Policy and Medicine

FDA Drug Shortages: Fundamental Problem is the Inability for the Market to Observe and Reward Quality

A recent paper by FDA officials explored why and how manufacturing-quality problems could combine with other economic and technological factors to result in shortages of generic sterile injectable drugs. 

The paper, written by Janet Woodcock, Director of FDA’s Center for Drug Evaluation and Research (CDER), and Marta Wosinka, director of economics staff at CDER, noted that the fundamental problem identified is “the inability of the market to observe and reward quality.”  An important, but largely unrecognized aspect of quality is the ability to reliably meet customer demand, they wrote.

“This lack of reward for quality can reinforce price competition and encourage manufacturers to keep costs down by minimizing quality investments.”  In the case of sterile injectables, “there is very little margin for error, so a lack of sustained investment in infrastructure and vigilant quality focus can produce what economists term a “bad market equilibrium,” particularly the problem of reliability, in which quality problems are rife.”

As a result, the authors proposed that FDA reward quality as a way to avoid manufacturing problems that are causing shortages.  Woodcock and Wosinka noted in their piece, published in Clinical Pharmacology & Therapeutics, that FDA must use its regulatory flexibility “on behalf of patients” to avoid shortages and further strengthen the incentive to “push the envelope” on quality. 

While they express FDA’s commitment to new tools and approaches to prevent and resolve drug shortages, some of which have “already borne fruit,” the authors recognize that the shortage crisis has reached a point “where FDA needs to engage the marketplace to help address the manufacturing problems, which unilateral FDA actions have not been able to prevent.”

Rewarding quality, however, may not be simple because there are various factors that prevent drugmakers from sufficiently investing in their operations – aging facilities, new opportunities to produce other medicines and contract manufacturing.  Nevertheless, Woodcock and Wosinka propose that FDA “support the buyers and payers in their purchase and reimbursement decisions by providing them with meaningful manufacturing quality metrics.”

They note that “this general approach has been successfully used in many other settings where quality is difficult to observe or quality signals are difficult to interpret. Restaurant grades, HMO scorecards or even a US Pharmacopeia stamp on vitamins are just a few among many tools that utilize this concept.  It would then be up to the marketplace to answer the ultimate question: how much are we willing to pay for quality?

The authors noted that their explanation for drug shortages is specific to generic sterile injectable products, so caution should be applied when extrapolating the conclusions of this article to other drug shortages, particularly oral products and brand name injectables.

Background

By early 2010, two companies decided to halt production of propofol after inspections revealed sterility and quality issues, leaving only one company to meet the market demand.  With the remaining firm unable to sufficiently ramp up production and inventories running out, a drug shortage occurred.

In 2011, drug shortages rose to unprecedented levels, with 251 medically necessary drugs affected.  Seventy-three percent of these drugs were sterile-injectable products such as the anesthetic propofol, injectable morphine, epinephrine used in cardiac arrest and anaphylactic shock, intravenous nutritional supplements, and chemotherapy agents.  The resulting health crisis has been particularly pronounced because these drugs are medically necessary, meaning that they are used to treat or prevent a serious disease or medical condition and that there is no appropriate substitute.

Although today’s buyers may now be more aware of quality problems with sterile injectables, “buyers appear to generally discount quality concerns and to focus principally on obtaining the lowest prices possible.”  This behavior is likely based on a belief that all marketed products are of equivalent quality.  “The resulting lack of reward for quality may encourage manufacturers to keep costs down by, for example, minimizing quality-related investments in areas such as maintenance of production facilities and equipment, quality control testing and oversight, and timely response to early indicators of quality problems.”

Not every production disruption turns into a shortage, but virtually all shortages are preceded by disruptions in production.  While some supply disruptions are unanticipated by the manufacturer, as a result of natural disasters or unforeseeable disruptions in the supply of the active pharmaceutical ingredient, they are few and far between.

“Instead, drug shortages are first and foremost driven by the inability of various firms to maintain production because of the failure of quality management in facilities that produce the finished dosage form of the drug (rather than the active ingredient).  These failures were directly responsible for 56% of sterile injectable drug shortages in 2011.”

Other shortages caused by delays and capacity issues are driven by quality-related shutdowns.  For example, shortages resulting from manufacturing failures for one drug increased demand for another drug by so much that companies producing it were not able to catch up with demand.  In this case, quality-based shortages of one drug lead to shortages of another drug (up to 7% of sterile-injectable shortages).

Some firms have discontinued older, medically necessary products.  Product discontinuations, which accounted for 9% of sterile-injectable shortages in 2011, are often triggered by capacity constraints, many of them brought about by quality-related production line disruptions.  Economic theory suggests that companies would generally consider a product to be worth producing if the revenue it generates can cover the costs of production.  “This production rule no longer holds true when the firm reaches production capacity and managers are forced to make trade-offs among products, exposing products with low–average revenue for potential cuts as companies try to optimize profitability of their production lineup.  Such pressures could be contributing to the discontinuations we observe.”

Woodcock and Wosinka noted that President Obama and Congress ensured that companies must properly notify FDA of potential shortages, given the time required to increase production at an existing line, initiate a new site, or (the most challenging) bring on a new manufacturer, shortages may occur even with advance notice of discontinuation.  

The current shortage crisis with generic sterile injectable drugs follows directly from contamination problems at multiple facilities—problems that have required correction through upgrades of systems and/or production processes.  The problems leading to shortages have included detection of shards of glass and metal in vials as well as of bacteria, endotoxin, or mold in what are supposed to be sterile products.  These problems have differing etiologies some can be linked to insufficient maintenance of production facilities and equipment; some are a result of antiquated/inadequate aseptic operation design; and others stem from suboptimal quality control testing and oversight and lack of timely responses to indicators of quality problems.

The scope of these problems and the resulting remediation needs have varied across firms.  In some cases, the widespread and systemic nature of the manufacturing failures has led firms to shut down all production while they address the problems.  In most cases, firms have been able to continue production while improvements were being made, although often at a reduced rate.

Economic Incentive to Minimize Investment in Manufacturing Quality

The drivers behind the quality problems we describe above are multifaceted, but we postulate that at their core is the failure of the market to sufficiently reward quality.

Market does not reward quality:  At the “heart of the quality problem is the fact that generic manufacturers compete on price.”  Buyers—in this case, hospitals and clinics—consider any given generic products as perfect substitutes, giving manufacturers little room for differentiation.  “Therefore, buyers have not been attuned to differences in the quality of production.  In their minds, the products are of sufficient quality if they are on the market,” thus “the lack of reliability of supply stemming from quality failures has not seemed to be a factor of concern.”

“Another reason for lack of awareness of quality differences results from providers’ inability to accurately assess production quality for a given drug.  Providers are more likely to suspect a causal link and therefore report an adverse event if a drug is used in a relatively healthy patient population.  But, generally, injection and infusion drugs are administered to patients who have compromised immune systems and little ability to fight infections and/or other comorbidities.”

“Few health-care providers consider whether substandard manufacturing could be the source of an adverse event, both because of the general high quality of the US drug supply, in which product defects are quite rare, or because certain adverse events, such as infection, are common in the treated population.  As such, the propofol example is more an exception than the rule.  In that case, providers were able to establish a potential causal link because the drug is often administered to relatively healthy patients.”

“Despite buyers’ unwillingness to pay a premium for quality, many firms strive to exceed minimum manufacturing standards.  Nonetheless, economic incentives create pressures on firms to minimize expenditures and thus generate a conflict between patient safety and profit.”

Quality is not fully transparent:  A drug manufacturer is responsible for implementing dependable daily operations that assure consistent drug quality.  Management’s daily decisions on myriad issues involving equipment, materials, maintenance, staff qualifications, supervision, process control, and investigations can significantly impact sterility assurance and will ultimately determine the quality of the drugs that are shipped from a given facility.  The primary mode of sterile injectable production, aseptic processing, is not a forgiving process so any such variable, if not properly attended to, can lead to contamination.

The FDA assesses whether a facility is in a state of control through periodic inspections that provide an evaluation of a firm’s manufacturing operations, including their system for quality management.  Almost all major sterile-injectable manufacturing facilities producing for the US market are inspected at least every 2 years, because they are based domestically.  Between inspections, the FDA relies, in part, on firms to be forthcoming about their quality problems, which they report by issuing defect reports.

Defects in sterile injectable products can be difficult to detect because microbial contamination may be non-uniform and episodic.  This lack of uniformity can confound conventional sampling plans. In addition, microbial contamination can increase after production, which means that more sensitive testing must be done at production time.

For these reasons, “FDA has made attempts over the last few years to enhance its audit of a site’s state of control and quality problems by developing a cadre of highly trained and experienced inspectors to conduct inspections of complex facilities such as those that produce sterile injectables.”

Exercising regulatory flexibility to avert shortages may have unintended consequences:  If FDA uncovers signals of emerging problems, it seeks the firm’s cooperation in voluntarily correcting the potentially major issue before there is an impact on product quality.  The agency will weigh the need to prevent adverse health outcomes but also the long-term incentives for firms to keep all of their facilities and processing lines up to quality standards.

FDA’s need to use regulatory flexibility on behalf of patients to avert and mitigate shortages could have unintended long-term consequences when coupled with the market’s lack of reward for quality.  “Economic models predict that, in the face of the seeming intertemporal inconsistency created by dual FDA objectives, quality investments would be lower than if the FDA could use preemptive enforcement without regard for disruptions in medically necessary products.  This dynamic may further reinforce the economic incentives to minimize quality investments given the nature of competition (based on price, not quality).”

Factors Reinforcing Insufficient Quality Investments

“The market’s lack of recognition of quality differences in generic sterile injectable products can influence firms to adopt a reactive approach to quality management.  In such cases, a firm might wait until problems are identified before taking action, in contrast to taking a proactive and vigilant approach that is necessary to sustain a dependable operation.”

When dealing with such a reactive quality-management approach, the medically necessary status of certain sterile injectable drugs impels the FDA to consider the medical ramifications of lack of access.  This in turn may give short-sighted firms an incentive to manufacture under a minimum level of control.  In addition to the key drivers mentioned above, several other factors may have further exacerbated insufficient quality investments.

Aging facilities:  In contrast to the production of tablets, facilities producing generic sterile injectables are primarily based in the United States because of high transportation costs associated with liquids that often require climate control.  New manufacturing lines have been added by various manufacturers over the past decade, but some primary production lines and facilities are quite old.  

“A review of inspection reports for key facilities suggests that some facilities at the heart of current drug shortages have been in operation continually since the 1960,” and “certain manufacturing lines have undergone only limited upgrades during that time while running 24 hours a day, 7 days per week, a finding consistent with a 2011 report.”

Such aging facilities require upgrades, but low margins may make the economics of such investments unattractive.  Although contemporary facilities are highly automated and use isolators and other separation technologies to protect the processing line from contamination risks, older facilities typically include processing lines and facility layouts that are less effective at mitigating the various operational variables that pose risks to product sterility.

 If the equipment is not well designed or is poorly maintained, repeated or extensive manual interventions often occur due to mechanical problems.  When production line operators perform manual activities near an insufficiently protected product, they raise the risk of microbial contamination.  Inadequately maintained or designed equipment has also resulted in particles being shed into the product, including metal or glass shavings.

New production opportunities:  Magnifying the problem of aging facilities, firms have been adding many new products to their portfolios.  Even before the drug-shortage crisis, generic sterile injectable lines were generally operating at full capacity.  This means that without further expansion in capacity, new marketing opportunities would force firms to make trade-offs between which products to produce and at what volume.

