Review and Discussion of Key Issues
In this section:
- Near-term Prospects
- Performance of DSP in Preventing and Mitigating Drug Shortages
- Data Collection
- FDA Communication With External Stakeholders and the Public
- Communication within FDA
- Communication Between Manufacturers and From Manufacturers to Customers
- Gray Market Distributors
- Market Conditions
- Reporting Supply Disruptions or Product Discontinuations to FDA
- FDA Inspections and Enforcement Actions
- FDA’s Unapproved Drugs Initiative
The following section synthesizes the information gathered during meetings with both FDA staff and external stakeholders, as well as additional research conducted for this report. Although the perspectives of numerous external stakeholders are described, doing so does not necessarily mean the authors endorse their perspectives.
For a number of reasons, the nature of the drug shortage problem suggests that shortages are not likely to abate in the near-term and that the problem will not be resolved without concerted effort from many stakeholders. (For further discussion of some of these issues, see “Market Conditions” below.) The production capacity of generic manufacturers is expanding only slowly, the infrastructure requirements to produce these drugs safely are significant, and updating aging manufacturing facilities will require time and money. Companies operating at full capacity may not be able to manufacture a drug in shortage without dropping production of another product, potentially producing a secondary shortage. In addition, industry concentration has made it difficult for smaller manufacturers to enter the marketplace, and wholesalers and GPOs are likely to continue to exert downward pressure on drug prices.
External stakeholders offered unanimous praise for the DSP staff. These stakeholders stated that the DSP team has been extremely responsive and works tirelessly to address drug shortages. Many also asserted that DSP seems under-resourced and could make use of additional assigned staff. According to data provided by DSP, the number of staff over the last several years has remained steady, even as the number of shortages has increased substantially.
DSP plays a valuable role within FDA: it acts essentially as a patient advocate ensuring that patient well-being is at the very center of Agency regulatory activities when drug shortages are an issue.
Most Centers reported maintaining a current list of drugs and other medical products in shortage in order to track and manage ongoing shortages. However, this information often lacks the specificity to allow for the analysis of the causes, durations, and FDA responses to shortages. The absence of readily analyzable data limits FDA’s ability to assess the adequacy of its responses to shortages, to identify steps it can take to reduce the likelihood of shortages, and, potentially, to predict future shortages.
Manufacturers and industry representatives assert that FDA lacks a firm definition of medically necessary, making it difficult to determine which drugs should be reported in the event of a shortage. They also believe that FDA should reach out to clinicians and other providers in determining whether a drug is considered medically necessary.
However, DSP does define medically necessary in its MAPP, 1 a document that was last revised in 2006. This document also outlines a procedure through which DSP consults with members of the relevant drug review division in FDA, as well as with experts outside of the Agency, including ASHP and other professional societies, as it determines whether a drug is medically necessary. The authors’ discussions with professional associations confirm this practice. DSP welcomes suggestions from industry about how the consultation process could be improved.
ASHP and DSP web sites listing drugs in shortage are consistently cited as the definitive public references on current drug shortages. However, the lists are quite different, at times leading to confusion. ASHP’s list is targeted toward its pharmacy clients and the information they require, while DSP’s list takes a more public health-oriented approach.
Generally, ASHP’s list of drugs is larger because it lists all known and confirmed drug shortages, including regional shortages. ASHP’s web site is viewed by many external stakeholders as more informative because it includes recommendations for alternative drugs, while CDER’s does not. In contrast, FDA’s list is limited to national shortages and it mostly consists of medically necessary drugs. DSP does list some drugs that are not medically necessary if it receives repeated inquiries about them from the public. Some stakeholders recommended that CDER more often list non-medically necessary drugs in shortage. Others who are familiar with both lists stated that to do so would simply duplicate ASHP’s efforts, but that assumes a user, perhaps encountering a shortage for the first time, would be aware of the ASHP list.
