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Healthcare providers are grappling with a shortage of chemotherapy drugs, leading to dose rationing and delayed care.
Supply chain managers have seen similar supply issues with cisplatin and other chemotherapy treatments in year’s past, and the supply-demand imbalance for many medications is likely to continue.
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“It feels a little like Groundhog Day,” said Erin Fox, senior pharmacy director at University of Utah Health, noting similar issues with chemo drugs in 2011. “We are not seeing progress because we haven’t done the work to incentivize quality.”
It’s not just chemo medications. Health system administrators and clinicians constantly manage a rotating list of dozens of pharmaceuticals in short supply. Providers are often forced to conserve drugs that are used daily in hospitals and find alternative suppliers or substitute medication, a practice that could jeopardize patient safety, limit access to care and squeeze hospital margins.
Here is what you need to know about drug shortages and how they affect care.
Why some drugs are regularly hard to find
Manufacturing quality issues and financial considerations drive many shortages. There are often one or two main suppliers of certain dosages of sterile injectable drugs like epinephrine, which is used to treat severe allergic reactions, and saline, which is used to deliver intravenous medications and stabilize patients during surgery. These drugs require specialized production for relatively inexpensive products. Many manufacturers divert resources to higher-margin items as a result.
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In May, drug manufacturer Teva said it will “pivot to growth” by focusing on “high-value” drugs, consolidating its manufacturing network and trimming some low-margin generics. Akorn Pharmaceuticals, the sole manufacturer of a large dose of the asthma treatment albuterol, has stopped production of multiple generic products as it sells assets through it Chapter 7 bankruptcy. When one production line at a major facility stops, either temporarily or permanently, it can send a ripple effect through the entire industry as smaller manufacturers struggle to plug the supply gap.
“If a manufacturer gets undercut through some sort of bidding process or they run into a quality roadblock, they may decide it’s not worth continuing,” said Michael Ganio, senior director of pharmacy practice and quality at the American Society of Health-System Pharmacists.
Unanticipated demand spikes, like those experienced during the COVID-19 pandemic when the surge of ventilated patients strained the supply of asthma drugs and sedatives, can also spur shortages. The pandemic has had a lingering effect on pharmaceutical ingredient producers, many of which are in China and India and have had trouble keeping up with demand amid staffing issues.
“Many of these products have stable demand forecasts, so they keep inventory low to protect their margins,” said David Dobrzykowski, an associate professor of supply chain management at the University of Arkansas and director of the university’s Walton College Healthcare Initiatives. “As soon as you have a disruption, there isn’t as much safety stock around and it’s hard to ramp up manufacturing quickly.”
How health systems manage shortages
Many health system supply chain managers have daily huddles with clinicians and administrators as they review products in short supply and potential substitutes.
St. Louis-based SSM Health has organized a centralized drug shortage team that coordinates pharmaceutical inventories and sourcing strategies across its 23 hospitals. The team reallocates inventory across its hospital network, surveys alternative suppliers and reviews conservation strategies when supplies are low, said Michelle Schmitt, director of pharmacy business operations at SSM.
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Health systems often have long-term, bulk purchasing deals with manufacturers or wholesalers for widely used drugs. That means they can rely on a consistent volume from a certain supplier at a stable price. But when they are forced to source alternative suppliers and products, they often have to enter into one-time purchasing agreements. They not only pay a premium, but often have to spend time training clinicians on how and when to administer an unfamiliar product.
How the drug supply chain works
The pharmaceutical supply chain is obfuscated by a web of suppliers, subcontractors and middlemen. Many large manufacturers use subcontractors, and there is minimal insight into their production capacity. Manufacturers are not required to publicly provide specific reasons for shortages, leaving most health systems in the dark.
Despite pushes from advocacy groups and pleas to Congress, there isn’t any transparency on which suppliers are more reliable and proficient, Fox said. Still, increasing transparency doesn’t address the core problem: a lack of supply of critical, widely used drugs.
Related: Healthcare supply chain grapples with wide range of shortages
Manufacturers distribute drugs to wholesalers and group purchasing organizations, and sometimes directly to pharmacies or hospitals. Some GPOs have created private drug labels in which they contract directly with a manufacturer to make a generic drug under their own brand name.
On behalf of health plans and employers, pharmacy benefit managers negotiate rebates and other discounts with manufacturers. PBMs and payers design the formulary, which is a list of drugs that are covered under the health plan. Patients pay less when a drug is placed on a higher formulary tier.
Why shortages squeeze margins
When demand spikes and supply wanes, prices go up. Hospitals typically don’t have the flexibility to renegotiate reimbursement with insurers in real time, and Medicare and Medicaid payed fixed rates, so they often have to assume the higher costs. In some cases, Medicare offers temporary reimbursement boosts for hospital-owned outpatient departments known as “pass-through payments,” which are designed to offset the cost of innovative, high-priced therapies.
Dueling Opinions: Grappling with new supply chain bottlenecks
Delaying care also dents revenue. If hospitals don’t have saline to stabilize patients during surgery, they may have to postpone elective procedures, which are high revenue generators. Providers may also have to prioritize doses for the most critical patients, leaving some patients in the lurch. When chemotherapy drugs were short in 2011, healthcare organizations paused clinical trials, potentially postponing breakthrough treatments.
How drug shortages could get fixed
Industry experts have proposed a number of solutions designed to shore up the drug supply chain, ranging from increasing U.S. production to rewarding high-quality manufacturers.
Bringing more production to the U.S. often requires health systems to pay a premium for products produced in the U.S., which they have been reluctant to do.
Civica, a health system-backed generic drug company, is building a 120,000-square-foot sterile injectable manufacturing facility in Petersburg, Virginia. Civica has primarily subcontracted with manufacturers, getting hospitals to guarantee to buy a certain percentage of their total volume for a specific drug over a long-term, fixed-rate contract. The reliability of the allotment guarantees and fixed prices help health systems manage costs, particularly when prices spike during shortages.
In March, Fox and other industry experts recommended to a Senate Homeland Security and Governmental Affairs subcommittee that Congress implement a rating system for pharmaceutical manufacturers. The Centers for Medicare and Medicaid Services could give hospitals an add-on payment when they purchase high-quality drugs, she said. The federal government could also give manufacturers interest-free loans or other subsidies for improving their manufacturing facilities or producing critical drugs, Fox said.
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