To Solve Drug Shortages, Fix the Broken Economic Model

As seen in Modern Healthcare
EXECUTIVE INSIGHT

Earlier this year, Fresenius Kabi hosted and sponsored the annual Angels for Change SummitONE conference. More than 150 healthcare leaders from across the pharmaceutical supply chain, along with government policy experts, came together for one purpose: to determine how to end drug shortages in this country. The theme was “ALL IN,” an acknowledgement that all stakeholders have a role to play in ending drug shortages.

What is the current state of drug shortages in America?

Lindsey Thomas: According to the FDA, there are 118 active drug shortages in the United States (as of Sept. 30, 2024). This number has increased over the past decade, and the average duration of a shortage has extended from two to three years. These shortages primarily affect generic and multi-sourced drugs that cost less than a few dollars per dose, many of which are essential medicines Americans rely on every day to treat cancer, stop infections and undergo surgery. The impact on patient care is significant, often leading to delayed treatments or the use of less effective or more expensive alternatives.

What are the causes of these persistent drug shortages?

LT: Several factors contribute to the ongoing drug shortage crisis:

• Broken economic model. This is the central, root cause. The prices of generic medicines have steadily declined, often falling below production costs. This makes it challenging for supply chain participants to invest in redundancy and supply resilience and can even force manufacturers to either stop producing these drugs or move production offshore, making the system more susceptible to disruptions.
• Unpredictable supply disruptions. Natural disasters, geopolitical tensions and other unexpected events can disrupt the supply chain at various points, from raw materials to finished products.
• Increasing regulatory requirements. While necessary for ensuring drug safety, changing regulatory requirements often increase production costs without corresponding price adjustments for generic drugs.
• Foreign supplier dependency. Reliance on foreign suppliers for raw materials and finished products makes the U.S. vulnerable to global disruptions. However, the solution is not to onshore everything. Global supply chains can be resilient, and building more capacity in the U.S. without fixing the economics will fail.

What strategies can be implemented to ensure a resilient U.S. drug supply?

LT: Key insights and takeaways from the summit included these strategies:

1. Reward resiliency. Implement policies that incentivize reliability. Establish resiliency benchmarks for essential medicines, including maintaining surge inventory, creating production redundancies and diversifying shipping capabilities.

2. Recognize the value of essential medicines. Utilize tax incentives to encourage domestic production of essential medicines and APIs, and revise legislation that penalizes generic manufacturers.

3. Implement new inventory strategies. Increase inventory holdings by wholesalers and end users to allow manufacturers more time to react to shortages. Develop more efficient national or regional stockpiles of finished doses and APIs.

4. Streamline regulatory processes. Explore accelerated approval pathways and prioritized reviews for domestically manufactured drugs. Support redundancy initiatives and implement more efficient inspection processes to reduce compliance burdens without compromising safety.

How can we work together to end drug shortages?

LT: In America, millions of dollars are spent annually managing drug shortages. We believe that by redirecting collective efforts toward addressing root causes rather than simply managing shortages, the industry can achieve a more stable and resilient drug supply. The SummitONE meeting demonstrated that there is a shared commitment across the pharmaceutical supply chain to end drug shortages. At Fresenius Kabi, we’re doing our part by investing more than $1 billion in expanding U.S. manufacturing capacity, increasing inventory levels and working closely with the FDA to prevent and mitigate shortages.

While challenges remain, the proposed strategies and collaborative spirit at the conference provide optimism for the future. With continued cooperation and implementation of these strategies, the goal of ensuring a reliable supply of ess