A 2010 ASHP survey of pharmacy directors found that the ASHP web site was used by 89% of respondents and DSP’s web site was used by 72%. On a 5-point Likert scale, respondents preferred the ASHP’s web site by a small margin for timeliness (ASHP: 4.0; DSP: 3.4), reason provided for shortage (ASHP: 3.8; DSP: 3.2), and alternatives provided (ASHP: 4.0; DSP: 2.7). 2
For this report, the authors compared the DSP and ASHP web sites on September 9, 2011. At that time, the DSP web site listed 62 active drug shortages, primarily of medically necessary drugs, compared to 181 drug shortages on the ASHP web site. Fifty-eight shortages appeared on both web sites. The ASHP web site listed 123 medications not listed on the DSP web site, whereas four medications appeared on the DSP web site but not on ASHP’s. 3
The DSP web site lists drug shortages and manufacturers, the reason for the shortage (when manufacturers permit protected non-public information to be disclosed publicly), and often a brief explanation of current and future availability. The ASHP web site has more information regarding each medication (via links to pages for individual drugs), the reason for the shortage, a brief explanation of current and future availability, and a major section listing therapeutic alternatives to the drug in shortage. Both web sites provide instructions on reporting a shortage.
Most external stakeholders expressed a desire for greater transparency regarding the causes of shortages; they find this difficult to obtain from manufacturers. Most hospitals, pharmacists, and clinicians with whom the authors met believed that such disclosure would allow for greater preparation and planning in clinical care. Moreover, greater disclosure of the cause of a shortage would increase trust within the health-care team, with pharmacists reporting that their conversations with physicians “go better” when a reason for the shortage can be offered. If the Agency is aware of the reasons behind a shortage, the information may be protected from public disclosure because it is confidential commercial or other information that cannot be disclosed without the permission of the manufacturer.
Several external stakeholders believed that better communication between FDA field investigators and DSP would be helpful in preventing and mitigating drug shortages. The Agency is cognizant that its inspection findings regarding quality problems may lead to a firm’s shutdown even when FDA itself does not seek such a result. Facing potential costs to address issues identified during inspection, firms may make business decisions to discontinue manufacturing on a temporary or permanent basis. The Agency will often try to work closely with firms to prevent a full shutdown.
In addition, FDA assesses the impact of Agency actions prior to issuing a regulatory decision that could affect drug production. On numerous occasions, FDA has worked with a manufacturer to mitigate certain safety or quality concerns so that medically necessary drugs remain available.
There is an inherent tension between the Agency’s compliance functions, which seek to ensure that industry produces quality products, and its desire to assure the availability of needed drugs. Significant communication and coordination between CDER’s Office of Compliance, DSP, other CDER offices, and ORA is essential.
Perhaps the major impediment to disclosure of impending shortages is manufacturers’ concern that such disclosures would run counter to competitive business practices. However, from a public health perspective, advanced warning of an expected disruption or discontinuation of production by any party would prove useful to other manufacturers who might be able to increase production of similar products. Industry representatives pointed out that it could take many weeks for a manufacturer to find out that a competitor has discontinued a product. Often, it is only when GPOs can no longer secure a product through their typical purchasing channels and then contact alternative manufacturers that these manufacturers learn of the shortage. Through all of this, FDA may be unaware of the developing shortage.
Greater transparency in how wholesalers manage drug shortages would also be desirable. For example, one wholesaler reported that it fills orders for drugs in shortage in proportion to amounts requested previously by its regional offices. Some stakeholders claimed that other wholesalers distribute their remaining stock in the order in which requests were received. There is also concern that as soon as hospitals learn of a shortage, they might decide to hoard additional doses. 4 If the practices of the wholesalers were more consistent and transparent, purchasers and hospitals would be able to better manage shortages and forego hoarding.
Following the manufacture of a finished product, drugs are typically further distributed by wholesalers, who then distribute the drugs to hospitals and pharmacies, often facilitated by GPOs. In some cases, a wholesaler will sell drugs to another wholesaler. Because of vulnerabilities in the drug distribution system in the U.S., drugs can be diverted and leave the legitimate supply chain. In such instances, the diverted drugs circulate in the “gray market” and, when the product is in shortage, they are often offered for sale at significantly higher prices. 5 It is unknown how these drugs are stored and handled or whether they are expired, counterfeit, or otherwise substandard.
