Drug shortages and the mythical market
by Michael Halasy
Drug shortages and the mythical market
I read an interesting article by Gehrett in the January issue of JAMA.
In response to the increased utilization of generic drugs (currently about 70% of drugs used in the US), a fact which should be applauded, we have seen a frightening increase in drug shortages. In Emergency Medicine, three of them have affected me directly as they are commonly used drugs. One, metoclopramide is useful for headaches, nausea, and gastric motility. Another, etomidate, is a useful sedative that is the staple drug in RSI (Rapid Sequence Intubation) kits across the country, and used on EMS ambulances extensively. There is a reason. Etomidate has lower cardiopulmonary depression than other sedatives like diprivan aka propofol. Another drug that is in shortage is Compazine, aka prochlorperazine, which is extensively used for migraines, as well as benign vertigo. In fact, it remains one of my favorite “staple” drugs.
Per the article, in 2005, the Center for Drug Evaluation and Research only noted 62 shortages through the year. 2009 saw 157 shortages, 2010, 178. 2011 had estimates of between 200 and 300. 75% in 2010 were sterile injectables. Ya know, The medications most frequently used in hospital settings. Many of these drugs are made at one site, by only one company, which limits supply and increases the chances of disruption.
While Gehrett does note that 80% of raw materials come from foreign countries, there does not seem to be any shortage of raw materials that have been documented or noted.
The only single, commonality, is that all of the medications we have seen in shortage status are off patent, generic medications, that are harder to formulate than some others, and have a definable shelf life.
President Obama has signed legislation that will give the FDA more latitude in heading off shortages, but this problem plainly reports to a market problem. Demand exists…supply is stable, but profits are not high on these medications. This would suggest that companies are simply avoiding injectable generics, and focusing on more profitable patented medications.
Meanwhile, cancer trials have been put on hold, while companies focus on profit margins. Headache patients suffer and receive other medications that may be suboptimal for them. This situation is only worsening with time, and should be cause of concern for all Americans.
I believe a specific part of the problem is that injectibles have very high manufacturing standards (and costs) but generic injectables have very low margins. I don’t think we find the same issues in the pill market.
Anecdotally it seems the FDA has been very aggressive about penalizing or shutting down manufacturing plants – need some harder data though.
“This would suggest that companies are simply avoiding injectable generics, and focusing on more profitable patented medications. “
I think these are often two seperate sets of companies, once the med goes generic the original patent holder may be discontinuing in the face of generic firm competition.
Hi Michael:
and glad to see you writing some more. This statement strikes me as unusual:
“all of the medications we have seen in shortage status are off patent, generic medications, that are harder to formulate than some others, and have a definable shelf life. President Obama has signed legislation that will give the FDA more latitude in heading off shortages, but this problem plainly reports to a market problem. Demand exists…supply is stable, but profits are not high on these medications. This would suggest that companies are simply avoiding injectable generics, and focusing on more profitable patented medications.”
I would have to ask what the process is for mking these tabs as well as the injectibles. Having worked for Baxter and piloted the CD and CF Dialyzers (Cuprophan) and a former pill pusher as well as manufacturing injectibles, is it the manufacturing process and the investment making these products scarce or the raw materials such as sodium levothyroxine or pid snot for heparin?
In any case the gov coukld finance the capital for manufacturing as it will not come off of Wall Street which is more inclined to gambling today than 3 to 5% returns.
The core problem here is the same core problem everywhere (in the US): nobody — no organized interest — is busy at work, minding the store for the average guy: IOW, total deunionization.
The simple legislated answer is also the same: legally mandated, sector wide labor agreements, wherein everyone involved in the same occupation, by law, works under one collectively bargained contract with all employers. In every modern OECD economy where this labor market setup is in place the average person is king — in every where not, the same are on the permanent downhill slide.
Just don’t expect the men who predominate in economics to ever mention the theoretically perfect answer (“sector wide labor agreements) outloud. The instinctive pack hunter human male seems incapable of gettingpast whether it is already a national topic. Women will accept a good concept on merit only — not because they are receptive — but because as instinctive individual gatherers women can actually think for themselves.
