1 Clinical Pharmacology & Therapeutics 2012 Vol: 93(2):170-176. DOI: 10.1038/clpt.2012.220

Economic and Technological Drivers of Generic Sterile Injectable Drug Shortages

Over the past few years, an increasing number of critically needed medicines have been in short supply. Using economic theory to frame the drug-shortage problem, this paper explores why and how manufacturing-quality problems could combine with other economic and technological factors to result in shortages of generic sterile injectable drugs. The fundamental problem we identify is the inability of the market to observe and reward quality. This lack of reward for quality can reinforce price competition and encourage manufacturers to keep costs down by minimizing quality investments. The US Food and Drug Administration’s (FDA’s) need to use its regulatory flexibility, on behalf of patients, to avoid shortages of medically necessary drugs may further strengthen the incentive to “push the envelope” on quality. These dynamics may have produced a market situation in which quality problems have become sufficiently common and severe to result in drug shortages.

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Figures
Figure 1: Reported reasons for sterile injectable drug shortages in 2011. Figure 2: Economic drivers of manufacturing quality problems. Figure 3: Factors that turn a supply disruption into a shortage. Figure 4: Market concentration in select generic sterile-injectable classes. Information from IMS Health, National Sales PerspectiveTM.
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References
  1. Jensen, V. & Rappaport, B.A. The reality of drug shortages-the case of the injectable agent propofol. N. Engl. J. Med. 363, 806-807 , (2010) .
  2. FDA letter to Hon. Elijah Cummings, Committee on Oversight and Government Reform, 23 July 2012, Link , .
  3. US Department of Health and Human Services. 2011 ASPE Issue Brief: Economic Analysis of the Causes of Drug Shortages Link , .
  4. Friedman, R. Aseptic processing contamination case studies and the pharmaceutical quality system. PDA J. Pharm. Sci. Technol. Vol. 59, No. 2, March-April 2005 , .
    • . . . When production line operators perform manual activities near an insufficiently protected product, they raise the risk of microbial contamination.4 Inadequately maintained or designed equipment has also resulted in particles being shed into the product, including metal or glass shavings.2 . . .
  5. Bureau of Labor Statistics. Current Employment Survey, Link extracted July 2012 , .
    • . . . Employment in pharmaceutical manufacturing as a whole was hard hit during the recession, with the number of pharmaceutical manufacturing jobs shrinking by 15% from December 2007 to June 2009.5 Cost cutting appears to have become, at least for the time being, a strategic focus of pharmaceutical companies . . .
  6. Indystar.com. Eli Lilly will shed 170 jobs in manufacturing, quality control <> , .
    • . . . Some companies made direct cuts to their manufacturing and quality control operations.6 The threat of looming job cuts may have caused at least some of the best-qualified employees to leave and find employment elsewhere, leaving behind less-qualified workers.7 Manufacturers of sterile injectables appear not to have been immune to cost-cutting initiatives.8 . . .
  7. Thomas, P. Derek Lowe: where are pharma’s jobs going?: insights on the 2012 job market from an industry insider Link , .
    • . . . Some companies made direct cuts to their manufacturing and quality control operations.6 The threat of looming job cuts may have caused at least some of the best-qualified employees to leave and find employment elsewhere, leaving behind less-qualified workers.7 Manufacturers of sterile injectables appear not to have been immune to cost-cutting initiatives.8 . . .
  8. Thomas, K.. Lapses at big drug factories add to shortages and danger. New York Times, 17 October 2012 , (2012) .
  9. Yurukoglu, A.. Medicare reimbursements and shortages of sterile injectable pharmaceuticals. National Bureau of Economic Research Working Paper No. 17987 , (2012) .
    • . . . Some have argued that the Medicare Modernization Act of 2005 (MMA) had an adverse impact on profit margins for generic sterile injectable drugs after it sharply lowered reimbursement rates that providers receive for provider-administered sterile injectables and other Part B drugs.9,10 This reimbursement was set by the MMA at 106% of the average selling price, which is roughly the average of actual transaction prices paid by providers for any version of a given molecule . . .
  10. Conti, R.M.. An economic assessment of the causes and policy implications of current specialty drug shortages. Testimony in front of the Senate Finance Committee, “Drug Shortages: What Causes Them and What Can We Do About Them?” 7 December 2011 , (2011) .
    • . . . Some have argued that the Medicare Modernization Act of 2005 (MMA) had an adverse impact on profit margins for generic sterile injectable drugs after it sharply lowered reimbursement rates that providers receive for provider-administered sterile injectables and other Part B drugs.9,10 This reimbursement was set by the MMA at 106% of the average selling price, which is roughly the average of actual transaction prices paid by providers for any version of a given molecule . . .
  11. Jacobson, M., Alpert, A. & Duarte F. Prescription Drug Shortages: Reconsidering the Role of Medicare Payment Policies. Health Affairs blog, 29 May 2012. Link , .
    • . . . However, trends in shortages of drugs affected by the payment reform are similar to the pattern among drugs that should not have been affected by it.11 In addition, many industry observers have told us that price competition had been a feature of the sterile-injectable industry long before the MMA—something that is consistent with the dynamics we have discussed in the previous section. . . .
  12. IMS Health, IMS National Sales PerspectiveTM, Year 2008, Data extracted June 2012 , .
  13. US Food and Drug Administration. Guidance for Industry: Sterile Drug Products Produced by Aseptic Processing - Current Good Manufacturing Practice. Link , .
  14. Allen L.V., Jr, Popovich, N.G. & Ansel, H.C. Section VII: sterile dosage forms and delivery systems. In: Ansel’s Pharmaceutical Dosage Forms and Drug Delivery Systems 9th edn. (Lippincott, Williams & Wilkins, Baltimore, MD, 2010) , .
    • . . . Not only must drugs be produced in specialized facilities, but their production is often committed to specific production lines within those facilities because of the drugs’ chemical properties, presentation form, and potential for cross-contamination.14 Most drugs’ chemistry requires that they be produced using a complex process of aseptic processing, in which the drug product, container, and closure are subject to sterilization separately and then brought together . . .
  15. Fox, E.. Drug shortage update current status & significant trends. University of Utah Drug Information Service Link , (2011) .
    • . . . Such coproduction of drugs is the reason that drug shortages have “traveled” across therapeutic classes.3 For example, after one key facility with cytotoxic lines shut down in early 2010, the number of shortages of chemotherapy drugs increased from 4 to 24 (ref. 15). . . .
  16. US Food and Drug Administration. A Review of FDA’s Approach to Medical Product Shortages, October 2011 Link , .
    • . . . Generally low inventory levels further increase the risk that a supply disruption will turn into a drug shortage.16 Such inventory practices reduce expenses by eliminating surplus production and inventory holding costs but increase the risk that even a modest disruption in supply will result in shortage . . .
  17. Kweder & Dill. Clin. Pharmacol. Ther.(in press) , (2013) .
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