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  4. Remarks by Commissioner Robert Califf to the Healthcare Distribution Alliance Board of Directors meeting - 11/15/2023
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Event Title
Remarks by Commissioner Robert Califf to the Healthcare Distribution Alliance Board of Directors meeting
November 15, 2023

Speech by
Robert M. Califf, M.D., MACC

Strategies for Responding to and Preventing Shortages of Medical Products

(Remarks as prepared for delivery)

Good morning.  It’s a pleasure to be with you today.  I want to thank this organization and its members for the important role (what your web site appropriately calls a “vital link”) you play in providing pharmacies, hospitals, long term care facilities, clinics and others with the medical products that patients need.  In a healthcare system as complicated and fragmented as ours, the steady advance of logistics and sophisticated use of technology and human systems has been essential to supplying needed medical products to the right patients at the right time. 

Despite the amazing progress in logistics, there are dangerous and troubling issues involved in our ongoing shortages and vulnerability of our essential low-cost products, including generic drugs, commonly used low-cost devices and personal protective equipment.  Indeed, because you are in routine communication with the manufacturers and their customers -- and have increasingly sophisticated digital capabilities that are integral to improving supply chains, but that can also make them vulnerable -- you have a critical role to play in predicting, preempting, and ameliorating the shortages that are plaguing our healthcare system.

As you know as well as anyone, no matter how many millions of drugs and devices are successfully transmitted from a manufacturer to a supplier, that success is undermined when a supply chain is interrupted and there is a shortage or maldistribution of critical medical supplies.  

Shortages are not only frustrating, they consume an enormous share of pharmacist and clinician time to find alternatives and provide explanations to patients.  Every provider organization has a staff dedicated to finding scarce supplies, rather than caring for patients.  This is an expensive waste of human talent, and, most importantly, by disrupting access to products that lengthen life and improve human function, shortages put patients’ health and lives at risk.

I wanted to talk with you today about some of the ways the FDA is responding to supply chain challenges. There have been many supply chain disruptions of drugs as well as medical devices, many of which have had a disproportionate impact on our most vulnerable populations, such as devices that are critical to pediatric and neonatal populations.  

For example, last December, as some of you may recall, there were local shortages of endotracheal tubes for children.  Your firms play a critical role in promoting resilient device supply chains by monitoring orders and inventory of critical devices and our Center for Devices and Radiological Health worked with distributors to facilitate access to these critical devices.

So, in addition to talking about the FDA’s role, I’d like to discuss some of the ways your organization and its members can help strengthen the process, including improving contracting practices to ensure an adequate supply of high-quality products. 

Quite simply, the FDA neither can, nor should, do this alone.  Supply chains are complex by their nature, and anticipating, preempting, and addressing shortages is a process that requires collaboration and cooperation among many different parties.

The Role of the FDA 

Shortages and supply chain disruptions are not new, of course, but the pandemic certainly helped bring them to the fore.  Nonetheless, it would be incorrect to think that this, or any unanticipated public health emergency, is the only cause of shortages.  Yes, catastrophes like pandemics, hurricanes, tornadoes, earthquakes, and war are likely to have a profound impact on supply chains. But there are plenty of other causes as well. Not all shortages are the same: some are due to manufacturing issues, while others may be due to lack of redundancy in manufacturing or significant increase in demand.  

As we consider FDA’s role, it’s important to recognize what the FDA can and can’t do.  We can’t, for instance, require a pharmaceutical company to make a drug, increase production of a drug, or allocate a drug among lawful purchasers.  

Nevertheless, one of the important roles we do play is to work closely with manufacturers and others in the supply chain to understand, mitigate and prevent or reduce the impact of intermittent or reduced availability of certain products.   

For instance, when we know there is a drug shortage or potential for a drug shortage, we work to identify the cause and extent of the shortage and to determine whether other manufacturers are willing and able to fill that gap. We can also expedite inspections to bring facilities online to fill that gap and can expedite review of applications or supplements for products that could help prevent or mitigate a shortage.

Once we are notified by a company regarding a potential or actual supply disruption, our Center for Drug Evaluation and Research (CDER) does a shortage evaluation, which includes a medical necessity assessment that determines whether the drug treats or prevents a serious disease or medical condition and whether there are acceptable clinical alternatives.  In addition, our Drug Shortage staff conducts a market data analysis to determine market share and whether acceptable alternatives can meet the anticipated supply gap and if a shortage is likely based on manufacturer data supplied voluntarily in addition to market data analysis.

