NCPA - National Center for Policy Analysis

Easing Drug Shortages

November 7, 2011

An increasing trend within the past several years has been a growing number of reported shortages in pharmaceutical drugs.  While these shortages occur for a number of reasons, they often force hospitals that have exhausted their contracted supply of a given drug to seek alternative resellers in the market.  The difficulty is that these resellers often drive up prices drastically, in a practice known as price gouging.  In order to reduce the incidence of this type of operation, President Obama recently signed an order to have the U.S. Food and Drug Administration (FDA) attempt to track and prevent potential shortages, says BusinessWeek.

  • More than half of all medical centers said last year that shortages compromised patient care, according to a survey from the American Society of Health System Pharmacists, with about 97 percent saying that shortages drove up costs through purchases from resellers.
  • Drug shortages almost tripled to 178 in 2010 from 61 in 2005, according to an FDA report. 
  • The FDA also reported that it helped prevent 38 shortages in 2010 and 99 to date this year.
  • Fifty-six percent of 549 hospital purchasing agents and pharmacists reported receiving daily solicitations from vendors and 52 percent said they bought drugs from gray market suppliers in the past two years

One of the criticisms going forward with this order is that the FDA will have little authority (or ability to impose consequences) for drug suppliers that choose not to cooperate.  Moreover, the administration's plan won't ease shortages because drugmakers have little incentive to raise output when Medicare and Medicaid, the two big U.S. public health programs, limit how fast the price of a drug can rise, notes Devon Herrick, a senior fellow at the National Center for Policy Analysis.

Source: Drew Armstrong and Anna Edney, "Obama Order Targets Drug Price 'Gouging,' Easing Shortages," BusinessWeek, November 2, 2011.


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