Causes

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. Pharmaceutical companies in various countries are also lobbying for longer patent protection before generic drugs can be released; this concern is part of Canada-European Union free trade discussions. For a discussion, see here. 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. In August 2013, it was said to be behind a shortage of essential drugs in India. This “cause” has little traction in Canada where many provinces claim that we pay inflated prices for generics when compared with other countries. See Council of Federation report of July 2012 and Supreme Court ruling on Ontario’s ban on in-house generics in November 2013.
    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 or Health Canada. 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. In May 2014, the same cause was invoked to explain a shortage of paclitaxel in Canada, attributed to Health Canada’s overzealous interpretation of guidelines (see here).
    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. The 2014 shutdown of Biolyse, which produced 80% of the paclitaxel used in Canada, putting 60 people out of work and resulting in an 80-fold increase in price for the product, which would be supplied by an American firm (see here). 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. Political sanctions against countries, such as Iran (e.g. see here).
    12. Moral objections to executions in some US states results in refusal to supply lethal drugs.
    13. 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. In April 2013, the US Supreme Court refused to hear an appeal from a company convicted by jury for using these anti-trust practices. 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. No evidence suggests that Canadian GPOs violate anti-trust laws. For more on this idea of GPO as a cause of drug shortages, see references below.*

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

Philip Zweig and Robert A. Campbell, Letter: Response to McKeever et al below [on GPO cause of the drug shortage] Clinical J of Oncology Nursing, 18.2: 143-145, April 2014.

Christian DeRoo, Pay to Play: The impact of Group Purchasing Organizations on the drug shortage, American University Business Law Review 3.1, 227-248, 18 March 2014.

Mollyann March and Philip Zweig, GPO’s fuel drug shortages, Baltimore Sun, 7 February 2014

Elizabeth Rosenthal, The soaring cost of a simple breath, New York Times, 12 October 2013. [GPO's are mentioned toward the end of this long article]

Margaret Clapp, Michael A. Rie, Philip L. Zweig, How a cabal keeps generics scare, New York Times, 2 September 2013.

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. Sign their petition, launched 25 December, 2013.

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. MossHealthcare 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

Prakash S. Sethi, Group Purchasing Organizations: An Undisclosed Scandal in the U.S. Healthcare Industry. Palgrave/Macmillan, 2009

GPOs are the “bad guy” in the film Puncture, based on a true lawsuit, and released January 2012. For a review, read here.
For a list of some GPO’s click here. In this report the purchasing volume of the five largest US GPO’s was $154.7 billion.
In 2013, GPO’s launched a website to discredit the people and claims of Physicians against Drug Shortages. There is only one post as of September 2014.