Pandemic builds momentum for tackling drug shortages

“I think there’s a lot of bipartisan interest in the supply chain,” Joshua Sharfstein, a public health researcher at Johns Hopkins University and former U.S. Food and Drug Administration official, told FreightWaves. “There’s certainly been interest in some of these legislative ideas. … I imagine FDA is going to need to pay a lot more attention to the supply chain in the future.”

The number of active drug shortages peaked at about 450 in 2012, according to a Government Accountability Office report. Since then, the number of new shortages has slowed, but ongoing shortages persist. FDA currently lists more than 100 drug shortages.

Expensive, name brand drugs rarely experience shortages. Instead, it’s usually cheap, generic drugs that run into problems, according to Penn State supply chain researcher Hui Zhao.

“Most of these drugs in shortage are low-priced, long off-patent, which means they have very low profitability,” Zhao told FreightWaves. “Manufacturers don’t want to enter into producing them, which is understandable.”

Injectables, rather than capsules or tablets, are also more likely to run into shortages, Zhao said. They’re more likely to experience quality problems that require manufacturing pauses for inspections and improvements.

Quality problems were the most common reason for drug shortages from 2011 to 2013, according to a 2014 GAO report. Before the pandemic, shortages were usually driven by some kind of supply problem.

The COVID-19 pandemic presented a new challenge. Government shutdowns across the globe disrupted drug production, but many shortages were driven by demand. The number of shortages related to demand more than doubled from 2019 to 2020, according to FDA data.

“There were definitely different causes of drug shortages this year than other years,” Sharfstein said. “We saw demand-induced shortages here, which are not typical.”

FDA already has some tools to address drug shortages. The agency can expedite the approval process for new manufacturing facilities. It can also offer regulatory flexibility for importing foriegn drugs and extend expiration dates during a shortage.

An annual report from FDA’s Office of Pharmaceutical Quality says the agency prevented hundreds of drug shortages last year by expediting approvals. 

However, those tools mainly allow FDA to react to existing shortages, rather than prevent future problems or address the underlying issues.

“We want them to be proactive. Look at the warning signs,” Mary Denigan-Macauley, director of the GAO’s health care team, told FreightWaves.

(FDA declined an interview request about drug shortages, in part because relevant experts were too busy. “We just have so much going on in this area right now,” an FDA spokesperson wrote in an email.)

One of the GAO’s outstanding recommendations for FDA is to use the data it already has to predict and stop future shortages. 

In 2018, FDA reported to GAO that it was working on a model that could use social media or other sources to identify the warning signs of upcoming drug shortages. The agency hoped to complete some initial modeling by last fall, but this type of analysis is still in the early stages of implementation.

Denigan-Macauley said FDA could probably scale up that type of forecasting relatively quickly. However, GAO also wants the agency to gather new information about the pharmaceutical supply chain, which could take more time.

A recent GAO report examining the government’s response to the coronavirus pandemic called on FDA to build a searchable database showing which raw materials suppliers drug manufacturers are using. 

Drugmakers submit some information about potential suppliers to FDA through drug applications. But currently, there’s no way for FDA officials to know which suppliers a manufacturer used for a finished product.

Last year, FDA officials had to individually call more than 180 drug manufacturers to ask whether their suppliers of raw materials were affected by the pandemic.

“FDA just doesn’t have the information. … We don’t even know where all our vulnerabilities are,” Denigan-Macauley said. “We have some serious data issues at the moment.”  

Part of the problem is that the pharmaceutical supply chain is spread out across the globe. In 2019, about two-thirds of finished drugs and nearly three-quarters of active pharmaceutical ingredients destined for the U.S. market were made outside the country, according to a CIDRAP report. FDA officials have argued that makes it harder to keep tabs on suppliers and manufacturers.

“We do not know whether Chinese facilities are actually producing [active pharmaceutical ingredients], how much they are producing or where the [active pharmaceutical ingredients] they are producing are being distributed worldwide,” FDA Commissioner Janet Woodcock told a congressional committee in 2019. 

Similar to the GAO, researchers at CIDRAP recommended creating an “in-depth map” showing where each drug is made and where its raw materials come from. While that information would be useful, Zhao argued the complexity of the pharmaceutical supply chain would make that very difficult.

The CIDRAP and GAO teams both recommended encouraging companies to bring more pharmaceutical manufacturing back to the U.S. They say that could increase supply chain visibility and guard against supply disruptions caused by natural disasters or trade disputes.

The lack of transparency in the pharmaceutical supply chain also makes it hard for drug purchasers to evaluate the reliability of their suppliers.  

In a recent report, a group of researchers from Johns Hopkins University, which included Sharfstein, argued that Congress should authorize FDA to grade the resiliency of drug manufacturers’ supply chains. That way purchasers would know they are buying from a reliable source, Sharfstein said.

According to the Johns Hopkins report, FDA implemented a voluntary program in 2016 for reporting metrics about supply chain reliability. The authors argued the program should be mandatory. 

Zhao was also enthusiastic about grading manufacturers’ supply chains. She said adding that visibility would incentivize manufacturers to invest in resilience. 

“A lot of the shortages are caused by quality disruptions, which means that there is some difference there,” Zhao said. “Some of these facilities are better equipped. They have more advanced … quality control methodologies than the others, and they’re not rewarded for that.”

In addition to proposals for increasing transparency, Zhao said it’s important to address the low profit margins for many generic drugs, one of the fundamental economic reasons behind shortages.

Hospitals and patients suffer tremendously when there are drug shortages, but the price of many generic drugs is so low that other players in the supply chain aren’t motivated to resolve the problem. Zhao said hospitals and health care providers should consider translating that pain into higher prices.

“From the hospital side, they need to know that it’s not just lower price,” she said. “If you keep pressing the price down for these critical drugs, you’re not going to have them anymore.”

However, higher prices alone probably won’t do the trick. For a 2017 paper, Zhao built a model simulating the effect of increasing prices. The model suggested price increases should be paired with a contractual clause penalizing manufacturers that fail to supply drugs.

“The penalty is the stick, but we need the carrot,” she said. “If there’s no carrot, who wants to do this? We cannot just have sticks. The manufacturers do not have to produce this.”

Reducing drug shortages has been an FDA priority for years. A detailed 2019 report from an FDA task force about drug shortages came to many of the same conclusions as the researchers calling for action now. 

The agency has also been collaborating with researchers and private companies to encourage more advanced manufacturing processes, which could prevent shortages caused by quality issues.

But there are some signs that the pandemic is adding even more momentum to efforts to end drug shortages. 

In February, the White House issued an executive order instructing the Department of Health and Human Services to evaluate risks in the pharmaceutical supply chain. President Joe Biden’s recent infrastructure plan proposes funding for bringing pharmaceutical manufacturing back to the U.S.

In many ways, Sharfstein said the decline in coronavirus cases has given regulators and public health officials a chance to breathe after a tumultuous year. He’s hoping they’ll use that respite to add resiliency to the nation’s drug supply chain before a resurgence in cases or another pandemic puts it to the test again.

“This is a moment to think about how to strengthen the supply chain,” he said.