Report: 'Carrot and stick' needed to deal with drug shortages

Shortages of essential, often lifesaving, drugs continue to plague countries globally, and they are looking at different ways to combat them. Canada will now require drugmakers to report shortages, a practice that has been voluntary. But a new report from Pew Charitable Trusts says solving the problem of drug shortages will be superchallenging and take a multipronged attack by regulators, payers and the industry if it is ever to be achieved.

The report, which came out of a Drug Shortages Summit sponsored by Pew last year, notes that the numbers of new shortages in the U.S. declined in both 2013 and 2014. That followed an FDA requirement that drugmakers report potential shortages, which has allowed the agency to prevent, or at least mitigate, some of them. Last year, the FDA permitted the importation of saline solution from foreign plants not approved to sell in the U.S. in the face of a nationwide shortage of that essential, product. Still, with new supply interruptions adding to persistent shortages, often in sterile injectable drugs, the total has surpassed 450 since 2012.

Most shortages stem from production interruptions, usually because of quality issues, and so the FDA has been pushing drugmakers to create a culture of quality--something all drugmakers will say they have but that many don't actually embrace. Added FDA staff is allowing for quicker inspections to get plants online and the agency is searching for ways to get drugmakers to build backup capacity. The agency also says it is looking at how to "incentivize" manufacturing quality.

The Pew study suggests a "carrot and stick" approach with stronger failure-to-supply clauses in contracts so that producers believe it is less expensive to invest in quality than it is to lose contracts. But it also suggests that payers have to be willing to pay for that quality.

That is because manufacturers believe right now cost is king and investing in quality can put them at a disadvantage when negotiating with group purchasing organizations. "Most manufacturers felt that although price is not the only factor, it is the dominant one," the report says. "A company must be price competitive to secure business regardless of its ability to show greater reliability. This dominance may act as a disincentive: manufacturers who invest in capacity may not see a market advantage if they cannot also compete on price."

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