Where Have All the Drugs Gone?

How bad is the drug shortage crisis?
 

Since 2019, the severity and length of shortages have increased. As of December 31, 2023, 125 total drug shortages were listed on the US FDA drug shortage database, affecting a variety of therapeutic classes. Our analysis using data from USP’s Medicine Supply Map, a platform that uses artificial intelligence and predictive analytics to identify, characterize and predict risk in the complex medicine supply chain, also showed an increase in the average time duration of drug shortages, which was over three years in 2023, compared to two years in 2020. Persistence in drug shortages is caused by compounding economic forces and the market’s inability to resolve these with traditional market economy responses.

What types of medicines are affected?
 

Although any medicine or therapeutic area can experience a drug shortage, some medicines are more at risk based on certain vulnerability factors. For example, in 2023, 53 percent of the drugs in shortage were sterile injectables. The medicines in shortage cost 8.5 times less than those not in shortage ($46 versus $392), and over half of the injectables in shortage were priced at just under $5.

When looking at solid oral medications in shortage, which accounted for 32 percent of all drugs in shortage, we found that more than half of these medications cost less than $3. These low prices likely resulted in low margins for drug manufacturers, reducing the incentive for them to continue producing the medicine – along with a lack of incentive for manufacturers of these drugs to invest in next generation quality management systems – and may have contributed to their shortage.

What are the risk factors for a shortage?
 

There is no one cause of drug shortages; however, the leading and root cause of most drug shortages are unsustainably low prices. For example, data shows that lower-priced drugs – commonly generic medicines – have a higher likelihood of being in shortage because manufacturers lack incentives to continue producing these products. Findings from USP’s Annual Drug Shortages Report show that there is a race to the bottom in pricing dynamics for generic medicines, which resulted in product discontinuations (mainly for low-priced generic solid oral medications) increasing by 40 percent from 2022 to 2023, from 100 drug products in 2022 to 140 in 2023.

Lower margins also undermine initiatives to ensure supply chain resiliency by limiting the ability of manufacturers to reinvest in manufacturing facility maintenance, manufacturing updates and quality assurance and management.

Aside from low prices, USP has identified three other risk factors associated with drug shortages:

• Geographic manufacturing concentration. Drugs that are made up of APIs and/or finished-dose products that are manufactured or produced in one or only few locations are more susceptible to shortages. Geographic concentration can also result in more significant impacts when a shortage does occur because there are limited options for sourcing/producing APIs or other materials. 
• Manufacturing quality concerns. Facilities with a history of quality issues can predict increased vulnerabilities for medicines made there. 
• Manufacturing complexity: Drugs with higher manufacturing complexity, such as sterile injectables, are more vulnerable to shortage. A need for dedicated lines for certain product categories (e.g., antibiotics such as amoxicillin) and/or complex chemical synthesis of the active ingredient can limit a manufacturer’s ability to produce a drug in the case of supply chain disruption. The complexity of pharmaceutical formulations can be assessed using:
  • dosage forms
  • number of underlying ingredients and key starting materials
  • expertise needed to synthesize the molecule
  • storage requirements
  • size and molecular structure of the API

What actions can be taken now to address shortages? 
 

Although there is no one-size-fits-all solution, short-term actions can be taken to reduce the risk of future shortages, while policymakers and industry regulators work on developing long-term solutions.

In the short term, manufacturers can continue to track and immediately report supply chain disruptions to the FDA to help regulatory agencies mitigate the impact of a disruption and reduce the risk of shortages. Having a strong understanding of the global supply chain and vulnerability factors using data can also better equip manufacturers to prevent fallout from drug shortages. In particular, there are data blind spots for key starting materials and excipients. Many supply chain risks associated with the key starting materials used to manufacture APIs are largely unknown because no single entity has a grasp on the sourcing [MM1] for these materials. Increased transparency into the volume and geographic location of API production would allow manufacturers to strengthen their ability to monitor their suppliers and understand how best to pivot when disruptions occur.

Going forward, policy adjustments and diversification of the geographic locations of manufacturing facilities are necessary. Policymakers and regulators from federal agencies, as well as non-governmental organizations, should develop safeguards that build on early warning capabilities, establish a vulnerable medicines list, coordinate supply chain resilience and reliability efforts through payment and purchasing models that value and incentivize supply chain quality, strengthen the manufacturing capacity for drug products through the development and adoption of advanced manufacturing technologies, and align incentives to promote sustainable prices for generic medicines. 

We need a fundamental shift in the market to realign supply and demand forces and create a predictable, sustainable, resilient supply chain that can reliably provide critical medicines to patients. Policymakers and public and private drug purchasers must value quality and resiliency through sustainable prices of drugs. This shift will also require us to broaden the geographic diversification of manufacturing sites and encourage domestic manufacturing of key critical drug components with pricing incentives that encourage utilization of excess domestic manufacturing capacity.

In addition to a marketplace shift, both governmental and non-governmental stakeholders must invest in early warning capabilities and utilize a vulnerable medicines list that highlights medicines most susceptible to shortages based on key risk factors to help provide insights that can inform policy and purchasing decisions. 

Have there been any success stories in resolving issues?
 

Increased transparency, collaboration and new technologies have led to some progress when it comes to addressing drug shortages. We are encouraged that there seems to be recognition among policymakers that a fundamental shift is needed to make the market for generic drugs more sustainable. For example, the Senate Finance Committee’s proposal to address shortages is one example of how policymakers are attempting to address these economic factors. Many of the concepts in the proposal align with USP’s recommendations, but we would add three areas for consideration: identify risks, reward resilience, and incentivize modern manufacturing technologies. 

There will continue to be a need in the near term for better tools to understand supply chain vulnerabilities and shortage risks, and ways to proactively intervene in a coordinated manner. Only by addressing both the short-term and long-term aspects of this issue will we be able to minimize the impacts of the ongoing drug shortage crisis. 

What is the USP position on drug shortages?
 

Shortages are systemic and have long-lasting impacts on patients, health systems, and future innovation. Policymakers, regulators, industry, payors, health systems, and other stakeholders must act to identify and respond to the risks and vulnerabilities in the medicines supply chain to ensure patients have access to the therapies they need.

Actions should address both short-term and long-term needs and include risk mitigation strategies, public and private investment and partnerships, payment reform to reward reliability and manufacturing quality, coordination and accountability and policy reforms. Major areas include:

• Building early warning capabilities
• Establishing a vulnerable medicines list
• Coordinating supply chain resilience and reliability efforts
• Strengthening the manufacturing base for drug products
• Promoting sustainable prices for generic medicines by valuing supply chain resiliency

To advance the conversation on drug shortages to action, USP, ACS-CAN and more than a dozen other organizations have signed on to a Call-to-Action – a suite of options designed to urge US Congress to create meaningful reform to prevent and mitigate shortages – enabling patient access to a consistent supply of quality medicines. USP has also published several papers on topics related to supply chain resilience and remains engaged with decision-makers to advance solutions to end drug shortages.

Without significant market interventions, current drug shortage trends will likely continue or worsen.