XIANGYANG, CHINA - DECEMBER 30: An employee works on the production line of ibuprofen, a fever ... [+]
Drug shortages are at an all-time high. The White House rolled out a plan earlier this month intended to sharply reduce future shortages of essential medicines, such as antibiotics and cancer drugs.
The Administration wants to “address the market failure that currently exists, which is that there is no entity that's accountable to [maintain the] supply chain,” said Neera Tanden, President Joe Biden’s domestic policy adviser, in an interview with Bloomberg News. “Today, when we have a drug shortage, various entities within the healthcare system point to each other.”
While I applaud the Administration’s determination, I am concerned that its plan ignores the main cause of drug shortages: the variable quality of America’s generic drug supply, much of which is imported from overseas.
What The White House Plan Would Do
The White House plan calls for creating and accrediting two new nongovernmental organizations—one to rate drug manufacturers on how well they maintain resilient supply chains and the other to score hospitals based on how well they avoid future drug shortages. A lot of money is involved—between $3.26 billion and $5.11 billion over the next 10 years.
A key component of the plan is the creation of a “Manufacturing Resiliency Assessment Program” that will monitor drug shortages and evaluate drugmakers’ efforts to prevent them, such as by sourcing key starting materials from several suppliers instead of just one. The plan also calls for boosting domestic manufacture of essential drugs.
The plan also proposes incentives and penalties to induce hospitals to adopt more resilient sourcing of essential drugs. To assess how well they respond, the White House proposes a “Hospital Resilient Supply Program” that will score each hospital’s purchasing practices. Those who buy from drugmakers that are highly rated by the Manufacturing Resiliency Assessment Program will score better than those that do not. So will hospitals that buy drugs in quantity rather than relying on “just-in-time” delivery. Hospitals that execute long-term contracts to ensure stable supply will also receive higher scores—and the incentives that come with them.
A pharmacist checks stock levels of medication in pharmacy stock room (Photo by Universal Images ... [+]
What The Plan Won’t Do
The plan does not encourage, much less require, U.S. wholesalers and pharmacy benefits managers (the powerful middlemen in the drug supply chain) to source the generic drugs they buy from manufacturers that consistently produce high-quality products. This is surprising, since quality concerns cause more drug shortages than all other factors combined. In her interview with Bloomberg, Tanden explained that the Administration did not want to undermine the FDA’s role as the “arbiter of the quality of drugs.”
Unfortunately, there’s a big disconnect between the frequency of quality problems that trigger FDA recalls and the agency’s stand on generic drug quality. Although the FDA does little product testing—opting instead to review company-supplied paperwork and occasionally inspect plants—the FDA’s Office of Generic Drugs’ website asserts that “All approved generic drugs have the same high quality, strength, purity, and stability as brand-name drugs.” When contacted for comment, the agency offered a more nuanced view, but basically stood by the assertion that this applies to all approved generic drugs.
WHITE OAK, MD - JULY 20: Food And Drug Administration headquarters in White Oak, Maryland, July 20, ... [+]
Based on this assurance, America’s drug wholesalers and pharmacy benefits managers scour the globe to find manufacturers willing to sell at the lowest possible price. Because U.S. companies can’t make products as cheaply as competitors in countries with low labor costs and lax regulatory oversight, most closed their doors or switched to repackaging drugs sourced overseas.
Today, China, India, and a few other nations dominate global production of generic drugs and ingredients. This makes America increasingly vulnerable to supply disruptions or embargoes. U.S. Department of Defense recently determined that more than half of its pharmaceutical supply chain is at “high” or “very high” risk.
A Consumer-Focused Alternative
Other consumer-facing agencies take a different approach to product quality. For example, the National Highway Traffic Safety Administration is responsible for assuring that all automobiles sold in the U.S. meet or exceed federal standards for quality and safety. To verify that they do, NHTSA crash-tests various makes and models of cars and posts the results on its website.
The Insurance Institute of Highway Safety also crash-tests cars and independently posts its findings. Consumer Reports and other groups rate cars based on their performance and features and share their findings with consumers. None of this work infringes on NHTSA’s regulatory authority.
Dr. Ricardo Martinez, who led NHTSA from 1994 to 1999, explained the agency’s philosophy to me this way: “From the perspective of enhancing safety, the more the consumer knows about the safety performance of vehicles, the greater the market competition for safety. And NHTSA just doesn’t allow vehicle manufacturers to certify their compliance with federal regulations, it has the authority to pull any vehicle produced and test it for compliance. NHTSA also monitors the fleet of existing cars for potential defects that could trigger a recall and require a remedy.”
Perhaps the White House should consider a similar approach to strengthen its drug shortage strategy.
Stop-motion photograph of a side-impact crash test. Crash-testing vehicles this way provides ... [+]
When Quality Is Known, Markets Respond
According to a 2023 survey by the American Society of Hospital Pharmacists, the vast majority of its members would be willing to pay more for drugs sourced from high-quality suppliers. Besides, testing for quality isn’t costly. It’s possible, if not likely, that some high-quality manufacturers are only little more expensive than those selling lower-quality drugs. But without independent testing, pharmacies, doctors and patients are flying blind.
In the coming months, findings from the U.S. military’s pilot drug testing program may start rolling out. When they do, the FDA’s insistence that “all generic drugs have the same high quality” may become untenable.
Large healthcare systems need not wait for the FDA to rethink its approach. If they informed drug wholesalers and pharmacy benefit managers that they will only buy drugs that have been independently tested by a qualified third party laboratory to confirm quality and safety, the market would swiftly correct itself.
If the test results were then shared with the FDA the same way “Official Medicines Control Laboratories” in Europe share their test results with the EU’s FDA counterpart, the agency could send its inspectors to the most worrisome overseas and U.S. plants.
Commenting on the White House plan, President Biden's national economic adviser Lael Brainard said, “We need new solutions, including increased domestic production, rewarding resilience, and transparency among middlemen.”
Pressing drug middlemen for greater transparency about product quality is a good place to start. When quality matters as well as price, U.S. generic drug manufacturers will be able to compete and win. America’s patients will be the biggest winners of all.
