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All opinions are my own.

Friday, December 7, 2018

Identifying the Root Causes of Drug Shortages and Finding An Enduring Solution

Most get excited about the drug shortages when they happen and start a discussion how they can be prevented. Problem has been thereandit is getting to worrisome levels. Shortages can also be used as a weapon against the US population. 

Regulators have proposed strategies (1) to alleviate these shortages but they have not worked. Actually shortages are getting worse. Had the 2013 strategy (1) been effective, the current discussion (2) would not be taking place. Each participant (manufacturer, supply chain participant and regulators) in drug supply chain has to participate and alleviate the problem. One of the difficulties of the current pharmaceutical system is lack of clarity and understanding of the drug distribution system (3,4,5). Current distribution system has been blamed for the shortages (5). Supply chain system has made every effort to make sure no one is able to penetrate their fortress and understand how things happen. 

I also believe that the current regulatory system may be latently aiding the current shortages and needs to be reviewed and simplified. Each participant has to participate to different degree to alleviate the problem. Many might not agree with this conjecture but if all was good we would not have the drug shortages. Fundamental change is needed in the pharma’s business model and it would be have to be disruptive. As discussed later there will be tremendous resistance to any change. 

I have my own over simplified description for three players on the drug landscape. 

1.     Drug producers: These companies discover therapies and commercialize the approved drugs using the best manufacturing technologies to maximize their profits. When drugs go off-patent, generics step in. 

2.     Supply chain intermediaries: Their mission is to facilitate drug distribution, manage healthcare programs and be extremely profitable. Reference (4) is worth the read as tries to explain the workings of PBMs and it is educational. I am sure they might be other descriptions of the process.  

3.     Regulators: Their mission is to assure safety of drugs and that involves companies follow strict regulatory guidelines.  

Problems of future drug shortages have their latent start when drugs are commercialized. We may not want to acknowledge this but have to recognize that each participant plays itspartin drug shortage at some point in the life of each drug. Some more than others. Common hypothesis is that the other party has created the problem and will address the issues. No one does and this keeps growing till it becomes acute. Every participant has to do its part thoughtfully to eliminate/reduce shortages.  
Solution for Drug Shortages:

Like in any business if the buyer keeps squeezing the seller on price, sooner than later if the seller cannot make their desired profit to stay in business, they will stop producing, and if shortages ensue, it is not their problem. This holds very true on pharma landscape (5) also. As explained later I believe that regulations are also part of the problem. 

Following is my overview of the landscape and potential solution. This will need to be fine tuned. 

Competition(6) is healthy for every business. Pharma, especially the generics, need to have the environment to compete. They don’t have the desired environment. FDA’s current ANDA approval methods and practices come in the way of creating competition. It just takes too long and multiple iterations to get the application completed and approved. This process is expensive. FDA will have to play the role of creative destructionist (7) andchange its ANDA approval process to 90 days (8)or less. With 90-day approval some of the generic producers could become proactive and may want to compete and supply to the market as soon as they see drug shortages. With shorter approval time companies would have the opportunity to use the best manufacturing technologies and stay profitable.

Breaking the current (3, 4) drug-delivery supply chain consortia is the key to eliminating shortages. Pharma’s current drug distribution business model (everything that lies between the manufacturer and the patient) has to be disrupted (7). Supply chain consortia has and will resist its breakup and politically do everything possible to scuttlebutt wholesaler - healthcare facility - drug seller linkage. It is a juggernaut (3,4) that needs to be cracked. However, with the current political influence of consortia on our elected legislators, it is going to be difficult to crack. For short term a Presidential Executive order might be the only answer. If that happens there will brouhaha of government intervention in free market economy. However, when patients die due to lack of drug availability, we need to ask ourselves a question “what is important profits or life?” Most will opt for life. 

Drug distribution consortia can be disrupted in other ways. Legislative support would be needed for the disruption. This consortium has and will use drug safety as an argument against anyone else who will encroach on their turf as they have done in the past e.g. patients trying to get drugs that are lower priced from Canada or elsewhere. It is fascinating that the members of the consortia tell the legislators (who are being funded by the pharma industry for their re-election) that the drugs from these countries will be not be of quality but turn around and buy from the same producers’ products to sell in the United States. 

Disruption of the supply chain consortia can be easily done if FDA allows direct import of the drugs on the shortage list by major hospitals (Cleveland Clinic, Mayo Clinic or other large buyers) and similar buying entities e.g. Veteran’s Administration, Amazon (PillPack) and bypass the supply chain consortium members. PBMs will do everything to stop anyone looking (9) at their inner sanctum by offering to participate in any alternate drug distribution as they supposedly have done for Amazon, Berkshire and JP Morgan alliance. 

Supply chain consortia, as stated above, in the name of facilitating drug distribution and drug safety, is also responsible for the current prices. Prices should be significantly lower (10, 11). Additional examples of prices of randomly selected drugs are illustrated in Table 2 (11) and Table 1 (12) of the linked. Actually if the generic manufacturers from the developing countries can be the direct supplier to the developing countries there is an opportunity not only to reduce/eliminate drug shortages but also to significantly lower the generic drug prices in the developed countries. 

