Drug Shortages Endanger Patients, Hike Costs

Drug shortages affect consumer costs in several ways, including higher out-of-pocket costs, higher insurance premiums, and adverse health.

The chronic and worsening wave of drug shortages in the United States not only imperils patient health, it also costs them more money, a new study shows.

The study released this week by RAND Corporation finds that drug shortages affect consumer costs in several ways, including higher out-of-pocket costs, higher insurance premiums, and adverse health outcomes when the drug is unavailable or unaffordable. In addition, providers paying more for drugs are passing that cost on to patients.

Premier Inc. reported way back in 2011 that drug shortages cost providers at least $200 million a year. The Food and Drug Administration in 2020 identified 43 new and 86 unresolved shortages of active ingredients.

The shortages have worsened since then. The New York Times reported in May that “hundreds of drugs are on the list of medications in short supply in the United States, as officials grapple with an opaque and sometimes interrupted supply chain, quality and financial issues that are leading to manufacturing shutdowns.”

NBC News reported in May that “widespread shortages of cancer drugs are forcing doctors to make difficult decisions about how to treat their patients, including rationing doses and turning to other treatment options with potentially more side effects.”  

The RAND study, commissioned by the Department of Health and Human Services, also found that:

• Drug shortages affect consumers with reduced sales and/or increased prices.
   
• The average drug shortage affects at least a half a million consumers, more than two thirds of whom are ages 65 to 85 (32%), 55 to 64 (24%) and 45 to 54 (17%).
   
• After a drug shortage, sales volumes declined between 28% and 35% compared to the year before the drug entered a shortage. The reduction in volume of generic drug fills was larger (median of 37.6%) compared to brand-name drugs experiencing a shortage (median of 30.4%).
   
• Drug shortages lead to a 16.6% increase in the price of drugs, driven mostly by an increase in the price of generics (14.6%). In some cases the price of generic substitutes was at least three times higher than the price increase of the drug in shortage.

The report highlights potential policies that could be pursued to address cost increases when there are shortages and to ensure sufficient supply of generic drugs.

To address the shortage, the report recommends that federal regulators tap into existing laws and policies that include requiring:

• Drugmakers to notify FDA about drug making discontinuations or delays that are likely to lead to supply disruptions;
   
• FDA to prioritize reviews of applications and inspections, as needed;
   
• Manufacturers of flagged drugs or of any API used for preparation included in those drugs to develop, maintain, and implement, as appropriate, a redundancy risk management plan;
   
• Registrants of drug establishments to report annually on the amount of each listed drug that they manufactured, propagated, compounded, or processed for commercial distribution.
  
  In addition, FDA has already taken steps to prevent or mitigate shortages, including;
  :
• Working with manufacturers to increase production of certain drugs in shortage;
   
• Expediting reviews of submissions to increase supply of products in shortage;
   
• Working with manufacturers to determine if data support extending expiration dates of certain drugs in shortage;
   
• Exercising temporary regulatory flexibility for sources of medically necessary drugs,
   
• Issuing emergency use authorizations, under a public health emergency, for certain therapeutic treatments and patients.