Among the groups with whom the authors met, there were divergent opinions on how drugs in shortage are reaching these distributors. For example, GPOs and providers tend to see a segment of secondary wholesalers as responsible for drugs reaching the gray market. One wholesaler indicated that it had implemented policies designed to reduce leakage to the gray market by selling shortage drugs only to select purchasers and by cutting off purchasers that are selling their allotments in the gray market. Others point to retail pharmacies that sell their remaining inventory of shortage drugs at a marked-up price to gray market distributors. The actions of these retail pharmacies may not be legal if state law requires a wholesale drug license for resale.
External stakeholders with whom the authors met were in general agreement that gray market distributors were not likely to be the cause of the rise in drug shortages, but they do believe that some gray market distributors are taking advantage of the situation. Indeed, taking advantage of shortages has emerged as a new business model for some in this sector. A 2011 report by the ISMP examined gray market activities associated with drug shortages in an online survey of hospital purchasing agents and pharmacists. Of 549 respondents (response rate not calculable), 56% reported receiving daily solicitations from gray market vendors and 52% reported purchasing drugs from gray market vendors in the last two years. Many respondents provided examples of egregious price gouging, including propofol that was marked up by over 1500%. 6 Several stakeholders, including GPOs and hospitals, recommended that reports of price gouging should be monitored and investigated by appropriate federal agencies. FDA accepts reports of price gouging on its website. 7
While FDA can attempt to prevent and mitigate drug shortages, understanding the root causes of shortages requires an examination of broader market forces. Many recent drug shortages have occurred among generic drug manufacturers, for whom competition has contributed to the low prices associated with generic production. Purchasers of drugs and vaccines, including wholesalers and GPOs, put additional downward pressure on prices. In some instances, prices and profit margins may be so low that manufacturers may respond to GMP violations by simply terminating production.8
According to an analysis of sales data from the IMS Health, IMS National Sales Perspective™ database conducted for the authors by CDER’s OSE, the total sales revenue for generic injectable products was $1.492 billion in 2001 and $4.622 billion in 2010, which is equivalent to $3.752 billion in 2001 dollars, 9 a 251% increase. These data suggest that the overall market for generic injectables is robust, but do not shed light on the profitability of individual drugs.
The problem is exacerbated by market concentration in the generic injectable market (see Figure 7). According to data obtained from IMS Health and prepared for this report by OSE, in 2010, the top five generic injectable manufacturers accounted for 80% of the packages/bottles/vials sold in the U.S. market by volume (and 73% of the dollars in sales) and the top three manufacturers held 71% of the market. (These could be different top manufacturers each year.) However, the data do not support the oft-made claim that there is increasing concentration in the generic injectable market, as the percentage of the market (by volume) held by the top five manufacturers actually declined from 90% in 2001. It is noteworthy that all five of the top manufacturers in 2010 had drugs in shortage in 2011. These data do not establish whether market concentration differed for drugs that went into shortage compared to those that did not.
Additional forms of concentration occur at the product level, where only a limited number of companies may manufacture a given product. Figure 8 indicates that the great majority of sterile injectable molecules have only one or two manufacturers. While innovator products comprise 66% of molecules that have only a single manufacturer, generics play a larger role when there is more than one manufacturer.
Moreover, although a number of firms produce sterile injectables (there are approximately 80 generic injectable manufacturers), the production of any given molecule is commonly concentrated among a very small number of manufacturers. As indicated in Figure 9, 342 out of 569 (60%) sterile injectable molecules in 2010 were virtually sole-sourced (90% or more market share) and only 74 markets/molecules (13%) had a top producer with less than half of the market by volume. Many of these molecules are still under patent protection. However, even products with generic competitors have highly concentrated markets; in only six markets (1%) did the top two producers have less than 50% market share by volume between them. This kind of market concentration makes the supply system vulnerable to drug shortages because a large supply disruption is difficult to make up with alternative suppliers.
