What's Behind Big Pharma's Record Drug Shortages?

by Tony D'Altorio

What's Behind Big Pharma's Record Drug Shortages?

by Tony D'Altorio, Investment U Research

Thursday, May 19, 2011

Something is happening inside the pharmaceutical sector that could put lives at risk.

It's not a bad batch of drugs, though; it's a record shortage of much-needed medicines.

The American Society of Health-System Pharmacists said its members couldn't obtain 211 prescription drugs through the usual channels in 2010, an unprecedented number. And from January through March of this year, it reported over 89 such shortages.

The organization held a national conference on the issue last November. It even went so far as to devote a special section of its website to the issue.

Cynthia Reilly, Director of the Society's practice development division admits to widespread concern among pharmacists. She says, "The clinical impact is significant, with the potential for morbidity and mortality."

Pharmacists, she says, are hard pressed trying to manage shortages, often conducting inventory work instead of tending to patients. And when alternative treatments are available, they may not be ideal or could lead to dosing and other errors.

Figures from the FDA show a surge in "stock-outs," with 178 drugs in short supply in 2010. This compares to just 65 drugs six years ago.

This growing problem has sparked rising concern in the healthcare sector. And with good reason, too.

Big Pharma Experiences Shortages of Critical Drugs

Most of the medicines experiencing shortages are for generic, off-patent medicines. But some of the most important, life-saving therapies - such as drugs for acute leukemia and bone marrow cancer - are falling short, as well.

Worse yet, Dr. Richard Schilsky, Chief of Oncology at the University of Chicago Medical Center and the former Head of the American Society of Clinical Oncology, says, "There is no substitute."

So a growing number of patients in the United States are experiencing problems, sometimes with life-threatening consequences.

Part of the problem is intensifying industry consolidation. Too many mergers and acquisitions have reduced the number of suppliers, thereby spurring cost-control efforts.

These have also led to companies disengaging these drugs because of a lack of profit. And some manufacturers now prefer to cut them altogether.

Meanwhile, the rise of producers in places like India and China is adding further pricing pressure and a shift to last minute production. Ms. Reilly of ASHP says, "There is no buffer stock anymore, so [pharmacies] don't even have a week's supply of drugs."

Then there are regulation issues...

Mike Benedict, Pharmacy Director at the Denver Health Medical Center, points to shutdowns of manufacturing centers. This, he says, leaves hospitals to stockpile drugs for injections and turn to secondary wholesalers who charge more for medicines in short supply.

Wide-Ranging Calls for Reform

These drug shortages have sparked wide-ranging calls for reform. That includes giving the FDA more powers and intensifying voluntary efforts by generic drug manufacturers to tackle shortfalls.

Others demand fresh financial incentives to ensure adequate provision of older medicines that are in short supply. And yet another potential solution is to lower the regulatory costs of approving some medicines.

But right now, no one really seems to have the right answer.

Perhaps the best solution is to give pharmaceutical companies incentives. Give them a good reason to produce enough of these older but still important drugs.

One thing is certain though: Something needs to be done.

Good investing,

Tony D'Altorio

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