NEW YORK, NY: In December, a sign will be posted at the pediatrics section at a Walgreens, … [+]
According to the FDA databasethere are currently more than 135 medicines in short supply, with medical devices also scarce. A recent US Senate Committee on Homeland Security and Government Affairs report found that drug shortages in the US increased by 30% between 2021 and 2022. The report also finds that “there has been a shortage of more than 15 critical medicines for more than a decade.”
The US endured medicine shortages for about 20 years, and unfortunately little has changed in that time. Headlines about critical drug shortages certainly feel more frequent and serious. Headlines as “Cancer drug shortages could jeopardize the treatment of chemotherapy patients,” And “Insufficient cancer drugs in the US force doctors to ration life-saving treatments” highlights not only the scarcity of chemotherapy drugs, but also shortages of other life-saving drugs and even emergency room supplies. What is particularly troubling is that while supply chain shortages have eased in many other areas, shortages related to medicines and medical supplies have worsened, suggesting an endemic problem.
While the pharmaceutical and medical device companies’ approach to inventory and foreign outsourcing, coupled with supply chain disruptions, are to blame, a closer look at Wall Street exposes the root of a much deeper problem. All this was predictable and it came at a high cost.
We still remember the severe shortage of personal protective equipment (PPE) that plagued the US healthcare system during the Covid-19 pandemic, which in one case led to reports from nurses in New York attract garbage bags for protection against the virus. A more recent echo was last year’s recall and a serious baby food shortage. My assessment at the time was that incompetence and lack of foresight and contingency planning by the Food and Drug Administration (FDA) and others in government were largely responsible for that debacle. While current cancer drugs may be deficient traced to “serious quality control violations” found at a pharmaceutical factory in India, that’s not the root cause. What is happening now with shortages in a broader sense has a different origin and is clearly not an isolated incident.
Every day we are reminded of our country’s dwindling supply of medicines ranging from penicillin to drugs used to treat chronic conditions even painkillers. In a more disturbing sign of the times, a close co-worker told me about a recent trip he made to the emergency room after sustaining injuries from a fall. While he was there, hospital staff wrapped his knee wound with a compression bandage because he had been told they were out of adhesive bandages. For a country that has all the technology, capabilities, resources and know-how imaginable, this scarcity of basics is very worrying. The current trajectory is unsustainable and fortunately the federal government recognizes the need for urgent action.
The importance of ending America’s dependence on foreign countries for drugs
Discussions about the issue have centered around ending the US’s dependence on foreign countries for medical supplies and active pharmaceutical ingredients (APIs), or the primary components of drugs. According to a Johns Hopkins study, of the 42 countries producing generic APIs for the US market, India, China and Italy were the largest producers. And the aforementioned Homeland Security and Government Affairs Committee report also found that the number of China-based API manufacturers registered with the FDA more than doubled from 2010 to 2015, from 188 to 445.
Last month, Senators Gary Peters (D-MI) and Joni Ernst (R-IA) introduced legislation in Congress to address the issue by advocating extensive coordination among appropriate federal agencies “to determine how potential shortfalls may affect national security and broader public health.” Ernst stressed that “the United States cannot continue to rely on our foreign adversaries, such as China, for critically important materials to meet the medical needs of Americans.” While this is a pressing national security concern, a larger point about how to address shortages is being overlooked.
At the start of the Covid outbreak, in this column I shared my thoughts on the global supply chain disruptions caused by the pandemic and the negative implications of our dependence on China and other countries for critical medicines and APIs. As I’ve explained, the rationale for outsourcing comes down in large part to economics for pharmaceutical companies.
For years it was more cost effective to produce offshore and companies have done just that. In the case of relatively cheap drugs, such as antibiotics, there is no reason to keep a significant stock of such cheap drugs used for a short period of time. Instead, many of these companies have focused on more high-profile, high-risk, expensive biopharmaceuticals and drugs more likely to be used for chronic conditions. An example of this is the recent news from Tel Aviv-based Teva Pharmaceuticals announcement that the company would cut part of its generics portfolio to focus on more profitable business activities focused on growth. Teva is a major producer of the ADHD treatment drug Adderall, which is currently facing shortages in some doses due to increased demand.
Addressing Big Pharma’s relationship with Wall Street is a must
There is no easy solution to the shortages of medicines, medical devices and other supplies we are experiencing. Yes, we must end extreme foreign dependence on manufacturing. Yes, we need to fix broken supply chain problems, and yes, we need to strengthen strategic reserves for certain critical drugs and APIs, just as we’ve done for petroleum. And we need to address the sheer burden of bureaucracy surrounding the process of getting drugs to market, managing the complexity of government reporting, and the additional costs patients incur when ecosystem actors add their markup to the price of drugs. But we also need to look at another fundamental cause of the problem.
For far too long, pharmaceutical companies, along with those in other industries, have made business decisions that favored investors with a profit-driven short-term outlook. As a result, foresight and long-term investment decisions have faded into the background. This situation has resulted in the current predicament, where there is often little to no incentive to prepare strategically for the needs that future pandemics, natural disasters or other crises may bring. This dynamic needs to change, and it requires companies to rethink profitability in a way that focuses on both short-term and long-term sustainability while making a strong value argument in both areas.
It is certainly a delicate balancing act, but one that is achievable. To capture all this, Giacomo Chiesi of the Chiesi Group, an Italian family pharmaceutical company, said “An important advantage of being a family business is the ability to focus on the long term – we look ahead to the next generation of people and not necessarily the next month or the next quarterly report.” This approach provides valuable advice for any business, whether public or private, but it also requires a deliberate and deliberate mindset.
Big pharma is the natural champion for bringing safe and cost-effective therapies to market globally, and it continues to enjoy tremendous competitive advantages in that role. But until current investment criteria are adjusted to place more emphasis on strategic risk management, the pharmaceutical industry will continue to undermine its own credibility. And that also applies to our health and safety.