[Hundreds of proven, decades-old vital drugs that can be produced
inexpensively are difficult or impossible to find due to the profit
incentives that govern drug production. These shortages have serious
medical consequences, but there are solutions.]
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BLAME CAPITALISM? WHY HUNDREDS OF DECADES-OLD YET VITAL DRUGS ARE
NEARLY IMPOSSIBLE TO FIND  
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Geoffrey Joyce
July 20, 2023
The Conversation
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_ Hundreds of proven, decades-old vital drugs that can be produced
inexpensively are difficult or impossible to find due to the profit
incentives that govern drug production. These shortages have serious
medical consequences, but there are solutions. _

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Past public ire
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over high drug prices has recently taken a back seat to a more
insidious problem – no drugs
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at any price
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Patients and their providers increasingly face limited or nonexistent
supplies of drugs
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many of which treat essential conditions such as cancer, heart disease
and bacterial infections. The American Society of Health System
Pharmacists now lists over 300 active shortages
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primarily of decades-old generic drugs no longer protected by patents.

While this is not a new problem, the number of drugs in short supply
has increased in recent years, and the average shortage is lasting
longer, with more than 15 critical drug products in short supply for
over a decade
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Current shortages include widely known drugs
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such as the antibiotic amoxicillin; the heart medicine digoxin; the
anesthetic lidocaine; and the medicine albuterol, which is critical
for treating asthma and other diseases affecting the lungs and
airways.

What’s going on?

I’m a health economist
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who has studied the pharmaceutical industry for the past 15 years. I
believe the drug shortage problem illustrates a major shortcoming of
capitalism. While costly brand-name drugs often yield high profits to
manufacturers, there’s relatively little money to be made in
supplying the market with low-cost generics, no matter how vital they
may be to patients’ health.

The shortage includes chemotherapy drugs, antibiotics, medications to
treat ADHD and other critical drugs. Some patients are able to get
their drugs, while others are not, and in some cases patients are
getting ‘rationed care.’

A generic problem

The problem boils down to the nature of the pharmaceutical industry
and how differently the markets for brand and generic drugs operate.
Perhaps the clearest indication of this is the fact that prices of
brand drugs in the U.S. are among the highest
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developed world, while generic drug prices are among the lowest.

When a drugmaker develops a new pill, cream or solution, the
government grants the company an exclusive patent for up to 20 years,
although most patents are filed before clinical testing, and thus the
effective patent life is closer to eight to 12 years. Nonetheless,
patents allow the drugmakers to cover the cost of research and
development and earn a profit without the threat of competition from a
rival making an identical product.

But once the patent expires, the drug becomes generic and any company
is allowed to manufacture it. Since generic manufacturers are
essentially producing the same product, profits are determined by
their ability to manufacture the drug at the lowest marginal cost.
This often results in low profit margins and can lead to cost-cutting
measures that can compromise quality and threaten supply.

Outsourced production creates more supply risks

One of the consequences of generics’ meager margins is that drug
companies outsource production to lower-cost countries.

As of mid-2019, 72% of the manufacturing facilities making active
ingredients for drugs sold in the U.S. were located overseas
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with India and China alone making up nearly half of that.

While overseas manufacturers often enjoy significant cost advantages
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over U.S. facilities, such as easy access to raw materials and lower
labor costs, outsourcing production at such a scale raises a slew of
issues that can hurt the supply. Foreign factories are more difficult
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for the Food and Drug Administration to inspect
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tend to have more production problems and are far more likely than
domestic factories to be shut down once a problem is discovered.

In testimony to a House subcommittee
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Janet Woodcock, the FDA’s principal deputy commissioner,
acknowledged that the agency has little information on which Chinese
facilities are producing raw ingredients, how much they are producing,
or where the ingredients they are producing are being distributed
worldwide.

The COVID-19 pandemic underscored the country’s reliance on foreign
suppliers – and the risks this poses to U.S. consumers.

India is the world’s largest producer of generic drugs but imports
70% of its raw materials from China. About one-third of factories
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in China shut down during the pandemic. To ensure domestic supplies,
the Indian government restricted the export of medications, disrupting
the global supply chain
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This led to shortages of drugs to treat COVID-19, such as for
respiratory failure and sedation, as well as for a wide range of other
conditions, like drugs to treat chemotherapy
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heart disease and bacterial infections.

Low profits hurt quality

Manufacturing drugs to consistently high quality standards requires
constant testing and evaluation.

A company that sells a new, expensive, branded drug has a strong
profit motive to keep quality and production high. That’s often not
the case for generic drug manufacturers, and this can result in
shortages
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In 2008, an adulterated version of the blood-thinning drug Heparin was
recalled worldwide
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after being linked to 350 adverse events and 150 deaths in the U.S.
alone.

In 2013, the Department of Justice fined the U.S. subsidiary of
Ranbaxy Laboratories
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India’s largest generic drug manufacturer, US$500 million after it
pleaded guilty to civil and criminal charges related to drug safety
and falsifying safety data. In response, the FDA banned products made
at four of the company’s manufacturing facilities in India from
entering the U.S., including generic versions of gabapentin
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which treats epilepsy and nerve pain, and the antibiotic
ciprofloxacin.

And while there may be multiple companies selling the same generic
drug in the U.S., there may be only a single manufacturer supplying
the basic ingredients. Thus, any hiccup in production or shutdown due
to quality issues can affect the entire market.

A recent analysis found that approximately 40% of generic drugs sold
in the U.S. have just one manufacturer
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by just one or two manufacturers has increased over time.

[A man in a suit points in front of a lectern that says $30 insulin,
with fridges of insulin in the background.]

California Gov. Gavin Newsom partnered with Civica Rx to manufacture
insulin for the state. AP Photo/Damian Dovarganes
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Repatriating the drug supply

It is hard to quantify the impact of drug shortages on population
health. However, a recent survey of U.S. hospitals, pharmacists and
other health care providers found that drug shortages led to increased
medication errors
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delayed administration of lifesaving therapies, inferior outcomes and
patient deaths.

What can be done?

One option is to simply find ways to produce more generic drugs in the
U.S.

California passed a law
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in 2020 to do just that by allowing the state to contract with
domestic manufactures to produce its own generic prescription drugs.
In March 2023, California selected a Utah company
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to begin producing low-cost insulin for California patients.

Whether this approach is feasible on a broader scale is uncertain,
but, in my view, it’s a good first attempt to repatriate America’s
drug supply.[The Conversation]

Geoffrey Joyce
[[link removed]], Director
of Health Policy, USC Schaeffer Center, and Associate Professor,
_University of Southern California
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This article is republished from The Conversation
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the original article
[[link removed]].

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