Remember the prescription drug shortages from last year? The problem hasn't gone away

Robin Finley was diagnosed with uterine cancer five years ago and underwent repeated treatments after it reoccured. Then, when she was halfway through a chemotherapy regimen last year, one of the two drugs she was taking became scarce.

She said that no one involved could tell her exactly what had happened to the drug, carboplatin. Its disappearance was just one of many ongoing shortages in the U.S., often of critical medications.

The 68-year-old retired high school English teacher was able to switch to another drug, cisplatin -- an equivalent, but one with potentially more side effects on her heart and hearing. She did lose some of her hearing, but whether that was due to her treatment or age, she doesn’t know.

And when the rounds of chemotherapy were done, she still had cancer.

“It was unsettling and scary, to have a lifesaving drug suddenly disappear, without explanation,” said Finley, of Caledonia, New York, south of Rochester. “Without anybody being able to tell me anything because they didn't know anything.” 

Creating a market for cheaper drugs

Forty years after the Hatch-Waxman Act revolutionized the prescription drug market by providing widespread access to affordable generic versions of the medications, the market is wrestling with a complication some attribute to the law's very success — persistent shortages brought about partly by low prices.

Although the problem burst into the headlines a year ago, it has been ongoing for years with no clear end in sight. In the first three months of 2024, a record 323 drugs experienced a shortage. As of the end of June, the number dropped slightly to 300, a number that includes 27 used in chemotherapy.

Shortages have affected at least 300 drugs at a time for the last 18 months, according to the American Society of Health-System Pharmacists.

In October of last year, as many as 10% of cancer patients reported that their care had been affected, with 68% of them citing difficulty finding substitutes and 45% saying they had faced treatment delays, the American Cancer Society's Cancer Action Network found in a survey.  Others said they had problems related to insurance coverage for alternate therapies. 

The White House has taken some steps to ease the shortages and Congress is considering legislation, but it appears unlikely to make any progress in this election year.

When the Hatch-Waxman Act, or formally the Drug Price Competition and Patent Term Restoration Act, was passed in 1984, it had two goals, said former Rep. Henry Waxman, a Democrat from California. One was to lower prices through competition -- spurred on after duplicate testing procedures were eliminated for generic drugs -- and the other to provide an incentive for the creation of new drugs, accomplished through extra time on patents.

At the time only 19% of all prescriptions were filled with generic drugs. Today that figure is about 90%, according to the U.S. Food and Drug Administration.

Another measure of the legislation's effectiveness is the drop in prices. The average co-pay for a generic drug was $6.16 versus $56.12 for a brand-name drug in 2022, a white paper by the Association for Accessible Medicines found. And the use of generic and biosimilar drugs saved $194 billion for commercial health plans and $130 billion for Medicare. In the last decade, the savings for patients, employers and taxpayers totaled $2.9 trillion. Biosimilar drugs differ from generic drugs in that they are made from living organisms.

“We didn’t really anticipate the great success from the Hatch-Waxman Act,” Waxman said. “We see a great deal of success but we have a problem that is an important one to address and that’s the question of shortages.” 

Manufacturing drugs at a bare minimum cost

The University of Utah Health began tracking shortages of prescription drugs nationally in 2001 and started recording shortages for the American Society of Health-System Pharmacists with regularity, with the average shortage lasting about a year and a half. An earlier peak occurred in 2014 with 320 drugs.  

The shortages are complicated and the result of multiple causes. But those same low prices that make them accessible and popular could be a critical part.

According to the Senate Finance Committee, more than half of the drugs facing shortages cost less than $1 per unit. A report this year from the Association for Accessible Medicines noted that the prices of generic drugs in the United States are on average 16% lower than in other countries and as much as half as expensive as in France, Japan, Mexico and the United Kingdom. 

According to that same report, generic drugs are going through an extended price deflation. In 2022, they accounted for 90.3% of prescriptions and 17.5% of spending. Compare that to 2013, when they made up 86.1% of prescriptions and 28.7% of spending.

All of that means the cost margins to make generic drugs are razor-thin, and could leave manufacturers with little motivation to produce generic drugs. Those that do make generic drugs do so with bare bones infrastructure and little redundancy to keep the drugs flowing if there is a disruption, some experts say.

