In June 2018, a bipartisan group of 31 U.S. Senators and 104 members of the House of Representatives wrote to Scott Gottlieb, MD, then Commissioner of Food and Drugs, to ask for assistance in addressing the Nation’s drug shortage crisis. Their letters urged the Food and Drug Administration (FDA or “the Agency”) to convene a task force to study the problem, prepare a report on the root causes of drug shortages, and make recommendations for enduring solutions.
After reviewing the FDA analysis, published research studies, and stakeholder input, the Task Force identified three major root causes:
- Root Cause 1: Lack of Incentives to Produce Less Profitable Drugs. When market conditions limit manufacturers’ profitability, they reduce a firm’s motivation to maintain a presence in, or enter the market for older preblockedion drugs, and to invest in manufacturing quality and redundant capacity. Manufacturers of older generic drugs, in particular, face intense price competition, uncertain revenue streams, and high investment requirements, all of which limit potential returns. Current contracting practices contribute to a “race to the bottom” in pricing.
- Root Cause 2: Market Does Not Recognize and Reward Manufacturers for Mature Quality Management Systems. All manufacturers must meet regulatory requirements for adherence to Current Good Manufacturing Practices (CGMPs), which set a minimum threshold that companies must achieve in order to be allowed to supply the U.S. marketplace. Mature quality management, however, starts with a foundational quality management system that conforms to CGMPs and 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. Currently, purchasers have only limited information that can be used to assess the state of quality management of any specific facility and have little information linking the drug products they buy with the facilities where they were manufactured. The lack of information does not enable the market to reward drug manufacturers with price premiums for mature quality management, back-up manufacturing capabilities, or risk-management plans, nor does it penalize manufacturers that fail to invest in modernization of manufacturing equipment and facilities to ensure a reliable supply. Thus, manufacturers are more likely to keep costs down by minimizing investments in manufacturing quality, which eventually leads to quality problems, triggering supply disruptions and shortages.
- Root Cause 3: Logistical and Regulatory Challenges Make It Difficult for the Market to Recover After a Disruption. Over the past two decades, the drug supply chain has become longer, more complex and fragmented as companies have located more production overseas (U.S. Department of Commerce 2011 and Van Den Bos 2009) and increased the use of contract manufacturers (Kuehn 2018). Although typical markets would respond to a shortage by increasing production, logistical and regulatory challenges, especially the complexity of the supply chain, can limit the ability of drug manufacturers to increase production. When companies wish to increase production, either by modifying an existing facility or building a new one, they may have to obtain approvals from many different national regulatory bodies, and/or find a new source of active pharmaceutical ingredients (APIs). If a new manufacturer wants to enter the U.S. market and start selling a drug that addresses a shortage, the manufacturer must first develop and file an application with FDA and await its approval.
Recommendations for Enduring Solutions
Although a complex array of factors contributes to the occurrence and prolongation of drug shortages, the root causes themselves are foundational. They reflect market behavior driven by a search for cost savings in the face of a seemingly inexorable rise in health care spending. Quantifying the extent and effects of drug shortages and addressing the problem over the long term will require the active participation of private sector players – purchasers, intermediaries, and manufacturers – as well as the public sector. To address the root causes of shortages, the Task Force offers three recommendations:
- Recommendation 1: Create a Shared Understanding of the Impact of Drug Shortages and the Contracting Practices That May Contribute to Them
- Recommendation 2: Create a Rating System to Incentivize Drug Manufacturers to Invest in Achieving Quality Management System Maturity
- Recommendation 3: Promote Sustainable Private Sector Contracts
FDA Initiatives to Prevent and Mitigate Drug Shortages
In addition to the recommendations above, there are several legislative proposals and planned. FDA initiatives that focus primarily on enabling the Agency to help prevent supply disruptions from leading to shortages and mitigating shortages when they occur.
Improved data sharing
A legislative proposal in the President’s FY 2020 budget would expand the information required to be provided to the FDA about interruptions in manufacturing under section 506C(a) of the Federal Food, Drug, and Cosmetic Act (FD&C Act) and would authorize FDA to impose penalties for failing to provide timely and adequate notification.
Improved data sharing guidance
By the end of calendar 2019, FDA plans to publish a new draft guidance for industry that will further discuss the requirement in section 506C(a) of the FD&C Act for manufacturers to notify FDA of a permanent discontinuance in the manufacture of certain products or an interruption in the manufacture of certain products that is likely to lead to a meaningful disruption in supply of that product in the U.S. The guidance will also request that manufacturers provide additional details about the situation to ensure FDA has the specific information it needs to help prevent or mitigate shortages.
Risk management plan requirement
A legislative proposal in the President’s FY 2020 budget would authorize the Agency 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.
Risk management plan guidance
By the end of calendar 2019, FDA plans to publish a new draft guidance for industry, “Risk Management Plans to Mitigate Potential for Drug Shortages.” This guidance would outline a new recommendation for pharmaceutical stakeholders to develop, implement, and maintain a risk management plan for the purpose of preventing and mitigating drug shortages.
Lengthened expiration dates
A legislative proposal in the President’s FY 2020 budget would authorize FDA to require, when likely to prevent or mitigate a shortage, that an applicant evaluate, submit studies to FDA, and label a product with the longest possible expiration date (shelf life) that FDA agrees is scientifically justified. Shortages can be exacerbated if drugs must be discarded because they exceed a labeled shelf life based on unnecessarily short expiration dates.
ICH Guideline Q12: Technical and Regulatory
Considerations for Pharmaceutical Product Lifecycle Management This internationally harmonized guideline is currently being finalized. This guideline outlines ways to enhance understanding of product and process development and establish an effective pharmaceutical quality system. Incentives for adopting these guidelines include opportunities for less stringent regulatory oversight of certain post-approval manufacturing changes. Global implementation of this guideline, once finalized, could facilitate the efforts of manufacturers who wish to modernize processes and equipment, but have found the regulatory landscape to pose a financial burden.
The Task Force believes that there is no simple solution for remedying drug shortages. The root causes of shortages involve economic factors that are driven by both private and public sector decision making. The types of enduring solutions proposed here will require multi-stakeholder efforts and rethinking of business practices throughout the health care system. A fuller characterization of the true costs of shortages and more comprehensive and reliable information about their effects on patients and the health care system would be an important component, as they would better enable purchasers to factor the costs of shortages into their buying decisions. Recognizing and rewarding quality manufacturing would provide companies an incentive to achieve greater reliability in production, thus reducing the risk of supply disruptions and shortages. Finally, changes in how drugs are paid for, including potential changes in contracting, could enable generic manufacturers to charge sustainable prices for their products. Given the potential scale of impacts from drug shortages, and the fact that these impacts have continually been underestimated, it is likely that drug shortages will continue to persist absent major changes to this marketplace.
The report is available here.