Economic Analysis of the Causes of Drug Shortages. Recommendations

10/28/2011

The following recommendations are based on our examination of the underlying factors that lead to periods of shortage in the prescription drug market, and particularly the underlying market factors that have contributed to the current shortages in the area of sterile injectable oncology drugs.  As noted earlier, our report complements the accompanying FDA report, “A Review of FDA’s Approach to Medical Product Shortages”, which focuses on the FDA’s role in monitoring and responding to shortages.

Policymakers must balance the short-run benefits of tailoring regulatory responses to specific situations against the risk of strategic behavior and consequent reductions in competition in the long run.

Steps that both expedite expansion of supply and maintain product quality in sectors with high capacity utilization could reduce the risk of shortages not only in the current situation, but in the future as well.  To facilitate this, FDA can expedite review of new manufacturing capacity in this area and we understand that FDA is committed to doing this.

Private organizations that purchase drugs and vaccines (including GPOs and insurers), can help to alleviate future shortages by strengthening the failure-to-supply requirements in their contracts in exchange for increases in price.  Such contract changes are likely to lead manufacturers to invest in extra capacity of both production lines and API.

 

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