In addition, we have encouraged the adoption of advanced manufacturing technologies and mature quality management practices to help avoid or mitigate drug shortages.  We also partner across government, academia, health systems, and industry to help strengthen and diversify the supply chain and identify and address supply chain vulnerabilities and accelerate domestic manufacturing.

Not surprisingly, one of the critical factors affecting our success, relates to when we learn about a potential shortage.  Just as with preparations for a storm, the earlier we know and can take action, the better.   And our ability to identify, prevent, and mitigate shortages is also dependent on the quality of data and notification provided by industry. If the data are incomplete or notification from manufacturers of an impending shortage lags or is not submitted, our efforts are greatly constrained. In 2022, for instance, we had about 48 new drug shortages, but we also were able to prevent over 200 drug shortages.  

In recent years there have been substantial increases in demand for many medical products, resulting in shortages of some products.  These involve both prescription and over-the-counter drugs, including products needed to treat hospitalized patients, cancer patients, pregnant women, and children.  As you know, because your members were impacted, last fall and winter amoxicillin powder for oral suspension was in shortage due to significant increase in demand that manufacturers were not able to meet during an unprecedented peak in viral respiratory illnesses, including RSV, the flu, and the ongoing Covid pandemic. This is just one example of how vulnerable to disruption our drug supply chain is as a result of increased demand.

Unfortunately, we currently receive minimal information on demand for drug products, and any information we may receive is provided on a voluntary basis, as we have no authority to require manufacturers to report increases in demand for any given drug. The current law requires certain manufacturers to notify us about manufacturing disruptions but not when excess demand may lead to a shortage. Having access to additional information would greatly hasten and enhance our efforts to work with industry to prevent and mitigate drug shortages.

That’s why the FDA is seeking an amendment to the FD&C Act to expand the notification requirements of Section 506Cto include notifying FDA of an increase in demand for drugs that the manufacturer likely will be unable to meet. With such advance notice, the FDA will be in a better position to take proactive steps to prevent or mitigate these demand-driven drug shortages. Without this advance notice we’ll continue to be caught flat footed.  

I should also point out that Congress has provided FDA with even fewer shortage authorities in the medical device space, which is very concerning and raises the risk of future shortages.  The FD&C Act provision (“section 506J”), added by the CARES Act, requires medical device manufacturers to submit notifications to FDA when they have discontinuances or significant interruptions in the manufacturing of critical devices during or in advance of a public health emergency.  But shortages can and do occur anytime, not just during public health emergencies.  The impact of this gap is clear.  Now that the COVID-19 PHE has ended, manufacturers are no longer providing these notifications. Until Congress ends the temporal limitation on the FDA’s authority for device shortages our domestic supply chain will remain vulnerable and patients will be at risk.  These concerns extend to personal protective equipment, as much of the manufacturing has shifted back offshore.

Ensuring Product Quality

There’s another complementary aspect of our work relating to shortages, which is to ensure the quality of the products that are available. We consistently work to identify and communicate potential quality issues early on, and to help the industry to correct these issues.  This in turn helps reduce the risk of recalls or shortages.  To this end, we actively monitor supply chain integrity, and we are taking steps to do all that we can to keep every drug consistently available and compliant with current good manufacturing practice by fostering an environment conducive to strengthening these supply chains so that shortage becomes a rare thing.  

One way the FDA is working to shore up supply chains is through development of a Quality Management Maturity program which will incentivize drug manufacturers to voluntarily invest in quality culture.  QMM is focused on spurring drug manufacturers to successfully integrate their business and manufacturing operations with quality practices and technological advancements to optimize product quality, enhance supply chain resiliency, and drive continual improvement. In other words, to develop a culture of quality within their organization.

Operationalizing a voluntary QMM program for pharmaceutical manufacturers requires a collaborative and transparent partnership among FDA, industry, and other stakeholders. 

The FDA has formed a multidisciplinary, multi-Center working group to facilitate the development of a QMM program. In developing the framework, FDA is considering standardized assessment tools, policy approaches, industry incentives, transparency, and communications.

The FDA has already completed two pilot programs on quality management maturity from 2021 to 2022, and currently we are using the lessons learned to help develop a program that will incentivize industry to voluntarily work towards fostering a strong quality culture mindset.

We’re also continuing to encourage stakeholder engagement on the QMM program generally.  In September, we established a public docket to solicit comments to assist in developing a QMM program for establishments that manufacture human drugs, including biological products. That comment period closes December 14.

We have heard from some who are interested in accessing more information on the FDA's inspections of manufacturing facilities through the Form 483s, which are issued to firm management at the conclusion of an inspection.  Many have advocated that these findings should be used to determine the quality of products and to inform business decisions. I would caution against this. 

