Battling Drug Shortages: Novel Ideas for an Unprecedented Challenge

Key takeaways:

• A new Senate Homeland Security and Governmental Affairs Committee (HSGAC) report reveals new drug shortages increased nearly 30 percent from 2021 to 2022.
• Drug shortages are complex issues that require a broad array of measures to remediate.
• Together with our members, Premier is working to create healthier pharmaceutical markets that prevent and resolve drug shortages and provide greater access to life-saving products.

U.S. healthcare providers continue to navigate the complex world of drug shortages, including vital fluids, cancer treatment drugs and other medications essential to patient care.

According to a new Senate Homeland Security and Governmental Affairs Committee (HSGAC) report, new drug shortages increased nearly 30 percent from 2021 to 2022. But while the COVID-19 pandemic exacerbated challenges, the problem is not new – 15 essential drugs (primarily low-cost generics) have been in short supply for more than a decade.

Extensive, long-standing research pinpoints the root causes that contribute to drug shortages, including economic drivers and unhealthy markets, overreliance on overseas sources and a lack of supply chain visibility. The Committee’s report speaks to these risks – and provides recommendations to help mitigate drug shortages and their related impacts on providers, patient care and U.S. national security.

Here we outline five key recommendations from the Committee’s report that align with Premier’s leadership and action to prevent and resolve drug shortages for the long term.

1. Invest in domestic advanced manufacturing capabilities for critical generic drug products regularly in shortage.

A hybrid approach to pharmaceutical supply chain management is needed, and one based on both domestic/nearshore and geographically diverse manufacturing.

Recognizing it can be cost-prohibitive for drug manufacturers competing in a lowest-price-wins market (because every penny counts with how healthcare is reimbursed), sustainable solutions for domestic production must decrease barriers to entry – namely the time and cost to enter the marketplace.

Premier and its members are leading the way, stepping up to systematically address the root causes and provide the right economic models that incent the domestic production of critical, at-risk products. The up-front liquidity, aggregated demand and buying commitments take away the guessing game for manufacturers and provide them the surety needed to expand production, invest in redundancies, modernize facilities and drive innovations for sustainable resiliency.

Our investments in VGYAAN and Exela Pharma Sciences are working to bring new, domestic sources of competition for 20 different shortage drugs and counting. Premier has also helped bring an additional 29 suppliers for generic injectables to market – suppliers not previously in the injectables market, adding much-needed competition to these therapeutic categories.

Recognizing the inherent risks in concentrating supply sources to just a few countries, regions or companies, the federal government has helped advance the return of capabilities to U.S. soil through programs such as the Defense Production Act. Government leaders can build on this progress – as the Committee’s report states: “with efforts to incentivize strategic onshoring and advanced domestic manufacturing technologies for critical generic drugs.”

To that end, Premier has long advocated for some of the recommendations mentioned in the report, including:

• Government-backed tax incentives for domestic manufacturing of essential drugs, specifically investments in advanced manufacturing;
• Broadening and applying to private payors the current Medicare payment incentives for hospitals to purchase domestically manufactured critical medical supplies and pharmaceuticals; and
• Redefining requirements for government purchasers to buy domestically.

2. Conduct regular interagency medical supply chain risk assessments.

To help ensure the nation is adequately prepared to identify and mitigate vulnerabilities, the Committee's report calls on Congress to require regular interagency risk assessments, inclusive of cybersecurity measures as well as regular updates to the U.S. Food and Drug Administration’s (FDA) Essential Medicines list.

For its part, Premier is committed to contracting with pharmaceutical suppliers that demonstrate manufacturing resiliency, redundancy and quality investments.

Via a proactive approach, the Premier team is in continuous communication with global suppliers to monitor for risks, with specific focus on products critical to care and categories with unhealthy markets. Risk assessment is embedded in the DNA of our contracting approach, including data on where product and raw materials are sourced, safety stock requirements, data on quality records and rapid replenishment capabilities.

Overall, Premier has built robust risk management capabilities to help prevent drug shortages, including:  

• The ProvideGx^® drug shortage mitigation program for dedicated sources of supply.
• Rapid Commit^® for short-term drug-access issues in the market with specific limited time opportunities, giving members an alternative supply source so they could better weather shortages while the overall market stabilizes.
• Our own distribution channel to dynamically allocate products based on clinical need, rather than by purchase history, as other distributors traditionally do. During the pandemic, Premier arranged for product to be directly shipped to providers in order to get supplies in advance to COVID-19 hotspots and avoid distributor allocations.

