Drug shortages reach record high in the United States due to corporate greed

America has more drug shortages than ever before and some blame business entities that have endangered the market for vital generic drugs by infusing corporate greed into the system.

The Biden administration is taking a look at how those group purchasing organizations (GPOs) and drug wholesalers are fueling generic drug shortages.

The United States is facing its largest-ever shortage of medicines, with a staggering 323 drugs currently in short supply, according to data from the American Society of Health-System Pharmacists (ASHP).

This concerning trend, highlighted in the ASHP’s survey report, underscores the critical challenges hospitals and patients are grappling with due to disruptions in treatment.

Among the drugs experiencing shortages are essential and life-saving medications such as oxytocin, Rho(D) immune globulin, chemotherapy drugs, pain relievers, sedatives, and ADHD medications. The shortage crisis is not limited to niche or specialized drugs but encompasses a broad spectrum of pharmaceuticals, impacting patient care across the board.

While some shortages can be attributed to manufacturing and quality issues, delays, and discontinuations, the majority stem from a deeper structural problem within the pharmaceutical industry. The concentration of market power among middlemen, particularly group purchasing organizations (GPOs), has exacerbated the shortage crisis.

“While the concept of GPOs initially aimed to leverage collective purchasing power to secure cost savings for healthcare providers, the practices of these corporate prescription drug middlemen have contributed to a myriad of challenges, including drug shortages,” said consumer advocate Lisa McCormick. “GPOs negotiate contracts with pharmaceutical manufacturers for healthcare facilities such as hospitals and clinics to purchase medications and medical supplies in bulk, but they are part of a syndrome of corporate greed that turned America’s health care system into a business model that demands your money or your life.”

In a Request for Information jointly issued by the Federal Trade Commission (FTC) and the Department of Health and Human Services (HHS), the government agencies said they want to learn more about market concentration, contracting practices, and regulatory exemptions used by the industry.

As part of its ongoing inquiry into pharmacy benefit managers (PBMs) and their impact on the accessibility and affordability of prescription drugs, the Federal Trade Commission issued compulsory orders to CVS Caremark; Express Scripts, Inc.; OptumRx, Inc.; Humana Pharmacy Solutions, Inc.; Prime Therapeutics LLC; MedImpact Healthcare Systems, Inc., Zinc Health Services, LLC, and Ascent Health Services, LLC.

These GPOs negotiate drug rebates on behalf of other PBMs and the compulsory orders require them to provide information and records on their business practices.

The government said it is looking for any evidence that competing drug suppliers are being disincentivized from competing in generic markets; how a lack of competition between GPOs and drug wholesalers is impacting patients, pharmacies and providers, in particular those that are smaller or rural; or other potential causes for “chronic” generic drug shortages.

“The prevalence of sole-source contracts and locked-in purchasing agreements effectively stifles competition in the pharmaceutical market,” said McCormick, who has championed reform as a 2018 US Senate candidate and as a citizen activist. “Manufacturers that secure contracts with GPOs gain a captive customer base, reducing incentives for other suppliers to enter the market or expand their operations. This lack of competition contributes to market consolidation, with a few manufacturers dominating the production of generic drugs.”

GPOs buying supplies for hospitals have created a market dynamic that favors monopolistic practices. Sole-source contracts and locked-in supplier purchasing agreements leave hospitals with limited options and little flexibility to address shortages. This system has led to rampant consolidation in the manufacturing sector, with nearly half of all generic drugs having a single manufacturer.

“GPOs also prioritize cost savings over supply chain resilience, skimming fees from pharmaceutical manufacturers and hospital administrators. This profit-driven approach has resulted in a money-hungry race to the bottom, with manufacturers cutting corners on quality to meet demand,” said McCormick.

“The Biden administration has acknowledged the severity of the drug shortage crisis and has taken initial steps to address it, such as exploring Medicare payment incentives for hospitals to maintain buffer stocks of critical medicines and investing in domestic manufacturing of active pharmaceutical ingredients aim to bolster the supply chain,” said McCormick. “However, these measures only scratch the surface of a much deeper problem.”

“America is divided between liberals fighting for a government run, single-payer health system and conservatives who argue that access to medicine is a privilege reserved only for whoever can afford it,” said McCormick. “America is the only developed country in the world that does not guarantee coverage for every citizen.”

The Federal Trade Commission (FTC) has launched an inquiry into GPOs to understand their impact on market concentration and contracting practices. Public comments on this issue have highlighted the urgent need for reforms to address the root causes of drug shortages.

The shortage of essential medications is not merely a logistical inconvenience; it is a matter of life and death for many patients. Every day that passes without meaningful reform is a missed opportunity to ensure access to vital healthcare resources and prevent unnecessary suffering.

The largest PBMs are integrated with the largest health insurance companies and wholly-owned mail-order and specialty pharmacies. They influence which drugs are prescribed to patients, which pharmacies patients can use, and how much patients ultimately pay at the pharmacy counter.

PBMs also have substantial influence over independent pharmacies, which have collectively voiced concern that PBMs negotiate and leverage contractual terms with these pharmacies that are confusing, unfair, arbitrary, and harmful to their businesses.

The FTC’s inquiry is aimed at shedding light on several PBM practices, including charging fees and clawbacks to unaffiliated pharmacies; steering patients towards PBM-owned pharmacies; potentially unfair auditing of unaffiliated pharmacies; the use of complicated and opaque pharmacy reimbursement methods; and negotiating rebates and fees with drug manufacturers that may skew the formulary incentives and impact the costs of prescription drugs to payers and patients.

Prescription drug middlemen, specifically group purchasing organizations (GPOs), play a pivotal yet often overlooked role in exacerbating drug shortages in the pharmaceutical industry.