It’s important to remember what the focus of the 483s and the accompanying process are:  

•    The observations in a 483 are issued at the close of an inspection and before an inspection is classified. If no conditions are observed that an investigator would determine violate the Federal Food, Drug, and Cosmetic Act then a 483 is not issued.  

•    When a 483 is issued, it is considered along with a written Establishment Inspection Report, all evidence or documentation collected on-site, and any responses made by the company to determine what further action, if any, is appropriate to protect public health.

•    If, after considering all relevant information we classify a facility as OAI (Official Action Indicated), it means that the FDA has concerns about the facility’s CGMP compliance with relevant requirements and that it should expect FDA follow up actions.

•    In other words, the issuance of a 483 is not the agency's final communication or final quality position of a firm, but the start of FDA interactions with that firm. 

•    We do post redacted 483s if three or more FOIA requests are submitted, or proactively by the FDA under specific conditions. They are publicly posted on FDA’s website in the CDER and ORA reading rooms.

We’re not trying to hide information that should be publicly available. In fact, a commitment goal associated with reauthorization of the GDUFA user fee program was to increase compliance-related communications with industry and public transparency. To achieve this, the FDA established the FDA data dashboard (datadashboard.fda.gov). This data dashboard is a one-stop shop for compliance data including final CGMP classifications, details on inspection citations, recalls, compliance actions, and import refusals. Compliance datasets are available on all medical products, and for drugs through APIs. The datasets are updated weekly. Over the next year we hope to add direct links to published 483s in the inspections dashboard and on the firm’s profile page. If you haven't had a chance to check out our recent webinar, “Understanding FDA Inspections and Data”, which explores many of these issues, I encourage you to do so. 

The Drug Supply Chain Security Act

I also want to briefly mention developments with the Drug Supply Chain Security Act (or DSCSA).  As you know, this 2013 law outlines steps to achieve interoperable, electronic tracing of products to identify and trace certain prescription drugs as they are distributed throughout the U.S. Under the DSCSA, trading partners – primarily manufacturers, wholesale distributors, dispensers, and repackagers – are subject to requirements for enhanced drug distribution security.

The FDA is committed to successful implementation of interoperable systems required under the DSCSA. We heard concerns about supply chain readiness, and so, in August, we published two compliance policy guidances describing a one-year stabilization period for certain DSCSA interoperable system requirements. This additional year will help give trading partners in the pharmaceutical supply chain sufficient time to implement, troubleshoot and mature their electronic interoperable systems. It is intended to avoid disruption to the supply chain and ensure continued patient access to drug products as trading partners work to fully implement the enhanced drug security requirements and lead to a stronger and safer drug supply chain.

Strengthening Contracting Practices

Before we open it up for questions, I want to mention one other important issue relating to drug shortages and specifically generic drugs that I alluded to earlier.  Generics have an outsized impact as more and more life-saving drugs reach generic status—well over 90% of prescriptions are generics--a boon to public health not just for Americans, but the entire world.  As chronic disease continues to rise among the world’s eight billion people, broad availability of high-quality, low-price generics could have a huge impact on public health.    

One of the many reasons for drug shortages today involves manufacturers of older generic drugs and particularly injectables.  These manufacturers face intense price competition, uncertain revenue streams, and investment requirements to maintain quality conditions.  If the basic economics and contracting practices of the generic drug market are not fixed, more patients will be impacted by these shortages and we will miss this amazing global public health opportunity.  

You and your members have a stake in preventing shortages and keeping a robust supply chain through transparent information sharing, of course, but also to engage in practices that raise quality, including, for instance, negotiating contracts that are fair and include guarantees to offer predictable revenue flows. Such practices would promote long term investments, including include mature quality management practices. This might mean that you pay more for resilient supply partners. This will not only result in improved patient access to high quality, low-cost medical products, it will be good for business.  

Let me mention one final example of how your increased transparency can benefit everyone.  As I alluded to earlier, three years after the beginning of the pandemic, we are still facing challenges in gathering health information. I’m pleased that HDA has been willing to provide aggregate information regarding distribution of COVID-19 vaccines from distributors out into the field.  This information has been critical to help target government efforts to protect the most Americans as possible against the severe side effects of COVID-19.

But it’s just as important for HDA to provide that same type of aggregate information about distribution of the COVID-19 therapeutics.  I can’t say it enough:  this kind of added transparency, which comes with low risk for your members, can have an enormously positive impact on public health.

You have an important role to play, and I look forward to our discussion.

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