Market Failure in the US

One of the big health care stories over the summer was the growing shortages of generic cancer drugs.  While I did not read that the shortages resulted in any deaths, the treatment protocols of some patients were changed to use alternative and possibly less effective drugs or were delayed, creating much anxiety (see Boston Globe and Huffington Post).  Although I couldn’t find an estimate of the number of patients effected, I learned that 14 of the 34 most-used chemotherapy drugs had supply problems, including cisplatin (used to treat metastatic testicular, bladder and ovarian cancers), doxorubicin (non-Hodgkin’s lymphoma, multiple myeloma, acute leukemias and other cancers), cytarabine (leukemia), and leucovorin (colorectal, head and neck and other cancers).  None of the stories I read provided an analysis of cause of the shortages but I got the general drift that there is a combination of factors, and some explanations seemed more political than fact-based, e.g., low reimbursement rates by a major payer (the US government) (NYT Sunday Review Opinion) and supply manipulation by manufacturers to drive up prices (Healthbeatblog).

The FDA requests manufacturers to report shortages in drug supply and causes (but does not have authority to require reporting) on their drug safety website (FDA Drug Safety).  The official explanation:  “A major reason for these shortages has been quality/manufacturing issues. However there have been other reasons such as production delays at the manufacturer and delays companies have experienced receiving raw materials and components from suppliers.  Discontinuations are another factor contributing to shortages.  FDA can’t require a firm to keep making a drug it wants to discontinue.  Sometimes these older drugs are discontinued by companies in favor of newer, more profitable drugs” (FDA FAQ).  I thought that since most major generic drug companies belong to the Generic Pharmaceutical Association, the Association would have an explanation or position, but not a tweet on its website (GPHA).  Of course, Congress jumped on the bandwagon; a bill requiring reporting was submitted early in the year to both houses (ASCO Post article) and a Congress person has asked the GAO to investigate the shortages (Fierce Pharma Manufacturing article).

What do shortages of US generic drugs have to do with the huge, unmet, rest-of-world need for affordable drugs?  Not surprisingly, most drugs sold outside of the US/EU/Japan markets are generics (because any drug that works is needed and there are no well-financed third-party reimburers to pay for the latest, best-in-class drugs), and sales of generics in emerging markets are projected to double in the next five years (ICIS article).  So how the US government, drug companies, and the medical system fix the US problem may provide guidance on ways to fix the world-wide problem.  But until those fixes emerge, I’ll take a look at how the various actors are entering the world generics market.  The strategies of companies- the “innovator” big pharmas, big generics companies like Teva and Roche), the specialty drug companies like Shire and Forest, the developing world generic companies like Cipla, the profitable biotechs like Gilead, and non-yet-profitable but innovative biotechs- may provide other ideas and potential solutions and the basis of another posting.

Meanwhile, I hope that the failure of the market to provide much-needed drugs in the US may generate some sympathy among the US public for those millions who are not just inconvenienced by drug shortages but die because of them.


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