Companies who can supply shortage drugs will have to be from FDA’s ANDA approved companies list. 90-day approval window will encourage and facilitate many producers to participate. PillPack, Amazon and others can distribute the needed drugs. 

I want to re-iterate that if the above suggested proposal or anything similar is considered, wholesalers, PBMs and everyone in the middle of the supply chain will resist and lobby against thinning of their “cash cow”. Lobbyists of every kind will make sure that their current landscape that they have nurtured for long is not disrupted. There is too much at stake for the consortia. 

If FDA can create a 90-day ANDA approval environment, it is very possible that manufacturers in the United States might re-start their mothballed or invest in new facilities that will have best of the technologies to supply the US market. Potential threat of drugs that could be used as a weapon could be everted. We may see resurgence of pharma manufacturing in the United States. Going forward we need to think this aspect seriously.  

Another major win, if the consortia can be disrupted, would be lower generic drug prices, possibly improved affordability, that will come from the companies considering and using the most innovative manufacturing technologies like continuous manufacturing for sterile and other products. Manufacturing technology innovation that has eluded pharmaceuticals will finally become a competitive tool, if the pharmaceutical industry is willing to partake. 

Companies in a competitive environment, a worldwide phenomenon, use the best and most innovate technologies to produce products. Quality will be built in rather tested in. FDA will not have to suggest companies how and what of quality product and manufacturing technologies. Regulators will not have to be the purveyors of technologies as they have been doing without much success. FDA has set the product quality standards companies have to meet. Pharma companies will justify their own investment and should be able to ramp up their production to meet spikes in demand. At times I see many trying to test FDA suggested technologies and I wonder why are they trying to appease the regulators when the investment in technology cannot be financially justified . As I said earlier companies need to decide what technologies suit their business model to stay profitable rather than regulators suggesting them what would help. 

FDA and other regulators will have to be most vigilant and more critical in their inspections and ensuing actions. Companies that do not adhere to cGMP practices and regulatory protocol will have to be shutdown. FDA will have to employ experienced personnel who are well versed in process development, design and are knowledgeable about different manufacturing technologies. Experienced personnel will spot deviations from cGMP practices as well data re-jigging.  

Combination of current relationships between manufactures, supply chain and the regulators an environment of drug shortages has been created. If we have any desire to change the current mold it will need to be broken. There is an opportunity to revamp the pharmaceutical landscape but as said earlier there will be resistance. If a pilot program to eliminate/reduce drug shortages through direct distribution can be started and assured, we will have two benefits: shortages will be reduced and competition will be a big win for the patients through lower prices. Success could also result in resurgence of pharma manufacturing in the United States and other developed countries. 

Girish Malhotra, PE
EPCOT International

  1. Strategic Plan for Preventing and Mitigating Drug Shortages, FDA, October 2013, Accessed November 21, 2018
  2. FDA is Advancing New Efforts to Address Drug Shortages, FDA, November 2018, Accessed November 19, 2018
  3. Follow the Pill: Understanding the U. S. Commercial Pharmaceutical Supply Chain, The Kaiser Family Foundation, March 2005 Accessed November 25, 2018
  4. Eickelberg, Henry C.: The Prescription Drug Supply Chain “Black Box” How it Works and Why You Should Care, American Health Policy Institute, 2015 November 26, 2018
  5. Koons, Cynthia: Why We May Lose Generic Drugs, Bloomberg Businessweek, April 11, 2018
  6. Gardner, Eric: Competition creates innovation: Creative Destruction & America’problem, ericgarder.net August 10, 2016, Accessed November 18, 2018
  7. Schumpeter, Joseph: Capitalism, Socialism and Democracy, 1942, Accessed November 29, 2018
  8. Malhotra, Girish: Simplified Roadmap for ANDA/NDA Submission and Approval will change Pharma Landscape, Profitability through Simplicity, November 25, 2018
  9. Triple Threat: Amazon, Berkshire, JPMorgan Rattle Health-Care Firms, The Wall Street Journal, January 30, 2018, Accessed January 31, 2018
  10. Sood, N; Shih, T; Van Nuys, K; Goldman, D; The Flow of Money Through the Pharmaceutical Distribution System, June 6, 2017, Accessed March 1, 2018
  11. Malhotra, Girish: Comparison of Drugs Prices: US vs. India; Their Manufacturing Costs & Opportunities to Improve Affordability, Profitability through Simplicity, January 18, 2018
  12. Malhotra, Girish: Opportunities to Lower Drug Prices and Improve Affordability: From Creation (Manufacturing) to Consumption (Patient), Profitability though Simplicity, March 8, 2018
  13. Malhotra, Girish: Batch, Continuous or "Fake/False" Continuous Processes in Pharmaceutical Manufacturing, Profitability through Simplicity, July 20, 2017

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