In addition, line operators need to turn over lines between products more frequently if those new products are added rather than replacing what is in the current production lineup. This line turnover can additionally introduce opportunities for sterility problems that can compromise product quality, especially if it involves production lines that are not fully automated.

Contracting practices:  Not only are buyers unable to observe manufacturing quality, but firms that contract out manufacturing of their product often do not have the same level of insight into or oversight of the contract manufacturer’s quality systems as they would have into their own.  Over-commitment on manufacturing capacity by a contract manufacturer can lead to an unsustainably high number of products on each line and substandard oversight of the process.

Contracted products are primarily branded sterile injectable products marketed by emerging companies without their own production facilities.  Their manufacturing is then contracted not to large branded manufacturers but to firms that primarily produce and market many generic products.  These relationships are proprietary, so buyers and their representatives generally have no knowledge that a drug they are buying may be made by a contract manufacturer.

Failure-to-supply clauses, which are commonly used in contracts between manufacturers and their buyers or buyers’ representatives, are also problematic.  While such clauses are supposed to impose a penalty for failure to supply a product, their incentive for firms to avoid supply problems has not been realized “because there often is no alternative source” when a drug shortage occurs.

Economic downturn:  The recession may have additionally increased pressure on manufacturers to cut cost, with the number of pharmaceutical manufacturing jobs shrinking by 15% from December 2007 to June 2009.  This may have caused at least some of the best-qualified employees to leave and find employment elsewhere, leaving behind less-qualified workers.

Increased price competition:  Some have argued that the Medicare Modernization Act of 2005 (MMA) had an adverse impact on profit margins for generic sterile injectable drugs after it sharply lowered reimbursement rates that providers receive for provider-administered sterile injectables and other Part B drugs.  The authors, however, were unable to confirm these assertions due to a lack of price transparency data before 2005.  Nevertheless, they maintained that “trends in shortages of drugs affected by the payment reform are similar to the pattern among drugs that should not have been affected by it.”  They also noted that “price competition had been a feature of the sterile-injectable industry long before the MMA—something that is consistent with the dynamics we have discussed in the previous section.”

Why do Supply Disruptions Turn Into Shortages?

Next, Woodcock and Wosinka explain several factors that explain why temporarily or permanently halting production on even a single production line so frequently results in a market-wide drug shortage.

High market concentration:  A key factor that helps turn a single production line disruption into a drug shortage is high market concentration.  Seven firms make up virtually all of sterile-injectable production as measured in standard units.  As one narrows the analysis down to specific drug classes, the concentration further increases. Concentration further increases if one drills down to finer market definitions, e.g., specific molecules.  For example, in 2008, Teva held a 68% market share of bleomycin, whereas Bedford Laboratories held a 62% share of cytarabine.

Specialized facilities and dedicated lines:  One key reason for the high market concentration is that sterile injectable products must be produced in highly specialized facilities.  Production must take place in a “clean room” environment with well-defined manufacturing processes and controls to assure that they are sterile, meaning free of contamination from all microorganisms and essentially free of visible particulate matter.

Not only must drugs be produced in specialized facilities, but their production is often committed to specific production lines within those facilities because of the drugs’ chemical properties, presentation form, and potential for cross-contamination.  Most drugs’ chemistry requires that they be produced using a complex process of aseptic processing, in which the drug product, container, and closure are subject to sterilization separately and then brought together.  A smaller number of drugs need only undergo terminal sterilization, in which the product in its final container is subject to a sterilization process through heat or radiation.

For some, the sterilized product further requires an additional lyophilization step in which water from the solution is removed in a highly controlled environment under high vacuum and extreme cold temperatures to yield a powder.  Apart from the differences in production process, certain drug classes such as cephalosporins, penicillins (antibiotics), and some cytotoxics (oncology) require dedicated equipment, and sometimes even dedicated buildings, which then cannot be used to produce other types of drugs.

Finally, manufacturing equipment, due to compatibility issues, may be capable of filling containers of only certain limited size ranges (e.g., different equipment may be needed for a 1- vs. 25-ml vial size) and container types (vials vs. syringes).  This further restricts products to specific lines.

Despite the limited fungibility of production driven by dedicated production lines, generic manufacturers do not appear to arrange for backup facilities.  The authors noted that of 900 applications for generic sterile-injectable between 2000 and 2011, only 11, or just over 1%, referenced more than one facility for production of the finished drug.  This contrasts with branded sterile-injectable applications, almost 20% of which were approved with backup facilities during the same time period.  About 5–6% of the studied sterile-injectable ANDAs have subsequently submitted additional production sites. Those submissions occurred on average 4 years after original submission; none had In submitted additional sites within 1 year of the original ANDA.

Because a specific set of products is often committed to select production lines, a process disruption on these lines, especially if they are few, can readily turn into market-wide drug shortages for a whole group of products.  Such coproduction of drugs is the reason that drug shortages have “traveled” across therapeutic classes.  For example, after one key facility with cytotoxic lines shut down in early 2010, the number of shortages of chemotherapy drugs increased from 4 to 24.

Inventory practices:  Generally low inventory levels further increase the risk that a supply disruption will turn into a drug shortage.  Such inventory practices reduce expenses by eliminating surplus production and inventory holding costs but increase the risk that even a modest disruption in supply will result in shortage.  These low inventory levels are one reason that notifying the FDA early about supply disruptions is important.

Conclusion

Ultimately, the FDA officials argued that “the fundamental problem with injectible shortages is insufficient market reward for quality (including reliability of production) stemming from the buyers’ inability to observe it.”  This in turn gives manufacturers strong incentives to minimize quality system investments, especially when faced with pressures brought about by new production opportunities, aging facilities, and the recent economic downturn.  Until new incentives are provided to improve quality, it is uncertain whether generic-injectable makers will adequately address quality issues.

Drug Shortages: Despite Gains, Many Drugs are Still in Short Supply

A recent article from Bloomberg noted that “as shortages of sterile injectables persist, the makeup of that part of the industry is in flux.”  To address the current marketplace struggles,  Mylan has agreed to buy Agila Specialties, the injectables unit of Strides Arcolab, for $1.6 billion, and analysts think Claris Lifesciences could be next, saying “it is a matter of supply and demand.”   

Claris has five (5) FDA-sanctioned manufacturing facilities in Ahmedabad, and an analyst tells Bloomberg it might be worth about $500 million.  Claris has “a ready-made facility,” Ranjit Kapadia, an analyst at Centrum Broking in Mumbai, said in a telephone interview. “There’s a scarcity of injectable facilities in the global space, and in the U.S. there’s a shortage of injectable products, so this may lead to an acquisition.” 

Claris was itself barred from selling its products in the U.S. after the FDA found it was producing contaminated drugs and failed to fully investigate the cause, according to a 2010 warning letter from the agency. Claris was told in August 2012 that it had addressed the complaints and was allowed to resume U.S. sales. Last month, it got FDA approval for its ninth drug. 

There are shortages of sterile injectable drugs in the U.S. and growing demand, but only a limited number of FDA-approved plants to make them.  “Manufacturing injectable drugs requires sterile facilities to protect against unwanted contaminants, and the FDA has cracked down on manufacturers that fail to meet its safety requirements,” Bloomberg noted.  FDA’s office of manufacturing and product quality sent 22 warning letters in 2012, up from 19 the previous year, according to its website. 

Recently, the Food and Drug Administration (FDA) added Pfizer Inc.’s tuberculosis treatment rifampin to its list of drugs in short supply, the latest in a growing number of spottily available TB medications, reported Reuters.  The FDA noted in a post on its website on Monday that the injectible antibiotic will be in short supply until the end of June. The cause of the shortage is a manufacturing delay, it said. 

Rifampin is one of the most potent and widely used TB drugs, and its shortage comes amid an increased prevalence of the disease around the world, though TB rates in the United States fell to an all-time low last year.  In a letter to physicians dated March 18, Pfizer said a number of vials of the medication may not meet the specifications for drug potency, and exhibited a change in color from the expected red powder to brown or black. 

The complexity of the manufacturing process means rivals can’t switch quickly to produce medicines that are in short supply, making it difficult to plug shortages, the FDA says on its website. Currently, 241 drugs -- most of them injectable medicines -- are in short supply, according to a list on the website of the American Society of Health-System Pharmacists. 

The largest producer in the U.S., Hospira, continues to struggle to get its plants to full capacity after running into FDA compliance problems.  In fact, Hospira recently disclosed an FDA inspection of its Rocky Mount, N.C., facility, saying 5 agency inspectors reviewed the facility for 3 weeks and issued a Form 483 warning flagging 20 problems at the plant.  As a result of the inspection, Hospira recalled the lots of 5 different products, including three lots of propofol injectable emulsion after reports came to light that some vials had visible particles embedded in the glass. These were found in some retained samples. 

It also recalled one lot of preservative-free morphine sulfate injection after a customer found either a loose crimp or no crimp on the flip-top vial, which raises the possibility of contamination. It also recalled three lots of diazepam injection, furosemide injection and Quelicin (succinylcholine chloride) injection for the same problem with loose crimping in flip tops.  The company said all of the recalls are voluntary and there have been no reports of patients being affected by any of the recalled products, although in each case there is a chance for serious effects. 

While companies like Hospira are facing troubles, others such as Hima Pharmaceuticals Plc reported a 19 percent rise in full-year profit, helped by strong growth in its lucrative injectables business, which has drawn interest from several bidders, according to Reuters. 

The company, founded in 1978 in Jordan, said it expected overall revenue to increase 10 percent in 2013, with revenue in the injectables business expected to grow in the low double-digits.  Revenue in the injectables business rose 49 percent to $470 million, driven mainly by an 83 percent increase in sales in the United States. 

Hikma’s injectables business, the second-biggest supplier of generic injectables in the United States, has been able to take advantage of a drug shortage there as several generic drugmakers have been forced to cut capacity in the face of stringent regulatory scrutiny due to quality issues.  Hikma said earlier this month it was reviewing options for the injectables business after getting several expressions of interest at a time when M&A activity in injectables is heating up. 

Other Drug Shortage News 

In other news, FDA updated that EMD Serono’s Cetrorelix Acetate for Injection is no Longer Experiencing Shortages as of March 26, 2013.  Additionally, Otsuka recently filed a desperately-needed treatment for resistant  strains of TB, but reports of further shortages with one of the current mainstay therapies.  Otsuka says it has now filed delamanid as a treatment for multi-drug resistant (MDR) pulmonary TB in patients who are also being treated with a background regimen of anti-TB drugs. 

FDA also recently announced that it has fast-tracked and approved Cook Pharmica’s manufacturing facility without doing a preapproval inspection so that it could begin producing a drug that is on the FDA shortage list, reported FiercePharmaManufacturing.  he company did not say which drug it was or who it is manufacturing it for, but indicated it was a sterile injectable product.  We previously noted that FDA took a similar action to approve a generic version of Johnson & Johnsons cancer drug Doxil from India’s Sun Pharma that it had put through a fast-track approval process.  

Finally, International Pharmaceutical Quality (IPQ) recently reported that “The Accelerated Recovery Initiative (ARI) – an FDA/industry partnership being coordinated by pharma data manager IMS – is gaining momentum in its effort to forecast, prevent, and mitigate the impact of drug shortages, and a pilot program is now underway.” 