3. Require manufacturers of life-supporting and life-sustaining drug products to report increased demand and export restrictions to the FDA.

Accurate demand signals and early indicators of potential disruption are vital to greater visibility and enabling a stronger supply chain.

The Committee recommends that Congress require manufacturer reporting to the FDA when they experience demand increases or export restrictions – and that downstream distributors report low hospital fill rates (e.g., what is ordered versus received) – to help minimize the gap between supply and demand.

Premier leverages fill rate trends as one mechanism to help determine the health of the supply chain. For drugs, we consider a healthy fill rate to be above 90 percent, and anything that falls below 80 percent is an early indication that demand is outpacing supply and that shortages may be imminent.

Monitoring fill rates and other robust data using CognitiveRx^® – a comprehensive drug shortage risk management and communication platform containing hundreds of millions of proprietary and open-source data points spanning more than 30 years – Premier provides early communication to both our members and government stakeholders on potential or impending shortages of any healthcare product.

Our product watch list – compiled using Premier’s purchasing data as well as member and supplier input – is designed to help with contingency planning, providing advance warning of potential unhealthy markets and connecting providers to resources that can help ensure continuity of care.

Notably, and following the Premier team’s engagement in early spring to share data and report the contrast media shortage, contrast media was added to the FDA’s shortage list – paving the way for waived prior authorizations and improved patient access. In addition, for two years during the height of the pandemic, Premier voluntarily shared fill rate data with the FDA for 250 drugs used in the treatment of COVID-19 to help monitor for any potential supply chain challenges.

4. The FDA should take steps to ensure its supply chain data can be used to monitor supply chain vulnerabilities and conduct predictive modeling.

AND

5. Streamline private and public efforts to predict and mitigate potential supply chain vulnerabilities.

Global supply chains are a complex labyrinth of manufacturers, raw material suppliers, subcontractors and more. In many cases, companies selling finished goods know their immediate suppliers, but have limited knowledge on the locations where American drugs and their components are manufactured – and in what quantities.

The answer to this problem is greater end-to-end visibility, enabling the FDA and other federal agencies to understand risk potential and work with private sector partners to make adjustments long before a crisis occurs.

These needs can be addressed through the creation of robust, timely and transparent data to predict supply levels, product burn rates and sourcing challenges as well as the ability to pivot distribution response and share this vital information in a timely manner across the supply chain.

Honing capabilities through intelligence from signals in sourcing and fulfillment, today providers leveraging actionable data to pinpoint market signals for early drug shortage detection and management – and plan and communicate medication strategies in advance with all caregivers.PINC AI™ technology and predictive analytics can help stakeholders predict demand surges and product shortages far in advance with over 90 percent accuracy. This enables them to see changes occurring in the market around them, and ahead of them, in ways never before possible.

Leveraging this comprehensive data, Premier’s product watch list is shared weekly with the FDA and White House leadership to provide insights on backorders and potential shortages and advocate for priority transportation of critical products. Premier also continues to work closely with federal and state agencies and industry organizations, including the FDA, ASPR, HIDA and others, on strategies to gather data, forecast demand, identify needed regulatory changes, increase available supplies and allocate based on need.

Premier and our members continue to advocate that the FDA make sourcing, quality, volume and capacity information publicly available for all medical products sold in the U.S. to improve transparency and support risk mitigation. A streamlined U.S. regulatory framework is needed that makes it easier to collect data, implement workarounds and guide conservation strategies for all products.

With added diversity, domestic investments and capacity, as well as a new focus on supply chain visibility, the U.S. can take steps now to ensure greater preparedness, protect patients and healthcare workers and insulate us from drug shortages in the future.

Together with our members since 2020, Premier is bolstering the supply chain by introducing new suppliers and committed/visible demand creation, working to create healthier pharmaceutical markets.

Drug shortages are complex issues that require a broad array of measures to remediate. The U.S. needs holistic and progressive ideas that address the safety and resilience of our drug supply.

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