Drug shortages have plagued the U.S. market over the last decade, and low-cost generics have been the drugs most at risk.
Documented shortages in recent months have included essential medications like diluents, fluids, anticoagulants, emergency drugs, antibiotics and more. Recent Premier data also shows several drugs vital to ongoing patient care have slipped into shortage as manufacturers (understandably) prioritized COVID-19 vaccine production ahead of other routine drugs.
A Problem Years in the Making
While the pandemic exacerbated pharmaceutical sourcing challenges, many of these shortages are the result of marketplace dynamics and cracks in the supply chain that originated long ago. Historically, the marketplace for drugs has rewarded the lowest-priced products – discouraging competition, driving manufacturers overseas and creating an unhealthy, unsustainable “race-to-the-bottom” environment.
Add to this unpredictable or inconsistent demand forecasting, quality concerns, opaque supply chains and regulatory hurdles for new drug approvals, all of which create a perfect storm for triggering shortages and product access challenges.
To tackle drug shortages, stakeholders must collaborate to influence behaviors that pivot towards quality and sustainability rather than price alone. Sustainable solutions will decrease barriers to entry, namely the time and cost to enter the market, while maintaining product standards and safety. Premier’s recent survey of health system pharmacists and generic drug manufacturers highlights some key insights and strategies:
- Providers rank confidence in supply availability as the biggest influencing factor in purchasing strategy ─ and cited developing shortage risk assessments as the most useful strategy to prevent or mitigate shortages.
As providers navigate issues at the end-user level, suppliers face challenges of their own:
- Generic manufacturers rank unpredictable demand and volumes among their top challenges to consistently supply drugs.
- And when asked what they wished health systems better understood to help prevent or mitigate shortages, “participating in a supplier’s committed programs” emerged as the number one opportunity. From a manufacturer’s perspective, redundancies and raw material safety stock are key, but equally important is a steady demand market signal.
Proven Solutions for Addressing Drug Shortages
To address the root causes of shortages, provider organizations are working with purchasing groups to leverage commitment and aggregate purchasing power ─ giving manufacturers proper demand forecasting, predictable revenue and the surety needed to bolster production or enter new markets. One such program, ProvideGx®, uses long-term contracts to establish consensus demand signaling as well as minimum requirements on manufacturers to retain an average of three to six months of active pharmaceutical ingredients (APIs) and finished dose products. The program has seen record-breaking growth in both member participation and drug purchasing in the past quarter, demonstrating the strong and continued value of this committed purchasing model. The program has also made a long-lasting impact on the industry overall, as 14 products added to ProvideGx have subsequently been delisted from the U.S. Food and Drug Administration (FDA) drug shortage list.
Within the purchasing process, empowering buyers with comprehensive information during contract vetting processes is vital, including information on quality records, API diversity, fill rates, manufacturing capabilities, communications transparency and product attributes – in addition to price. Now more than ever, providers recognize that resiliency does not have to come at the expense of savings.
As buying patterns are addressed, COVID-19 made it clear that we need greater diversity of drug manufacturing and suppliers, and that includes greater domestic production. Leveraging data to identify products most at-risk, providers are looking beyond committed contracts and co-investing in domestic pharmaceutical suppliers – and for product categories that lack adequate competition, geographic diversity or stable sources of contingency supply. Many of these domestic investments also leverage existing production capacity to support a more sustainable approach to U.S.-based production rather than building from the ground-up.
Extending these private-sector, commitment-driven models increases competition and manufacturers’ ability to accommodate surge demand. Policymaker solutions, including zero percent interest loans and tax incentives, information-sharing requirements and streamlined regulatory approvals can also help close the gap and solve the drug shortage problem.
Transparency is Key
To drive greater visibility, our nation requires information and data on the location, production process and inventory status for drugs. Both suppliers and providers can help bridge this gap and enable stronger transparency on supply and demand. One answer to this is a better view upstream, requiring manufacturer disclosures on API and finished product locations and quantities. The FDA is making strides in this area, with the intent to collect manufacturing volume data for drugs and biologics via a new Coronavirus Aid, Relief, and Economic Security Act (CARES Act) authority. Alongside purchasing commitments, providers may also consider providing visibility into utilization data for more predictable forecasting.
Overall, greater technology adoption allows for improved transparency to comprehensively track product availability – from raw materials, to manufacturer, to distribution, to state and national stockpiles, to end dispenser inventory. The government, providers, group purchasing organizations, distributors and manufacturers must work together to promote transparency and interoperability within this national data infrastructure.
Drug shortages are a multi-faceted issue that require a broad array of measures to remediate. Through a combination of diversification, commitment, predictive data, advocacy and market-based strategies, the U.S. can take steps now to ensure greater preparedness and insulate us from drug shortages in the future.
For more, download your copy of Premier’s INSCRIPT thesis on drug shortages today.
This article ran in Becker's Hospital Review on March 21, 2022.