At a mid-March supply chain conference in Cincinnati, Ohio cosponsored by Xavier University and FDA, IMS Commercial Effective Services Senior Principle Michael Barnes noted that the pilot program is “in the early stages” and is now “getting to the point at which FDA, IMS and a select number of manufacturers are beginning to test the process.”  In his presentation at the FDA/Xavier conference, IMS’ Barnes provided insights into:  

• the common complaints from stakeholders on how drug shortages are currently handled
• why drug shortages occur
• the formation, purpose and function of ARI, and
• the ARI pilot and the respective roles being played by FDA, GPhA and IMS

Tufts Center for the Study of Drug Development: Study on the Structural Roots of Drug Shortages and The Shortages Effects on Kids

Pharm Exec recently asked the Tufts Center for the Study of Drug Development (TCSDD) to summarize new survey research—partly commissioned by a grant from Amgen—that documents the scope of the threat and identifies the structural roots of the shortages. In a larger sense, the study underscores how effective management of the drug supply chain is emerging as something much more than an engineering feat: instead it’s a societal obligation. 

TCSDD developed a two-part methodology that entailed building a database of current drug shortages and conducting interviews with experience hospital pharmacists to gather first-hand knowledge of how drug shortages are managed and the challenges that they pose.  Tufts CSDD staff gathered publicly available data on 240 drug shortages occurring between 2001 and February 2012, from lists maintained by the ASHP and the FDA.   

TCSDD staff coded the root cause of each drug shortage and summarized these causes by major grouping.  The vast majority (94%) of drugs were small molecule chemical entities and 6% were large molecule biologics).  Most shortages (80%) involved generic equivalents, only 20% involved branded drugs.  More than three out of four (77%) drug shortages in the sample were sterile injectables.  The number of branded large molecule therapies are projected to increase rapidly through 2016—10 of the top 20 drugs.  And the number of generic biologics (biosimilars) entering the market is also expected to rise sharply during the next 3-5 years.  Given that all large molecules are adminstred in a sterile injectable format, the incidence of drug shortages is expected to rise sharply and the challenge to manage these shortages will likely intensify.   

One out of five drug shortages (18%) involve anti-infective treatments; 17% involve drugs targeting disease of the central nervous system and pain.  Drug shortages targeting cardiovascular illnesses and cancer-related illnesses represent 12% and 11% of all shortages respectively.  

One of the causes for shortages is that the supply chain of manufacturers capable of providing sterile injectibles consists of only a few manufacturers: Teva, Hospira and Bedford Labs produced 71% of sterile injectibles between 2001 and February 2012. 

The average product shortage duration was approximately 19 months.  Four out of every 10 drug shortages is associated with manufacturing problems.  The leading cause of manufacturing delays was voluntary suspension of suppliers for requalification of equipment.  Inspection citations and raw materials shortages were infrequent reasons for drug shortages and tended to occur outside the U.S. 

The second most common reason, accounting for 27% of shortages, is high demand coming from a variety of sources including consumers, as well as competitors looking to secure comparator drugs for clinical testing.  13% of shortages are due to drug discontinuation and withdrawal from the market. 

The article also noted the significant costs associated with additional hospital pharmacy staffing.  For example, one study found that the labor cost alone to manage drug shortages is an estimated $216 million annually in the U.S.  The costs associated with pharmacists, pharmacy technicians and nurses in a 400-bed hospital (or greater) are in the range of $25,077 to $118,800 per year.   

In the UK, one survey found that 43% of pharmacists spend 2-5 hours per week sourcing out-of-stock medication.  In addition, some hospitals need to increase the medication that they hold in stock as a strategy for dealing with unrelaiability of certain drug supply chains.  This extra inventory adds to hospital pharmacy expenses and dollars must be re-allocated to cover these costs.  

Information technology systems—in particular, large databases containing inventory data and tracking capabilities—within the pharmacy play a key role in managing and resolving shortages.   

Finding alternatives to treatments also poses challenges.  Pharmacists spend time working out alternatives, and consider all guidelines, but the lack of published data available for patient outcomes “poses difficulties when assessing the impact of an alternative drug due to a shortage.” 

Drug Shortages Hurting Pediatric Cancer Patients 

Unfortunately, drug shortages have caused adverse health consequences and in some cases, have affected the life expectancy of young cancer patients.  Specifically, a recent study from St. Jude Children's Research Hospital found that estimated two-year cancer-free survival for patients with intermediate- or high-risk Hodgkin lymphoma fell to 75% from 88% when the drug cyclophosphamide was substituted for mechlorethamine, a drug that has been in short supply. 

The study’s authors have pointed out that other treatment options were put into play and that no patients have died as a result but said, “those who relapsed received additional intensive therapy that is associated with higher odds for infertility and other health problems later,” reported FierceHealthCare.   The study, published recently in The New England Journal of Medicine, did not estimate what the long-term impact of the drug substitution will be. 

“We can think of no credible explanation for this dramatic difference in event-free survival other than the drug substitution,” the researchers noted. The analysis found that, as a group, patients who received cyclophosphamide had fewer unfavorable symptoms and were more likely to have intermediate-risk, rather than high-risk Hodgkin lymphoma. The patients ranged in age from 3 to 21. Half were age 14 or younger.

“This is a devastating example of how drug shortages affect patients and why these shortages must be prevented,” said Dr. Monika Metzger, the study’s principal investigator.  “Our results demonstrate that, for many chemotherapy drugs, there are no adequate substitute drugs available.” 

The study points out what the industry knows, that shortages, particularly of generic injectable drugs like mechlorethamine, is more than a financial or regulatory hurdle to be jumped.  The drugs often bring thin margins so they may only have one supplier still making them.  If the drugmaker has a plant problem or other interruption, then a shortage can quickly materialize. Mechlorethamine, which is again available, the study points out, has been used in cancer treatment since the 1960s.  But cyclophosphamide also has been extensively prescribed for treating children and adults with Hodgkin lymphoma. Studies had shown it to be a safe and effective alternative to mechlorethamine. 

The FDA in 2011 initiated new protocols for drugmakers to give it the earliest possible warning in case of potential shortages and has worked with companies to ease the impact of shortages. It has even granted temporary permission for some companies to import drugs that are not approved in the U.S. but are used in other countries as alternatives to drugs that are now in short supply. There have been fewer new drug shortages reported this year but the problem remains a big challenge for the industry and the agency. 

The study’s authors gave the FDA credit for working to solve the shortage problem but Dr. Michael Link, the senior author of the report, said, “This puts a face on the problem of drug shortages and shows that the problem is real, not theoretical. This is about a curative therapy that we were unable to administer because the drug we needed was not available.”    

“Despite heroic efforts by the drug shortage office of the Food and Drug Administration to solve the shortages of a number of medically necessary drugs, it is clear that patients are still suffering from the unavailability of life-saving drugs. A more systematic solution to the problem is needed.” 

Drug Shortages Hamper MDR-TB Treatment 

In addition to drug shortages hurting children with cancer, a recent report from the Centers for Disease Control (CDC), reported by Medpage Today, showed that “Drug shortages have affected most U.S. health programs that deal with multidrug-resistant tuberculosis (MDR-TB).” 

“Shortages of so-called second-line drugs have lead to treatment delays, lapses, and interruptions, as well as the use of inadequate regimens,” the agency reported in the Jan. 18 issue of Morbidity and Mortality Weekly Report.  Health agencies were forced to divert staff in order to procure scarce drugs, the CDC reported. 

Drug-susceptible TB is treated with four so-called first-line drugs – isoniazid (Nydrazid), rifampin (Rifadin), pyrazinamide, and ethambutol (Myambutol) – in a 6-month standard regimen.  MDR-TB, on the other hand, is characterized by resistance to isoniazid and rifampin and must be treated for between 18 and 24 months with up to 6 drugs that are “less effective, more toxic, and more costly than first-line drugs,” the CDC report said.

Since 2005, the CDC has been told of difficulties obtaining a range of second-line drugs, including streptomycin, cycloserine (Seromycin), ethionamide (Trecator), rifabutin (Mycobutin), amikacin (Amikin), capreomycin (Capastat Sulfate), and kanamycin (Kantrex).  The current report comes as a national shortage of isoniazid is in its second month. 

The findings come from a national survey of TB control programs conducted in late 2010 by the National Tuberculosis Controllers Association, which found, the CDC reported, that shortages not only interfere with patient care but “could promote the development of drug resistance as well as the transmission of drug-resistant Mycobacterium tuberculosis.” 

“The association surveyed 61 of its 68 members and 33 (or 54%) responded, including 29 that represented state TB programs and four that represented large cities.  Of those, 26 programs – representing about 75% of the U.S. TB burden – reported having at least one MDR TB case in the previous 5 years.” 

Of the systems reporting MDR-TB, 21 -- or 81% -- said they had trouble getting second-line drugs.  All cited nationwide shortages, but 71% also complained of shipping delays, 62% said they lacked resources, and 48% blamed a complicated procurement process related to investigational new drug protocols. 

Nineteen of the 21 jurisdictions said shortages led to adverse outcomes, with 58% citing treatment delay, 32% reporting treatment lapse or interruption, and 32% said they had been forced to use an inadequate regimen.  “For example, the CDC report cited an April 2011 case in which shortages of capreomycin and amikacin delayed treatment for a father and his infant who had MDR-TB.” 

Despite efforts to get the drugs, treatment was delayed for 8 days, lengthening the time the father remained infectious.  At the same time, the infant, who had basilar meningitis and severe communicating hydrocephalus, “was placed in a particularly dangerous situation,” the CDC report said. 

TB meningitis in young children “is a medical emergency, and delays in treatment lead to worse outcomes, such as severe cognitive impairment, epilepsy, and death,” the report noted.  “The CDC report cautioned that, because of the 54% response rate to the survey, the results might not represent the national experience with shortages of second-line drugs.”

 

FDA Strategic Plan to Address Drug Shortages, Solicitation for Comment

Earlier this month, the Food and Drug Administration (FDA) released a notice for public comment in the Federal Register regarding ideas stakeholders and the public may have for combating drug shortages.  As noted on FDA’s own blog, the agency believes that despite the progress made over the last year, even more can be done and is therefore turning to the American public for advice. 

Comments due by Thursday, March 14, 2013.  The Docket Number is FDA-2013-N-0124. 

Background 

As we previously wrote this summer, the President signed into law the Food and Drug Administration Safety and Innovation Act (FDASIA) (Pub. L. 112-144) on July 9, 2012.  Section 1003 of FDASIA adds section 506D to the Federal Food, Drug, and Cosmetic Act (the FDCA) to require the formation of a task force to develop and implement a strategic plan for enhancing the Agency's response to preventing and mitigating drug shortages.  Section 506D of the FDCA (21 U.S.C. 356) requires that the drug shortages strategic plan include the following: 

• Plans for enhanced interagency and intra-agency coordination, communication, and decisionmaking;
• Plans for ensuring that drug shortages are considered when the Secretary initiates a regulatory action that could precipitate a drug shortage or exacerbate an existing drug shortage;
• Plans for effective communication with outside stakeholders, including who the Secretary should alert about potential or actual drug shortages, how the communication should occur, and what types of information should be shared;
• Plans for considering the impact of drug shortages on research and clinical trials; and
• An examination of whether to establish a “qualified manufacturing partner program” as described in section 506D(a)(1)(C) of the FD&C Act. 

