Economic Analysis of the Causes of Drug Shortages. Supply Disruptions

10/28/2011

The structure of the sterile injectable market, the recent expansion in volume and scope, and the consequent very high level of capacity utilization, means that small disruptions to supply — such as may occur because of quality problems — which would otherwise be absorbed through diversion of capacity, can lead to cascading and persistent shortages.  Moreover, high rates of capacity utilization may also limit the ability of manufacturers to perform routine maintenance and keep facilities in good order.[18]

Quality problems in manufacturing are linked to a majority (54 percent) of shortages of sterile injectable drugs.  Some of the largest manufacturers of sterile injectable drugs have had serious quality problems leading to the temporary voluntary closure or renovations of major production facilities. This means that quality problems that affect an entire plant may result in shortages for many drugs.  This temporary closure of a large manufacturing facility can also lead to other facilities being unable to meet the increased demand for the drug due to the lack of excess capacity and the pressure of ramping up supply for multiple drugs in other facilities.

Over time, entry, and expansions in capacity in the industry, should lead to a situation where shortages due to supply disruptions are sporadic and rare.  In the current environment, where capacity is severely constrained, shortages induced by disruptions can cascade throughout the sector and persist for long periods of time.

 

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