Market concentration alone would not itself pose a problem if manufacturers could easily switch production to other facilities or production lines. However, such flexibility is limited because of the cost, expertise, and complexity associated with the maintenance of sterile injectable manufacturing facilities, limiting the number of facilities involved in the manufacturing of such products. In particular, sterile injectable products are manufactured with a well-defined manufacturing process and controls to assure product quality. These products must be sterile, free of particulate matter, and free of contamination from all pathogenic and nonpathogenic microorganisms. Furthermore, according to generally accepted industry practices, certain drug classes such as cytotoxics (cancer drugs) and cephalosporins (antibiotics) are made on dedicated equipment which then cannot be used to produce other types of injectable drugs. Because of considerably more complex manufacturing processes, supply disruptions of sterile injectable products not only are more likely to turn into drug shortages, but they also typically last months, while those of oral drugs are generally resolved more rapidly.
Partly because of this segmentation and specialization in production, even large firms will commonly have only one line dedicated to producing a particular type of product. Coupled with the limited number of producers, a supply disruption experienced on one dedicated production line can easily turn into drug shortages for multiple products when the lost production cannot be sufficiently supplemented by other manufacturers because of limitations in capacity available on their own limited lines. This results in clustering of shortages for co-produced drugs. Current oncology shortages can be traced to just three key cytotoxic lines operated by two separate manufacturers.
A final market factor is the shift to “just in time” manufacturing and inventorying practices. These practices reduce expenses by eliminating surpluses, but increase the risk that even a modest perturbation in the market can result in a shortage. Figure 10 captures how all these factors can convert a supply disruption into a full-fledged drug shortage.
Figure 10: Dynamics of Sterile Injectable Drug Shortages
There was broad consensus among all external stakeholders that S. 296 introduced by Senator Amy Klobuchar is an important step to remedy the problems associated with manufacturer non-reporting. If signed into law, S. 296 would require manufacturers of drugs and a small minority of products regulated by CBER to report to FDA all supply disruptions or product discontinuations that could lead to shortages (not just medically necessary ones) six months in advance or as soon as practicable after recognition of an impending shortage. The law would also enable the Agency to impose monetary penalties on manufacturers that fail to adhere to reporting requirements. 10 Representative Diana DeGette has introduced a similar bill, H.R. 2245, which has the added stipulation that fines for knowingly failing to adhere to reporting requirements would not exceed $10,000 per day and a maximum of $1,800,000, with the final fee schedule to be determined by the DHHS Secretary. 11 Most external stakeholders acknowledge that, while S. 296 will not completely prevent drug shortages, its requirements for expanded reporting and penalties for incomplete reporting would go a long way toward improving the current system.
Any approach to drug shortages must, however, go beyond notification. Addressing shortages by improved notification can be considered secondary prevention and it requires resource-intensive efforts by DSP. In contrast, primary prevention (e.g., upgrading aging production facilities and expanding capacity) addresses the root causes of shortages and obviates at least some efforts at DSP. Finally, prevention of shortages will be enhanced if we have overlapping systems in place in case one system of prevention fails.
Importation of unapproved drugs manufactured for foreign markets is often seen by external stakeholders as a solution to alleviate domestic shortages, and FDA is sometimes accused of not exercising enforcement discretion in this regard frequently enough. 12
However, there are obstacles that prevent importation from being a satisfactory solution in many cases. The product may already be in shortage abroad or importation into the United States could trigger a shortage abroad. In either case, the manufacturer may be unwilling to divert drugs to the U.S. market. While there may be firms that manufacture the drug in shortage or alternatives for foreign markets, these suppliers are not FDA-approved and, accordingly, the manufacturing facilities may not have been inspected by FDA, among other issues. Furthermore, even if FDA uses enforcement discretion with regard to the importation of a drug manufactured for a foreign market, some pharmacist groups and providers contend that state laws and regulations concerning imported drugs have, at times, been impediments to importation. There also needs to be an entity (either the manufacturer or a distributor) willing to distribute the drug domestically. This process is often time-consuming because new contracts need to be developed by the manufacturer.
