Possible Causes of the Drug Shortage

The causes are unknown to most people –patients, pharmacists, and physicians–who are dealing with this problem.

Those who do know the causes are reluctant to publicize them.

The following is a list of possibilities:

1. Big pharmaceutical companies discontinuing or actively combatting generics in order to enhance sales of newer, more expensive, brand-name drugs. Sometimes companies discourage sales of their own cheaper brands or arrange “deals” in marketing. For an example, click here. For another example, in 2013 a lawsuit has ensued between two American pharmaceuticals Hospira and ICU  over marketing practices to Canada. Sometimes pharmaceuticals “tweak” their drugs slightly to apply for a renewed patent in a process called “evergreening.” A landmark case in India, rejected evergreening of an important cancer drug. For an April 2013 discussion of pay-for-delay, click here.
2. Prices of generic drugs fixed at prices too low to cover manufacturing costs (e.g., in US Medicare). In June 2012, this cause was endorsed by a report of the US Committee on Oversight and Government Reform and by pharmaceutical lobby groups in Europe.
3. Pharmacists choosing not to stock cheaper drugs because profit margin is too narrow.
4. Shortage of substrate (materials to make drugs).
5. Growing demand for medicines in developing world.
6. Manufacturing or quality control breakdowns within production lines owing to lack of investment to improve or maintain standards.
7. Manufacturing slowdowns owing to greater vigilance by FDA. This cause was characterized as “meaningless red tape” by a report of the US Committee on Oversight and Government Reform in June 2012. The FDA strongly disputes these charges in a letter of 23 July 2012.
8. Canada has almost no drug manufacturing industry of its own and is vulnerable to changes elsewhere. Massive layoffs and closures at pharma companies in 2010-12 are said to be owing to the expiration of patents on blockbuster drugs. These changes further distance sites of manufacturing from Canada.
9. Legislative changes to financing arrangements for generic drugs, for example in Ontario and Alberta, resulting in declining profitability for pharmacists and manufacturers. These changes provoke cause #3 above. Pharmacists decide not to stock the drugs, and manufacturing further declines in response to lower demand.
10. No Canadian controls require the pharmaceutical industry to warn of shortages in advance, let alone provide the reasons. Notification is voluntary and, so far, incomplete. Go to Tracking page for current lists.
11. Effect of large Hospital Group Purchasing Organizations in USA–creating a “monopsony” (single buyer, many sellers) [also "monopsomy"]. Their unethical and anti-trust business practices, such as vendor kickbacks or “pay for delay” schemes, have placed profit above manufacturing standards and patient supplies. For a shocking example from July 2012, click here. For an April 2013 discussion of pay-for-delay, click here. This cause figured in a report of the US Committee on Oversight and Government Reform, 15 June 2012.       Canada has at least three GPO’s one Medbuy is based in London Ontario. Another HealthPro is in the Toronto area, and a third Sigma Santé is in Montreal. In 2013, clients of the GPO Medbuy in southwestern Ontario experienced an under-dosing error of chemotherapy drugs, which Medbuy blamed on the compounding pharmacy that supplied the drug. In May 2013, it emerged that the Canadian GPO, Health Pro, is a client of the American pharmaceutical Hospira and that 25 of the 136 drugs that Hospira has contracted to supply to HealthPro are on back order. For more on this idea of GPO as a cause of drug shortages, see references below.*
12. Political sanctions in countries such as Iran (e.g. see here)

* To understand the large American hospital Group Purchasing Organizations, see any of the following

Roxanne Nelson, GPOs to Blame for Drug Shortages, says Physicians Group, Medscape Medical News, 24 January, 2013 [free account; password will be needed].

J. Woodcock and M. Wosinska State of the Art: Economic and Technical Drivers of Generic Sterile Injectable Drug Shortages, Clinical Pharmacology and Therapeutics 93.2 (Feb 2013): 171-76 online 23 January 2013

Physicians Against Drug Shortages, founded 10 December 2012

Dr. Joel Zivot quoted in article by Kristina Fiore, 18 October 2012.

North Coast Medical, GPO’s Business Practices Questioned, 6 September 2012.

GPO Drug Shortage diagram, designed by P.L. Zweig, 2012.

Diana L. Moss, Healthcare Intermediaries: Competition and Healthcare Policy at Loggerheads? American Antitrust Institute, White Paper, 7 May 2012.

US Government Accountability Office (GAO), Group Purchasing Organizations: Federal Oversights and Self Regulation, 30 March 2012.

Michael F. Cannon, What is causing drug shortages? Cato@Liberty, 16 March 2012.

Patricia Earl and Philip L. Zweig, Connecting the Dots: How Anticompetitive Contracting Practices, Kickbacks, and Self-Dealing by Hospital Group Purchasing Organizations (GPOs) caused the U.S. Drug Shortage, White Paper, 10 January 2012.

John Wilkerson, HHS rejected ASP Hike after weighing GPO, drug distribution issues, InsideHealthPolicy.com, 9 November 2011

Robert E. Liton,  Hal J. Singer, Anna Birkenbach, ‘An Empirical Analysis of Aftermarket Transaction by Hospitals,’ Journal of Contemporary Health Law and Policy, vol. 28, no. 1, Fall 2011