Per the directive in section 506D, FDA has formed an internal Drug Shortages Task Force (Task Force) to develop and implement the drug shortages strategic plan.  The Task Force is seeking comments from the public on issues related to the development of this strategic plan.  Importantly, although FDASIA refers only to a drug shortages strategic plan, FDA anticipates that the strategic plan will consider prevention and mitigation of both drug and biological product shortages.  Accordingly, FDA expressed its interest in receiving comments on the following questions from all parties, including those with an interest in biological products: 

1. In an effort to address the major underlying causes of drug and biological product shortages, FDA is seeking new ideas to encourage high-quality manufacturing and to facilitate expansion of manufacturing capacity. 
2. To assist in the evaluation of product manufacturing quality, FDA is exploring the broader use of manufacturing quality metrics.  With that in mind, FDA would like input on the following issues:  What metrics do manufacturers currently use to monitor production quality?  To what extent do purchasers and prescribers use information about manufacturing quality when deciding how to purchase or utilize products? What kinds of manufacturing quality metrics might be valuable for purchasers and prescribers when determining which manufacturers to purchase from or which manufacturers' products to prescribe? What kinds of manufacturing quality metrics might be valuable for manufacturers when choosing a contract manufacturer? How frequently would such metrics need to be updated to be meaningful. 
3. The use of a qualified manufacturing partner program similar to one used under the Biomedical Advanced Research and Development Authority (BARDA) has been suggested as a potentially useful approach to expanding manufacturing capacity and preventing shortages. FDA recognizes that there are important potential differences between the BARDA program and the use of a parallel program to address shortages. For example, the BARDA program covers a relatively stable and limited number of products, but drugs at risk of shortage are many, may change rapidly over time, and are difficult to predict in advance. In addition, FDA does not have funding to pay manufacturers to participate in a drug shortages qualified manufacturing partner program or to guarantee purchase of the end product. With these differences in mind, is it possible to design a qualified manufacturing partner program that would have a positive impact on shortages? 
4. Are there incentives that FDA can provide to encourage manufacturers to establish and maintain high-quality manufacturing practices, to develop redundancy in manufacturing operations, to expand capacity, and/or to create other conditions to prevent or mitigate shortages? 
5. In FDA’s work to prevent shortages of drugs and biological products, FDA regularly engages with other U.S. Government Agencies.  Are there incentives these Agencies can provide, separately or in partnership with FDA, to prevent shortages? 
6. When notified of a potential or actual drug or biological product shortage, FDA may take certain actions to mitigate the impact of the shortage, including expediting review of regulatory submissions, expediting inspections, exercising enforcement discretion, identifying alternative manufacturing sources, extending expiration dates based on stability data, and working with the manufacturer to resolve the underlying cause of the shortage. Are there changes to these existing tools that FDA can make to improve their utility in managing shortages? Are there other actions that FDA can take under its existing authority to address impending shortages? 
7. To manage communications to help alleviate potential or actual shortages, FDA uses a variety of tools, including posting information on our public shortages Web sites and sending targeted notifications to specialty groups. Are there other communication tools that FDA should use or additional information the Agency should share to help health care professionals, manufacturers, distributors, patients, and others manage shortages more effectively? Are there changes to FDA’s public shortage Web sites that would help enhance their utility for patients, prescribers, and others in managing shortages? 
8. What impact do drug and biological product shortages have on research and clinical trials? What actions can FDA take to mitigate any negative impact of shortages on research and clinical trials? 
9. What other actions or activities should FDA consider including in the strategic plan to help prevent or mitigate shortages? 

Other Drug Shortage News 

In addition, FDA recently announced the approval of the first generic version of the cancer drug Doxil (doxorubicin hydrochloride liposome injection).  Doxil is currently on FDA’s drug shortage list.  The generic is made by Sun Pharma Global FZE (Sun).  Doxorubicin hydrochloride liposome injection is administered intravenously by a health care professional. Sun’s generic will be available in 20 milligram and 50 milligram vials. 

In February 2012, to address the shortage of doxorubicin hydrochloride liposome injection, FDA announced it would exercise enforcement discretion for temporary controlled importation of Lipodox (doxorubicin hydrochloride liposome injection), an alternative to Doxil produced by Sun and its authorized distributor, Caraco Pharmaceutical Laboratories Ltd. that is not approved in the United States.  Enforcement discretion was also used to release one lot of Janssen’s Doxil made under an unapproved manufacturing process. 

In addition, a federal judge also recently approved a consent decree with Ben Venue Laboratories, FDA announced.  The company, a subsidiary of Boehringer Ingelheim, suspended its manufacturing capabilities in 2011 after receiving a string of warning letters from FDA over the maintenance of its current good manufacturing practices (CGMPs). 

According to RAPS, “the quality control problems had led to widespread shortages of various critical medications, including Doxil (doxorubicin), a cancer drug.”  As of October 2012, that enforcement discretion continues even as Ben Venue's manufacturing capabilities have started to come back online.  That same month, Ben Venue announced that both “FDA and the European Medicines Agency (EMA) were reviewing a new shared manufacturing method that would see initial supplies of Doxil manufactured at Ben Venue, while a second facility would ensure the quality and sterility of the drug.”   

“Under the terms of the consent decree, Ben Venue is permitted to continue to manufacture and distribute more than one hundred important drugs that are essential for patient care,” the company said in a statement.  “Ben Venue is also permitted to continue drug-development activities, and may file abbreviated new drug applications (ANDAs), and, as remediation progresses to the FDA’s satisfaction, receive ANDA approvals and manufacture other products.” 

However, the consent decree restrains Ben Venue from manufacturing and distributing drugs from its Bedford, Ohio, facility until FDA determines that its operations are compliant with the FDCA. 

In a statement, FDA's Acting Associate Commissioner for Regulatory Affairs Melinda Plaiser explained that the consent decree was enacted in response to serious, systemic concerns.  “The company’s failure to promptly address these problems put patients at risk of receiving poor-quality drugs and compromises the availability of medically necessary products,” said Plaisier.  “This company continued to violate the law, and FDA took action to help ensure that medicines that consumers rely on are safe, effective, and of high quality.” 

Ben Venue acknowledged those concerns in its own statement, noting that it has already spent more than $300 million to upgrade its facilities to address some of the systemic quality deficiencies that had plagued it in recent years.  The company also noted that since its October 2012 announcement of the return of limited manufacturing capabilities, it has resumed production on additional manufacturing lines.  That consent decree was subject to the approval of a federal court, which FDA announced it received on 31 January 2013.  

FDA's statement on the matter also indicates that Ben Venue's CEO, vice president of operations and vice president of quality operations were all named defendants under the decree, providing it with significant leverage if the company violates its terms.

The agency will also likely be glad to have the facility's capacity back up and running. Ben Venue is a manufacturer of numerous sterile injectable drugs, and in the wake of its shut down and subsequent drug shortages, FDA came under fire from Congress for two reasons: the shortages and pharmaceutical compounding. 

In the first instance, FDA was slammed by legislators for not working harder to keep the manufacturing facility open, with a congressional report alleging that FDA did not have a “sufficient focus in ensuring access to and a continued supply of needed medicines over the last several years.” 

“Although manufacturers are reluctant to speak publicly about problems with their governing agency, the Committee found that the new political regime at FDA is largely to blame for the sudden spike of shortages that began in 2010,” quoted RAPS.  FDA, meanwhile, hit back at that report, saying that responsibilities for the shortages “live largely outside of FDA's purview.” 

“It is the manufacturer’s responsibility to ensure that its products are safe, effective and of high quality,” wrote Jeanne Ireland, then-assistant commissioner for legislation at FDA.  “When products manufacture under problematic manufacturing conditions pose a safety threat to patients—such as glass shards or metal shavings in vials of injectable drug products or fungal contamination of the product—manufacturers generally must stop production to resolve the problem before resuming manufacturing and distribution.”

The European Medicines Agency Mitigating Drug Shortages in Europe

The European Medicines Agency (EMA) recently released a proposal for how it can help mitigate potential and real drug shortages stemming from manufacturing problems, reported FiercePharmaManufacturing.  The six-page proposal notes that “Recent unexpected disruptions to the manufacturing supply chain due to manufacturing/GMP (good manufacturing practices) compliance problems have resulted in acute and chronic shortages of important medicinal products in the European Union (EU) requiring changes to prescribing information, and initiation of patient allocation programs.” 

The Reflection Paper is concerned with public health crises that arise due to unforeseen disruptions within the manufacturing process, caused by manufacturing/GMP compliance problems and affecting medicinal products for human use, independent of their route of authorisation, where a need for co-ordination of the assessment and risk reducing actions at a Community level has been identified. Supply disruptions not caused by manufacturing/GMP compliance problems fall outside the scope of this Reflection Paper. 

EU legislation currently requires mandatory pre-notification by Marketing Authorisation Holders (MAHs) of disruption of supply in the case of permanent or temporary cessations and for manufacturers of medicines in the case of any defect that could lead to an abnormal restriction in supply. 

It will be interesting to see if the Food and Drug Administration (FDA) and the EMA work together on this proposal, perhaps by entering into a Memorandum of Understanding (MoU).   

The regulators’ dilemma  

Over the past two to three years there have been a number of public health crises caused by acute and chronic supply shortages as a result of manufacturing/GMP compliance problems.  Experience obtained has been analysed by EMA and a number of lessons learned have been identified.   

In some cases defective medicines had to be left on the market to prevent shortages of life saving medicines as there is no available alternative and the risks linked to a possible exposure with the defective product are considered less than those linked to the unavailability of the product.  In some cases of GMP non-compliance the ability of Regulators to take action against a manufacturing site was restricted in order to avoid product shortages. Very difficult risk-benefit judgements had to be made between poor quality processes or product, or no product at all.  

The switching of patients to alternatives may also be hindered by factors other than supply per se and beyond the control of the Network.  For example, the exclusive link between peritoneal dialysis solutions from a certain MAH, the patient and the connector meant the exclusion of competitor products so that patients were inextricably linked to products from that MAH and could not be switched without undergoing a surgical procedure to change the connector further increasing the risk to patients.  

The impact of globalisation  

The globalisation of manufacture has continued to increase in importance so that many medicinal products have extended manufacture and supply chains, which increases the risk of supply disruption including new vulnerabilities.  Many sources of active substances for life-saving medicines, e.g. antibiotics, are now wholly located outside the EU, some located in countries that have uncertain political and regulatory systems and which may be prone to natural disaster.  The 2011 tsunami in Japan illustrated how natural disasters can impact the supply chain of pharmaceuticals.  

Manufacturing is in consolidation, leading to one or very few manufacturing sites supplying at a global level so failure at these sites leads to global supply shortages. There may be no redundancy or fail-safe capacity built into the global supply chain.  EMA has seen the case of a single contract manufacturer with particular capabilities may be depended upon for several key products.  With the arm’s length involvement of the MAH, contract manufacturing can be prone to marginal GMP compliance and consequent potential quality problems leading to supply problems.  

The industry’s approach  

EMA noted that “industry’s risk management tends to be very reactive rather than proactive.”  As a result, they called for “Sustained pressure” “to bring about a change in a manufacturer’s approach to quality risk management and supply chain security.” 

The current regulatory framework  

Unprecedented import of large quantities of unlicensed versions of medicines by Member States to prevent a shortage had to be supported by rapid and sustained pressure on MAHs to introduce variations to regularise the situation.  The need for urgent variations or better still pre-planned inclusion of failsafe manufacturing site capacity in marketing authorisations needs to be considered.  

Even if there are several potential suppliers at a global level, only one or two may have been included in a given marketing authorisation to the EU.  It, therefore, can be difficult to add these quickly in a time of crisis – all the more so in the case of biological medicinal products where there are greater regulatory hurdles as a result of concerns about the equivalence of product from different manufacturing sites.  

Collaboration and cooperation within the Network  

Actions at national level are taken to address local supply shortages without information being shared within the Network.  Proactive risk management and clear and transparent communication by the MAH are essential measures to maintain trust between all stakeholders.  International collaboration amongst Regulatory Authorities at a global level is vital to ensure better supervision of these globalised supply chains.  There may be a need to mobilise resources from outside the Network in order to assess problems and provide solutions.  

