Sandoz Report: A Unified Approach to Overcoming Drug Shortages

With drug shortages for chemotherapy drugs and generic medications are impacting over 90% of hospital systems nationwide, all stakeholders will need to collaborate and enact policy changes to eliminate them, according to a report from Sandoz.¹

The report, entitled “Solving America’s Drug Shortage Dilemma, For Good,” contained recommendations for health systems and policymakers on how they can address ongoing drug shortages and prevent future ones. Over the past 6 years, drug shortages have impacted 84% of generic drugs. Over time, these shortages can result in treatment delays or the need for patients to seek alternative treatments, making conditions like hypertension and arthritis harder to manage.

Managing these shortages is also very expensive, costing hospitals around $600 million annually, and shortages are linked to price increases, with affected drugs averaging 16.6% higher prices. Patients using alternative treatments may face costs at least three times higher.

Several factors can contribute to drug shortages, including high generic price deflation, slow adoption of new generics and biosimilars, and increasing input costs make it difficult for manufacturers to sustain production.² Government policies, like Medicaid penalties and Medicare reimbursement practices, often favor higher-cost drugs over generics, further straining the market. Regulatory and manufacturing challenges, such as complex production processes and supply chain issues, also contribute.

Consolidation among large purchasers of generic medicines, such as group purchasing organizations (GPOs) and drug distributors, has driven prices to unsustainably low levels, making it difficult for manufacturers to cover their production costs.¹ Three GPOs now dominate the hospital purchasing market, exerting immense influence as intermediaries between manufacturers and health care providers.

While the use of generic medicines has increased or remained steady, the total prices for generics have dropped significantly, by $6.5 billion over the past 5 years. This price deflation, combined with stringent contract terms imposed by GPOs, often forces manufacturers to halt production, exacerbating drug shortages and harming patients' access to needed medicines.

“In my opinion, when there's a shortage, formularies should immediately allow patients access to suitable alternatives. Some adults, and children especially, rely on medications to function daily and live happily. It’s likely that some children with ADHD this year, in first or second grade, struggled to grasp reading because their parents couldn’t access the medicines they needed,” said Laura Bray, founder of Angels for Change, in the report.

Ongoing efforts by the Federal Trade Commission, Department of Justice, and HHS to investigate pharmaceutical middlemen, like pharmacy benefit managers (PBMs), are promising. However, Congress and federal agencies must collaborate to address anticompetitive practices and review purchaser market consolidation. To ensure fair drug pricing, PBMs should pass rebate savings to patients. Additionally, longer-term contracts could enhance the sustainability of the generics market, and Congress should consider allowing more flexibility in formularies during drug shortages to ensure patient access to alternatives.

The US pharmaceutical landscape faces challenges from patent litigation tactics that hinder the Hatch-Waxman Act’s goal of speeding generic drug access. Originator companies often create large “patent estates” with overlapping claims to delay generic competition through prolonged litigation, similar to the “patent thickets” created in the biosimilar space.³ This practice increases litigation costs and uncertainty for generics, discouraging their development.¹ To address this, policymakers should reform patent laws, such as the US Patent and Trademark Office's proposed rule on terminal disclaimers, to balance innovation and access to affordable generics.

Policymakers are encouraged to ensure timely insurance coverage for newly FDA-approved generics, especially first generics, to promote competition and long-term savings. Congress should consider requiring Medicare plans to cover generics soon after launch or provide justifications for withholding coverage. Strengthening the generics market could also help reduce health care costs for employers.

Additionally, Congress may need to amend the 340B program to allow sustainable pricing for generics manufacturers and improve oversight to ensure discounted medicines benefit patients directly. Ensuring broader and quicker access to generics could further increase savings for the US health care system.

The report stressed that achieving a balance between local and global pharmaceutical supply chains is essential for maintaining a stable supply of generic medicines for US patients. While some manufacturers source materials domestically, a diverse global supply chain is crucial for obtaining key pharmaceutical ingredients. Collaborating with reliable partners in countries with strong US trade relations helps mitigate risks of medicine shortages and rising costs.

The authors concluded, “Policy leadership and cooperation from all stakeholders is urgently needed to resolve shortages and foster a more resilient, sustainable generics market in the US. Now is the time to make decisive change, for good—let’s make it together.”

References

1. Solving America’s drug shortage dilemma, for good. Sandoz. September 24, 2024. Accessed October 9, 2024. https://prod.cms.us.sandoz.com/sites/spare37_sandoz_com/files/Media%20Documents/Sandoz_Solving%20America%27s%20Drug%20Shortage%20Dilemma%2C%20For%20Good_9.24.24%5B58%5D.pdf

2. Jeremias S. AAM White Paper Offers Causes and Solutions to the US Generic Drug Shortage. The American Journal of Managed Care®. July 30, 2023. Accessed October 9, 2024. https://www.ajmc.com/view/aam-white-paper-offers-causes-and-solutions-to-the-us-generic-drug-shortage

3. Niazi SK. BioRationality: Bill to remove double patenting that harms biosimilars heads to the house. The Center for Biosimilars®. August 12, 2024. Accessed October 9, 2024. https://www.centerforbiosimilars.com/view/biorationality-bill-to-remove-double-patenting-that-harms-biosimilars-heads-to-the-house