Nonetheless, in 2010, on three occasions, CDER utilized regulatory discretion with regard to the importation of drugs approved in other countries, after it had assured itself that the supplier was legitimate and relevant documentation had been reviewed by FDA. There had been an additional five such instances through mid-August 2011.
Industry representatives often contend that FDA inspections and enforcement actions play a major role in drug shortages. 13, 14 They believe that FDA inspections have become more rigorous, leading to more frequent disruptions or delays in production that ultimately cause drug shortages.
In fact, the primary cause of GMP citations is lapses in manufacturing protocols, equipment or practices, putting companies out of compliance with standards that are needed to provide patients with drugs that are safe and of high quality, and with which companies are legally obligated to comply. Manufacturing quality defects that produce substandard pharmaceuticals pose risks to patients and public health. In general, inspection findings that have been followed by shortages have been serious in nature: glass shards, metal filings, and fungal or other contamination in injectable products that must be sterile and pure to be safe for patients. (Less severe infractions are typically resolved quickly so any shortages are not lengthy.) The federal requirements for manufacturing quality have been in place for more than four decades and there have been no recent changes to these manufacturing standards.
FDA is committed to working with industry to prevent and mitigate shortages. When injectable drugs are contaminated or not sterile, the Agency must weigh the risks presented by the drugs against the risks posed by a potential shortage. Sometimes the manufacturer and the Agency can work together to address the immediate risks, such as by instructing health-care providers to filter injectable drugs before use. At other times, such measures are not available and, in order to protect public health, the Agency must prevent the contaminated or non-sterile products from being administered to patients. At the same time, the Agency works with the company to develop strategies to reduce the severity and length of any shortage that might ensue.
There are several thousand prescription drugs currently being marketed in the United States that have never been approved by FDA. Some of these drugs were on the market prior to the 1962 amendments to the FD&C Act, which required manufacturers to provide evidence of a new drug’s effectiveness before it could be approved for marketing to the public.
In 2006, the Agency announced its Unapproved Drugs Initiative (UDI), an effort to use enforcement policies to increase the number of unapproved drugs that are tested and submitted for FDA approval. 15 The goal of the UDI is to ensure that all drugs marketed in the United States are evaluated for safety and effectiveness through the appropriate drug approval pathway. FDA is aware that there are drugs that have been marketed for many years that have not received FDA approval but are medically necessary. The goal of the UDI is to ensure continued availability of critical medications, while also encouraging companies to seek approval for these drugs. The UDI has resulted in many unapproved drugs being removed from the market, and, as a result, a number of pharmaceutical industry, purchaser, and provider organizations have asserted that it has been at the root of many recent drug shortages. Such assertions have found their way into the popular press. 16, 17, 18
However, prior to taking action to remove a particular unapproved product or class of drugs from the market, CDER’s Office of Compliance works closely with DSP to prevent unnecessary disruption of the market or hardship to patients. In addition, FDA will meet with companies to provide guidance in helping them seek FDA approval for their product.
Moreover, data provided by DSP show that there were no shortages related to the UDI in 2010 or 2011. While a number of unapproved drugs, such as potassium phosphate and sodium chloride, have been in shortage (in the database developed for this report, 14 of 127 drugs in shortage were unapproved), the reasons for shortages of these and other unapproved drugs are similar to those of approved drugs and none was related to any action by the UDI itself.
The most recent shortage indirectly related to the UDI involved concentrated oral morphine sulfate, an unapproved product. In that instance, the drug was already in shortage due to GMP violations. In March 2009, the UDI issued a warning letter to the manufacturers of the concentrated form of the drug, believing that less-concentrated forms, which were FDA-approved, could satisfy market demand. The Agency reversed its action within days when providers pointed out that the concentrated form was medically necessary for some patients. As a result of this experience, it is now the policy of DSP to consult with outside professional societies and clinical reviewers when determining whether a drug is medically necessary.