The interfaces between medicinal products and other products such as medical devices can be important and there is a need for further discussion about how best these interfaces can be managed.  The existence of monopolies in supply of medicines restricts options for risk mitigation.  There is a need for further discussion in order to address this issue.  

Envisaged activities  

While the causes of shortages are varied and complex, the challenge remains to effectively co-ordinate an assessment, to develop risk minimisation measures to alleviate the impact on patients, and to communicate within the Network, with international partners and with healthcare professionals, patients and the general public. On occasions, EMA is being asked to coordinate the follow-up to an emerging event in the absence of an appropriate legal framework.  

In some cases, the need for rapid implementation of risk minimisation measures is paramount.  Short and medium term measures will be undertaken to enhance the current approach.  In addition, there are some aspects which will require discussion with bodies outside the Network, e.g. in the area of medical devices. 

Short term actions  

Based on the findings and analysis noted above, EMA proposed ten (10) short term actions the agency will be taking to combat drug shortages 

1.    Establish an internal catalogue of Centrally Authorised Products (CAPs) and non-CAPs requiring coordination at EU level (e.g. referrals) that have experienced product shortages to facilitate future analysis of trends and communication on shortages.  

2.    Maintain a public catalogue of current shortages of CAPs and medicinal products where an EU co-ordination of assessment has been undertaken with links to all relevant Opinions, communications, etc. MAHs will be invited to report shortages caused by manufacturing/GMP compliance problems on a voluntary basis.

 3.    Develop a common understanding of the concept of “essential” medicine for subsequent application at national level and develop a decision tree to assist National Competent Authorities (NCAs) in deciding what shortages should be dealt with at EU level (also providing clarification on the most appropriate regulatory framework to be applied).  

4.    Provide clarification on how to best provide national input into the development of EU advice/ communication and how such EU advice/communication and national advice/communication can be complementary.  

5.    Establish and publish a Standard Operating Procedure (SOP) for handling reports of shortages in supply of medicinal products due to quality defects and manufacturing problems and where an EU co-ordination of assessment is necessary.  The procedure should outline the interlinking of regulatory, pharmacovigilance, GMP inspection, assessment and communication aspects of dealing with shortages due to unforeseen events in the manufacturing supply chain.  

6.    Revise through the GMDP IWG the Community Procedure “Procedure for Handling Rapid Alerts Arising From Quality Defects” to include transmission of alerts in the event of a shortage in supply of medicinal products due to quality defects and manufacturing problems, whilst ensuring that this will not result in non-urgent information being transmitted. Revise through the GMDP IWG Chapter 8 of the GMP Guide “Complaints and Product Recall” to clarify reporting requirements relating to restriction of supply in case this relates to a quality defect and a recall of batches.  

7.    Explore if “crisis” situations arising from shortages in supply of medicinal products due to quality defects and manufacturing problems can in the future also be addressed in the context of the EU Regulatory Network Incident Management Plan for medicines for human use. 

8.    Develop international co-operation in this area so that there is a sharing of information on specific shortages (with or without impact on other territories) and sharing of information on best practices on risk management and prevention strategies. 

9.    Raise the awareness of the impact of medicinal product shortages and stimulate industry reaction and improvements (whereby industry should propose solutions) in business continuity planning guaranteeing better access for patients to essential medicines by organising a public workshop between Regulatory Authorities, industry, patient and healthcare representatives to outline the problems encountered.  

10. Undertake a survey of past initiatives taken by NCAs to manage/prevent shortages in order to develop an inventory of possible tools available to NCAs and to share best practice.

Medium term actions 

EMA will:

1. Facilitate risk benefit evaluation where risk of shortage has to be balanced with potential risk due to presence of a product defect.
2. Promote better and proactive risk management by MAHs by requiring submission by all MAHs of a risk-analysis of their manufacturing process identifying any weaknesses and, depending on the severity, provide a contingency plan and proposals to strengthen the identified weaknesses.
3. Investigate processes that could be used to measure the impact of medicinal product shortage in patients experiencing its consequences, e.g. lowered dose or switch to an alternative product.

The Patient Access to Drugs in Shortage Act

As we have noted several times over the past two years, the ongoing battle to resolve drug shortages has several distinct causes—one of them being drug pricing.  Specifically, the Medicare Modernization Act (MMA) and other government pricing policies have had unintended consequences affecting companies’ ability to make profits, particularly for the generic injectable drugs that have been so heavily in shortage.  The inability for companies to make profits on drugs has caused them to stop making the product, reducing production, or have left the entity unable to complete the necessary updates to its manufacturing facilities.  

Although the Food and Drug Administration (FDA) has taken several steps to address issues causing drug shortages, and Congress passed a new title in the Food and Drug Administration Safety and Innovation Act (FDASIA) to codify measures to reduce such shortages, more is still needed to address the impact the government’s pricing regime is having on drug shortages. 

As a result, several members of Congress recently introduced The Patient Access to Drugs in Shortage Act (H.R. 6611), which would amend the Social Security Act, exempting manufacturers from the current pricing method of average sales price plus 6%, which they claim works for branded drugs but not cheap generics.  The exemption would apply for generic sterile injectables with three or fewer active manufacturers to the wholesale acquisition cost.  The legislation would also offer tax breaks to brand-drug makers that enter the market during shortages. 

U.S. Representative Bill Cassidy, M.D. (R-LA), along with Congressman Andy Harris, M.D. (R-MD), Mike Rogers (R-MI), Tom Rooney (R-FL) and Dan Benishek, M.D. (R-MI), introduced the legislation.  Dr. Cassidy was an associate professor of medicine for Louisiana State University, and co-founded the Greater Baton Rouge Community Clinic, a clinic providing free dental and health care to the working uninsured. 

“Facing miniscule or negative profits in addition to requirements to provide discounts and rebates for drugs for high-need populations, many manufacturers choose to abandon the production of sterile injectables in favor of a more lucrative market. Additionally, because of the high front-end costs for highly complex infrastructure required for injectable drugs combined with low returns, there is little incentive for new manufacturers to enter a market in a time of shortage,” Cassidy wrote in his letter seeking cosponsors. 

Dr. Cassidy previously noted in an opinion piece in the Wall Street Journal, co-authored with Dr. Patrick Cobb, that the root cause of drug shortages is economic.  The legislation already has support from the Community Oncology Alliance, the National Patient Advocate Foundation (NPAF) and drug wholesaler AmerisourceBergen.  The Alliance noted that in a recent survey it conducted among community cancer clinics, “98.9% of respondents reported experiencing a drug shortage problem.  There are too many cases where treatment has to be delayed or suspended because of a shortage or, in cases where an alternate is available, more expensive therapy has to be used.” 

The proposal relies on returning to wholesale pricing for these kinds of drugs, similar to the reimbursement system that led to a series of lawsuits against drugmakers and wholesalers for gaming the system for profit.  “That won't happen this time around, the congressmen claim, because prices will be based on wholesale acquisition cost (WAC), a price set by wholesalers, which the group claims is a real market price, and so resistant to being manipulated.”   

The legislation would also exempt the drugs from Medicaid and Medicare discounts and rebates that also lower their prices—340B discounts.  The 340B program requires drug manufacturers to provide outpatient drugs at reduced prices to safety net hospitals and other entities that provide a disproportionate share of care to low-income, underinsured, and uninsured individual.  If the drugs are in short supply, any branded drugmaker returning to the market “wouldn't have to pony up the Patient Protection and Affordable Care Act annual fee, in hopes of drawing them back into the market.” 

Dr. Cassidy also released a Frequently Asked Questions document to explain why the legislation is needed.  The document notes that the root cause of the shortages is Medicare reimbursement based on average sales price (ASP) of the manufacturer.  The document points out that ASPs of top cancer drugs in short supply have decreased close to 50%, on average, since 2005.  Generic manufacturer net sales are below ASP because they are required to provide Medicaid rebates and 340B discounts that exert additional downward pressure on already unstable pricing. 

The document asserts that “Exempting Medicaid rebates and 340B discounts is essential to achieving pricing stability,” and notes that “these are low cost generics so the overall impact on Medicaid and 340B is very small,” and the “rebates and discounts are meaningless when a drug is short and cannot be procured.”

“We hear from patients, doctors and hospitals that every day, shortages of cancer chemotherapy medicines and other drugs affect a patient’s treatment.  This legislation adjusts how Medicare pays for medicine so as to decrease the risk of a drug shortage, said Congressman Cassidy.  “It is good for everyone.  Patients are more likely to have their life saving drugs.  Medicare saves money by eliminating the need to substitute much more expensive medicines for inexpensive generics.  Doctors and hospitals, which currently spend a lot of resources dealing with drug shortages, can focus on better care for patients with less hassle and expense.” 

“As a doctor who has treated patients for nearly 30 years, I am proud to support this important legislation to prevent drug shortages in this nation.  During my first term in Congress, both citizens in Northern Michigan and my former colleagues have expressed their concerns about pending drug shortages and their impact on the ability to treat patients.  I want to thank Rep. Bill Cassidy for his leadership on this issue and his efforts to propose a comprehensive solution,” said Rep. Dan Benishek, a general surgeon from Michigan’s Upper Peninsula.  

“As a physician, there is nothing more frustrating than not having access to a drug a patient desperately needs,” said Congressman Harris.  “This legislation will improve the care patients receive by alleviating some of the drug shortages that have become all too prevalent.” 

“As a cancer survivor, I know that timely access to treatment can mean the difference between life and death for patients,” said Congressman Rogers, who represents Michigan’s Eighth Congressional District and is a senior member of the House Energy and Commerce Committee.  “Today cancer patients are still suffering unacceptable delays and shortages for critical oncology drugs.  This legislation will help to ensure that more of these life-savings drugs are quickly available to patients who need them.” 

“I began working on the drug shortage issue nearly two years ago after meeting with doctors and hospital administrators in my district, who warned me that they faced shortages of critical, life-saving medicines,” said Congressman Rooney.  “We took an important step to reduce shortages and save lives last year by passing a bipartisan bill I introduced with Rep. Diana DeGette (D-CO) that gives the FDA, doctors and pharmacists more tools to identify, respond to and prepare for drug shortages.  Now, we need to take the next step and help prevent shortages from occurring in the first place.” 

Objecting to the proposed legislation is the Safety Net Hospitals for Pharmaceutical Access (SNHPA), which represents more than 900 hospitals enrolled in the federal 340B drug discount program.  SNHPA asserted that “no evidence has suggested that the 340B drug discount program contributes to drug shortages.”  As a result, they note that if “H.R. 6611's 340B language were to become law, it would increase costs to patients, providers, and the government without alleviating drug shortages.” 

Other Drug Shortage News 

In continuing coverage, American Medical News reported that “Drug shortages are intensifying in some parts of the nation due to the recent closings of two specialty pharmacies in Massachusetts following a fungal meningitis outbreak.”  The Boston-based “Massachusetts General Hospital, which is New England's largest hospital, is among the health centers that have been particularly hard-hit.”   

According to Massachusetts General’s Inpatient Pain Services Director Padma Gulur, MD, “about 17% of the nearly 400,000 doses of medication it uses each month were provided by Ameridose” and a “smaller amount of medication was produced by NECC.”  As a result, the hospital’s pharmacy, which once operated from 7:30 a.m. to 4:30 p.m., now functions around the clock.  The pharmacy expanded its space to other sterile areas and is considering temporarily using one of the operating rooms, Dr. Gulur said. 

Iyah Romm, policy and health planning director at the Department of Public Health, told the council Wednesday morning that hospitals were reporting shortages of certain medications before the outbreak. 

