Discussions with the US Pharmacopoeia on drug shortages

Since 2019, the severity and duration of shortages have increased. As of December 31, 2023, the U.S. FDA's drug shortage database recorded a total of 125 drug shortages 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 risks in the complex drug supply chain, also showed an increase in the average duration of drug shortages, which was over three years in 2023, compared to two years in 2020. The persistence of drug shortages is due to intensifying economic forces and the market's inability to resolve them with traditional free-market responses.

Although drug shortages can occur in any drug or therapeutic area, some drugs are more at risk due to certain vulnerability factors. For example, in 2023, 53 percent of drugs in short supply were sterile injectables. The drugs in short supply cost 8.5 times less than those not in short supply ($46 versus $392), and over half of the drugs in short supply cost just under $5.

When we examined shortages of solid oral medications, which accounted for 32 percent of all shortages, 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 drugs—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 shortages.

There is not just one cause of drug shortages; however, the root cause and primary driver of most drug shortages is unsustainably low prices. For example, data shows that lower-priced drugs—often generics—are more likely to experience shortages because manufacturers lack incentives to continue producing those products. Findings from the USP's Annual Drug Shortages Report show that there is a race to the bottom in generic drug pricing dynamics, resulting in product discontinuations (primarily low-cost generics in solid oral form) increasing 40 percent from 2022 to 2023, from 100 drugs in 2022 to 140 in 2023.

Lower margins also undermine initiatives to ensure a resilient supply chain by limiting manufacturers' ability to reinvest in maintenance of their manufacturing facilities, production upgrades, and quality assurance and management.

In addition to low prices, the USP has identified three other risk factors associated with drug shortages:

• Geographical concentration of production. Drug products consisting of APIs and/or finished doses manufactured or produced at one or a few locations are more vulnerable to shortages. Geographical concentration may also lead to greater impacts in the event of a shortage due to limited opportunities to source/produce APIs or other materials.
• Concerns about manufacturing quality. In companies with a history of quality problems, the medicines manufactured there are likely to be more vulnerable.
• Manufacturing complexity: Medicines with higher manufacturing complexity, such as sterile injectables, are more vulnerable to shortages. The need for dedicated production lines for certain product categories (e.g. antibiotics such as amoxicillin) and/or complex chemical synthesis of the active ingredient may limit a manufacturer's ability to produce a medicine in the event of a supply chain disruption. The complexity of pharmaceutical formulations can be assessed using the following criteria:
  • Dosage forms
  • Number of underlying ingredients and main raw materials
  • Expertise in the synthesis of the molecule
  • Storage requirements
  • Size and molecular structure of the API

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

In the short term, manufacturers can continue to track supply chain disruptions and promptly report them to FDA to help regulators mitigate the impact of a disruption and reduce the risk of shortages. A good understanding of the global supply chain and vulnerability factors through data can also better enable manufacturers to prevent the consequences of drug shortages. Data gaps exist, particularly 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 company has control over procurement. [MM1] for these materials. Increased transparency regarding the volume and geographic location of API production would enable manufacturers to better monitor their suppliers and understand how best to respond in the event of disruptions.

Going forward, policy adjustments and diversification of geographic locations of manufacturing sites are needed. Policymakers and regulators from federal agencies and nongovernmental organizations should develop safeguards based on early warning systems, create a list of at-risk drugs, coordinate supply chain resilience and reliability through payment and purchasing models that value and promote supply chain quality, strengthen pharmaceutical manufacturing capacity through the development and adoption of advanced manufacturing technologies, and create incentives to promote sustainable pricing for generic drugs.

We need a fundamental market shift to realign supply and demand and create a predictable, sustainable and resilient supply chain that can reliably deliver essential medicines to patients. Policymakers and public and private drug buyers must value quality and resilience through sustainable drug pricing. This shift will also require that we expand the geographic diversification of manufacturing sites and encourage domestic production of key drug components through price incentives that encourage the use of excess domestic manufacturing capacity.

In addition to shifting markets, government and non-government actors need to invest in early warning systems and develop a medicines at risk list that identifies medicines most at risk of shortages based on key risk factors. This will provide insights that can inform policy and purchasing decisions.

Greater transparency, collaboration, and new technologies have led to some progress in addressing drug shortages. It is encouraging that policymakers appear to recognize that fundamental change is needed to make the generic drug market more sustainable. For example, the Senate Finance Committee's proposal to address shortages is an example of how policymakers are trying to address these economic factors. Many of the concepts in this proposal are consistent with the USP's recommendations, but we would like to add three areas for consideration: identifying risks, rewarding resilience, and incentivizing advanced manufacturing technologies.

In the short term, we will continue to need better tools to understand supply chain vulnerabilities and shortage risks and to intervene in a proactive and coordinated manner. Only by addressing both the short-term and long-term aspects of this problem can we minimize the impact of the ongoing medicine shortage crisis.

Shortages are systemic and have long-term impacts on patients, healthcare systems and future innovation. Policymakers, regulators, industry, payers, healthcare systems and other stakeholders must act to identify and address the risks and vulnerabilities in the medicines supply chain so that patients have access to the therapies they need.

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

• Establishment of early warning systems
• Creation of a list of medicines at risk
• Coordinating efforts to ensure supply chain resilience and reliability
• Strengthening the pharmaceutical production base
• Promoting sustainable prices for generics by strengthening supply chains

To advance the conversation about drug shortages, USP, ACS-CAN, and more than a dozen other organizations have joined a Call to Action – a set of options designed to urge the U.S. Congress to develop meaningful reforms to prevent and mitigate shortages to ensure patients have access to a consistent supply of high-quality medicines. USP has also published several articles on topics related to supply chain resilience and continues to work with decision makers to find solutions to end drug shortages.

Without significant intervention in the market, the current trend towards drug shortages is likely to continue or even worsen.