Many of the limited number of generic manufacturing facilities that remain are outdated and in need of modernization. The majority of generic drugs most often in shortage -- injectable generics -- are produced outside of the United States, specifically in India and China, according to a 2021 study.

When the U.S. Food and Drug Administration inspected an Intas Pharmaceuticals plant in India in late 2022 and found serious problems related to quality assurance, the company was forced to suspend production. One spillover: a shortage of cisplatin, the chemotherapy drug. The factory accounted for about half of the U.S. supply, according to the Washington Post.

Market dynamics have created an economic environment where there are few incentives for manufacturers to create redundancy or resiliency within the system, said Mark Fleury, the principal for policy development in emerging science at the American Cancer Society Cancer Action Network. 

“So most of these drugs are being made at the bare minimum cost with the bare minimum investment to keep plants going,” he said. “Any disruption, maintenance or natural disaster or geopolitical issue can really send ripples through really tight supply chains.”

Manufacturers also can go bankrupt or decide to discontinue a product because it is not profitable. During the pandemic, the same supply chain problems that delayed the production and delivery of cars and other consumer goods also affected prescription drugs, he said.

Dr. Kari Wisinski, an oncologist with UW Health, the University of Wisconsin health system, who primarily treats breast cancer, was among the health care providers who scrambled to find alternatives to chemotherapy drugs in shortage last year — carboplatin and cisplatin, in particular. It was not the first time. She has witnessed shortages on and off for a decade or more with chemotherapy and other injectable generic medications, the ones most affected. 

“I’ve been in practice about 16 years now, but this one was I think the most significant that we’ve seen probably for two or three main reasons,” she said. 

The drugs are commonly used, the shortage was expected to be more prolonged and in some cases, there were no easy substitutes to turn to, she said.

Wisinski was able to work with the American Society of Clinical Oncology on alternative approaches. For breast cancer, she sometimes substituted other chemotherapies that carried different risks, or flipped the order in which the drugs were administered. But for other cancers -- testicular cancer, some ovarian cancers and pediatric cancers -- there is no effective alternative to carboplatin.

During the shortages, pharmacists, physicians and other team members focus on how to find drugs in short supply or determine which alternatives will be effective, but that takes time away from patients. And shortages can create disparities in who receives care. Larger health care systems are better able financially to stockpile supplies when they become aware of an impending shortage. 

“It shifts some of the resources of our health care system to a problem that's important, but it is taking away from other work that people would be doing,” Wisinski said. 

"The wedding was beautiful"

When Robin Finley was first diagnosed in March 2019, she was terrified. She immediately had a hysterectomy and radiation therapy in the hopes that the cancer, which began in the lining of her uterus, would not reoccur. Radiation cut her risk to only 5% but a few months later she experienced abdominal pain and found that it had. She was in a trial regimen that was successful for almost a year, but then had to substitute traditional chemotherapy.

She did have one short period of remission but was mostly in treatment. Before last year, she had never been affected by the shortages that have occurred with regularity throughout the health system.

She was able to attend her daughter’s wedding in June, though she had not been feeling well. The weather cooperated and the wedding was beautiful, she emailed. She was to continue with a different kind of chemotherapy plus immunotherapy once she was feeling better.

But the chemotherapy ceased its effectiveness against the cancer and as of the beginning of October, she was receiving hospice care.

"I am no longer on any treatment plan as the cancer has worked its way around all of them," she emailed.

Curbing the influence of middlemen

What is causing prices to drop so much that it’s sparking shortages? Politicians and others are focusing on the system’s middlemen, which control not only prices but also which prescription drugs are available. Those are primarily group purchasing organizations or GPOs, which buy drugs for hospitals and nursing homes, and pharmacy benefit managers, or PBMs, which manage prescription drug plans for employers or governments.

Large health care companies may own both kinds of organizations; CVS Health has the GPO Zinc and the PBM CVS Caremark.

Sen. Ron Wyden of Oregon, the Democratic chairman of the Senate Finance Committee, is taking aim at the GPOs. 

“The richest country on Earth should not have all these drug shortages of drugs that are essential,” Wyden told NBC. “Right at the heart of the problem is this middleman issue, and these group purchasing organizations are now a central part of the problem." 