The article notes that FDA Commissioner Margaret A. Hamburg, MD, said, “Drug shortages are still a serious problem, one that may be temporarily impacted by [Ameridose's] voluntary recall of all its unexpired products.”  Some hospitals are trying to boost their pharmacy capabilities so they can reconstitute and package drugs themselves rather than rely on specialty pharmacies that could have safety issues similar to those of NECC.   

Shortages of lifesaving medication, including benzodiazepine drugs to stop seizures, have led emergency medical workers in the Memphis, Tenn., area to rely on compounding centers to create those products, said emergency physician Joseph E. Holley Jr., MD.  “If there are less compounding facilities around, there will be less opportunities to have those drugs made for us,” said Dr. Holley. 

To address the unique concerns in Massachusetts regarding drug shortages, the Massachusetts, Public Health Council adopted emergency regulations in November to allow hospitals to share safe, compounded drugs with other hospitals in times of need, said Lauren Smith, MD, MPH, interim commissioner for the Massachusetts Dept. of Public Health.  The rules took effect Dec. 1. The council is an appointed board of clinicians, professors and public health advocates. 

The rules are primarily aimed at allowing hospitals to share drugs within their health care systems.  But the state could consider special requests to distribute them outside those organizations.  Romm said the emergency regulations will allow the department to review hospitals’ methods for compounding and transporting the medications they share with other health care centers, to ensure they are “not compromising patient care.” 

“Part of the Dept. of Public Health’s mission is to work with hospitals to ensure that they have a plan in place to respond to any unforeseen emergencies,” Dr. Smith said. “These regulations provide another tool at our disposal to respond to any urgent situations that may arise, so we may protect the public health and ensure patient safety.”

Prescription Drug Shortages: Crisis Abating - Still Need for Pricing Reform

Some progress on drug shortages has been made over the last few months, due in part to manufacturing improvements.  For example, Genzyme said that a new plant was now producing all of the supply needed for its thyroid cancer treatment, Thyrogen.  Supply had been spotty for about three years, but now biotech unit of Sanofi says it is producing enough of the drug to meet the needs of all patients.  “We are grateful to the thyroid cancer treatment community for its ongoing patience and partnership,” Alicia Secor, Genzyme’s vice president and general manager of endocrinology, said in a statement. 

A Genzyme spokeswoman explained in an email that the drug went onto shortage lists as Genzyme worked through manufacturing problems after a virus was found at the Boston-area plant where the drug was filled and finished.  A couple of other drugs, including Fabrazyme, Genzyme’s treatment for the rare Fabry disease, were also interrupted.  Genzyme began manufacturing Thyrogen at its new Framingham, MA, plant when the FDA signed off on it earlier this year. Fill/finish is being handled by Hospira, she said. 

Hospira, which has been at the heart of a number of drug shortages as it works through improvements to its manufacturing plants, also said it expects to soon have sufficient supplies to re-enter the market with propofol. The anesthetic is one of the drugs hospitals had turned to the large-sale compounder, Ameridose, for because it was hard to come by. Now Ameridose has closed because of FDA issues, a move that may lead to a number of shortages. 

In another case, FDA allowed the manufacturer American Regent to sell a drug used during chemotherapy that was found to contain glass particles.  Doctors and nurses were instructed to filter the drug, sodium thiosulfate, before administering it to patients.  “If there wasn’t a shortage, we would never allow a company to continue marketing” in such cases, Dr. Sandra Kweder, deputy director of the FDA’s office of new drugs, said. But “patients need it.” 

FDA is also working with the Drug Enforcement Administration (DEA) to make exceptions with drug quotas so capable manufacturers can make extra supplies since many anesthesiology drugs in short supply are controlled substances.   

'Repackaging' doses in the operating room has been shown to increase the risk of infection in the past, but some clinicians may feel pressured to split up the larger vials of anesthesia drugs in times of shortage to maximize the number of patients who have access to care, Joel Zivot, MD, medical director of the cardiothoracic intensive care unit at Emory University in Atlanta, told MedPage Today.  Many anesthesiologists have called for smaller packaging, though that's been a challenge given it increases production costs on generic agents that are less profitable to begin with. 

Food and Drug Administration (FDA) Commissioner Margaret Hamburg recently told The New York Times that while far from resolved, “we’re in the midst of a period of really, very significant change that offers great promise for the future.”  NYT reported that only about 100 drugs have been added to the shortage list so far this year, compared with 221 when it peaked last year.  The FDA says that it has prevented the shortage of about 150 drugs this year by working with the industry to find supplies to avert a potential dearth of a particular med. 

Nevertheless, “there are still dozens of drugs in short supply, forcing some patients to go without essential meds and forcing healthcare providers to make some tough choices.”  Much of the national shortage problem can be traced to production disruptions when drugmakers initiate improvements after the FDA has sent them warning letters.  A House subcommittee report earlier this year criticized the FDA for being too aggressive in that regard.  

“From rural ambulance squads to prestigious hospitals, health care workers are struggling to keep vital medicines in stock because of a drug shortage crisis that is proving to be stubbornly difficult to fix.  Rationing is just one example of the extraordinary lengths being taken to address the shortage, which health care workers say has ceased to be a temporary emergency and is now a fact of life.  In desperation, they are resorting to treating patients with less effective alternative medicines and using expired drugs.  The Cleveland Clinic has hired a pharmacist whose only job is to track down hard-to-find drugs.” 

While shortages have been averted, when drugs become hard to get, they tend to remain hard to get, says Erin Fox, who tracks drug shortages at the University of Utah. Her group is keeping an eye on the supplies of 282 difficult-to-come-by drugs, she tells the newspaper. "The shortages we have aren't going away--they're not resolving," she said. "But the good news is we're not piling more shortages on top.” 

Compounding and Drug Shortages 

In addition to these concerns, the deadly meningitis outbreak caused by contamination at a large drug producer could worsen the situation.  FDA said that shortages of six drugs — medicines used during surgery and to treat conditions like congestive heart failure — could get worse after a big compounding pharmacy closed over concerns about drug safety.  The pharmacy, Ameridose, shares some management with the New England Compounding Center (NECC), which is at the center of a meningitis outbreak that has claimed 33 lives and sickened 461 more. 

Methylprednisolone, the drug that has caused the meningitis outbreak, was not technically in short supply.  A brand-name form made by Pfizer is on the market. The cheaper generic kind ran out, however, because the two companies that make it, Teva Pharmaceuticals Industries and Sandoz, have all shipments on back order with vague information as to when they’ll be available again. Some hospitals and clinics may have turned to compounding pharmacies for the drug to keep their costs down. 

“Compounding pharmacies have fit a niche in terms of getting medications to patients,” John Dombrowski, MD, chair of communications for ASA and director of the Washington Pain Clinic, told MedPage Today.  Steven Gayer, MD, professor of anesthesiology at the University of Miami, agreed that in times of shortage, “the correct answer is to find a compounding pharmacy.” 

Although compounders are focused on providing tailored drugs for specific patient needs, David Ball, a spokesperson for the International Academy of Compounding Pharmacists, confirmed that these pharmacies have been picking up some of the slack during shortages. 

“Compounders have regularly been called on to make those medications that are commercially unavailable,” Ball said.  They have access to raw materials, and with orders from patients -- or from hospitals for specific patients -- they can help disseminate drugs when they're needed most. 

Some of these pharmacies have even adopted a direct-to-consumer approach. The Professional Compounding Centers of America, which supplies compounders with raw materials, has a section on its website that instructs patients how to find their local compounders if their medications are out of stock. 

Consequently, FDA Commissioner Hamburg noted in a recent post on FDA’s blog that the agency is taking a number of actions to help address any shortages that may result from the supply of drugs affected by the Ameridose recall. 

GPO’s and Drug Shortages 

Despite this recent success, six members from the U.S. House of Representatives recently sent a letter to the Government Accountability Office (GAO) asking the agency to investigate “whether contracting practices by Hospital Group Purchasing Organizations (GPOs) are a driving cause of drug shortages that force hospitals and other providers to rely on compounding pharmacies.”  The letter was written by Representatives Edward J. Markey (D-Mass.), Henry A. Waxman (D-Calif.), John Dingell (D-Mich.), Frank Pallone (D-N.J.), Diana DeGette (D-Colo.), Anna G. Eshoo (D-Calif.). 

Markey said the investigation “will shed light on any possible linkages between drug shortages and reliance on compounding pharmacies and help address gaps in our oversight of this industry.”  “We look forward to GAO helping us understand the role General Purchasing Organizations play in avoiding, ameliorating, or contributing to the occurrence of drug shortages, and the role drug shortages play in hospital use of compounded drugs,” said Rep. Waxman.  

GPOs are designed to leverage the purchasing power of their client hospitals to obtain the lowest prices for drugs and devices.  Virtually every hospital in the US is a member of at least on GPO and more than 70% of all hospital purchases are made through GPO contracts. 

However, a number of experts say that anticompetitive, exclusionary contracting by GPOs have “rigged the market” in favor of a few manufacturers and distributors.  Current law allows GPOs to charge the drug manufacturer a fee that is based on a percentage of the total value of the purchase.  

Some experts consider this a “kickback” that creates a perverse incentive structure, whereby the more the hospital pays for the products, the higher the kickback and profit for the GPO.  Shut out of the lucrative GPO contract and unable to make a profit, other manufacturers cease production and leave the supply chain more limited, fragile, and vulnerable to shortage.  Such fees also drive down generic drugmakers' profits on selling their drugs, diminishing incentives to continue production and potentially opening the door to shortages, according to the letter. 

Angie Boliver, director of communications for Novation -- one of the largest GPOs in the U.S. -- told MedPage Today the drug shortage is complex and that the "notion that GPOs are responsible for drug shortages simply because they have negotiated prices too low is without logic or justification.”  “The reality is that hospitals will, and do, pay whatever amounts they have to pay in order to get life-saving drugs,” Boliver said in a statement. “It is important to note that GPOs are negotiating against some of the largest and most powerful companies in the world. These companies are sophisticated businesses that are perfectly capable of negotiating contracts that will provide a reasonable profit margin.” 

Healthcare Supply Chain Association president Curtis Rooney said GPOs “do not have the ability – nor would it be in our interest – to force manufacturers into contracts that undermine their ability to deliver product.”  “Drug companies regularly and quickly adjust pricing of GPO contracts when they experience shocks to production, and GPOs manage thousands of price changes annually, both increases and decreases,” Rooney said, adding that "all hospitals can purchase off-contract. 

The lawmakers are asking GAO to investigate questions that include: 

• What market factors contribute to the reliance of hospitals and other healthcare providers on compounding pharmacies?
• What impact have contracting practices by market participants such as manufacturers, distributors, group purchasing organizations, and providers had on competition and innovation in medical devices and drugs, access to medical devices and drugs, including an impact on drug shortages, and pricing of medical devices and drugs?
• Do drug shortages drive hospitals and other health care providers to rely more heavily on purchases of drugs, including sterile injectable medications, from compounding pharmacies?
• Do the incentives in the current GPO model lead to inflated prices for drugs and devices?  Put another way, what is known about the competitive and budgetary impacts on both hospitals and the Medicare program that could result from eliminating the GPO safe harbor exemption from the Medicare anti-kickback statute?
• What is known about the impact that GPO administrative fees have had on generic drug makers’ financial condition, their ability to maintain and upgrade plant equipment, and their ability to conduct quality control? 

“This initiative is a courageous step forward in addressing the foundational reasons behind both the tragedies caused by drug compounding and the broader issue of preventable drug shortages,” said Peter J. Pitts, President, Center for Medicine in the Public Interest and a former FDA Associate Commissioner. “The anticompetitive manipulation of American healthcare by GPOs is an urgent topic for congressional action.” 

