FDA Says a "Broken Marketplace" to Blame for Drug Shortages

Given how markets operate, pharmaceutical companies need financial incentives in order to keep providing a reliable stream of high-quality products that otherwise, due to low prices and other factors, might fall into shortage, according to an FDA report about the drug shortages problem released this week.

The report is the result of an FDA-led interagency Drug Shortage Task Force; the analysis of drug shortage data and possible solutions, some of which need approval by Congress, comes in response to a request from over 100 senators and representatives last year. The report analyzes information from various stakeholders, published research, and an economic analysis of market conditions.

“Despite public- and private-sector efforts to prevent and mitigate drug shortages, they continue to occur and persist,” Acting Commissioner Ned Sharpless, MD, and Janet Woodcock, MD, director of the Center for Drug Evaluation and Research, say in a joint statement.

They say the results point to “a broken marketplace, where scarcity of drugs in shortage or at risk for shortage does not result in the price increases predicted by basic economic principles.” Factors responsible for the problem include a lack of incentives for manufacturers to produce less profitable drugs, the report says.

The report also cites logistical and regulatory challenges that make it difficult to bounce back from a disruption, and a lack of recognition and reward for manufacturers that go beyond the baseline of Current Good Manufacturing Practices (CGMP) and achieve what the FDA calls “mature quality management.” Such a system, the report said, “builds in a performance and patient focus that utilizes technology, statistical process control, and planning activities to ensure a reliable supply of the drugs manufactured at the facility.” That process allows for early detection of supply chain issues, the FDA noted.

In a blog post last week, Woodcock previewed the agency’s thinking. If payers have tight budgets, they will choose the lowest-cost option, which, when purchasing many drugs through a single contract, pressures each drug in the contract to be sold at the cheapest price possible. Safety isn’t the issue, since facilities must conform to CGMP practices, but that is simply a floor. If manufacturers with mature quality management systems and resulting reliability had some way to broadcast that information to purchasers, buyers might be willing to pay a bit more in order to ensure a steady supply, she said.

To that end, the report proposes, as 1 of 3 recommendations, a voluntary rating system, whereby drug manufacturers would be prodded to invest in their facilities. Group purchasing organizations other purchasers could require disclosure of the rating in their contracts with manufacturers, adding transparency to the market.

The report also says a “shared understanding” of the impact of drug shortages on patients as well as these contracting practices are needed. Previous estimates of the impact on patient outcomes and healthcare costs and delivery may actually be underestimated, and improved quantification of the effects are needed, the report said.

In addition, a new contracting system is necessary. The report indicates that this might take the form of “paying higher prices for drugs manufactured at top-rated facilities, requiring a certain quality maturity rating as a condition of contracting, or guaranteeing purchase of a set volume of products from sites achieving a certain quality maturity rating.”

The report includes an analysis of 163 drugs that went into shortage from 2013 to 2017 and compared these medicines with similar ones that did not go into shortage. Affected drugs:

• Were more likely to be relatively low-price and financially unattractive to the drug maker
• Were more likely to be sterile injectables
• Went into shortage due to supply disruption
• Rarely saw their prices rise after shortages began
• Had lost profitability, causing their manufacturers to cease production

Draft Guidance Coming

The FDA said it plans to publish new draft guidance on data sharing by the end of 2019 for drug makers to disclose when manufacturing of a certain drug ends or if supply is likely to be interrupted. The guidance will also request that manufacturers provide additional details about the situation to the FDA.

Another planned draft guidance for industry would address risk management, creating an outline for drug makers to develop, implement, and maintain a plan in order to avoid and mitigate drug shortages.

The report also recommends international action in order to streamline postmarketing regulatory changes. The FDA said the International Council for Harmonisation (ICH) is finalizing a guideline to provide more flexibility in making post-approval changes to the product or its manufacturing process, given the global nature of the pharma market and different regulatory authorities.

Legislative solutions

The FDA also has 3 legislative proposals in the administration’s fiscal year 2020 budget related to data sharing, risk management, and lengthened expiration dates for drugs.

One proposal would authorize the FDA “to require application holders of certain drugs to conduct periodic risk assessments to identify vulnerabilities in their manufacturing supply chain and develop plans to mitigate the risks of the identified vulnerabilities.”

Under the second proposal, the FDA would be permitted to impose penalties if drug manufacturers failed to provide “timely and adequate notification” about manufacturing interruptions.

Another proposal would authorize the FDA to require that an applicant submit studies to FDA if the product is labeled with the longest possible expiration date (shelf life) that FDA agrees is scientifically justified.