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’s problem, ericgardner.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

Could Amazon (A), Berkshire Hathaway (B) and J.P. Morgan Chase (M) be the Anti Ballistic Missile (ABM) needed to Control/Curb Rising Healthcare Costs?

Recent announcement of Amazon, Berkshire Hathaway and JP Morgan Chase ^{(1, 2)} to address rising healthcare costs for their employees has caused a bit of uproar on the healthcare landscape. Healthcare companies and many others have expressed their concern and doubts about success of the partnership ⁽³⁾. There will be many “naysayers” and many will pontificate. Their concerns could be real but time for “creative destruction” ^{(4, 5, 6)} on the healthcare landscape has come. It has been long overdue.

In the last one hundred years creative destruction/disruption has led to significant innovations in almost every industry. To a major extent pharmaceutical and healthcare industries have escaped this disruption. It is my perspective that time for the needed disruption has come. Banding of ABM (Amazon, Berkshire, Morgan) is start of an alternate landscape. There will be evolution. Some of the elements that need the change are also being discussed ⁽¹⁾. Discussion of healthcare costs and controlling them is out of the closet. These three companies with a combined revenue of about $500 billion dollars per year and over one million employees are going to explore possibilities of how the costs can be contained and even lowered will be a good thing.

The task is going to be challenging, multi-faceted and evolutionary. There will be significant resistance from every cog of the healthcare wheel. Political and economic power of the healthcare industry will be tested. We should not be surprised if legislators, intellectuals and consultants also get in the act to score points.

For success there will be strategic re-modeling of the current business model, rejuvenation of the manufacturing practices, supply chain changes and re-allocation of the workforce. Status quo of the current practices is going to be increasingly disrupted and disturbed with every ABM success. Each success will bring in new players to improve the process. Business strategies will change. Technology, artificial and real, along with process of continuous improvement will play a major role.  

ABM effort to lower healthcare costs is counter to the current operating philosophies of the pharmaceutical, insurers and pharmacy benefit manager companies. A quick look just at the pharmaceuticals tells us part of the story. Most of the revenue growth of the pharmaceutical companies is in the developed countries ⁽⁷⁾. Lately pharmaceutical companies due to their inability to create affordable new drugs that are more effective than the current drugs for the mutually subsidized healthcare systems and affordable to 98+% of the global population are depending on high priced orphan drugs, preventing generic entries and are raising prices. Due to political pressures some pharmaceutical companies have opted to less than 10% price increases ^{(8, 9)}. I am not sure how long this these strategies will work.

At the initial going ⁽¹⁾ ABM alliance has supposedly conceded drug distribution to industry’s middlemen PBM (Pharmacy Benefit Manager’s). However, if the Alliance has to be successful in lowering drug prices it will have to crack open the PBM pricing juggernaut between the formulation sellers to the patients. Reverse calculations will show ABM how the price multiples traverse between the API manufacturer and the patient ⁽¹⁰⁾.

ABM alliance is giving the healthcare industry and opportunity to stay afloat. There will be survival tug of war. My conjecture is fissures in the healthcare citadel will develop and could get wider thereby lowering healthcare costs.

Other healthcare components would most likely experience similar cost pressures. Since there are multiple elements in healthcare, I am sharing my perspective of the possibilities as they relate to drug prices (pharmaceutical manufacturing) only ⁽¹¹⁾.

A recent post “Comparison of Drugs Prices: US vs. India: Their Manufacturing Costs & Opportunities to Improve Affordability” ⁽¹⁰⁾ gives us a perspective of drug price differences for the generic drugs. Brief review suggests tremendous price change possibilities.

While collecting the pricing information ⁽¹⁰⁾ I noticed drug packing that might be worth mentioning. Majority of the drugs in India come in blister pack or foil strips of 10 to 20 counts each. When one asks for a specific drug, customer receives the prescribed/required number of tablets. Since air-conditioning is not available at every pharmacy, blister pack or foil strips might be preserving the drug from extremes. Such packing could be used in the developed countries also. Few advantages in such packing i.e. reduce waste, reduced cross contamination if the tablets are a look alike and speedier drug dispensing. Every cost reduction could be passed on to the patients.

Opportunities:

Since Amazon is an online store and they are already serving the needs of patients, they could throw each of the following elements to serve and lower drug costs.

