FDA notes it cannot require the other firms to increase production.

Additionally, when a shortage occurs and a firm has inventory that is close to expiry or already expired, if the company has data to support extension of the expiration dating for that inventory, FDA is able to review this and approve the extended dating to help increase supplies until new production is available.

But when American manufacturers are not able to resolve a shortage immediately and the shortage involves a critical drug needed for domestic patients, FDA may look for a firm that is willing and able to redirect product into the United States market to address a shortage. FDA considers a list of criteria to evaluate the product to ensure efficacy and safety. These criteria include the formulation and other attributes of the drug as well as the quality of the manufacturing site where the drug is made.

Many of the FDA’s steps described above are outlined in the agency’s long-term strategic plan, which outlines its “priority actions,” as well as actions drug manufacturers, and others can take, to prevent drug shortages by promoting and sustaining quality manufacturing. FDA also publishes a “drug shortage database” on its website allowing industry and consumers the ability to see the status of drug shortages and learn additional details, if known.

FDA Manual of Policies and Procedures (MAPP)

In September of 2014, FDA also published a MAPP establishing the Center for Drug Evaluation (CDER) and Research’s procedures for notification, evaluation, and management of drug shortage situations for all CDER products including those studied or marketed under investigational new drug applications (INDs), new drug applications (NDAs), biologics license applications (BLAs), abbreviated new drug applications (ANDAs), and unapproved drugs marketed without an approved application. The MAPP outlines the priorities and responsibilities of important CDER workers like the Drug Shortage Staff (DSS).

The MAPP is a useful look at agency strategic thinking. For example, below is a flowchart created by FDA’s CDER, outlining its procedure after receiving an initial notification of a potential drug shortage:

Drug Shortages Article

Additional Steps to Combat Drug Shortages

Recently, Health Affairs published “Health Policy Brief: Drug Shortages,” updated on September 24, 2014. The Health Policy Briefs are produced under a partnership of Health Affairs and the Robert Wood Johnson Foundation. The Brief provides an excellent overview of the drug shortage issue. In particular, it outlines several potential ways to combat shortages in the United States. Medicare Part B reimbursements, other government drug pricing programs, group purchasing organizations, national stockpiles, and exclusivity are discussed in greater detail.

A well-cited reason for generic sterile injectable drug shortages is the low reimbursements rates from Medicare Part B. The Brief notes these changes stemmed from: “changes via the 2003 Medicare Prescription Drug, Improvement, and Modernization Act that reduced payment rates for outpatient physician-administered drugs, which includes chemotherapy drugs.”

“It is theorized that these lower payments incentivized both physicians and manufacturers to switch to higher-cost drugs, thereby reducing investment in cheaper generic drugs, leading to "growing market concentration" and eventual drug shortages,” the Brief stated. Critics have pushed for changes to the reimbursement structure, calling for additional incentives to use generic medication. Some legislative proposals to change the basis of Medicare Part B payments have been introduced, but none are expected to pass in the near future.

The Brief’s next topic, other government drug pricing programs like Medicaid and the 340B drug discount program control prices, “negatively influencing the profit potential of drug manufacturers, inhibiting their ability to invest in factory upgrades and thus contributing to drug shortages.” Congress has proposed exemption for certain generic sterile injectable drugs from these pricing programs, but the proposals have not advanced far.

A third topic, group purchasing organizations (GPOs), are entities that negotiate pharmaceutical contracts on behalf of health care providers. These organizations force manufacturers to accept low prices which ultimately encourage a softer market and may create drug shortages. The Brief notes a proposal that has not yet been tried—strengthening “failure-to-supply” clauses in contracts between GPOs and manufacturers—with the goal to require higher prices in exchange for secured drug supplies.

Next, national stockpiles are suggested as a way to influence the demand side of the market, as the Brief mentions, “ensuring that manufacturers have sufficient incentives and resources to maintain robust production.” But specific shortages are hard to predict and ultimately more production by the industry as a whole is necessary, rather than stockpiling specific drugs.

Finally, the Brief cites exclusivity—the protection of intellectual property and manufacturing rights—as a boon to the brand-name drug market. This creates more profit, and similar exclusivity rights to manufacture generic medication may improve the generic drug supply to reduce shortages. But this is challenging, as pointed out: “because the very idea of extended patent exclusivity is antithetical to the price-reducing objective of generic drugs. An exclusivity policy might also create a perverse incentive by which manufacturers would actually be rewarded for keeping a drug in short supply instead of manufacturing it.”


The Brief concludes by noting economists have predicted over time, manufacturer-reported investments in facilities and increased generic drug approvals may result in a market-driven correction, reducing shortages that exist today. Additionally, in the meantime, although both major parties agree on the threat posed from drug shortages, there is not agreement on major policy steps to further address the problem. Some authorities granted to FDA may help the situation, but ultimately both private and public sector actions are necessary. We will continue to follow the drug shortage issue and the need for consumers and policymakers to have a more complete understanding of the role collaboration between companies and physicians play in the research and development of much needed drugs, thereby helping to reduce shortages which affect the quality of healthcare for all Americans.

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