“Through exclusive contracting, which has given GPOs effective monopolistic control of this industry, they have contributed to product shortages and disincentives for legitimate producers to manufacture and stock essential drugs,” said S. Prakash Sethi, Ph.D., University distinguished professor, Baruch College, The City University of New York.  “At the same time, they have given rise to unscrupulous manufacturers to produce and market substandard drugs and thereby expose the patient population to serious health risks.”

Causes of Drug Shortages 

Federal drug officials trace much of the drug shortage crisis to delays at plants that make sterile injectable drugs, which account for about 80 percent of the scarce medicines.  Nearly a third of the industry’s manufacturing capacity is not running because of plant closings or shutdowns to fix serious quality issues.  Other shortages have been caused by supply disruptions of the raw ingredients used to make the drugs, or by manufacturers exiting the market. 

For example, a New York Times article discussed how six of the major manufacturers of sterile injectable drugs have been warned by FDA about serious violations of manufacturing rules, and four of them have closed factories or significantly slowed production to fix the problems. 

While some industry observers and former plant employees point to plants reluctant to fix manufacturing problems, manufacturers reject descriptions of their factories as deteriorating and say they are investing hundreds of millions of dollars to make improvements.  

The “Gray Market” is also exacerbating the drug shortage problem, where smaller distributors are marking up the prices on drugs in short supply.  Capt. Valerie Jensen, RPh, associate director of the Drug Shortage Program at the FDA’s Center for Drug Evaluation and Research, said during a panel at the ASA meeting that it’s “not clear what, if any, laws are being broken” in that process, and added that FDA is sending all gray-market reports to the Department of Justice.  FDA has 11 employees dedicated solely to drug shortages. 

Some people have accused the FDA of causing the shortages, saying overzealous enforcement and poor communication have led plants to close needlessly or to slow production. Others have cited economic factors, like market pressures and reimbursement policies that have set prices so low that some companies have stopped making certain drugs.  

An article from Businessweek explained that in an “ordinary market, when one company’s production lines shut down, competitors step in to meet demand. The generic injectable drug business is different in that it is greatly influenced by the practices of Medicare, the largest U.S. purchaser of health care.”  

As a Bloomberg Government study points out, “Medicare rules from 2005 prevent reimbursement to providers for injectables and other drugs health-care workers administer from rising more than 6% above the average sales price, effectively limiting what drugmakers can charge. The cap has reduced suppliers’ incentive to expand capacity when shortages happen.” 

FDASIA, passed in July 2012, requires drug companies to notify the FDA six months in advance of anticipated problems that might lead them to shut down production of a drug.  However, Ezekiel Emanuel, a former adviser to the Obama administration on health-care policy, recommended a change in the Medicare price controls—to either raise the cap above 6% or, at least do so when a shortage develops. 

Emanuel noted that “Strict adherence to Medicare’s price caps on injectable drugs may be penny-wise and pound-foolish.  And it stands in the way of ensuring Americans’ constant access to safe drugs of every kind.” 

Echoing Emanuel’s position, a recent article written by Bill Cassidy, MD, a Republican Congressman from Louisiana, and Patrick Cobb, a practicing oncologist, also noted that drug shortages are being caused by the Medicare Modernization Act.  While the legislation “has lowered the cost of pharmaceuticals for seniors … it has in an increasing number of cases made them less available.” 

“Before this legislation, providers of these pharmaceuticals received reimbursement proportional to the drugs' average wholesale price. Among other changes, the new law also addressed concerns that the average wholesale price was often inflated above real costs and did not reflect actual market prices. Medicare began to reimburse providers at 106% of the average sales price of the drug over the previous two quarters of sales in lieu of the average wholesale price, so that average sales price corresponded to the sales price of a drug. This was intended to end abuse of the system.” 

In response to the change in Medicare's reimbursement system, many private insurance companies have switched to an average-sales-price-based reimbursement system. Manufacturers who previously had an overwhelming financial incentive to produce generic drugs now face minuscule profits or losses, in addition to government requirements to provide discounts and rebates on drugs for high-need populations. With much to lose and little to gain, many manufacturers continue to leave the market for these reasons. 

Almost all drug shortages have come about after their price has plummeted, and the problem is compounded by the fact that many generics have few suppliers.

The Affordable Care Act could make this already bad situation worse. Under this legislation, if Medicare expenditures exceed a predetermined amount, the Independent Payment Advisory Board is mandated to cut expenses. One of the few areas the board can cut is drug costs. This will move the market for pharmaceuticals further away from market forces—and until market forces are acknowledged, drug shortages will persist. 

“Well-intentioned but ill-advised policy changes in the Medicare Modernization Act must be addressed immediately to ensure that lifesaving treatments remain available. This means Congress has to remove artificial price caps.”

 

Johnson and Johnson Requests Manufacturing Permit to Reduce Shortage of Doxil

Over the past year, we have written several stories about the troubling drug shortages that have been occurring.  This summer, Congress passed the Food and Drug Administration Safety and Innovation Act (FDASIA), which gave FDA new authorities to help fight drug shortages.  Additionally, FDA recently announced that it had seen fewer drug shortages.   

Moving forward with positive news, Johnson & Johnson recently applied for U.S. and European regulatory approval of a new manufacturing process that would provide a short-term fix to the supply shortage of the cancer drug Doxil, reported the Wall Street Journal. 

Doxil is used in a variety of cancer treatments, and is among the most prominent drugs to experience a shortage situation in the US this year.  FDA has been aggressive in working to ease supply problem.  For example, in February 2012, FDA said it would allow select foreign manufacturers to import unapproved supplies of Doxil—the foreign version of which is called Lipodox—to ease shortages. 

The root of Doxil’s shortages is a “voluntary shutdown” of an Ohio facility run by Ben Venue Laboratories, a contract manufacturer working for J&J, after a November 2011 inspection by FDA and EMA found “ongoing quality and manufacturing issues,” reported RAPS.   The Doxil shortageleft as many as 2,700 patients on a waiting list for the drug last year, though J&J has since squeezed out enough supply to clear the waiting list. 

The plan includes J&J's existing contract manufacturer, Ben Venue Laboratories, whose factory troubles led to a suspension in the manufacturing and distribution of Doxil last year.  The supply crunch for the drug—used to treat ovarian cancer, multiple myeloma and AIDS-related Kaposi's sarcoma—caused sales to plunge 87% to $37 million for the first half of 2012.  

Under J&J’s plan, Ben Venue would produce Doxil while a second supplier would handle other tasks such as ensuring the injectable drug is sterile, said J&J spokeswoman Lisa Vaga. She declined to identify the other supplier, citing “confidentiality obligations.”  FDA and EMA are reviewing J&J’s applications to use the new manufacturing process, Ms. Vaga said.  “It isn't clear when the agencies will make a decision, but J&J and Ben Venue have said they expected Doxil production to resume by the end of 2012.  Ms. Vaga said J&J is in discussions with the regulators.”  

“If regulators approve J&J's plan, Doxil would be made in areas of the Ben Venue facility that are available for production, Ms. Vaga said.”  Sterile filtration and aseptic filling—which are designed to ensure the drug remains free of contamination—would be performed elsewhere by the other supplier.  

FDA spokeswoman Erica Jefferson said the agency can't comment on any pending applications.   “We are confident using regulatory discretion to ensure the safety and utility of this product,” said FDA Associate Director Valerie Jensen, who heads the drug shortage program, at the time of the announcement.  An EMA spokesman couldn't be reached.  Doxil is sold in Europe as Caelyx. 

Ben Venue spokeswoman Marjorie Moeling said the company is making progress toward upgrading the Bedford plant. "We will provide updates on our progress to resume manufacturing once we are more fully confident that our restart plans are being realized," she said.  

In May, an EMA advisory body recommended J&J pursue a plan to transfer sterile filtration and aseptic filling for Doxil from the Ben Venue plant to an alternative site. The EMA committee recommended J&J apply for such approval by September.  

“Longer term, the New Brunswick, N.J., company is planning to move all Doxil production processes to multiple suppliers and away from Ben Venue, which plans to exit the contract-manufacturing business. That process could take about two years because of the complexity of the Doxil manufacturing process, according to the EMA.

Ms. Vaga said J&J's long-term plan is ongoing and on track.”

FDA Announces Fewer Drug Shortages

According to a recent story from MedPage Today, the Food and Drug Administration (FDA) has tracked about 100 drug shortages this year, down almost half from this time last year, an agency official said. 

“Last year, at this exact time we were over 180,” Capt. Valerie Jensen, RPh, associate director of the drug shortage program in the FDA's Center for Drug Evaluation and Research (CDER), said last week at the American Osteopathic Association Health Policy Forum here.  FDA tracked 251 shortages all of last year and 181 in 2010, Jensen said. 

We have been covering drug shortages for over a year now.  This positive news may show that FDA’s action and new authority given to the agency under FDASIA are working.   

Jensen credited the drop in shortages to drug manufacturers improving quality, reducing the need for FDA action and recalls.  “We have fewer new shortages, but I want to caution that ... some of these firms that [were] having problems are still having problems,” Jensen said. 

The FDA also has increased efforts in recent years to communicate and work with drug companies to prevent or stop shortages, Jensen said.  The agency can work with companies to correct their quality issues or solve supply issues.

“We're also working with the other companies making those drugs, and we're asking them to ramp up production,” Jensen said.  “We can't require them to increase production, but we can ask them to.”  The FDA's drug center has 11 people staff its drug shortages team. 

 “Jensen also said the FDA was working on creating a way for providers to sort through the FDA's mountain of drug shortage information by specialty, so specialists can more easily keep an eye on drugs used in their field.  This way non-oncologists wouldn't have to weed through statistics on cancer drugs they never prescribe and oncologists wouldn't have to hear about the latest on the amphetamine/dextroamphetamine (Adderall) shortage.” 

Ultimately we will not see the end of drug shortages until we open the market for competition and eliminate the Medicare price controls for generic sterile Injectable drugs, but some of the new rules and programs from HHS and FDA are helping reduce the bottlenecks.  

FTC Approves Accelerated Recovery Initiative to Reduce Drug Shortages

The Federal Trade Commission (FTC) issued a formal Advisory Opinion to the Generic Pharmaceutical Association (GPhA) approving the trade group’s proposed “Accelerated Recovery Initiative,” which hopes to address drug shortage issues.  The GPhA requested an opinion on July 16, 2012.   

GPhA plans to adopt this program, known as ARI, to help the Food and Drug Administration (FDA) to respond to the unprecedented increase in shortages of critically important medicines that has occurred in recent years, as we have reported several times.  The ARI will attempt to resolve the shortages by providing FDA with information that GPhA believes will enable FDA staff to “more efficiently and effectively to accelerate the recovery of critical drugs in shorts supply” and thereby to help ensure patients have access to the drugs they need.  A key element of the ARI is an agreement among competitors to compile competitively sensitive production information from manufacturers of shortage drugs. 

The FTC said the proposal appears “not likely to harm competition.”  Although the manufacturer data that GPhA proposes to collect is competitively sensitive and the ARI would raise substantial antitrust concerns if this information were shared with competitors, “the proposed program includes many safeguards designed to insure that such sharing does not occur.”  GPhA has chosen an independent third party to collect and transmit the data to the FDA and that no other party, including GPhA, will have access to this information or any analysis derived therefrom. The program also includes various other features intended to minimize the risk that the ARI could serve to facilitate collusion among drug manufacturers. Accordingly, FTC said it “has no present intention to bring an enforcement action to challenge GPhA's proposed ARI program if it is implemented as described and the safeguards it contains are adhered to in practice.” 