Three of the largest GPOs — Vizient, Premier Inc. and HealthTrust Performance Group— dominate the market (the same is true for the PBMs) and together control at least 80% of the hospital purchasing market, according to the Association of Accessible Medicines.

Wyden says they force prices so low that manufacturers discontinue some drugs and are unable to upgrade their facilities.

Proposed legislation from his committee would use the purchasing power of Medicare and Medicaid to try to curb the shortages. It would require three-year contracts at a minimum for generic drugs at a high risk of shortages, commitments to purchase in volume and at stable pricing, contingency contracts with alternate manufacturers and transparency in quality control at plants. It would prohibit exclusive contracts and other anticompetitive practices. 

The committee’s senior Republican, Sen. Mike Crapo of Idaho, said in a statement that the legislation would provide financial incentives to manufacturers, middlemen and health care providers in return for a reliable supply of high quality drugs and a transparent system.

Said Wyden: “When you’re spending $4.5 trillion dollars in America on health care and a big fraction of that is Medicare and Medicaid and money that taxpayers put into health care, I think it’s the responsibility of the Congress to do everything we can to ensure accountability, transparency and the public interest. That’s what our bill does."

Others are looking at the role of PBMs, which determine which drugs are covered by an insurance plan and at what price. The three largest PBMs, CVS Caremark, Express Scripts and OptumRx, a division of United Healthcare, control almost 80% of the market, according to the Pharmacists Society of the State of New York. 

David Gaugh, the interim president of the Association for Accessible Medicines, said that with the consolidation of the PBMs, a number of generic drugs have been pushed out of the market or never made it to the market at all. When drugs are dropped for various reasons, there are not ready replacements, he said.

In addition, the terms imposed by the GPOs and the PBMs discourage manufacturers from agreeing to contracts, he said. The pharmacy reimbursements for generic medications have been driven to such low levels that they are sometimes below a pharmacy’s acquisition costs. That in turn pushes the prices that generic manufacturers can sell their drugs to unsustainable levels, creating a market susceptible to shortages, he said. 

A past president of the American Medical Association, Dr. Jesse M. Ehrenfeld, also pointed to PBMs in an article last year calling for reforms to alleviate shortages. The AMA has long been concerned about the role PBMs play, given their immense influence over the price and accessibility of drugs and the opaque nature of their negotiations with manufacturers and insurers, he wrote. 

He is hopeful that an investigation into PBM business practices by the Federal Trade Commission and legislation in the House and Senate will force PBMs to disclose the prices they negotiate and other terms of their contracts. 

Both GPOs and PBMs reject accusations that their members contribute to drug shortages. The opposite is true, they assert.

The trade association for the GPOs, the Healthcare Supply Chain Association, declined to answer specific questions from NBC but provided responses it had sent to the Senate committee and to the Federal Trade Commission and the Department of Health and Human Services, which jointly requested information as part of an examination of drug shortages.

"GPOs actively work to prevent and mitigate drug shortages, which are fundamentally antithetical to the GPO model," it wrote to the Federal Trade Commission and the Department of Health and Human Services in May. "GPOs offer innovative programs to protect against supply chain interruptions and, further, support government efforts to enhance supply chain resiliency and mitigate drug shortages."

The GPOs negotiate fair deals, create efficiencies in the market, ensure all potential suppliers are considered in bidding and are transparent with its members, the association wrote. They are particularly valuable for smaller or rural hospitals by allowing them access to competitive pricing, it said.

The country's largest GPO, Vizient Inc., said it launched the End Drug Shortages Alliance in 2021 to bring together groups across the supply chain to predict and help to avert supply disruptions. The alliance says it now has more than 80 organizations -- including GPOs, health care providers, pharmaceutical manufacturers, suppliers, distributors and others -- working to end drug shortages.

 "Vizient partners with suppliers to help reduce the likelihood of drug shortages via programs that create and maintain additional buffer inventory of certain essential medications critical to providing patient care," Mittal Sutaria, Vizient's senior vice president for pharmacy contract and program services, said in a statement.

"Our programs have helped over 1,300 hospitals obtain more than 3.5 million units of medications during a drug shortage that would have not  have been available otherwise to treat patients," she said.

The Pharmaceutical Care Management Association, which represents PBMs, said in a statement that PBMs played a key role in creating and maintaining demand for generic drugs. They support legislation to end anti-competitive practices.

