Lack of common drugs continues: Three months and no progress

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We previously reported on the ongoing critical drug shortage crisis, but now the problem has garnered the attention of President Obama, who issued an executive order Monday in hopes of resolving the issue or at least improving it. His order will require that the FDA respond as follows: Speed up the review of applications that alter the production of these drugs, increase reporting of potential drug shortages, and provide more information to the Justice Department regarding possible price gouging and collusion between manufacturers and wholesalers.

Certain aspects of this order have already been submitted as part of legislation that has been pending in Congress since February, which is why ACSH s Dr. Josh Bloom is less than optimistic that the President s decree will do much to fight these drug shortages. The problem," he says, "became widely recognized this past summer. Since then, there's been a lot of talk, but absolutely nothing has been done. People are dying because simple, routine medicines are not available.

Indeed, the problem has grown quite substantially within the last year alone, such that more than 180 generic drugs necessary for the treatment of childhood cancers and other diseases are in short supply. At the same time, some of these treatments, even if available, are being sold on the so-called gray market for as much as 80 times their typical price. Though the Obama administration blames a dysfunctional marketplace for these shortages, others say the government is the real culprit thanks to the onerous economic and technical hurdles it has placed before the drug companies.

According to Greg Conko of the Competitive Enterprise Institute, essentially all of the drug shortages that occur in the U.S. arise in the generics market, where profitability is fairly low. And those who purchase these drugs mainly insurance firms and government health programs are especially motivated to lower the price of these medications as much as possible, which means only a few manufacturers are able to sustain such a market. So, when supply disruptions occur, Conko explains, there aren t a lot of additional producers in the market to take up the slack.

Compounding the problem is Medicare s statutory price inflexibility, which caps price increases on drugs at 6 percent within any six-month period thus limiting a manufacturer s incentive to increase production when shortfalls emerge.

Writing in an opinion piece for the New England Journal of Medicine, Dr. Bruce A. Chabner of Massachusetts General Hospital in Boston says that generic drug manufacturers must be provided with greater financial incentives in order to alleviate ongoing drug shortages.

ACSH s Dr. Gilbert Ross adds that the current problem is reminiscent of the vaccine shortages that occurred in the 80s. The shortages were due to the expense of frivolous lawsuits against drug companies, as well as government-imposed price controls. However, once companies were shielded from baseless litigation, the problem resolved itself. Therefore, he says, stringent controls on generic cancer drug prices as stipulated by the Medicare Modernization Act may have to be rethought. While prices may rise somewhat, their contribution to general drug costs is a drop in the bucket compared to total drug expenditures.