Local same day delivery could play a major role in Amazon business expansion. Through reverse calculation ^{(10, 11, 12, 13)} ABM could negotiate with various OTC, generic and even with the brand companies the best prices they can provide offer via Amazon.com to their employees and expand to serve others. Reverse calculation will improve price negotiation and incorporation of better technologies to improve product quality, profits and lower costs. ABM enterprise through Amazon could have more than one supplier for the same drug offerings. It would be a case similar to companies competing for “shelf space” on the basis of product quality and sell price as is being currently done by different producers of the same products on Amazon website and at the grocery stores. Another significant benefit of ABM’s effort and the drugs being available via Amazon.com will result in drug pricing transparency. Through technology copay systems of mutually subsidized systems could be incorporated. Single pay system could also be tested and if successful could be expanded.

My conjecture is that if companies compete side-by-side for the same product quality they will compete on costs. This also means inclusion of manufacturing technology innovation through “economies of scale” ^{(14, 15),} which has been shunned in API manufacturing and their formulations.  

FDA will also have to change its process review and approval methods. It will have to develop and promulgate a road map so that the ANDA approval process could be lowered to three months ^{(16, 17)}. NDA approval methods will have to be revisited. FDA will face significant internal resistance to such a change but the long-term benefits will outlast the short-term hiccups. Since “Lower the Healthcare Cost” Genie is out of the bag and is recognized, change will happen. 

FDA’s regulatory quality compliance would still stand. My conjecture is that if companies compete side-by-side for same product quality they will compete on costs and quality and that means manufacturing technology innovation through inclusion of “economies of scale” in API manufacturing and their formulations.

Since drugs being available via Amazon.com another significant benefit of ABM’s effort will be drug-pricing transparency that is hidden from the patients in mutually subsidized healthcare systems.    

 

Quoting WSJ Editorial Board ⁽⁶⁾ “… health care is long overdue for a shake up, and the leaders of these companies—Mr. Buffett, Jeff Bezos and Jamie Dimon —deserve credit for jumping in. The public would be the beneficiary if this trio can figure out how to lower costs and increase quality, and the odds are better with them than another political intervention.” Since change in healthcare is much needed by the constituents of our country it will also be a test of metal of our legislators’ short and long-term interest and alliance. Political and economic pressures will be tremendous.

Only time will tell who wins and who does not and by how much. One thing is for sure that each segment of healthcare (pharmaceutical development, manufacturing, distribution and insurers, providers, hospitals) will have to review/alter their modus operandi to lower their costs and improve quality of products/services they provide.

Assembly line methods e.g. cataract in India, knee replacements and other procedures might have to be adopted, streamlined or considered to improve and lower healthcare costs. Drug affordability is an issue and will become increasingly an important part of the discussion as America ages. Healthcare providers will have to forgo their latent prevailing sentiment that patients will pay the highest price to get well and extend their life.

Many will be rooting for the ABM alliance success but there will be many who could create obstacles.

Girish Malhotra, PE

EPCOT International

1. Triple Threat: Amazon, Berkshire, JPMorgan Rattle Health-Care Firms, The Wall Street Journal, January 30, 2018, Accessed January 31, 2018
2. If Amazon And Buffett Lift Veil On Health Prices, Insurers Are In Trouble, Forbes.com, January 31, 2018, Accessed January 31, 2018
3. JPMorgan to Banking Clients: Joint Health-Care Venture Is No Threat, WSJ.COM, February 4, 2018, Accessed February 4, 2018
4. Creative destruction: https://en.wikipedia.org/wiki/Creative destruction Accessed January 31, 2018
5. Malhotra, Girish: Is "Creative Destruction" the way to go for the Pharmaceuticals? Profitability through Simplicity, December 11, 2008, Accessed February 5, 2018
6. Welcome to the Health-Care Jungle, WSJ.COM February 1, 2018, Accessed February 5, 2018
7. Malhotra, Girish: An Alternate Look at the Pharmaceutical World Revenues and Drug Affordability, Pages 2-5, www.gmpnews.net, Autumn 2017, Manufacturing Chemist, Volume 88, Number 10, October 2017, Pg. 28-32
8. Facing Criticism, Drug Makers Keep Lid On Price Increases, WSJ.COM [https://www.wsj.com/articles/facing-criticism-drug-makers-keep-lid-on-price-increases-1488157893], February 26, 2017, Accessed February 5, 2018
9. US pharma industry holds to price-cap pledge, Pharmaceutical Technology [https://www.pharmaceutical-technology.com/comment/us-pharma-industry-holds-price-cap-pledge/], January 5, 2018, Accessed February 5, 2018
10. Malhotra, Girish: Comparison of Drugs Prices: US vs. India; Their Manufacturing Costs & Opportunities to Improve Affordability, Profitability through Simplicity, January 18, 2018
11. Malhotra, Girish: May Day May Day: Can Someone Help and Lower Drug Prices?, Profitability through Simplicity, May 1, 2015, Accessed February 5, 2018
12. Malhotra, Girish: A Blueprint for Improved Pharma Competitiveness, Contract Pharma, September 8, 2014 Accessed February 6, 2018
13. Malhotra, Girish: Can An Alliance Between US Pharmaceutical Benefit Managers (1) and Make in India (2) Lead to Lower Global Drug Prices? Profitability through Simplicity, June 17, 2015 Accessed February 6, 2018
14. Malhotra, Girish: Recent Posts That Relate to Pharmaceuticals and Chemicals-I, Profitability through Simplicity, 2013, Accessed February 6, 2018
15. Malhotra, Girish: Neglected Tropical Disease (Infectious Diseases) Drugs: What are they telling us about Innovations! Profitability through Simplicity, March 7, 2012, Accessed February 6, 2018
16. Malhotra, Girish: Can the Review and Approval Process for ANDA at USFDA be Reduced from Ten Months to Three Months? Profitability through Simplicity, March 25, 2017
17. Malhotra, Girish: ANDA (Abbreviated New Drug Application) / NDA (New Drug Applications) Filing Simplification: Road Maps are a Must, Profitability through Simplicity, May 11, 2017

