ER drug shortages getting worse with more FDA regulations
“The drug shortage problem is real,” Devon Herrick, senior fellow at the National Center for Policy Analysis (NCPA), recently told Patient Daily. “Drug shortages are widespread, and there are no reliable substitutes for most of these drugs.”
Herrick explained that the U.S. government’s measures to mitigate drug shortage have failed because it has ignored the NCPA's conclusion that shortages result from too much, not too little control over the market for these drugs.
“The government keeps tightening the screws on manufacturers, and the shortages keep growing,” Herrick said.
Herrick explained that since his testimony in 2011 before the U.S. Senate's Committee on Finance, the problem has gotten worse.
“Most are generic injectable medications that have been on the market a long time, and are commonly used in hospitals, emergency rooms and cancer treatment centers,” Herrick said. “The American Hospital Association (AHA) recently reported that virtually all the community hospitals it surveyed had experienced a drug shortage."
Herrick further explained that the drug shortage problem is not new, and there are a few possible reasons for these shortages.
“Government regulation is one problem,” Herrick said. “There are many reasons for drug shortages. Shortages of certain drugs reoccur due to a lack of competition and manufacturing problems, but the ultimate cause is government regulatory policy.”
Herrick said that normally, when a product’s price rises due to its scarcity, new competitors enter the market, increasing supply and driving down the price. Government regulations, however, often prevent price increases that would attract competitors.
“Another problem is output controls,” Herrick said. “The FDA has stepped up its efforts to ensure that drug manufacturing processes and facilities meet its quality standards by instituting a ‘zero tolerance’ policy. It levies fines and forces manufacturers to retool both domestic and foreign facilities.”
For example, Herrick explained that the FDA approves how much a drug manufacturer can produce. If a shortage develops because the FDA shuts down a competitor’s plant, a manufacturer must seek FDA approval to increase its output and alter its production timetable. This slows down adjustments in production.
“Medicare Part B price controls are also an issue that creates shortages,” he said. “Certain generic drugs are in short supply due to a lack of competition and manufacturing problems. The law also changed the way injectable and intravenous drugs administered by physicians are reimbursed under Medicare Part B. Rather than paying providers a fee that varies with the difficulty of the procedure, Medicare reimburses them a small percent of the drug’s cost, based on its average selling price. This gives physicians an incentive to use newer patented drugs, even when older generic drugs are just as effective.”
Herrick explained that when prices are kept artificially low, shortages develop.
“People adjust to persistent shortages in ways that can worsen the shortages,” he said.
Herrick argues that attempts to solve drug shortages with more regulations could actually worsen the problem.
“Indeed, expanding the number and type of companies required to provide advance notice of impending shortages would exacerbate shortages by encouraging hospitals to hoard drugs,” Herrick said. “Such legislation would not make it any easier for manufacturers to avoid the problem. Ultimately, the only way to alleviate the drug shortage is to make generic drugs more profitable. Thus, Congress should create a mechanism to reduce rebates for specific drugs in short supply.”
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