A new Health Policy Brief from Health Affairs and the Robert Wood Johnson Foundation (RWJF) looks at the ongoing problem of drug shortages in the United States. From 2005 to 2010, the number of reported drug shortages almost tripled.

Today, newly reported drug shortages overall are decreasing, but the total amount of drug shortages continues to increase, reflecting just how long it can take to rectify a shortage. Generic sterile injectable drugs, a vital component for patients fighting cancer, combatting an infection, or about to undergo surgery, are in especially short supply.

One of the most cited reasons for generic sterile injectable drug shortages is low reimbursement rates from Medicare Part B that came about after a change in law in 2003. These changes incentivized both physicians and manufacturers to switch to higher-cost drugs, reducing investment in cheaper generic drugs and causing “growing market concentration,” and eventual drug shortages.

Recent efforts by Congress and the Food and Drug Administration (FDA) to mitigate shortages have focused on regulatory matters: expediting consideration of new drugs and allowing certain drugs from abroad.

What’s the Background?

The brief traces the role of the FDA in regulating drug shortages. A 2011 report by the Government Accountability Office (GAO) noted that the FDA lacked the authority to address this problem, and that steps were needed “to effectively evaluate its work and improve its ability to protect the public health.”

The brief details subsequent efforts by the Executive branch and Congress, including a drug shortage task force and a 2013 strategic plan to prevent and mitigate drug shortages. The brief also examines the efforts of the Generic Pharmaceutical Association, the key trade association, to improve communication between manufacturers, the FDA, and stakeholders, a move that so far has not had a significant impact.

What’s the Debate?

As the brief explains, many policy makers believe that underlying market forces are responsible for the continued drug shortages in the United States. These problems are not prevalent in Europe, where drug makers are compensated differently. To address the shortages some have called for a change in Medicare Part B reimbursement, believing that this would increase provider payments and improve manufacturers’ profit margins.

However, there is disagreement within the industry that these reimbursements are the “main cause of shortages,” so related legislation already introduced in Congress is unlikely to be enacted. Some policy analysts have pointed to other government-mandated drug discount programs such as Medicaid and the 340B drug discount program as limiting manufacturers’ profit potential, ultimately undermining their ability to make the kinds of investments that might address drug shortages.

What’s Next?

While Congress seems unlikely to act, some economists have predicted that over time, the market is likely to correct itself so that shortages will not be as acute as they are today. For this reason, industry experts caution against implementing large-scale changes to the system. Other efforts to address shortages are expected to originate within the industry itself.

About Health Policy Briefs

Health Policy Briefs are aimed at policy makers, congressional staffers, and others needing short, jargon-free explanations of health policy basics. The briefs, which are reviewed by experts in the field, include competing arguments on policy proposals and the relevant research supporting each perspective.

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