“When drug shortages happen due to manufacturing and supply chain challenges, PBMs manage demand for those who need drugs, as they did for hydrochloroquine during the COVID-19 pandemic, broaden coverage for alternative drugs, and empower providers with real time alerts about supply chain shortages,” the association said. 

To predict and to mitigate drug shortages, PBMs support voluntary data sharing and policies that allow for the immediate substitution of biosimilar drugs — drugs that are highly similar and have no differences in effectiveness or safety.

How can shortages be prevented?

The FDA's drug shortage staff already works with manufacturers to try to alleviate problems. Manufacturers are required to notify the FDA if they expect a shortage, allowing the staff to approach other manufacturers in the hopes that they can make up the difference, Gaugh said. But he doesn't expect what has been successful in the past to continue.

"It's only going to get worse because now it's a matter of pricing and availability," he said.

Waxman anticipates many proposals for easing the shortages to focus on raising prices but cautions about raising the price of generic drugs as a way to spur production.

“It’s a different issue, a different time and that’s why we need to invite more creative ideas,” Waxman said. “Some people will say, ‘Well, look, just raise the price of generics.’ That’s not going to solve the problem. We need generics but we need them to be affordable.”

President Joe Biden announced in November 2023 that he was using his executive authority to increase investment in domestic manufacturing of essential medicines and was setting aside $35 million for investment in domestic production, according to the White House.

Other suggestions that have been made include:

• Reward manufacturers that have good records for reliability with loans for infrastructure upgrades, and create a buffer inventory maintained by the Department of Health and Human Services.
• Return some manufacturing to the United States.
• Encourage nonprofit organizations such as Civica, which has a contract with California to produce state-sponsored insulin. "A nonprofit pharmaceutical company is a term most people have not heard before but Civica isn’t the only one and I think we’ll start getting much more familiar with the idea soon," Waxman said.

Jing Dong, an associate professor of business at Columbia Business School in New York City, said that if approval from the Food and Drug Administration fails to account for the pricier measures needed to ensure a reliable supply chain or better production control, consumers could balk at paying extra for those steps.

"As consumers, we only know whether the drug passes the FDA or not, right?" Dong said.

"We want to pay for the cheapest one available out there," she said. "So this doesn't create the necessary rewarding system for manufacturers who are willing to invest in a more robust and healthy supply chain for these drugs. And I think part of the solution we could think about is basically making this information more transparent."

Why don't the prices of drugs like chemotherapy, which are in constant demand, rise when there are shortages and encourage more manufacturing? One issue is the fixed-price agreements that insurance companies and pharmacy benefit managers negotiate with drug manufacturers, she said. They can keep prices depressed in the short term.

"Many hospitals and healthcare providers have long-term contracts with drug manufacturers and suppliers," she said.

Fleury of the American Cancer Society Cancer Action Network agreed that it was critical to pay for resiliency in the manufacturing system -- as both the Senate Finance Committee proposal and one from the White House would do.

"We think that is important because just managing today's crisis doesn't get us out of tomorrow," he said. "I think we need both that short-term toolbox to address day-to-day crises, but we need to really get ourselves out of the economic model that has really created a race to the bottom."

'Biking is one of my passions'

Robin Finley grew up in western New York and taught English for 33 years at the high school in Perry, New York, until she retired. She said she missed the job, dreamt about it, and the teenagers she had in class.

"I would not go back at this point because I've had the joy of retirement but it was a joyful thing to be teaching as well," she said.

Until recently, she said, she loved to hike and bike on the quiet country roads around her home and the path along the Erie Canal. She had been a runner but bought a bicycle instead.

Before recently, Finley paid little attention to drug shortages, never imagining that critical drugs such as the carboplatin she relied on could become unavailable. One of her brothers is a professor who works in cancer research at Wayne State University in Detroit but even he was not able to help her make sense of the shortages.

"It worked very well for me and to think that money issues or something of that nature would keep me and others from getting a life saving drug has become really important to me," she said. "And I would like this to be investigated so it doesn't happen to anybody else."

This story is part of "Out of Stock: Investigating America's Drug Shortage Crisis," a series exploring the causes and possible solutions of a problem plaguing America's health care system.