The FDA has undertaken a variety of activities to address the drug shortage problem. In the case of generic injectables, this often involves asking other manufacturers of the drug in shortage if they are willing and able to increase their production. Other FDA strategies include expediting regulatory reviews to accelerate approval of new sources of supply, new manufacturing lines, or new raw material sources. The FDA also exercises regulatory discretion, for example permitting controlled importation of equivalent products approved abroad but not in the United States.  In May 2012, the FDA reported that industry response to its October 2011 request to manufacturers for voluntary early notification of potential supply disruptions had enabled it to prevent 128 potential drug shortages over the six month period from November 2011 through April 2012. 

The Proposed Program 

The ARI is intended to assist the FDA in responding to drug shortages by providing the agency with information from manufacturers relating to their production and supply of designated shortage drugs.  GPhA plans to engage IMS Health Incorporated to collect information from manufacturers of shortage drugs about their current and projected production and supply schedules.  IMS will use this data, along with market data it currently collects, to analyze whether, and to what extent, the anticipated supply of a given drug is likely to fall short of the projected demand over the next several months and then provide this information to FDA staff. The current focus of the program is on accelerating the recovery of critical drugs that are in short supply, but it is possible that the ARI program could also be used to assist the FDA to head off potential drug shortages. 

The program will operate “under terms of strict confidentiality and with appropriate safeguards.”  In particular, IMS will report the production information it collects and the analysis it performs only to the FDA and will not share it with any other party.  FTC understood the details of the program to be as follows: 

1. Scope of the Program: The FDA, with input from GPhA, will decide on the initial group of drugs to be addressed through the ARI program.  GPhA anticipates that the initial focus of the program will be on a subset of drugs currently on the FDA's published list of drugs in shortage.  Other criteria for inclusion in the ARI are expected to include at least the following:  

a)    the drug is expected to be in shortage for more than 90 days;

b)    there is no therapeutic alternative (as defined by the American Society of Health-System Pharmacists' list); and

c)    it is multi-source (that is, there are other manufacturers that might be able to increase their production). 

The FDA would have discretion to include in the ARI program a drug that does not meet all of these criteria-for example, a drug that is not currently on the FDA drug shortage list but has the potential to go into shortage-where circumstances warrant.  Drugs may move into and out of the ARI program as requested by the FDA and depending on the circumstances.  Given the benefits of preventing potential drug shortages from becoming actual shortages, as the ARI program evolves there may be a focus on drugs that are not currently in shortage but present a potential for a shortage to develop. 

2. Manufacturer Participation: IMS, with assistance from GPhA, will recruit drug manufacturers to participate in the program.  All manufacturers of drugs covered by the ARI will be invited to participate, regardless of whether they are members of GPhA and regardless of whether they are manufacturers of branded or generic drugs.  When a drug is added to the ARI program, manufacturers of that drug that are not already ARI participants will be invited to join the program.  GPhA will not participate in recruitment of firms selling potential, rather than actual, shortage drugs.  Participation in the ARI is voluntary and the program will be “non-exclusive,” that is, participating firms will be free to participate in a similar program by some other sponsor (were one to be organized). In addition, nothing in the program would limit the ability of a firm to provide information directly to the FDA or to otherwise disclose its own ARI data for other legitimate purposes consistent with the antitrust guidelines. 

Companies that choose to join must execute a participation agreement that requires them to pay annual ARI dues and to comply with specified confidentiality rules, antitrust guidelines, and prohibitions on misuse of the ARI process.  The draft participation agreement includes various commitments to be made by individual companies, GPhA, and IMS to ensure that the data participants submit is kept confidential and not shared or used in ways not contemplated by the program. 

3. IMS Activities:  IMS will gather information from manufacturers of selected shortage drugs, perform a “gap analysis” for each drug included in the ARI program, and submit reports to the FDA.  IMS will not use the information generated under the ARI for any other purpose. IMS will contact manufacturers of ARI drugs that have signed a participation agreement and request current supply and production information and forecasts for the next 90-180 days for the drug or drugs in question.  IMS will ask manufacturers to update this information on a monthly basis and to notify both IMS and the FDA immediately of unanticipated changes or potential supply disruptions.  Requests for information from manufacturers about potential shortage drugs in the ARI program will be limited to those manufacturers that make or have made the drug in question.  IMS will use the production and supply data it collects, along with its own forecasts of demand based on past demand data, to perform the gap analysis, that is, the projection of the extent of a likely supply shortfall.  

IMS will produce a monthly report to the FDA providing both a summary analysis for each drug along with a detailed breakdown by National Drug Code number.  IMS will provide the gap analysis and underlying data that IMS generates under the ARI program only to the FDA and will clearly mark each report as confidential. IMS will not provide information contained in these reports, or any data gathered from participants, to GPhA, ARI participants, or any other party.  In addition, IMS will institute appropriate safeguards (e.g., firewalls) to limit internal access to this information to guard against the risk that knowledge of this confidential information could spill over into other aspects of IMS’s business and be used for non-ARI purposes.  

IMS communications with individual manufacturers under the ARI program will be limited to that which is necessary to gather the data needed to perform the gap analysis for an ARI drug.  “IMS will only be receiving supply/forecast data for the drugs at issue and will not be having an ongoing dialogue with the manufacturers, nor will it be requesting any additional information from these manufacturers.”  All communications with manufacturers concerning their ability to increase their production or supply of a drug will continue to be undertaken by the FDA.  IMS will not make recommendations to the FDA regarding how the agency should seek to address a given drug shortage. Instead, GPhA expects that the FDA will use the factual information IMS provides along with non-public information possessed by the agency to determine appropriate solutions to a shortage.  

IMS will not disclose competitively sensitive information to GPhA. IMS will submit monthly reports to GPhA, and GPhA expects it may share those reports with its members and the public at large.  These IMS reports to GPhA will identify

• The number of drugs addressed in the most recent FDA report,
• The number of reports IMS sent to the FDA, and
• The number of drugs added or deleted from the ARI program during the prior month.  

The report may identify by name the specific drugs addressed in the most recent IMS report to the FDA, to the extent that the drug already appears on the FDA's drug shortage list.  In no event, however, will IMS disclose to GPhA information that would identify any potential shortage drug that the FDA has requested IMS to analyze, unless the FDA has already publicly disclosed that information. In addition, IMS will not disclose information that would reveal the production and supply infonnation submitted by manufacturers. 

Legal Analysis 

The key antitrust issue raised by the ARI arises from the fact that it involves an agreement among competitors to pool information about their output, both present and future.  As a general matter, the antitrust laws do not prohibit trade associations from collecting data from competing sellers and collectively providing information and analysis to government officials.  Such activity, undertaken for a legitimate purpose, may serve to promote rather than injure competition and consumer welfare. 

Under some circumstances, however, such data gathering programs can serve to facilitate collusion among competing sellers and thereby present a substantial risk of anti competitive harm. Trade association programs that involve sharing of competitively significant information among competitors have long been a subject of antitrust scrutiny, given their potential to facilitate collusion among rivals.  Such programs are not per se unlawful unless part of a larger scheme to fix prices or other competitively significant terms of dealing. Instead, they are judged under the rule of reason, based on their likely effects on competition in light of the particular circumstances. 

FTC said that “certain circumstances [in the proposed ARI raise the potential for competitive harm.  As GPhA recognizes, the inventory and future production information it proposes to collect is competitively sensitive.  In addition, markets for the sale of generic injectables, which represent the vast majority of drugs in shortage, typically have few sellers.  Such market concentration tends to make markets more susceptible to collusion. 

On its face, however, FTC asserted that “the proposed ARI program does not involve the exchange or sharing among competitors of the output information that the program would collect.  Rather, the information would be collected and analyzed by a third party, IMS, which would share this information solely with the FDA.”  Moreover, the program will operate “under terms of strict confidentiality and with appropriate safeguards.”  GPhA has designed various aspects of the program to limit the potential that the ARI might result in harm to competition. 

First, the role of GPhA itself is strictly limited to shield it from access to competitively sensitive information.  GPhA is involved in developing the initial identification of drugs to be part of the ARI, will assist IMS in recruiting participants, and will provide financial support for the program.  Aside from publicizing the program, no other activities by GPhA are specified.  GPhA will receive monthly reports from IMS, which it may disseminate to its members and others, but these will provide no information relating to the production data that IMS has collected, nor will they identify potential shortage drugs that IMS has analyzed. 

Second, GPhA has defined the obligations and activities of IMS to limit the risk that IMS would inadvertently facilitate anticompetitive behavior.  IMS's duty to strictly limit disclosure of the production data gathered from ARI participants, and any information and analysis derived therefrom, solely to FDA staff is a binding commitment set forth in formal written agreements.  Likewise, the agreements make clear that IMS's use of the information is strictly limited to ARI program activities. IMS also plans to institute appropriate internal safeguards to prevent misuse or improper disclosure of information generated under the ART. 

In addition, GPhA has defined IMS's role to be providing objective data and gap analysis reports to the FDA, not recommendations on how to address a given shortage. The ARI does not provide a role for IMS to act as a representative of ARI participant companies in matters involving drug shortages.  Nor does the ARI set up IMS as an intermediary between ARI participants and the FDA to broker solutions to a drug shortage or potential shortage. “This carefully defined role for IMS helps to guard against the risk that the ARI could have the unintended effect of fostering collusion among competing sellers acting through IMS,” FTC opined. 

Third, GPhA has taken steps to discourage ARI participants from attempting to use the program for anticompetitive ends. The draft ARI participation agreement: 

1. Emphasizes the confidential nature of the production information to be collected;
2. Advises companies of the need to ensure that their employees, agents, and consultants adhere to ARI program rules, which include confidentiality obligations embodied in the agreement and a set of antitrust guidelines that are provided along with the participation agreement; and
3. Provides that participants that breach those obligations will be terminated from the program.  

Moreover, participants must make an express commitment not to use the ARI program activities to “exchange, discuss or agree on the price, output, cost, or other terms of competition, regarding any Shortage Drug or any other product or service.”   In addition, under the agreement, participants must indemnify GPhA, IMS, and other ARI participants for any losses resulting from breach of this commitment. Jd. § 8. 

FTC recognized that the safeguards GPhA has included “help to assure that the ARI is likely to operate in accordance with its legitimate purpose and limit the risk that the program would serve to facilitate collusion among actual or potential rivals.” 

“The ARI's protections against disclosure of confidential information may also offer other benefits,” FTC noted.  For example, assurance to manufacturers that their confidential information will be protected may encourage greater participation in the program and thereby result in more useful information to support the FDA's efforts to combat drug shortages.  

In addition, safeguarding non-public information relating to the supply of critical drugs, particularly as to the potential for a shortage, may help to reduce the risk of actions that distort the supply chain, whether abusive conduct by other market participants that may seek to exploit a shortage for their own advantage, or the potential for hoarding by well-intentioned health care providers concerned about their patients. 

Finally, it does not appear that the ARI program presents other risks to competition and consumers.  As noted above, the program is “non-exclusive,” that is, it involves no agreement among competitors to deal only through the ARI. It would not preclude ARI participants from also participating in another organization's program that sought to use similar data for legitimate purposes.  Nor would it have any effect on manufacturers' ability to use their own participant data in other business contexts. 

FTC did not assess the likelihood or extent of any precompetitive benefits that may result from the ARI because the anticompetitive effects appear unlikely.  FTC also noted that it understands that GPhA is continuing to discuss with FDA staff how best to make the ARI complement the FDA's existing drug shortage activities.