1. Center for Drug Evaluation and Research, Food and Drug Administration. Manual of Policies and Procedures (MAPP), 6003.1. Available at: http://www.fda.gov/downloads/AboutFDA/CentersOffices/
CDER/ManualofPoliciesProcedures/ucm079936.pdf (accessed September 28, 2011).
2. Kaakeh R, Sweet B, Reilly C. Impact of Drug Shortages on U.S. Health Systems. American Journal of Health-System Pharmacy. 2001;68:e13-e21.
3. For this analysis, a drug shortage was included only if it did not involve a biologic and neither site considered the shortage resolved. Five shortages were counted twice on the DSP web site because they involved more than one formulation of the drug, but were only counted once on the ASHP web site. These were considered to be five shortages (not 10) for the purposes of this analysis.
4. Thompson CA. Drug shortage broaches ethics of buying in excess. American Journal of Health-System Pharmacy 2009;66:610-1.
5. Institute for Safe Medication Practices. Gray Market, Black Heart: Pharmaceutical Gray Market Finds a Disturbing Niche During the Drug Shortage Crisis. ISMP Medication Safety Alert, August 25, 2011. Available at: http://www.ismp.org/Newsletters/acutecare/showarticle.asp?ID=3 (accessed September 28, 2011).
6. Institute for Safe Medication Practices. Gray Market, Black Heart: Pharmaceutical Gray Market Finds a Disturbing Niche During the Drug Shortage Crisis. ISMP Medication Safety Alert, August 25, 2011. Available at: http://www.ismp.org/Newsletters/acutecare/showarticle.asp?ID=3 (accessed September 28, 2011).
7. FDA Office of Criminal Investigation. Report Suspected Criminal Activity. Available at: https://www.accessdata.fda.gov/scripts/email/oc/oci/contact.cfm (accessed October 26, 2011).
8. American Society of Health-System Pharmacists. ASHP guidelines on managing drug product shortages. American Journal of Health-System Pharmacy 2001;58:1445–50.
9. Calculation performed at http://www.usinflationcalculator.com.
10. Preserving Access to Life-Saving Medications Act, S. 296, 112th Cong., (2011).
11. Preserving Access to Life-Saving Medications Act of 2011, H.R. 2245, 112th Cong., (2011).
13. Stein R. Shortages of key drugs endanger patients. Washington Post, May 1, 2011. Available at: http://www.washingtonpost.com/national/shortages-of-key-drugs-endanger-patients/2011/04/26/AF1aJJVF_print.html (accessed September 28, 2011).
14. Roy A. FDA-driven drug shortages: the new death panel? Forbes, June 24, 2011. Available at: http://www.forbes.com/sites/aroy/2011/06/24/drug-shortages-the-new-death-panel/ (accessed September 28, 2011).
15. FDA’s current Compliance Policy Guide on Marketed Unapproved Drugs (CPG) was issued in June 2006 as part of the Unapproved Drugs Initiative. The guidance emphasizes that marketed prescription drugs should obtain FDA approval and explains the Agency’s enforcement priorities with regard to marketed unapproved drugs.
16. de Rugy V. The FDA and drug shortages. National Review Online, June 14, 2011. Available at: http://www.nationalreview.com/corner/269583/fda-and-drug-shortages-veronique-de-rugy (accessed September 28, 2011).
17. Ponnuru R. Too much FDA intervention equals too few drugs. Bloomberg, June 21, 2011. Available at: http://www.bloomberg.com/news/2011-06-21/too-much-fda-intervention-equals-too-few-drugs-ramesh-ponnuru.html (accessed September 28, 2011).
18. Cherici C, Frazier J, Feldman M, et al., Premier Healthcare Alliance. Navigating Drug Shortages in American Healthcare. March 2011. Available at: http://www.premierinc.com/about/news/11-mar/drug-shortage-white-paper-3-28-11.pdf (accessed September 28, 2011).