Pharmaceutical Manufacturing Technology Innovation: Does Reading the Tea Leaves Matter?

For the last few years I have been presenting my perspective of where, how and why pharmaceutical industry as well as the regulators need to review where the collective is and could/should consider to make the drugs affordable to significantly large (may be 60%) population of the global population.

I often go back and review my experiences and perspective that I have presented over the years to see if we are making headway in technology innovation that could or would drugs more affordable.

Following are some of the old blogs.  

1. Process Centricity is the Key to Quality by Design Tuesday, April 6, 2010 https://pharmachemicalscoatings.blogspot.com/2010/04/process-centricity-is-key-to-quality-by.html
2. Why Fitting a Square Plug in a Round hole is Profitable for Pharma and Most Likely Will Stay? August 1, 2014  https://pharmachemicalscoatings.blogspot.com/2014/08/why-fitting-square-plug-in-round-hole.html
3. Are The Rules A Constraint to Innovation, Competition and A Cause of Adulterated Product? October 1, 2010  https://pharmachemicalscoatings.blogspot.com/2010/10/are-rules-constraint-to-innovation.html
4. Reading the Tea Leaves: Predictions for Pharma's Future Original January 14, 2014          https://pharmachemicalscoatings.blogspot.com/2016/01/reading-tea-leaves-predictions-for.html
5. Pharmaceutical Companies Can Innovate If They Want To, October 15, 2010  https://pharmachemicalscoatings.blogspot.com/2010/10/pharmaceutical-companies-can-innovate.html
6. Regulatory Compliance vs. Operational Excellence: What Should Happen First? February 3, 2015 https://pharmachemicalscoatings.blogspot.com/2015/02/regulatory-compliance-vs-operational.html 

It is interesting that in the last few years “continuous manufacturing” like acronyms QbD and PAT have become the latest buzzword in pharma. US FDA has introduced these terms to be adopted as if they will solve all the quality issues and as if the companies have designed operations using matchsticks. Companies have to address their issues rather than regulators suggesting what the companies need to do. Companies innovate manufacturing technologies and regulators don’t, they just regulate.

Reading the tealeaves is generally related to what the future holds. I consider it voodoo or an exotic past time. If we do not act on our needs/desires to achieve our goals, someone reading tealeaves for one’s future does not matter. What matters is self-actualization (1) at every company. Outside influences do not matter much if we do not internalize excellence. 

I have conjectured it my most recent blog “Innovation In Pharmaceuticals: What Would It Take & Who is Responsible?” that innovation has to be internalized and cannot be thrust by any external body especially the regulators. “Process Centricity” has to overtake the current “Regulation Centricity” in pharmaceuticals and that is the only way to achieve consistent product quality and make drugs affordable.

1. Self-actualization: https://en.wikipedia.org/wiki/Self-actualization, Accessed December 22, 2017

Girish Malhotra, PE

EPCOT International