A great concern to many physicians, hospitals, and also thousands of patients, is the growing shortage of life-saving drugs across the United States. According to The Wall Street Journal shortages have more than tripled since 2005, and by the end of this year more than 300 products are likely to be back-ordered, in short supply, or totally unavailable.
Many of the critical shortage drugs are sterile injectibles, which includes significant members of important chemotherapy agents essential to the treatment and survival of cancer patients. Why is this happening, especially in the United States?
There are several factors involved. However, the central problem is one of regulated prices under the Medicare program, and the natural response of the marketplace to this scheme. Since price controls for cancer drugs took effect in 2005, there has been a cap on how much prices can rise -- no more than 6% above the average sales price (ASP) paid during the preceding quarter for any agent. In addition, the FDA has increased its regulatory standards for generic drug manufacturers and their facilities making it more costly and longer to gain approval for generic drug production. The net effect is that generic drug makers, who have now consolidated and operate on a global market, have little incentive to produce needed quantities of drugs (without taking losses), and efforts to respond quickly are hamstrung by the FDA.
President Obama issued an executive order last week to the FDA to broaden reporting of shortages, provide more information to the Justice Department to investigate possible collusion or price gouging, and to enhance reviews of applications for these drugs. His order, a grandstand event for the media, will do nothing to help the situation, and could make it worse.
Some readers are not old enough to remember the Soviet Union in the 1960’s and 1970’s, but I recall it clearly. This situation with drug shortages reminds me of the reports from the Soviet bureaucrats in those days about grain production in the Ukraine or Belarus. They were always about a shortage and a crisis. The grain prices in the Soviet Union were controlled centrally and totally under the “command economy” dictates of socialism. This is the direction we are moving towards today with health care in the United States. It is a tremendous problem now, and it will be a full blown disaster before much longer.
Drug shortages are just one example. Others are already with us. Think about the supply of primary care physicians. Why are their numbers dwindling? Why can’t you find a good primary care doctor easily today? The world of price controlled health care tells you why. We can do better. We should start by dramatically reforming the Medicare program.
The New York Times – Obama Tries to Speed Response to Shortages in Vital Medicines – Dated: October 31, 2011
The Wall Street Journal – The Bush-Obama Rx Shortages – Dated: November 2, 2011
The New England Journal of Medicine – The Shortage of Essential Chemotherapy Drugs in the United States – Dated: November 3, 2011
The New England Journal of Medicine – Drug Shortages – A Critical Challenge for the Generic Drug Market – Dated: October 31, 2011
The Wall Street Journal - Solving the Growing Drug Shortages - Dated: November 4, 2011