The core problem here is the same core problem everywhere (in the US): nobody — no organized interest — is busy at work, minding the store for the average guy: IOW, total deunionization.
The simple legislated answer is also the same: legally mandated, sector wide labor agreements, wherein everyone involved in the same occupation, by law, works under one collectively bargained contract with all employers. In every modern OECD economy where this labor market setup is in place the average person is king — in everywhere not, the same are on the permanent downhill slide.
Just don’t expect the men who predominate in economics to ever mention the theoretically perfect answer (“sector wide labor agreements”) outloud. The instinctive pack hunter human male seems incapable of gettingpast whether it is already a national topic. Women will accept a good concept on merit only — not because they are receptive — but because as instinctive individual gatherers women can actually think for themselves.
The core problem here is the same core problem everywhere (in the US): nobody — no organized interest — is busy at work, minding the store for the average guy: IOW, total deunionization.
The simple legislated answer is also the same: legally mandated, sector wide labor agreements, wherein everyone involved in the same occupation, by law, works under one collectively bargained contract with all employers. In every modern OECD economy where this labor market setup is in place the average person is king — in everywhere not, the same are on the permanent downhill slide.
Just don’t expect the men who predominate in economics to ever mention the theoretically perfect answer (“sector wide labor agreements”) outloud. The instinctive pack hunter human male seems incapable of getting past whether it is already a national topic. Women will accept a good concept on merit only — not because they are receptive — but because as instinctive individual gatherers women can actually think for themselves.
MichaelH, The case of vaccines is easy to see and the government must provide the money with pharma providing expertise. But this is a “unknown” demand problem interacting with short shelf life. You are describing high demand and, apparently, low competition. So why doesn’t the “efficient” market just charge accordingly?
Also, are the shortages worldwide or just US?
I know that Canada is having the same issues. The reasons are varied, but over the past decade a couple of things have happened.
1. Raw materials are increasingly being purchased from countries like China or India who have “lax” QI, and formulations can be contaminated or not meet standards. This is being done to lower raw material costs.
2. The pharmaceutical companies have consolidated considerably, resulting in many drugs only being made by one manufacturer. With limited capacity, and at least in OTHER countries-price controls on generics, they are choosing not to use capacity to make generics.
3. There are also third party payors in the mix, who often have contracts that limit price increases on generic medications.
SO, yes, there are high demands, and certainly raw materials could be contributing to this, but it is somewhat interesting that non generic medications are not in shortage. Only cheaper, “staple” medications. Which, at least to me, indicates a problem with capacity and market efficiency.
You guys are too funny. “We *demand* this drug be available for $5!!! Everyone should have this drug readily available!”
[pause]
No one is making the drug! Look at how the market has failed!
Sarath,
The “market failure” part is how these drugs are far less profitable for drug manufacturers than say, a 20th “mee too” Viagra-like clone, ONLY because these drugs have gone off patent, not because market demand does not exist for them. Meanwhile, there is little real consumer demand for yet-another patent Viagra clone, but the drug companies choose to heavily market and distribute that particular drug because it has extremely high profit margins.
Real consumer demand (and medical needs) go unmet, while drugs no one needs are pushed on TV, radio, Internet, print like crazy. This is the very DEFINITION of “market failure”, not an example of the contrary.
Once again, the incentives in for profit medicine is not well aligned with consumer medical needs or the best interests of the public.
If there’s a drug for naivety, you should be on that too. This problem is wider than just injectables. The root cause is we have a govt that has given up on enforcing antitrust laws (see Barry Lynn’s “Cornered: The New Monopoly Capitalsm and the Economics of Destruction).
“Novartis, for instance, makes both branded and generic versions of Ritalin; Shire Pharmaceuticals does the same for Adderall XR. In both cases, the companies have ensured that supplies of branded drugs are adequate while allowing generic versions to go wanting.”
http://www.nytimes.com/2012/01/01/health/policy/fda-is-finding-attention-drugs-in-short-supply.html?_r=2
We have too many people. We can’t afford to educate them, house them, or care for them. This is a way to alleviate such problems.
Are you suggesting we come and euthanize you, C. fronke?
Except that no one is demanding any given price. That’s the part you invented to cause this to make sense to you.